SkyWest Airlines 2013 Annual Report Download - page 17

operated by ExpressJet under the United CPA (provided that such material default is not cured within
60 days following receipt of notice). ExpressJet’s termination rights include the right to terminate the
United CPA if United fails to make payment of $500,000 or more due to ExpressJet under the United
CPA and such failure is not cured within five business days following receipt of notice.
Under the terms of the United CPA, ExpressJet operates 220 ERJ145s and nine ERJ135s in the
United flight system. All of the ERJ145s and ERJ 135s are leased to ExpressJet by United pursuant to
sublease or lease agreements. Upon the expiration of the United CPA, ExpressJet is obligated to return
the subleased or leased aircraft to United.
Under the terms of the United CPA, United has agreed to compensate ExpressJet on a monthly
basis based on the block hours flown by ExpressJet and the weighted average number of aircraft
operated by ExpressJet under the United CPA. Additionally, ExpressJet may earn incentive
compensation for good operating performance, but is subject to financial penalties for poor operating
performance. The parties to the United CPA have made customary representations, warranties and
covenants, and the United CPA contains other provisions typical of agreements of this kind, including
with respect to various operational, marketing and administrative matters.
ExpressJet United Express Agreements
ExpressJet and United are parties to two ExpressJet United Express Agreements, consisting of a
United Express Agreement initially executed between ExpressJet Delaware and United, dated
December 1, 2009, and a United Express Agreement initially executed between Atlantic Southeast and
United, dated February 10, 2010. As of December 31, 2013, ExpressJet operated 22 ERJ145s and
14 CRJ200s under the United Express Agreements. Generally, under the ExpressJet United Express
Agreements, 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 ExpressJet’s obligations
under the ExpressJet United Express Agreements, ExpressJet receives from United compensation
(subject to an annual adjustment) of a fixed fee per completed block hour, fixed fee per completed
departure, fixed fee per passenger and a fixed fee for overhead and aircraft costs. The ExpressJet
United Express Agreements provide for incentives based upon ExpressJet’s performance, including
on-time arrival performance and completion percentage rates. Additionally, certain of ExpressJet’s
operating costs are reimbursed by United, including fuel costs.
ExpressJet’s rights to fly aircraft under the ExpressJet United Express Agreements expire in
two tranches: the agreements expire with respect to 22 ERJ145s on April 30, 2015, and 14 CRJ200s
during 2015. Under the agreements, United must notify ExpressJet of its intention to renew each
tranche of aircraft not less than six months prior to the end of the term for such aircraft.
SkyWest Airlines American Agreement
On September 11, 2012, SkyWest Airlines and American entered into the SkyWest Airlines
American Agreement. As of December 31, 2013, SkyWest Airlines operated 12 CRJ200s under the
SkyWest Airlines American Agreement, flying approximately 80 American Eagle flights per day
between Los Angeles and designated outlying destinations. Generally, under the SkyWest Airlines
American Agreement, American 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 American Agreement, SkyWest Airlines receives from American
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
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