SkyWest Airlines 2010 Annual Report Download - page 14

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• if the other party files for bankruptcy, reorganization or similar action (subject to limitations
imposed by the U.S. Bankruptcy Code) or if either party makes an assignment for the benefit of
creditors; or
• if SkyWest Airlines fails to maintain competitive base rate costs (provided that SkyWest Airlines
has the right to adjust its rates prior to any such termination).
Atlantic Southeast Delta Connection Agreement
Atlantic Southeast and Delta are parties to the Atlantic Southeast Delta Connection Agreement,
dated as of September 8, 2005. As of December 31, 2010, Atlantic Southeast operated ten CRJ900s,
42 CRJ700s and 98 CRJ200s for Delta under the Atlantic Southeast Delta Connection Agreement. As
of December 31, 2010, Atlantic Southeast was operating more than 800 Delta Connection flights per
day between Atlanta or Cincinnati and outlying destinations. Under the Atlantic Southeast Delta
Connection Agreement, Delta is entitled to all passenger, cargo and other revenues associated with
each flight. Commencing in 2008, Atlantic Southeast is entitled to maintain its percentage of total
Delta Connection flights that it had in 2007, so long as its bid for additional regional flying is
competitive with bids submitted by other regional carriers.
In exchange for providing the designated number of flights and performing Atlantic Southeast’s
other obligations under the Atlantic Southeast Delta Connection Agreement, Atlantic Southeast 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 direct costs related to Delta Connection flights plus (ii) if
Atlantic Southeast completes a certain minimum percentage of its Delta Connection flights, an amount
equal to a certain percentage of the direct costs (not including fuel costs) related to the Delta
Connection flights. Costs directly reimbursed by Delta under the Atlantic Southeast Delta Connection
Agreement include costs related to fuel, ground handling, and aircraft engine maintenance and
ownership. The Atlantic Southeast Delta Connection Agreement also provides for incentive
compensation based upon Atlantic Southeast’s performance, including on-time arrival performance and
completion percentage rates.
Among other provisions, the Atlantic Southeast Delta Connection Agreement 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, Atlantic Southeast
reached an agreement with Delta related to the average rate provisions to be applied under the
Atlantic Southeast Delta Connection Agreement.
The Atlantic Southeast 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, Atlantic Southeast reached an
agreement with Delta related to the second lowest rate provisions to be applied under the Atlantic
Southeast Delta Connection Agreement. As a result of that agreement, Atlantic Southeast and Delta
have established the contractual rates which will apply under the Atlantic Southeast Delta Connection
Agreement through December 31, 2015.
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