Passenger and Ground Handling Revenue | 6 Months Ended |
Jun. 30, 2014 |
Passenger and Ground Handling Revenue | ' |
Passenger and Ground Handling Revenue | ' |
Note B — Passenger and Ground Handling Revenue |
|
The Company recognizes passenger and ground handling revenues when the service is provided. Under the Company’s contract and pro-rate flying agreements with Delta Airlines, Inc. (“Delta”), United Air Lines, Inc. (“United”), US Airways Group, Inc. (“US Airways”), American Airlines, Inc. (“American”) and Alaska Airlines (“Alaska”), revenue is considered earned when the flight is completed. Revenue is recognized under the Company’s pro-rate flying agreements based upon the portion of the pro-rate passenger fare the Company anticipates that it will receive. Other ancillary revenues commonly associated with airlines such as baggage fee revenue, ticket change fee revenue and the marketing component of the sale of mileage credits are retained by the Company’s major airline partners on flights that the Company operates under its code-share agreements. |
|
In the event that the contractual rates under the Company’s flying 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 contractual agreements with its major partners, the Company is eligible for incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the agreements and are 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 table summarizes the significant provisions of each code share agreement the Company has executed with its major partners: |
|
Delta Connection Agreements |
|
Agreement | | Number of | | Term / Termination | | Pass through costs | | Performance | | Payment Structure |
aircraft under | Dates | or costs paid | Incentive |
contract | | directly | Structure |
| | by major partner | |
SkyWest Airlines | | · CRJ 200 - 38 | | · The contract expires on an individual aircraft basis beginning in 2014 | | · Fuel | | · No financial performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
Delta Connection Agreement | · CRJ 700 - 19 | | |
| · CRJ 900 - 32 | · The final aircraft expires in 2022 | · Engine Maintenance |
| | | |
| | · The weighted average remaining term of the aircraft under contract is 5.5 years | · Landing fees, Station Rents, De-ice |
| | | |
| | · Upon expiration, aircraft may be renewed or extended | · Insurance |
| | | | | | | | | | |
ExpressJet Delta Connection | | · CRJ 200 - 64 | | · The contract expires on an individual aircraft basis beginning in 2014 | | · Fuel | | · Performance based financial incentives | | · Rate per block hour, per departure and per aircraft under contract |
Agreement | · CRJ 700 - 41 | | |
| · CRJ 900 - 28 | · The final aircraft expires in 2022 | · Engine Maintenance |
| | | |
| | · The weighted average remaining term of the aircraft under contract is 4.3 years | · Landing fees, Station Rents, De-ice |
| | | |
| | · Upon expiration, aircraft may be renewed or extended | · Insurance |
| | | | | | | | | | |
SkyWest Airlines | | · EMB 120 - 9 | | · Terminable upon 120 days’ notice | | · None | | · None | | · Pro-rata sharing of the passenger fare revenue |
Prorate Agreement | · CRJ 200 - 10 |
|
SkyWest Airlines and ExpressJet are each parties to a Delta Connection Agreement with Delta, pursuant to which SkyWest Airlines and ExpressJet provide contract flight services for Delta. The SkyWest Airlines and ExpressJet Delta Connection Agreements contain multi-year rate reset provisions beginning in 2010 and continuing each 5th year thereafter. The Delta Connection Agreements also provide that, beginning with the fifth anniversary of the execution of the agreements (September 8, 2010), Delta has the right to require that certain contractual rates under those agreements shall not exceed the second lowest of all carriers within the Delta Connection program. During the fourth quarter of 2010, SkyWest Airlines and ExpressJet reached an agreement with Delta on contractual rates satisfying the 2010 rate reset provision and the second-lowest rate provision and agreed to rates through December 31, 2015. Delta additionally waived its right to require that the contractual rates payable under the Delta Connection Agreements shall not exceed the second-lowest rates of all carriers within the Delta Connection program through December 31, 2015. |
|
United Express Agreements |
|
Agreement | | Number of | | Term / Termination | | Pass through costs | | Performance | | Payment Structure |
aircraft under | Dates | or costs paid | Incentive Structure |
contract | | directly by major | |
| | partner | |
SkyWest Airlines | | · CRJ 200 - 61 | | · The contract expires on an individual aircraft basis beginning in 2015 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
United Express Agreement | · CRJ 700 - 70 | | |
| · EMB 120 – 9 | · The final aircraft expires in 2026 | · Landing fees, Station Rents, De-ice |
| · E175 – 8 | | |
| | · The weighted average remaining term of the aircraft under contract is 3.8 years | · Insurance |
| | | |
| | · Upon expiration, aircraft may be renewed or extended | |
| | | | | | | | | | |
Atlantic Southeast | | · CRJ 200 - 14 | | · Terminates 2015 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
United Express Agreement | | |
| · Upon expiration, aircraft may be renewed or extended | · Landing fees, Station Rents, De-ice |
| | |
| | · Insurance |
| | | | | | | | | | |
ExpressJet Delaware United Express Agreement | | · ERJ 145 - 22 | | · Terminates 2015 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
| |
· Upon expiration, aircraft may be renewed or extended | · Landing fees, Station Rents, De-ice |
| |
| · Insurance |
|
ExpressJet Delaware United Express Agreement | | · ERJ 135 - 9 | | · The contract expires on an individual aircraft basis beginning in 2014 | | · Fuel | | · Performance based incentives or penalties | | · Rate per block hour, per departure and per aircraft under contract |
· ERJ 145 - 220 | | |
| · The final aircraft expires in 2020 | · Engine Maintenance |
| | |
| · The weighted average remaining term of the aircraft under contract is 3.8 years | · Landing fees, Station Rents, De-ice |
| | |
| · Upon expiration, aircraft may be renewed or extended | · Insurance |
| | | | | | | | | | |
SkyWest Airlines United Express Prorate Agreement | | · CRJ200 - 20 | | · Terminable upon 120 days’ notice | | · None | | · None | | · Pro-rata sharing of the passenger fare revenue |
· EMB 120 - 27 |
|
|
Alaska Capacity Purchase Agreement |
|
Agreement | | Number of | | Term / Termination | | Pass through costs | | Incentive Structure | | Payment Structure |
aircraft under | Dates | or costs paid |
contract | | directly by major |
| | partner |
SkyWest Airlines | | · CRJ 700 - 9 | | · Terminates 2018 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
Capacity Purchase Agreement | | |
| · Upon expiration, aircraft may be renewed or extended | · Landing fees, Station Rents, De-ice |
| | |
| | · Insurance |
|
US Airways Express Agreement |
|
Agreement | | Number of | | Term / Termination | | Pass through costs | | Incentive Structure | | Payment Structure |
aircraft under | Dates | or costs paid |
contract | | directly by major |
| | partner |
SkyWest Airlines US Airways Express Agreement | | · CRJ 200 - 10 | | · Terminates 2015 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
· CRJ 900 - 4 | | |
| · Upon expiration, aircraft may be renewed or extended | · Landing fees, Station Rents, De-ice |
| | |
| | · Insurance |
| | | | | | | | | | |
SkyWest Airlines US Airways Express Prorate Agreement | | · CRJ 200 - 1 | | · Terminable upon 120 days’ notice | | · None | | · None | | · Pro-rata sharing of the passenger fare revenue |
|
American Agreement |
|
Agreement | | Number of | | Term / Termination | | Pass through costs | | Incentive Structure | | Payment Structure |
aircraft under | Dates | or costs paid |
contract | | directly by major |
| | partner |
SkyWest Airlines American Capacity Purchase Agreement | | · CRJ 200 - 12 | | · Terminates 2016 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
| |
· Upon expiration, aircraft may be renewed or extended | · Landing fees, Station Rents, De-ice |
| |
| · Insurance |
| | | | | | | | | | |
SkyWest Airlines American Prorate Agreement | | · CRJ 200 - 4 | | · Terminable upon 120 days’ notice | | · None | | · None | | · Pro-rata sharing of the passenger fare revenue |
|
|
|
|
ExpressJet American Capacity Purchase Agreement | | · CRJ 200 - 11 | | · Terminates 2017 | | · Fuel | | · Performance based incentives | | · Rate per block hour, per departure and per aircraft under contract |
| |
· Upon expiration, aircraft may be renewed or extended | · Landing fees, Station Rents, De-ice |
| |
| · Insurance |
|
Other Revenue Items |
|
The Company’s passenger and ground handling revenues could be impacted by a number of factors, including changes to the Company’s code-share agreements with its major partners, contract modifications resulting from contract re-negotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share agreements and settlement of reimbursement disputes with the Company’s major partners. |