SkyWest Airlines 2014 Annual Report Download - page 144

Annual Bonus. In an effort to encourage achievement of the Company’s objectives, an annual
performance-based bonus plan is maintained for the Executives. The combination of salary and annual
bonuses is intended to result in a cash compensation package for each Executive that falls within
competitive market standards as determined by the Compensation Committee based on its review and
understanding of other regional and major air carrier executive compensation programs when the
performance measures and personal goals are met. The purpose of the bonus plan is to reward the
Executives with an annual cash bonus in an amount that correlates (i) in part, to the level of pretax
earnings and other financial measurements of the Company or its operating subsidiaries achieved for
the year; and (ii) in part, to the achievement of specific operational goals and individual quantitative
and qualitative goals during the year. The 2014 annual bonus objective of 80% of salary for
Messrs. Atkin, Childs, Steel, Rich, Thompson and Holt was allocated between 40% of salary based on
pretax earnings and other financial targets established by the Compensation Committee, and 40% of
salary based on the achievement of specific operational and individual targets. Mr. Kraupp’s annual
bonus objective of 60% of salary was allocated between 30% of salary based on pretax earnings and
other financial targets established by the Compensation Committee and 30% of salary based on the
achievement of specific operational and individual targets. The differing percentages for the Executives
are due to differing entity level responsibilities. Details are explained below under the headings ‘‘2014
Pretax Earnings and Financial Targets Component’’ and ‘‘2014 Operational and Individual Targets
Component’’.
2014 Pretax Earnings and Financial Targets Component. In determining annual pretax earnings and
other financial targets to be used for the purpose of determining each bonus amount for the
Executives, the Compensation Committee began with a targeted pretax earnings objective which the
Compensation Committee considered a key measure of the financial health of the Company and the
Board believes is reflective of the Company’s development of shareholder value. The Compensation
Committee then considered the planned budget for the year, timing differences between the Company’s
actual engine overhaul expenses and the related revenue collected from the Company’s major partners,
and other unusual or non-recurring items. The specific income and other financial targets were 1) a
designated amount of pretax earnings at the operating subsidiary level, 2) a designated amount of
controllable expenditures at the operating subsidiary level, and 3) a designated amount of capital
expenditures at the operating subsidiary level. The bonus objective for pretax earnings and other
financial targets was weighted 50% to pretax earnings at the operating subsidiary level, 25% to
controllable expenditures at the operating subsidiary level and 25% to capital expenditures at the
operating subsidiary level. The above identified measurements were identified to encourage continued
focus on overall pretax earnings and financial results, to encourage continued integration and
improvement of ExpressJet’s operations, and to facilitate the exchange of best practices between the
operating subsidiaries of the Company.
In the case of Messrs. Atkin, Childs, Steel, Rich and Kraupp, the applicable pretax earnings and
other financial targets were based on the designated amounts of both operating subsidiaries SkyWest
Airlines (weighted 50%) and ExpressJet (weighted 50%). Because of his primary responsibility with
respect to operations of SkyWest Airlines, Mr. Thompson’s pretax earnings and financial targets were
set as the designated amounts at the SkyWest Airlines level. Similarly, because Mr. Holt was principally
engaged with respect to the operations of ExpressJet, his pretax earnings and financial targets were
designated amounts at the ExpressJet level. At year-end, the Compensation Committee reviewed the
actual pretax earnings and financial results for the year, as well as other items taken into account in
setting the annual pretax earnings and financial targets, and determined the extent to which the
applicable goals were met.
2014 Operational and Individual Targets Component. A portion of the Executives’ annual bonus is
based on their achievement of operational targets (weighted 50%) and individual targets (weighted
50%) established in advance each year. The Compensation Committee has adopted this approach
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