SkyWest Airlines 2007 Annual Report Download - page 11

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SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to the United Express Agreement entered into on July 31, 2003. As of
December 31, 2007, SkyWest Airlines operated 52 CRJ700s, 65 CRJ200s and 48 Brasilia turboprops under the United
Express Agreement, flying a total of approximately 1,150 United Express flights per day between Chicago (O’ Hare), Denver,
Los Angeles, San Francisco, Portland and Seattle/Tacoma and designated outlying destinations. Generally, under the United
Express Agreement, United retains all air fares, cargo rates, mail charges and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’ 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, a fixed-fee for overhead
and aircraft costs, and a one-time start-up payment for each aircraft delivered. The United Express Agreement provides for
incentives based upon SkyWest Airlines’ performance, including on-time arrival performance and completion percentage
rates. Additionally, certain of SkyWest Airlines’ operating costs are reimbursed by United, including costs related to fuel and
aircraft ownership. As of December 31, 2007, 20 of the 48 Brasilia turboprops were operated under a revenue-sharing
arrangement.
The United Express Agreement is scheduled to expire incrementally on December 31, 2011, 2013, 2015 and 2018.
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 imposed by the U.S. Bankruptcy Code, if the other party becomes insolvent, fails to pay
its debts when due, takes action leading to its cessation as a going concern, makes an assignment of
substantially all of its assets, or ceases or suspends operations;
• if bankruptcy proceedings are commenced against the other party (subject to limitations imposed by the U.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 a marketing or code-share relationship with any party other than United to provide hub service at
United’ s hubs in Chicago (O’ Hare), Denver, San Francisco, Seattle/Tacoma, or Washington, D.C. (Dulles
International Airport).
Midwest Airline Services Agreement
SkyWest Airlines and Midwest are parties to the Midwest Services Agreement entered into on December 20, 2006.
Under the terms of the Midwest Services Agreement, SkyWest Airlines has agreed to operate up to 25 CRJ200s under the
Midwest code. As of December 31, 2007, SkyWest Airlines operated 15 CRJ200s under the Midwest Services Agreement,
flying a total of approximately 75 Midwest Connect flights per day between Milwaukee, Kansas City and designated outlying
destinations. On January 16, 2008, we announced that SkyWest Airlines has agreed to operate additional aircraft under the
Midwest Services Agreement.
In exchange for providing the designated number of flights and performing SkyWest Airlines’ other obligations
under the Midwest Services Agreement, Midwest has agreed to pay SkyWest Airlines on a weekly basis a fixed-fee per
completed block hour, fixed-fee per completed departure, a fixed-fee for overhead, and a one-time start-up payment for each
aircraft delivered. The Midwest Services Agreement provides for incentives or penalties based upon SkyWest Airlines’
performance, including on-time arrival performance and completion percentage rates. Additionally, Midwest has agreed to
reimburse certain of SkyWest Airlines’ operating costs, including costs related to fuel, landing fees, and catering.
The Midwest Services Agreement expires on June 30, 2012 and automatically extends for successive two-year
renewal periods unless either party gives written notice to the other party at least one year prior to the expiration of the initial
term of any renewal period that such party intends not to renew the agreement. The Midwest Services Agreement is subject
to early termination in various circumstances including: