SkyWest Airlines 2008 Annual Report Download - page 40

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis presents factors that had a material effect on our results of
operations during the years ended December 31, 2008, 2007 and 2006. Also discussed is our financial
position as of the end of December 31, 2008 and 2007. You should read this discussion in conjunction with
our consolidated financial statements, including the notes thereto, appearing elsewhere in this Report or
incorporated herein by reference. This discussion and analysis contains forward-looking statements. Please
refer to the sections of this Report entitled ‘‘Cautionary Statement Concerning Forward-looking Statements’’
and ‘‘Item 1A. Risk Factors’’ for discussion of some of the uncertainties, risks and assumptions associated
with these statements.
Overview
Through SkyWest Airlines and ASA, we operate the largest regional airline in the United States.
As of December 31, 2008, SkyWest Airlines and ASA offered scheduled passenger and air freight
service with more than 2,300 total daily departures to 218 destinations in the United States, Canada,
Mexico and the Caribbean. Additionally, as of December 31, 2008, we provided ground handling
services for approximately eight other airlines throughout our system. As of December 31, 2008, we
operated a combined fleet of 442 aircraft consisting of 250 CRJ200s (67 assigned to United, 162
assigned to Delta, 12 assigned to Midwest and nine used by SkyWest Airlines as additional maintenance
spare aircraft) 104 CRJ700s (52 assigned to United and 52 assigned to Delta), 20 CRJ900s (all assigned
to Delta), 56 Brasilia turboprops (44 assigned to United and 12 assigned to Delta), and 12 ATR-72
turboprops (all assigned to Delta). As of December 31, 2008, the 12 ATR-72 turboprops were no longer
in revenue service, and ASA expects to return the aircraft to the lessor by February 28, 2009. We
believe our success in attracting multiple contractual relationships with major airline partners is
attributable to our delivery of high-quality customer service with an all cabin-class fleet at a competitive
cost structure. For the year ended December 31, 2008, approximately 56.3% of our aggregate capacity
was operated under the Delta code, approximately 40.3% was operated under the United code and
approximately 3.4% was operated under the Midwest code.
SkyWest Airlines has been a code-share partner with Delta in Salt Lake City and United in Los
Angeles since 1987 and 1997, respectively. In 1998, SkyWest Airlines expanded its relationship with
United to provide service in Portland, Seattle/Tacoma, San Francisco and additional Los Angeles
markets. In 2004, SkyWest Airlines expanded its United Express operations to provide service in
Chicago. In December 2006, SkyWest Airlines and Midwest entered into an Airline Services Agreement
(the ‘‘Midwest Services Agreement’’). SkyWest Airlines serves markets from Midwest’s hub in
Milwaukee. As of December 31, 2008, SkyWest Airlines operated as a Delta Connection carrier in Salt
Lake City, a United Express carrier in Los Angeles, San Francisco, Denver, Chicago and the Pacific
Northwest, and a Midwest Connect carrier in Milwaukee operating more than 1,500 total daily flights.
ASA has been a code-share partner with Delta in Atlanta since 1984. ASA expanded its operations
as a Delta Connection carrier to also include Cincinnati and Salt Lake City in September 2002 and
April 2003, respectively. ASA operates approximately 775 daily flights, all in the Delta Connection
system.
We provide a substantial majority of the regional airline service for Delta in Atlanta and Salt Lake
City. In connection with our acquisition of ASA in September 2005, we established new, separate, but
substantially similar, long-term fixed-fee Delta Connection Agreements with Delta for both SkyWest
Airlines and ASA. We also obtained the right to use 29 gates in the Hartsfield-Jackson International
Airport located in Atlanta, from which we currently provide service to Delta. Delta has also agreed that
if Delta solicits requests for proposals to fly Delta Connection regional aircraft, ASA will be permitted
to bid to maintain the same percentage of total Delta Connection regional jet flights that it operated
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