SkyWest Airlines 2013 Annual Report Download - page 15

The ExpressJet Delta Connection Agreement provides that, upon the fifth anniversary of the
execution of the agreement (September 8, 2010), Delta obtained the right to require that certain
contractual rates under that agreement shall not exceed the second lowest rates of all carriers within
the Delta Connection Program. On November 19, 2010, ExpressJet (formerly Atlantic Southeast)
reached an agreement with Delta related to the second lowest rate provisions to be applied under the
ExpressJet Delta Connection Agreement. As a result of that agreement, ExpressJet and Delta have
established the contractual rates which will apply under the ExpressJet Delta Connection Agreement
through December 31, 2015.
The ExpressJet Delta Connection Agreement is scheduled to terminate on September 8, 2020,
unless Delta elects to exercise its option to extend the term for up to four additional five-year terms.
The ExpressJet Delta Connection Agreement is subject to early termination in various circumstances
including:
• if ExpressJet or Delta commits a material breach of the ExpressJet Delta Connection
Agreement, subject to 30-day notice and cure rights;
• if ExpressJet fails to conduct all flight operations and maintain all aircraft under the ExpressJet
Delta Connection Agreement in compliance in all material respects with applicable government
regulations;
• if ExpressJet fails to satisfy certain performance and safety requirements;
• if, under certain circumstances, Delta has a right to terminate the SkyWest Airlines 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 ExpressJet fails to maintain competitive base rate costs (provided, however, that ExpressJet
has the right to adjust its rates prior to any such termination).
During 2012, we reached an agreement with Delta to add 34 additional used dual-class
Bombardier regional jet aircraft in exchange for the early termination of 66 CRJ200 aircraft under our
Delta Connection Agreements. All 34 dual-class aircraft operate under the terms and conditions of the
SkyWest Airlines Delta Connection Agreement regardless of whether SkyWest Airlines or ExpressJet
operate the aircraft. The 34 additional aircraft consist of five CRJ700s and 29 CRJ900s. As of
December 31, 2013, we had taken delivery of all 34 of the additional aircraft. The remaining lease
terms of the 34 additional aircraft currently run through December 31, 2022. We anticipate that all
66 CRJ200 aircraft will be removed from the Delta Connection Agreements by December 31, 2015. Of
the 66 CRJ200s scheduled to be removed from Delta operations, 41 CRJ200s are subleased from Delta
for a nominal amount, which are scheduled to be returned to Delta without obligation to us.
SkyWest Airlines United Express Agreement
SkyWest Airlines and United are parties to the SkyWest Airlines United Express Agreement
entered into on July 31, 2003. As of December 31, 2013, SkyWest Airlines operated 70 CRJ700s,
78 CRJ200s and 36 Brasilia turboprops under the SkyWest Airlines United Express Agreement, flying a
total of approximately 1,050 United Express flights per day between Chicago (O’Hare), Denver,
Houston, Los Angeles, San Francisco or Washington Dulles and designated outlying destinations.
Generally, under the SkyWest Airlines United Express Agreement, United retains all air fares, cargo
rates, mail charges and other revenues associated with each flight.
In exchange for providing the designated number of flights and performing SkyWest Airlines’
obligations under the SkyWest Airlines United Express Agreement, SkyWest Airlines receives from
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