SkyWest Airlines 2008 Annual Report Download - page 14

terms. The SkyWest Airlines Delta Connection Agreement is subject to early termination in various
circumstances, including:
• if SkyWest Airlines or Delta commits a material breach of the SkyWest Airlines Delta
Connection Agreement, subject to 30 days notice and cure rights;
• if SkyWest Airlines fails to conduct all flight operations and maintain all aircraft under the
SkyWest Airlines Delta Connection Agreement in compliance in all material respects with
applicable government regulations;
• if SkyWest Airlines fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the ASA Delta Connection
Agreement;
• if the other party files for bankruptcy, reorganization or similar action (subject to limitations
imposed by the U.S. Bankruptcy Code) or if either party makes an assignment for the benefit of
creditors; or
• if SkyWest Airlines fails to maintain competitive base rate costs (provided that SkyWest Airlines
has the right to adjust its rates prior to any such termination).
ASA Delta Connection Agreement
ASA and Delta are parties to the ASA Delta Connection Agreement, dated as of September 8,
2005. As of December 31, 2008, ASA operated 39 CRJ700s, 110 CRJ200s and 12 ATR-72 turboprops
for Delta under the ASA Delta Connection Agreement. The 12 ATR-72 turboprops are no longer in
revenue service. ASA expects to return the aircraft to the lessor by February 28, 2009. ASA operates
these aircraft to provide Delta Connection service between Delta hubs and destinations designated by
Delta. As of December 31, 2008, ASA was operating more than 775 Delta Connection flights per day
between Atlanta, Cincinnati and designated outlying destinations. Under the ASA Delta Connection
Agreement, Delta is entitled to all passenger, cargo and other revenues associated with each flight.
Commencing in 2008, ASA is guaranteed to maintain its percentage of total Delta Connection flights
that it had in 2007, so long as its bid for additional regional flying is competitive with bids submitted by
other regional carriers.
In exchange for providing the designated number of flights and performing ASA’s other obligations
under the ASA Delta Connection Agreement, ASA is scheduled to receive from Delta on a weekly
basis (i) reimbursement for 100% of its direct costs related to Delta Connection flights plus (ii) if ASA
completes a certain minimum percentage of its Delta Connection flights, an amount equal to a certain
percentage of the direct costs (not including fuel costs) related to the Delta Connection flights. Costs
directly reimbursed by Delta under the ASA Delta Connection Agreement include costs related to fuel,
ground handling, and aircraft maintenance and ownership. The ASA Delta Connection Agreement also
provides for incentive compensation based upon ASA’s performance, including on-time arrival
performance and completion percentage rates.
The ASA Delta Connection Agreement is scheduled to terminate on September 8, 2020, unless
Delta elects to exercise its option to extend the term for up to four additional five-year terms. The
ASA Delta Connection Agreement is subject to early termination in various circumstances including:
• if ASA or Delta commits a material breach of the ASA Delta Connection Agreement, subject to
30 days notice and cure rights;
• if ASA fails to conduct all flight operations and maintain all aircraft under the ASA Delta
Connection Agreement in compliance in all material respects with applicable government
regulations;
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