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. 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”), 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 flight completion 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 and is reflected in passenger revenues. 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 revenue-sharing arrangements (referred to as “revenue-sharing” or “pro-rate” arrangements), the major airline and the Company negotiate a passenger fare proration formula when a passenger has a connecting flight operated by both the Company and the major airline partner, pursuant to which the Company receives a percentage of the ticket revenues for those passengers traveling for the portion of their trip operated by the Company, and the major airline retains the ticket revenues for the other portion of the passengers’ trips 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 the 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 respective agreement	Term / Termination Dates
SkyWest Airlines Delta Connection Agreement (fixed-fee arrangement)	 CRJ 200—48  CRJ 700—19  CRJ 900—36	 The contract expires on an individual aircraft basis with expirations that commenced in 2015  The final aircraft expires in 2022  Upon expiration, aircraft may be renewed or extended

ExpressJet Delta Connection Agreement (fixed-fee arrangement)	 CRJ 200—44  CRJ 700—41  CRJ 900—28	 The contract expires on an individual aircraft basis with expirations that commenced in 2015  The final aircraft expires in 2022  Upon expiration, aircraft may be renewed or extended

SkyWest Airlines Delta Connection Pro-rate Agreement (revenue-sharing arrangement)	 CRJ 200—14	 Terminates with 30-day notice

United Express Agreements

Agreement	Number of aircraft under respective agreement	Term / Termination Dates
SkyWest Airlines United Express Agreements (fixed-fee arrangement)	 CRJ 200— 50  CRJ 700— 70  E175— 40	 The contract expires on an individual aircraft basis with expirations that commenced in 2015  The final aircraft expires in 2026  Upon expiration, aircraft may be renewed or extended

ExpressJet United ERJ Agreement (fixed-fee arrangement)	 ERJ 135— 5  ERJ 145— 169	 The contract expires on an individual aircraft basis with expirations that commenced in 2015  The final aircraft expires in 2017  Upon expiration, aircraft may be renewed or extended

SkyWest Airlines United Express Pro-rate Agreement (revenue-sharing arrangement)	 CRJ 200— 26	 Terminates with 120-day notice

Alaska Capacity Purchase Agreement

Agreement

Number of
aircraft under
respective agreement

Term / Termination Dates

SkyWest Airlines
Alaska Agreement (fixed-fee arrangement)

 CRJ 700— 9

 E175— 3

 CRJ 700 portion terminates 2016
E175 portion terminates 2027

 Upon expiration, aircraft may be renewed or extended

American Agreements

Agreement	Number of aircraft under respective agreement	Term / Termination Dates
SkyWest Airlines American Agreement Previously under the US Airways Agreement (fixed-fee arrangement)	 CRJ 200— 6	 Terminates by the end of 2015  Upon expiration, aircraft may be renewed or extended

SkyWest Airlines American Agreement Previously under the US Airways Pro-rate Agreement (revenue-sharing arrangement)	 CRJ 200— 1	 Terminated October 2015
SkyWest Airlines American Agreement (fixed-fee arrangement)	 CRJ 200— 12	 Terminates 2016  Upon expiration, aircraft may be renewed or extended

SkyWest Airlines American Pro-rate Agreement (revenue-sharing arrangement)	 CRJ 200— 5	 Terminates with 120- day notice

ExpressJet American Agreement (fixed-fee arrangement)	 CRJ 200— 12  ERJ 145— 16	 Terminates 2017  Upon expiration, aircraft may be renewed or extended

ExpressJet American Pro-rate Agreement (revenue-sharing arrangement)	 CRJ 200— 2	 Terminates with 120- day notice

In addition to the contractual arrangements described above, SkyWest Airlines has entered into agreements with Alaska, United and Delta to place additional Embraer E175 dual-class jet (“E175”) aircraft into service for those major partners. In June 2015, SkyWest Airlines reached an agreement with Alaska to place eight additional E175 aircraft into service pursuant to the SkyWest Airlines Alaska Agreement. The Company anticipates that those eight E175 aircraft, when added to the three E175 aircraft in service for Alaska and four additional E175 aircraft that Alaska has agreed to place into service under the SkyWest Airlines Alaska Agreement, will result in a total of 15 E175 aircraft under contract with Alaska. In September 2015, SkyWest Airlines reached an agreement with United to place 18 additional E175 aircraft into service pursuant to the SkyWest Airlines United Express Agreement, which the Company believes will result in a total of 58 E175 aircraft under contract with United. In October 2015, SkyWest Airlines reached an agreement with Delta to place 19 new E175 aircraft into service pursuant to the SkyWest Airlines Delta Connection Agreement. Under the agreement, the Company anticipates that delivery of the E175 aircraft to be flown for Delta will begin in August 2016, with all 19 aircraft being delivered by mid-2017.

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 airline 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 airline partners.