SkyWest Airlines 2007 Annual Report Download - page 56

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Legal Matters
The Company is subject to certain legal actions which it considers routine to its business activities. As of
December 31, 2007, management believes, after consultation with legal counsel, that the ultimate outcome of such legal
matters is not likely to have a material adverse effect on the Company’ s financial position, liquidity or results of operations.
ASA and SkyWest Airlines v. Delta Air Lines
During the quarter ended December 31, 2007, Delta Air Lines notified SkyWest, SkyWest Airlines and ASA of a
dispute under the Delta Connection Agreements executed by Delta with SkyWest Airlines and ASA. The dispute related to
allocation of liability for certain irregular operations (“IROP”) expenses that are paid by SkyWest Airlines and ASA to their
passengers under certain situations. As a result, Delta withheld a combined total of approximately $25 million (pretax) from
one of the weekly scheduled wire payments to SkyWest and ASA during December. On February 1, 2008, SkyWest Airlines
and ASA filed a lawsuit in Georgia state court disputing Delta’ s treatment of the matter. The Company has evaluated the
Delta dispute in accordance with the provisions of Financial Accounting Standards Board No. 5 (“FASB No.5”), Accounting
for Contingencies. Based on the provisions of FASB No. 5, an estimated loss is accrued if the loss is probable and reasonably
estimable. Because these conditions have not been satisfied, the Company has not recorded a loss in the consolidated
financial statements as of December 31, 2007.
Concentration Risk and Significant Customers
The Company requires no collateral from its major partners or customers but monitors the financial condition of its
major partners. The Company maintains an allowance for doubtful accounts receivable based upon expected collectability of
all accounts receivable. The Company’ s allowance for doubtful accounts totaled $47,000 as of December 31, 2007 and 2006.
For the years ended December 31, 2007, 2006 and 2005, the Company’ s contractual relationships with Delta and United
combined accounted for approximately 93.3%, 95.6% and 98.5%, respectively of the Company’ s total revenues.
Employees
As of December 31, 2007 the Company and SkyWest Airlines collectively employed 10,249 full-time equivalent
employees consisting of 4,587 pilots and flight attendants, 4,084 customer service personnel, 1,095 mechanics and other
maintenance personnel, and 483 administration and support personnel. None of these employees are currently 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 continue in the future. During 2007,
SkyWest Airlines’ pilots voted against a resolution to join an officially recognized union. Under governing rules, SkyWest
Airlines’ pilots may vote again on this issue in one year from the previous vote.
As of December 31, 2007, ASA employed approximately 4,295 full-time equivalent employees consisting of 2,356
pilots and flight attendants, 751 customer service personnel, 831 mechanics and other maintenance personnel, and 357
administration and support personnel. Three of ASA’ s employee groups are represented by unions. ASA’ s pilots are
represented by the Air Line Pilots Association International (“ALPA”), ASA’ s flight attendants are represented by the
Association of Flight Attendants-CWA, and ASA’ s flight controllers are represented by the Professional Airline Flight
Control Association. The collective bargaining agreements between ASA and its flight attendants and flight controllers
became amendable September 26, 2003 and April 2006, respectively. During 2007, ASA reached a labor agreement with its
pilots and the collective bargaining agreement will become amendable in November 20, 2010. In conjunction with the 2007
pilot agreement, ASA paid an additional $13.5 million to its pilots during the year ended December 31, 2007.
(5) Capital Transactions
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock in one or more series without shareholder
approval. No shares of preferred stock are presently outstanding. The Company’ s Board of Directors is authorized, without
any further action by the stockholders of the Company, to (i) divide the preferred stock into series; (ii) designate each such
series; (iii) fix and determine dividend rights; (iv) determine the price, terms and conditions on which shares of preferred
stock may be redeemed; (v) determine the amount payable to holders of preferred stock in the event of voluntary or
involuntary liquidation; (vi) determine any sinking fund provisions; and (vii) establish any conversion privileges.