SkyWest Airlines 2013 Annual Report Download - page 10

fee-per-completed block hour and departure basis, plus a payment based on block hours flown (the
‘‘SkyWest Airlines Delta Connection Agreement’’). SkyWest Airlines conducts its US Airways and
Alaska operations pursuant to the terms of code-share agreements with Alaska and US Airways,
respectively, pursuant to which SkyWest Airlines is paid primarily on a fee-per-completed block hour
and departure basis, plus a fixed margin per aircraft each month, and an incentive or penalty based on
performance incentives. SkyWest Airlines is also a party to a code-share agreement with American (the
‘‘SkyWest Airlines American Agreement’’), pursuant to which SkyWest Airlines operates as American
Eagle on designated routes, and is paid primarily on a fee-per-completed block hour and departure
basis, plus a fixed margin per aircraft each month and an incentive or penalty based on performance
incentives.
ExpressJet
ExpressJet provides regional jet service principally in the United States, primarily from airports
located in Atlanta, Cleveland, Chicago (O’Hare), Denver, Houston, Detroit, Memphis, Newark,
Minneapolis and Washington Dulles. ExpressJet offered more than 2,200 daily scheduled departures as
of December 31, 2013, of which approximately 700 were Delta Connection flights, 1,400 were United
Express flights and 100 were American Eagle flights. As of December 31, 2013, ExpressJet operated a
fleet of 421 aircraft consisting of the following:
CRJ200 ERJ145 ERJ135 CRJ700 CRJ900 Total
United .................... 14 242 9 ——265
Delta ..................... 76 —— 41 28 145
American .................. 11 —— — —11
Total ..................... 101 242 9 41 28 421
ExpressJet conducts Delta Connection operations pursuant to the terms of a Second Amended and
Restated Delta Connection Agreement initially executed between Delta and Atlantic Southeast and to
which ExpressJet is now a party (the ‘‘ExpressJet Delta Connection Agreement’’). Under the
ExpressJet Delta Connection Agreement, ExpressJet is paid primarily on a fee-per-completed block
hour and departure basis, plus, if ExpressJet completes a certain minimum percentage of its Delta
Connection flights, a specified margin on such costs. Additionally, the ExpressJet Delta Connection
Agreement provides for incentive compensation upon satisfaction of certain performance goals.
ExpressJet’s United code-share operations are conducted under a Capacity Purchase Agreement
initially executed by ExpressJet and Continental Airlines, Inc. (‘‘Continental’’) and to which United
became a party through its merger with Continental (the ‘‘United CPA’’) and two United Express
Agreements between ExpressJet and United (collectively, the ‘‘ExpressJet United Express
Agreements’’). Under the ExpressJet United Express Agreements and the United CPA ExpressJet is
paid by United, primarily on a fee-per-completed block hour and departure basis, plus a margin based
on performance incentives. ExpressJet is also a party to a code-share agreement with American (the
‘‘ExpressJet American Agreement’’), pursuant to which ExpressJet currently operates as American
Eagle on designated routes, and is paid primarily on a fee-per-completed block hour and departure
basis, plus a fixed margin per aircraft each month and an incentive or penalty based on performance
incentives.
Competition and Economic Conditions
The airline industry is highly competitive. SkyWest Airlines and ExpressJet compete principally
with other code-sharing regional airlines, but also compete with regional airlines operating without
code-share agreements, as well as low-cost carriers and major airlines. The combined operations of
SkyWest Airlines and ExpressJet extend throughout most major geographic markets in the United
States. Our competition includes, therefore, nearly every other domestic regional airline, and to a
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