SkyWest Airlines 2006 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2006 SkyWest Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 88

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88

12
Seattle/Tacoma anddesignated outlyingdestinations. Generally, under the United Express Agreement,
United retains all air fares, cargo rates,mail charges and otherrevenues associated with each flight.
In exchangefor providing the designated number of flights and performing SkyWestAirlines’
obligations under the United Express Agreement, SkyWest Airlines receives from United compensation
(subject to an annual adjustment) of a fixed-fee per completed block hour, a fixed-fee per completed
departure, a fixed-fee per passenger, afixed-fee for overhead and aircraft costs, and a one-time start-up
payment for each aircraft delivered.The United ExpressAgreement providesfor incentives based upon
SkyWest Airlines’performance, including on-time arrival performance and completion percentage rates.
Additionally, certainof SkyWestAirlines’ operating costs arereimbursed by United, including costs
related to fuel and aircraftownership.
TheUnited Express Agreement is scheduled to expire incrementally on December 31, 2011,2013 and
2015. United has the option, upon one year’s notice, of extending the United Express Agreement for five
years. The United Express Agreement is subject to early termination in various circumstances including:
•if SkyWest Airlines or United fails to fulfill an obligation under the United Express Agreement for
a period of 60 days after written notice to cure;
•if SkyWest Airlines’ operations fall below certain performance levels for a period of three
consecutive months;
•subject to limitations imposedby the U.S. Bankruptcy Code, if the other party becomes insolvent,
fails to pay its debts when due, takes actionleading to its cessation as a goingconcern, makes an
assignmentof substantially allofits assets, or ceases or suspendsoperations;
•if bankruptcy proceedings arecommenced against the other party(subject to limitations imposed by
theU.S. Bankruptcy Code) and certain specified conditions are not satisfied; or
•if SkyWest Airlines operates, subject to certain exceptions, any additional regional jets or turboprop
aircraft pursuant to amarketingorcode-share relationship with anyparty other than Unitedto
provide hub service at United’s hubs in Chicago (O’Hare), Denver, Los Angeles,SanFrancisco,
Seattle/Tacoma, or Washington, D.C. (Dulles International Airport).
MidwestAirline Services Agreement
SkyWest Airlinesand Midwestareparties to an Airlines Services Agreemententered into on
December20, 2006 (the “AirlineServices Agreement”). Undertheterms of theAirlinesServices
Agreement, SkyWest Airlines has agreed to operate up to 25 CRJ200s. The initial 15 aircraft arescheduled
for delivery beginning in April 2007 andcontinuing throughOctober 2007. Delivery dates of additional
aircraft, if any, will be determined at a later date. We expectthat the aircraft will serve markets from
Midwest’s current hubs in Milwaukee and Kansas City.
In exchangefor providing the designated number of flights and performing SkyWestAirlines’ other
obligations under theAirlines ServiceAgreement, Midwesthas agreedto pay SkyWest Airlineson a
weekly basis a fixed-feeper completedblock hour, fixed-fee per completed departure, a fixed-feefor
overhead, and a one-time start-up payment foreachaircraftdelivered. The Airlines ServicesAgreement
provides for incentives or penalties based upon SkyWest Airlines’ performance, including on-time arrival
performanceand completion percentage rates. Additionally, Midwest has agreed to reimburse certain of
SkyWest Airlines’ operating costs, including costs relatedtofuel, landing fees, and catering.