SkyWest Airlines 2011 Annual Report Download - page 14

In exchange for providing the designated number of flights and performing ExpressJet’s other
obligations under the ExpressJet Delta Connection Agreement, ExpressJet is scheduled to receive from
Delta on a weekly basis (i) specified fixed rate payments for each completed flight, which are intended
to pay for certain direct costs related to Delta Connection flights plus (ii) if ExpressJet completes a
certain minimum percentage of its Delta Connection flights, an amount equal to a certain percentage
of the direct costs (not including fuel costs) related to the Delta Connection flights. Costs directly
reimbursed by Delta under the ExpressJet Delta Connection Agreement include costs related to fuel,
ground handling, and aircraft engine maintenance and aircraft ownership. The ExpressJet Delta
Connection Agreement also provides for incentive compensation based upon ExpressJet’s performance,
including on-time arrival performance and completion percentage rates.
The ExpressJet Delta Connection Agreement provides that, upon the fifth anniversary of the
execution of the agreement (September 8, 2010), Delta obtained the right to require that certain
contractual rates under that agreement shall not exceed the second lowest rates of all carriers within
the Delta Connection Program. On November 19, 2010, ExpressJet (formerly Atlantic Southeast)
reached an agreement with Delta related to the second lowest rate provisions to be applied under the
ExpressJet Delta Connection Agreement. As a result of that agreement, ExpressJet and Delta have
established the contractual rates which will apply under the ExpressJet Delta Connection Agreement
through December 31, 2015.
The ExpressJet Delta Connection Agreement is scheduled to terminate on September 8, 2020,
unless Delta elects to exercise its option to extend the term for up to four additional five-year terms.
The ExpressJet Delta Connection Agreement is subject to early termination in various circumstances
including:
• if ExpressJet or Delta commits a material breach of the ExpressJet Delta Connection
Agreement, subject to 30-day notice and cure rights;
• if ExpressJet fails to conduct all flight operations and maintain all aircraft under the ExpressJet
Delta Connection Agreement in compliance in all material respects with applicable government
regulations;
• if ExpressJet fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the SkyWest Airlines Delta
Connection Agreement;
• if the other party files for bankruptcy, reorganization or similar action (subject to limitations
imposed by the U.S. Bankruptcy Code) or if either party makes an assignment for the benefit of
creditors; or
• if ExpressJet fails to maintain competitive base rate costs (provided that ExpressJet has the right
to adjust its rates prior to any such termination).
SkyWest, Inc. Delta Connection Agreement
In December 2006, we entered into a Delta Connection Agreement which awarded us the right to
operate 12 CRJ700s previously operated by Comair. This Delta Connection Agreement is ancillary to,
and satisfied certain obligations of Delta under, the ExpressJet Delta Connection Agreement. Delta has
not extended the contract term on these aircraft. We anticipate returning these aircraft to Delta during
the first six months of 2012.
SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to the SkyWest Airlines United Express Agreement
entered into on July 31, 2003. As of December 31, 2011, SkyWest Airlines operated 70 CRJ700s,
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