SkyWest Airlines 2012 Annual Report Download - page 36

not launched against the airline industry, there will be lasting consequences of the attacks, including
increased security and insurance costs, increased concerns about future terrorist attacks, increased
government regulation and airport delays due to heightened security. Additional terrorist attacks and
the fear of such attacks could negatively impact the airline industry, and result in further decreased
passenger traffic and yields, increased flight delays or cancellations associated with new government
mandates, as well as increased security, fuel and other costs. We cannot provide any assurance that
these events will not harm the airline industry generally or our operations or financial condition in
particular.
Fuel costs have adversely affected, and will likely continue to adversely affect, the operations and financial
performance of the airline industry.
The price of aircraft fuel is unpredictable and volatile. Higher fuel prices may lead to higher
airfares, which would tend to decrease the passenger load of our code-share partners. Over extended
periods, such decreases will likely have an adverse effect on the number of flights we could be
scheduled to operate and adversely affect our revenues. Additionally, fuel shortages have been
threatened. In addition, we bear the economic risk of fuel price fluctuations on our pro-rate operations.
As of December 31, 2012, essentially all of our Brasilia turboprops flown for Delta were flown under
pro-rate arrangements, while approximately 60% of our Brasilia turboprops flown in the United system
were flown under pro-rate arrangements. As of December 31, 2012, we operated 17 CRJ200s under a
pro-rate agreement with United, nine CRJ200 under a pro-rate agreement with Delta and one CRJ200
under a pro-rate arrangement with US Airways. The future cost and availability of fuel to us cannot be
predicted, and substantial fuel cost increases or the unavailability of adequate supplies of fuel may have
a material adverse effect on our results of operations. During periods of increasing fuel costs, our
operating margins have been, and will likely continue to be, adversely affected.
We are subject to significant governmental regulation.
All interstate air carriers, including SkyWest Airlines and ExpressJet, are subject to regulation by
the DOT, the FAA and other governmental agencies. Regulations promulgated by the DOT primarily
relate to economic aspects of air service. The FAA requires operating, air worthiness and other
certificates; approval of personnel who may engage in flight, maintenance or operation activities; record
keeping procedures in accordance with FAA requirements; and FAA approval of flight training and
retraining programs. We cannot predict whether we will be able to comply with all present and future
laws, rules, regulations and certification requirements or that the cost of continued compliance will not
have a material adverse effect on our operations. We incur substantial costs in maintaining our current
certifications and otherwise complying with the laws, rules and regulations to which we are subject. A
decision by the FAA to ground, or require time-consuming inspections of or maintenance on, all or any
of our aircraft for any reason may have a material adverse effect on our operations. In addition to state
and federal regulation, airports and municipalities enact rules and regulations that affect our
operations. From time to time, various airports throughout the country have considered limiting the use
of smaller aircraft, such as our aircraft, at such airports. The imposition of any limits on the use of our
aircraft at any airport at which we operate could have a material adverse effect on our operations.
The occurrence of an aviation accident would negatively impact our operations and financial condition.
An accident or incident involving one of our aircraft could result in significant potential claims of
injured passengers and others, as well as repair or replacement of a damaged aircraft and its
consequential temporary or permanent loss from service. In the event of an accident, our liability
insurance may not be adequate to offset our exposure to potential claims and we may be forced to bear
substantial losses from the accident. Substantial claims resulting from an accident in excess of our
related insurance coverage would harm our operational and financial results. Moreover, any aircraft
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