SkyWest Airlines 2015 Annual Report Download - page 22

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• 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, 2015, we had 599 aircraft out of our total 660 aircraft available for scheduled service
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 were 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 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 uncured breach by ExpressJet of certain operational and performance provisions, including measures and standards
related to flight completions and on-time arrivals.
We currently use the systems, facilities and services of Delta and United to support a significant portion of our
operations, including airport and terminal facilities and operations, information technology support, ticketing and
reservations, scheduling, dispatching, fuel purchasing and ground handling services. If Delta or United were to cease to
maintain any of these systems, close any of these facilities or no longer provide these services to us, due to termination
of one of our code-share agreements, a strike or other labor interruption by Delta or United personnel or for any other
reason, we may not be able to obtain alternative systems, facilities or services on terms and conditions as favorable as
those we currently receive, or at all. Since our revenues and operating profits are dependent on our level of flight
operations, we could then be forced to significantly reduce our operations. Furthermore, upon certain terminations of our
code-share agreements, Delta and United could require us to sell or assign to them facilities and assets, including
maintenance facilities, we use in connection with the code-share services we provide. As a result, in order to offer airline
service after termination of any of our code-share agreements, we may have to replace these facilities, assets and
services. We may be unable to arrange such replacements on satisfactory terms, or at all.