SkyWest Airlines 2012 Annual Report Download - page 12

These code-share agreements authorize Delta, United, American, Alaska and US Airways to
identify our flights and fares under their two-letter flight designator codes (‘‘DL,’’ ‘‘UA’’ ‘‘AA’’, ‘‘AS’’ or
‘‘US,’’ respectively) in the central reservation systems, and generally require us to paint our aircraft
with their colors and logos and to market our status as Delta Connection, United Express, American
Eagle, US Airways Express or Alaska, as applicable. Under each of our code-share agreements, our
passengers participate in the major partner’s frequent flyer program, and the major partner provides
additional services such as reservations, ticket issuance, ground support services and gate access. We
also coordinate our marketing, advertising and other promotional efforts with our major partners.
During the year ended December 31, 2012, approximately 91% of our passenger revenues related to
contract flights, where Delta, United, Alaska and US Airways controlled scheduling, ticketing, pricing
and seat inventories. The remainder of our passenger revenues during the year ended December 31,
2012 related to pro-rate flights, where we controlled scheduling, ticketing, pricing and seat inventories,
and shared revenues with Delta or United according to pro-rate formulas. The following summaries of
our code-share agreements do not purport to be complete and are qualified in their entirety by
reference to the applicable agreement.
SkyWest Airlines Delta Connection Agreement
SkyWest Airlines and Delta are parties to the SkyWest Airlines Delta Connection Agreement,
dated as of September 8, 2005. As of December 31, 2012, SkyWest Airlines operated 28 CRJ900s,
19 CRJ700s and 45 CRJ200s under the SkyWest Airlines Delta Connection Agreement. As of
December 31, 2012, SkyWest Airlines was operating more than 500 Delta Connection flights per day
between Salt Lake City, Detroit or Minneapolis and outlying destinations. Additionally, as of
December 31, 2012, SkyWest Airlines operated eight Brasilia turboprops and nine CRJ200 under the
Delta code under a revenue-sharing arrangement. Generally, Delta is entitled to all passenger, cargo
and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’ other
obligations under the SkyWest Airlines Delta Connection Agreement, SkyWest Airlines is scheduled to
receive from Delta on a weekly basis (i) specified fixed rate payments for each completed flight, which
are intended to pay for certain costs related to the Delta Connection flights, plus (ii) a fixed dollar
payment per completed flight block hour, subject to annual escalation at an agreed rate. Costs directly
reimbursed by Delta under the SkyWest Airlines Delta Connection Agreement include costs primarily
related to fuel, aircraft engine maintenance and aircraft ownership.
The SkyWest Airlines Delta Connection Agreement provides that, beginning with the fifth
anniversary of the execution of the agreement (September 8, 2010), Delta has the right to require that
certain contractual rates under that agreement shall not exceed the second lowest rates of all carriers
within the Delta Connection Program. On November 19, 2010, SkyWest Airlines reached an agreement
with Delta related to the second lowest rate provisions to be applied under the SkyWest Airlines Delta
Connection Agreement. As a result of that agreement, SkyWest Airlines and Delta have established the
contractual rates which will apply under the SkyWest Airlines Delta Connection Agreement through
December 31, 2015.
The SkyWest Airlines Delta Connection Agreement is scheduled to terminate on December 31,
2022, unless Delta elects to exercise its option to extend the term for up to four additional five-year
terms. The SkyWest Airlines Delta Connection Agreement is subject to early termination in various
circumstances, including:
• if SkyWest Airlines or Delta commits a material breach of the SkyWest Airlines Delta
Connection Agreement, subject to 30-day notice and cure rights;
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