SkyWest Airlines 2012 Annual Report Download - page 146

• Long-Term Awards
• Retirement and other Benefits
The compensation objectives for each Executive are more fully described in the following
paragraphs.
Salary. Salary is provided with the objective of paying for the underlying role and responsibility
associated with the Executive’s position, which the Committee believes allows the Company to attract
and retain qualified executives. The Executives’ salaries are set at levels that the Committee believes
are generally competitive with the compensation paid to officers in similar positions at other airlines.
Salary adjustments are considered annually and influenced by growth of the Company’s operations,
individual performance, changes in responsibility, changes in cost of living, and other factors. The
salaries of the Executives are set forth in the Summary Compensation Table set forth immediately
following this section.
Annual Bonus. In an effort to encourage achievement of the Company’s objectives an annual
performance-based bonus plan is maintained for the Executives. The combination of salary and annual
bonuses is intended to result in a cash compensation package for each Executive that falls within
competitive market standards as determined by the Committee based on its review and understanding
of other regional and major air carrier executive compensation programs when the performance
measures and personal goals are met. The purpose of the bonus plan is to reward the Executives with
an annual cash bonus in an amount that correlates (i) in part, to the level of net income and other
financial measurements of the Company or its operating subsidiaries achieved for the year; and (ii) in
part, to the achievement of specific operational goals and individual quantitative and qualitative goals
during the year. The 2012 annual bonus objective of 80% of salary for Messrs. Atkin, Rich, Child and
Holt was allocated between 40% of salary based on net income and other financial targets established
by the Committee, and 40% of salary based on the achievement of specific operational and individual
goals. Mr. Kraupp’s annual bonus objective of 60% of salary was allocated between 30% of salary
based on net income and other financial targets established by the Committee and 30% of salary based
on the achievement of specific operational and individual goals. The differing percentages for the
Executives are due to differing entity level responsibilities. Details are explained below under the
headings ‘‘2012 Net Income and Financial Targets Component’’ and ‘‘2012 Operational and Individual
Goals Component’’.
2012 Net Income and Financial Targets Component. In determining annual net income and other
financial targets to be used for the purpose of determining each bonus amount for the Executives, the
Committee began with a targeted net income objective which the Committee believes is a key measure
of the financial health of the Company and reflects the Company’s development of shareholder value.
The Committee then considered the planned budget for the year, timing differences between the
Company’s actual engine overhaul expenses and the related revenue collected from the Company’s
major partners, and other unusual or non-recurring items, such as the transition and integration of the
ExpressJet Holdings, Inc.’s operations. The specific income and other financial targets were 1) a
designated amount of net income at the operating subsidiary level, 2) a designated amount of
controllable expenditures at the operating subsidiary level, 3) a designated amount of capital
expenditures at the operating subsidiary level, and 4) a designated amount of net income at the
Company level. The bonus objective for net income and other financial targets was allocated 50.0% to
net income at the operating subsidiary level, 26.0% to controllable expenditures, 12.0% to capital
expenditures, and 12.0% to net income at the Company level. The above identified measurements were
identified to encourage continued focus on overall net income and financial results, to encourage
continued integration of ExpressJet Holdings, Inc.’s operations, and to facilitate the exchange of best
practices between the operating subsidiaries of the Company.
24