SkyWest Airlines 2007 Annual Report Download - page 15

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passenger and baggage screening and search procedures, and securing of cockpit doors. We are committed to complying with
future safety and security requirements.
Insurance
SkyWest Airlines and ASA maintain insurance policies that we believe are of types customary in the industry and in
amounts we believe are adequate to protect against material loss. These policies principally provide coverage for public
liability, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our
flight equipment, and workers’ compensation insurance. We cannot assure, however, that the amount of insurance we carry
will be sufficient to protect us from material loss.
Seasonality
Our results of operations for any interim period are not necessarily indicative of those for the entire year, since the
airline industry is subject to seasonal fluctuations and general economic conditions. Our operations are somewhat favorably
affected by increased travel on our pro-rate routes, historically occurring in the summer months, and are unfavorably affected
by decreased business travel during the months from November through January and by inclement weather which
occasionally results in cancelled flights, principally during the winter months.
ITEM 1A. RISK FACTORS
In addition to factors discussed elsewhere in this Report, the following are important risks which could adversely
affect our future results. Additional risks and uncertainties not presently known to us or that we currently do not deem
material may also impair our business operations. If any of the risks we describe below occur, or if any unforeseen risk
develops, our operating results may suffer, our financial condition may deteriorate, the trading price of our common stock
may decline and investors could lose all or part of their investment in us.
Risks Related to Our Operations
We are highly dependent on Delta, United and Midwest.
If any of our code-share agreements are terminated, we would be significantly impacted and likely would not have
an immediate source of revenue or earnings to offset such loss. A termination of any of these agreements would have a
material adverse effect on our financial condition, operating revenues and net income unless we are able to enter into
satisfactory substitute arrangements for the utilization of the affected aircraft by other code-share partners, or, alternatively,
obtain the airport facilities and gates and make the other arrangements necessary to fly as an independent airline. We may not
be able to enter into substitute code-share arrangements, and any such arrangements we might secure may not be as favorable
to us as our current agreements. Operating our airline independent from major partners would be a significant departure from
our business plan, would likely be very difficult and may require significant time and resources, which may not be available
to us at that point.
The current terms of the SkyWest, SkyWest Airlines and ASA Delta Connection Agreements are subject to certain
early termination provisions. Delta’ s termination rights include cross-termination rights (meaning that a breach by SkyWest
Airlines or ASA of its Delta Connection Agreement could, under certain circumstances, permit Delta to terminate any or all
of the Delta Connection Agreements), the right to terminate each of the agreements upon the occurrence of certain force
majeure events (including certain labor-related events) that prevent SkyWest Airlines or ASA from performance for certain
periods and the right to terminate each of the agreements if SkyWest Airlines or ASA, as applicable, fails to maintain
competitive base rate costs, subject to certain rights of SkyWest Airlines to take corrective action to reimburse Delta for lost
revenues. The current term of the SkyWest Airlines’ United Express Agreement is subject to certain early termination
provisions and subsequent renewals. United may terminate the United Express Agreement due to an uncured breach by
SkyWest Airlines of certain operational and performance provisions, including measures and standards related to flight
completions, baggage handling and on-time arrivals. The current term of the SkyWest Airlines’ Midwest Services Agreement
is subject to certain early termination provisions and subsequent renewals. Midwest may terminate the Midwest Services
Agreement due to an uncured breach by SkyWest Airlines of certain operational and performance provisions, including
measures and standards related to customer complaints factor, the care check factor or the customer experience pulse factor.
We currently use Delta’ s, United’ s and Midwest’ s systems, facilities and services to support a significant portion of
our operations, including airport and terminal facilities and operations, information technology support, ticketing and
reservations, scheduling, dispatching, fuel purchasing and ground handling services. If Delta, United or Midwest were to