Note B — Passenger and Ground Handling Revenue

The Company recognizes passenger and ground handling revenues when the service is provided under its code-share agreements. Ground handling revenue primarily consists of customer service functions such as gate and ramp agent services, at applicable airports where the Company provides such services to other airlines. Under the Company’s fixed-fee arrangements (referred to as “fixed-fee arrangements, “contract flying” or “capacity purchase agreements”) with Delta Airlines Inc. (“Delta”), United Airlines Inc. (“United”), US Airways Group, Inc. (“US Airways”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”), the major airline generally pays the Company 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 and on-time performance. The major airline partner also directly reimburses the Company for certain direct expenses incurred under the fixed-fee arrangement such as fuel expense and landing fee expenses. Under the fixed-fee arrangements, revenue is earned when each flight is completed.

Under a revenue-sharing arrangement (referred to as a “revenue-sharing” or “pro-rate” arrangements), 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. Revenue is recognized under the Company’s pro-rate flying agreements when each flight is completed based upon the portion of the pro-rate passenger fare the Company anticipates that it will receive for each completed flight.

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 agreements, the Company is eligible to receive 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 each period during the term of an agreement, the Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly.

The following table summarizes the significant provisions of each code share agreement the Company has with each major partner:

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 (fixed-fee arrangement)	CRJ 200—48 CRJ 700—19 CRJ 900—32	The contract expires on an individual aircraft basis with expirations commencing in 2015 The final aircraft expires in 2022 The average remaining term of the aircraft under contract is 4.5 years Upon expiration, aircraft may be renewed or extended	Fuel Engine Maintenance Landing fees, Station Rents, Deice Insurance	No financial performance based incentives	Rate per block hour, per departure and per aircraft under contract

ExpressJet Delta Connection Agreement (fixed-fee arrangement)	CRJ 200—59 CRJ 700—41 CRJ 900—28	The contract expires on an individual aircraft basis with expirations commencing in 2015 The final aircraft expires in 2022 The average remaining term of the aircraft under contract is 3.9 years Upon expiration, aircraft may be renewed or extended	Fuel Engine Maintenance Landing fees, Station Rents, Deice Insurance	Performance based financial incentives	Rate per block hour, per departure and per aircraft under contract

SkyWest Airlines Pro-rate Agreement (revenue-sharing arrangement)	EMB 120—2 CRJ 200—13	Terminates with 30-day notice	None	None	Pro-rata sharing of the passenger fare revenue

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 Agreements (fixed-fee arrangement)	CRJ 200—49 CRJ 700—70 E175—29 EMB 120—4	The contract expires on an individual aircraft basis with expirations commencing in 2015 The final aircraft expires in 2026 The average remaining term of the aircraft under contract is 4.0 years Upon expiration, aircraft may be renewed or extended	Fuel Landing fees, Station Rents, Deice Insurance	Performance based incentives	Rate per block hour, per departure and per aircraft under contract

ExpressJet United ERJ Agreement (fixed-fee arrangement)	ERJ 135—7 ERJ 145—202	The contract expires on an individual aircraft basis with expirations commencing in 2015 The final aircraft expires in 2017 The average remaining term of the aircraft under contract is 1.7 years Upon expiration, aircraft may be renewed or extended	Fuel Engine Maintenance Landing fees, Station Rents, Deice Insurance	Performance based incentives or penalties	Rate per block hour, per departure and per aircraft under contract

SkyWest Airlines United Express Pro-rate Agreement (revenue-sharing arrangement)	CRJ 200—23 EMB 120—6	Terminates with 120-day notice	None	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 Alaska Agreement (fixed-fee arrangement)

CRJ 700—9

Terminates 2018

Upon expiration, aircraft may be renewed or extended

Fuel

Landing fees, Station Rents, Deice

Insurance

Performance based incentives

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

US Airways Agreements

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 Agreement (fixed-fee arrangement)	CRJ 200—10 CRJ 900—4	Terminates by the end of 2015 Upon expiration, aircraft may be renewed or extended	Fuel Landing fees, Station Rents, Deice Insurance	Performance based incentives	Rate per block hour, per departure and per aircraft under contract

SkyWest Airlines US Airways Pro-rate Agreement (revenue-sharing arrangement)	CRJ 200—1	Terminates with 120- day notice	None	None	Pro-rata sharing of the passenger fare revenue

American Agreements

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 Agreement (fixed-fee arrangement)	CRJ 200—12	Terminates 2016 Upon expiration, aircraft may be renewed or extended	Fuel Landing fees, Station Rents, Deice Insurance	Performance based incentives	Rate per block hour, per departure and per aircraft under contract

SkyWest Airlines American Pro-rate Agreement (revenue-sharing arrangement)	CRJ 200—5	Terminates with 120- day notice	None	None	Pro-rata sharing of the passenger fare revenue

ExpressJet American Agreement (fixed-fee arrangement)	CRJ 200—11 ERJ 145—6	Terminates 2017 Upon expiration, aircraft may be renewed or extended	Fuel Landing fees, Station Rents, Deice Insurance	Performance based incentives	Rate per block hour, per departure and per aircraft under contract

ExpressJet American Pro-rate Agreement (revenue-sharing arrangement)	CRJ 200—3	Terminates with 120- day notice	None	None	Pro-rata sharing of the passenger fare revenue

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 Delta, United, Alaska, American or US Airways, 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.