SkyWest Airlines 2008 Annual Report Download - page 29

The airline industry is highly competitive and has undergone a period of consolidation and transition leaving
fewer potential code-share partners.
The airline industry is highly competitive. We not only compete with other regional airlines, some
of which are owned by or operated as code-share partners of major airlines, but we also face
competition from low-cost carriers and major airlines on many of our routes. Low-cost carriers such as
Southwest, JetBlue, US Airways, Frontier, and AirTran, among others, operate at many of our hubs,
resulting in significant price competition. Additionally, a large number of other carriers operate at our
hubs, creating intense competition. Certain of our competitors are larger and have significantly greater
financial and other resources than we do. Moreover, federal deregulation of the industry allows
competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline
industry is particularly susceptible to price discounting because airlines incur only nominal costs to
provide service to passengers occupying otherwise unsold seats. Increased fare competition could
adversely affect our operations and the price of our common stock. The airline industry has undergone
substantial consolidation, and it may in the future undergo additional consolidation. Recent examples
include the merger between Delta and Northwest Airlines in October 2008. America West Airlines and
US Airways in September 2005, and American Airlines’ acquisition of the majority of Trans World
Airlines’ assets in 2001. Several of the major airlines are currently in discussions related to
consolidation in the industry. Other developments include domestic and international code-share
alliances between major carriers. Any additional consolidation or significant alliance activity within the
airline industry could limit the number of potential partners with whom we could enter into code-share
relationships and materially adversely affect our relationship with our code-share partners.
As a result of the Delta and Northwest merger, Delta may change its strategy regarding the use of
its wholly owned regional carriers and the use of third party regional carriers such as SkyWest Airlines
and ASA. Delta may also make other strategic changes such as changing and or consolidating hub
locations. If Delta were to make changes such as these in its strategy and operations, our operations
and financial results could be adversely impacted.
Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do
so.
The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the
airline industry in general, including our operations. The primary effects experienced by the airline
industry include a substantial loss of passenger traffic and revenue. Although, to some degree, airline
passenger traffic and revenue have recovered since the September 11th attacks, additional terrorist
attacks could have a similar or even more pronounced effect. Even if additional terrorist attacks are
not launched against the airline industry, there will be lasting consequences of the attacks, including
increased security and insurance costs, increased concerns about future terrorist attacks, increased
government regulation and airport delays due to heightened security. Additional terrorist attacks and
the fear of such attacks could negatively impact the airline industry, and result in further decreased
passenger traffic and yields, increased flight delays or cancellations associated with new government
mandates, as well as increased security, fuel and other costs. We cannot provide any assurance that
these events will not harm the airline industry generally or our operations or financial condition in
particular.
Fuel costs have adversely affected, and will likely continue to adversely affect, the operations and financial
performance of the airline industry.
The price of aircraft fuel is unpredictable and was volatile during much of 2008. Higher fuel prices
may lead to higher airfares, which would tend to decrease the passenger load of our code-share
partners. In the long run, such decreases will likely have an adverse effect on the number of flights
such partner will ask us to provide and the revenues associated with such flights. Additionally, fuel
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