SkyWest Airlines 2009 Annual Report Download - page 43

Financial Highlights
We had revenues of $2.6 billion for the year ended December 31, 2009, a 25.2% decrease,
compared to revenues of $3.5 billion for the year ended December 31, 2008. We had net income of
$83.7 million, or $1.47 per diluted share, for the year ended December 31, 2009, a decrease of 25.9%,
compared to $112.9 million of net income, or $1.93 per diluted share, for the year ended December 31,
2008.
The significant items affecting our financial performance during 2009 are outlined below:
On June 10, 2009, SkyWest Airlines reached a mutual understanding with Midwest to terminate
the service SkyWest Airlines provided under the Midwest Services Agreement. As a result, SkyWest
Airlines removed its remaining 12 CRJ200s from Midwest service based on the following schedule: one
aircraft was removed in each of June 2009 and July 2009, three aircraft were removed in October 2009,
two aircraft were removed in November 2009, two aircraft were removed in December 2009 and the
last three aircraft were removed in January 2010. Additionally, SkyWest Airlines agreed to cancel an
unsecured note from Midwest in the amount of approximately $9.3 million in exchange for a
$4.0 million payment from Midwest. The $4.0 million payment was recorded as revenue by SkyWest
Airlines during the three months ended December 31, 2009.
We review our investment securities on an ongoing basis for the presence of other-than-temporary-
impairment (‘‘OTTI’’) with formal reviews performed quarterly. OTTI losses on individual equity
investment securities are recognized as a realized loss through earnings when fair value is significantly
below cost, the decline in fair value has existed for an extended period of time, and recovery is not
expected in the near term. OTTI losses on individual perpetual preferred securities are recognized as a
realized loss through earnings when a decline in the cash flows has occurred or the rating of the
security has been downgraded below investment grade. As a result of an ongoing valuation review of
our investment securities portfolio, we recognized a pre-tax charge of approximately $7.1 million during
the year ended December 31, 2009 for certain investment securities deemed to have
other-than-temporary impairment.
On October 23, 2009, Delta sent letters to SkyWest Airlines and ASA requiring them to either
adjust the rates payable under their respective Delta Connection Agreements or accept termination of
those agreements, and notifying SkyWest Airlines and ASA of Delta’s estimate of the average rates to
be applied under the agreements. On October 28, 2009, SkyWest Airlines and ASA notified Delta of
their election to adjust the rates payable under the Delta Connection Agreements; however, they also
notified Delta of their disagreement with Delta’s estimated rates and their belief that the methodology
Delta used to calculate its estimated rates is inconsistent with the terms of the Delta Connection
Agreements. SkyWest Airlines and ASA continue to negotiate with Delta in an effort to determine an
appropriate methodology for calculating the average rates of the carriers within the Delta Connection
Program. Because SkyWest Airlines and ASA have not reached an agreement with Delta regarding the
final contractual rates to be established under the Delta Connection Agreements, the Company has
evaluated the dispute for calculating the average rate of the carriers within the Delta Connection
Program under the revenue recognition accounting guidance and recorded revenue under those
agreements based on management’s understanding of the applicable terms in the Delta Connection
Agreements and management’s best estimate of the revenue that will ultimately be realized upon
settlement of the contractual rates with Delta with respect to the year ended December 31, 2009.
ASA experienced significant weather related cancellations in its Atlanta hub during the three
months ended March 31, 2009. Additionally, on March 31, 2009, as a result of an internal audit, ASA
grounded 60 CRJ200 regional jet aircraft in order to perform engine safety inspections in accordance
with the manufacturer’s recommendations. ASA cancelled approximately 750 scheduled flights as a
result of the severe weather and aircraft grounding during the quarter. As a result, ASA experienced a
negative impact on revenues of approximately $7.6 million.
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