SkyWest Airlines 2013 Annual Report Download - page 40

•ExpressJet leases a 68,000 square-foot facility in Houston, Texas. ExpressJet has subleased the
building to an unrelated aircraft maintenance provider; however ExpressJet remains obligated
for payment and other obligations of the lease under the lease agreement which is scheduled to
expire on October 2, 2016.
• ExpressJet leases a 57,000 square-foot training center and support space in Houston, Texas. The
lease agreement is scheduled to expire on December 31, 2027.
• ExpressJet owns three buildings in Saltillo, Mexico consisting of approximately 96,000 square
feet of hangar space and 3,000 square feet of administrative space. These buildings are leased to
Saltillo Jet Center S. de R.L. de C.V., a subsidiary of ExpressJet, for use in its aircraft painting
business.
• ExpressJet leases a 27,225 square-foot aircraft maintenance hangar in Kansas City, Missouri. The
lease agreement is scheduled to expire on November 30, 2016.
Our management deems the current facilities of SkyWest, SkyWest Airlines and ExpressJet as being
suitable to support existing operations and believes these facilities will be adequate for the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS
We are subject to certain legal actions which we consider routine to our business activities. As of
December 31, 2013, our management believed, after consultation with legal counsel, that the ultimate
outcome of such legal matters was not likely to have a material adverse effect on our financial position,
liquidity or results of operations. However, the following is a significant outstanding legal matter, which
if not resolved consistent with the position we have taken in such matters, would negatively impact our
financial results.
SkyWest Airlines and ExpressJet v. Delta
During the quarter ended December 31, 2007, Delta notified SkyWest, SkyWest Airlines and
Atlantic Southeast (now ExpressJet) of a dispute under the Delta Connection Agreements executed by
Delta with SkyWest Airlines and Atlantic Southeast. The dispute relates to the allocation of liability for
certain irregular operation (‘‘IROP’’) expenses paid by SkyWest Airlines and Atlantic Southeast
(now ExpressJet) to their passengers and vendors under certain situations. During the period between
the execution of the Delta Connection Agreements in September 2005 and December 2007, SkyWest
Airlines and Atlantic Southeast passed through to Delta IROP expenses that were paid pursuant to
Delta’s policies, and Delta accepted and reimbursed those expenses. Delta now claims it is obligated to
reimburse only a fraction of the IROP expenses. As a result, Delta withheld a combined total of
approximately $25 million (pre-tax) from one of the weekly scheduled wire payments to SkyWest
Airlines and Atlantic Southeast during December 2007. Since December 2007, Delta has continued to
withhold payments from the weekly scheduled wire payments to SkyWest Airlines and Atlantic
Southeast (now ExpressJet), and has disputed subsequent billings for IROP expenses. On February 1,
2008, SkyWest Airlines and Atlantic Southeast filed a Complaint in the Superior Court for Fulton
County, Georgia (‘‘Superior Court’’) challenging Delta’s treatment of the matter and seeking recovery
of the payments withheld by Delta and any future withholdings related to this issue. Delta filed an
Answer to the SkyWest Airlines and Atlantic Southeast Complaint and a Counterclaim against SkyWest
Airlines and Atlantic Southeast on March 24, 2008. Delta’s Counterclaim alleged that SkyWest Airlines
and Atlantic Southeast breached the Delta Connection Agreements by invoicing Delta for IROP
expenses that were paid pursuant to Delta’s policies, and claims only a portion of those expenses may
be invoiced to Delta. Since July 1, 2008, we have not recognized revenue related to IROP expense
reimbursements withheld by Delta because collection of those reimbursements is the subject of
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