SkyWest Airlines 2010 Annual Report Download - page 13

ticketing, pricing and seat inventories, and shared revenues with Delta, United or AirTran according to
pro-rate formulas. The following summaries of our code-share agreements do not purport to be
complete and are qualified in their entirety by reference to the applicable agreement.
SkyWest Airlines Delta Connection Agreement
SkyWest Airlines and Delta are parties to the SkyWest Airlines Delta Connection Agreement,
dated as of September 8, 2005. As of December 31, 2010, SkyWest Airlines operated 21 CRJ900s,
13 CRJ700s and 52 CRJ200s under the SkyWest Airlines Delta Connection Agreement. Additionally, as
of December 31, 2010, SkyWest Airlines operated 10 Brasilia turboprops under the Delta code under a
revenue-sharing arrangement. SkyWest Airlines operates these aircraft to provide Delta Connection
service between Delta hubs and destinations designated by Delta. As of December 31, 2010, SkyWest
Airlines was operating approximately 490 Delta Connection flights per day. Generally, Delta is entitled
to all passenger, cargo and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’ other
obligations under the SkyWest Airlines Delta Connection Agreement, SkyWest Airlines is scheduled to
receive from Delta on a weekly basis (i) specified fixed rate payments for each completed flight, which
are intended to pay for certain costs related to the Delta Connection flights, plus (ii) a fixed dollar
payment per completed flight block hour, subject to annual escalation at an agreed rate. Costs directly
reimbursed by Delta under the SkyWest Airlines Delta Connection Agreement include costs primarily
related to fuel, aircraft engine maintenance and ownership.
Among other provisions, the SkyWest Airlines Delta Connection Agreement also provides that,
beginning with the third anniversary of the execution of the agreement (September 8, 2008), Delta has
the right to require that certain contractual rates under that agreement shall not exceed the average
rate of all carriers within the Delta Connection Program. On November 19, 2010, SkyWest Airlines
reached an agreement with Delta related to the average rate provisions to be applied under the
SkyWest Airlines Delta Connection Agreement.
The SkyWest Airlines Delta Connection Agreement provides that, beginning with the fifth
anniversary of the execution of the agreement (September 8, 2010), Delta has the right to require that
certain contractual rates under that agreement shall not exceed the second lowest rates of all carriers
within the Delta Connection Program. On November 19, 2010, SkyWest Airlines reached an agreement
with Delta related to the second lowest rate provisions to be applied under the SkyWest Airlines Delta
Connection Agreement. As a result of that agreement, SkyWest Airlines and Delta have established the
contractual rates which will apply under the SkyWest Airlines Delta Connection Agreement through
December 31, 2015.
The SkyWest Airlines Delta Connection Agreement is scheduled to terminate on September 8,
2020, unless Delta elects to exercise its option to extend the term for up to four additional five-year
terms. The SkyWest Airlines Delta Connection Agreement is subject to early termination in various
circumstances, including:
• if SkyWest Airlines or Delta commits a material breach of the SkyWest Airlines Delta
Connection Agreement, subject to 30-day notice and cure rights;
• if SkyWest Airlines fails to conduct all flight operations and maintain all aircraft under the
SkyWest Airlines Delta Connection Agreement in compliance in all material respects with
applicable government regulations;
• if SkyWest Airlines fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the Atlantic Southeast Delta
Connection Agreement;
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