SkyWest Airlines 2011 Annual Report Download - page 46

February 2010. Upon the completion of the ExpressJet Combination on December 31, 2011, ExpressJet
operated as a Delta Connection carrier in Atlanta and Cincinnati and a United Express carrier in
Chicago (O’Hare), Washington, D.C. (Dulles International Airport), Cleveland, Newark and Houston.
Historically, multiple contractual relationships have enabled us to reduce reliance on any single
major airline code and to enhance and stabilize operating results through a mix of contract flying and
our controlled or ‘‘pro-rate’’ flying. For the year ended December 31, 2011, contract flying revenue and
pro-rate revenue represented approximately 91% and 9%, respectively, of our total passenger revenues.
On contract routes, the major airline partner controls scheduling, ticketing, pricing and seat inventories
and we are compensated by the major airline partner at contracted rates based on the completed block
hours, flight departures and other operating measures. On pro-rate flights, we control scheduling,
ticketing, pricing and seat inventories and receive a pro-rated portion of passenger fares. For the year
ended December 31, 2011, essentially all of our Brasilia turboprops flown for Delta were flown under
pro-rate arrangements, while approximately 61% the ASMs flown by our Brasilia turboprops in the
United system were flown under contractual arrangements, with the remaining 39% of the ASMs flown
by our Brasilias in the United system were flown under pro-rate arrangements. For the year ended
December 31, 2011, approximately 90% of the ASMs flown by our CRJ200s in the United system were
flown under contractual arrangements, with the remaining 10% of the ASMs flown under pro-rate
arrangements.
Financial Highlights
We had revenues of $3.7 billion for the year ended December 31, 2011, a 32.2% increase,
compared to revenues of $2.8 billion for the year ended December 31, 2010. We had a net loss of
$27.3 million, or $0.52 per diluted share, for the year ended December 31, 2011, a decrease of 128.4%,
compared to net income of $96.4 million, or $1.70 per diluted share, for the year ended December 31,
2010.
The significant items affecting our financial performance during the year ended December 31, 2011
are summarized below:
On November 12, 2010, we completed the ExpressJet Merger, which has substantially affected all
aspects of our operations. Among other effects, the ExpressJet Merger added 242 ERJ145 aircraft to
our fleet. The completion of the ExpressJet Merger is the most significant factor that affects the
comparability of our financial and operating results between the year ended December 31, 2011 and
the year ended December 31, 2010.
The Delta Connection Agreements provide that, beginning with the fifth anniversary of the
execution of the agreements (September 8, 2010), Delta has the right to require that certain contractual
rates under those agreements shall not exceed the second lowest rates of all carriers within the Delta
Connection Program. During the fourth quarter of 2010, SkyWest Airlines and Atlantic Southeast (now
ExpressJet) reached an agreement with Delta on contractual rates satisfying the second-lowest rate
provision and agreed on rates through December 31, 2015. Delta additionally waived its right to require
that the contractual rates payable under the Delta Connection Agreements under those agreements
shall not exceed the second lowest of all carriers within the Delta Connection Program through
December 31, 2015. As a result of the negotiated adjustment of the contractual rates under the Delta
Connection Agreements, our passenger revenues for the year ended December 31, 2011 were
$21.7 million lower than they would have been under the rates that existed prior to the adjustment. We
recorded $10.3 million in additional revenue as a result of the finalization of contractual rates during
the quarter ended December 31, 2010. Under the terms of the SkyWest Airlines and ExpressJet Delta
Connection Agreements, Delta has agreed to compensate SkyWest Airlines and ExpressJet for
initiatives that directly result in pass-through cost savings. Delta agreed to share such savings with
SkyWest Airlines and ExpressJet on an equal basis for a twelve-month period. During the three months
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