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 aircraft under contract	Term / Termination Dates	Pass through costs or costs paid directly by major partner	Performance Incentive Structure	Payment Structure
SkyWest Airlines Delta Connection Agreement	· CRJ 200 - 38 · CRJ 700 - 19 · CRJ 900 - 32	· The contract expires on an individual aircraft basis beginning in 2014 · The final aircraft expires in 2022 · The weighted average remaining term of the aircraft under contract is 5.5 years · Upon expiration, aircraft may be renewed or extended	· Fuel · Engine Maintenance · Landing fees, Station Rents, De-ice · Insurance	· No financial performance based incentives	· Rate per block hour, per departure and per aircraft under contract

ExpressJet Delta Connection Agreement	· CRJ 200 - 64 · CRJ 700 - 41 · CRJ 900 - 28	· The contract expires on an individual aircraft basis beginning in 2014 · The final aircraft expires in 2022 · The weighted average remaining term of the aircraft under contract is 4.3 years · Upon expiration, aircraft may be renewed or extended	· Fuel · Engine Maintenance · Landing fees, Station Rents, De-ice · Insurance	· Performance based financial incentives	· Rate per block hour, per departure and per aircraft under contract

SkyWest Airlines Prorate Agreement	· EMB 120 - 9 · CRJ 200 - 10	· Terminable upon 120 days’ notice	· None	· None	· Pro-rata sharing of the passenger fare revenue

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 aircraft under contract	Term / Termination Dates	Pass through costs or costs paid directly by major partner	Performance Incentive Structure	Payment Structure
SkyWest Airlines United Express Agreement	· CRJ 200 - 61 · CRJ 700 - 70 · EMB 120 – 9 · E175 – 8	· The contract expires on an individual aircraft basis beginning in 2015 · The final aircraft expires in 2026 · The weighted average remaining term of the aircraft under contract is 3.8 years · Upon expiration, aircraft may be renewed or extended	· Fuel · Landing fees, Station Rents, De-ice · Insurance	· Performance based incentives	· Rate per block hour, per departure and per aircraft under contract

Atlantic Southeast United Express Agreement	· CRJ 200 - 14	· Terminates 2015 · Upon expiration, aircraft may be renewed or extended	· Fuel · Landing fees, Station Rents, De-ice · Insurance	· Performance based incentives	· Rate per block hour, per departure and per aircraft under contract

ExpressJet Delaware United Express Agreement	· ERJ 145 - 22	· Terminates 2015 · Upon expiration, aircraft may be renewed or extended	· Fuel · Landing fees, Station Rents, De-ice · Insurance	· Performance based incentives	· Rate per block hour, per departure and per aircraft under contract

ExpressJet Delaware United Express Agreement

· ERJ 135 - 9

· ERJ 145 - 220

· The contract expires on an individual aircraft basis beginning in 2014

· The final aircraft expires in 2020

· The weighted average remaining term of the aircraft under contract is 3.8 years

· Upon expiration, aircraft may be renewed or extended

· Fuel

· Engine Maintenance

· Landing fees, Station Rents, De-ice

· Insurance

· Performance based incentives or penalties

· Rate per block hour, per departure and per aircraft under contract

SkyWest Airlines United Express Prorate Agreement

· CRJ200 - 20

· EMB 120 - 27

· Terminable upon 120 days’ notice

· None

· Pro-rata sharing of the passenger fare revenue

Alaska Capacity Purchase Agreement

Agreement

Number of
aircraft under
contract

Term / Termination
Dates

Pass through costs
or costs paid
directly by major
partner

Incentive Structure

Payment Structure

SkyWest Airlines
Capacity Purchase Agreement

· CRJ 700 - 9

· Terminates 2018

· Upon expiration, aircraft may be renewed or extended

· Fuel

· Landing fees, Station Rents, De-ice

· Insurance

· Performance based incentives

· Rate per block hour, per departure and per aircraft under contract

US Airways Express Agreement

Agreement	Number of aircraft under contract	Term / Termination Dates	Pass through costs or costs paid directly by major partner	Incentive Structure	Payment Structure
SkyWest Airlines US Airways Express Agreement	· CRJ 200 - 10 · CRJ 900 - 4	· Terminates 2015 · Upon expiration, aircraft may be renewed or extended	· Fuel · Landing fees, Station Rents, De-ice · Insurance	· Performance based incentives	· Rate per block hour, per departure and per aircraft under contract

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 aircraft under contract	Term / Termination Dates	Pass through costs or costs paid directly by major partner	Incentive Structure	Payment Structure
SkyWest Airlines American Capacity Purchase Agreement	· CRJ 200 - 12	· Terminates 2016 · Upon expiration, aircraft may be renewed or extended	· Fuel · Landing fees, Station Rents, De-ice · Insurance	· Performance based incentives	· Rate per block hour, per departure and per aircraft under contract

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

· Upon expiration, aircraft may be renewed or extended

· Fuel

· Landing fees, Station Rents, De-ice

· Insurance

· Performance based incentives

· Rate per block hour, per departure and per aircraft under contract

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.