SkyWest Airlines 2013 Annual Report Download - page 14

Connection Agreement. As a result of that agreement, SkyWest Airlines and Delta have established the
contractual rates which will apply under the SkyWest Airlines Delta Connection Agreement through
December 31, 2015.
The SkyWest Airlines Delta Connection Agreement is scheduled to terminate on December 31,
2022, unless Delta elects to exercise its option to extend the term for up to four additional five-year
terms. The SkyWest Airlines Delta Connection Agreement is subject to early termination in various
circumstances, including:
• if SkyWest Airlines or Delta commits a material breach of the SkyWest Airlines Delta
Connection Agreement, subject to 30-day notice and cure rights;
• if SkyWest Airlines fails to conduct all flight operations and maintain all aircraft under the
SkyWest Airlines Delta Connection Agreement in compliance in all material respects with
applicable government regulations;
• if SkyWest Airlines fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the ExpressJet Delta Connection
Agreement;
• if the other party files for bankruptcy, reorganization or similar action (subject to limitations
imposed by the U.S. Bankruptcy Code) or if either party makes an assignment for the benefit of
creditors; or
• if SkyWest Airlines fails to maintain competitive base rate costs (provided, however, that
SkyWest Airlines has the right to adjust its rates prior to any such termination).
ExpressJet Delta Connection Agreement
ExpressJet and Delta are parties to the ExpressJet Delta Connection Agreement, originally dated
as of September 8, 2005. As of December 31, 2013, ExpressJet operated 28 CRJ900s, 41 CRJ700s and
76 CRJ200s for Delta under the ExpressJet Delta Connection Agreement. As of December 31, 2013,
ExpressJet was operating approximately 700 Delta Connection flights per day between Atlanta or
Detroit and outlying destinations. Under the ExpressJet Delta Connection Agreement, Delta is entitled
to all passenger, cargo and other revenues associated with each flight. Commencing in 2008, ExpressJet
obtained the right to maintain its percentage of total Delta Connection flights that it had in 2007, so
long as its bid for additional regional flying is competitive with bids submitted by other regional
carriers.
In exchange for providing the designated number of flights and performing ExpressJet’s other
obligations under the ExpressJet Delta Connection Agreement, ExpressJet is scheduled to receive from
Delta on a weekly basis (i) specified fixed rate payments for each completed flight, which are intended
to pay for certain direct costs related to Delta Connection flights plus (ii) if ExpressJet completes a
certain minimum percentage of its Delta Connection flights, an amount equal to a certain percentage
of the direct costs (not including fuel costs) related to the Delta Connection flights. Costs directly
reimbursed by Delta under the ExpressJet Delta Connection Agreement include costs related to fuel,
ground handling, and aircraft engine maintenance and aircraft ownership. The ExpressJet Delta
Connection Agreement also provides for incentive compensation based upon ExpressJet’s performance,
including on-time arrival performance and completion percentage rates.
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