SkyWest Airlines 2009 Annual Report Download - page 15

SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to the United Express Agreement entered into on July 31,
2003. As of December 31, 2009, SkyWest Airlines operated 66 CRJ700s, 81 CRJ200s and 39 Brasilia
turboprops under the United Express Agreement, flying a total of approximately 1,060 United Express
flights per day between Chicago (O’Hare), Denver, Los Angeles, San Francisco, Portland and Seattle/
Tacoma and designated outlying destinations. Generally, under the United Express Agreement, United
retains all air fares, cargo rates, mail charges and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’
obligations under the United Express Agreement, SkyWest Airlines receives from United compensation
(subject to an annual adjustment) of a fixed-fee per completed block hour, a fixed-fee per completed
departure, a fixed-fee per passenger, a fixed-fee for overhead and aircraft costs, and a one-time start-up
payment for each aircraft delivered. The United Express Agreement provides for incentives based upon
SkyWest Airlines’ performance, including on-time arrival performance and completion percentage rates.
Additionally, certain of SkyWest Airlines’ operating costs are reimbursed by United, including costs
related to fuel and aircraft ownership. As of December 31, 2009, 27 of the 39 Brasilia turboprops and
14 of the 81 CRJ200s were operated under a revenue-sharing arrangement.
On October 16, 2009, SkyWest Airlines extended to United a secured term loan in the amount of
$80 million. The term loan bears interest at a rate of 11%, with a ten-year amortization period. The
loan is secured by certain ground equipment and airport slot rights held by United. SkyWest Airlines
also agreed to defer certain amounts otherwise payable to SkyWest Airlines under the existing United
Express Agreement. The maximum deferral amount is $49 million and any amounts deferred accrue a
deferral fee of 8%, payable weekly. United’s right to defer such payments is scheduled to terminate in
ten years.
On October 16, 2009, SkyWest Airlines extended existing rights to operate 40 regional jet aircraft
under the United Express Agreement until the end of their current lease terms (on average 8.4 years).
The following table is the updated schedule of expirations for the SkyWest Airlines United Express
contract aircraft:
Brasilia
Year Turboprops CRJ200s CRJ700s
2010 .................................... 1 2 —
2011 .................................... — 4 —
2013 .................................... 9 11 1
2014 .................................... — — 10
2015 .................................... — 10 31
2016 .................................... — — 10
2017 .................................... — 2 —
2018 .................................... — 7 —
2019 .................................... — 2 9
2020 .................................... — — 9
2021 .................................... — 15 —
2022 .................................... — 8 —
2024 .................................... — 6 —
United has the option, upon one year’s notice, of extending the United Express Agreement for five
years. The United Express Agreement is subject to early termination in various circumstances including:
• if SkyWest Airlines or United fails to fulfill an obligation under the United Express Agreement
for a period of 60 days after written notice to cure;
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