SkyWest Airlines 2011 Annual Report Download - page 78

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)
monthly basis. At the end of each month, the Company calculates the incentives achieved during the
month and recognizes revenue accordingly.
On February 10, 2010, Atlantic Southeast and United entered into a United Express Agreement,
pursuant to which ExpressJet (formerly Atlantic Southeast) operates 14 CRJ200s as a United Express
carrier. On February 11, 2010, Atlantic Southeast began operating as a United Express carrier. The
United Express Agreement executed by Atlantic Southeast is a capacity purchase agreement with a
five-year term, and other terms which are generally consistent with the SkyWest Airlines United
Express Agreement.
On December 1, 2009, ExpressJet Delaware and United also entered into a United Express
Agreement, which sets forth the principal terms and conditions governing the United Express
operations formerly conducted by ExpressJet Delaware. Under the terms of that United Express
Agreement, to which ExpressJet became a party through the ExpressJet Combination, ExpressJet is
compensated primarily on a fee-per-completed-block hour and departure basis and is reimbursed for
fuel and other costs. Additionally, ExpressJet is eligible for incentive compensation upon the
achievement of certain performance criteria. The incentives are defined in that ExpressJet United
Express Agreement as being measured and determined on a monthly basis. At the end of each month,
the Company calculates the incentives achieved during the month and recognizes revenue accordingly.
Continental CPA
Effective November 12, 2010, ExpressJet Delaware entered into the Continental CPA, whereby
ExpressJet Delaware agreed to provide regional airline service in the Continental flight system. Under
the terms of the Continental CPA, ExpressJet operates 206 aircraft in the Continental flight system and
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. At the end of each
month, the Company calculates the incentives achieved during the month under the Continental CPA
and recognizes revenue accordingly.
Alaska Capacity Purchase Agreement
SkyWest Airlines and Alaska have entered into an Alaska Capacity Purchase Agreement, which
sets forth the principal terms and conditions governing SkyWest Airlines’ Alaska operations. Under the
terms of the Alaska Capacity Purchase Agreement, SkyWest Airlines is compensated primarily on a
fee-per-completed-block hour and departure basis and is reimbursed for fuel and other costs.
Additionally, SkyWest Airlines is eligible for incentive compensation upon the achievement of certain
performance criteria. The incentives are defined in the Alaska Capacity Purchase Agreement as being
measured and determined on a monthly basis. At the end of each month, the Company calculates the
incentives achieved during the month and recognizes revenue accordingly.
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