SkyWest Airlines 2014 Annual Report Download - page 80

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SKYWEST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)
In the event that the contractual rates under the agreements have not been finalized at quarterly
or annual financial statement dates, the Company records revenues based on the lower of prior
period’s approved rates, as adjusted to reflect any contract negotiations and the Company’s estimate of
rates that will be implemented in accordance with revenue recognition guidelines. In the event the
Company has a reimbursement dispute with a major partner, the Company evaluates the dispute under
its established revenue recognition criteria and, provided the revenue recognition criteria have been
met, the Company recognizes revenue based on management’s estimate of the resolution of the
dispute.
In several of the Company’s agreements, the Company is eligible for incentive compensation upon
the achievement of certain performance criteria. The incentives are defined in the agreements and are
being measured and determined on a monthly, quarterly or semi-annual basis. At the end of period, the
Company calculates the incentives achieved during that period and recognizes revenue accordingly.
The following summarizes the significant provisions of each code share agreement the Company
has with each major partner:
Delta Connection Agreements
Number of Pass-through costs Performance
aircraft under Term / Termination or costs paid directly Incentive
Agreement contract Dates by major partner Structure Payment Structure
SkyWest Airlines • CRJ 200—44 • The contract • Fuel • No financial • Rate per block
Delta Connection • CRJ 700—19 expires on an performance based hour, per departure
• Engine
Agreement • CRJ 900—32 individual aircraft incentives and per aircraft
Maintenance
(fixed-fee basis with under contract
arrangement) expirations • Landing fees,
commencing in Station Rents,
2015 Deice
• The final aircraft • Insurance
expires in 2022
• The average
remaining term of
the aircraft under
contract is 4.8 years
• Upon expiration,
aircraft may be
renewed or
extended
75