SkyWest Airlines 2013 Annual Report Download - page 16

United compensation (subject to an annual adjustment) of a fixed fee per completed block hour, a
fixed fee per completed departure, a fixed fee per passenger, and a fixed fee for overhead and aircraft
costs. The SkyWest Airlines United Express Agreement provides for incentives based upon SkyWest
Airlines’ performance, including on-time arrival performance and completion percentage rates.
Additionally, certain of SkyWest Airlines’ operating costs are reimbursed by United, including costs
related to fuel and aircraft ownership. As of December 31, 2013, 27 of the 36 Brasilia turboprops and
17 of the 78 CRJ200s SkyWest Airlines operated under the SkyWest Airlines United Express
Agreement were operated under a revenue-sharing arrangement. On October 16, 2009, SkyWest
Airlines and United agreed to extend the right of SkyWest Airlines to operate 40 regional jet aircraft
under the SkyWest Airlines United Express Agreement until the end of their respective lease terms.
United has the option, upon twelve months prior notice, to extend the SkyWest Airlines United
Express Agreement for five years. The SkyWest Airlines United Express Agreement is scheduled to
terminate in 2024. The SkyWest Airlines United Express Agreement is subject to early termination in
various circumstances including:
• if SkyWest Airlines or United fails to fulfill an obligation under the SkyWest Airlines United
Express Agreement for a period of 60 days after written notice to cure;
• if SkyWest Airlines’ operations fall below certain performance levels for a period of three
consecutive months;
• subject to limitations imposed by the U.S. Bankruptcy Code, if the other party becomes
insolvent, fails to pay its debts when due, takes action leading to its cessation as a going concern,
makes an assignment of substantially all of its assets, or ceases or suspends operations;
• if bankruptcy proceedings are commenced against the other party (subject to limitations imposed
by the U.S. Bankruptcy Code) and certain specified conditions are not satisfied; or
• if SkyWest Airlines operates, subject to certain exceptions, any additional regional jets or
turboprop aircraft pursuant to a marketing or code-share relationship with any party other than
United to provide hub service at United’s hubs in Chicago (O’Hare), Denver, San Francisco,
Seattle/Tacoma, or Washington, D.C. (Dulles International Airport).
On May 16, 2013, SkyWest Airlines and United entered into a United Express Agreement to
operate 40 new Embraer E175 dual-class regional jet aircraft. Under the agreement, we anticipate that
the 40 aircraft will be introduced into service in the second quarter of 2014, with deliveries continuing
to mid-2015. The United Express Agreement has a 12-year term for each of the aircraft subject to the
agreement, and other terms which are generally consistent with the SkyWest Airlines United Express
Agreement.
ExpressJet United CPA
Effective November 12, 2010, ExpressJet Delaware and Continental entered into the United CPA,
whereby ExpressJet Delaware agreed to provide regional airline service in the Continental flight system.
The rights and obligations of ExpressJet Delaware under the United CPA became the rights and
obligations of ExpressJet as a consequence of the ExpressJet Combination. The rights and obligations
of Continental under the United CPA became the rights and obligations of United as a consequence of
United’s merger with Continental in 2010.
The United CPA provides for a ten-year term, subject to early termination by United or ExpressJet
upon the occurrence of certain events. United’s termination rights include the right to terminate the
United CPA if ExpressJet’s performance falls below identified standards (and such failure is not cured
within 60 days following receipt of notice), upon the occurrence of a labor strike lasting 15 days or
longer and upon the occurrence of a material default under certain lease agreements relating to aircraft
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