SkyWest Airlines 2011 Annual Report Download - page 16

Continental CPA if Continental fails to make payment of $500,000 or more due to ExpressJet under
the Continental CPA and such failure is not cured within five business days following receipt of notice.
Under the terms of the Continental CPA, ExpressJet operates 206 aircraft in the Continental flight
system. All of the aircraft are leased to ExpressJet by Continental pursuant to sublease or lease
agreements. Upon the expiration of the Continental CPA, ExpressJet is obligated to return the
subleased or leased aircraft to Continental.
Under the terms of the Continental CPA, Continental has agreed to compensate ExpressJet on a
monthly basis based on the block hours flown by ExpressJet and the weighted average number of
aircraft operated by ExpressJet under the Continental CPA. Additionally, ExpressJet may earn incentive
compensation for good operating performance, but is subject to financial penalties for poor operating
performance. The parties to the Continental CPA have made customary representations, warranties and
covenants, and the agreement contains other provisions typical of agreements of this kind, including
with respect to various operational, marketing and administrative matters.
ExpressJet United Express Agreements
ExpressJet and United are parties to two ExpressJet United Express Agreements, consisting of a
United Express Agreement initially executed between ExpressJet Delaware and United, dated
December 1, 2009, and a United Express Agreement initially executed between Atlantic Southeast and
United, dated February 10, 2010. As of December 31, 2011, Atlantic Southeast and ExpressJet
Delaware operated not less than 36 ERJ-145s and 14 CRJ200s under the United Express Agreements.
Generally, under the ExpressJet United Express Agreements, United retains all air fares, cargo rates,
mail charges and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing ExpressJet’s obligations
under the ExpressJet United Express Agreements, ExpressJet receives from United compensation
(subject to an annual adjustment) of a fixed fee per completed block hour, fixed fee per completed
departure, fixed fee per passenger and a fixed fee for overhead and aircraft costs. The ExpressJet
United Express Agreements provide for incentives based upon ExpressJet’s performance, including
on-time arrival performance and completion percentage rates. Additionally, certain of ExpressJet’s
operating costs are reimbursed by United, including fuel costs.
The ExpressJet United Express Agreements expire in four tranches: the agreements expire with
respect to 14 ERJ145s on May 1, 2012, 11 ERJ145s on April 30, 2013, 11 ERJ145s on April 30, 2015,
and 14 CRJ200s during 2015. The ExpressJet United Express Agreements also include a renewal
option, at United’s election, for additional periods up to a total term of five years. Under the
agreements, United must notify ExpressJet of its intention to renew each group of aircraft not less than
six months prior to the end of the term for such aircraft.
SkyWest Airlines Alaska Capacity Purchase Agreement
On April 13, 2011, SkyWest Airlines and Alaska entered into the SkyWest Airlines Alaska Capacity
Purchase Agreement. As of December 31, 2011, SkyWest Airlines operated five CRJ700s under the
SkyWest Airlines Alaska Capacity Purchase Agreement, flying a total of approximately 30 Alaska flights
per day between Seattle, Portland and designated outlying destinations. Generally, under the SkyWest
Airlines Alaska Capacity Purchase Agreement, Alaska retains all air fares, cargo rates, mail charges
and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’
obligations under the SkyWest Airlines Alaska Capacity Purchase Agreement, SkyWest Airlines receives
from Alaska compensation (subject to an annual adjustment) of a fixed fee per completed block hour,
a fixed fee per completed departure, a fixed fee per passenger, and a fixed fee for overhead and
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