SkyWest Airlines 2006 Annual Report Download - page 16

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10
approximately 400 Delta Connection flightsper day between Salt Lake City and designated outlying
destinations. Delta is entitled to allpassenger,cargo and other revenues associated with each flight.
In exchangefor providing the designatednumber of flights and performing SkyWestAirlines’ other
obligations under theSkyWest Airlines Delta Connection Agreement, SkyWest Airlines receives from
Delta on a weeklybasis (i) reimbursement for 100% of its direct costs relatedtothe Delta Connection
flights plus (ii) a fixed dollar payment per completed flight blockhour, subject to annual escalation at an
agreed rate.Costs directly reimbursed by Delta under theSkyWest Airlines DeltaConnection Agreement
include costs relatedto fuel, groundhandling,andaircraft maintenance andownership.
TheSkyWest Airlines DeltaConnection Agreement is scheduled to terminate on September 8, 2020,
unless Deltaelects to exercise its optionto extend theterm for up to four additional five-year terms. The
SkyWest Airlines Delta Connection Agreement is subject to early termination in various circumstances
including:
•if SkyWest Airlines or Delta commits a material breach of theSkyWest Airlines Delta Connection
Agreement, subject to 30 daysnotice and cure rights;
•if SkyWest Airlines fails to conduct all flight operations and maintain allaircraft under the SkyWest
Airlines Delta Connection Agreement in compliance in allmaterial respects with applicable
government regulations;
•if SkyWest Airlines fails to satisfy certain performance andsafety requirements;
•if, under certaincircumstances, Delta has a right to terminate the ASA Delta Connection
Agreement;
•if theother partyfilesfor bankruptcy, reorganization or similar action (subject to limitations
imposedby theU. S. Bankruptcy Code)or if either party makesan assignment for thebenefit of
creditors; or
•if SkyWest Airlines fails to maintain competitive base rate costs (provided that SkyWest Airlines
has theright to adjust its rates prior to any such termination).
ASADelta Connection Agreement
ASAand Delta are parties to the ASADelta Connection Agreement, dated as of September 8, 2005.
As of December31, 2006, ASA operated 31 CRJ700s, 112 CRJ200s and 12 ATR-72 turboprops for Delta
under the ASA DeltaConnection Agreement. We expect to removethe 12 ATR-72turboprops from the
ASA fleetandreturn themto DeltabyDecember 2008. ASA operates these aircraft to provide Delta
Connection service betweenDelta hubs and destinationsdesignated by Delta. As of December 31, 2006,
ASAwas operating more than 750 Delta Connectionflightsperday betweenAtlanta,Cincinnati, Salt Lake
City and designated outlying destinations. Under the ASA Delta ConnectionAgreement, Delta is entitled
to all passenger, cargo and other revenues associated with each flight. Commencingin 2008, ASAis
guaranteed to maintain its percentage of totalDelta Connection flights that it hasin2007, so long as its bid
for additional regional flying is competitive with other regional carriers.