SkyWest Airlines 2007 Annual Report Download - page 55

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54
Company is not required to consolidate any of these trusts or any other entities in applying FIN 46. Management believes that
the Company’ s maximum exposure under these leases is the remaining lease payments.
Total rental expense for non-cancelable aircraft operating leases was approximately $294.4 million, $281.5 million
and $210.2 million for the years ended December 31, 2007, 2006 and 2005, respectively. The above minimum rental expense
does not include airport station rents, which amounted to approximately $61.7 million, $50.3 million and $29.6 million for
the years ended December 31, 2007, 2006 and 2005, respectively.
The Company’ s leveraged lease agreements, typically obligate the Company to indemnify the equity/owner
participant against liabilities that may arise due to changes in benefits from tax ownership of the respective leased aircraft.
The terms of these contracts range up to 18 years. The Company did not accrue any liability relating to the indemnification to
the equity/owner participant because of management’ s assessment that the probability of this occurring is remote.
Self-insurance
The Company self-insures a portion of its potential losses from claims related to workers’ compensation,
environmental issues, property damage, medical insurance for employees and general liability. Losses are accrued based on
an estimate of the ultimate aggregate liability for claims incurred, using standard industry practices and the Company’ s actual
experience. Actual results could differ from these estimates.
Purchase Commitments and Options
On November 21, 2006, the Company announced that SkyWest Airlines had been selected by Delta to operate 12
new CRJ700s previously operated by Comair Inc. Ten of the 12 CRJ700s were delivered by December 31, 2007 and the
remaining two CRJ700s are scheduled to be delivered by June 2008. As of December 31, 2007, the Company had total 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, the Company announced that SkyWest Airlines plans to acquire 22 additional regional jet
aircraft through 2010, 18 of which the Company intends 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 CRJ900s configured
with 76 seats in its Delta Connection operations. These four 50-seat CRJ200s are scheduled to be placed into service under
other capacity purchase agreements. On November 30, 2007, the Company announced that it placed a firm order with
Bombardier Aerospace. The Company is scheduled to take deliver 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,
the Company’ s 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 agreed upon by the Company
and its major partners.
On January 16, 2008, the Company announced that SkyWest Airlines 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.
The following table summarizes future purchase commitments as of December 31, 2007 (in thousands):
Year ending December 31,
2008.................................................................................................................................. $127,580
2009.................................................................................................................................. 332,239
2010.................................................................................................................................. 98,011
$557,830