SkyWest Airlines 2011 Annual Report Download - page 90

SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2011
(7) Commitments and Contingencies (Continued)
rights to voluntarily dismiss their claims in the Superior Court, and filed a new complaint (the ‘‘State
Court Complaint’’) in the Georgia State Court of Fulton County (the ‘‘State Court’’). The claims
continue to include breach of contract, breach of contract based on mutual departure, breach of
contract based on voluntary payment, and breach of the duty of good faith and fair dealing. Delta
moved for partial dismissal of the State Court Complaint, which motion was denied in its entirety.
Delta also filed a separate action in the Superior Court containing claims for declaratory judgment and
breach of the confidentiality provisions of the Delta Connection Agreements. SkyWest Airlines and
Atlantic Southeast moved for dismissal of Delta’s claims in the Superior Court. A hearing on SkyWest
Airlines’ and Atlantic Southeast’s motion was held on April 27, 2011, after which the Superior Court
dismissed Delta’s complaint in its entirety. Discovery in the lawsuit is ongoing.
On September 22, 2011, Delta filed a motion for leave to file a counterclaim against SkyWest and
Atlantic Southeast. The proposed counterclaim contains claims for unjust enrichment and breach of
contract related to alleged non-revenue positive space flying by SkyWest and Atlantic Southeast
employees for non-Delta related business. Delta’s proposed counterclaim does not specify an amount of
damages, but the proposed counterclaim alleges, on information and belief, that Delta’s damages
exceed $4.5 million. The State Court has not ruled on Delta’s motion for leave to file its proposed
counterclaim. An estimated loss is accrued if the loss is probable and reasonably estimable. Because
these conditions have not been satisfied, the Company has not recorded a loss in its consolidated
financial statements with respect to the dispute. As of December 31, 2011, a range of reasonably
possible loss is not determinable related to this counter claim.
During 2010, the Company and Delta began preliminary settlement discussions related to the
dispute. Notwithstanding the legal merits of the case, the Company offered to settle the claim for
approximately $5.9 million less than the cumulative total of revenue recognized related to this matter.
Those settlement discussions were not successful; however, as a result of the settlement offer, the
Company wrote off $5.9 million of related receivables as of December 31, 2010. As of December 31,
2011, the range of reasonably possible loss related to the dispute is $0 to $25.8 million.
SkyWest Airlines and ExpressJet continue to vigorously pursue their claims set forth in the State
Court complaint and will defend against Delta’s proposed counterclaim if the court grants Delta leave
to file.
Concentration Risk and Significant Customers
The Company requires no collateral from its major partners or customers but monitors the
financial condition of its major partners. The Company maintains an allowance for doubtful accounts
receivable based upon expected collectability of all accounts receivable. The Company’s allowance for
doubtful accounts totaled $240,000 and $47,000 as of December 31, 2011 and 2010, respectively. For
the years ended December 31, 2011, 2010 and 2009, the Company’s contractual relationships with
Delta, United and Continental combined accounted for approximately 97.6%, 94.7% and 97.3%,
respectively of the Company’s total revenues.
Employees Under Collective Bargaining Agreements
As of December 31, 2011, the Company had 18,418 full-time equivalent employees. Approximately
46% of these employees were represented by unions, including the following employee groups.
Notwithstanding the completion of the ExpressJet Combination, ExpressJet’s employee groups continue
to be represented by those unions who provided representation prior to the ExpressJet Combination.
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