SkyWest Airlines 2006 Annual Report Download - page 49

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financing cannotbe arranged at thetime of delivery,Bombardierhas financed aircraft acquisitionsuntil
more permanent arrangements can be made.Subsequent to this initial acquisition of an aircraft, we may
also refinance theaircraft or convert one form of financing to another (e.g.,replacing debt financing with
leveraged lease financing).
At present, we intendto satisfy our2007firmaircraft purchase commitment,aswell as ouracquisition
of any additional aircraft, through acombination of operating leases and debt financing, consistent with
our historical practices. Basedoncurrent market conditions and discussions with prospective leasing
organizations and financial institutions, we currently believe that we will be able to obtainfinancing for the
committed acquisitions, as well as additional aircraft, without materially reducing the amount of working
capital availablefor our operating activities.
Aircraft Lease and Facility Obligations
We also have significant long-term lease obligations primarily relating to our aircraftfleet. At
December31,2006, we had268aircraft under lease withremainingterms ranging from one to 18 years.
Future minimum lease payments dueunder all long-term operating leases were approximately $3.5 billion
at December 31, 2006.Assuming a 7.0% discount rate, which is the rate used to approximate the implicit
rates within theapplicable aircraft leases, the present value of these lease obligations wouldhave been
equal to approximately $2.2 billion at December 31, 2006.
As part of ourleveraged lease agreements, we typically agree to indemnify the equity/owner
participant against liabilities that may arise due to changesin benefits from taxownership of therespective
leased aircraft. SeeNote4to our consolidated financial statements setforth in Item 8 of this Report.
Long-term Debt Obligations
Our total long-term debt at December 31,2006 was $1,784.1 million, of which $1,777.2 million related
to the acquisition of Brasilia turboprop, CRJ200 and CRJ700 aircraft and$7.0 million related to our
corporate office building. The average effectiverate on thedebt related to the Brasilia turboprop andCRJ
aircraft was approximately 6.6% at December 31, 2006.
Seasonality
Our resultsofoperations for any interim period arenot necessarily indicative of those for theentire
year, sincethe airline industry is subject to seasonal fluctuations and general economic conditions. Our
operations aresomewhat favorably affected by increased travelon ourpro-rateroutes, historically
occurring in the summer months, and are unfavorably affected by decreasedbusiness travel during the
months from November through January and by inclement weather which occasionally results in cancelled
flights, principally during the winter months.
New Accounting Standard
In July 2006, the FASB issued Interpretation No. 48,Accounting for Uncertainty in Income Taxes,
(“FIN No. 48”). FINNo.48 prescribes a recognition threshold and measurement process for recording in
the financialstatementsuncertain taxpositions taken or expected to be taken in atax return.Additionally,
FIN No. 48 provides guidance on classification, accountingin interim periods and disclosure requirements
for uncertain tax positions. Theprovisions of FIN No. 48 are anticipated to becomeeffective for us
beginning January 1, 2007. We arecurrentlyevaluating the impact that FIN No. 48 is anticipated to have
on our results of operations and financial position; however, we do not expect that the adoption of
FIN No. 48 will have amaterial impact on our resultsof operations andfinancial position.