SkyWest Airlines 2008 Annual Report Download - page 55

initial acquisition of an aircraft, we may also refinance the aircraft or convert one form of financing to
another (e.g., replacing debt financing with leveraged lease financing).
At present, we intend to satisfy our 2009 firm aircraft purchase commitment, as well as our
acquisition of any additional aircraft, through a combination of operating leases and debt financing,
consistent with our historical practices. Based on current market conditions and discussions with
prospective leasing organizations and financial institutions, we currently believe that we will be able to
obtain financing for our committed acquisitions, as well as additional aircraft, without materially
reducing the amount of working capital available for our operating activities. Nonetheless, recent
disruptions in the credit markets have resulted in greater volatility, decreased liquidity and limited
availability of capital, and there is no assurance that we will be able to obtain necessary funding or that,
if we are able to obtain necessary capital, the corresponding terms will be favorable or acceptable to us.
Aircraft Lease and Facility Obligations
We also have significant long-term lease obligations primarily relating to our aircraft fleet. At
December 31, 2008, we had 287 aircraft under lease with remaining terms ranging from one to
17 years. Future minimum lease payments due under all long-term operating leases were approximately
$3.0 billion at December 31, 2008. Assuming a 7.4% discount rate, which is the average rate used to
approximate the implicit rates within the applicable aircraft leases, the present value of these lease
obligations would have been equal to approximately $2.0 billion at December 31, 2008.
As part of our leveraged lease agreements, we typically agree to indemnify the equity/owner
participant against liabilities that may arise due to changes in benefits from tax ownership of the
respective leased aircraft. See Note 4 to our consolidated financial statements set forth in Item 8 of this
Report.
Long-term Debt Obligations
Our total long-term debt at December 31, 2008 was $1,811.5 million, of which $1,805.4 million
related to the acquisition of Brasilia turboprop, CRJ200, CRJ700 and CRJ900 aircraft and $6.1 million
related to our corporate office building. The average effective interest rate on the debt related to the
Brasilia turboprop and CRJ aircraft was approximately 5.5% at December 31, 2008. The average
effective interest rate on the debt related to our corporate office building was approximately 7.9% at
December 31, 2008.
Guarantees
We have guaranteed the obligations of SkyWest Airlines under the SkyWest Airlines Delta
Connection Agreement and the Midwest Airline Services Agreement and the obligations of ASA under
the ASA Delta Connection Agreement.
New Accounting Standards
In October 2008, the Financial Accounting Standards Board (the ‘‘FASB’’) issued Emerging Issues
Task Force (‘‘EITF’’) 08-6 Equity Method Investment Accounting Considerations, which address how the
initial carrying value of an equity method investment should be determined, how an impairment
assessment of an underlying indefinite-lived intangible asset of an equity method investment should be
performed, and the accounting for an equity-method investee’s issuance of shares. Our management
believes that this will not have a material impact on our consolidated financial statements.
Also, in October 2008, the FASB issued Staff Position No. FAS 157-3, Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active (‘‘FSP 157-3’’). FSP 157-3 clarifies the
application of SFAS 157, which we adopted as of January 1, 2008, in cases where a market is not active.
We have considered the guidance provided by FSP 157-3 in our determination of estimated fair values
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