SkyWest Airlines 2011 Annual Report Download - page 24

agreements with Delta related to the second lowest rate provisions to be applied under their respective
Delta Connection Agreements. As a result, SkyWest Airlines and ExpressJet have established the
contractual rates which will apply under those agreements through December 31, 2015.
There can be no assurance that the agreed-upon rates will be higher than the costs SkyWest
Airlines and ExpressJet will incur to provide the services required under their respective Delta
Connection Agreement. The new rates and future rate adjustments could negatively affect our financial
position and operating results.
Increased labor costs, strikes, labor disputes and increased unionization of our workforces may adversely
affect our ability to conduct our business.
Our business is labor intensive, requiring large numbers of pilots, flight attendants, mechanics and
other personnel. Labor costs constitute a significant percentage of our total operating costs. For
example, during the year ended December 31, 2011, our salary, wage and benefit costs constituted
approximately 32.0% of our total operating costs. Increases in our unionized labor costs could result in
a material reduction in our earnings. Any new collective bargaining agreements entered into by other
regional carriers with their work forces may also result in higher industry wages and increased pressure
on us to increase the wages and benefits of our employees. Future agreements with unionized and
non-unionized employees may be on terms that are not as attractive as our current agreements or
comparable to agreements entered into by our competitors.
Approximately 46% of our workforce is unionized. Strikes or labor disputes with our unionized
employees may adversely affect our ability to conduct business. Relations between air carriers and labor
unions in the U.S. are governed by the Railway Labor Act (‘‘RLA’’), which provides that a collective
bargaining agreement between an airline and a labor union does not expire, but instead becomes
amendable as of a stated date. The RLA generally prohibits strikes or other types of self-help actions
both before and after a collective bargaining agreement becomes amendable, unless and until the
collective bargaining processes required by the RLA have been exhausted.
SkyWest Airlines’ employees are not currently represented by any union; however, collective
bargaining group organization efforts among those employees occur from time to time. Such efforts will
likely continue in the future and may ultimately result in some or all of SkyWest Airlines’ employees
being represented by one or more unions. Moreover, one or more unions representing ExpressJet
employees may seek a single carrier determination by the National Mediation Board, which could
require SkyWest Airlines to recognize such union or unions as the certified bargaining representative of
SkyWest Airlines’ employees. One or more unions representing ExpressJet employees may also assert
that SkyWest Airlines’ employees should be subject to ExpressJet’s collective bargaining agreements. If
SkyWest Airlines’ employees were to unionize or be deemed to be represented by one or more unions,
negotiations with unions representing SkyWest Airlines’ employees could divert management attention
and disrupt operations, which may result in increased operating expenses and may negatively impact
our financial results. Moreover, we cannot predict the outcome of any future negotiations relating to
union representation or collective bargaining agreements. Agreements reached in collective bargaining
may increase our operating expenses and negatively impact our financial results.
Our ability to realize all of the anticipated benefits of our acquisition of ExpressJet Delaware will depend on
the successful integration of the operations previously conducted by Atlantic Southeast and ExpressJet
Delaware.
On November 12, 2010, we acquired ExpressJet Delaware through a merger of ExpressJet
Holdings, Inc. (‘‘ExpressJet Holdings’’), the sole shareholder of ExpressJet Delaware, with a wholly-
owned subsidiary of Atlantic Southeast (the ‘‘ExpressJet Merger’’). Effective December 31, 2011, we
combined the operations of Atlantic Southeast and ExpressJet Delaware through the ExpressJet
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