SkyWest Airlines 2013 Annual Report Download - page 65

delivery of these aircraft in March 2014 and have scheduled delivery of the remaining aircraft covered
by the order through August 2015.
We have not historically funded a substantial portion of our aircraft acquisitions with working
capital. Rather, we have generally funded our aircraft acquisitions through a combination of operating
leases and long-term debt financing. At the time of each aircraft acquisition, we evaluate the financing
alternatives available to us, and select one or more of these methods to fund the acquisition. At
present, we intend to fund our acquisition of any additional aircraft through a combination of operating
leases and debt financing, consistent with our historical practices. Based on current market conditions
and discussions with prospective leasing organizations and financial institutions, we currently believe
that we will be able to obtain financing for our committed acquisitions, as well as additional aircraft,
without materially reducing the amount of working capital available for our operating activities.
Aircraft Lease and Facility Obligations
We also have significant long-term lease obligations, primarily relating to our aircraft fleet. At
December 31, 2013, we had 570 aircraft under lease with remaining terms ranging from one to
12 years. Future minimum lease payments due under all long-term operating leases were approximately
$1.9 billion at December 31, 2013. Assuming a 5.8% discount rate, which is the average rate used to
approximate the implicit rates within the applicable aircraft leases, the present value of these lease
obligations would have been equal to approximately $1.5 billion at December 31, 2013.
Long-term Debt Obligations
As of December 31, 2013, we had $1.5 billion of long-term debt obligations related to the
acquisition of CRJ200, CRJ700 and CRJ900 aircraft. The average effective interest rate on the debt
related to the CRJ aircraft was approximately 4.5% at December 31, 2013.
Guarantees
We have guaranteed the obligations of SkyWest Airlines under the SkyWest Airlines Delta
Connection Agreement and the obligations of ExpressJet under the ExpressJet Delta Connection
Agreement. We have also guaranteed the obligations of ExpressJet under the United CPA.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aircraft Fuel
In the past, we have not experienced difficulties with fuel availability and we currently expect to be
able to obtain fuel at prevailing prices in quantities sufficient to meet our future needs. Pursuant to our
contract flying arrangements, United, Delta, Alaska, American and US Airways have agreed to bear the
economic risk of fuel price fluctuations on our contracted flights. We bear the economic risk of fuel
price fluctuations on our pro-rate operations. For the year ended December 31, 2013, approximately
3% of our ASMs were flown under pro-rate arrangements. The average price per gallon of aircraft fuel
decreased 3.9% to $3.45 for the year ended December 31, 2013, from $3.59 for the year ended
December 31, 2012. For illustrative purposes only, we have estimated the impact of the market risk of
fuel on our pro-rate operations using a hypothetical increase of 25% in the price per gallon we
purchase. Based on this hypothetical assumption, we would have incurred an additional $25.3 million in
fuel expense for the year ended December 31, 2013.
Interest Rates
Our earnings are affected by changes in interest rates due to the amounts of variable rate
long-term debt and the amount of cash and securities held. The interest rates applicable to variable
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