SkyWest Airlines 2010 Annual Report Download - page 49

converted into the right to receive $6.75 per share in cash, payable to the holder thereof, without
interest. Based on the number of outstanding shares of ExpressJet Holdings common stock as of the
effective time of the Merger, the aggregate value of the ExpressJet Merger consideration was
$131.6 million. After taking into effect the number of shares acquired by SkyWest and its subsidiaries,
the aggregate value of the ExpressJet Merger consideration was $136.5 million. As part of the
ExpressJet Merger, we recorded a purchase accounting gain of $15.6 million. This amount represents
the difference between the consideration paid and the net fair value of ExpressJet Holdings’ tangible
and intangible assets acquired and liabilities assumed. The fair value of the assets and liabilities
acquired were more than purchase price.
Under the SkyWest Airlines and Atlantic Southeast United Express Agreements, we recognize
revenue in our consolidated statement of income at a fixed hourly rate for mature engine maintenance
on regional jet engines and we recognize engine maintenance expense on our CRJ200 regional jet
engines in our consolidated statement of income on an as-incurred basis as maintenance expense.
During the year ended December 31, 2010, our CRJ200 engine expense under our SkyWest Airlines
and Atlantic Southeast United Express Agreements and our AirTran code-share agreement increased
$41.5 million compared to the year ended December 31, 2009. The increase in CRJ 200 engine
overhauls reimbursed at a fixed hourly rate was principally due to scheduled engine maintenance
events. We anticipate the average quarterly number of scheduled engine maintenance events we
experienced during the year ended December 31, 2010 will likely continue each quarter through 2011
and the first quarter of 2012.
Total available seat miles (‘‘ASMs’’) for the year ended December 31, 2010 increased 15.2%,
compared to the year ended December 31, 2009, primarily due to the ExpressJet Merger, as well as
SkyWest Airlines’ acceptance of 18 new CRJ700s since April 1, 2009, and its incremental placement of
those aircraft into service over that period. During the year ended December 31, 2010, we generated
25.5 billion ASMs, compared to 22.1 billion ASMs during the year ended December 31, 2009.
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.
On September 29, 2010, we invested $7 million for a 30% ownership interest in Mekong Aviation
Joint Stock Company, an airline operating in Vietnam (‘‘Air Mekong’’). We anticipate accounting for
the investment using the equity method of accounting and intend to reflect our equity interest in Air
Mekong’s earnings on a one-quarter lag.
Outlook
On January 4, 2011, we announced SkyWest Airlines’ plans to acquire four additional regional jet
aircraft during 2011. SkyWest Airlines plans to place these aircraft into operation under the SkyWest
Airlines Delta Connection Agreement. Additionally, we have announced plans to lease eight used
CRJ700s from another operator. SkyWest Airlines and Atlantic Southeast plan to operate the eight
CRJ700s under the SkyWest Airlines and Atlantic Southeast Delta Connection Agreements. On
January 25, 2011, SkyWest Airlines agreed to operate five CRJ700s for Alaska Airlines. SkyWest
Airlines plans to lease these aircraft from Alaska Airlines for a nominal amount.
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