SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14719
SKYWEST, INC.
Incorporated under the laws of Utah 87-0292166
(I.R.S. Employer ID No.)
444 South River Road
St. George, Utah 84790
(435) 634-3000
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at February 12, 2001 ----- -------------------------------- Common stock, no par value 56,085,580 |
SKYWEST, INC.
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements: Condensed Consolidated Balance Sheets as of December 31, 2000 and March 31, 2000 3 Condensed Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2000 and 1999 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2000 and 1999 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 15 |
PART I. FINANCIAL INFORMATION
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
ASSETS
December 31, March 31, 2000 2000 ----------- --------- CURRENT ASSETS: Cash and cash equivalents $ 66,190 $ 24,544 Available-for-sale securities 227,440 146,804 Receivables, net 17,230 9,512 Inventories 18,982 16,195 Prepaid aircraft rents 10,712 23,880 Other current assets 14,044 12,891 --------- --------- Total current assets 354,598 233,826 --------- --------- PROPERTY AND EQUIPMENT: Aircraft and rotable spares 291,381 230,248 Deposits on aircraft 98,510 68,372 Buildings and ground equipment 50,550 38,832 Rental vehicles - 3,861 --------- --------- 440,441 341,313 Less-accumulated depreciation and amortization (128,254) (107,359) --------- --------- 312,187 233,954 --------- --------- OTHER ASSETS 2,623 2,403 --------- --------- $ 669,408 $ 470,183 ========= ========= |
See notes to condensed consolidated financial statements.
SKYWEST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, March 31, 2000 2000 --------- --------- CURRENT LIABILITIES: Current maturities of long-term debt $ 10,174 $ 12,437 Trade accounts payable 41,273 42,385 Accrued salaries, wages and benefits 13,687 10,254 Engine overhaul accrual 12,990 9,889 Income taxes payable 1,785 - Taxes other than income taxes 2,163 3,230 Air traffic liability 1,648 1,452 --------- --------- Total current liabilities 83,720 79,647 --------- --------- LONG-TERM DEBT, net of current maturities 75,751 48,321 --------- --------- DEFERRED INCOME TAXES PAYABLE 28,686 29,995 --------- --------- STOCKHOLDERS' EQUITY: Common stock 290,485 165,765 Retained earnings 212,026 168,331 Treasury stock (20,285) (20,285) Net unrealized depreciation on available-for-sale securities (975) (1,591) --------- --------- Total stockholders' equity 481,251 312,220 --------- --------- $ 669,408 $ 470,183 ========= ========= |
See notes to condensed consolidated financial statements.
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended December 31, December 31, ------------------------------- ------------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ OPERATING REVENUES: Passenger $ 129,483 $ 115,378 $ 395,068 $ 345,643 Freight and other 1,398 2,003 4,831 6,037 ------------ ------------ ------------ ------------ 130,881 117,381 399,899 351,680 ------------ ------------ ------------ ------------ OPERATING EXPENSES: Flying operations 57,310 44,512 160,680 127,906 Aircraft, traffic and passenger service 20,204 16,744 56,416 50,160 Maintenance 15,928 14,688 46,765 43,847 Promotion and sales 6,536 6,750 20,756 21,861 General and administrative 6,478 6,738 22,378 20,450 Depreciation and amortization 8,587 7,243 24,688 20,577 Other - 526 531 1,562 ------------ ------------ ------------ ------------ Total operating expenses 115,043 97,201 332,214 286,363 ------------ ------------ ------------ ------------ OPERATING INCOME 15,838 20,180 67,685 65,317 ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest expense - (466) (1,704) (1,919) Interest income 4,737 2,359 10,453 6,497 Gain on sales of property and equipment - 70 470 261 ------------ ------------ ------------ ------------ 4,737 1,963 9,219 4,839 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 20,575 22,143 76,904 70,156 PROVISION FOR INCOME TAXES (8,024) (8,525) (29,991) (27,013) ------------ ------------ ------------ ------------ NET INCOME $ 12,551 $ 13,618 $ 46,913 $ 43,143 ============ ============ ============ ============ NET INCOME PER COMMON SHARE: Basic $ 0.23 $ 0.28 $ 0.90 $ 0.88 Diluted $ 0.22 $ 0.27 $ 0.88 $ 0.87 WEIGHTED AVERAGE COMMON SHARES Basic 55,653,000 49,128,000 52,263,000 49,069,000 Diluted 56,830,000 49,958,000 53,389,000 49,759,000 |
See notes to condensed consolidated financial statements.
SKYWEST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended December 31, ------------------------- 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 46,913 $ 43,143 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,688 20,577 Nonairline depreciation and amortization 249 850 Gain on sales of property and equipment (470) (261) Maintenance expense related to disposition of rotable spares 1,034 678 (Decrease) increase in deferred income taxes (1,309) 2,150 Changes in operating assets and liabilities: (Increase) decrease in receivables, net (7,718) 8,126 Increase in inventories (2,787) (1,601) Decrease in other current assets 12,015 4,328 Increase in trade accounts payable 1,863 11,958 Increase (decrease) in other current liabilities 4,347 (6,743) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 78,825 83,205 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of available-for-sale securities (80,020) (50,910) Acquisition of property and equipment: Aircraft and rotable spares (65,260) (22,908) Buildings and ground equipment (11,706) (2,882) Rental vehicles (875) (3,480) Proceeds from sales of property and equipment 4,442 3,110 Increase in deposits on aircraft and rotable spares (30,138) (13,582) Increase in other assets (417) (446) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (183,974) (91,098) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 32,299 - Issuance of common stock, net of issuance costs 124,720 1,335 Payment of cash dividends (3,092) (2,206) Reduction of long-term debt (7,132) (7,817) --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 146,795 (8,688) --------- --------- Increase (decrease) in cash and cash equivalents 41,646 (16,581) Cash and cash equivalents at beginning of period 24,544 52,237 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 66,190 $ 35,656 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 2,559 $ 2,127 Income taxes 29,325 25,587 |
See notes to condensed consolidated financial statements.
SKYWEST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Consolidated Financial Statements
The condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal recurring nature. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. We suggest that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in our latest annual report on Form 10-K for the year ended March 31, 2000. The results of operations for the three and nine months ended December 31, 2000, are not necessarily indicative of the results that may be expected for the year ending March 31, 2001.
Note B - Available-for-Sale Securities
Available-for-sale securities are recorded at fair market value. Our position in available-for-sale securities consists primarily of investment grade bonds, bond funds, and commercial paper. Unrealized appreciation and depreciation has been recorded as a separate component of stockholders' equity.
Note C - Income Taxes
For the nine months ended December 31, 2000 and 1999, the Company provided for income taxes based upon the estimated annualized effective tax rate. At December 31, 2000, the Company has recorded a net current deferred tax asset of $9.2 million and a net noncurrent deferred tax liability of $28.7 million.
Note D - Interest Expense
During the three months ended December 31, 2000, the Company began to capitalize interest costs incurred on long-term construction projects and advance payments on aircraft purchase contracts. Total interest costs incurred were $787,000 and $466,000 for the three months ended December 31, 2000 and 1999, and $2,491,000 and $1,919,000 for the nine months ended December 31, 2000 and 1999, respectively. Interest capitalized during the three and nine months ended December 31, 2000 was $787,000.
Note E - Net Income Per Common Share
Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods. Diluted net income per common share reflects the potential dilution that could occur if outstanding stock options were exercised. The calculation of the weighted average number of common shares outstanding is as follows:
For the For the Three Months Ended Nine Months Ended December 31, December 31, ------------------ ------------------ 2000 1999 2000 1999 ------ ------ ------ ------ (In thousands) (In thousands) Weighted average number of common shares outstanding ... 55,653 49,128 52,263 49,069 Effect of outstanding stock options .................... 1,177 830 1,126 690 ------ ------ ------ ------ Weighted average number of shares for diluted net income per common share .................................... 56,830 49,958 53,389 49,759 ====== ====== ====== ====== |
SKYWEST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
Note F - Stock Offering
On September 12, 2000, the Company completed a public offering of 5,790,830 shares of common stock which generated net proceeds of $122.1 million after deducting underwriting commissions and other expenses.
Note G - Stock Dividend
On November 7, 2000, the Board of Directors declared a dividend distribution of one share of common stock for each outstanding share of common stock. The stock dividend was distributed on December 15, 2000 to shareholders of record as of November 30, 2000. The effect of the stock dividend has been retroactively reflected in the accompanying financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Operating Statistics --------------------------------------------------------------------------------------------- For the For the Three Months Ended Nine Months Ended December 31, December 31, ---------------------------------------------- ------------------------------------------- 2000 1999 % Change 2000 1999 % Change --------- --------- --------- --------- --------- -------- Passengers carried 1,430,436 1,354,955 5.6 4,303,167 4,207,958 2.3 Revenue passenger miles (000s) 328,606 292,397 12.4 986,590 906,269 8.9 Available seat miles (000s) 567,672 542,050 4.7 1,709,038 1,617,783 5.6 Passenger load factor 57.9% 53.9% 4.0 pts 57.7% 56.0% 1.7 pts Passenger breakeven load factor 50.9% 44.8% 6.1 pts 48.2% 45.9% 2.3 pts Yield per revenue passenger mile 39.4(cents) 39.5(cents) (0.3) 40.0(cents) 38.1(cents) 5.0 Revenue per available seat mile 23.1(cents) 21.6(cents) 6.9 23.4(cents) 21.6(cents) 8.3 Cost per available seat mile 20.3(cents) 17.9(cents) 13.4 19.5(cents) 17.7(cents) 10.2 Average passenger trip (miles) 230 216 6.5 229 215 6.5 |
For the Three Months Ended December 31, 2000 and 1999
For the three months ended December 31, 2000, the Company reported consolidated net income of $12.6 million, or $0.22 per share on a diluted basis, compared to $13.6 million, or $0.27 per share on a diluted basis for the same period last year. The decrease is primarily related to the impact of inclement weather and Air Traffic Control ("ATC") flight cancellations experienced during the 2000 quarter. Additionally, we accelerated the training of flight crews which will be required for our significant fleet expansion and incurred related expenses prior to the aircraft deliveries. Consolidated operating revenues increased 11.5% to $130.9 million for the three months ended December 31, 2000 from $117.4 million for the three months ended December 31, 1999.
Passenger revenues, which represented 98.9% of consolidated operating revenues, increased 12.2% to $129.5 million for the three months ended December 31, 2000 from $115.4 million or 98.3% of consolidated operating revenues for the three months ended December 31, 1999. The increase was primarily the result of a 12.4% increase in revenue passenger miles ("RPMs"). The increase in RPMs is the result of five additional regional jet aircraft deliveries. In spite of the 12.2% increase in passenger revenues, the increase did not keep pace with the increase in operating costs due to the impact of inclement weather and ATC flight cancellations during the quarter ended December 31, 2000. We experienced approximately 5,200 flight cancellations during the quarter, which is an increase of about 2,700 when compared to historical averages for the same three month periods. These flight cancellations occurred primarily in fee-per-departure, or contract flying markets, where the contracted compensation rates are collected only when flights are completed. Typically, these cancellations occur shortly prior to or around the scheduled departure time so a significant amount of the associated costs is still incurred, without receipt of the revenue that would otherwise be earned.
Total operating expenses and interest increased 17.8% to $115.0 million for the three months ended December 31, 2000 compared to $97.7 million for the three months ended December 31, 1999. As a percentage of consolidated operating revenues, total operating expenses and interest increased to 87.9% for the three months ended December 31, 2000 from 83.2% for the comparable three months ended December 31, 1999.
Airline operating costs per available seat mile ("ASM") (including interest expense) increased 13.4% to 20.3 cents for the three months ended December 31, 2000 from 17.9 cents for the three months ended December 31, 1999. The increase is primarily the result of lower than expected ASM production because of the high rate of flight cancellations during the 2000 quarter. The majority of the operating costs are still incurred when flights are cancelled. Additionally, cost per ASM was significantly impacted by increased fuel costs. Factors relating to the change in operating expenses are discussed below.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Salaries, wages and employee benefits increased as a percentage of airline operating revenues to 27.4% for the three months ended December 31, 2000 from 26.8% for the three months ended December 31, 1999. The average number of full-time equivalent employees for the three months ended December 31, 2000 was 3,891 compared to 3,341 for the three months ended December 31, 1999. The increase in number of personnel was due to continued Delta Connection and United Express expansion. Additionally, we accelerated the training of flight crews which will be required for our significant fleet expansion and incurred the related expenses prior to the aircraft deliveries. Salaries, wages and employee benefits per ASM increased to 6.3 cents for the three months ended December 31, 2000 compared to 5.8 cents for the three months ended December 31, 1999 as a result of additional employees.
Aircraft costs, including aircraft rent and depreciation, decreased slightly as a percentage of airline operating revenues to 17.7% for the three months ended December 31, 2000 from 17.9% for the three months ended December 31, 1999. The decrease is due to airline operating revenues increasing at a faster rate than aircraft costs. However, aircraft costs per ASM increased slightly to 4.1 cents for the three months ended December 31, 2000 from 3.8 cents for the three months ended December 31, 1999 due to the flight cancellations previously discussed.
Maintenance expense decreased as a percentage of airline operating revenues to 8.1% for the three months ended December 31, 2000 compared to 8.7% for the three months ended December 31, 1999. This decrease is due to airline operating revenues increasing at a faster rate than maintenance costs. Maintenance expense per ASM was 1.9 cents for both three month periods ended December 31, 2000 and 1999.
Fuel costs increased as a percentage of airline operating revenues to 15.2% for the three months ended December 31, 2000 from 10.3% for the three months ended December 31, 1999 primarily due to a substantial increase in the average fuel price per gallon to $1.29 from $0.97. Fuel costs per ASM increased to 3.5 cents for the three months ended December 31, 2000 from 2.2 cents for the three months ended December 31, 1999.
Other expenses, primarily consisting of commissions, landing fees, station rentals, computer reservation system fees and hull and liability insurance, increased as a percentage of airline operating revenues to 19.5% for the three months ended December 31, 2000 from 18.9% for the three months ended December 31, 1999. Other expenses per ASM increased to 4.5 cents for the three months ended December 31, 2000 from 4.1 cents for the three months ended December 31, 1999.
For the Nine Months Ended December 31, 2000 and 1999
For the nine months ended December 31, 2000, the Company enplaned a record number of passengers and reported an 8.7% increase in consolidated net income of $46.9 million, or $0.88 per share on a diluted basis, compared to $43.1 million, or $0.87 per share on a diluted basis for the same period last year. Consolidated operating revenues increased 13.7% to $399.9 million for the nine months ended December 31, 2000 from $351.7 million for the nine months ended December 31, 1999.
Passenger revenues, which represented 98.8% of consolidated operating revenues, increased 14.3% to $395.1 million for the nine months ended December 31, 2000 from $345.6 million or 98.3% of consolidated operating revenues for the nine months ended December 31, 1999. The increase was primarily the result of an 8.9% increase in RPMs as well as a 5.0% increase in yield per RPM. The increase in RPMs is the result of additional aircraft deliveries and flights, period over period. The increase in yield per RPM is primarily the result of competitors eliminating and reducing scheduled service in the San Francisco and Los Angeles markets. Additionally, the Company implemented selected fare increases during the 2000 fiscal year which have remained in effect. Fuel surcharges have also been added to fares to mitigate the increase in fuel prices. On SkyWest-controlled flights, SkyWest also continues to use a state-of-the-art revenue management and control system which utilizes historical booking data to optimize revenue. Together these factors have resulted in an 8.3% increase in revenue per available seat mile to 23.4 cents for the nine months ended December 31, 2000 from 21.6 cents for the nine months ended December 31, 1999.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Total operating expenses and interest increased 15.8% to $333.9 million for the nine months ended December 31, 2000 compared to $288.3 million for the nine months ended December 31, 1999. As a percentage of consolidated operating revenues, total operating expenses and interest increased to 83.5% for the nine months ended December 31, 2000 from 82.0% for the nine months ended December 31, 1999. For the nine months ended December 31, 2000, total airline operating expenses and interest (excluding nonairline expenses) were 84.4% of airline operating revenues compared to 81.9% for the nine months ended December 31, 1999. Airline operating costs per ASM (including interest expense) increased to 19.5 cents for the nine months ended December 31, 2000 from 17.7 cents for the nine months ended December 31, 1999. Factors relating to the changes in operating expenses are discussed below.
Salaries, wages and employee benefits as a percentage of airline operating revenues was 26.4% for the nine months ended December 31, 2000 and 26.0% for the nine months ended December 31, 1999. The average number of full-time equivalent employees for the nine months ended December 31, 2000 was 3,705 compared to 3,275 for the nine months ended December 31, 1999. The increase in number of personnel was due to the Delta Connection and United Express expansion. Salaries, wages and employee benefits per ASM increased to 6.2 cents for the nine months ended December 31, 2000 from 5.6 cents for the nine months ended December 31, 1999 as a result of additional employees.
Aircraft costs, including aircraft rent and depreciation, decreased as a percentage of airline operating revenues to 16.7% for the nine months ended December 31, 2000 from 17.3% for the nine months ended December 31, 1999. The decrease is due to airline operating revenues increasing at a faster rate than aircraft costs. However, aircraft costs per ASM increased slightly to 3.9 cents for the nine months ended December 31, 2000 from 3.7 cents for the nine months ended December 31, 1999 primarily due to flight cancellations during the three months ended December 31, 2000.
Maintenance expense decreased as a percentage of airline operating revenues to 7.8% for the nine months ended December 31, 2000 from 8.8% for the nine months ended December 31, 1999. Maintenance expense per ASM decreased to 1.8 cents for the nine months ended December 31, 2000 from 1.9 cents for the nine months ended December 31, 1999.
Fuel costs increased as a percentage of airline operating revenues to 13.2% for the nine months ended December 31, 2000 from 9.5% for the nine months ended December 31, 1999, primarily due to an increase in the average fuel price per gallon to $1.20 from $0.86. Fuel costs per ASM increased to 3.1 cents for the nine months ended December 31, 2000 from 2.1 cents for the nine months ended December 31, 1999.
Other expenses, primarily consisting of commissions, landing fees, station rentals, computer reservation system fees and hull and liability insurance, decreased as a percentage of airline operating revenues to 18.9% for the nine months ended December 31, 2000 from 19.7% for the nine months ended December 31, 1999. The decrease is primarily the result of the airline not incurring commissions on contract related passenger revenues.
Liquidity and Capital Resources
We had working capital of $270.9 million and a current ratio of 4.2:1 at December 31, 2000 compared to working capital of $154.2 million and a current ratio of 2.9:1 at March 31, 2000. The improvement in working capital is primarily the result of a common stock offering completed on September 12, 2000, wherein we generated net proceeds of $122.1 million. During the nine months ended December 31, 2000, the other principal sources of funds were $78.8 million generated from operations, $32.3 million from the issuance of long-term debt, $4.4 million of proceeds from the sale of property and equipment and $2.6 million from the issuance of common stock upon the exercise of stock options. During the nine months ended December 31, 2000, we invested $80.0 million in available-for-sale securities, $65.3 million in flight equipment, $30.1 million in aircraft deposits, $13.0 million in buildings, ground equipment and rental vehicles, reduced long-term debt by $7.1 million, and paid cash dividends of $3.1 million. These factors resulted in an increase of $41.6 million in cash and cash equivalents over the last nine months.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company's position in available-for-sale securities, consisting primarily of bonds, bond funds and commercial paper, increased to $227.4 million at December 31, 2000 compared to $146.8 million at March 31, 2000. At December 31, 2000, the Company's long-term debt to equity position was 13.6% compared to 13.4% at March 31, 2000.
During the nine months ended December 31, 2000, SkyWest took delivery of five Canadair Regional Jets ("CRJs") in connection with the Delta Connection and United Express expansion. Additionally, as of December 31, 2000, SkyWest had agreed to purchase 114 CRJs and related spare parts inventory and support equipment at an aggregate cost of approximately $2.5 billion. SkyWest will take delivery of these aircraft beginning in January 2001 and deliveries will continue through December 2004. Depending on the state of the aircraft financing market at the time of delivery, management will determine whether to acquire these aircraft through third party, long-term loans or lease agreements. SkyWest also has options to acquire 119 additional CRJs at fixed prices (subject to cost escalations) and delivery schedules and are exercisable at various dates through April 2008.
We have significant long-term operating lease obligations primarily relating to our aircraft fleet. These leases are classified as operating leases and therefore are not reflected as liabilities in our consolidated balance sheets. At December 31, 2000, SkyWest leased 85 aircraft under leases with an average remaining term of approximately 8.4 years. Future minimum lease payments due under all long-term operating leases were approximately $601.6 million at December 31, 2000. At an 8% discount factor, the present value of these obligations would be equal to approximately $414.2 million at December 31, 2000.
Our total long-term debt of $85.9 million was incurred in connection with the acquisition of Brasilia Turboprops and CRJs. Certain amounts related to Brasilia Turboprops are supported by continuing subsidy payments through the export support program of the Federative Republic of Brazil. The subsidy payments reduce the stated interest rates to an average effective rate of approximately 4.06% on $29.4 million of the long-term debt at December 31, 2000. The continuing subsidy payments are at risk if the Federative Republic of Brazil does not meet its obligations under the export support program. While we have no reason to believe, based on information currently available, that we will not continue to receive these subsidy payments from the Federative Republic of Brazil in the future, there can be no assurance that such a default will not occur. On the remaining Brasilia Turboprop long-term debt of $24.4 million, the average effective rate is 3.82% at December 31, 2000 and the lender has assumed the risk of the subsidy payments. The average effective rate on the debt related to the Canadair Regional Jet aircraft of $32.1 million was 7.26% at December 31, 2000 and is not subject to subsidy payments.
We spent approximately $49.5 million for nonaircraft capital expenditures during the nine months ended December 31, 2000, consisting primarily of aircraft engine overhauls, rotable spare parts, buildings and ground equipment and rental vehicles.
We have available $10.0 million in an unsecured bank line of credit with interest payable at the bank's base rate less one-quarter percent, which was a net rate of 9.25% at December 31, 2000. We believe that, in the absence of unusual circumstances, the working capital available to us will be sufficient to meet our present requirements, including expansion, capital expenditures, lease payments and debt service requirements for at least the next 12 months.
Seasonality
As is common in the airline industry, SkyWest's operations are favorably affected by increased travel, historically occurring in the summer months, and are unfavorably affected by decreased business travel during the months from November through January and by inclement weather which occasionally results in cancelled flights, principally during the winter months. However, SkyWest does expect some mitigation of the historical seasonal trends due to an increase in the portion of its operations in contract flying.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Forward-Looking Statements
This Form 10-Q contains forward-looking statements and information that are based on management"s belief, as well as assumptions made by and information currently available to management. When used in this document, the words "anticipate", "estimate", "project", "expect", and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. The key factors that have a direct bearing on our operating results include, among other things, employee relations and labor costs, changes in SkyWest"s code-sharing relationships, fluctuations in the economy and the demand for air travel, the degree and nature of competition and SkyWest"s ability to expand services in new and existing markets and to maintain profit margins in the face of pricing pressures.
PART II. OTHER INFORMATION
SKYWEST, INC.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Aircraft Fuel
We are exposed to fluctuations in the price and availability of aircraft fuel that affect our earnings. Our financial statements reflect both the cost of fuel we purchase for SkyWest controlled flights, as well as fuel we purchase for contract flights which is subject to reimbursement by our code-sharing partners. Currently, we have limited exposure to fuel price increases with respect to approximately 65% of ASMs produced, due to contractual arrangements with Delta and United. These major airlines reimburse us for the actual cost of fuel on contracted flights. For illustrative purposes only, we have estimated the impact of market risk using a hypothetical increase in fuel price per gallon of 10% for the three months and nine months ended December 31, 2000 and 1999. Based on this hypothetical assumption and after considering the impact of the contractual arrangements, we would have experienced an increase in fuel expense of approximately $778,000 for the three months ended December 31, 2000 and $423,000 for the three months ended December 31, 1999. We would have experienced an increase in fuel expense of approximately $1,914,000 for the nine months ended December 31, 2000 and $1,164,000 for the nine months ended December 31, 1999. We currently intend to use cash generated by operating activities to fund any adverse change in the price of fuel.
Interest Rates
Our earnings are affected by changes in interest rates due to the amounts of variable rate long-term debt and the amount of cash and securities held. The interest rates applicable to variable rate notes may rise and increase the amount of interest expense. We would also receive higher amounts of interest income on our cash and securities held at the time; however, the market value of our available-for-sale securities would decline. At December 31, 2000 we had variable rate notes representing 22% of the total long-term debt and 8% at December 31, 1999. We do not have significant exposure to the changing interest rates on our fixed-rate long-term debt instruments, which represented 78% of the total long-term debt at December 31, 2000 and 92% at December 31, 1999. For illustrative purposes only, we have estimated the impact of market risk using a hypothetical increase in interest rates of one percentage point for both our variable rate long-term debt and cash and securities. Based on this hypothetical assumption, we would have incurred an additional $48,000 in interest expense and received $755,000 in additional interest income for the three months ended December 31, 2000 and an additional $12,000 in interest expense and received $474,000 in additional interest income for the three months ended December 31, 1999. Additionally, we would have incurred $129,000 in interest expense and received $1,831,000 in additional interest income for the nine months ended December 31, 2000 and an additional $40,000 in interest expense and received $1,342,000 in additional interest income for the nine months ended December 31, 1999. As a result of this assumption, we can fund interest rate increases on our variable rate long-term debt with the increased amounts of interest income.
PART II. OTHER INFORMATION
SKYWEST, INC
(Continued)
Item 6: Exhibits and Reports on Form 8-K
a. Reports on Form 8-K - There were no reports on Form 8-K filed during the quarter ended December 31, 2000.
b. Exhibits -- 10.1 - Master Purchase Agreement between Bombardier, Inc. and SkyWest Airlines, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
February 13, 2001 BY: /s/ Bradford R. Rich ------------------------------------- Bradford R. Rich Executive Vice President, Chief Financial Officer and Treasurer |
EXHIBIT INDEX
Exhibit No. Description ------- ------------- 10.1 Master Purchase Agreement between Bombardier Inc. and SkyWest Airlines, Inc. |
Exhibit 10.1
MASTER PURCHASE AGREEMENT NO. PA-489
BETWEEN
BOMBARDIER INC.
AND
SKYWEST AIRLINES, INC.
TABLE OF CONTENTS ARTICLE ------- 1 INTERPRETATION 2 SUBJECT MATTER OF SALE 3 AIRLINE SUPPORT SERVICES AND WARRANTY 4 PRICE 5 PAYMENT 6 DELIVERY PROGRAM 7 BUYER INFORMATION 8 CERTIFICATION FOR EXPORT 9 ACCEPTANCE PROCEDURE 10 TITLE AND RISK 11 CHANGES 12 BUYER'S REPRESENTATIVES AT MANUFACTURE SITE 13 EXCUSABLE DELAY 14 NON-EXCUSABLE DELAY 15 LOSS OR DAMAGE 16 TERMINATION 17 NOTICES 18 INDEMNITY AGAINST PATENT INFRINGEMENT 19 LIMITATION OF LIABILITY AND INDEMNIFICATION 20 ASSIGNMENT 21 SUCCESSORS 22 APPLICABLE LAWS 23 CONFIDENTIAL NATURE OF AGREEMENT 24 AGREEMENT EXHIBITS -------- I CERTIFICATE OF ACCEPTANCE II BILL OF SALE III CERTIFICATE OF RECEIPT OF AIRCRAFT IV CHANGE ORDER ANNEXES ------- A AIRLINE SERVICES B WARRANTY AND SERVICE LIFE POLICY |
This Master Purchase Agreement is made on the 7th day of November, 2000
BY AND BETWEEN: BOMBARDIER INC., a Canadian corporation represented by BOMBARDIER AEROSPACE, REGIONAL AIRCRAFT having an office at 123 Garratt Boulevard, Downsview, Ontario, Canada ("Bombardier") AND: SkyWest Airlines, Inc., a Utah corporation having its offices at 444 South River Road, St. George, Utah, 84790, USA ("Buyer") WHEREAS Buyer may in future desire to purchase new Aircraft (as defined in Article 1.4 of this Master Purchase Agreement) and related data, documents, and services under this Agreement (as defined in Article 1.4 of this Master Purchase Agreement) from Bombardier, and the parties desire to agree in advance on the terms that will govern such purchase; and WHEREAS This Master Purchase Agreement and any subsequent amendments thereto, together with the Supplement(s) that may be executed from time to time, will be the governing document for any future transactions between Bombardier and Buyer relating to the purchase and sale of new Bombardier products, currently being offered for sale by Bombardier Aerospace, Regional Aircraft. |
NOW THEREFORE, in consideration of the mutual covenants herein contained, Buyer and Bombardier agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 The recitals above have been inserted for convenience only and do not form part of this Agreement.
1.2 The headings in this Agreement are included for convenience only and shall not be used in the construction and interpretation of this Agreement.
1.3 In this Agreement, unless otherwise expressly provided, the singular includes the plural and vice-versa.
1.4 In this Agreement the following expressions shall, unless otherwise expressly provided, mean:
(a) "Acceptance Period" shall have the meaning attributed to it in Article 9.3;
(b) "Acceptance Date" shall have the meaning attributed to it in Article 9.7(a);
(c) "Agreement" means this Master Purchase Agreement and Supplements, if any, including their Exhibits, Annexes, Schedules and Appendices, if any, either attached hereto (each of which is incorporated in the Agreement by this reference) or subsequently agreed by the parties, hereto, pursuant to the provisions of this Agreement;
(d) "Aircraft" shall have the meaning attributed to it in the applicable Supplement;
(e) "Aircraft Purchase Price" shall have the meaning attributed to it in the applicable Supplement;
(f) "Base Price" shall have the meaning attributed to it in the applicable Supplement;
(g) "Bill of Sale" shall have the meaning attributed to it in Article 9.7(c);
(h) "Buyer Selected Optional Features" shall have the meaning attributed to it in the applicable Supplement;
(i) "Delivery Date" shall have the meaning attributed to it in Article 9.7(c);
(j) "Economic Adjustment Formula", if applicable, shall have the meaning attributed to it in the applicable Supplement;
(k) "Excusable Delay" shall have the meaning attributed to it in Article 13.1;
(l) "FAA" shall have the meaning attributed to it in Article 8.1;
(m) "Non-Excusable Delay" shall have the meaning attributed to it in Article 14.1;
(n) "Notice" shall have the meaning attributed to it in Article 17.1;
(o) "Other Patents" shall have the meaning attributed to it in Article 18.1;
(p) "Permitted Change" shall have the meaning attributed to it in Article 11.2;
(q) "Readiness Date" shall have the meaning attributed to it in Article 9.1;
(r) "Regulatory Change" shall have the meaning attributed to it in Article 8.4;
(s) "Scheduled Delivery Date" shall have the meaning attributed to it in the applicable Supplement;
(t) "Specification" shall have the meaning attributed to it in the applicable Supplement;
(u) "Supplement" means a supplementary agreement to this Agreement entered into by the parties for the purchase of specific products currently offered for sale by Bombardier Aerospace, Regional Aircraft;
(v) "Taxes" shall have the meaning attributed to it in Article 4.2; and
(w) "TC" shall have the meaning attributed to it in Article 8.1.
1.5 All dollar amounts in this Agreement are in United States Dollars.
ARTICLE 2 - SUBJECT MATTER OF SALE
2.1 A description of the Aircraft being purchased and sold under the terms of this Agreement and the related Bombardier specification document number(s) will be set out in the applicable Supplement. Until a Supplement, in the form of Supplement No. PA-489-1 attached hereto, is executed between the parties hereto, neither party shall have any obligation under the terms of this Agreement.
2.2 This Agreement shall be applicable to the purchase of Aircraft completed during a period of three (3) years from the date hereof as evidenced by the execution of a Supplement.
ARTICLE 3 - CUSTOMER SUPPORT SERVICES AND WARRANTY
3.1 Bombardier shall provide to Buyer the customer support services pursuant to the provisions of Annex A attached hereto and the applicable Supplement.
3.2 Bombardier shall provide to Buyer the warranty and the service life policy described in Annex B attached hereto and the applicable Supplement which shall be the exclusive warranty applicable to the Aircraft.
3.3 Unless expressly stated otherwise, the services referred to in 3.1 and 3.2 above and the applicable Supplement are incidental to the sale of the Aircraft and are included in the Aircraft Purchase Price.
ARTICLE 4 - PRICE
4.1 (a) The base price for each of the Aircraft is set out in the applicable Supplement. (b) The base price of the Buyer Selected Optional Features is set out in the applicable Supplement. |
4.2 The Aircraft Purchase Price (as defined in the applicable Supplement) does not include any taxes, fees or duties including, but not limited to, sales, use, value added (including the Canadian Goods and Services Tax), personal property, gross receipts, franchise, excise taxes, assessments or duties ("Taxes") which are or may be imposed by law upon Bombardier, any affiliate of Bombardier, Buyer or the Aircraft whether or not there is an obligation for Bombardier to collect same from Buyer, by any taxing authority or jurisdiction occasioned by, relating to or as a result of the execution of this Agreement or the sale, lease, delivery, storage, use or other consumption of any Aircraft or any other matter, good or service provided under or in connection with this Agreement. According to legislation as of the date hereof, Canadian taxes, duties and Goods and Services Tax are not applicable to aircraft sold and immediately exported from Canada.
4.3 If any Taxes (other than Canadian income taxes charged on the income of Bombardier) are imposed upon Buyer or become due or are to be collected from Bombardier by any taxing authority, Bombardier shall notify Buyer and Buyer shall promptly, but no later than ten (10) working days after receiving such notice, pay such Taxes directly to the taxing authority, or reimburse Bombardier for such Taxes, as the case may be, including interest and penalties.
4.4 Upon Bombardier's request, Buyer shall execute and deliver to Bombardier any documents that Bombardier deems necessary or desirable in connection with any exemption from or reduction of or the contestation of or the defense against any imposition of Taxes.
ARTICLE 5 - PAYMENT
5.1 The terms of payment for the Aircraft purchased and sold under the terms of this Agreement shall be set out in the applicable Supplement.
5.2 Subject to the provisions of Article 9.9 hereof, should Buyer fail to make any of the payments required under the applicable Supplement on or before the stipulated date and Buyer does not correct the failure within a period of thirty (30) days thereafter, Buyer shall be in default and any Supplement and this Agreement as it relates thereto shall automatically terminate and Bombardier shall have no further obligation to Buyer under any Supplement and this Agreement as it relates thereto, including the obligation to proceed further with the manufacture of the Aircraft on behalf of Buyer or the sale and/or delivery of the Aircraft to Buyer. Notwithstanding the preceding sentence Bombardier shall have the option (but not the obligation) of waiving such termination should Buyer make arrangements satisfactory to Bombardier for such payment and all future payments within ten (10) calendar days of Buyer's default.
5.3 Buyer shall pay Bombardier daily interest on late payments, from the date that any payment becomes due up to and including the day prior to receipt of payment, at a rate of two percent (2%) per annum over the prime rate charged by the National Bank of Canada from time to time, calculated and compounded monthly. Bombardier's right to receive such interest is in addition to any other right or remedy Bombardier has at law as a result of Buyer's failure to make payments when due.
5.4 Buyer shall make all payments due under this Agreement and/or any applicable Supplement in immediately available United States Dollars by deposit on or before the due date, to Bombardier's account, in the manner set out in the applicable Supplement.
5.5 All amounts due with respect to each Aircraft shall be paid on or prior to the Delivery Date of the respective Aircraft.
5.6 All payments provided for under this Agreement and/or any applicable Supplement shall be made so as to be received by Bombardier in immediately available funds on or before the dates stipulated herein.
5.7 Bombardier shall remain the exclusive owner of the Aircraft, free and clear of all rights, liens, charges or encumbrances created by or through Buyer, until such time as all payments referred to in this Article 5 have been received in full by Bombardier.
ARTICLE 6 - DELIVERY PROGRAM
6.1 The Aircraft shall be offered for inspection and acceptance to Buyer at Bombardier's facility and during the month(s) set forth in the applicable Supplement.
ARTICLE 7 - BUYER INFORMATION
7.1 During the manufacture of the Aircraft, Buyer shall provide to Bombardier on or before the date required by Bombardier, all information as Bombardier may reasonably request to manufacture the Aircraft including, without limitation, the selection of furnishings, internal and external colour schemes.
Buyer will, not less that the number of months set forth in the applicable Supplement, prior to the delivery of the first Aircraft governed by such Supplement:
(a) provide Bombardier with an external paint scheme agreed on by the parties;
(b) select interior colours (from Bombardier's standard colours); and
(c) provide to Bombardier, on drawings which will be forwarded to Buyer, language translations for interior and exterior Aircraft labels.
Failure of Buyer to comply with these requirements may result in an increase in price, a delay in delivery of the Aircraft, or both.
ARTICLE 8 - CERTIFICATION FOR EXPORT
8.1 Bombardier has obtained or will obtain from Transport Canada, Airworthiness ("TC"), a TC Type Approval or Certificate (Transport Category) and from the Federal Aviation Administration of the United States ("FAA") an FAA Type Certificate for the type of aircraft purchased under this Agreement and any applicable Supplement.
8.2 Bombardier shall provide to Buyer a TC Certificate of Airworthiness (Transport Category) for Export to the United States of America, on or before the Delivery Date.
8.3 Bombardier shall not be obligated to obtain any other certificates or approvals as part of this Agreement. The obtaining of any import license or authority required to import or operate the Aircraft into any country outside of Canada shall be the responsibility of Buyer. Bombardier shall, to the extent permitted by law, and with Buyer's assistance, seek the issuance of a Canadian export license to enable Buyer to export the Aircraft from Canada subject to prevailing export control regulations in effect on the Delivery Date.
8.4 If any addition or change to, or modification or testing of the Aircraft is required by any law or governmental regulation or requirement or interpretation thereof by any governmental agency having jurisdiction in order to meet the requirements of Article 8.2 (a "Regulatory Change"), such Regulatory Change shall be made to the Aircraft prior to Delivery Date, or at such other time after the Delivery Date as the parties may agree upon.
8.5 The Regulatory Change shall be made without additional charge to Buyer unless such Regulatory Change is:
(a) necessary to comply with any requirement of the country specified in the TC Certificate of Airworthiness for Export, which varies from or is in addition to its regulation, requirement or interpretation in effect on the date hereof for the issuance of a Certificate of Airworthiness in said country, in which case Buyer shall pay Bombardier's reasonable charges for such Regulatory Change, or
(b) required by any governmental law or regulations or interpretation thereof promulgated by TC, or the FAA as applicable, which is effective subsequent to the date of this Agreement but before the Delivery Date and which is applicable to all aircraft in general or to all aircraft of the same category as the Aircraft, in which case Buyer shall pay Bombardier's reasonable charges for such Regulatory Change incorporated in any such Aircraft.
8.6 If delivery of the Aircraft is delayed by the incorporation of any Regulatory Change, such delay shall be an Excusable Delay within the meaning of Article 13.
8.7 Bombardier shall issue a Change Order, reflecting any Regulatory Change required to be made under this Article 8, which shall set forth in detail the particular changes to be made and the effect, if any, of such changes on design, performance, weight, balance, time of delivery, Base Price and Aircraft Purchase Price. Any Change Orders issued pursuant to this Article shall be effective and binding upon the date of Bombardier's transmittal of such Change Order.
8.8 If the use of any of the certificates identified in this Article 8 are discontinued during the performance of this Agreement, reference to such discontinued certificate shall be deemed a reference to any other certificate or instrument which corresponds to such certificate or, if there should not be any such other certificate or instrument, then Bombardier shall be deemed to have obtained such discontinued certificate(s) upon demonstrating that the Aircraft complies substantially with the Specification.
8.9 Reference to a regulatory authority shall include any succeeding department or agency then responsible for the duties of said regulatory authority.
ARTICLE 9 - ACCEPTANCE PROCEDURE
9.1 Bombardier shall give Buyer at least thirty (30) days advance notice, by facsimile or telegraphic communication or other expeditious means, of the projected date of readiness of each Aircraft for inspection and delivery.
Bombardier shall give Buyer at least ten (10) working days advance notice, by facsimile or telegraphic communication or other expeditious means, of the date on which an Aircraft will be ready for Buyer's inspection, flight test and acceptance (the "Readiness Date").
9.2 Within two (2) days following receipt by Buyer of the notice of Readiness Date Buyer shall:
(a) provide notice to Bombardier as to the source and method of payment of the balance of the Aircraft Purchase Price;
(b) identify to Bombardier the names of Buyer's representatives who will participate in the inspection, flight test and acceptance; and
(c) provide evidence of the authority of the designated persons to execute the Certificate of Acceptance and other delivery documents on behalf of Buyer.
9.3 Buyer shall have three (3) consecutive working days commencing on the Readiness Date in which to complete the inspection and flight test (such three (3) working day period being the "Acceptance Period").
9.4 Up to four (4) representatives of Buyer may participate in Buyer's ground inspection of the Aircraft and two (2) representatives of Buyer may participate in the flight test. Bombardier shall, if requested by Buyer, perform an acceptance flight of not less than one (1) and not more than three (3) hours duration. Ground inspection and flight test shall be conducted in accordance with Bombardier's acceptance procedures (a copy of which shall be provided to Buyer at least 30 days prior to the Scheduled Delivery Date of the first Aircraft governed by the applicable Supplement hereunder) and at Bombardier's expense. At all times during ground inspection and flight test, Bombardier shall retain control over the Aircraft.
9.5 If no Aircraft defect or discrepancy is revealed during the ground inspection or flight test, Buyer shall accept the Aircraft on or before the last day of the Acceptance Period in accordance with the provisions of Article 9.7.
9.6 If any material defect or discrepancy in the Aircraft is revealed by Buyer's ground inspection or flight test, the defect or discrepancy will promptly be corrected by Bombardier, at no cost to Buyer, which correction may occur during or after the Acceptance Period depending on the nature of the defect or discrepancy and of the time required for correction. To the extent necessary to verify such correction, Bombardier shall perform one (1) or more further acceptance flights.
9.7 Upon completion of the ground inspection and acceptance flight of the Aircraft and correction of any defects or discrepancies:
(a) Buyer will sign a Certificate of Acceptance (in the form of Exhibit I hereto ) for the Aircraft. Execution of the Certificate of Acceptance by or on behalf of Buyer shall be evidence of Buyer having examined the Aircraft and found it in accordance with the provisions of this Agreement. The date of signature of the Certificate of Acceptance shall be the "Acceptance Date";
(b) Bombardier will supply a TC Certificate of Airworthiness for Export, and
(c) Buyer shall pay Bombardier the balance of the Aircraft Purchase Price and any other amounts due, at which time Bombardier shall issue a bill of sale (in the form of Exhibit II hereto) passing to Buyer good title to the Aircraft free and clear of all liens, claims, charges and encumbrances except for those liens, charges or encumbrances created by or claimed through Buyer (the "Bill of Sale"). The date on which Bombardier delivers the Bill of Sale and Buyer takes delivery of the Aircraft shall be the "Delivery Date".
Delivery of the Aircraft shall be evidenced by the execution and delivery of the Bill of Sale and of the Certificate of Receipt of Aircraft (in the form of Exhibit III hereto ).
9.8 Provided that Bombardier has met all of its obligations under this Article 9, should Buyer not accept, pay for and take delivery of any of the Aircraft governed by the applicable Supplement within ten (10) calendar days after the end of the Acceptance Period of such Aircraft, Buyer shall be deemed to be in default of the terms of this Agreement with respect to all the undelivered Aircraft governed by the applicable Supplement.
9.9 Buyer shall promptly, upon demand, reimburse Bombardier for all costs and expenses reasonably incurred by Bombardier as a result of Buyer's failure to accept or take delivery of the Aircraft, including but not limited to reasonable amounts for storage, insurance, taxes, preservation or protection of the Aircraft. Provided that Bombardier has met all of its obligations under this Article 9, should Buyer not accept, pay for and/or take delivery of any one of the Aircraft governed by a Supplement within thirty (30) calendar days following the end of the Acceptance Period, the present Agreement, with respect to all Aircraft governed by such Supplement shall automatically terminate. Bombardier shall however, have the option (but not the obligation) of waiving such termination should Buyer, within ten (10) calendar days following such termination, make arrangements satisfactory to Bombardier to accept delivery and provide payment for all amounts owing or to become due pursuant to this Agreement and the applicable Supplement.
ARTICLE 10 - TITLE AND RISK
10.1 Title to the Aircraft and risk of loss of or damage to the Aircraft passes to Buyer when Bombardier presents the Bill of Sale to Buyer on the Delivery Date. 10.2 If, after transfer of title on the Delivery Date, the Aircraft remains in or is returned to the care, custody or control of Bombardier, Buyer shall retain risk of loss of, or damage to the Aircraft and for itself and on behalf of its insurer(s) hereby waives and renounces to, and releases Bombardier and any of Bombardier's affiliates from any claim, whether direct, indirect or by way of subrogation, for damages to or loss of the Aircraft arising out of, or related to, or by reason of such care, custody or control. |
ARTICLE 11 - CHANGES
11.1 Other than a Permitted Change as described in Article 11.2, or a Regulatory Change as described in Article 8.4, any change to the Aircraft (including without limitation the Specification) or any features, changing such Aircraft from that described in the Specification, requested by Buyer, and as may be mutually agreed upon by the parties hereto, shall be made using a change order ("Change Order") substantially in the format of Exhibit IV hereto. Should Buyer request a change, Bombardier shall advise Buyer, to the extent |
reasonably practical, of the effect, if any, of such change request on:
(a) the Scheduled Delivery Date;
(b) the price and payment terms applicable to the Change Order; and
(c) any other material provisions of this Agreement which will be
affected by the Change Order. Such Change Order shall become effective and binding on the parties hereto when signed by a duly authorized representative of each party. 11.2 Bombardier, prior to the Delivery Date and without a Change Order or Buyer's consent, may: (a) substitute the kind, type or source of any material, part, accessory or equipment with any other material, part, accessory or equipment of like, equivalent or better kind or type; or (b) make such change or modification to the Specification as it deems appropriate to: 1) improve the Aircraft, its maintainability or appearance, or |
2) to prevent delays in manufacture or delivery, or
3) to meet the delivery requirements of Articles 2, 6 and 8,
other than with respect to a Regulatory Change to which
the provisions of Articles 8.4 and 8.5 shall apply,
provided that such substitution, change or modification shall not affect the Aircraft Purchase Price or materially affect the Scheduled Delivery Date, interchangeability or replacability of spare parts or performance characteristics of the Aircraft. Any change made in accordance with the provisions of this Article 11.2 shall be deemed to be a "Permitted Change" and the cost thereof shall be borne by Bombardier.
ARTICLE 12 - BUYER'S REPRESENTATIVES AT MANUFACTURE SITE
12.1 From time to time, commencing with the date which is thirty (30) days prior to the Scheduled Delivery Date of the first Aircraft governed by the applicable Supplement, and ending with the Delivery Date of the last Aircraft purchased hereunder, Bombardier shall furnish, without charge, office space at Bombardier's facility for one (1) representative of Buyer. Buyer shall be responsible for all expenses of its representative and shall notify Bombardier at least thirty (30) days prior to the first scheduled visit of such representative and three (3) days for each subsequent visit. 12.2 Bombardier's and Bombardier's affiliates' facilities shall be accessible to Buyer's representative during normal working hours. Buyer's representative shall have the right to periodically observe the work at Bombardier's or Bombardier's affiliates' facilities where the work is being carried out provided there shall be no disruption in the performance of the work. 12.3 Bombardier shall advise Buyer's representative of Bombardier's or Bombardier's affiliates' rules and regulations applicable at the facilities being visited and Buyer's representative shall conform to such rules and regulations. 12.4 At any time prior to delivery of the Aircraft, Buyer's representative may request, in writing, correction of parts or materials which they reasonably believe are not in accordance with the Specification. Bombardier shall provide a written response to any such request. Communication between Buyer's representative and Bombardier shall be solely through Bombardier's Contract Department or it's designate. 12.5 BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS BOMBARDIER, ITS ASSIGNEES AND AFFILIATES AND THEIR OFFICERS, DIRECTORS, AGENTS, EMPLOYEES AND CONTRACTORS FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES RESULTING FROM INJURIES TO OR DEATH OF OR LOSS OF OR DAMAGE TO PROPERTY OF BUYER OR BUYER'S REPRESENTATIVES WHILE AT BOMBARDIER'S OR BOMBARDIER'S AFFILIATES OR SUBCONTRACTOR'S FACILITIES AND/OR DURING INSPECTION, FLIGHT TEST OR ACCEPTANCE OF THE AIRCRAFT, WHETHER OR NOT CAUSED BY THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS LIABILITY OF BOMBARDIER, ITS ASSIGNEES, AFFILIATES OR THEIR OFFICERS, DIRECTORS, AGENTS, EMPLOYEES OR CONTRACTORS. |
ARTICLE 13 - EXCUSABLE DELAY
13.1 In the event of a delay on the part of Bombardier in the performance of its obligations or responsibilities under the provisions of this Agreement or any applicable Supplement due directly or indirectly to a cause which is beyond the reasonable control or without the fault or negligence of Bombardier (an "Excusable Delay"), Bombardier shall not be liable for, nor be deemed to be in default under this Agreement nor under the applicable Supplement on account of such delay in delivery of the Aircraft or other performance hereunder and the time fixed or required for the performance of any obligation or responsibility in this Agreement or the applicable Supplement shall be extended for a period equal to the period during which any such cause or the effect thereof persist. Excusable Delay shall be deemed to include, without |
limitation, delays occasioned by the following causes:
(a) force majeure or acts of God;
(b) war, warlike operations, act of the enemy, armed aggression,
civil commotion, insurrection, riot or embargo;
(c) fire, explosion, earthquake, lightning, flood, draught,
windstorm or other action of the elements or other catastrophic
or serious accidents;
(d) epidemic or quarantine restrictions;
(e) any legislation, act, order, directive or regulation of any
governmental or other duly constituted authority;
(f) strikes, lock-out, walk-out, and/or other labour troubles
causing cessation, slow-down or interruption of work;
(g) lack or shortage or delay in delivery of supplies, materials,
accessories, equipment, tools or parts;
(h) delay or failure of carriers, subcontractors or suppliers for
any reason whatsoever; or
(i) delay in obtaining type certification or any airworthiness
approval or certificate, or any equivalent approval or
certification, by reason of any law or governmental order,
directive or regulation or any change thereto, or interpretation
thereof, by a governmental agency, the effective date of which
is subsequent to the date of the applicable Supplement, or by
reason of any change or addition made by Bombardier or its
affiliates as a result of a request of or requirement made by a
governmental agency to the compliance program of Bombardier or
of its affiliate, or any part thereof, as same may have been
approved by TC, or change to the interpretation thereof to
obtain any such airworthiness approval or certificate.
13.2 (a) If Bombardier concludes, based on its appraisal of the facts and normal scheduling procedures, that due to Excusable Delay delivery of an Aircraft will be delayed for more than twelve (12) months after the originally Scheduled Delivery Date or any revised date agreed to in writing by the parties, Bombardier shall promptly notify Buyer in writing and either party may then terminate the applicable supplement and the Agreement as it relates thereto with respect to such Aircraft by giving written notice to the other within fifteen (15) days after receipt by Buyer of Bombardier's notice. (b) If, due to Excusable Delay, delivery of an Aircraft is delayed for more than twelve (12) months after the Scheduled Delivery Date, either party may terminate the applicable Supplement and the Agreement as it relates thereto with respect to such Aircraft by giving written notice to the other within fifteen (15) days after the expiration of such twelve (12) month period. 13.3 Termination under Article 13.2 shall discharge all obligations and liabilities of Buyer and Bombardier hereunder with respect to such delayed Aircraft and all related undelivered items and services, except that Bombardier shall promptly repay to Buyer, and Bombardier's sole liability and responsibility shall be limited to the repayment to Buyer, of all advance payments for such Aircraft received by Bombardier less any amount due by Buyer to Bombardier. 13.4 The termination rights set forth in Article 13.2 are in substitution for any and all other rights of termination or contract lapse arising by operation of law in connection with Excusable Delays. |
ARTICLE 14 - NON-EXCUSABLE DELAY
14.1 If delivery of the Aircraft is delayed by causes not excused under Article 13.1 (a "Non-Excusable Delay"), Bombardier shall pay Buyer, as liquidated damages and not as a penalty, the amount as set forth in the applicable Supplement for each day of Non-Excusable Delay in excess of a grace period of the number of days set forth in the applicable Supplement, to a maximum of the amount set forth in the applicable Supplement for any such delayed Aircraft. 14.2 Any right Buyer might otherwise have to refuse to accept delivery of an Aircraft when offered by Bombardier for inspection and acceptance following a Non-Excusable Delay is included within the rights and remedies for which the liquidated damages provided pursuant to Article 14.1 are the exclusive right and remedy. Buyer will not have the right to refuse to take delivery of any Aircraft because of a Non-Excusable Delay unless and until the aggregate duration of the Non-Excusable Delay for such Aircraft exceeds the period as set forth in the applicable Supplement. If Bombardier has not offered an Aircraft for inspection and acceptance before the end of that period as set forth in the applicable Supplement, Buyer may terminate the Agreement as to such Aircraft by giving notice to Bombardier. If, no such notice having been given, Bombardier offers such Aircraft for inspection and acceptance and Buyer refuses to take delivery of such Aircraft because of Non-Excusable Delay, Buyer will be deemed to have terminated the Agreement and the applicable Supplement as to such Aircraft. Buyer shall, effective upon such termination, be entitled to recover from Bombardier, as liquidated damages and not as a penalty, the aggregate amount of liquidated damages calculated under Article 14.1 to the date of termination. In addition Bombardier shall promptly repay to Buyer all advance payments for such Aircraft plus daily simple interest thereon from the date of receipt to the date of repayment at the prime rate charged by the National Bank of Canada from time to time, calculated and compounded monthly. |
ARTICLE 15 - LOSS OR DAMAGE
15.1 In the event that prior to the Delivery Date of any Aircraft, the Aircraft is lost, destroyed or damaged beyond repair due to any cause, Bombardier shall promptly notify Buyer in writing. Such notice shall specify the earliest date reasonably possible, consistent with Bombardier's other contractual commitments and production schedule, by which Bombardier estimates it would be able to deliver a replacement for the lost, destroyed or damaged Aircraft. The applicable Supplement and this Agreement as it relates thereto shall automatically terminate with respect to such Aircraft unless Buyer gives Bombardier written notice, within thirty (30) days of Bombardier's notice, that Buyer desires a replacement for such Aircraft. If Buyer gives such notice to Bombardier, the parties shall execute an amendment to the applicable Supplement which shall set forth the Delivery Date for such replacement aircraft and corresponding new replacement Aircraft Purchase Price; provided, however, that nothing herein shall obligate Bombardier to manufacture and deliver such replacement aircraft if it would require the reactivation or acceleration of its production line for the model of aircraft purchased hereunder. The terms and conditions of this Agreement and the applicable Supplement applicable to the replaced Aircraft shall apply to the replacement aircraft. |
ARTICLE 16 - TERMINATION
16.1 Any Supplement hereto and this Agreement as it relates thereto may be terminated, in whole or in part, with respect to any or all of the Aircraft governed by such Supplement before the applicable Delivery Date by Bombardier or Buyer by notice of termination to the other party upon the occurrence of any of the following events: (a) a party makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts or generally does not pay its debts as they become due; or (b) a receiver or trustee is appointed for a party or for substantially all of such party's assets and, if appointed without such party's consent, such appointment is not discharged or stayed within thirty (30) calendar days thereafter; or (c) proceedings or action under any law relating to bankruptcy, insolvency or the reorganization or relief of debtors are instituted by or against a party, and, if contested by such party, are not dismissed or stayed within thirty (30) calendar days thereafter; or (d) any writ of attachment or execution or any similar process is issued or levied against a party or any significant part of its property and is not released, stayed, bonded or vacated within thirty (30) calendar days after its issue or levy. 16.2 In addition, any Supplement hereto and this Agreement as it relates thereto may be terminated, in whole or in part, before the Delivery Date with respect to any or all undelivered Aircraft governed by the applicable Supplement: (a) as otherwise provided in this Agreement or the applicable Supplement; or (b) by Bombardier, if Buyer is in default or breach of any material term or condition of this Agreement or the applicable Supplement and Buyer does not cure such default or breach within thirty (30) calendar days after receipt of notice from Bombardier specifying such default or breach. (c) by Buyer, if Bombardier is in default or breach of any material term or condition of this Agreement or the applicable Supplement and such breach remains uncured for a period of sixty (60) calendar days following receipt of a notice from Buyer specifying the nature of default or breach. |
16.3 In case of termination under Articles 5.2 or 9.9, or by Bombardier pursuant to Articles 16.1 or 16.2: (a) all rights (including property rights), if any, which Buyer or its assignee may have or may have had in or to this Agreement and the applicable Supplement or any or all of the undelivered Aircraft governed by such Supplement shall become null and void with immediate effect; (b) Bombardier may sell, lease or otherwise dispose of such Aircraft to another party free of any claim by Buyer; and (c) all amounts paid by Buyer with respect to the applicable undelivered Aircraft governed by the applicable Supplement shall be retained by Bombardier and shall be applied against the costs, expenses, losses and damages incurred by Bombardier as a result of Buyer's default and/or the termination of this Agreement and the applicable Supplement. Buyer hereby acknowledges and recognizes that such costs, expenses, losses and damages will aggregate not less than the amount previously paid by Buyer with respect to such undelivered Aircraft. 16.4 Subject to Article 14.1, in the event of termination of this Agreement and the applicable Supplement by Buyer, Buyer's sole rights, remedies and recourses against Bombardier and Bombardier's obligations to Buyer shall be limited to only the return by Bombardier of those amounts paid by Buyer to Bombardier hereunder on account of the undelivered Aircraft governed by the applicable Supplement. |
ARTICLE 17 - NOTICES
17.1 Any notice, request, approval, permission, consent or other communication ("Notice"), to be given or required under this Agreement or a Supplement shall be provided in writing, by registered mail, facsimile, courier, telegraphic or other electronic communication providing reasonable proof of transmission, except that no notice shall be sent by mail if disruption of postal service exists or is threatened either in the country of origin or of destination, by the party giving the Notice and shall be addressed as follows: (a) Notices to Bombardier shall be addressed to: Bombardier Inc. Bombardier Aerospace, Regional Aircraft 123 Garratt Boulevard Downsview, Ontario Canada M3K 1Y5 |
Attention: Director of Contracts Facsimile: (416) 375-4533
(b) Notices to Buyer shall be addressed to:
SkyWest Airlines, Inc.
444 South River Road
St. George, Utah
USA, 84790
Attention: Vice-President, Planning Facsimile: (435) 634-3305 17.2 Notice given in accordance with Article 17.1 shall be deemed sufficiently given to and received by the addressees: (a) if delivered by hand, on the day when the same shall have been so delivered; or (b) if mailed or sent by courier on the day indicated on the corresponding acknowledgment of receipt; or (c) if sent by telex or facsimile on the day indicated by the acknowledgment or the answer back of the receiver in provable form. |
ARTICLE 18 - INDEMNITY AGAINST PATENT INFRINGEMENT
18.1 In the case of any actual or alleged infringement of any Canadian or United States patent or, subject to the conditions and exceptions set forth below, any patent issued under the laws of any other country in which Buyer from time to time may lawfully operate the Aircraft ("Other Patents"), by the Aircraft, or by any system, accessory, equipment or part installed in such Aircraft at the time title to such Aircraft passes to Buyer, Bombardier shall indemnify, protect and hold harmless Buyer from and against all claims, suits, actions, liabilities, damages and costs resulting from the infringement, excluding any indirect, punitive incidental or consequential damages (which include without limitation loss of revenue or loss of profit) and Bombardier shall, at its option and expense: (a) procure for Buyer the right under such patent to use such system, accessory, equipment or part; or (b) replace such system, accessory, equipment or part with one of the similar nature and quality that is non-infringing; or (c) modify such system, accessory, equipment or part to make same non-infringing in a manner such as to keep it otherwise in compliance with the requirements of this Agreement. Bombardier's obligation hereunder shall extend to Other Patents only if from the time of design of the Aircraft, system, accessory, equipment or part until the alleged infringement claims are resolved: (d) such other country and the country in which the Aircraft is permanently registered have ratified and adhered to and are at the time of the actual or alleged infringement contracting parties to the Chicago Convention on International Civil Aviation of December 7, 1944 and are fully entitled to all benefits of Article 27 thereof; and (e) such other country and the country of registration shall each have been a party to the International Convention for the Protection of Industrial Property (Paris Convention) or have enacted patent laws which recognize and give adequate protection to inventions made by the nationals of other countries which have ratified, adhered to and are contracting parties to both of the forgoing conventions. 18.2 The foregoing indemnity does not apply to BFE, or to avionics, engines or any system, accessory, equipment or part that was not manufactured to Bombardier's detailed design or to any system, accessory, equipment or part manufactured by a third party to Bombardier's detailed design without Bombardier's authorization. |
18.3 Buyer's remedy and Bombardier's obligation and liability under this Article are conditional upon (i) Buyer giving Bombardier written notice within ten (10) days after Buyer receives notice of a suit or action against Buyer alleging infringement or within twenty (20) days after Buyer receives any other written claim of infringement (ii) Buyer uses reasonable efforts in full cooperation with Bombardier to reduce or mitigate any such expenses, damages, costs or royalties involved, and (iii) Buyer furnishes promptly to Bombardier all data, papers and records in its possession or control necessary or useful to resist and defend against such claim or suit. Bombardier may at its option conduct negotiations with any party claiming infringement and may intervene in any suit or action. Whether or not Bombardier intervenes, Bombardier shall be entitled at any stage of the proceedings to assume or control the defense. Buyer's remedy and Bombardier's obligation and liability are further conditional upon Bombardier's prior approval of Buyer's payment or assumption of any liabilities, expenses, damages, royalties or costs for which Bombardier may be held liable or responsible. 18.4 THE INDEMNITY, OBLIGATIONS AND LIABILITIES OF BOMBARDIER AND REMEDIES OF BUYER SET OUT IN THIS ARTICLE ARE EXCLUSIVE AND ACCEPTED BY BUYER TO BE IN LIEU OF AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF BOMBARDIER AND OF ITS AFFILIATES AND ALL OTHER RIGHTS, REMEDIES AND CLAIMS, INCLUDING CLAIMS FOR DAMAGES, DIRECT, INDIRECT, PUNITIVE INCIDENTAL OR CONSEQUENTIAL, OF BUYER AGAINST BOMBARDIER AND ITS AFFILIATES EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT INFRINGEMENT BY THE AIRCRAFT OR ANY INSTALLED SYSTEM, ACCESSORY, EQUIPMENT OR PART. |
ARTICLE 19 - LIMITATION OF LIABILITY AND INDEMNIFICATION
19.1 BOMBARDIER SHALL HAVE NO OBLIGATION OR LIABILITY (AT LAW OR IN EQUITY), WHETHER ARISING IN CONTRACT (INCLUDING WITHOUT LIMITATION, WARRANTY), IN TORT (INCLUDING THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE, OR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR STRICT PRODUCTS LIABILITY OF BOMBARDIER OR ITS AFFILIATES), OR OTHERWISE, FOR ANY CLAIM CAUSE OF ACTION, OR MATTER OF ANY KIND ARISING UNDER, IN CONNECTION WITH OR PURSUANT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN, FOR LOSS OF USE, REVENUE OR PROFIT OR FOR ANY OTHER INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE. 19.3 THE WARRANTIES, LIABILTIES AND OBLIGATIONS OF BOMBARDIER, AND THE REMEDIES OF BUYER SET FORTH IN THIS AGREEMENT ) ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, GUARANTEES, OBLIGATIONS, REPRESENTATIONS AND LIABILITIES OF, AND RIGHTS, CLAIMS, REMEDIES, DAMAGES, COSTS AND EXPENSES AGAINST, BOMBARDIER OR ANY SUCCESSOR OR PERMITTED ASSIGNEE,EXPRESSED OR IMPLIED ARISING IN FACT, IN LAW, IN EQUITY, IN CONTRACT, IN TORT OR OTHERWISE, INCLUDING BUT NOT LIMITED TO (a) ANY IMPLIED WARRANTY OR CONDITIONS OF MERCHANTABLITY OR FITNESS, (b) ANY IMPLIED WARRANTY OR CONDITON ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, (c) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR NON-CONFORMANCE OR DEFECT OR FAILURE OF ANY KIND OR LOSS OF OR DAMAGE TO ANY AIRCRAFT OR PART THEREOF, ANY SPARE PARTS OR ANY TECHNICAL DATA, PRODUCT, DOCUMENT OR SERVICE PROVIDED UNDER THIS AGREEMENT. (d) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO ANY AIRCRAFT, ANY BRAD PARTS, ANY VENDOR PARTS, ANY SPARE PARTS OR ANY TECHNICAL DATA. |
19.3 BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS BOMBARDIER, ITS SUBSIDIARIES, AFFILIATES, SUBCONTRACTORS AND LESSORS, AND THEIR RESPECTIVE EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS, AND EACH OF THEM, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND EXPENSES FOR LOSS OF OR DAMAGE TO PROPERTY INCLUDING ANY AIRCRAFT, AND LOSS OF USE THEREOF, OR INJURIES TO OR DEATH OF ANY AND ALL PERSONS (INCLUDING BUYER'S DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES BUT EXCLUDING BOMBARDIER'S DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES), ARISING DIRECTLY OR INDIRECTLY OUT OF OR IN CONNECTION WITH ANY SERVICE PROVIDED UNDER THIS AGREEMENT. |
ARTICLE 20 - ASSIGNMENT
20.1 Either party may assign, sell, transfer or dispose of (in whole or in part) any of its rights and obligations hereunder or a Supplement to a wholly owned subsidiary or affiliate provided that there is no increase to the liability and/or responsibility of the non-assigning party and that the assigning party remains jointly and severally liable with any assignee for the performance of its obligation under this Agreement. 20.2 Except as provided in Article 20.1, Buyer shall not assign, sell, transfer or dispose of (in whole or in part) any of its rights or obligations hereunder or a Supplement without Bombardier's prior written consent. In the event of such assignment, sale, transfer or disposition Buyer shall remain jointly and severally liable with any assignee for the performance of all and any of Buyer's obligations under this Agreement and Bombardier reserves the right as a condition of its consent to amend one or more of the terms and conditions of this Agreement and (including for more certainty) the applicable Supplement. 20.3 Notwithstanding Article 20.2 above, Buyer may assign, after transfer of title of the Aircraft, its rights under this Agreement, save and except for any rights of Buyer which are expressly stated to be personal to Buyer, to a third party purchaser of any one of the Aircraft, provided said third party acknowledges in writing to be bound by the applicable terms and conditions of this Agreement, and provided that there is no increase to the liability and/or responsibility of Bombardier. 20.4 Bombardier may assign any of its rights to receive money hereunder without the prior consent of Buyer. 20.5 Notwithstanding the other provisions of this Article 20, Bombardier shall, at Buyer's cost and expense, if so requested in writing by Buyer, take any action reasonably required for the purpose of causing any of the Aircraft to be subjected (i) to, after the Delivery Date, an equipment trust, conditional sale or lien, or (ii) to another arrangement for the financing of the Aircraft by Buyer, providing, however, there shall be no increase to the liability and/or responsibility of Bombardier arising through such financing. |
ARTICLE 21 - SUCCESSORS
21.1 This Agreement shall inure to the benefit of and be binding upon each of Bombardier and Buyer and their respective successors and permitted assignees. |
ARTICLE 22 - APPLICABLE LAWS
22.1 THIS AGREEMENT (AND INCLUDING FOR MORE CERTAINTY ANY APPLICABLE SUPPLEMENTS) SHALL BE SUBJECT TO AND CONSTRUED IN ACCORDANCE WITH AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY THE DOMESTIC LAWS OF THE PROVINCE OF ONTARIO, CANADA, EXCLUDING THE CHOICE OF LAW RULES, AND THE PARTIES HAVE AGREED THAT THE APPLICATION OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS IS HEREBY EXCLUDED. 22.2 Bombardier's obligations under this Agreement shall be subject to and apply only to the extent permitted by applicable laws, regulations, directives and/or orders regarding export controls. |
ARTICLE 23 - CONFIDENTIAL NATURE OF AGREEMENT
23.1 This Agreement is confidential between the parties and shall not, without the prior written consent of the other party, be disclosed by either party in whole or in part to any other person or body except: iii) as may be required by financial institutions or arrangers involved with the financing of the Aircraft, and then only subject to such person or body agreeing to execute the other party's confidentiality agreement. It is the disclosing party's responsibility to have such form executed with any third party prior to disclosure of any such information and to provide such form to the other party for approval. The foregoing does not apply where the disclosing party or the applicable third party is required to disclose such information by law or compelled by court order to do so, and iv) as may be required by United Airlines Inc. ("United"), and then only after a request in writing from United and only subject to specified receiving personnel of United agreeing to execute a confidentiality agreement in a form reasonably acceptable to Bombardier. 23.2 Except as may be reasonably required for the normal operation, maintenance, overhaul and repair of the Aircraft, Buyer shall hold confidential all technical data and information supplied by or on behalf of Bombardier. Buyer shall not reproduce any technical data or information or divulge the same to any third party without the prior written consent of Bombardier. 23.3 Either party may announce the signing of this Agreement by means of a notice to the press provided that the content and date of the notice has been agreed to by the other party. 23.4 In the event that this Agreement is required to be filed as an exhibit to a registration statement under the Securities Act of 1933 as amended, (the "Securities" Act) or a periodic report under the Exchange Act of 1934, as amended (the "Exchange" Act) Buyer shall notify Bombardier, by written notice, at least forty-five (45) days prior to the date of such anticipated filing of such determination and the reasons therefor, and shall use its best efforts to work with Bombardier to prepare and file with the Securities and Exchange Commission (the "Commission") a request for confidential treatment pursuant to Rule 24b-2 under the Exchange Act or Rule 406 under the Securities Act, as the case may be, with respect to information in this Agreement, and such other information as Bombardier may reasonably request. |
Subject to compliance with the foregoing, and notwithstanding the other provisions of this Article, portions of this Agreement or a Supplement hereto may be filed as exhibits to such registration statement or periodic report to the extent required by the Commission and such filing shall not constitute a breach hereof by Buyer. This provision shall survive until the latter of (i) the complete performance by Buyer of its obligation hereunder or (ii) two (2) years from the date hereof.
ARTICLE 24 - AGREEMENT
24.1 This Agreement including any Supplements pursuant hereto, as same may be amended from time to time, and the matters referred to herein constitute the entire Agreement between Bombardier and Buyer with respect to the Bombardier products governed by the applicable Supplements and supersede and cancel all prior representations, brochures, alleged warranties, statements, negotiations, undertakings, letters, memoranda of agreement, proposals, acceptances, agreements, understandings, contracts and communications, whether oral or written, between Bombardier and Buyer or their respective agents, with respect to or in connection with the subject matter of this Agreement and the applicable Supplement and no agreement or understanding varying the terms and conditions hereof shall be binding on either Bombardier or Buyer hereto unless an amendment to this Agreement or the applicable Supplement is issued and duly signed by their respective authorized representatives. In the event of any inconsistencies between this Agreement and a Supplement or other documents referred to herein, the provisions of the Supplement shall prevail. 24.2 If any of the provisions of this Agreement or a Supplement are for any reason declared by judgment of a court of competent jurisdiction to be unenforceable or ineffective, those provisions shall be deemed severable from the other provisions of this Agreement/the Supplement and the remainder of this Agreement/the Supplement shall remain in full force and effect. 24.3 THE BENEFIT OF THE WAIVER, RELEASE, RENUNCIATION AND EXCLUSION OF LIABILITY IN ARTICLE 19, EXTENDS ALSO TO THE OTHER DIVISIONS, OTHER SUBSIDIARIES, AND OTHER AFFILIATES OF BOMBARDIER INC. (COLLECTIVELY THE "BOMBARDIER GROUP") AND TO THE OFFICERS, DIRECTORS, EMPLOYEES AND REPRESENTATIVES OF THE BOMBARDIER GROUP. 24.4 Bombardier and Buyer confirm to each other they have each obtained the required authorizations and fulfilled any conditions applicable to enable each of them to enter into this Agreement and any Supplement. |
24.5 Buyer and Bombardier agree that this Agreement has been the subject of discussion and negotiation and is fully understood by the parties hereto and that the other mutual agreements of the parties set forth herein were arrived at in consideration of the provisions contained in Articles, 12.5, 18.4, 19, Annex A Article 2.9.4.5 and Annex B Article 5.1. |
In witness whereof this Agreement was signed on the date written hereof:
For and on behalf of For an on behalf of SKYWEST AIRLINES, INC. BOMBARDIER INC. Bombardier Aerospace "Bradford R. Rich" "Scott Preece" Signed:_____________________ Signed:________________ Bradford R. Rich Scott Preece Executive Vice President Manager of Contracts CFO, and Treasurer Regional Aircraft |
"Eric Christensen"
Signed:_____________________
Eric Christensen
Vice President, Planning