SkyWest Airlines 2009 Annual Report Download - page 80

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2009
(5) Commitments and Contingencies (Continued)
minimum rental payments required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2009 (in thousands):
Year ending December 31,
2010 ................................................ $ 329,512
2011 ................................................ 320,526
2012 ................................................ 320,998
2013 ................................................ 313,418
2014 ................................................ 302,013
Thereafter ............................................. 1,306,566
$2,893,033
The majority of the Company’s leased aircraft are owned and leased through trusts whose sole
purpose is to purchase, finance and lease these aircraft to the Company; therefore, they meet the
criteria of a variable interest entity. However, since these are single owner trusts in which the Company
does not participate, the Company is not considered at risk for losses and is not considered the primary
beneficiary. As a result, based on the current rules, the Company is not required to consolidate any of
these trusts or any other entities in applying the accounting guidance. Management believes that the
Company’s maximum exposure under these leases is the remaining lease payments.
Total rental expense for non-cancelable aircraft operating leases was approximately $300.8 million,
$295.8 million and $294.4 million for the years ended December 31, 2009, 2008 and 2007, respectively.
The minimum rental expense for airport station rents was approximately $47.7 million, $59.4 million
and $61.7 million for the years ended December 31, 2009, 2008 and 2007, respectively.
The Company’s leveraged lease agreements, typically obligate the Company to indemnify the
equity/owner participant against liabilities that may arise due to changes in benefits from tax ownership
of the respective leased aircraft. The terms of these contracts range up to 17 years. The Company did
not accrue any liability relating to the indemnification to the equity/owner participant because of
management’s assessment that the probability of this occurring is remote.
Self-insurance
The Company self-insures a portion of its potential losses from claims related to workers’
compensation, environmental issues, property damage, medical insurance for employees and general
liability. Losses are accrued based on an estimate of the ultimate aggregate liability for claims incurred,
using standard industry practices and the Company’s actual experience. Actual results could differ from
these estimates.
Purchase Commitments and Options
On October 12, 2007, the Company announced SkyWest Airlines’ plans to acquire 22 additional
regional jet aircraft through 2010, 18 of which SkyWest Airlines has begun operating under its United
Express Agreement as part of an aircraft transition plan, allowing United to remove 23 30-seat Brasilia
turboprops from the contract reimbursement model contemplated by the United Express Agreement
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