SkyWest Airlines 2012 Annual Report Download - page 15

terminate in 2024. The SkyWest Airlines United Express Agreement is subject to early termination in
various circumstances including:
• if SkyWest Airlines or United fails to fulfill an obligation under the SkyWest Airlines United
Express Agreement for a period of 60 days after written notice to cure;
• if SkyWest Airlines’ operations fall below certain performance levels for a period of three
consecutive months;
• subject to limitations imposed by the U.S. Bankruptcy Code, if the other party becomes
insolvent, fails to pay its debts when due, takes action leading to its cessation as a going concern,
makes an assignment of substantially all of its assets, or ceases or suspends operations;
• if bankruptcy proceedings are commenced against the other party (subject to limitations imposed
by the U.S. Bankruptcy Code) and certain specified conditions are not satisfied; or
• if SkyWest Airlines operates, subject to certain exceptions, any additional regional jets or
turboprop aircraft pursuant to a marketing or code-share relationship with any party other than
United to provide hub service at United’s hubs in Chicago (O’Hare), Denver, San Francisco,
Seattle/Tacoma, or Washington, D.C. (Dulles International Airport).
ExpressJet United CPA
Effective November 12, 2010, ExpressJet Delaware and Continental entered into the United CPA,
whereby ExpressJet Delaware agreed to provide regional airline service in the Continental flight system.
The rights and obligations of ExpressJet Delaware under the United CPA became the rights and
obligations of ExpressJet as a consequence of the ExpressJet Combination. The rights and obligations
of Continental under the United CPA became the rights and obligations of United as a consequence of
United’s merger with Continental in 2010.
The United CPA provides for a ten-year term, subject to early termination by United or ExpressJet
upon the occurrence of certain events. United’s termination rights include the right to terminate the
United CPA if ExpressJet’s performance falls below identified standards (and such failure is not cured
within 60 days following receipt of notice), upon the occurrence of a labor strike lasting 15 days or
longer and upon the occurrence of a material default under certain lease agreements relating to aircraft
operated by ExpressJet under the United CPA (provided that such material default is not cured within
60 days following receipt of notice). ExpressJet’s termination rights include the right to terminate the
United CPA if United fails to make payment of $500,000 or more due to ExpressJet under the United
CPA and such failure is not cured within five business days following receipt of notice.
Under the terms of the United CPA, ExpressJet operates 220 ERJ145s and seven ERJ135s in the
United flight system. All of the ERJ145s and ERJ 135s are leased to ExpressJet by United pursuant to
sublease or lease agreements. Upon the expiration of the United CPA, ExpressJet is obligated to return
the subleased or leased aircraft to United.
Under the terms of the United CPA, United 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 United CPA. Additionally, ExpressJet may earn incentive
compensation for good operating performance, but is subject to financial penalties for poor operating
performance. The parties to the United CPA have made customary representations, warranties and
covenants, and the United CPA contains other provisions typical of agreements of this kind, including
with respect to various operational, marketing and administrative matters.
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