SkyWest Airlines 2014 Annual Report Download - page 18

as of December 31, 2014. We anticipate deliveries of the remaining E175 aircraft will continue through
2015. The E175 agreement has a 12-year term for each of the aircraft subject to the agreement.
The SkyWest Airlines United Express Agreements have a latest scheduled termination date in
2026. The SkyWest Airlines United Express Agreements are subject to early termination in various
circumstances including:
• if SkyWest Airlines or United fails to fulfill an obligation under the SkyWest Airlines United
Express Agreements 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; or
• 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.
ExpressJet United ERJ Agreement
Effective November 12, 2010, ExpressJet Delaware and Continental entered into the ExpressJet
United ERJ Agreement, whereby ExpressJet Delaware agreed to provide regional airline service in the
Continental flight system. The rights and obligations of ExpressJet Delaware under the ExpressJet
United ERJ Agreement became the rights and obligations of ExpressJet as a consequence of the
ExpressJet Combination. The rights and obligations of Continental under the ExpressJet United ERJ
Agreement became the rights and obligations of United as a consequence of United’s merger with
Continental in 2010. The ExpressJet United ERJ Agreement was amended and restated on
November 7, 2014, which among other modifications, reduced the term of the agreement.
The ExpressJet United ERJ Agreement terminates in December 2017, subject to early termination
by United or ExpressJet upon the occurrence of certain events. United’s termination rights include the
right to terminate the ExpressJet United ERJ Agreement 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 operated by ExpressJet under the ExpressJet United
ERJ Agreement (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 ExpressJet United ERJ
Agreement if United fails to make payment of $500,000 or more due to ExpressJet under the
ExpressJet United ERJ Agreement and such failure is not cured within five business days following
receipt of notice. Additionally, effective January 1, 2018, United has the right to extend the term for a
12-month period for a certain number of aircraft upon 180 days written notice. United also has the
right to extend the term for a second 12-month period for a certain number of aircraft upon 180 days
written notice.
Under the terms of the ExpressJet United ERJ Agreement, ExpressJet operates 216 ERJ145s and
nine ERJ135s in the United flight system. All of such ERJ145s and ERJ 135s are leased to ExpressJet
by United pursuant to sublease or lease agreements. Upon the expiration of the ExpressJet United
ERJ Agreement, ExpressJet is obligated to return the subleased or leased aircraft to United. As of
December 31, 2014, ExpressJet had removed ten ERJ145s from service and was in the process of
returning such aircraft to United. During the 2015 calendar year, ExpressJet anticipates removing
59 ERJ145s and nine ERJ135s from contract and intends to return the aircraft to United under the
aircraft lease agreement.
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