SkyWest Airlines 2009 Annual Report Download - page 130

Net income performance targets—During the first 60 days of each fiscal year, the Compensation
Committee establishes annual net income goals at the Company level for the Chief Executive and the
CFO, and at the applicable operating subsidiary level for the Presidents of SkyWest Airlines and ASA,
and corresponding targeted levels of annual bonuses to be paid if the applicable annual net income
goal is attained. In addition to the annual net income goal required to receive the full target annual
bonus amount, the Compensation Committee establishes threshold annual net income goals necessary
to receive any annual bonus for the subject year, the amount of bonus payable at the applicable
threshold level of net income and maximum annual net income goals and corresponding bonus levels,
above which additional bonus payments become discretionary. In 2009, the Company’s threshold net
income goal was $74.1 million, the target net income goal was $111.4 million, and the maximum net
income goal was $167.4 million. Lesser threshold, target, and maximum net income goals were set for
each of the Company’s operating airline subsidiaries, taking into account their differing operations. The
goals set for the President of SkyWest Airlines were threshold net income of $46.2 million, targeted net
income of $66.0 million, and maximum net income of $85.8 million. The goals set for the President of
ASA were threshold net income of $31.8 million, targeted net income of $45.4 million, and maximum
net income of $59.0 million. The Company’s annual bonus plan for 2009 also provided for pro-rated
adjustment of the bonuses payable based on actual annual net income results that differed from the
target performance levels within the applicable threshold and maximum net income ranges
Individual goals—Three-fourths of each Named Executive’s non-discretionary annual performance
bonus is determined based solely on the degree to which the applicable net income target is attained.
The remaining one-fourth of each Named Executive’s annual performance-based bonus is dependent on
both the percentage of the net income target attained and the degree to which the Named Executive
achieves a combination of additional, specific individual goals established each year. The Compensation
Committee has adopted this approach because it believes the use of individual goals allows awards to
reflect the individual efforts and achievements of a Named Executive that may not be reflected by
corporate net income performance. For fiscal year 2009, the individual goals of the Chief Executive
were approved by the Compensation Committee, and the Chief Executive approved the individual goals
of the other Named Executives. One-fourth of the amount of net-income based annual bonus otherwise
payable to each Named Executive is increased or decreased, as applicable, within certain predetermined
ranges based on the Named Executive’s achievement of his individual goals. The personal goals for the
Chief Executive and the Presidents of SkyWest Airlines and ASA include quality operational goals such
as percentage of flights departing on-time and percentage of scheduled flights completed, as well as
cost control and business development goals. The personal goals of the CFO include timely financial
reporting, internal control performance, implementation of best practices and processes and business
development.
Target annual bonus amount—The target annual bonus for each Named Executive for 2009 was
equal to 80% of salary; however, the percentage is subject to redetermination by the Compensation
Committee on an annual basis. No performance-based annual bonus is payable if the Named
Executive’s applicable threshold net income target is not attained. The annual performance-based
bonus amounts were calculated as described above and are summarized in the Summary Compensation
Table under the heading ‘‘Non-Equity Incentive Plan Compensation’’.
Discretionary annual bonus amount—In addition to the annual performance-based bonus, the
Compensation Committee may award discretionary additional annual bonuses to Named Executives
based on such criteria as the Compensation Committee determines to be appropriate. For 2009, the
annual bonuses earned by Mr. Holt also included a discretionary element that was primarily intended
to reward exceptional operational performance. The discretionary amount of Mr. Holt’s 2009 annual
bonus described above is listed in the Summary Compensation Table under the heading ‘‘Bonuses’’.
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