SkyWest Airlines 2006 Annual Report Download - page 69

63
Purchase Commitments and Options
On November 21,2006, the Company announcedthat SkyWest had been selected by Delta to operate
12 CRJ700s previously operated by Comair. Deliveries of these aircraft began in January 2007 andare
scheduled to be completed by April 2007. On December 21, 2006 theCompany announced that SkyWest
Airlines wasselected by Midwest Airlines to enter into an airline services agreement. Under the terms of
theagreement, SkyWest Airlines hasagreedto operate up to 25 additionalCRJ200s. The initial 15 aircraft
are scheduled for delivery beginning in April 2007. The Company’s total firm aircraft orders and
commitments, as of December 31, 2006,consisted of orders for eight CRJ900s, and commitments to
operate eleven CRJ200s to be acquired through third-party lease arrangements and sublease 12 CRJ700’s
from Delta. Total expenditures for these aircraft and related flight equipment, including amounts for
contractual price escalations areestimatedto be approximately $363.5 million through April2007.
Additionally, the Company’s agreement with Bombardier includes options for another38 aircraftthat can
be delivered in either 70 or 90-seat configurations. Delivery dates for theseaircraft remainsubject to final
determination as agreed upon by the Company and its major partners.
Legal Matters
TheCompany is subject to certain legal actions which it considers routineto its business activities. As
of December 31,2006, management believes, after consultation with legal counsel, that theultimate
outcome of such legal matters is not likely to have amaterial adverse effect on theCompany’s financial
position, liquidity or results of operations.
Concentration Riskand Significant Customers
The Companyrequires no collateral from itsmajorpartners or customers but monitors thefinancial
condition of itsmajor partners. The Company maintains an allowance for doubtful accounts receivable
basedupon expected collectability of all accounts receivable. The Company’s allowance for doubtful
accounts totaled $47,000 and $58,000 as of December 31, 2006 and 2005, respectively. Forthe years ended
December 31,2006, 2005 and 2004, the Company’s contractualrelationships with Delta and United
combined accounted for approximately 95.6%, 98.5% and 95.0%, respectively of the Company’s total
revenues.
Employees
As of December 31,2006 the Company and SkyWest Airlines collectively employed 8,792 full-time
equivalent employees consistingof 3,799 pilots and flight attendants, 3,562 customer service personnel,972
mechanicsandother maintenancepersonnel, and459administrationandsupportpersonnel. None of
these employees arecurrently represented by a union. The Company is aware, however, that collective
bargaining group organization efforts among SkyWest Airlines’ employees occur from time to time and the
Company anticipates that such efforts will continueinthe future. During 2004, SkyWest Airlines’ pilots
voted against a resolution to join an officially recognizedunion. Under governingrules,SkyWest Airlines’
pilots may voteagain on this issue at any time because oneyear has passed since theprevious vote.
As of December31, 2006, ASA employed approximately 5,658 full-time equivalent employees
consistingof 2,376 pilots andflightattendants, 2,135 customer service personnel, 853mechanics and other
maintenancepersonnel, and 294administration and support personnel. Three of ASA’s employee groups
are represented by unions. ASA’s pilots arerepresented by theAir Line Pilots Association International,
ASA’s flight attendants are represented by the Association of Flight Attendants—CWA, and ASA’s flight
controllers arerepresented by the Professional Airline Flight Control Association. The collective
bargainingagreements between ASA and its pilots andflight attendants became amendableSeptember 15,
2002 and September 26, 2003, respectively. ASA has been negotiatingwith the pilots and flight attendants