SkyWest Airlines 2010 Annual Report Download - page 16

Additionally, certain of SkyWest Airlines’ operating costs are reimbursed by United, including costs
related to fuel and aircraft ownership. As of December 31, 2010, 29 of the 38 Brasilia turboprops and
18 of the 83 CRJ200s SkyWest Airlines operated under the SkyWest Airlines United Express
Agreement were operated under a revenue-sharing arrangement.
On October 16, 2009, SkyWest Airlines extended to United a secured term loan in the amount of
$80 million. The term loan bore interest at a rate of 11%, with a ten-year amortization period. The
loan was secured by certain ground equipment and airport slot rights held by United. On August 11,
2010, United repaid the $80 million term loan. SkyWest Airlines also agreed to defer certain amounts
otherwise payable to SkyWest Airlines under the existing SkyWest Airlines United Express Agreement.
The maximum deferral amount is $49 million and any amounts deferred accrue a deferral fee of 8%,
payable weekly. United’s right to defer such payments is scheduled to terminate in 2019.
On October 16, 2009, SkyWest Airlines and United agreed to extend the right of SkyWest Airlines
to operate 40 regional jet aircraft under the SkyWest Airlines United Express Agreement until the end
of their respective lease terms (on average 8.4 years).
United has the option, upon twelve months prior notice, of extending the SkyWest Airlines United
Express Agreement for five years. The SkyWest Airlines United Express Agreement is subject to early
termination in various circumstances including:
• if SkyWest Airlines or United fails to fulfill an obligation under the SkyWest Airlines United
Express Agreement for a period of 60 days after written notice to cure;
• if SkyWest Airlines’ operations fall below certain performance levels for a period of three
consecutive months;
• subject to limitations imposed by the U.S. Bankruptcy Code, if the other party becomes
insolvent, fails to pay its debts when due, takes action leading to its cessation as a going concern,
makes an assignment of substantially all of its assets, or ceases or suspends operations;
• if bankruptcy proceedings are commenced against the other party (subject to limitations imposed
by the U.S. Bankruptcy Code) and certain specified conditions are not satisfied; or
• if SkyWest Airlines operates, subject to certain exceptions, any additional regional jets or
turboprop aircraft pursuant to a marketing or code-share relationship with any party other than
United to provide hub service at United’s hubs in Chicago (O’Hare), Denver, San Francisco,
Seattle/Tacoma, or Washington, D.C. (Dulles International Airport).
Atlantic Southeast United Express Agreement
On February 10, 2010, Atlantic Southeast and United entered into the Atlantic Southeast United
Express Agreement, pursuant to which Atlantic Southeast operated 16 CRJ200 aircraft as a United
Express carrier as of December 31, 2010. The Atlantic Southeast United Express Agreement is a
capacity purchase agreement with a five-year term, and other terms which are generally consistent with
the SkyWest Airlines United Express Agreement.
ExpressJet Continental CPA
Effective November 12, 2010, ExpressJet entered into the Continental CPA, whereby ExpressJet
agreed to provide regional airline service in the Continental flight system.
The Continental CPA provides for a ten-year term, subject to early termination by Continental or
ExpressJet upon the occurrence of certain events. Continental’s termination rights include the right to
terminate the Continental CPA if ExpressJet’s performance falls below identified standards (and such
failure is not cured within 60 days following receipt of notice), upon the occurrence of a labor strike
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