SkyWest Airlines 2009 Annual Report Download - page 134

personal automobile allowance, country club dues in the case of the Chief Executive, and use of
Company-owned recreational equipment.
The Company and its subsidiaries also maintain a non-discriminatory, broad-based program under
which all full-time Company employees and their dependents, including the Named Executives and
their dependents, may fly without charge on a space-available basis on regularly scheduled flights of
aircraft operated by the Company’s operating airline subsidiaries.
Commitment to Performance Based Compensation
The Company is committed to performance-based compensation. The compensation packages of
the Named Executives are designed to be performance-based, with the following components:
• Annual bonus being subject to meeting net income targets
• Stock option portion of the long-term award is dependent on stock appreciation
• Performance units payable in cash are based on meeting return on shareholder equity targets.
From the Compensation Committee’s viewpoint, these three compensation components constitute
performance-based compensation and represent over half of each Named Executive’s annual
compensation.
2010 Long-Term Awards
As discussed above, during the first 60 days of each fiscal year, the Compensation Committee
establishes annual threshold, target and maximum 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 goals are attained. For the year ending December 31, 2010, the Company’s
threshold net income goal is $63.2 million, the target net income goal is $94.7 million and the
maximum net income goal is $126.3 million. The threshold, target and maximum net income goals for
SkyWest Airlines and ASA are $38.4 million and $18.8 million, $57.7 million and $28.2 million and
$76.9 million and $37.6 million, respectively.
In 2010, the Company took additional measures to strengthen the performance-based nature of its
long-term award program by subjecting two-thirds of each Named Executive’s stock option grant for
2010 to a performance condition based on the level of return on shareholder equity attained by the
Company for 2010. The targeted level of 2010 shareholder return on equity is 8.4%. All performance-
based options granted in 2010 to Named Executives will be forfeited if 2010 shareholder return on
equity is less than less than 4.2%; forfeiture will occur on a pro-rated basis if 2010 shareholder return
on equity falls between 4.2% and 8.4%.
With these changes, 55% of the Named Executives’ 2010 long-term awards are performance-based,
including a majority of stock grants.
Additionally, for 2010 the Compensation Committee elected to grant restricted stock units to the
Named Executives rather than shares of restricted stock. Under each Named Executive’s restricted
stock unit award, no shares of Company stock are issuable to the Named Executive unless he remains
employed by the Company for three years from the date of grant or an intervening change in control
occurs with respect to the Company.
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