SkyWest Airlines 2010 Annual Report Download - page 145

Elements of Compensation
The Company’s executive compensation objectives and principles are implemented through the use
of the following principal elements of compensation, each discussed more fully below:
• Salary
• Annual Bonus
• Long-Term Awards (of which, a majority are performance-based)
• Retirement and other Benefits
The compensation objectives for each Executive are more fully described in the following
paragraphs. Actual compensation for the Executives for 2010 is reflected in the summary compensation
table immediately following this section.
Salary. Salary is provided with the objective of paying for the underlying role and responsibility
associated with the Executive’s position, which the Committee believes allows the Company to attract
and retain qualified executives. The Executives’ salaries are set at levels that the Committee believes
are generally competitive with the compensation paid to officers in similar positions at other airlines.
Salary adjustments are considered annually and influenced by growth of the Company’s operations,
individual performance, changes in responsibility, changes in cost of living and other factors. The
salaries of the Executives are set forth in the Summary Compensation Table set forth immediately
following this section.
Annual Bonus. In an effort to encourage achievement of the Company’s objectives, the Company
maintains an annual performance-based bonus plan for the Executives. The combination of salary and
annual bonuses is intended to result in a cash compensation package for each Executive that falls
within competitive market standards when the performance measures and personal goals are met. The
purpose of the bonus plan is to reward the Executives with an annual cash bonus in an amount that
correlates (i) in substantial part to the level of ‘‘Net Income’’ (as defined below) of the Company and
its operating subsidiaries achieved for the year; and (ii) to a lesser degree, to the achievement of
specific individual, subjective and qualitative goals during the year. The annual bonus objective for each
named executive is 60% of salary based on Net Income targets, and 20% of salary based on
achievement of individual goals.
Net Income-based Bonus Component. Prior to the beginning of each year, the Committee
establishes Net Income targets for the Company and each of the Company’s airline operating
subsidiaries. For purposes of setting Net Income targets and calculating actual Net Income results, ‘‘Net
Income’’ is generally defined as the net income of the Company (or its applicable operating subsidiary),
as set forth in the Company’s consolidated financial statements, but with such periodic adjustments as
the Committee determines are necessary to adjust for accounting timing differences such as the timing
difference between engine overhaul expenses and the related revenue collected from the Company’s
major partners. As a result, Net Income for purposes of calculating the Annual Bonus payable to the
Executives may differ from the net income of the Company reported in the Company’s consolidated
financial statements.
A target bonus of 60% of salary is set for each Executive based upon the achievement of the Net
Income targets. The annual bonus is adjusted proportionately for actual net income results greater or
lesser than the Net Income targets.
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