SkyWest Airlines 2014 Annual Report Download - page 27

The Improvement Act also:
• Requires that all airline pilots obtain an Airline Transport Pilot license, which was previously
only required for captains.
• Obligates the FAA to maintain a database of pilot records, including records to be provided by
airlines and other sources, so that airlines will have access to more information before they hire
pilots.
• Requires the FAA to issue new regulations governing the airlines’ obligations to submit pilot
records and the requirements for airlines to obtain access for information in the database before
the database portion of the Improvement Act becomes effective.
• Directs the FAA to rewrite the rules for how long pilots are allowed to work and how much rest
they must have before working.
The Improvement Act (and associated regulations) has increased our compliance and FAA
reporting obligations, has had a negative effect on pilot scheduling, work hours and the number of
pilots required to be employed for our operations or other aspects of our operations, and may continue
to negatively impact our operations and financial condition.
We are highly dependent on Delta and United.
As of December 31, 2014, we had 664 aircraft out of our total 749 aircraft operating under a
fixed-fee arrangement or a revenue-sharing agreement with either Delta or United. If our code-share
agreements with Delta or United are terminated, we would be significantly impacted and likely would
not have an immediate source of revenue or earnings to offset such loss. A termination of either of
these agreements would likely have a material adverse effect on our financial condition, operating
revenues and net income unless we are able to enter into satisfactory substitute arrangements for the
utilization of the affected aircraft by other code-share partners, or, alternatively, obtain the airport
facilities and gates and make the other arrangements necessary to fly as an independent airline. We
may not be able to enter into substitute code-share arrangements, and any such arrangements we might
secure may not be as favorable to us as our current agreements. Operating our airlines independent
from major partners would be a significant departure from our business plan, would likely be very
difficult and would likely require significant time and resources, which may not be available to us at
that point.
The current terms of the SkyWest Airlines and ExpressJet Delta Connection Agreements are
subject to certain early termination provisions. Delta’s termination rights include cross-termination
rights (meaning that a breach by either of SkyWest Airlines or ExpressJet of its Delta Connection
Agreement could, under certain circumstances, permit Delta to terminate any or all of the Delta
Connection Agreements to which we or either of our operating subsidiaries is a party), the right to
terminate each of the agreements upon the occurrence of certain force majeure events (including
certain labor-related events) that prevent SkyWest Airlines or ExpressJet from performance for certain
periods and the right to terminate each of the agreements if SkyWest Airlines or ExpressJet, as
applicable, fails to maintain competitive base rate costs, subject to certain rights of SkyWest Airlines to
take corrective action to reimburse Delta for lost revenues. The current terms of the SkyWest Airlines
and ExpressJet United Express Agreements are subject to certain early termination provisions and
subsequent renewals. United may terminate the SkyWest Airlines and ExpressJet United Express
Agreements due to an uncured breach by SkyWest Airlines or ExpressJet of certain operational or
performance provisions, including measures and standards related to flight completions, baggage
handling and on-time arrivals. The current terms of the United CPA are subject to certain early
termination provisions and subsequent renewals. United may terminate the United CPA due to an
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