SkyWest Airlines 2006 Annual Report Download - page 57

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006
(1) Nature of Operations and Summary of Significant AccountingPolicies
SkyWest, Inc. (the “Company”), through its wholly-owned subsidiaries, SkyWest Airlines, Inc.
(“SkyWest Airlines”)and AtlanticSoutheast Airlines,Inc.(“ASA”),operatesthe largestregional airlinein
the UnitedStates.As of December 31, 2006, SkyWest and ASA offered scheduled passenger and air
freight service with approximately 2,400total daily departures to 229different destinations in the
United States, Canada, Mexico and the Caribbean. Additionally, theCompany provides ground handling
services for approximately ten other airlines throughout its system. As of December31, 2006, the
Company’s fleet consistedof 23540- and 50-seat Bombardier CRJ200 Regional Jet aircraft (“CRJ200s”)
(66 assigned to United AirLines, Inc. (“United”), 169 assigned to Delta Air Lines, Inc. (“Delta”)
92 70-seat Bombardier CRJ 700 Regional Jet aircraft (“CRJ700s”) (52 assigned to United and40 assigned
to Delta), nine 70-90-seat Bombardier CRJ900 Regional Jet aircraft (“CRJ900”)(all assigned to Delta),
62 EmbraerBrasilia EMB-120 turboprops (“Brasilia Turboprops”) (48 assigned to United and 14 assigned
to Delta), and12Avionsde Transport72-210 (“ATR-72 turboprops”) (all assigned to Delta).For the year
ended December 31, 2006, approximately 58.1% of the Company’s capacity was operated under theDelta
code andapproximately 41.9% wasoperatedunder the United code.
SkyWest Airlines has been a partner with Delta in SaltLake City and United in Los Angeles since
1987 and 1997, respectively. In 1998, SkyWest Airlines expanded its relationship with United to provide
service in Portland, Seattle/Tacoma, San Franciscoand additionalLos Angeles markets. In 2004, SkyWest
Airlines expanded its United Express operations to provide service in Chicago. As of December 31, 2006,
SkyWest Airlines operated approximately 1,600 total daily flights as aDeltaConnection carrierin Salt
LakeCity, and a United Expresscarrier in Chicago (O’Hare), Denver, Los Angeles, San Francisco,
Portland and Seattle/Tacoma. SkyWest Airlines believes its success in attracting multiple contractual
relationshipswith major airlinepartners is attributable to its delivery of high-quality customerservice with
an all cabin-class fleet at a competitive cost structure.
On September 7, 2005, the Company completed the acquisition of allof the issued and outstanding
capitalstock of ASA. ASAisaregional airline with primaryhub operations in Atlanta, Salt Lake City and
Cincinnati. The consolidated statements of income for the year ended December 31, 2005 reported herein
contain 114 days of operations relating to ASA from September 8, 2005 to December 31,2005.
Pursuanttothe terms of theStock Purchase Agreement entered into between the Company, Delta
andASA Holdings, Inc. (“ASA Holdings”) theCompany paid $421.3 million in cash for ASA, plus $5.3
million of transaction fees. Additionally, as part of the purchase, the Company assumed approximately
$1,251.3 million in long-term debt which combined with the amountspaid at closing, resulted in an
aggregatepurchase price of approximately $1,677.9million. The purchase price of ASAhas been adjusted
to reflect certain post-closing adjustments relatedtoASA’s working capitalas of September 7, 2005.
ASA has been a code-share partner with Delta in Atlanta since1984. ASAexpanded its operations as
a Delta Connection carrier to also include Cincinnati and SaltLake City in September 2002 and
April 2003, respectively. ASA operates approximately 750 daily flights, all in theDeltaConnection system.