SkyWest Airlines 2012 Annual Report Download - page 24

reimbursement amounts payable by our code-share partners, our financial results will be negatively
affected.
SkyWest Airlines and ExpressJet are parties to Delta Connection Agreements, pursuant to which
SkyWest Airlines and ExpressJet provide contract flight services for Delta. Among other provisions,
those Delta Connection Agreements provide that Delta has the right to require that certain contractual
rates under those agreements shall not exceed the second lowest rates of all carriers within the Delta
Connection Program. On November 19, 2010, SkyWest Airlines and ExpressJet reached agreements
with Delta related to the second lowest rate provisions to be applied under their respective Delta
Connection Agreements. As a result, SkyWest Airlines and ExpressJet have established the contractual
rates which will apply under those agreements through December 31, 2015.
There can be no assurance that the agreed-upon rates contemplated by our Delta Connection
Agreements will be higher than the costs SkyWest Airlines and ExpressJet will incur to provide the
services required under their respective Delta Connection Agreement. The new rates and future rate
adjustments could negatively affect our financial position and operating results.
Increased labor costs, strikes, labor disputes and increased unionization of our workforces may adversely
affect our ability to conduct our business.
Our business is labor intensive, requiring large numbers of pilots, flight attendants, mechanics and
other personnel. Labor costs constitute a significant percentage of our total operating costs. For
example, during the year ended December 31, 2012, our salary, wage and benefit costs constituted
approximately 35% of our total operating costs. Increases in our labor costs could result in a material
reduction in our earnings. Any new collective bargaining agreements entered into by other regional
carriers with their work forces may also result in higher industry wages and increased pressure on us to
increase the wages and benefits of our employees. Future agreements with unionized and
non-unionized employees may be on terms that are not as attractive as our current agreements or
comparable to agreements entered into by our competitors.
Approximately 42% of our workforce is unionized. Strikes or labor disputes with our unionized
employees may adversely affect our ability to conduct business. Relations between air carriers and labor
unions in the U.S. are governed by the RLA, which provides that a collective bargaining agreement
between an airline and a labor union does not expire, but instead becomes amendable as of a stated
date. The RLA generally prohibits strikes or other types of self-help actions both before and after a
collective bargaining agreement becomes amendable, unless and until the collective bargaining
processes required by the RLA have been exhausted.
SkyWest Airlines’ employees are not currently represented by any union; however, collective
bargaining group organization efforts among those employees occur from time to time. Such efforts will
likely continue in the future and may ultimately result in some or all of SkyWest Airlines’ employees
being represented by one or more unions. Moreover, one or more unions representing ExpressJet
employees may seek a single carrier determination by the National Mediation Board, which could
require SkyWest Airlines to recognize such union or unions as the certified bargaining representative of
SkyWest Airlines’ employees. One or more unions representing ExpressJet employees may also assert
that SkyWest Airlines’ employees should be subject to ExpressJet’s collective bargaining agreements. If
SkyWest Airlines’ employees were to unionize or be deemed to be represented by one or more unions,
negotiations with unions representing SkyWest Airlines’ employees could divert management attention
and disrupt operations, which may result in increased operating expenses and may negatively impact
our financial results. Moreover, we cannot predict the outcome of any future negotiations relating to
union representation or collective bargaining agreements. Agreements reached in collective bargaining
may increase our operating expenses and negatively impact our financial results.
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