SkyWest Airlines 2015 Annual Report Download - page 129

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Salary. Salary is provided with the objective of paying for the underlying role and responsibility associated
with the Executive’s position, which the Compensation Committee believes allows the Company to attract and retain
qualified executives. The Executives’ salaries are set at levels that the Compensation Committee believes are generally
competitive with the compensation paid to officers in similar positions at other airlines. Salary adjustments are
considered annually and influenced by growth of the Company’s operations, individual performance, changes in
responsibility, changes in cost of living, and other factors. The salaries of the Executives are set forth in the Summary
Compensation Table immediately following this section.
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 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 pre-tax earnings
of the Company or its operating subsidiaries achieved for the year; (ii) in part, to the level of cash flow from operations
of the Company or its operating subsidiaries achieved for the year; and (iii) in part, to the achievement of specific
operational goals during the year. The 2015 annual bonus objective of 100% of salary for Messrs. Atkin and Childs, was
allocated between 65% of salary based on a pre-tax earnings target established by the Compensation Committee, 10% of
salary based on a cash flow from operations target established by the Compensation Committee and 25% of salary based
on the achievement of specific operational targets. The 2015 annual bonus objective of 80% of salary for Messrs. Steel,
Simmons and Thompson was allocated between 52% of salary based on a pre-tax earnings target established by the
Compensation Committee, 8% of salary based on a cash flow from operations target established by the Compensation
Committee and 20% of salary based on the achievement of specific operational targets. Mr. Vais was appointed Chief
Operating Officer of ExpressJet during 2015. Mr. Vais 2015 weighted annual bonus objective was 68% of his salary,
allocated between 44% of salary based on a pre-tax earnings target , 7% of salary based on a cash flow from operations
target and 17% of salary based on the achievement of specific operational targets. The differing percentages for the
Executives are due to differing entity level responsibilities. Details are explained below under the headings “2015 Pre-
tax Earnings Target Component”, “2015 Cash Flow from Operations Target Component” and “2015 Operational Targets
Component”.
In the case of Messrs. Atkin, Childs, Steel and Simmons, the applicable pre-tax earnings target, cash flow from
operations target and operational targets were based on the pre-tax earnings, the cash flow from operations and the
operational performance 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 pre-tax
earnings, cash flow from operations and operational performance targets were set at the designated amounts at the
SkyWest Airlines level. Similarly, because Mr. Vais was principally engaged with respect to the operations of
ExpressJet, his pre-tax earnings, cash flow from operations and operational performance targets were set at the
designated amounts at the ExpressJet level. At year-end, the Compensation Committee reviewed the actual pre-tax
earnings, cash flow from operations and operational performance for the year, as well as other items taken into account
in setting the annual pre-tax earnings, cash flow from operations and operational performance targets, and determined the
extent to which the applicable goals were met.
2015 Pre-tax Earnings Target Component. In determining the annual pre-tax 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 pre-tax 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 and other unusual or non-recurring
items, including changes in pro-rate flying market yields and fuel price changes. The above measurement was identified
to encourage continued focus on overall pre-tax earnings and to facilitate the exchange of best practices between the
operating subsidiaries of the Company.