SkyWest Airlines 2012 Annual Report Download - page 35

Risks Related to the Airline Industry
We may be materially affected by uncertainties in the airline industry.
The airline industry has experienced tremendous challenges in recent years and will likely remain
volatile for the foreseeable future. Among other factors, the financial challenges faced by major and
regional carriers, including American, United, US Airways, Pinnacle and Mesa, the slowing U.S.
economy and continuing hostilities in the Middle East and other regions have significantly affected, and
are likely to continue to affect, the U.S. airline industry. These events have resulted in declines and
shifts in passenger demand, increased insurance costs, increased government regulations and tightened
credit markets, all of which have affected, and will continue to affect, the operations and financial
condition of participants in the industry, including us, major carriers (including our major partners),
competitors and aircraft manufacturers. These industry developments raise substantial risks and
uncertainties, which will affect us, major carriers (including our major partners), competitors and
aircraft manufacturers in ways that we are unable to currently predict.
The airline industry is highly competitive and has undergone a period of consolidation and transition leaving
fewer potential code-share partners.
The airline industry is highly competitive. We not only compete with other regional airlines, some
of which are owned by or operated as code-share partners of major airlines, but we also face
competition from low-cost carriers and major airlines on many of our routes. Low-cost carriers such as
Southwest, JetBlue, US Airways and Frontier among others, operate at many of our hubs, resulting in
significant price competition. Additionally, a large number of other carriers operate at our hubs,
creating intense competition. Certain of our competitors are larger and have significantly greater
financial and other resources than we do. Moreover, federal deregulation of the industry allows
competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline
industry is particularly susceptible to price discounting because airlines incur only nominal costs to
provide service to passengers occupying otherwise unsold seats. Increased fare competition could
adversely affect our operations and the price of our common stock. The airline industry has undergone
substantial consolidation, and it may in the future undergo additional consolidation. Recent examples
include the merger between United and Continental in October 2010, Delta and Northwest
Airlines, Inc. in November 2008 and America West Airlines and US Airways in September 2005, as
well as the merger of Southwest and AirTran Airways, Inc. (‘‘AirTran’’) during 2011. We understand
that several airlines are currently in discussions related to consolidation in the industry. Other
developments include domestic and international code-share alliances between major carriers. Any
additional consolidation or significant alliance activity within the airline industry could limit the number
of potential partners with whom we could enter into code-share relationships and could have a material
adverse effect on our relationships with our code-share partners.
Due, in part, to the dynamic nature of the airline industry, major airlines may also make other
strategic changes such as changing or consolidating hub locations. If our major partners were to make
changes such as these in their strategy and operations, our operations and financial results could be
adversely impacted.
Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do
so.
The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the
airline industry in general, including our operations. The primary effects experienced by the airline
industry include a substantial loss of passenger traffic and revenue. Although, to some degree, airline
passenger traffic and revenue have recovered since the September 11th attacks, additional terrorist
attacks could have a similar or even more pronounced effect. Even if additional terrorist attacks are
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