SkyWest Airlines 2010 Annual Report Download - page 26

of those reimbursements is subject of litigation and is not reasonably assured. The current status of the
litigation with Delta is summarized below in Item 3. Legal Proceedings.
There can be no assurance that the dispute between SkyWest Airlines and Atlantic Southeast, on
the one hand, and Delta, on the other hand, will be resolved consistent with the position taken by
SkyWest Airlines and Atlantic Southeast. If the dispute is not resolved consistent with the position
taken by SkyWest Airlines and Atlantic Southeast our financial results would be negatively impacted.
The litigation may have other negative effects on our relationship with Delta and our operations under
the existing Delta Connection Agreements.
Disagreements regarding the interpretation of our code-share agreements with our major partners could have
an adverse effect on our operating results and financial condition.
SkyWest, SkyWest Airlines, Atlantic Southeast and ExpressJet have entered into code-share
agreements with Delta, United and Continental. For the year ended December 31, 2010, more than
99% of our ASMs were attributable to flights we flew under those agreements. We anticipate that, for
the foreseeable future, substantially all of our revenues will be generated under existing or future
code-share agreements.
Contractual agreements, such as our code-share agreements, are subject to interpretation and
disputes may arise under such agreements if the parties to an agreement apply different interpretations
to that agreement. Those disputes may divert management time and resources from the core operation
of the business, and may result in litigation, arbitration or other forms of dispute resolution.
In recent years we have experienced disagreements with our major partners regarding the
interpretation of various provisions of our code-share agreements. Some of those disagreements have
resulted in litigation (see the preceding risk factor entitled SkyWest Airlines and Atlantic Southeast are
engaged in litigation with Delta, which may negatively impact our financial results and our relationship with
Delta), and we may be subject to additional disputes and litigation in the future. Those disagreements
have also required a significant amount of management time and financial resources.
To the extent that we continue to experience disagreements regarding the interpretation of our
code-share or other agreements, we will likely expend valuable management time and financial
resources in our efforts to resolve those disagreements. Those disagreements may result in litigation,
arbitration or other proceedings. Furthermore, there can be no assurance that any or all of those
proceedings, if commenced, would be resolved in our favor. An unfavorable result in any such
proceeding could have adverse financial consequences or require us to modify our operations. Such
disagreements and their consequences could have an adverse effect on our operating results and
financial condition.
We have a significant amount of contractual obligations.
As of December 31, 2010, we had a total of approximately $1.9 billion in total long-term debt
obligations. Substantially all of this long-term debt was incurred in connection with the acquisition of
aircraft, engines and related spare parts. We also have significant long-term lease obligations primarily
relating to our aircraft fleet. These leases are classified as operating leases and therefore are not
reflected as liabilities in our consolidated balance sheets. At December 31, 2010, we had 539 aircraft
under lease, with remaining terms ranging from one to 17 years. Future minimum lease payments due
under all long-term operating leases were approximately $2.7 billion at December 31, 2010. At a 6.2%
discount factor, the present value of these lease obligations was equal to approximately $2.0 billion at
December 31, 2010. As of December 31, 2010, we had commitments of approximately $193.5 million to
purchase four new CRJ700s and lease eight used CRJ700s. We expect to complete these deliveries by
the fourth quarter of 2011. Our high level of fixed obligations could impact our ability to obtain
additional financing to support additional expansion plans or divert cash flows from operations and
expansion plans to service the fixed obligations.
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