SkyWest Airlines 2012 Annual Report Download - page 33

factors such as timeliness of departure and arrival. Any interruptions or disruptions could, therefore,
severely and adversely affect us. Extreme weather can cause flight disruptions, and, during periods of
storms or adverse weather, fog, low temperatures, etc., our flights may be canceled or significantly
delayed. Hurricanes Katrina and Rita and Superstorm Sandy, in particular, caused severe disruption to
air travel in the affected areas and adversely affected airlines operating in the region, including
ExpressJet. We operate a significant number of flights to and from airports with particular weather
difficulties, including Atlanta, Salt Lake City, Chicago, San Francisco, Newark and Denver. A
significant interruption or disruption in service at one of our hubs, due to adverse weather or
otherwise, could result in the cancellation or delay of a significant portion of our flights and, as a
result, could have a severe adverse impact on our, operations and financial performance.
We are increasingly dependent on technology, and if our technology fails or we are unable to continue to invest
in new technology, our business may be adversely affected.
We have become increasingly dependent on technology initiatives to reduce costs and to enhance
customer service in order to compete in the current business environment. The performance and
reliability of our technology are critical to our ability to compete effectively. Technology initiatives will
continue to require significant capital investments in order to deliver these expected benefits. If we are
unable to make these investments, our business and operations could be negatively affected. In
addition, we may face challenges associated with integrating complex technology systems formerly
operated by Atlantic Southeast and ExpressJet Delaware. If we are unable to manage these challenges
effectively, our business and operations could be negatively affected.
In addition, any internal technological error or failure or large scale external interruption in the
technology infrastructure we depend on, such as power, telecommunications or the internet, may
disrupt our internal network. Any individual, sustained or repeated failure of technology could impact
our customer service and result in increased costs. Like most companies, our technology systems and
related data may be vulnerable to a variety of sources of interruption due to events beyond our control,
including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and
other security issues. While we have in place, and continue to invest in, technology security initiatives
and disaster recovery plans, these measures may not be adequate or implemented properly to prevent a
business disruption and mitigate the resulting adverse financial consequences.
Our investment in foreign airlines may negatively impact our profitability.
On September 4, 2008, we announced our intention to acquire a 20% interest in a Brazilian
regional airline, Trip Linhas Aereas (‘‘Trip’’), for $30 million. On July 12, 2012, we sold our interest in
Trip to Trip Investimentos, Ltda. (‘‘Trip Investimentos’’) for a price of $42 million. The purchase price
is scheduled to be paid in three installments over a two-year period and may be accelerated upon the
occurrence of certain conditions identified in the purchase agreement. As part of the sale transaction,
we also received an option to acquire 15.38% of the ownership in Trip Investimentos. The option has
an initial exercise price per share equal to the price paid by Trip Investimentos to acquire our Trip
shares. The exercise price escalates annually at a specified rate and we can exercise the option, at our
discretion, between the second and fourth anniversaries of our receipt of the final required installment
payments from Trip Investimentos. Under the terms of the purchase agreement, Trip Investimentos
cannot transfer the Trip shares until all three installment payments have been made. For financial
reporting purposes, the restriction on Trip Investimentos’ ability to transfer the Trip shares prevents the
transaction from being recognized as a sale. As of December 31, 2012, we had received the first
installment payment of $8.4 million. The initial payment was recorded as an ‘‘Other Long-Term
Liability’’ on our consolidated balance sheet. The second installment payment is due July 12, 2013, for
an amount of $16.8 million. The third installment payment is due July 12, 2014, for an amount of
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