SkyWest Airlines 2008 Annual Report Download - page 28

our flights may be canceled or significantly delayed. Hurricanes Katrina and Rita, in particular, caused
severe disruption to air travel in the affected areas and adversely affected airlines operating in the
region, including ASA. We operate a significant number of flights to and from airports with particular
weather difficulties, including Atlanta, Salt Lake City, Chicago, Milwaukee and Denver. A significant
interruption or disruption in service at one of our hubs, due to adverse weather or otherwise, could
result in the cancellation or delay of a significant portion of our flights and, as a result, could have a
severe impact on our business, operations and financial performance.
Our investment in a foreign airline may negatively impact our profitability.
On September 4, 2008, we announced our intention to acquire a 20% interest in a Brazilian
regional airline, Trip Linhas Aereas (‘‘Trip’’), for $30 million. As of December 31, 2008, we made an
investment of $5 million for a 6.7% interest in Trip, which is recorded under ‘‘Other assets’’ on our
consolidated balance sheet. If Trip meets or exceeds certain financial targets, we are scheduled to make
an additional $15 million investment on March 1, 2009 and another $10 million investment on March 1,
2010. There is no assurance that Trip will ultimately succeed in its business plan. In the event that Trip
incurs operating losses or files for bankruptcy, such events would negatively impact our profitability.
Fluctuations in interest rates could adversely affect our liquidity, operating expenses and results.
A substantial portion of our indebtedness bears interest at fluctuating interest rates. These are
primarily based on the London interbank offered rate for deposits of U.S. dollars, or ‘‘LIBOR.’’
LIBOR tends to fluctuate based on general economic conditions, general interest rates, federal reserve
rates and the supply of and demand for credit in the London interbank market. We have not hedged
our interest rate exposure and, accordingly, our interest expense for any particular period may fluctuate
based on LIBOR and other variable interest rates. To the extent these interest rates increase, our
interest expense will increase, in which event, we may have difficulty making interest payments and
funding our other fixed costs and our available cash flow for general corporate requirements may be
adversely affected.
Our business could be harmed if we lose the services of our key personnel.
Our business depends upon the efforts of our chief executive officer, Jerry C. Atkin, and our other
key management and operating personnel. We may have difficulty replacing management or other key
personnel who leave and, therefore, the loss of the services of any of these individuals could harm our
business. We do not maintain key-man insurance on any of our executive officers.
Risks Related to the Airline Industry
We may be materially affected by uncertainties in the airline industry.
The airline industry has experienced tremendous challenges in recent years and will likely remain
volatile for the foreseeable future. Among other factors, the financial challenges faced by major
carriers, including Delta and United the slowing U.S. economy and increased hostilities in Iraq, the
Middle East and other regions have significantly affected, and are likely to continue to affect, the U.S.
airline industry. These events have resulted in declines and shifts in passenger demand, increased
insurance costs, increased government regulations and tightened credit markets, all of which have
affected, and will continue to affect, the operations and financial condition of participants in the
industry, including us, major carriers (including our major partners), competitors and aircraft
manufacturers. These industry developments raise substantial risks and uncertainties which will affect
us, major carriers (including our major partners), competitors and aircraft manufacturers in ways that
we are unable to currently predict.
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