SkyWest Airlines 2011 Annual Report Download - page 29

We may be limited from expanding our flying within the Delta, United and Continental flight systems, and
there are constraints on our ability to provide airline services to airlines other than Delta, United and
Continental.
Additional growth opportunities within the Delta, United and Continental flight systems are
limited by various factors. Except as currently contemplated by our existing code-share agreements, we
cannot assure that Delta, United or Continental will contract with us to fly any additional aircraft. We
may not receive additional growth opportunities, or may agree to modifications to our code-share
agreements that reduce certain benefits to us in order to obtain additional aircraft, or for other
reasons. Furthermore, the troubled financial condition and prior bankruptcies and restructurings of
Delta and United may reduce the growth of regional flying within their flight systems. Given the
troubled nature of the airline industry, we believe that some of our competitors may be more inclined
to accept reduced margins and less favorable contract terms in order to secure new or additional
code-share operations. Even if we are offered growth opportunities by our major partners, those
opportunities may involve economic terms or financing commitments that are unacceptable to us. Any
one or more of these factors may reduce or eliminate our ability to expand our flight operations with
our existing code-share partners. Additionally, even if Delta, United and/or Continental choose to
expand our fleet on terms acceptable to us, they may be allowed at any time to subsequently reduce
the number of aircraft covered by our code-share agreements. We also cannot provide any assurance
that we will be able to obtain the additional ground and maintenance facilities, including gates, and
support equipment, to expand our operations. The failure to obtain these facilities and equipment
would likely impede our efforts to implement our business strategy and could materially and adversely
affect our operating results and our financial condition.
Delta, United and Continental may be restricted in increasing their business with us, due to
‘‘scope’’ clauses in the current collective bargaining agreements with their pilots that restrict the
number and size of regional jets that may be operated in their flight systems not flown by their pilots.
Delta’s scope limitations restrict its partners from operating aircraft with over 76 seats, even if those
aircraft are operated for an airline other than Delta. We cannot assure that these scope clauses will not
become more restrictive in the future. Any additional limit on the number of regional jets we can fly
for our code-share partners could have a material adverse effect on our expansion plans and the price
of our common stock.
Our business model depends on major airlines, including Delta, United and Continental electing to
contract with us instead of operating their own regional jets. Some major airlines, including Delta,
American and Alaska, own their own regional airlines or operate their own regional jets instead of
entering into contracts with regional carriers. We have no guarantee that in the future our code-share
partners will choose to enter into contracts with us instead of operating their own regional jets. Our
partners are not prohibited from doing so under our code-share agreements. A decision by Delta,
United or Continental to phase out code-share relationships and instead acquire and operate their own
regional jets could have a material adverse effect on our financial condition, results of operations or
the price of our common stock.
Additionally, our code-share agreements limit our ability to provide airline services to other
airlines in certain major airport hubs of each of Delta and United. Under the SkyWest Airlines Delta
Connection Agreement, our growth is contractually restricted in Atlanta, Cincinnati, Orlando and Salt
Lake City. Under the ExpressJet Delta Connection Agreement, our growth is restricted in Atlanta,
Cincinnati, New York (John F. Kennedy International Airport), Orlando and Salt Lake City. Under the
SkyWest Airlines United Express Agreement, growth is restricted in Chicago (O’Hare International
Airport), Denver, San Francisco, Seattle/Tacoma and Washington D.C. (Dulles International Airport).
Due to the fluctuations in our schedules, which are established primarily by our major partners, there
may be times that the number of flights we fly to and from a particular airport may exceed the
limitations set forth in one or more of our code-share agreements. The breach of those limitations
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