SkyWest Airlines 2008 Annual Report Download - page 15

• if ASA fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the SkyWest Airlines 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 ASA fails to maintain competitive base rate costs (provided that ASA has the right to adjust
its rates prior to any such termination).
SkyWest Inc. Delta Connection Agreement
In December 2006, we expanded our relationship with Delta by entering into a Delta Connection
Agreement which awarded us the right to operate 12 CRJ700s, previously operated by Comair. This
Delta Connection Agreement is ancillary to, and satisfied certain obligations of Delta under the ASA
Delta Connection Agreement. We have the right to designate either SkyWest Airlines or ASA to
operate the 12 aircraft to provide service, primarily to and from Delta’s Cincinnati hub through
February 2012 (subject to Delta’s right to extend the arrangement for up to three additional three-year
terms). Under the arrangement, Delta has agreed to pay ASA or SkyWest Airlines, as applicable, a
fixed-fee per completed block hour, a fixed-fee per completed departure, a fixed-fee for overhead, a
one-time start-up payment for each aircraft delivered and incentive payments based upon performance,
including on-time arrival performance and completion percentage rates. Additionally, Delta has agreed
to reimburse SkyWest Airlines or ASA, as applicable, for certain operating costs under this Delta
Connection Agreement.
SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to the United Express Agreement entered into on July 31,
2003. As of December 31, 2008, SkyWest Airlines operated 52 CRJ700s, 67 CRJ200s and 44 Brasilia
turboprops under the United Express Agreement, flying a total of approximately 990 United Express
flights per day between Chicago (O’Hare), Denver, Los Angeles, San Francisco, Portland and Seattle/
Tacoma and designated outlying destinations. Generally, under the United Express Agreement, United
retains all air fares, cargo rates, mail charges and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’
obligations under the United Express Agreement, SkyWest Airlines receives from United compensation
(subject to an annual adjustment) of a fixed-fee per completed block hour, a fixed-fee per completed
departure, a fixed-fee per passenger, a fixed-fee for overhead and aircraft costs, and a one-time start-up
payment for each aircraft delivered. The United Express Agreement provides for incentives based upon
SkyWest Airlines’ performance, including on-time arrival performance and completion percentage rates.
Additionally, certain of SkyWest Airlines’ operating costs are reimbursed by United, including costs
related to fuel and aircraft ownership. As of December 31, 2008, 20 of the 44 Brasilia turboprops were
operated under a revenue-sharing arrangement.
The United Express Agreement is scheduled to expire incrementally on December 31, 2011, 2013,
2015, 2018 and 2020. United has the option, upon one year’s notice, of extending the United Express
Agreement for five years. The United Express Agreement is subject to early termination in various
circumstances including:
• if SkyWest Airlines or United fails to fulfill an obligation under the United Express Agreement
for a period of 60 days after written notice to cure;
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