SkyWest Airlines 2010 Annual Report Download - page 23

on our financial condition, operating revenues and net income unless we are able to enter into
satisfactory substitute arrangements for the utilization of the affected aircraft by other code-share
partners, or, alternatively, obtain the airport facilities and gates and make the other arrangements
necessary to fly as an independent airline. We may not be able to enter into substitute code-share
arrangements, and any such arrangements we might secure may not be as favorable to us as our
current agreements. Operating our airline independent from major partners would be a significant
departure from our business plan, would likely be very difficult and may require significant time and
resources, which may not be available to us at that point.
The current terms of the SkyWest, SkyWest Airlines and Atlantic Southeast Delta Connection
Agreements are subject to certain early termination provisions. Delta’s termination rights include cross-
termination rights (meaning that a breach by SkyWest, SkyWest Airlines or Atlantic Southeast of its
Delta Connection Agreement could, under certain circumstances, permit Delta to terminate any or all
of the Delta Connection Agreements), the right to terminate each of the agreements upon the
occurrence of certain force majeure events (including certain labor-related events) that prevent
SkyWest Airlines or Atlantic Southeast from performance for certain periods and the right to terminate
each of the agreements if SkyWest Airlines or Atlantic Southeast, as applicable, fails to maintain
competitive base rate costs, subject to certain rights of SkyWest Airlines to take corrective action to
reimburse Delta for lost revenues. The current terms of the SkyWest Airlines, Atlantic Southeast and
ExpressJet United Express Agreements are subject to certain early termination provisions and
subsequent renewals. United may terminate the SkyWest Airlines, Atlantic Southeast and ExpressJet
United Express Agreements due to an uncured breach by SkyWest Airlines, Atlantic Southeast or
ExpressJet of certain operational or performance provisions, including measures and standards related
to flight completions, baggage handling and on-time arrivals. The current terms of the Continental CPA
are subject to certain early termination provisions and subsequent renewals. Continental may terminate
the Continental CPA due to an uncured breach by ExpressJet of certain operational and performance
provisions, including measures and standards related to flight completions and on-time arrivals.
We currently use the systems, facilities and services of Delta, United and Continental to support a
significant portion of our operations, including airport and terminal facilities and operations,
information technology support, ticketing and reservations, scheduling, dispatching, fuel purchasing and
ground handling services. If Delta, United or Continental were to cease any of these systems, close any
of these facilities or no longer provide these services to us, due to termination of one of our code-share
agreements, a strike or other labor interruption by Delta, United or Continental personnel or for any
other reason, we may not be able to replace those systems, facilities or services on terms and conditions
as favorable as those we currently receive, or at all. Since our revenues and operating profits are
dependent on our level of flight operations, we could then be forced to significantly reduce our
operations. Furthermore, upon certain terminations of our code-share agreements, Delta, United and
Continental could require us to sell or assign to them facilities and assets, including maintenance
facilities, we use in connection with the code-share services we provide. As a result, in order to offer
airline service after termination of any of our code-share agreements, we may have to replace these
facilities, assets and services. We may be unable to arrange such replacements on satisfactory terms, or
at all.
We may be negatively impacted if Delta, United or Continental experiences significant financial difficulties in
the future.
For the year ended December 31, 2010 approximately 99.3% of our ASMs were attributable to our
code-share agreements with Delta, United and Continental. Both Delta and United have incurred
significant losses in recent years, which materially weakened their financial condition. Volatility in fuel
prices may negatively impact Delta’s, United’s and Continental’s results of operations and financial
condition. Among other risks, Delta, United and Continental are vulnerable both to unexpected events
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