SkyWest Airlines 2012 Annual Report Download - page 14

• if ExpressJet fails to conduct all flight operations and maintain all aircraft under the ExpressJet
Delta Connection Agreement in compliance in all material respects with applicable government
regulations;
• if ExpressJet fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the SkyWest Airlines Delta
Connection Agreement;
• if the other party files for bankruptcy, reorganization or similar action (subject to limitations
imposed by the U.S. Bankruptcy Code) or if either party makes an assignment for the benefit of
creditors; or
• if ExpressJet fails to maintain competitive base rate costs (provided, however, that ExpressJet
has the right to adjust its rates prior to any such termination).
During 2012, we reached an agreement with Delta to add 34 additional used dual-class
Bombardier regional jet aircraft in exchange for the early termination of 66 CRJ200 aircraft under our
Delta Connection Agreements. All 34 dual-class aircraft will be operated under the terms and
conditions of the SkyWest Airlines Delta Connection Agreement regardless of whether SkyWest
Airlines or ExpressJet operate the aircraft. The 34 additional aircraft consist of five CRJ700s and
29 CRJ900s. As of December 31, 2012, we had taken delivery of 15 CRJ900s and five CRJ700s. Of the
20 dual-class aircraft that were in operation as of December 31, 2012, ExpressJet was operating 11. The
remaining lease terms of the 34 additional aircraft currently run through December 31, 2022. We
anticipate that the 14 remaining CRJ900 aircraft will be delivered by June 2013. We anticipate that all
66 CRJ200 aircraft will be removed from the Delta Connection Agreements by December 31, 2015. Of
the 66 CRJ200s scheduled to be removed from Delta operations, 41 CRJ200s are subleased from Delta
for a nominal amount, which are scheduled to be returned to Delta without obligation to us.
SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to the SkyWest Airlines United Express Agreement
entered into on July 31, 2003. As of December 31, 2012, SkyWest Airlines operated 70 CRJ700s,
78 CRJ200s and 34 Brasilia turboprops under the SkyWest Airlines United Express Agreement, flying a
total of approximately 1,050 United Express flights per day between Chicago (O’Hare), Denver,
Houston, Los Angeles, San Francisco or Washington Dulles and designated outlying destinations.
Generally, under the SkyWest Airlines United Express Agreement, United retains all air fares, cargo
rates, mail charges and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’
obligations under the SkyWest Airlines United Express Agreement, SkyWest Airlines receives from
United compensation (subject to an annual adjustment) of a fixed fee per completed block hour, a
fixed fee per completed departure, a fixed fee per passenger, and a fixed fee for overhead and aircraft
costs. The SkyWest Airlines United Express Agreement provides for incentives based upon SkyWest
Airlines’ performance, including on-time arrival performance and completion percentage rates.
Additionally, certain of SkyWest Airlines’ operating costs are reimbursed by United, including costs
related to fuel and aircraft ownership. As of December 31, 2012, 25 of the 34 Brasilia turboprops and
17 of the 78 CRJ200s SkyWest Airlines operated under the SkyWest Airlines United Express
Agreement were operated under a revenue-sharing arrangement. On October 16, 2009, SkyWest
Airlines and United agreed to extend the right of SkyWest Airlines to operate 40 regional jet aircraft
under the SkyWest Airlines United Express Agreement until the end of their respective lease terms.
United has the option, upon twelve months prior notice, to extend the SkyWest Airlines United
Express Agreement for five years. The SkyWest Airlines United Express Agreement is scheduled to
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