SkyWest Airlines 2007 Annual Report Download - page 37

36
remaining two CRJ700s are scheduled to be delivered by June 2008. As of December 31, 2007, we had firm aircraft orders
and commitments to operate two CRJ700’ s to be subleased from Delta. Total expenditures for these aircraft and related flight
equipment are estimated to be approximately $1 million.
On October 12, 2007, we announced that SkyWest Airlines plans to acquire 22 additional regional jet aircraft
through 2010, 18 of which we intend to operate for United Express, as part of an aircraft transition plan, allowing United
Express to remove 23 EMB-120 30-seat turboprop aircraft from the contract reimbursement model in the United Express
Agreement and add 66 seat regional jet aircraft for United Express flying. Generally, the turboprop removals are intended to
occur in conjunction with deliveries of new regional jet aircraft in order to ensure a smooth transition in existing markets.
Additionally, SkyWest Airlines intends to exchange four 50-seat CRJ200s for four regional jet aircraft configured with 76
seats in its Delta Connection operations. On November 30, 2007, we announced that we placed a firm order for 22 aircraft
with Bombardier Aerospace. We are scheduled to take delivery of these aircraft beginning in late 2008 and continue through
the first quarter of 2010. Total expenditures for these aircraft and related flight equipment, including amounts for contractual
price escalations, are estimated to be approximately $528.0 million through the first quarter of 2010. Additionally, our
agreement with Bombardier includes options for another 22 aircraft that can be delivered in either 70 or 90 seat
configurations. Delivery dates for these aircraft remain subject to final determination as we agree upon with our major
partners.
On January 16, 2008, we announced that SkyWest Airlines has agreed to operate additional aircraft under the
Midwest Services Agreement. Total expenditures for these aircraft and related flight equipment are estimated to be
approximately $28.8 million through the first quarter of 2008.
SkyWest Airlines has not historically funded a substantial portion of its aircraft acquisitions with working capital.
Rather, it has generally funded its aircraft acquisitions through a combination of operating leases and debt financing. At the
time of each aircraft acquisition, we evaluate the financing alternatives available, and select one or more of these methods to
fund the acquisition. In the event that alternative financing can not be arranged at the time of delivery, Bombardier has
financed aircraft acquisitions until more permanent arrangements can be made. Subsequent to this initial acquisition of an
aircraft, we may also refinance the aircraft or convert one form of financing to another (e.g., replacing debt financing with
leveraged lease financing).
At present, we intend to satisfy our 2008 firm aircraft purchase commitment, as well as our acquisition of any
additional aircraft, through a combination of operating leases and debt financing, consistent with our historical practices.
Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we
currently believe that we will be able to obtain financing for the committed acquisitions, as well as additional aircraft,
without materially reducing the amount of working capital available for our operating activities.
Aircraft Lease and Facility Obligations
We also have significant long-term lease obligations primarily relating to our aircraft fleet. At December 31, 2007,
we had 287 aircraft under lease with remaining terms ranging from one to 18 years. Future minimum lease payments due
under all long-term operating leases were approximately $3.3 billion at December 31, 2007. Assuming a 7.4% discount rate,
which is the average rate used to approximate the implicit rates within the applicable aircraft leases, the present value of these
lease obligations would have been equal to approximately $2.1 billion at December 31, 2007.
As part of our leveraged lease agreements, we typically agree to indemnify the equity/owner participant against
liabilities that may arise due to changes in benefits from tax ownership of the respective leased aircraft. See Note 4 to our
consolidated financial statements set forth in Item 8 of this Report.
Long-term Debt Obligations
Our total long-term debt at December 31, 2007 was $1,851.0 million, of which $1,844.4 million related to the
acquisition of Brasilia turboprop, CRJ200, CRJ700 and CRJ900 aircraft and $6.6 million related to our corporate office
building. The average effective interest rate on the debt related to the Brasilia turboprop and CRJ aircraft was approximately
6.5% at December 31, 2007.