Through SkyWest Airlines and ExpressJet, we offer scheduled passenger service
with approximately 3,600 daily departures to destinations in the United States,
Canada, Mexico and the Caribbean. Substantially all of our flights are operated
as Delta Connection, United Express, US Airways Express, American Eagle or Alaska
under code-share arrangements with Delta Air Lines, Inc. ("Delta"),
United Air Lines, Inc. ("United"), US Airways Group, Inc. ("US
Airways"), American Airlines, Inc. ("American") or Alaska Airlines,
Inc. ("Alaska"), respectively. SkyWest Airlines and ExpressJet generally
provide regional flying to our partners under long-term, fixed-fee code-share
agreements. Among other features of our fixed-fee agreements, our partners generally
reimburse us for specified direct operating expenses (including fuel expense,
which is passed through to our partners), and pay us a fee for operating the
aircraft.
SkyWest Airlines and ExpressJet have developed industry-leading reputations
for providing quality regional airline service during their long operating histories.
SkyWest Airlines has been flying since 1972 and ExpressJet (and its predecessors)
since 1979. Our consolidated fleet consisted of a total of 749 aircraft, of
which 425 were assigned to United, 239 were assigned to Delta, 29 were assigned
to American, 15 were assigned to US Airways, nine were assigned to Alaska, two
were subleased to unaffiliated entities and 30 were removed from service. We
currently operate two types of regional jet aircraft: the Bombardier Aerospace
("Bombardier") regional jet, which comes in three different configurations:
the 50-seat Bombardier CRJ200 Regional Jet (the "CRJ200"), the 70-seat
Bombardier CRJ700 Regional Jet (the "CRJ700") and the 70-90-seat Bombardier
CRJ900 Regional Jet (the "CRJ900"); and the Embraer S.A. ("Embraer")
regional jet, which we operate in three different configurations the 50-seat
Embraer ERJ-145 regional jet (the "ERJ145"), the 37-seat Embraer ERJ-135
regional jet (the "ERJ135"), and the 76-seat Embraer E-175 jet (the
"E175"). We also operate the 30-seat Embraer Brasilia EMB- 120 turboprop
(the "EMB120").
We were incorporated in Utah in 1972. Our principal executive offices are
located at 444 South River Road, St. George, Utah 84790, and our primary telephone
number is (435) 634-3000. We maintain an Internet web site at www.skywest.com.
Our website provides a link to the web site of the SEC, through which our annual,
quarterly and current reports, as well as amendments to those reports, are available.
In addition, we provide electronic or paper copies of our SEC filings free of
charge upon request.
Majors, Low-Cost Carriers and Regional Airlines
The airline industry in the United States has traditionally been dominated
by several major airlines, including American, Delta and United. The major airlines
offer scheduled flights to most major U.S. cities, numerous smaller U.S. cities,
and cities throughout the world through a hub and spoke network.
Low-cost carriers, such as Southwest Airlines Co. ("Southwest")
and JetBlue Airways Corporation ("JetBlue"), generally offer fewer
conveniences to travelers and have lower cost structures than major airlines,
which permits them to offer flights to and from many of the same markets as
the major airlines, but at lower prices. Low-cost carriers typically fly direct
flights with limited service to smaller cities, concentrating on higher demand
flights to and from major population bases.
Regional airlines, such as SkyWest Airlines, ExpressJet, Mesa, Air Wisconsin,
Endeavor, Trans State and Republic, typically operate smaller aircraft on lower-volume
routes than major and low-cost carriers. Several regional airlines, including
Envoy, PSA, Piedmont and Horizon, are wholly-owned subsidiaries of major airlines.
In contrast to low-cost carriers, regional airlines generally do not try to
establish an independent route system to compete with the major airlines. Rather,
regional airlines typically enter into relationships with one or more major
airlines, pursuant to which the regional airline agrees to use its smaller,
lower-cost aircraft to carry passengers booked and ticketed by the major airline
between a hub of the major airline and a smaller outlying city. In exchange
for such services, the major airline pays the regional airline either a fixed
flight fee, termed "contract" or "fixed-fee" flights, or
receives a percentage of applicable passenger ticket revenues, termed "pro-rate"
or "revenue-sharing" flights as described in more detail below.
Relationship of Regional and Major Airlines
Regional airlines generally enter into code-share agreements with major airlines,
pursuant to which the regional airline is authorized to use the major airlines
two-letter flight designator codes to identify the regional airlines flights
and fares in the central reservation systems, to paint its aircraft with the
colors and/or logos of its code-share partner and to market and advertise its
status as a carrier for the code-share partner. For example, SkyWest Airlines
primarily operates as United Express out of Chicago (OHare), Denver, Houston,
Los Angeles and San Francisco; as Delta Connection out of Salt Lake City, Detroit
and Minneapolis; as an Alaska carrier out of Seattle and Portland; as a US Airways
carrier out of Phoenix; and as American Eagle out of Los Angeles. ExpressJet
operates primarily as Delta Connection out of Atlanta and Detroit; as United
Express out of Chicago (OHare), Houston, Cleveland, Newark, Denver and Washington
Dulles; and as American Eagle out of Dallas. Code-share agreements also generally
obligate the major airline to provide services such as reservations, ticketing,
ground support and gate access to the regional airline, and both partners often
coordinate marketing, advertising and other promotional efforts. In exchange,
the regional airline provides a designated number of low-capacity (usually between
30 and 76 seats) flights between larger airports served by the major airline
and surrounding cities, usually in lower-volume markets. The financial arrangements
between the regional airlines and their code-share partners usually involve
contractual or fixed-fee payments based on the flights or a revenue-sharing
arrangement based on the flight ticket revenues, as explained below:
Fixed-Fee Arrangements. Under a fixed-fee arrangement (referenced in this
report as a "fixed-fee arrangement," "contract flying" or
a "capacity purchase agreement"), the major airline generally pays
the regional airline a fixed-fee for each departure, flight or block time incurred,
and an amount per aircraft in service each month with additional incentives
based on completion of
flights, on- time performance and baggage handling performance. In addition,
the major and regional airline often enter into an arrangement pursuant to which
the major airline bears the risk of changes in the price of fuel and other such
costs that are passed through to the major airline partner. Regional airlines
benefit from a fixed-fee arrangement because they are sheltered from some of
the elements that cause volatility in airline financial performance, including
variations in ticket prices, passenger loads and fuel prices. However, regional
airlines in fixed-fee arrangements do not benefit from positive trends in ticket
prices (including ancillary revenue programs), passenger loads or fuel prices
because the major airlines absorb most of these costs associated with the regional
airline flight, and the margin between the fixed-fees for a flight and the expected
per-flight costs tends to be smaller than the margins associated with revenue-sharing
arrangements.
Revenue-Sharing Arrangements. Under a revenue-sharing arrangement (referenced
in this report as a "revenue-sharing" arrangement or "pro-rate"
arrangement), the major airline and regional airline negotiate a passenger fare
proration formula, pursuant to which the regional airline receives a percentage
of the ticket revenues for those passengers traveling for one portion of their
trip on the regional airline and the other portion of their trip on the major
airline. Substantially all costs associated with the regional airline flight
are borne by the regional airline. In such a revenue-sharing arrangement, the
regional airline realizes increased profits as ticket prices and passenger loads
increase or fuel prices decrease and, correspondingly, the regional airline
realizes decreased profits as ticket prices and passenger loads decrease or
fuel prices increase.
96.52 %