SkyWest Airlines 2010 Annual Report Download - page 91

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
(6) Commitments and Contingencies (Continued)
minimum rental payments required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2010 (in thousands):
Year ending December 31,
2011 ................................................ $ 373,166
2012 ................................................ 352,082
2013 ................................................ 331,451
2014 ................................................ 316,067
2015 ................................................ 283,421
Thereafter ............................................. 1,083,545
$2,739,732
The majority of the Company’s leased aircraft are owned and leased through trusts whose sole
purpose is to purchase, finance and lease these aircraft to the Company; therefore, they meet the
criteria of a variable interest entity. However, since these are single owner trusts in which the Company
does not participate, the Company is not considered at risk for losses and is not considered the primary
beneficiary. As a result, based on the current rules, the Company is not required to consolidate any of
these trusts or any other entities in applying the accounting guidance. Management believes that the
Company’s maximum exposure under these leases is the remaining lease payments.
Total rental expense for non-cancelable aircraft operating leases was approximately $311.9 million,
$300.8 million and $295.8 million for the years ended December 31, 2010, 2009 and 2008, respectively.
The minimum rental expense for airport station rents was approximately $43.5 million, $47.7 million
and $59.4 million for the years ended December 31, 2010, 2009 and 2008, respectively.
The Company’s leveraged lease agreements, typically obligate the Company to indemnify the
equity/owner participant against liabilities that may arise due to changes in benefits from tax ownership
of the respective leased aircraft. The terms of these contracts range up to 17 years. The Company did
not accrue any liability relating to the indemnification to the equity/owner participant because of
management’s assessment that the probability of this occurring is remote.
Self-insurance
The Company self-insures a portion of its potential losses from claims related to workers’
compensation, environmental issues, property damage, medical insurance for employees and general
liability. Losses are accrued based on an estimate of the ultimate aggregate liability for claims incurred,
using standard industry practices and the Company’s actual experience. Actual results could differ from
these estimates.
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