SkyWest Airlines 2011 Annual Report Download - page 57

Revenues. Operating revenues increased $151.5 million, or 5.8%, during the year ended
December 31, 2010, compared to the year ended December 31, 2009. We are reimbursed for our actual
fuel costs by our major partners under our contract flying arrangements. For financial reporting
purposes, we record these reimbursements as operating revenue. Under the SkyWest Airlines and
ExpressJet Delta Connection Agreements and the Continental CPA, we are reimbursed for our engine
overhaul expenses as incurred. We also record those engine overhaul reimbursements as operating
revenue. The following table summarizes the amount of fuel and engine overhaul reimbursements
included in our passenger revenues for the periods indicated (dollar amounts in thousands).
For the year ended December 31,
2010 2009 $ Change % Change
Passenger revenues .......................... $2,724,276 $2,582,238 $ 142,038 5.5%
Less: Fuel reimbursement from major partners ...... 258,523 360,309 (101,786) (28.2)%
Less: Engine overhaul reimbursement from major
partners ................................ 106,241 112,556 (6,315) (5.6)%
Passenger revenue excluding fuel and engine overhauls
reimbursements ........................... $2,359,512 $2,109,373 $ 250,139 11.9%
Passenger revenues. Passenger revenues increased $142.0 million, or 5.5%, during the year ended
December, 31 2010, compared to the year ended December 31, 2009. Our passenger revenues,
excluding fuel and engine overhaul reimbursements from major partners, increased $250.1 million, or
11.9%, during the year ended December 31, 2010, compared to the year ended December 31, 2009.
The increase in passenger revenues, excluding fuel and engine overhaul reimbursements, was primarily
due to four factors. First, Atlantic Southeast experienced an abnormally high number of flight
cancellations, primarily due to weather problems in its Atlanta hub, during the year ended
December 31, 2009. Additionally, on March 31, 2009, as a result of an internal audit, Atlantic
Southeast grounded 60 CRJ200 aircraft in order to perform engine safety inspections in accordance
with the manufacturer’s recommendations. Consequently, Atlantic Southeast cancelled approximately
750 more flights than normal as a result of the severe weather and the aircraft grounding during the
three months ended March 31, 2009.Those cancelations contributed to an increase in passenger
revenue of approximately $7.6 million for the year ended December 31, 2010, compared to the year
ended December 31, 2009. Second, our block hour production increased 13.5% during the year end
December 31, 2010, compared to the year ended December 31, 2009.The increase in block hours was
primarily due to SkyWest Airlines taking incremental delivery of 18 CRJ 700s subsequent to April 1,
2009, and the completion of the ExpressJet Merger on November 12, 2010. Third, during the three
months ended December 31, 2010, SkyWest Airlines and Atlantic Southeast finalized certain
contractual rates from September 8, 2008 through December 31, 2010 with Delta. As a result, we
recorded $10.3 million in additional revenue as a result of the finalization of contractual rates during
the quarter ended December 31, 2010. Fourth, under the terms of the SkyWest Airlines and ExpressJet
Delta Connection Agreements, Delta has agreed to compensate SkyWest Airlines and Atlantic
Southeast (now ExpressJet) for initiatives that directly result in pass through cost savings. Delta agreed
to share such savings with SkyWest Airlines and Atlantic Southeast (now ExpressJet) on an equal basis
for a twelve-month period. During the three months ended December 31, 2010, Delta paid, and
SkyWest Airlines and Atlantic Southeast recognized, approximately $6.9 million in cost savings revenue.
Ground handling and other. Total ground handling and other revenues increased $9.5 million, or
30.3%, during the year ended December 31, 2010, compared to the year ended December 31, 2009.
The increase was primarily related to aircraft rental revenue to other airlines. During the year ended
December 31, 2010, we obtained leases for four CRJ900s and subleased the aircraft to Air Mekong. In
addition, ExpressJet Delaware had approximately $4.3 million in ground handling and other revenue
during 2010.
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