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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                to


Commission File No. 0-14719

SKYWEST, INC.

Incorporated under the Laws of Utah

87-0292166(IRS Employer ID No.)


444 South River Road
St. George, Utah 84790
(435) 634-3000

Securities Registered Pursuant to Section 12(b) of the Act:None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, No Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of this
Act. Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or 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 ý    No o

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this Form 10-K, or any amendment to this
Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The aggregate market value of the registrant's common stock held by non-affiliates (based upon the closing sale price of the registrant's common stock
on The Nasdaq National Market) on June 30, 2009 was approximately $547,794,710.

As
of February 12, 2010, there were 56,013,914 shares of the registrant's common stock outstanding.

Documents Incorporated by Reference

Portions of the registrant's proxy statement to be used in connection with the Registrant's 2010 Annual Meeting of Shareholders are incorporated by reference into
Part III of this Report as specified.



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Table of Contents

SKYWEST, INC.

ANNUAL REPORT ON FORM 10-K



TABLE OF CONTENTS



Page No.PART ICautionary Statement Concerning Forward Looking Statements

3Item 1.

Business

4Item 1A.

Risk Factors

15Item 1B.

Unresolved Staff Comments

29Item 2.

Properties

29Item 3.

Legal Proceedings

32Item 4.

Submission of Matters to a Vote of Security Holders

33PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

34Item 6.

Selected Financial Data

36Item 7.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

37Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

55Item 8.

Financial Statements and Supplementary Data

56Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

88Item 9A.

Controls and Procedures

88Item 9B.

Other Information

91PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

91Item 11.

Executive Compensation

91Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

91Item 13.

Certain Relationships and Related Transactions

91Item 14.

Principal Accountant Fees and Services

91PART IVItem 15.

Exhibits and Financial Statement Schedules

91Signatures

96


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PART I

Unless otherwise indicated, "SkyWest," "we," "us," "our" and similar terms refer to SkyWest, Inc.;
"SkyWest Airlines" refers to our wholly-owned subsidiary, SkyWest Airlines, Inc.; and "ASA" refers to our wholly-owned subsidiary, Atlantic Southeast
Airlines, Inc.

Cautionary Statement Concerning Forward-Looking Statements

Certain of the statements contained in this Annual Report on Form 10-K should be considered "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as "may," "will," "expect," "intend,"
"anticipate," "believe," "estimate," "plan," "project," "could," "should," "hope," "likely," and "continue" and similar terms used in connection with statements regarding our outlook, the revenue
environment, our contractual relationships, and our anticipated financial performance. These statements include, but are not limited to, statements about
our future growth and development plans, including our future financial and operating results, our plans for SkyWest Airlines and ASA, our objectives, expectations and intentions and other statements
that are not historical facts. Readers should keep in mind that all forward-looking statements are based on our existing beliefs about present and future events outside of our control and on
assumptions that may prove to be incorrect. If one or more risks identified in this Report materializes, or any other underlying assumption proves incorrect, our actual results will vary, and may vary
materially from those anticipated, estimated, projected, or intended. These risks and uncertainties include, but are not limited to, those described below in Item 1A., Risk Factors, and the
following:



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There
may be other factors that may affect matters discussed in forward-looking statements set forth in this Report, which factors may also cause actual results to differ materially from
those discussed. We assume no obligation to publicly update any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these statements other
than as required by law.

ITEM 1.    BUSINESS

General

Through SkyWest Airlines and ASA, our wholly-owned subsidiaries, we offer scheduled passenger service with approximately 2,300 daily
departures to 217 destinations in the United States, Canada, Mexico and the Caribbean. Substantially all of our flights are operated as Delta Connection, United Express or AirTran under
code-share arrangements with Delta, United or AirTran, respectively, with significant presence in Delta and United's key domestic hubs and focus cities. SkyWest Airlines and ASA generally
provide regional flying to our partners under long-term, fixed-fee code-share agreements. Among other features of our fixed-fee agreements, our partners
generally reimburse us for specified direct operating expenses (including fuel expense, which is passed through to our partners), and pay us a fee for operating the aircraft.

SkyWest
Airlines and ASA have developed industry-leading reputations for providing quality, low-cost regional airline service during their long operating
historiesSkyWest Airlines has been flying since 1972 and ASA since 1979. As of December 31, 2009, our consolidated fleet consisted of a total of 449 aircraft, of which 258 were
assigned to Delta, 186 were assigned to United, three were assigned to Midwest, and two were assigned to AirTran. We currently operate one type of regional jet aircraft in three different
configurations, the 50-seat Bombardier Aerospace ("Bombardier") CRJ200 Regional Jet (the "CRJ200"), the 70-seat Bombardier CRJ700 Regional Jet (the "CRJ700") and the
70-90-seat Bombardier CRJ900 Regional Jet (the "CRJ900"), and one type of turboprop aircraft, the 30-seat Embraer Brasilia EMB-120 turboprop (the
"Brasilia turboprop").

We
were incorporated in Utah in 1972. Our principal executive offices are located at 444 South River Road, St. George, Utah 84790, and our primary telephone number is
(435) 634-3000. We maintain an Internet web site atwww.skywest.com. Our website provides a link to the web site of the
SEC, through which our annual, quarterly and current reports, as well as amendments to those reports, are available. In addition, we provide electronic or paper copies of our filings free of charge
upon request.

Our Operating Platforms



SkyWest Airlines provides regional jet and turboprop service primarily located in the midwestern and western United States. SkyWest
Airlines offered approximately 1,500 daily scheduled departures as of December 31, 2009, of which approximately 1,060 were United Express flights, 410 were Delta Connection flights, 20 were
Midwest Connect flights and ten were AirTran coded flights. SkyWest Airlines' operations are conducted from hubs located in Chicago (O'Hare), Denver, Los Angeles, Milwaukee, San Francisco and Salt
Lake City. SkyWest Airlines' fleet as of December 31, 2009 consisted of 21 CRJ900s, all of which were flown for Delta, 79 CRJ700s, of which 66 were flown for United and 13 for Delta; 138
CRJ200s, of which 81 were flown for United, 52 were flown for Delta, three were flown for Midwest and two were flown for AirTran, and 51 Brasilia turboprops, of which 39 were flown for United and 12
were flown for Delta.

SkyWest
Airlines currently conducts its Delta Connection operations pursuant to the terms of an Amended and Restated Delta Connection Agreement which obligates Delta to compensate
SkyWest

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Airlines
for its direct costs associated with operating Delta Connection flights, plus a payment based on block hours flown (the "SkyWest Airlines Delta Connection Agreement"). In addition, the
SkyWest Airlines Delta Connection Agreement provides for us to increase our profitability if we reduce our total costs. SkyWest Airlines' United code-share operations are conducted under a
United Express Agreement pursuant to which SkyWest Airlines is paid primarily on a fee-per-completed block hour and departure basis plus a margin based on performance
incentives (the "SkyWest Airlines United Express Agreement"). Under the United Express Agreement, excess margins over certain percentages must be returned or shared with United, depending on various
conditions. On June 10, 2009, SkyWest Airlines and Midwest reached a mutual understanding to terminate the service SkyWest Airlines provided under the Airline Services Agreement (the "Midwest
Services Agreement"). As a result, SkyWest Airlines removed its remaining 12 CRJ200 regional jet aircraft out of Midwest service in stages through January 2010.

On
November 4, 2009, SkyWest Airlines entered into a code-share agreement with AirTran. Under the terms of the code-share agreement, SkyWest Airlines has
agreed to operate five CRJ200s for AirTran under a pro-rate arrangement. SkyWest Airlines commenced AirTran service with two aircraft in December 2009, and added three additional aircraft
in January and February of 2010. The AirTran code-share agreement has a three-year term; however, after May 15, 2010, either party may terminate the agreement upon
120 days written notice.



ASA provides regional jet service primarily in the United States primarily from hubs located in Atlanta and Cincinnati. ASA offered
more than 780 daily scheduled departures as of December 31, 2009, all of which were Delta Connection flights. ASA's fleet as of December 31, 2009, consisted of ten CRJ900s, 38 CRJ700s,
112 CRJ200s. Under the terms of the Second Amended and Restated Delta Connection Agreement executed by ASA and Delta (the "ASA Delta Connection Agreement"), Delta has agreed to compensate ASA for its
direct costs associated with operating Delta Connection flights, plus, if ASA completes a certain minimum percentage of its Delta Connection flights, a specified margin on such costs. Additionally,
the ASA Delta Connection Agreement provides for incentive compensation upon satisfaction of certain performance goals. Under the ASA Delta Connection Agreement, excess margins over certain percentages
must be returned to or shared with Delta, depending on various conditions.

On
February 10, 2010, ASA and United entered into a United Express Agreement, pursuant to which ASA has agreed to operate 14 CRJ200 aircraft as a United Express carrier (the "ASA United
Express Agreement"). On February 11, 2010, ASA began operating as a United Express carrier, and we anticipate that the 14 United Express regional jets to be flown by ASA will be in operation by
May of 2010. The ASA United Express Agreement is a capacity purchase agreement with a five-year term, and other terms which are generally consistent with the SkyWest Airlines United
Express Agreement.

Competition and Economic Conditions

The airline industry is highly competitive. SkyWest Airlines and ASA compete principally with other code-sharing regional
airlines, but also with regional airlines operating without code-share agreements, as well as low-cost carriers and major airlines. The combined operations of SkyWest Airlines
and ASA extend throughout most major geographic markets in the United States. Our competition includes, therefore, nearly every other domestic regional airline, and to a certain extent, most major and
low-cost domestic carriers. The primary competitors of SkyWest Airlines and ASA among regional airlines with code-share arrangements include Air Wisconsin Airlines Corporation,
American Eagle Airlines, Inc. ("American Eagle") (owned by American Airlines, Inc. ("American")), Comair, Inc. ("Comair") (owned by Delta), Compass Airlines ("Compass") (owned by
Delta), Mesaba Airlines ("Mesaba") (owned by Delta), ExpressJet Holdings, Inc. ("ExpressJet"), Horizon Air

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Industries, Inc.
("Horizon") (owned by Alaska Air Group, Inc.), Mesa Air Group, Inc. ("Mesa"), Pinnacle Airlines Corp. ("Pinnacle"), Republic Airways Holdings Inc.
("Republic") and Trans State Airlines, Inc. Major airlines award contract flying to these regional airlines based upon, but not limited to, the following criteria: low cost, financial
resources, overall customer service levels relating to on-time arrival and departure statistics, cancellation of flights, baggage handling performance and the overall image of the regional
airline as a whole. The principal competitive factors we experience with respect to our pro-rate flying include fare pricing, customer service, routes served, flight schedules, aircraft
types and relationships with major partners.

The
principal competitive factors for code-share partner regional airlines are code-share agreement terms, customer service, aircraft types, fare pricing, flight
schedules and markets and routes served. The combined operations of SkyWest Airlines and ASA represent the largest regional airline operation in the United States. However, some of the major and
low-cost carriers are larger, and have greater financial and other resources than SkyWest Airlines and ASA. Additionally, regional carriers owned by major airlines, such as American Eagle,
Comair, Compass and Mesaba, may have access to greater resources at the parent level than SkyWest Airlines and ASA, and may have enhanced competitive advantages since they are subsidiaries of major
airlines. Moreover, federal deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible
to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats.

Generally,
the airline industry is highly sensitive to general economic conditions, in large part due to the discretionary nature of a substantial percentage of both business and leisure
travel. Many airlines have historically reported lower earnings or substantial losses during periods of economic recession, heavy fare discounting, high fuel costs and other disadvantageous
environments. Economic downturns combined with competitive pressures have contributed to a number of reorganizations, bankruptcies, liquidations and business combinations among major and regional
carriers. The effect of economic
downturns may be somewhat mitigated by the predominantly contract-based flying arrangements of SkyWest Airlines and ASA. Nevertheless, the per passenger component in such fee structure would be
affected by an economic downturn. In addition, if Delta or United, or one or more other code-share partners we may secure in the future, experience a prolonged decline in passenger load or
are harmed by low ticket prices or high fuel prices, they will likely seek to renegotiate their code-share agreements with SkyWest Airlines and ASA or cancel flights in order to reduce
their costs.

Industry Overview



The airline industry in the United States has traditionally been dominated by several major airlines, including American, Continental
Airlines, Inc. ("Continental"), Delta, US Airways and United. The major airlines offer scheduled flights to most major U.S. cities, numerous smaller U.S. cities, and cities throughout the world
through a hub and spoke network.

Low
cost carriers, such as Southwest Airlines Co. ("Southwest"), JetBlue Airways Corporation ("JetBlue"), Frontier Airlines, Inc. ("Frontier") and AirTran, generally offer
fewer conveniences to travelers and have lower cost structures than major airlines, which permits them to offer flights to and from many of the same markets as the major airlines, but at lower prices.
Low cost carriers typically fly direct flights with limited service to smaller cities, concentrating on higher demand flights to and from major population bases.

Regional
airlines, such as ASA, ExpressJet, Mesa, Pinnacle, Republic and SkyWest Airlines, typically operate smaller aircraft on lower-volume routes than major and low cost carriers.
Several regional airlines, including American Eagle, Comair, Compass, Mesaba and Horizon, are wholly-owned subsidiaries of major airlines.

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In
contrast to low cost carriers, regional airlines generally do not try to establish an independent route system to compete with the major airlines. Rather, regional airlines typically
enter into relationships with one or more major airlines, pursuant to which the regional airline agrees to use its smaller, lower-cost aircraft to carry passengers booked and ticketed by
the major airline between a hub of the major airline and a smaller outlying city. In exchange for such services, the major airline pays the regional airline either a fixed flight fee, termed
"contract" or "fixed-fee" flights, or receives a percentage of applicable ticket revenues, termed "pro-rate" or "revenue-sharing" flights.



Regional airlines generally enter into code-share agreements with major airlines, pursuant to which the regional airline is
authorized to use the major airline's two-letter flight designator codes to identify the regional airline's flights and fares in the central reservation systems, to paint its aircraft with
the colors and/or logos of its code-share partner and to market and advertise its status as a carrier for the code-share partner. For example, SkyWest Airlines flies out of
Chicago (O'Hare), Denver, Los Angeles and San Francisco as United Express and out of Salt Lake City as Delta Connection and Milwaukee as an AirTran carrier. ASA operates as Delta Connection out of
Atlanta and Cincinnati. In addition, the major airline generally provides services such as reservations, ticketing, ground support and gate access to the regional airline, and both partners often
coordinate marketing, advertising and other promotional efforts. In exchange, the regional airline provides a designated number of low-capacity (usually between 30 and 70 seats) flights
between larger airports served by the major airline and surrounding cities, usually in lower-volume markets. The financial arrangements between the regional airlines and their code-share
partners usually involve contractual, or fixed-fee payments based on the flights or a revenue-sharing arrangement based on the flight ticket revenues, as explained
below:



Code-Share Agreements

SkyWest Airlines and ASA operate under United Express Agreements with United, and SkyWest, SkyWest Airlines and ASA operate under Delta
Connection Agreements with Delta. During the fiscal year ended December 31, 2009, SkyWest Airlines operated under the Midwest Services Agreement with Midwest. On November 4, 2009,
SkyWest Airlines entered into a code-share agreement with AirTran.

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These
code-share agreements authorize Delta, United, Midwest and AirTran to identify our flights and fares under their two-letter flight designator codes ("DL,"
"UA" "YX", or "FL") in the central reservation systems, and generally require us to paint our aircraft with their colors and logos and to market our status as Delta Connection, United
Express. Midwest Connect or AirTran. Under each of our code-share agreements, our passengers participate in the major partner's frequent flyer program, and the major partner provides
additional services such as reservations, ticket issuance, ground support services and gate access. We also coordinate our marketing, advertising and other promotional efforts with Delta, United,
Midwest and AirTran. As of December 31, 2009, approximately 94% of our passenger revenues related to contract flights, where Delta, United or Midwest controlled scheduling, ticketing, pricing
and seat inventories. The remainder of or our passenger revenues as of December 31, 2009 related to pro-rate flights, where we controlled scheduling, ticketing, pricing and seat
inventories, and shared revenues with Delta, United or AirTran according to pro-rate formulas. The following summaries of our code-share agreements do not purport to be
complete and are qualified in their entirety by reference to the applicable agreement.

SkyWest Airlines Delta Connection Agreement

SkyWest Airlines and Delta are parties to the SkyWest Airlines Delta Connection Agreement, dated as of September 8, 2005. As of
December 31, 2009, SkyWest Airlines operated 21 CRJ900s, 13 CRJ700s and 52 CRJ200s under the SkyWest Airlines Delta Connection Agreement. Additionally, as of December 31, 2009, SkyWest
Airlines operated 12 Brasilia turboprops under the Delta code under a revenue-sharing arrangement. SkyWest Airlines operates these aircraft to provide Delta Connection service between Delta hubs and
destinations designated by Delta. As of December 31, 2009, SkyWest Airlines was operating approximately 410 Delta Connection flights per day. Delta is entitled to all passenger, cargo and other
revenues associated with each flight.

In
exchange for providing the designated number of flights and performing SkyWest Airlines' other obligations under the SkyWest Airlines Delta Connection Agreement, SkyWest Airlines is
scheduled to receive from Delta on a weekly basis (i) reimbursement for 100% of its direct costs related to the Delta Connection flights plus (ii) a fixed dollar payment per completed
flight block hour, subject to annual escalation at an agreed rate. Costs directly reimbursed by Delta under the SkyWest Airlines Delta Connection Agreement include costs primarily related to fuel,
aircraft maintenance and ownership.

Among
other provisions, the SkyWest Airlines Delta Connection Agreement provides that, beginning with the third anniversary of the execution of the agreement (September 8, 2008),
Delta has the right to require that certain contractual rates under that agreement shall not exceed the average rate of all carriers within the Delta Connection Program. On October 23, 2009,
Delta sent a letter to SkyWest Airlines requiring it to either adjust the rates payable under the SkyWest Airlines Delta Connection Agreement or accept termination of that agreement, Delta's letter
also notified SkyWest Airlines of Delta's estimate of the average rates to be applied under the SkyWest Airlines Delta Connection Agreement. On October 28, 2009, SkyWest Airlines notified Delta
of its election to adjust the rates payable under the SkyWest Airlines Delta Connection Agreement; however, SkyWest Airlines also notified Delta of its disagreement with Delta's estimated rates and
its belief that the methodology Delta used to calculate its estimated rates is inconsistent with the terms of the SkyWest Airlines Delta Connection Agreement. SkyWest Airlines and Delta have exchanged
subsequent correspondence, and SkyWest Airlines continues to negotiate with Delta in an effort to determine an appropriate methodology for calculating the average rates of the carriers within the
Delta Connection Program.

The
SkyWest Airlines Delta Connection Agreement provides that, beginning with the fifth anniversary of the execution of the agreement (September 8, 2010), Delta has the right to
require that certain contractual rates under that agreement shall not exceed the second lowest of all carriers within the Delta Connection Program.

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The SkyWest Airlines Delta Connection Agreement is scheduled to terminate on September 8, 2020, unless Delta elects to exercise its option to extend the
term for up to four additional five-year terms. The SkyWest Airlines Delta Connection Agreement is subject to early termination in various circumstances,
including:



ASA Delta Connection Agreement

ASA and Delta are parties to the ASA Delta Connection Agreement, dated as of September 8, 2005. As of December 31, 2009,
ASA operated ten CRJ900s, 38 CRJ700s and 112 CRJ200s for Delta under the ASA Delta Connection Agreement. On January 9, 2009, ASA reached an agreement with Delta to operate an additional ten
CRJ900s. The aircraft were previously ordered by Delta and are now being contracted for flying with ASA. As of December 31, 2009, ASA had taken delivery of all of these aircraft. ASA intends to
use the aircraft as replacements for 20, 50-seat CRJ200s that are scheduled for removal from contract service between January and August 2010, which is earlier than the existing scheduled
termination dates as contained in the Delta Connection Agreement. ASA operates these aircraft to provide Delta Connection service between Delta hubs and destinations designated by Delta. As of
December 31, 2009, ASA was operating more than 780 Delta Connection flights per day between Atlanta, Cincinnati and designated outlying destinations. Under the ASA Delta Connection Agreement,
Delta is entitled to all passenger, cargo and other revenues associated with each flight. Commencing in 2008, ASA is guaranteed to maintain its percentage of total Delta Connection flights that it had
in 2007, so long as its bid for additional regional flying is competitive with bids submitted by other regional carriers.

In
exchange for providing the designated number of flights and performing ASA's other obligations under the ASA Delta Connection Agreement, ASA is scheduled to receive from Delta on a
weekly basis (i) reimbursement for 100% of its direct costs related to Delta Connection flights plus (ii) if ASA completes a certain minimum percentage of its Delta Connection flights,
an amount equal to a certain percentage of the direct costs (not including fuel costs) related to the Delta Connection flights. Costs directly reimbursed by Delta under the ASA Delta Connection
Agreement include costs related to fuel, ground handling, and aircraft maintenance and ownership. The ASA Delta Connection Agreement also provides for incentive compensation based upon ASA's
performance, including on-time arrival performance and completion percentage rates.

Among
other provisions, the ASA Delta Connection Agreement provides that, beginning with the third anniversary of the execution of the agreement (September 8, 2008), Delta has the
right to require that certain contractual rates under that agreement shall not exceed the average rate of all carriers

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within
the Delta Connection Program. On October 23, 2009, Delta sent a letter to ASA requiring it to either adjust the rates payable under the ASA Delta Connection Agreement or accept
termination of that agreement. Delta's letter also notified ASA of Delta's estimate of the average rates to be applied under the ASA Delta Connection Agreement. On October 28, 2009, ASA
notified Delta of its election to adjust the rates payable under the ASA Delta Connection Agreement; however, ASA also notified Delta of its disagreement with Delta's estimated rates and its belief
that the methodology Delta used to calculate its estimated rates is inconsistent with the terms of the ASA Delta Connection Agreement. ASA and Delta have exchanged subsequent correspondence, and ASA
continues to negotiate with Delta in an effort to determine an appropriate methodology for calculating the average rates of the carriers within the Delta Connection Program.

The
ASA Delta Connection Agreement provides that, beginning with the fifth anniversary of the execution of the agreement (September 8, 2010), Delta has the right to require that
certain contractual rates under that agreement shall not exceed the second lowest of all carriers within the Delta Connection Program.

The
ASA Delta Connection Agreement is scheduled to terminate on September 8, 2020, unless Delta elects to exercise its option to extend the term for up to four additional
five-year terms. The ASA Delta Connection Agreement is subject to early termination in various circumstances including:



SkyWest, Inc. Delta Connection Agreement

In December 2007, we expanded our relationship with Delta by entering into a Delta Connection Agreement which awarded us the right to
operate 12 CRJ700s, previously operated by Comair. This Delta Connection Agreement is ancillary to, and satisfied certain obligations of Delta under the ASA Delta Connection Agreement. We have the
right to designate either SkyWest Airlines or ASA to operate the 12 aircraft to provide service, primarily to and from Delta's Cincinnati hub through February 2012 (subject to Delta's right to extend
the arrangement for up to three additional three-year terms). Under the arrangement, Delta has agreed to pay ASA or SkyWest Airlines, as applicable, a fixed-fee per completed
block hour, a fixed-fee per completed departure, a fixed-fee for overhead, a one-time start-up payment for each aircraft delivered and incentive
payments based upon performance, including on-time arrival performance and completion percentage rates. Additionally, Delta has agreed to reimburse SkyWest Airlines or ASA, as applicable,
for certain operating costs under this Delta Connection Agreement.

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SkyWest Airlines United Express Agreement

SkyWest Airlines and United are parties to the United Express Agreement entered into on July 31, 2003. As of December 31,
2009, SkyWest Airlines operated 66 CRJ700s, 81 CRJ200s and 39 Brasilia turboprops under the United Express Agreement, flying a total of approximately 1,060 United Express flights per day between
Chicago (O'Hare), Denver, Los Angeles, San Francisco, Portland and Seattle/Tacoma and designated outlying destinations. Generally, under the United Express Agreement, United retains all air fares,
cargo rates, mail charges and other revenues associated with each flight.

In
exchange for providing the designated number of flights and performing SkyWest Airlines' obligations under the United Express Agreement, SkyWest Airlines receives from United
compensation (subject to an annual adjustment) of a fixed-fee per completed block hour, a fixed-fee per completed departure, a fixed-fee per passenger, a
fixed-fee for overhead and aircraft costs, and a one-time start-up payment for each aircraft delivered. The United Express Agreement provides for incentives based
upon SkyWest Airlines' performance, including on-time arrival performance and completion percentage rates. Additionally, certain of SkyWest Airlines' operating costs are reimbursed by
United, including costs related to fuel and aircraft ownership. As of December 31, 2009, 27 of the 39 Brasilia turboprops and 14 of the 81 CRJ200s were operated under a revenue-sharing
arrangement.

On
October 16, 2009, SkyWest Airlines extended to United a secured term loan in the amount of $80 million. The term loan bears interest at a rate of 11%, with a
ten-year amortization period. The loan is secured by certain ground equipment and airport slot rights held by United. SkyWest Airlines also agreed to defer certain amounts otherwise
payable to SkyWest Airlines under the existing United Express Agreement. The maximum deferral amount is $49 million and any amounts deferred accrue a deferral fee of 8%, payable weekly.
United's right to defer such payments is scheduled to terminate in ten years.

On
October 16, 2009, SkyWest Airlines extended existing rights to operate 40 regional jet aircraft under the United Express Agreement until the end of their current lease terms
(on average 8.4 years). The following table is the updated schedule of expirations for the SkyWest Airlines United Express contract aircraft:

Year

Brasilia
Turboprops

CRJ200s

CRJ700s2010


1


2


2011





4


2013


9


11


12014








102015





10


312016








102017





2


2018





7


2019





2


92020








92021





15


2022





8


2024





6





United
has the option, upon one year's notice, of extending the United Express Agreement for five years. The United Express Agreement is subject to early termination in various
circumstances including:



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ASA United Express Agreement

On February 10, 2010, ASA and United entered into the ASA United Express Agreement, pursuant to which ASA has agreed to operate
14 CRJ200 aircraft as a United Express carrier. On February 11, 2010, ASA began operating as a United Express carrier, and we anticipate that the 14 United Express regional jets to be flown by
ASA will be in operation by May of 2010. The ASA United Express Agreement is a capacity purchase agreement with a five-year term, and other terms which are generally consistent with the
SkyWest Airlines United Express Agreement.

AirTran

On November 4, 2009, SkyWest Airlines entered into a code-share agreement with AirTran. Under the terms of the
code-share agreement, SkyWest Airlines has agreed to operate five CRJ200s for AirTran under a pro-rate arrangement. SkyWest Airlines commenced AirTran service with two aircraft
in December 2009 and added three additional aircraft in January and February of 2010. The code-share agreement has a three-year term; however, after May 15, 2010, either
party may terminate the agreement upon 120 days written notice.

Midwest Airline Services Agreement

On June 10, 2009, SkyWest Airlines announced the wind down of the Midwest Services Agreement. As a result, SkyWest Airlines and
Midwest terminated the Midwest Services Agreement on December 31, 2009 and SkyWest Airlines removed the remaining 12 CRJ200s out of Midwest service by January 2010.

Markets and Routes

As of December 31, 2009, SkyWest Airlines and ASA scheduled the following daily flights as Delta Connection carriers: 754
flights to or from Hartsfield- Jackson Atlanta International Airport, 388 flights to or from Salt Lake City International Airport and 22 flights to or from Cincinnati/Northern Kentucky International
Airport.

As
of December 31, 2009, SkyWest Airlines scheduled the following daily flights as a United Express carrier: 250 flights to or from Chicago O'Hare International Airport, 320
flights to or from Denver International Airport, 210 flights to or from Los Angeles International Airport, 238 flights to or from San Francisco International Airport and 42 flights to or from other
outlying airports.

As
of December 31, 2009, SkyWest Airlines scheduled 20 daily flights as a Midwest Connect carrier to or from Milwaukee International Airport.

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As
of December 31, 2009, SkyWest Airlines scheduled 10 daily flights as an AirTran carrier to or from Milwaukee International Airport.

Our
flight schedules are structured to facilitate the connection of our passengers with flights of our major partners at the airports we serve.

Training and Aircraft Maintenance

SkyWest Airlines' and ASA's employees perform substantially all routine airframe and engine maintenance and periodic inspection of
equipment at their respective maintenance facilities, and provide substantially all training to SkyWest Airlines and ASA crew members and maintenance personnel at their respective training facilities.
SkyWest Airlines and ASA also contract with third party vendors for non-routine airframe and engine maintenance.

Fuel

Historically, we have not experienced problems with the availability of fuel, and believe we will be able to obtain fuel in quantities
sufficient to meet our existing and anticipated future requirements at competitive prices. Standard industry contracts generally do not provide protection against fuel price increases, nor do they
ensure availability of supply. However, our code-share agreements with Delta and United provide for fuel used in the performance of the code-share agreements to be reimbursed
by our major partners, thereby reducing our exposure to fuel price fluctuations. United purchased fuel directly from a fuel vendor for our United Express aircraft under contract operated out of
Chicago, San Francisco, Los Angeles and Denver; Midwest purchased all of the fuel for our Midwest aircraft directly from Midwest's fuel vendors and as of June 1, 2009, Delta purchased the
majority of the fuel for our Delta aircraft under contract directly from its fuel vendors. During the year ended December 31, 2009, approximately 92.2% of our fuel purchases were associated
with our Delta and United code-share agreements and were reimbursed by our major partners. A substantial increase in the price of jet fuel, to the extent our fuel costs are not reimbursed,
or the lack of adequate fuel supplies in the future, could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Employees

As of December 31, 2009, SkyWest and SkyWest Airlines collectively employed 8,654 full-time equivalent employees
consisting of 4,232 pilots and flight attendants, 2,833 customer service personnel, 1,106 mechanics and other maintenance personnel, and 483 administration and support personnel. None of these
employees are currently represented by a union. We are aware, however, that collective bargaining group organization efforts among SkyWest Airlines' employees occur from time to time and we anticipate
that such efforts will continue in the future. If unionization efforts are successful, we may be subjected to risks of work interruption or stoppage and/or incur additional expenses associated with
increased union representation of our employees. SkyWest Airlines has never experienced a work stoppage due to a strike or other labor dispute, and we consider SkyWest Airlines' relationships with its
employees to be good.

As
of December 31, 2009, ASA employed approximately 3,604 full-time equivalent employees consisting of 2,227 pilots and flight attendants, 240 customer service
personnel, 901 mechanics and other maintenance personnel, and 236 administration and support personnel. Three of ASA's employee groups are represented by unions. ASA's pilots are represented by the
Air Line Pilots Association International, ASA's flight attendants are represented by the Association of Flight AttendantsCNA, and ASA's flight controllers are represented by the
Professional Airline Flight Control Association. ASA's collective bargaining agreement with its pilots will become amendable on November 20, 2010. ASA's collective bargaining agreement with its
flight attendants will become amendable in July 20, 2011.

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The
collective bargaining agreement between ASA and its flight controllers became amendable in April 2006, and ASA is currently engaged in negotiations with its flight controllers. ASA has never
experienced a work stoppage due to a strike or other labor dispute, and considers its relationships with employees to be good.

Government Regulation

All interstate air carriers, including SkyWest Airlines and ASA, are subject to regulation by the U.S. Department of Transportation
(the "DOT"), the U.S. Federal Aviation Administration (the "FAA") and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA
requires operating, air worthiness and other certificates; approval of personnel who may engage in flight, maintenance or operating activities; record-keeping procedures in accordance with FAA
requirements; and FAA approval of flight training and retraining programs. Generally, governmental agencies enforce their regulations through, among
other ways, certifications, which are necessary for the continued operations of SkyWest Airlines and ASA, and proceedings, which can result in civil or criminal penalties or revocation of operating
authority. The FAA can also issue maintenance directives and other mandatory orders relating to, among other things, grounding of aircraft, inspection of aircraft, installation of new safety-related
items and the mandatory removal and replacement of aircraft parts.

We
believe SkyWest Airlines and ASA are operating in compliance with FAA regulations and hold all operating and airworthiness certificates and licenses which are necessary to conduct
their respective operations. We incur substantial costs in maintaining current certifications and otherwise complying with the laws, rules and regulations to which SkyWest Airlines and ASA are
subject. SkyWest Airlines' and ASA's flight operations, maintenance programs, record keeping and training programs are conducted under FAA approved procedures. SkyWest Airlines and ASA do not
currently operate at any airports where landing slots are restricted.

All
air carriers are required to comply with federal laws and regulations pertaining to noise abatement and engine emissions. All air carriers are also subject to certain provisions of
the Federal Communications Act of 1934, as amended, because of their extensive use of radio and other communication facilities. SkyWest Airlines and ASA are also subject to certain other federal and
state laws relating to protection of the environment, labor relations and equal employment opportunity. We believe SkyWest Airlines and ASA are in compliance in all material respects with these laws
and regulations.

Environmental Matters

SkyWest, SkyWest Airlines and ASA are subject to various federal, state, local and foreign laws and regulations relating to
environmental protection matters. These laws and regulations govern such matters as environmental reporting, storage and disposal of materials and chemicals and aircraft noise. We are, and expect in
the future to be, involved in various environmental matters and conditions at, or related to, our properties. We are not currently subject to any environmental cleanup orders or actions imposed by
regulatory authorities. We are not aware of any active material environmental investigations related to our assets or properties.

Safety and Security

We are committed to the safety and security of our passengers and employees. Since the September 11, 2001 terrorist attacks,
SkyWest Airlines and ASA have taken many steps, both voluntarily and as mandated by governmental agencies, to increase the safety and security of their operations. Some of the safety and security
measures we have taken with our
code-share partners include: aircraft security and surveillance, positive bag matching procedures, enhanced passenger and baggage screening and search procedures, and securing of cockpit
doors. We are committed to complying with future safety and security requirements.

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Insurance

SkyWest Airlines and ASA maintain insurance policies we believe are of types customary in the industry and in amounts we believe are
adequate to protect against material loss. These policies principally provide coverage for public liability, passenger liability, baggage and cargo liability, property damage, including coverages for
loss or damage to our flight equipment, and workers' compensation insurance. We cannot assure, however, that the amount of insurance we carry will be sufficient to protect us from material loss.

Seasonality

Our results of operations for any interim period are not necessarily indicative of those for the entire year, since the airline
industry is subject to seasonal fluctuations and general economic conditions. Our operations are somewhat favorably affected by pleasure travel on our pro-rate routes, historically
contributing to increased travel 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.

ITEM 1A.    RISK FACTORS

In addition to factors discussed elsewhere in this Report, the following are important risks which could
adversely affect our future results. Additional risks and uncertainties not presently known to us or that we currently do not deem material may also impair our business operations. If any of the risks
we describe below occur, or if any unforeseen risk develops, our operating results may suffer, our financial condition may deteriorate, the trading price of our common stock may decline and investors
could lose all or part of their investment in us.

Risks Related to Our Operations

We are highly dependent on Delta and United.

If any of our code-share agreements with Delta or United are terminated, we would be significantly impacted and likely
would not have an immediate source of revenue or earnings to offset such loss. A termination of any of these agreements would likely have a material adverse effect on our financial condition,
operating revenues and net income unless we are able to enter into satisfactory substitute arrangements for the utilization of the affected aircraft by other code-share partners, or,
alternatively, obtain the airport facilities and gates and make the other arrangements necessary to fly as an independent airline. We may not be able to enter into substitute code-share
arrangements, and any such arrangements we might secure may not be as favorable to us as our current agreements. Operating our airline independent from major partners would be a significant departure
from our business plan, would likely be very difficult and may require significant time and resources, which may not be available to us at that point.

The
current terms of the SkyWest, SkyWest Airlines and ASA Delta Connection Agreements are subject to certain early termination provisions. Delta's termination rights include
cross-termination rights (meaning that a breach by SkyWest, SkyWest Airlines or ASA of its Delta Connection Agreement could, under certain circumstances, permit Delta to terminate any or all of the
Delta Connection Agreements), the right to terminate each of the agreements upon the occurrence of certain force majeure events (including certain labor-related events) that prevent SkyWest Airlines
or ASA from performance for certain periods and the right to terminate each of the agreements if SkyWest Airlines or ASA, as applicable, fails to maintain competitive base rate costs, subject to
certain rights of SkyWest Airlines to take corrective action to reimburse Delta for lost revenues. The current terms of the SkyWest Airlines and ASA United Express Agreements are subject to certain
early termination provisions and subsequent renewals. United may terminate the SkyWest Airlines and ASA United

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Express
Agreements due to an uncured breach by SkyWest Airlines or ASA of certain operational and performance provisions, including measures and standards related to flight completions, baggage
handling and on-time arrivals.

We
currently use Delta's and United's systems, facilities and services to support a significant portion of our operations, including airport and terminal facilities and operations,
information technology support, ticketing and reservations, scheduling, dispatching, fuel purchasing and ground handling services. If Delta or United were to cease any of these operations or no longer
provide these services to us, due to termination of one of our code-share agreements, a strike or other labor interruption by Delta or United personnel or for any other reason, we may not
be able to replace these services on terms and conditions as favorable as those we currently receive, or at all. Since our revenues and operating profits are dependent on our level of flight
operations, we could then be forced to significantly reduce our operations. Furthermore, upon certain terminations of our code-share agreements, Delta and United could require us to sell
or assign to them facilities and inventories, including maintenance facilities, we use in connection with the code-share services we provide. As a result, in order to offer airline service
after termination of any of our code-share agreements, we may have to replace these airport facilities, assets and services. We may be unable to arrange such replacements on satisfactory
terms, or at all.

We may be negatively impacted by the troubled financial condition of Delta and United.

For the year ended December 31, 2009 approximately 98.1% of our ASMs were attributable to our code-share
agreements with Delta and United. Both Delta and United have incurred significant losses in recent years, which materially weakened their financial condition. Because of their weakened financial
condition, there is no assurance that either United or Delta will ultimately succeed or will remain a going concern over the long term. Volatility in fuel prices may negatively impact both Delta's and
United's results of operations and financial condition. Among other risks, Delta and United are vulnerable both to unexpected events (such as additional terrorist attacks or additional spikes in fuel
prices) and to deterioration of the operating environment (such as a
recession or significant increased competition). There is no assurance that Delta or United will be able to operate successfully under these financial conditions.

In
light of the importance of our code-share agreements with Delta and United to our business, the termination of these agreements could jeopardize our operations. Such
events could leave us unable to operate many of our current aircraft, as well as additional aircraft we are obligated to purchase, which would likely result in a material adverse effect on our
operations and financial condition.

The
financial condition of Delta and United will continue to pose risks for our operations. Serial bankruptcies are not unprecedented in the commercial airline industry, and Delta and/or
United could file for bankruptcy again, in which case our code-share agreements could be subject to termination under the U.S. Bankruptcy Code. Regardless of whether subsequent bankruptcy
filings prove to be necessary, Delta and United have required, and will likely continue to require, our participation in efforts to reduce costs and improve their respective financial positions. These
efforts could result in lower utilization rates of our aircraft, lower departure rates on the contract flying portion of our business, more volatile operating margins and more aggressive contractual
positions, which could result in additional litigation. We believe that any of these developments could have a negative effect on many aspects of our operations and financial condition.

On
October 16, 2009, SkyWest Airlines entered into a series of transactions with United that provided operational funding to United, extended SkyWest Airlines' existing rights to
operate 40 regional jet aircraft under the SkyWest Airlines United Express Agreement until the end of their current lease terms and created an opportunity for ASA to operate 14 regional jet aircraft
as a United Express carrier. We anticipate that ASA will begin operating as a United Express carrier starting in the

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first
quarter of 2010, and the 14 United Express regional jets to be flown by ASA will be in operation by May of 2010. We also anticipate that ASA will operate these aircraft under a capacity purchase
agreement with a five-year term, and other terms which are generally consistent with the existing SkyWest Airlines United Express Agreement.

Also
on October 16, 2009, SkyWest Airlines extended to United a secured term loan in the amount of $80 million. The term loan bears interest at a rate of 11%, with a
ten-year amortization period. The loan is secured by certain ground equipment and airport slot rights held by United. SkyWest Airlines also agreed to defer certain amounts otherwise
payable to SkyWest Airlines under the existing SkyWest Airlines United Express Agreement. The maximum deferral amount is $49 million and any amounts deferred accrue a deferral fee of 8%,
payable weekly. United's right to defer such payments is scheduled to terminate in ten years.

A
default by United under the SkyWest Airlines United Express Agreement, the ASA United Express Agreement, the term loan extended by SkyWest Airlines to United or United's obligation to
repay certain amounts deferred pursuant to the financing arrangement we established with United in October 2009, could have a material adverse effect on our financial condition, results of operations,
liquidity and the price of our common stock.

The amounts we receive under our code-share agreements may be less than the actual amounts of the corresponding costs we incur.

Under our code-share agreements with Delta and United, we are compensated for certain costs we incur in providing services.
With respect to costs that are defined as "pass-through" costs, our code-share partner is obligated to pay to us the actual amount of the cost (and, with respect to the ASA
Delta Connection Agreement, a pre-determined rate of return based upon the actual cost we incur). With respect to other costs, our code-share partner is obligated to pay to us
amounts based, in part, on pre-determined rates for certain costs. During the year ended December 31, 2009, approximately 46% of our costs were pass-through costs and
approximately 54% of our costs were reimbursable at pre-determined rates. These pre-determined rates may not be based on the actual expenses we incur in delivering the
associated services. If we incur expenses that are greater than the pre-determined reimbursement amounts payable by our code-share partners, our financial results will be
negatively affected.

The rates we are paid under the Delta Connection Agreements are subject to adjustment and, if adjusted downward beyond our current estimates, our financial results would be
negatively affected.

SkyWest Airlines and ASA have each entered into a Delta Connection Agreement with Delta, pursuant to which SkyWest Airlines and ASA
provide contract flight services for Delta. Among other provisions, those Delta Connection Agreements provide that, beginning with the third anniversary of the execution of the agreements
(September 8, 2008), Delta has the right to require that certain contractual rates under those agreements shall not exceed the average rate of all carriers. As of December 31, 2009,
SkyWest Airlines and ASA had not finalized the contractual rates under their respective Delta Connection Agreements. On October 23, 2009, Delta sent letters to SkyWest Airlines and ASA
requiring them to either adjust the rates payable under their respective Delta Connection Agreements or accept termination of those agreements. Delta also notified SkyWest Airlines and ASA of Delta's
estimate of the average rates to be applied under the Delta Connection Agreements. On October 28, 2009, SkyWest Airlines and ASA notified Delta of their election to adjust the rates payable
under the Delta Connection Agreements; however, they also notified Delta of their disagreement with Delta's estimated rates and their belief that the methodology Delta used to calculate its estimated
rates is inconsistent with the terms of the Delta Connection Agreements. SkyWest Airlines and ASA have exchanged subsequent correspondence with Delta, and SkyWest Airlines and ASA continue to
negotiate with Delta in an effort to determine an appropriate methodology for calculating the average rates of

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the
carriers within the Delta Connection program. Because SkyWest Airlines and ASA have not reached an agreement with Delta regarding the final contractual rates to be established under the Delta
Connection Agreements, we have evaluated our method for calculating the average rate of the carriers within the Delta Connection Program under the revenue recognition accounting guidance and recorded
revenue under those agreements based on our management's understanding of the applicable terms in the Delta Connection Agreements and our management's best estimate of the revenue that will ultimately
be realized upon settlement of the contractual rates with Delta with respect to the year ended December 31, 2009. There can be no assurance that the methodology we have used to estimate the
average rate which will be established pursuant to the Delta Connection Agreements will ultimately be used for purposes of determining the average rate to which we will be subject. If our disagreement
with Delta on this issue is not resolved consistent with management's interpretation, our operating results and financial condition may be negatively impacted.

The
SkyWest Airlines and ASA Delta Connection Agreements provide that, beginning with the fifth anniversary of the execution of the agreements (September 8, 2010), Delta has the
right to require that certain contractual rates under those agreements shall not exceed the 2nd lowest of all carriers within the Delta Connection Program.

SkyWest Airlines and ASA are engaged in litigation with Delta, which may negatively impact our financial results and our relationship with Delta

During the quarter ended December 31, 2007, Delta notified SkyWest, SkyWest Airlines and ASA of a dispute under the Delta
Connection Agreements executed by Delta with SkyWest Airlines and ASA. The dispute relates to allocation of liability for IROP expenses that are paid by SkyWest Airlines and ASA to their passengers
under certain situations. As a result, Delta withheld a combined total of approximately $25 million (pretax) from one of the weekly scheduled wire payments to SkyWest Airlines and ASA during
December 2007. Delta continues to withhold a portion of the funds we believe are payable as weekly scheduled wire payments to SkyWest Airlines and ASA. As of December 31, 2009, we had
recognized a cumulative total of $32.4 million of revenue associated with the funds withheld by Delta. On February 1, 2008, SkyWest Airlines and ASA filed a lawsuit in Georgia state
court disputing Delta's treatment of the matter (the "Complaint"). Delta filed an Answer to the Complaint and a Counterclaim against SkyWest Airlines and ASA on March 24, 2008. Delta's
Counterclaim alleges that ASA and SkyWest Airlines breached the Delta Connection Agreements by invoicing Delta for the IROP expenses that were paid pursuant to Delta's policies, and claims only a
portion of those expenses may be invoiced to Delta. Delta seeks unspecified damages in its counterclaim.

On
March 24, 2008, Delta filed a Motion to Dismiss the Complaint (the "Motion to Dismiss"). A hearing on the Motion to Dismiss was held September 5, 2008. In an order
entered September 13, 2008, the Court granted in part and denied in part the Motion to Dismiss. The Court denied the Motion to Dismiss with respect to the breach of contract claim contained in
the Complaint. The Court denied in part the Motion to Dismiss with respect to the action for declaratory judgment contained in the Complaint, and granted in part the Motion to Dismiss to the extent
the Complaint seeks to read alternative or supplemental obligations created by prior conduct into the Delta Connection Agreements. The Court granted the Motion to Dismiss with respect to claims for
estoppel, unilateral mistake, and mutual mistake contained in the Complaint. The Court's ruling affects the current posture of the case, but does not preclude pursuit of the claim for breach of
contract or the claim for declaratory relief, under which SkyWest Airlines and ASA continue to seek recovery of all amounts withheld by Delta.

On
July 31, 2009, SkyWest Airlines and ASA filed an Amended Complaint in the lawsuit adding claims under Georgia law for voluntary payment and mutual departure from the strict
terms of the Delta Connection Agreements. Under those theories, SkyWest Airlines and ASA seek recovery of all of

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the
approximately $25 million withheld by Delta during December 2007. SkyWest Airlines and ASA are also seeking recovery of additional amounts withheld by Delta subsequent to December 2007.
Discovery on all of SkyWest's Airlines' and ASA's claims and defenses is in process. On September 4, 2009, Delta filed a motion to dismiss the Amended Complaint in part. Delta asserts that the
claims added by SkyWest Airlines and ASA in the Amended Complaint should be dismissed based on legal arguments set forth in Delta's memorandum in support of its motion. On January 22, 2010, the
Court granted Delta's motion in part, dismissing the claims under Georgia law for voluntary payment and mutual
departure from the strict terms of the Connection Agreements. SkyWest Airlines and ASA have filed an application seeking an interlocutory appeal of the Court's order and continue to vigorously pursue
their claims set forth in the Amended Complaint, to the extent permitted by the Court's ruling on the Motion to Dismiss, and their defenses to Delta's counterclaims.

There
can be no assurance that the dispute will be resolved consistent with the position taken by SkyWest Airlines and ASA. If the dispute is not resolved consistent with the position
taken by SkyWest Airlines and ASA our financial results would be negatively impacted. The litigation may have other negative effects on our relationship with Delta and our operations under the
existing Delta Connection Agreements.

Disagreements regarding the interpretation of our code-share agreements with our major partners could have an adverse effect on our operating results and
financial condition.

SkyWest and its subsidiaries have entered into code-share agreements with Delta and United. For the year ended
December 31, 2009, more than 98% of our ASMs were attributable to flights we flew under those agreements. We anticipate that, for the foreseeable future, substantially all of our
revenues will be generated under existing or future code-share agreements.

Contractual
agreements, such as our code-share agreements, are subject to interpretation and disputes may arise under such agreements if the parties to an agreement apply
different interpretations to that agreement. Those disputes may divert management time and resources from the core operation of the business, and may result in litigation, arbitration or other forms
of dispute resolution.

In
recent years we have experienced disagreements with our major partners regarding the interpretation of various provisions of our code-share agreements. Some of those
disagreements have resulted in litigation (see the preceding risk factor entitledSkyWest Airlines and ASA are engaged in litigation with Delta, which may negatively impact our
financial results and our relationship with Delta), and we may be subject to additional disputes and litigation in the future. Those disagreements have also required a
significant amount of management time and financial resources.

To
the extent that we continue to experience disagreements regarding the interpretation of our code-share or other agreements, we will likely expend valuable management time
and financial resources in our efforts to resolve those disagreements. Those disagreements may result in litigation, arbitration or other proceedings. Furthermore, there can be no assurance that any
or all of those proceedings, if commenced, would be resolved in our favor. An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify our
operations. Such
disagreements and their consequences could have an adverse effect on our operating results and financial condition.

We have a significant amount of contractual obligations.

As of December 31, 2009, we had a total of approximately $2.0 billion in total long-term debt obligations.
Substantially all of this long-term debt was incurred in connection with the acquisition of aircraft, engines and related spare parts. We also have significant long-term 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, 2009, we had 284 aircraft

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under
lease, with remaining terms ranging from one to 17 years. Future minimum lease payments due under all long-term operating leases were approximately $2.9 billion at
December 31, 2009. At a 5.8% discount factor, the present value of these lease obligations was equal to approximately $2.1 billion at December 31, 2009. As of December 31,
2009, we had commitments of approximately $98.0 million to purchase four CRJ700s. We expect to complete these deliveries by the first quarter of 2010. Our high level of fixed obligations could
impact our ability to obtain additional financing to support additional expansion plans or divert cash flows from operations and expansion plans to service the fixed obligations.

There are risks associated with our regional jet strategy, including potential oversupply and possible passenger dissatisfaction.

Our selection of Bombardier Regional Jets as the primary aircraft for our existing operations and projected growth involves risks,
including the possibility that there may be an oversupply of regional jets available for sale in the foreseeable future, due, in part, to the financial difficulties of regional and major airlines,
including Delta, United, Comair, Mesa and ExpressJet. A large supply of regional jets may allow other carriers, or even new carriers, to acquire aircraft for unusually low acquisition costs, allowing
them to compete more effectively in the industry, which may ultimately harm our operations and financial performance.

Our
regional jet strategy also presents the risk that passengers may find the Bombardier Regional Jets to be less attractive than other aircraft, including other regional jets. Recently,
several other models of regional jets have been introduced by manufacturers other than Bombardier. If passengers develop a preference for other regional jet models, our results of operation and
financial condition could be negatively impacted.

We may be limited from expanding our flying within the Delta and United flight systems, and there are constraints on our ability to provide airline services to airlines
other than Delta and United.

Additional growth opportunities within the Delta and United flight systems are limited by various factors. Except as currently
contemplated by our existing code-share agreements, we cannot assure that Delta or United will contract with us to fly any additional aircraft. We may not receive additional growth
opportunities, or may agree to modifications to our code-share agreements that reduce certain benefits to us in order to obtain additional aircraft, or for other reasons. Furthermore, the
troubled financial condition, bankruptcies and restructurings of Delta and United may reduce the growth of regional flying within their flight systems. Given the troubled nature of the airline
industry, we believe that some of our competitors may be more inclined to accept reduced margins and less favorable contract terms in order to secure new or additional code-share
operations. Even if we are offered growth opportunities by our major partners, those opportunities may involve economic terms or financing commitments that are unacceptable to us. Any one or more of
these factors may reduce or eliminate our ability to expand our flight operations with our existing code-share partners. Additionally, even if Delta and/or United choose to expand our
fleet on terms acceptable to us, they may be allowed at any time to subsequently reduce the number of aircraft covered by our code-share agreements. We also cannot provide any assurance
that we will be able to obtain the additional ground and maintenance facilities, including gates, and support equipment, to expand our operations. The failure to obtain these facilities and equipment
would likely impede our efforts to implement our business strategy and could materially adversely affect our operating results and our financial condition.

Delta,
United and/or AirTran may be restricted in increasing their business with us, due to "scope" clauses in the current collective bargaining agreements with their pilots that
restrict the number and size of regional jets that may be operated in their flight systems not flown by their pilots. Delta's scope limitations restrict its partners from operating aircraft with over
76 seats, even if those aircraft are operated for an airline other than Delta. We cannot assure that these scope clauses will not become more restrictive in the future. Any additional limit on the
number of regional jets we can fly for our code-share partners could have a material adverse effect on our expansion plans and the price of our common stock.

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Our business model depends on major airlines, including Delta and United, electing to contract with us instead of operating their own regional jets. Some major
airlines, including Delta, American and Alaska Airlines, own their own regional airlines or operate their own regional jets instead of entering into contracts with regional carriers. We have no
guarantee that in the future our code-share partners will choose to enter into contracts with us instead of operating their own regional jets. Our partners are not prohibited from doing so
under our code-share agreements. A decision by Delta or United to phase out code-share relationships and instead acquire and operate their own regional jets could have a
material adverse effect on our financial condition, results of operations or the price of our common stock.

Additionally,
our code-share agreements limit our ability to provide airline services to other airlines in certain major airport hubs of each of Delta and United. Under the
SkyWest Airlines Delta Connection Agreement, our growth is contractually restricted in Atlanta, Cincinnati, Orlando and Salt Lake City. Under the ASA Delta Connection Agreement, our growth is
restricted in Atlanta, Cincinnati, New York (John F. Kennedy International Airport), Orlando and Salt Lake City. Under the SkyWest Airlines United Express Agreement, growth is restricted in Chicago
(O'Hare International Airport), Denver, San Francisco, Seattle/Tacoma and Washington D.C. (Dulles International Airport).

Economic and industry conditions constantly change, and negative economic conditions in the United States and other countries may create challenges for us that could
materially and adversely affect our operations and financial condition.

Our operations and financial condition are affected by many changing economic and other conditions beyond our control, including, among
others:



The
aggregate effect of any, or some combination, of the foregoing economic and industry conditions on our operations or financial condition is virtually impossible to forecast; however,
the occurrence of any or all of such conditions in a significant manner could materially and adversely affect our operations and financial condition.

Reduced utilization levels of our aircraft under our code-share agreements would adversely impact our financial results.

Our code-share agreements set forth minimum levels of flight operations which our major partners are required to schedule
for our operations and we are required to provide. These minimum flight operating levels are intended to compensate us for reduced operating efficiencies caused by production decreases made by our
major partners under our respective code-share agreements. Generally, our major partners have utilized our flight operations at levels which exceed the minimum levels set forth in our
code-share agreements. For the year ended December 31, 2009 our block hours decreased

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approximately
1.0% from the year ended December 31, 2008 and for certain months of the year ended December 31, 2009 the block hours flown under certain of our code-share
agreements were lower than the minimum levels set forth in those agreements. However, if our major partners schedule the utilization of our aircraft below historical levels (including taking into
account the stage length and frequency of our scheduled flights), we may not be able to maintain operating efficiencies previously obtained, which would negatively impact our operating results and
financial condition. Continued reduced utilization levels of our aircraft under our code-share agreements would adversely impact our financial results.

Increased labor costs, strikes, labor disputes and increased unionization of our workforces may adversely affect our ability to conduct our business.

Our business is labor intensive, requiring large numbers of pilots, flight attendants, mechanics and other personnel. Labor costs
constitute a significant percentage of our total operating costs. For example, during the year ended December 31, 2009, our salary, wage and benefit costs constituted approximately 29.1% of our
total operating costs. Increases in our unionized labor costs could result in a material reduction in our earnings. Any new collective bargaining agreements entered into by other regional carriers
with their work forces may also result in higher industry wages and increased pressure on us to increase the wages and benefits of our employees. Future agreements with unionized and
non-unionized employees may be on terms that are not as attractive as our current agreements or comparable to agreements entered into by our competitors.

ASA's
pilots, flight attendants and flight controllers are represented by unions, including: The Air Line Pilots Association, International, the Association of Flight
AttendantsCNA and the Professional Airline Flight Control Association. ASA's collective bargaining agreement with its pilots will become amendable on November 20, 2010. ASA's
collective bargaining agreement with its flight attendants will become amendable in July 20, 2011. The contract with ASA's flight controllers became amendable in April 2006, and ASA is
currently engaged in negotiations with its flight controllers. Negotiations with unions representing ASA's employees could divert management attention and disrupt operations, which may result in
increased operating expenses and may negatively impact our financial results. In addition, there are other ASA employees that are not currently represented by any union; however, collective bargaining
group organization efforts among those employees occur from time to time. We recognize that such efforts will likely continue in the future and may ultimately result in additional ASA employees being
represented by one or more unions. Moreover, we cannot predict the outcome of any future negotiations relating to union representation or collective bargaining agreements.

SkyWest
Airlines' employees are not currently represented by any union; however, collective bargaining group organization efforts among those employees occur from time to time. We
recognize that such efforts will likely continue in the future and may ultimately result in some or all of SkyWest Airlines' employees being represented by one or more unions. Moreover, one or more
unions representing ASA employees may seek a single carrier determination by the National Mediation Board, which could require SkyWest Airlines to recognize such union or unions as the certified
bargaining representative of SkyWest Airlines' employees. One or more unions representing ASA employees may also assert that SkyWest Airlines' employees should be subject to ASA collective bargaining
agreements. If SkyWest Airlines' employees were to unionize or be deemed to be represented by one or more unions, negotiations with unions representing SkyWest Airlines' employees could divert
management attention and disrupt operations, which may result in increased operating expenses and may negatively impact our financial results. Moreover, we cannot predict the outcome of any future
negotiations relating to union representation or collective bargaining agreements. Agreements reached in collective bargaining may increase our operating expenses and negatively impact our financial
results.

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If
unionizing efforts among SkyWest Airlines' employees are successful, we may be subjected to risks of work interruption or stoppage and/or incur additional administrative expenses
associated with union representation.

If
we are unable to reach labor agreements with any current or future unionized work groups, we may be subject to work interruptions or stoppages, which may adversely affect our ability
to conduct our operations and may even allow Delta or United to terminate their respective code-share agreement.

We have been adversely affected by increases in fuel prices, and we would be adversely affected by disruptions in the supply of fuel.

Dependence on foreign imports of crude oil, limited refining capacity and the possibility of changes in government policy on jet fuel
production, transportation and marketing make it impossible to predict the future availability of jet fuel. If there are additional outbreaks of hostilities or other conflicts in
oil-producing areas or elsewhere, or a reduction in refining capacity (due to weather events, for example), or governmental limits on the production or sale of jet fuel, there could be a
reduction in the supply of jet fuel and significant increases in the cost of jet fuel. Major reductions in the availability of jet fuel or significant increases in its cost, or a continuation of
current high prices for a significant period of time, would have a material adverse impact on us.

Pursuant
to our contract flying arrangements, Delta and United have agreed to bear the economic risk of fuel price fluctuations on our contracted flights. We bear the economic risk of
fuel price fluctuations on our pro-rate operations. As of December 31, 2009, essentially all of our Brasilia turboprops flown for Delta were flown under pro-rate
arrangements while, approximately 47% of our Brasilia turboprops flown in the United system were flown under pro-rate arrangements. As of December 31, 2009, we operated 14 CRJ200s
under a pro-rate agreement with United. On November 4, 2009, we entered into a code-share agreement with AirTran. Under the terms of the code-share
agreement, SkyWest Airlines has agreed to operate five CRJ200s for AirTran under a pro-rate arrangement. As of December 31, 2009, we operated two CRJ 200s with AirTran. We
anticipate that SkyWest Airlines will add three additional aircraft in early 2010. Our operating and financial results can be affected by the price and availability of jet fuel. Due to the competitive
nature of the airline industry, we may not be able to pass on increased fuel prices to our pro-rate customers by increasing fares. Fuel prices are volatile, and changed since 2007.

The Airline Safety and Pilot Training Improvement Act of 2009 could negatively affect our operations and our financial condition.

Prompted by the crash of a Colgan aircraft, which killed 50 people near Buffalo, New York, passengers and governmental authorities have
raised questions about pilot qualifications, training and fatigue. The Airline Safety and Pilot Training Improvement Act of 2009 was introduced in the United States House of Representatives and, as of
the date of this Report, was under consideration by the United States Senate. If adopted in the manner currently proposed, the Airline Safety and Pilot Training Improvement Act of 2009 would add new
certification requirements for entry-level commercial pilots, require additional emergency training, improve availability of pilot records and mandate stricter rules to minimize pilot fatigue.

The
Airline Safety and Pilot Training Improvement Act of 2009 would also:



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Declining interest rates could have a negative effect on our financial results.

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. However, under our contractual arrangement with our major partners, the majority of the decline in interest expense would be passed through to our major partners and recorded
as passenger revenue in the consolidated statement of income. Interest expense decreased $19.7 million, or 18.6%, during the year ended December 31, 2009 compared to the year ended
December 31, 2008. The decrease in interest expense was substantially due to a decrease in interest rates and the majority of this reduction was passed through to our major partners. Interest
income decreased $9.7 million, or 46.5% during the year ended December 31, 2009, compared to the year ended December 31, 2008. The decrease in interest income was substantially
due to the decrease in interest rates. If interest rates continue to decline, our financial results will be negatively affected.

Our insurance costs have increased and further increases in insurance costs or reductions in coverage could have an adverse impact on us.

We carry insurance for public liability, passenger liability, property damage and all-risk coverage for damage to our
aircraft. As a result of terrorist attacks occurring during recent years, aviation insurers significantly reduced the amount of insurance coverage available to commercial air carriers for liability to
persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events (war-risk coverage). At the same time, these insurers significantly increased
the premiums for aviation insurance in general.

The
U.S. government has agreed to provide commercial war-risk insurance for U.S.-based airlines through August 31, 2010, covering losses to employees, passengers,
third parties and aircraft. If the U.S. government ceases to provide such insurance beyond that date, or reduces the coverage provided by such insurance, we will attempt to purchase insurance
coverage, likely with a narrower scope, from commercial insurers at an additional cost. To the extent this coverage is not available at commercially reasonable rates, we would be adversely affected.

While
the price of commercial insurance had declined since the period immediately after the 2001 terrorist attacks, in the event commercial insurance carriers further reduce the amount
of insurance coverage available to us, or significantly increase the cost of obtaining such coverage, we would be adversely affected.

We could be adversely affected by an outbreak of a disease that affects travel behavior.

In the second quarter of 2009, there was an outbreak of the H1N1 flu virus which had an adverse impact throughout our network. In 2003,
there was an outbreak of Severe Acute Respiratory Syndrome ("SARS"), which had an adverse impact on travel behavior. In addition, in the past there have been concerns about outbreaks or potential
outbreaks of other diseases, such as avian flu. Any outbreak of a disease (including a worsening of the outbreak of the H1N1 flu virus) that affects travel behavior could have a material adverse
impact on our operating results and financial condition. In addition, outbreaks of disease could result in quarantines of our personnel or an inability to access facilities or our aircraft, which
could adversely affect our operations and financial condition.

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We may be unable to obtain all of the aircraft, engines, parts or related maintenance and support services we require, which could have a material adverse impact on our
operations and financial condition.

We rely on a limited number of aircraft types, and are dependent on Bombardier as the sole manufacturer of our regional jets. For the
year ended December 31, 2009, 47.6% of our available seat miles were flown using CRJ200s, 37.6% of our available seat miles were flown using CRJ700s and 11.5% of our available seat miles were
flown using CRJ900s. As of December 31, 2009, we had commitments of approximately $98.0 million to purchase four CRJ700s. We expect to complete these deliveries by the first quarter of
2010. Additionally, we have obtained options to acquire another 22 regional jets that can be delivered in 70 to 90-seat configurations. Delivery dates for these aircraft remain subject to
final determination as agreed upon by us and our major partners.

Any
significant disruption or delay in the expected delivery schedule of our fleet would adversely affect our business strategy and overall operations and could have a material adverse
impact on our operating results or our financial condition. Certain of Bombardier's aerospace workers are represented by unions and have participated in at least one strike in recent history. Any
future prolonged strike at Bombardier or delay in Bombardier's production schedule as a result of labor matters could disrupt the delivery of regional jets to us, which could adversely affect our
planned fleet growth. We are also dependent on General Electric as the sole manufacturer of our aircraft engines. General Electric also provides parts, repair and overhaul services, and other types of
support services on our engines. Our operations could be materially and adversely affected by the failure or inability of Bombardier or General Electric to provide sufficient parts or related
maintenance and support services to us on a timely or economical basis, or the interruption of our flight operations as a result of unscheduled or unanticipated maintenance requirements for our
aircraft or engines. In addition, the issuance of FAA directives restricting or prohibiting the use of Bombardier aircraft types we operate would have a material adverse effect on our business and
operations.

Maintenance costs will likely continue to increase as the age of our regional jet fleet increases.

Our maintenance costs increased $54.4 million, or 14.3%, during the year ended December 31, 2009, compared to the year
ended December 31, 2008. The average age of our CRJ200s is approximately 8.3 years. Most of the parts on the CRJ200 fleet are no longer under warranty and we have started to incur more
heavy airframe inspections and engine overhauls on those aircraft. Our maintenance costs are expected to continue to increase on our CRJ200 fleet. Under our SkyWest Airlines United Express Agreement,
specific amounts are included in the current rates for future maintenance on CRJ200 engines used in SkyWest Airlines' United Express operations. The ASA United Express Agreement contains similar
provisions. The actual cost of maintenance on CRJ200 engines may vary from the agreed upon rates. During the year ended December 31, 2009, our CRJ200 engine expense for aircraft operated under
our SkyWest Airlines United Express Agreement increased $29.7 million as compared to the year ended December 31, 2009.

Because
the average age of our CRJ900s and CRJ700s as of December 31, 2009 was approximately 2.1 and 4.8 years, respectively, our CRJ900 and CRJ700 fleets require less
maintenance now than we anticipate they will require in the future. We have incurred relatively low maintenance expenses on our CRJ900 and CRJ700 fleets because most of the parts on these aircraft are
under multi-year warranties and a limited number of heavy airframe checks and engine overhauls have occurred. Our maintenance costs will increase significantly, both on an absolute basis
and as a percentage of our operating expenses, as our fleet ages and these warranties expire. Those increased costs will have a negative impact on our financial results.

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If we incur problems with any of our third-party service providers, our operations could be adversely affected.

Our reliance upon others to provide essential services on behalf of our operations may limit our ability to control the efficiency and
timeliness of contract services. We have entered into agreements with contractors to provide various facilities and services required for our operations, including fuel supply and delivery, aircraft
maintenance, services and ground facilities, and software and expect to enter into additional similar agreements in the future. These agreements are generally subject to termination after notice. Any
material problems with the efficiency and timeliness of our automated or contract services could have a material adverse effect on our business, financial condition and results of operations.

Interruptions or disruptions in service at one of our hub airports, due to adverse weather or for any other reason, could have a material adverse impact on our operations.

We currently operate primarily through hubs in Atlanta, Los Angeles, Milwaukee, San Francisco, Salt Lake City, Chicago, Denver,
Cincinnati/Northern Kentucky and the Pacific Northwest. Nearly all of our flights either originate from or fly into one of these hubs. Our
revenues depend primarily on our completion of flights and secondarily on service factors such as timeliness of departure and arrival. Any interruptions or disruptions could, therefore, severely and
adversely affect us. Extreme weather can cause flight disruptions, and during periods of storms or adverse weather, fog, low temperatures, etc., our flights may be canceled or significantly delayed.
Hurricanes Katrina and Rita, in particular, caused severe disruption to air travel in the affected areas and adversely affected airlines operating in the region, including ASA. We operate a
significant number of flights to and from airports with particular weather difficulties, including Atlanta, Salt Lake City, Chicago, Milwaukee and Denver. A significant interruption or disruption in
service at one of our hubs, due to adverse weather or otherwise, could result in the cancellation or delay of a significant portion of our flights and, as a result, could have a severe adverse impact
on our, operations and financial performance.

Our investment in a foreign airline may negatively impact our profitability.

On September 4, 2008, we announced our intention to acquire a 20% interest in a Brazilian regional airline, Trip Linhas Aereas
("Trip"), for $30 million. As of December 31, 2009, we had invested $20 million for a 16.4% interest in Trip, which is recorded under "Other assets" on our consolidated balance
sheet. If Trip meets or exceeds certain financial targets, we are scheduled to make another $10 million investment on March 1, 2010. There is no assurance that Trip will ultimately
succeed in its business plan. In the event that Trip incurs operating losses or files for bankruptcy, our investment may have little or no value and our financial results and condition would be
negatively impacted.

Our business could be harmed if we lose the services of our key personnel.

Our business depends upon the efforts of our chief executive officer, Jerry C. Atkin, and our other key management and operating
personnel. We may have difficulty replacing management or other key personnel who leave and, therefore, the loss of the services of any of these individuals could harm our business. We do not maintain
key-man insurance on any of our executive officers.

Risks Related to the Airline Industry

We may be materially affected by uncertainties in the airline industry.

The airline industry has experienced tremendous challenges in recent years and will likely remain volatile for the foreseeable future.
Among other factors, the financial challenges faced by major carriers, including Delta and United, the slowing U.S. economy and increased hostilities in Iraq, the Middle East and other regions have
significantly affected, and are likely to continue to affect, the U.S.

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airline
industry. These events have resulted in declines and shifts in passenger demand, increased insurance costs, increased government regulations and tightened credit markets, all of which have
affected, and will continue to affect, the operations and financial condition of participants in the industry, including us, major carriers (including our major partners), competitors and aircraft
manufacturers. These industry developments raise substantial risks and uncertainties which will affect us, major carriers (including our major partners), competitors and aircraft manufacturers in ways
that we are unable to currently predict.

The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential code-share partners.

The airline industry is highly competitive. We not only compete with other regional airlines, some of which are owned by or operated as
code-share partners of major airlines, but we also face competition from low-cost carriers and major airlines on many of our routes. Low-cost carriers such as
Southwest, JetBlue, US Airways and Frontier among others, operate at many of our hubs, resulting in significant price competition. Additionally, a large number of other carriers operate at our hubs,
creating intense competition. Certain of our competitors are larger and have significantly greater financial and other resources than we do. Moreover, federal deregulation of the industry allows
competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs
to provide service to passengers occupying otherwise unsold seats. Increased fare competition could adversely affect our operations and the price of our common stock. The airline industry has
undergone substantial consolidation, and it may in the future undergo additional consolidation. Recent examples include the merger between Delta and Northwest Airlines, Inc. ("Northwest") in
November 2008, America West Airlines and US Airways in September 2005, and American's acquisition of the majority of Trans World Airlines' assets in 2001. Several of the major airlines are currently
in discussions related to consolidation in the industry. Other developments include domestic and international code-share alliances between major carriers. Any additional consolidation or
significant alliance activity within the airline industry could limit the number of potential partners with whom we could enter into code-share relationships and materially adversely
affect our relationship with our code-share partners.

As
a result of the Delta and Northwest merger, Delta may change its strategy regarding the use of its wholly owned regional carriers and the use of third party regional carriers such as
SkyWest Airlines and ASA. Delta may also make other strategic changes such as changing and or consolidating hub locations. If Delta were to make changes such as these in its strategy and operations,
our operations and financial results could be adversely impacted.

Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do so.

The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in general,
including our operations. The primary effects experienced by the airline industry include a substantial loss of passenger traffic and revenue. Although, to some degree, airline passenger traffic and
revenue have recovered since the September 11th attacks, additional terrorist attacks could have a similar or even more pronounced effect. Even if additional terrorist
attacks are not launched against the airline industry, there will be lasting consequences of the attacks, including increased security and insurance costs, increased concerns about future terrorist
attacks, increased government regulation and airport delays due to heightened security. Additional terrorist attacks and the fear of such attacks could negatively impact the airline industry, and
result in further decreased passenger traffic and yields, increased flight delays or cancellations associated with new government mandates, as well as increased security, fuel and other costs. We
cannot provide any assurance that

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these
events will not harm the airline industry generally or our operations or financial condition in particular.

Fuel costs have adversely affected, and will likely continue to adversely affect, the operations and financial performance of the airline industry.

The price of aircraft fuel is unpredictable and was volatile during much of 2007, 2008 and 2009. Higher fuel prices may lead to higher
airfares, which would tend to decrease the passenger load of our code-share partners. In the long run, such decreases will likely have an adverse effect on the number of flights such
partner will ask us to provide and the revenues associated with such flights. Additionally, fuel shortages have been threatened. The future cost and availability of fuel to us cannot be predicted, and
substantial fuel cost increases or the unavailability of adequate supplies of fuel may have a material adverse effect on our results of operations. During periods of increasing fuel costs, our
operating margins have been, and will likely continue to be, adversely affected.

We are subject to significant governmental regulation.

All interstate air carriers, including SkyWest Airlines and ASA, are subject to regulation by the DOT, the FAA and other governmental
agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, air worthiness and other certificates; approval of personnel who may
engage in flight, maintenance or operation activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs. We cannot predict
whether we will be able to comply with all present and future laws, rules, regulations and certification requirements or that the cost of continued compliance will not have a material adverse effect
on our operations. We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to
ground, or require time-consuming inspections of or maintenance on, all or any of our aircraft for any reason may have a material adverse effect on our operations. In addition to state and
federal regulation, airports and municipalities enact rules and regulations that affect our operations. From time to time, various airports throughout the country have considered limiting the use of
smaller aircraft, such as our aircraft, at such airports. The imposition of any limits on the use of our aircraft at any airport at which we operate could have a material adverse effect on our
operations.

The occurrence of an aviation accident would negatively impact our operations and financial condition.

An accident or incident involving one of our aircraft could result in significant potential claims of injured passengers and others, as
well as repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service. In the event of an accident, our liability insurance may not be adequate to offset
our exposure to potential claims and we may be forced to bear substantial losses from the accident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm
our operational and financial results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are less safe or reliable than other
airlines.

Risks Related to Our Common Stock

We can issue additional shares without shareholder approval.

Our Restated Articles of Incorporation, as amended (the "Restated Articles"), authorize the issuance of up to 120,000,000 shares of
common stock, all of which may be issued without any action or approval by our shareholders. As of December 31, 2009, we had 55,609,015 shares outstanding. In addition, as of
December 31, 2009, we had equity-based incentive plans under which 1,453,234 shares are reserved for issuance and an employee stock purchase plan under which 2,847,093 shares are

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reserved
for issuance, both of which may dilute the ownership interest of our shareholders. Our Restated Articles also authorize the issuance of up to 5,000,000 shares of preferred stock. Our board of
directors has the authority to issue preferred stock with the rights and preferences, and at the price, which it determines. Any shares of preferred stock issued would likely be senior to shares of
our common stock in various regards, including dividends, payments upon liquidation and voting. The value of our common stock could be negatively affected by the issuance of any shares of preferred
stock.

The amount of dividends we pay may decrease or we may not pay dividends.

Historically, we have paid dividends in varying amounts on our common stock. The future payment and amount of cash dividends will
depend upon our financial condition and results of operations, loan covenants and other factors deemed relevant by our board of directors. There can be no assurance that we will continue our practice
of paying dividends on our common stock or that we will have the financial resources to pay such dividends.

Provisions of our charter documents and code-share agreements may limit the ability or desire of others to gain control of our company.

Our ability to issue preferred and common shares without shareholder approval may have the effect of delaying or preventing a change in
control and may adversely affect the voting and other rights of the holders of our common stock, even in circumstances where such a change in control would be viewed as desirable by most investors.
The provisions of the Utah Control Shares Acquisitions Act may also discourage the acquisition of a significant interest in or control of our company. Additionally, our code-share
agreements contain termination and extension trigger provisions related to change in control type transactions that may have the effect of deterring a change in control of our company.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None

ITEM 2.    PROPERTIES

Flight Equipment

As of December 31, 2009, our fleet consisted of the following types of owned and leased aircraft:

Aircraft Type

Number of
Owned Aircraft

Number of
Leased Aircraft

Passenger
Capacity

Scheduled Flight
Range (miles)

Average Cruising
Speed (mph)

Average Age
(years)CRJ200s


84


166


50


1,500


530


8.3CRJ700s


61


56


70


1,600


530


4.8CRJ900s


11


20


90


1,500


530


2.1Brasilia Turboprops


9


42


30


300


300


12.5


SkyWest
Airlines has firm orders to acquire four new CRJ700s. In addition, gross committed expenditures for these four aircraft and related equipment, including estimated amounts for
contractual price escalations will be approximately $98.0 million through the first quarter of 2010. SkyWest Airlines and ASA have also obtained combined options for another 22 Bombardier
Regional Jets that can be delivered in either 70 or 90-seat configurations.

The
following table outlines the number of Bombardier Regional Jets that SkyWest Airlines and ASA are scheduled to receive during each of the periods set forth below and the expected
size and composition of our combined fleet following the receipt of these aircraft. The projected fleet size

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schedule
below assumes aircraft financed under operating leases will be returned to the lessor at the end of the lease.

During the fiscal year
ending December 31,2010

2011

2012

2013Additional aircraft deliveriesAdditional CRJ200s


0


0


0


0Additional CRJ700s


4


0


0


0Additional CRJ900s


0


0


0


0




As of December 31,2010

2011

2012

2013Expected fleet sizeTotal Bombardier Regional Jets


386


382


368


368Total Brasilia Turboprops


42


28


26


17Total Combined Fleet


428


410


394


385




The Bombardier Regional Jets are among the quietest commercial jets currently available and offer many of the amenities of larger
commercial jet aircraft, including flight attendant service, as well as a stand-up cabin, overhead and under seat storage, lavatories and in-flight snack and beverage service.
The speed of Bombardier Regional Jets is comparable to larger aircraft operated by the major airlines, and they have a range of approximately 1,600 miles; however, because of their smaller size and
efficient design, the
per-flight cost of operating a Bombardier Regional Jet is generally less than that of a 120-seat or larger jet aircraft.



The Brasilia turboprops are 30-seat, pressurized aircraft designed to operate more economically over short-haul
routes than larger jet aircraft. These factors make it economically feasible for SkyWest Airlines to provide high frequency service in markets with relatively low volumes of passenger traffic.
Passenger comfort features of the Brasilia turboprops include stand-up headroom, a lavatory, overhead baggage compartments and flight attendant service. We expect that Delta and United
will want us to continue to operate Brasilia turboprops in markets where passenger load and other factors make the operation of a regional jet impractical. As of December 31, 2009, SkyWest
Airlines operated 51 Brasilia turboprops out of Los Angeles, San Francisco, Salt Lake City, Seattle/Tacoma and Portland. SkyWest Airlines' Brasilia turboprops are generally used in its California
markets, which are characterized by high frequency service on shorter stage lengths.

Ground Facilities

SkyWest Airlines and ASA own or lease the following principal properties:

SkyWest Airlines Facilities



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ASA Facilities



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Our
management deems SkyWest Airlines' and ASA's current facilities as being suitable and necessary to support existing operations and believes these facilities will be adequate for the
foreseeable future.

ITEM 3.    LEGAL PROCEEDINGS

We are subject to certain legal actions which we consider routine to our business activities. As of December 31, 2009, our
management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters is not likely to have a material adverse effect on our financial position, liquidity or
results of operations. However, the following is a significant outstanding legal matter.

ASA and SkyWest Airlines v. Delta

During the quarter ended December 31, 2007, Delta notified SkyWest, SkyWest Airlines and ASA of a dispute under the Delta
Connection Agreements executed by Delta with SkyWest Airlines and ASA. The dispute relates to allocation of liability for IROP expenses that are paid by SkyWest Airlines and ASA to their passengers
under certain situations. As a result, Delta
withheld a combined total of approximately $25 million (pretax) from one of the weekly scheduled wire payments to SkyWest Airlines and ASA during December 2007. Delta continues to withhold a
portion of the funds we believe are payable as weekly scheduled wire payments to SkyWest Airlines and ASA. As of September 30, 2009, we had recognized a cumulative total of $32.4 million
of revenue associated with the funds withheld by Delta. On February 1, 2008, SkyWest Airlines and ASA filed a lawsuit in Georgia state court disputing Delta's treatment of the matter (the
"Complaint"). Delta filed an Answer to the Complaint and a Counterclaim against SkyWest Airlines and ASA on March 24, 2008. Delta's Counterclaim alleges that ASA and SkyWest Airlines breached
the Delta Connection Agreements by invoicing Delta for the IROP expenses that were paid pursuant to Delta's policies, and claims only a portion of those expenses may be invoiced to Delta. Delta seeks
unspecified damages in its counterclaim.

On
March 24, 2008, Delta filed a Motion to Dismiss the Complaint (the "Motion to Dismiss"). A hearing on the Motion to Dismiss was held September 5, 2008. In an order
entered September 13,

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2008,
the Court granted in part and denied in part the Motion to Dismiss. The Court denied the Motion to Dismiss with respect to the breach of contract claim contained in the Complaint. The Court
denied in part the Motion to Dismiss with respect to the action for declaratory judgment contained in the Complaint, and granted in part the Motion to Dismiss to the extent the Complaint seeks to read
alternative or supplemental obligations created by prior conduct into the Delta Connection Agreements. The Court granted the Motion to Dismiss with respect to claims for estoppel, unilateral mistake,
and mutual mistake contained in the Complaint. The Court's ruling affects the current posture of the case, but does not preclude pursuit of the claim for breach of contract or the claim for
declaratory relief, under which SkyWest Airlines and ASA continue to seek recovery of all amounts withheld by Delta.

On
July 31, 2009, SkyWest Airlines and ASA filed an Amended Complaint in the lawsuit adding claims under Georgia law for voluntary payment and mutual departure from the strict
terms of the Delta Connection Agreements. Under those theories, SkyWest Airlines and ASA seek recovery of all of the approximately $25 million withheld by Delta during December 2007. SkyWest
Airlines and ASA are also seeking recovery of additional amounts withheld by Delta subsequent to December 2007. Discovery on all of SkyWest's Airlines' and ASA's claims and defenses is in process. On
September 4, 2009, Delta filed a motion to dismiss the Amended Complaint in part. Delta asserts that the claims added by SkyWest Airlines and ASA in the Amended Complaint should be dismissed
based on legal arguments set forth in Delta's memorandum in support of its motion. On January 22, 2010, the Court granted Delta's motion in part, dismissing the claims under Georgia law for
voluntary payment and mutual departure from the strict terms of the Connection Agreements. SkyWest Airlines and ASA have filed an application seeking an interlocutory appeal of the Court's order and
continue to vigorously pursue their claims set forth in the Amended Complaint, to the extent permitted by the Court's ruling on the Motion to Dismiss, and their defenses to Delta's counterclaims.

For
financial reporting purposes we accrue an estimated loss if the loss is probable and reasonably estimable. Because these conditions have not been satisfied, we have not recorded a
loss related to the
preceding dispute in the consolidated financial statements as of December 31, 2009.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2009.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price for Our Common Stock

Our common stock is traded on The Nasdaq Global Select Market under the symbol "SKYW." At February 11, 2010, there were
approximately 997 stockholders of record. Securities held of record do not include shares held in securities position listings. The following table sets forth the range of high and low closing sales
prices for our common stock, during the periods indicated.

2009

2008Quarter

High

Low

High

LowFirst

$
19.05

$
8.19

$
26.64

$
20.43Second


15.47


9.66


21.77


12.65Third


18.04


10.28


20.64


11.45Fourth


18.02


13.97


18.60


11.52


The
transfer agent for our common stock is Zions First National Bank, Salt Lake City, Utah.

Dividends

During 2009 and 2008, our Board of Directors declared regular quarterly dividends of $0.04 and $0.03 per share, respectively.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table contains information regarding our equity compensation plans as of December 31, 2009.

Plan Category

Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights

Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected in
the First Column)Equity compensation plans approved by security holders(1)


4,740,695

$
20.37


4,300,327


(1)Consists
of our Executive Stock Incentive Plan, our All Share Stock Option Plan, our SkyWest Inc. Long Term Incentive Plan, and our Employee Stock
Purchase Plan. See Note 9 to our Consolidated Financial Statements for the fiscal year ended December 31, 2009, included in Item 8 of this Report, for additional information
regarding these plans.


Stock Performance Graph

The following Performance Graph and related information shall not be deemed "soliciting material" or "filed"
with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as
amended, except to the extent we specifically incorporate it by reference into such filing.

The
following graph compares the cumulative total shareholder return on our common stock over the five-year period ended December 31, 2009, with the cumulative total
return during such period of the Nasdaq Stock Market (U.S. Companies) and a peer group index composed of passenger airlines, the members of which are identified below (the "Peer Group") for the same
period. The following

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graph
assumes an initial investment of $100.00 with dividends reinvested. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of
future stock price performance.

Comparison of Cumulative Five Year Total Return

PERFORMANCE GRAPH

INDEXED RETURNSYears EndingCompany Name / Index

Base
Period
Dec04

Dec05

Dec06

Dec07

Dec08

Dec09SkyWest, Inc.


100


134.64


128.46


135.85


94.84


87.31NASDAQ Composite


100


102.20


112.68


124.56


74.70


108.56Peer Group


100


113.16


168.72


147.82


91.88


84.74


The
Peer Group consists of regional and major passenger airlines with U.S operations that have equity securities traded on the Nasdaq Stock Market. The members of the Peer Group are: Air
France-KLM-ADR; Air T, Inc.; Air Transport Services Group; Allegiant Travel Co.; Baltia Air Lines, Inc.; British Airways PLC-ADR;
Deutsche Lufthansa AG-ADR; Great Lakes Aviation Ltd.; Hawaiian Holdings, Inc.; Japan Airlines Corp-ADR; JetBlue Airways Corp.; Mesa Air Group, Inc.;
Pinnacle Airlines Corp.; Republic Airways Holdings Inc.; Ryanair Holdings PLC-ADR; SkyWest, Inc.; and UAL Corp.

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ITEM 6.    SELECTED FINANCIAL DATA

The following selected financial and operating data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and our consolidated financial statements and related notes included elsewhere in this Report.

Selected Consolidated Financial Data (amounts in thousands, except per share data):

Year Ended December 31,2009

2008

2007

2006

2005(2)Operating revenues

$
2,613,614

$
3,496,249

$
3,374,332

$
3,114,656

$
1,964,048Operating income


212,195


255,231


344,524


339,160


220,408Net income


83,658


112,929


159,192


145,806


112,267Net income per common share:Basic

$
1.50

$
1.95

$
2.54

$
2.33

$
1.94Diluted


1.47


1.93


2.49


2.30


1.90Weighted average shares:Basic


55,854


57,790


62,710


62,474


57,851Diluted


56,814


58,633


64,044


63,382


58,933Total assets

$
4,310,802

$
4,014,291

$
3,990,525

$
3,731,419

$
3,320,646Current assets


1,254,099


1,220,668


1,210,139


1,095,454


693,632Current liabilities


449,835


386,604


398,219


408,431


615,917Long-term debt, net of current maturities


1,816,318


1,681,705


1,732,748


1,675,626


1,422,758Stockholders' equity


1,352,219


1,275,521


1,246,007


1,178,293


913,198Return on average equity(1)


6.4
%

9.0
%

13.1
%

13.9
%

13.2
%Cash dividends declared per common share

$
0.16

$
0.13

$
0.12

$
0.12

$
0.12


(1)Calculated
by dividing net income by the average of beginning and ending stockholders' equity for the year.(2)On
September 7, 2005, we completed the acquisition of ASA from Delta for $421.3 million in cash. We paid $5.3 million of transaction
fees and assumed approximately $1.25 billion in long-term debt and related assets. Our 2005 consolidated operating revenues contain 114 days of additional revenue and
expenses generated by the ASA acquisition.


Selected Operating Data

Year Ended December 31,2009

2008

2007

2006

2005Block hours


1,363,257


1,376,815


1,438,818


1,298,769


866,975Departures


870,761


872,288


904,795


857,631


623,307Passengers carried


34,544,772


33,461,819


34,392,755


31,465,552


20,343,975Revenue passenger miles (000)


17,448,958


17,101,910


17,892,282


15,819,191


9,538,906Available seat miles (000)


22,142,650


22,020,250


22,968,768


20,209,888


12,718,973Revenue per available seat mile


11.8
¢

15.9
¢

14.7
¢

15.4
¢

15.4
¢Cost per available seat mile


11.2
¢

15.2
¢

13.7
¢

14.3
¢

14.1
¢Average passenger trip length


505


511


520


503


469Number of operating aircraft at end of year


449


442


436


410


380


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The
following terms used in this section and elsewhere in this Report have the meanings indicated below:

"Revenue
passenger miles" represents the number of miles flown by revenue passengers.

"Available
seat miles" represents the number of seats available for passengers multiplied by the number of miles the seats are flown.

"Revenue
per available seat mile" represents passenger revenue divided by available seat miles.

"Cost
per available seat mile" represents operating expenses plus interest divided by available seat miles.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis presents factors that had a material effect on our results of operations
during the years ended December 31, 2009, 2008 and 2007. Also discussed is our financial position as of the end of December 31, 2009 and 2008. You should read this discussion in
conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Report or incorporated herein by reference. This discussion and analysis contains
forward-looking statements. Please refer to the sections of this Report entitled "Cautionary Statement Concerning Forward-looking Statements" and "Item 1A. Risk Factors" for discussion of some
of the uncertainties, risks and assumptions associated with these statements.

Overview

Through SkyWest Airlines and ASA, we operate the largest regional airline in the United States. As of December 31, 2009, SkyWest
Airlines and ASA offered scheduled passenger and air freight service with more than 2,300 total daily departures to 217 destinations in the United States, Canada, Mexico and the Caribbean.
Additionally, as of December 31, 2009, we provided ground handling services for approximately 11 other airlines throughout our system. As of December 31, 2009, we operated a combined
fleet of 449 aircraft consisting of 250 CRJ200 (81 assigned to United, 164 assigned to Delta, three assigned to Midwest and two assigned to AirTran, 117 CRJ700 (66 assigned to United and 51 assigned
to Delta), 31 CRJ900s (all assigned to Delta) and 51 Brasilia turboprop (39 assigned to United and 12 assigned to Delta). We believe our success in attracting multiple contractual relationships with
our major airline partners is attributable to our delivery of high-quality customer service with an all cabin-class fleet at a competitive cost structure. For the year ended
December 31, 2009, approximately 55.8% of our aggregate capacity was operated
under the Delta code, approximately 42.4% was operated under the United code, approximately 1.7% was operated under the Midwest code and approximately 0.1% under the AirTran code.

SkyWest
Airlines has been a code-share partner with Delta in Salt Lake City and United in Los Angeles since 1987 and 1997, respectively. In 1998, SkyWest Airlines expanded
its relationship with United to provide service in Portland, Seattle/Tacoma, San Francisco and additional Los Angeles markets. In 2004, SkyWest Airlines expanded its United Express operations to
provide service in Chicago. On June 10, 2009, SkyWest Airlines and Midwest mutually agreed to terminate the service SkyWest Airlines provided to Midwest under the Midwest Services Agreement. As
a result, SkyWest Airlines removed its remaining 12 CRJ200s from Midwest service based on the following schedule: one aircraft was removed in each of June 2009 and July 2009, three aircraft were
removed in October 2009, two aircraft were removed in November 2009, two aircraft were removed in December 2009 and the last three aircraft were removed in January 2010. On November 4, 2009,
SkyWest Airlines entered into a code-share agreement with AirTran. Under the terms of the code-share agreement, SkyWest Airlines has agreed to operate five CRJ200s for AirTran
under a pro-rate arrangement. SkyWest Airlines

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commenced
AirTran service with two aircraft in December 2009 and added three additional aircraft in January and February of 2010. The code-share agreement has a three-year
term; however, after May 15, 2010, either party may terminate the agreement upon 120 days written notice.

As
of December 31, 2009, SkyWest Airlines operated as a Delta Connection carrier in Salt Lake City, a United Express carrier in Los Angeles, San Francisco, Denver, Chicago and the
Pacific Northwest, and a Midwest Connect carrier in Milwaukee and an AirTran carrier in Milwaukee, operating more than 1,500 total daily flights.

ASA
has been a code-share partner with Delta in Atlanta since 1984. As of December 31, 2009, ASA operated as a Delta Connection carrier in Atlanta and Cincinnati. ASA
operates approximately 780 daily flights, all in the Delta Connection system.

We
provide a substantial majority of the regional airline service for Delta in Atlanta and Salt Lake City. In connection with our acquisition of ASA in September 2005, we established
new, separate, but substantially similar, long-term fixed-fee Delta Connection Agreements with Delta for both SkyWest Airlines and ASA. We also obtained the right to use 29
gates in the Hartsfield-Jackson International Airport located in Atlanta, from which we currently provide service to Delta. Pursuant to the terms of the Delta Connection Agreement executed by ASA and
Delta, Delta has also agreed that if Delta solicits requests for proposals to fly Delta Connection regional aircraft, ASA will be permitted to bid to maintain the same percentage of total Delta
Connection regional jet flights that it operated during 2007, and, if ASA does not achieve the winning bid for the proposed flying, ASA will be permitted to match the terms of the winning bid to the
extent necessary for ASA to maintain the same percentage of Delta Connection regional jet flights that it operated during 2007.

On
February 10, 2010, ASA and United entered into the ASA United Express Agreement, pursuant to which ASA has agreed to operate 14 CRJ200 aircraft as a United Express carrier. On
February 11, 2010, ASA began operating as a United Express carrier, and we anticipate that the 14 United Express regional jets to be flown by ASA will be in operation by May of 2010. The ASA
United Express Agreement is a capacity purchase agreement with a five-year term, and other terms which are generally consistent with the SkyWest Airlines United Express Agreement.

Historically,
multiple contractual relationships have enabled us to reduce reliance on any single major airline code and to enhance and stabilize operating results through a mix of
contract flying and our controlled or "pro-rate" flying. For the year ended December 31, 2009, contract flying revenue and pro-rate revenue represented approximately 94%
and 6%, respectively, of our total passenger revenues. On contract routes, the major airline partner controls scheduling, ticketing, pricing and seat inventories and we are compensated by the major
airline partner at contracted rates based on the completed block hours, flight departures and other operating measures. On pro-rate flights, we control scheduling, ticketing, pricing and
seat inventories and receive a pro-rated portion of passenger fares. For the year ended December 31, 2009, essentially all of our Brasilia turboprops flown for Delta were flown
under pro-rate arrangements, while approximately 53% of our Brasilia turboprops flown in the United system were flown under contractual arrangements, with the remaining 47% flown under
pro-rate arrangements. For the year ended December 31, 2009, approximately 96% of our CRJ200s flown in the United system were flown under contractual arrangements, with the
remaining 4% flown under pro-rate arrangements. On November 4, 2009, SkyWest Airlines entered into a code-share agreement with AirTran. Under the terms of the
code-share agreement, SkyWest Airlines has agreed to operate five CRJ200s for AirTran under a pro-rate arrangement. SkyWest Airlines commenced AirTran service with two aircraft
in December 2009 and added three additional aircraft in January and February of 2010.

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Financial Highlights

We had revenues of $2.6 billion for the year ended December 31, 2009, a 25.2% decrease, compared to revenues of
$3.5 billion for the year ended December 31, 2008. We had net income of $83.7 million, or $1.47 per diluted share, for the year ended December 31, 2009, a decrease of
25.9%, compared to $112.9 million of net income, or $1.93 per diluted share, for the year ended December 31, 2008.

The
significant items affecting our financial performance during 2009 are outlined below:

On
June 10, 2009, SkyWest Airlines reached a mutual understanding with Midwest to terminate the service SkyWest Airlines provided under the Midwest Services Agreement. As a
result, SkyWest Airlines removed its remaining 12 CRJ200s from Midwest service based on the following schedule: one aircraft was removed in each of June 2009 and July 2009, three aircraft were removed
in October 2009, two aircraft were removed in November 2009, two aircraft were removed in December 2009 and the last three aircraft were removed in January 2010. Additionally, SkyWest Airlines agreed
to cancel an unsecured note from Midwest in the amount of approximately $9.3 million in exchange for a $4.0 million payment from Midwest. The $4.0 million payment was recorded as
revenue by SkyWest Airlines during the three months ended December 31, 2009.

We
review our investment securities on an ongoing basis for the presence of other-than-temporary-impairment ("OTTI") with formal reviews performed quarterly. OTTI
losses on individual equity investment securities are recognized as a realized loss through earnings when fair value is significantly below cost, the decline in fair value has existed for an extended
period of time, and recovery is not expected in the near term. OTTI losses on individual perpetual preferred securities are recognized as a realized loss through earnings when a decline in the cash
flows has occurred or the rating of the security has been downgraded below investment grade. As a result of an ongoing valuation review of our investment securities portfolio, we recognized a
pre-tax charge of approximately $7.1 million during the year ended December 31, 2009 for certain investment securities deemed to have
other-than-temporary impairment.

On
October 23, 2009, Delta sent letters to SkyWest Airlines and ASA requiring them to either adjust the rates payable under their respective Delta Connection Agreements or accept
termination of those agreements, and notifying SkyWest Airlines and ASA of Delta's estimate of the average rates to be applied under the agreements. On October 28, 2009, SkyWest Airlines and
ASA notified Delta of their election to adjust the rates payable under the Delta Connection Agreements; however, they also notified Delta of their disagreement with Delta's estimated rates and their
belief that the methodology Delta used to calculate its estimated rates is inconsistent with the terms of the Delta Connection Agreements. SkyWest Airlines and ASA continue to negotiate with Delta in
an effort to determine an appropriate methodology for calculating the average rates of the carriers within the Delta Connection Program. Because SkyWest Airlines and ASA have not reached an agreement
with Delta regarding the final contractual rates to be established under the Delta Connection Agreements, the Company has evaluated the dispute for calculating the average rate of the carriers within
the Delta Connection Program under the revenue recognition accounting guidance and recorded revenue under those agreements based on management's understanding of the applicable terms in the Delta
Connection Agreements and management's best estimate of the revenue that will ultimately be realized upon settlement of the contractual rates with Delta with respect to the year ended
December 31, 2009.

ASA
experienced significant weather related cancellations in its Atlanta hub during the three months ended March 31, 2009. Additionally, on March 31, 2009, as a result of
an internal audit, ASA grounded 60 CRJ200 regional jet aircraft in order to perform engine safety inspections in accordance with the manufacturer's recommendations. ASA cancelled approximately 750
scheduled flights as a result of the severe weather and aircraft grounding during the quarter. As a result, ASA experienced a negative impact on revenues of approximately $7.6 million.

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Our
maintenance costs increased $54.4 million, or 14.3%, during the year ended December 31, 2009, compared to the year ended December 31, 2008. The increase was
primarily related to the timing of engine overhaul events. During the year ended December 31, 2009, our CRJ200 engine expense under
our United Express and Midwest Services Agreements increased $29.7 million. The remainder of the increase in maintenance costs was principally due to scheduled maintenance and engine overhaul
events on our aging CRJ200 and CRJ700 aircraft.

Outlook

On October 12, 2007, we announced SkyWest Airlines' plans to acquire 22 additional regional jet aircraft through 2010, 18 of
which SkyWest Airlines intends to operate for United Express, as part of an aircraft transition plan. We believe this transition plan will allow United Express to remove 23 30-seat
Brasilia turboprops from operation under the United Express Agreement and add 66-seat regional jet aircraft for United Express flying. Generally, the turboprop removals are intended to
occur in conjunction with deliveries of new regional jet aircraft in an effort to facilitate a smooth transition in existing markets. Additionally, SkyWest Airlines exchanged four 50-seat
CRJ200s for four 76-seat CRJ900s in its Delta Connection operations. On November 30, 2007, we announced that SkyWest Airlines placed a firm order for 22 aircraft with Bombardier. As
of December 31, 2009, SkyWest Airlines had taken delivery of four CRJ900s and 14 CRJ700s under that order. SkyWest Airlines is scheduled to take delivery of the remaining four aircraft during
the first quarter of 2010.

On
October 16, 2009, SkyWest Airlines entered into a series of transactions with United that provided operational funding to United, extended SkyWest Airlines' existing rights to
operate 40 regional jet aircraft under the United Express Agreement until the end of their current lease terms (on average 8.4 years) and created an opportunity for ASA to operate 14 regional
jet aircraft as a United Express carrier. We anticipate that ASA will begin operating as a United Express carrier starting in the first quarter of 2010, and the 14 United Express regional jets to be
flown by ASA will be in operation by May of 2010. We also anticipate that ASA will operate these aircraft under a capacity purchase agreement with a five-year term, and other terms which
are generally consistent with the SkyWest Airlines United Express Agreement.

Also
on October 16, 2009, SkyWest Airlines extended to United a secured term loan in the amount of $80 million. The term loan bears interest at a rate of 11%, with a
ten-year amortization period. The loan is secured by certain ground equipment and airport slot rights held by United. SkyWest Airlines also agreed to defer certain amounts otherwise
payable to SkyWest Airlines under the SkyWest Airlines United Express Agreement. The maximum deferral amount is $49 million and any amounts deferred accrue a deferral fee of 8%, payable weekly.
United's right to defer such payments is scheduled to terminate in ten years.

On
November 4, 2009, SkyWest Airlines entered into a code-share agreement with AirTran. Under the terms of the code-share agreement, SkyWest Airlines has
agreed to operate five CRJ200s for AirTran under a pro-rate arrangement. SkyWest Airlines commenced AirTran service with two aircraft in December 2009 and added three additional aircraft
in January and February of 2010. The code-share agreement has a
three-year term; however, after May 15, 2010, either party may terminate the agreement upon 120 days written notice.

Critical Accounting Policies

Our significant accounting policies are summarized in Note 1 to our consolidated financial statements for the year ended
December 31, 2009, included in Item 8 of this Report. Critical accounting policies are those policies that are most important to the preparation of our consolidated financial statements
and require management's subjective and complex judgments due to the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting

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policies
relate to revenue recognition, aircraft maintenance, aircraft leases, impairment of long-lived assets and intangibles, stock-based compensation expense and fair value as discussed
below. The application of these accounting policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results will differ, and could
differ materially from such estimates.

Revenue Recognition

Passenger and ground handling revenues are recognized when service is provided. Under our contract and pro-rate flying
agreements with our code-share partners, revenue is considered earned when the flight is completed. Our agreements with our code-share partners contain certain provisions
pursuant to which the parties could terminate the respective agreement, subject to certain rights of the other party, if certain performance criteria are not maintained. Our revenues could be impacted
by a number of factors, including changes to the code-share agreements, contract modifications resulting from contract renegotiations and our ability to earn incentive payments
contemplated under applicable agreements. In the event contracted rates are not finalized at a quarterly or annual financial statement date, we record that period's revenues based on the lower of
prior period's approved rates adjusted for the current contract negotiations and our estimate of rates that will be implemented in accordance with revenue recognition guidelines. Also, in the event we
have a reimbursement dispute with a major partner at a quarterly or annual financial statement date, we evaluate the dispute under established revenue recognition criteria and, provided the revenue
recognition criteria have been met, we recognize revenue for that period based on our estimate of the resolution of the dispute. Accordingly, we are required to exercise judgment and use assumptions
in the application of our revenue recognition policy.

Maintenance

We use the direct-expense method of accounting for our regional jet aircraft engine overhaul costs. Under this method, the maintenance
liability is not recorded until the maintenance services are performed. We use the "deferral method" of accounting for our Brasilia turboprop engine overhauls, which provides for engine overhaul costs
to be capitalized and depreciated over the estimated useful life of the engine. For leased aircraft, we are subject to lease return provisions that require a minimum portion of the "life" of an
overhaul be remaining on the engine at the lease return date. With respect to engine overhauls related to leased Brasilia turboprops to be returned, we adjust the estimated useful lives of the final
engine overhauls based on the respective lease return dates. With respect to SkyWest Airlines, a third-party vendor provides our long-term engine services covering the scheduled and
unscheduled repairs for engines on our CRJ700s operated under the SkyWest Airlines United Express Agreement. Under the terms of the vendor agreement, we pay a set dollar amount per engine hour flown
on a monthly basis and the third-party vendor assumes the obligation to repair the engines at no additional cost to us, subject to certain specified exclusions.

Aircraft Leases

The majority of SkyWest Airlines' aircraft are leased from third parties, while ASA's aircraft are primarily debt-financed
on a long-term basis. In order to determine the proper classification of our leased aircraft as either operating leases or capital leases, we must make certain estimates at the inception
of the lease relating to the economic useful life and the fair value of an asset as well as select an appropriate discount rate to be used in discounting future lease payments. These estimates are
utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a capital lease. All of our aircraft
leases have been classified as operating leases, which results in rental payments being charged to expense over the terms of the related leases. Additionally, operating leases are not reflected in our

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consolidated
balance sheet and accordingly, neither a lease asset nor an obligation for future lease payments is reflected in our consolidated balance sheets.

Impairment of Long-Lived and Intangible Assets

As of December 31, 2009, we had approximately $2.9 billion of property and equipment and related assets. Additionally, as
of December 31, 2009, we had approximately $24.0 million in intangible assets. In accounting for these long-lived and intangible assets, we make estimates about the expected
useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. We
recorded an intangible of approximately $33.7 million relating to the acquisition of ASA. The intangible is being amortized over fifteen years under the straight-line method. As of
December 31, 2009, we had recorded $9.7 million in accumulated amortization expense. Factors indicating potential impairment include, but are not limited to, significant decreases in the
market value of the long-lived assets, a significant change in the condition of the long-lived assets and operating cash flow losses associated with the use of the
long-lived assets. On a periodic basis, we evaluate whether the book value of our aircraft is impaired. Based on the results of the evaluations, our management concluded no impairment was
necessary as of December 31, 2009. However, there is inherent risk in estimating the future cash flows used in the impairment test. If cash flows do not materialize as estimated, there is a
risk the impairment charges recognized to date may be inaccurate, or further impairment charges may be necessary in the future.

Stock-Based Compensation Expense

We estimate the fair value of stock options as of the grant date using the Black-Scholes option pricing model. We use historical data
to estimate option exercises and employee termination in the option pricing model. The expected term of options granted is derived from the output of the option pricing model and represents the period
of time that options granted are expected to be outstanding. The expected volatilities are based on the historical volatility of our common stock and other factors.

Fair value

We hold certain assets that are required to be measured at fair value in accordance with United States GAAP. We determined fair value
of these assets based on the following three levels of inputs:

Level 1 

Quoted prices in active markets for identical assets or liabilities.Level 2 

Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities. Some of our marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.Level 3 

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions.


We
utilize several valuation techniques in order to assess the fair value of our financial assets and liabilities. Our cash and cash equivalents primarily utilize quoted prices in active
markets for identical assets or liabilities.

We
have valued non-auction rate marketable securities using quoted prices in active markets for identical assets or liabilities. If a quoted price is not available, we
utilize broker quotes in a non-active market for valuation of these securities. For auction-rate security instruments, quoted prices in active markets are no longer available.
As a result, we have estimated the fair values of these securities utilizing a discounted cash flow.

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Results of Operations

2009 Compared to 2008

Operational Statistics.The following table sets forth our major operational statistics and the associated
percentages-of-change for the periods identified below.

Year Ended December 31,2009

2008

% ChangeRevenue passenger miles (000)


17,448,958


17,101,910


2.0Available seat miles ("ASMs") (000)


22,142,650


22,020,250


0.6Block hours


1,363,257


1,376,815


(1.0
)Departures


870,761


872,288


(0.2
)Passengers carried


34,544,772


33,461,819


3.2Passenger load factor


78.8
%

77.7
%

1.1
ptsRevenue per available seat mile


11.8
¢

15.9
¢

(25.8
)Cost per available seat mile


11.2
¢

15.2
¢

(26.3
)Fuel cost per available seat mile


1.8
¢

5.5
¢

(67.3
)Average passenger trip length (miles)


505


511


(1.2
)


Revenues.Operating revenues decreased $882.6 million, or 25.2%, during the year ended December 31, 2009, compared to the
year ended
December 31, 2008. We are reimbursed for our actual fuel costs by our major partners under our contract flying arrangements. For financial reporting purposes, we record these reimbursements as
operating revenue. Under the SkyWest Airlines and ASA Delta Connection Agreements, we are reimbursed for our engine overhaul expenses. We also record those engine overhaul reimbursements as operating
revenue. The following table summarizes the amount of fuel and engine overhaul reimbursements included in our passenger revenues for the periods indicated (dollar amounts in thousands).

Year Ended December 31,2009

2008

$ Change

% ChangePassenger revenues

$
2,582,238

$
3,466,287

$
(884,049
)

(25.5
)%Less: Fuel reimbursement from major partners


360,309


1,185,201


(824,892
)

(69.6
)%Less: Engine overhaul reimbursement from major partners


112,556


120,101


(7,545
)

(6.3
)%Passenger revenue excluding fuel and engine overhaul reimbursements

$
2,109,373

$
2,160,985

$
(51,612
)

(2.4
)%


Passenger revenues.Passenger revenues decreased $884.0 million, or 25.5%, during the year ended December 31, 2009, compared
to the
year ended December 31, 2008. The decrease in passenger revenues was primarily due to a decrease in fuel reimbursements from our major partners. The fuel reimbursement from our major partners
decreased $824.9 million or 69.6%, during the year ended December 31, 2009, compared to the year ended December 31, 2008. Our passenger revenues, excluding fuel and engine
overhaul reimbursements from major partners, decreased $51.6 million, or 2.4%, during the year ended December 31, 2009, compared to the year ended December 31, 2008. The
percentage decrease in passenger revenues, excluding fuel and engine overhaul reimbursements, was more than the percentage increase in ASMs, primarily due to three factors. First, ASA experienced an
abnormally high number of flight cancellations in part due to significant weather related cancellations in its Atlanta hub during the three months ended March 31, 2009. Additionally, on
March 31, 2009, as a result of an internal audit, ASA grounded 60 CRJ200s in order to perform engine safety inspections in accordance with the manufacturer's recommendations. ASA cancelled
approximately 750 scheduled flights as a result of the severe weather and aircraft grounding during the first quarter of 2009. As a

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result,
ASA experienced a negative impact on passenger revenues of approximately $7.6 million. Second, Delta transitioned ground handling services at 23 stations from SkyWest Airlines and ASA
to other ground handlers during the second quarter of 2009. Revenue earned under ground handling contracts where we provide ground handling services for our own aircraft is presented in the "Passenger
revenue" line in our consolidated statements of income. Third, on October 23, 2009, Delta sent letters to SkyWest Airlines and ASA requiring them to either adjust the rates payable under their
respective Delta Connection Agreements or accept termination of those agreements Delta's letter also notified SkyWest Airlines and ASA of Delta's estimate of the average rates to be applied under
those agreements. On October 28, 2009, SkyWest Airlines and ASA notified Delta of their election to adjust the rates payable under the Delta Connection Agreements; however, they also notified
Delta of their disagreement with Delta's estimated rates and their belief that the methodology Delta used to calculate its estimated rates is inconsistent with the terms of the Delta Connection
Agreements. SkyWest Airlines and ASA and Delta have exchanged subsequent correspondence, and SkyWest Airlines and ASA continue to negotiate with Delta in an effort to determine an appropriate
methodology for calculating the average rates of the carriers within the Delta Connection Program. Because SkyWest Airlines and ASA have not reached an agreement with Delta regarding the final
contractual rates to be established under the Delta Connection Agreements, the Company has evaluated the method for calculating the average rate of the carriers within the Delta Connection Program
under the revenue recognition accounting guidance and recorded revenue under those agreements based on management's understanding of the applicable terms in the Delta Connection Agreements and
management's best estimate of the revenue that will ultimately be realized upon settlement of the contractual rates with Delta with respect to the year ended December 31, 2009.

Ground handling and other.Total ground handling and other revenues increased $1.4 million, or 4.7%, during the year ended
December 31,
2009, compared to the year ended December 31, 2008. Revenue earned under other ground handling contracts where we provide ground handling services for other airlines is presented in the "Ground
handling and other" line in our consolidated statements of income. The increase was primarily related to the higher volume of flights serviced under ground handling
contracts with United and Delta, whereby we perform ground handling services for several other regional airlines.

Individual
expense components for the periods indicated are expressed in the following table on the basis of cents per ASM. ASM is a common metric used in the airline industry to measure
an airline's passenger capacity. ASMs reflect both the number of aircraft in an airline's fleet and the seat capacity for the aircraft in the fleet. As the size of our fleet is the underlying
driver of our operating costs, the primary basis for our presentation in this Item 7 is on a cost per ASM basis to discuss

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significant
changes in our costs not proportionate to the relative changes in our fleet size (dollar amounts in thousands).

Year Ended December 31,2009

2008

$ Change

% Change2009
Cents Per
ASM

2008
Cents Per
ASMAmount

Amount

Amount

PercentAircraft fuel

$
390,739

$
1,220,618

$
(829,879
)

(68.0
)%

1.8


5.5Salaries, wages and benefits


698,326


724,094


(25,768
)

(3.6
)%

3.2


3.3Aircraft maintenance, materials and repairs


436,039


381,653


54,386


14.3
%

2.0


1.7Aircraft rentals


300,773


295,784


4,989


1.7
%

1.3


1.4Depreciation and amortization


221,548


220,195


1,353


0.6
%

1.0


1.0Station rentals and landing fees


116,312


132,017


(15,705
)

(11.9
)%

0.5


0.6Ground handling services


95,805


106,135


(10,330
)

(9.7
)%

0.4


0.5Other airline expense


141,877


160,522


(18,645
)

(11.6
)%

0.6


0.7Total operating expenses


2,401,419


3,241,018


(839,599
)

(25.9
)%

10.8


14.7Interest


86,330


106,064


(19,734
)

(18.6
)%

0.4


0.5Total airline expenses

$
2,487,749

$
3,347,082


(859,333
)

(25.7
)%

11.2


15.2


Fuel.Fuel costs decreased $829.9 million, or 68.0%, during the year ended December 31, 2009, compared to the year ended
December 31, 2008. The average cost of fuel decreased to $1.87 per gallon during the year ended December 31, 2009, from $3.33 during the year ended December 31, 2008. In addition
to the decrease in the average cost per gallon of fuel during the year ended December 31, 2009, United purchased fuel directly from a fuel vendor for our United Express aircraft under contract
operated out of Chicago, San Francisco, Los Angeles and Denver; Midwest purchased all of the fuel for our Midwest aircraft directly from Midwest's fuel vendors and Delta purchased the majority of the
fuel for our Delta aircraft under contract directly from its fuel vendors. These modifications reduced our total fuel costs, as well as our passenger revenues for the year ended December 31,
2009. During the year ended December 31, 2008, we purchased the fuel for all of our Delta Connection flights. The following table summarizes the gallons of fuel we purchased directly, and the
percentage change in fuel price per gallon on our fuel expense, for the periods indicated:

Year Ended December 31,(in thousands, except per gallon amounts)

2009

2008

% ChangeFuel gallons purchased


209,254


366,540


(42.9
)%Average price per gallon

$
1.87

$
3.33


(43.8
)%Fuel expense

$
390,739

$
1,220,618


(68.0
)%


Salaries wages and employee benefits.Salaries, wages and employee benefits decreased $25.8 million, or 3.6%, during the year
ended
December 31, 2009, compared to the year ended December 31, 2008. The average number of full-time equivalent employees decreased 11.7% to 12,642 for the year ended
December 31, 2009, from 14,315 for the year ended December 31, 2008. The decrease in number of employees was significantly due to a reduction in our customer service employees resulting
from United transitioning 16 stations from SkyWest Airlines to other ground handlers during the second quarter of 2008 and Delta transitioning 23 stations from SkyWest Airlines and ASA to other ground
handlers during the second quarter of 2009.

Aircraft maintenance, materials and repairs.Maintenance costs increased $54.4 million, or 14.3%, during the year ended
December 31,
2009, compared to the year ended December 31, 2008. The

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following
table summarizes the amount of engine overhauls and engine overhaul reimbursements included in our aircraft maintenance expense for the periods indicated (dollar amounts in thousands).

Year Ended December 31,2009

2008

$ Change

% ChangeAircraft maintenance, materials and repairs

$
436,039

$
381,653

$
54,386


14.3
%Less: Engine overhaul reimbursed from major partners


112,556


120,101


(7,545
)

(6.3
)%Less: CRJ 200 engine overhauls reimbursed at fixed hourly rate


34,176


4,462


29,714


665.9
%Aircraft maintenance excluding reimbursed engine overhauls and CRJ 200 engine overhauls reimbursed at fixed hourly rate

$
289,307

$
257,090

$
32,217


12.5
%


Aircraft
maintenance expense excluding reimbursed engine overhauls and CRJ 200 engine overhauls reimbursed at fixed hourly rate, increased $32.2 million, or 12.5%, during the year
ended December 31, 2009, compared to the year ended December 31, 2008. The increase in maintenance excluding engine overhaul costs was principally due to scheduled maintenance events on
our aging CRJ200 and CRJ700 fleets.

Under
the SkyWest Airlines United Express Agreement (and pursuant to the Midwest Services Agreement prior to its termination on January 1, 2010), we recognize revenue in our
consolidated statement of income at a fixed hourly rate for mature engine maintenance on regional jet engines and we recognize engine maintenance expense on our CRJ200 regional jet engines in our
consolidated statement of income on an as-incurred basis as maintenance expense. During the year ended December 31, 2009, our CRJ200 engine expense under our SkyWest Airlines United
Express and Midwest Services Agreements increased $29.7 million. Under our Delta Connection Agreements we were reimbursed for engine overhaul costs by Delta. Such reimbursements are reflected
as passenger revenue in our consolidated statements of income.

Aircraft rentals.Aircraft rentals increased $5.0 million, or 1.7%, during the year ended December 31, 2009, compared to the
year ended
December 31, 2008. The increase in aircraft rents was primarily due to ASA taking delivery of ten CRJ900s during 2009. These aircraft were financed through long-term leases. This
increase was partially offset by ASA returning 12 ATR-72 turboprops to the lessor and terminating the associated leases.

Station rentals and landing fees.Station rentals and landing fees expense decreased $15.7 million, or 11.9%, during the year
ended
December 31, 2009, compared to the year ended December 31, 2008. The decrease in station rentals and landing fees expense was primarily due to our major partners paying for certain
station rents and landing fees directly to the airport.

Ground handling service.Ground handling service expense decreased $10.3 million, or 9.7%, during the year ended December 31,
2009,
compared to the year ended December 31, 2008. The decrease in ground handling was primarily due to United transitioning 16 stations from SkyWest Airlines to other ground handlers during the
second quarter of 2008 and Delta transitioning 23 stations from SkyWest Airlines and ASA to other ground handlers during the second quarter of 2009.

Other airline expenses.Other airline expenses, primarily consisting of property taxes, hull and liability insurance, crew simulator
training and
crew hotel costs, decreased $18.6 million, or 11.6%, during the year ended December 31, 2009, compared to the year ended December 31, 2008. The decrease in other airline expenses
was primarily due to the decrease in crew simulator training and crew hotel costs.

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Interest.Interest expense decreased $19.7 million, or 18.6%, during the year ended December 31, 2009 compared to the year
ended
December 31, 2008. The decrease in interest expense was substantially due to a decrease in interest rates. At December 31, 2009, we had variable rate notes representing 38.6% of our
total long-term debt. The majority of our variable rate notes are based on the three-month and six-month LIBOR rates. At December 31, 2009, the three-month and
six-month LIBOR rates were 0.25% and 0.43%, respectively. At December 31, 2008, the three-month and six-month LIBOR rates were 1.43% and 1.75%, respectively.

Interest income.Interest income decreased $9.7 million, or 46.5% during the year ended December 31, 2009, compared to the
year ended
December 31, 2008. The decrease in interest income was substantially due to the decrease in interest rates discussed in the preceding paragraph.

Total airline expenses.Total airline expenses (consisting of total operating and interest expenses) decreased $859.3 million, or
25.7%,
during the year ended December 31, 2009, compared to the year ended December 31, 2008. We are reimbursed for our actual fuel costs by our major partners under our contract flying
arrangements. We record the amount of those reimbursements as revenue. Under the SkyWest, SkyWest Airlines and ASA Delta Connection Agreements, we are reimbursed for our engine overhaul expense, which
we record as revenue. The following table summarizes the amount of fuel and engine overhaul expenses which are included in our total airline expenses for the periods indicated (dollar amounts in
thousands).

Year Ended December 31,2009

2008

$ Change

% ChangeTotal airline expense

$
2,487,749

$
3,347,082

$
(859,333
)

(25.7
)%Less: Fuel expense


390,739


1,220,618


(829,879
)

(68.0
)%Less: Engine overhaul reimbursement from major partners


112,556


120,101


(7,545
)

(6.3
)%Less: CRJ 200 engine overhauls reimbursed at fixed hourly rate


34,176


4,462


29,714


665.9
%Total airline expense excluding fuel and engine overhauls and CRJ 200 engine overhauls reimbursed at fixed hourly rate

$
1,950,278

$
2,001,901

$
(51,623
)

(2.6
)%


Excluding
fuel and engine overhaul costs and CRJ 200 engine overhauls reimbursed at fixed hourly rates, our total airline expenses decreased $51.6 million, or 2.6%, during the
year ended December 31, 2009, compared to the year ended December 31, 2008. The percentage decrease in total airline expenses excluding fuel and engine overhauls, was more than the
percentage increase in ASMs, which was primarily due to the increased operating efficiencies obtained from increased stage lengths flown by our regional jets.

Impairment of marketable securities.As a result of an ongoing valuation review of our marketable securities portfolio, we recognized a
pre-tax charge of approximately $7.1 million during the year ended December 31, 2009 for certain marketable securities deemed to have
other-than-temporary impairment.

Other income.During the year ended December 31, 2008, we negotiated the principal terms of a prospective capacity purchase
agreement with
Continental, which was intended to become effective if we had successfully completed our proposed acquisition of the outstanding shares of capital stock of ExpressJet. During the course of those
negotiations, Continental agreed it would pay us a break-up fee under certain circumstances in the event our efforts to acquire ExpressJet were not successful. In June 2008, ExpressJet
reached terms directly with Continental on a new capacity purchase agreement, and accordingly, we were precluded from completing the acquisition of ExpressJet. As a result, we received

47

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the
break-up fee from Continental in June 2008. The break-up fee, net of our direct transaction costs, was $6.3 million (pre-tax) and was recorded as other
income during the year ended December 31, 2008.

Income taxes.The provision for income taxes, as a percentage of income before taxes, increased to 36.5% in 2009 from 35.9% in 2008. The
lower 2008
rate includes the impact of a decrease to the effective state income tax rate as the result of state tax law changes in Utah and other states. The state effective tax rate also decreased slightly from
2008 to 2009 minimizing the increase of the effective tax rate from 2008 to 2009.

Net Income.Primarily due to factors described above, net income decreased to $83.7 million, or $1.47
per diluted share, for the year ended December 31, 2009, compared to $112.9 million, or $1.93 per diluted share, for the year ended December 31, 2008.

2008 Compared to 2007

Operational Statistics.The following table sets forth our major operational statistics and the associated
percentages-of-change for the periods identified below.

Year ended December 31,2008

2007

% ChangeRevenue passenger miles (000)


17,101,910


17,892,282


(4.4
)Available seat miles ("ASMs") (000)


22,020,250


22,968,768


(4.1
)Block hours


1,376,815


1,438,818


(4.3
)Departures


872,288


904,795


(3.6
)Passengers carried


33,461,819


34,392,755


(2.7
)Passenger load factor


77.7
%

77.9
%

(0.2
)ptsRevenue per available seat mile


15.9
¢

14.7
¢

8.2Cost per available seat mile


15.2
¢

13.7
¢

10.9Fuel cost per available seat mile


5.5
¢

4.6
¢

19.6Average passenger trip length (miles)


511


520


(1.7
)


Revenues.Operating revenues increased $121.9 million, or 3.6%, during the year ended December 31, 2008, compared to the year
ended
December 31, 2007. We are reimbursed for our actual fuel costs by our major partners under our contract flying arrangements. For financial reporting purposes, we record these reimbursements as
operating revenue. Under the SkyWest Airlines and ASA Delta Connection Agreements, we are reimbursed for our engine overhaul expenses. We also record those engine overhaul reimbursements as operating
revenue. The following table summarizes the amount of fuel and engine overhaul reimbursements included in our passenger revenues for the periods indicated (dollar amounts in thousands).

Year end December 31,2008

2007

$ Change

% ChangePassenger revenues

$
3,466,287

$
3,342,131

$
124,156


3.7
%Less: Fuel reimbursement from major partners


1,185,201


1,034,630


150,571


14.6
%Less: Engine overhaul reimbursement from major partners


120,101


67,961


52,140


76.7
%Passenger revenue excluding fuel and engine overhauls reimbursements

$
2,160,985

$
2,239,540

$
(78,555
)

(3.5
)%


Passenger revenues.Passenger revenues increased $124.2 million, or 3.7%, during the year ended December 31, 2008, compared
to the year
ended December 31, 2007. The increase in passenger revenues was primarily due to an increase in fuel and engine overhaul reimbursements from our major

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partners.
The fuel reimbursement from our major partners increased $150.6 million, or 14.6%, during the year ended December 31, 2008, compared to the year ended December 31, 2007.
Our passenger revenues, excluding fuel and engine overhaul reimbursements from major partners, decreased $78.6 million, or 3.5%, during the year ended December 31, 2008, compared to the
year ended December 31, 2007. In June 2008, SkyWest Airlines was notified that Midwest was in the process of organizing a financial restructuring. SkyWest Airlines subsequently reached
agreement with Midwest to reduce the number of aircraft operating under the Midwest Services Agreement from 21 aircraft to 12 aircraft. As part of the modified agreement, SkyWest Airlines agreed to
defer a portion of Midwest's weekly payment obligations from July 1, 2008 through November 30, 2008. The amount SkyWest Airlines agreed to defer, plus certain amounts Midwest owed
SkyWest Airlines at June 30, 2008, were initially scheduled for repayment starting on August 31, 2009; however, in June 2009, SkyWest Airlines and Midwest reached a mutual understanding
to terminate the Midwest Services Agreement, remove the remaining SkyWest Airlines aircraft from Midwest service and further restructure Midwest's payment obligation to SkyWest Airlines SkyWest
Airlines agreed to cancel an unsecured note from Midwest in the amount of approximately $9.3 million in exchange for a $4.0 million payment from Midwest that is guaranteed by Republic
Airways Holdings, Inc. The unsecured note related to certain deferred payments Midwest owed SkyWest Airlines from services provided under the Midwest Services Agreement.

Ground handling and other.Total ground handling and other revenues decreased $2.2 million, or 7.0%, during the year ended
December 31,
2008, compared to the year ended December 31, 2007. Revenue earned under other ground handling contracts where we provide ground handling services for other airlines is presented in the "Ground
handling and other" line in our consolidated statements of income. The decrease was primarily related to the lower volume of flights serviced under ground handling contracts with United and Delta,
whereby we perform ground handling services for several other regional airlines.

Individual
expense components are expressed in the following table on the basis of cents per ASM for the periods indicated. ASM is a common metric used in the airline industry to measure
an airline's passenger capacity. The size of our fleet is the underlying driver of our operating costs, the primary basis for our presentation in this Item 7 is on a cost per ASM basis to
discuss significant changes in our costs not proportionate to the relative changes in our fleet size (dollar amounts in thousands).

Year ended December 31,2008

2007

$ Change

% ChangeAmount

Amount

Amount

Percent

2008
Cents Per
ASM

2007
Cents Per
ASMAircraft fuel

$
1,220,618

$
1,062,079

$
158,539


14.9
%

5.5


4.6Salaries, wages and benefits


724,094


726,947


(2,853
)

(0.4
)%

3.3


3.2Aircraft maintenance, materials and repairs


381,653


297,960


83,693


28.1
%

1.7


1.3Aircraft rentals


295,784


294,443


1,341


0.5
%

1.4


1.3Depreciation and amortization


220,195


208,944


11,251


5.4
%

1.0


0.9Station rentals and landing fees


132,017


135,757


(3,740
)

(2.8
)%

0.6


0.6Ground handling services


106,135


140,374


(34,239
)

(24.4
)%

0.5


0.6Other


160,522


163,304


(2,782
)

(1.7
)%

0.7


0.7Total operating expenses


3,241,018


3,029,808


211,210


7.0
%

14.7


13.2Interest


106,064


126,320


(20,256
)

(16.0
)%

0.5


0.5Total airline expenses

$
3,347,082

$
3,156,128


190,954


6.1
%

15.2


13.7


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Fuel.Fuel costs increased $158.5 million, or 14.9% during the year ended December 31, 2008, compared to the year ended
December 31, 2007. The average cost per gallon of fuel increased to $3.33 per gallon during the year ended December 31, 2008, from $2.41 during the year ended December 31, 2007.
The increase in the average cost per gallon during the year ended December 31, 2008 was mitigated by United purchasing fuel directly from a fuel vendor for our United Express aircraft operated
out of Chicago, San Francisco, Los Angeles and Denver. Midwest also purchased all of its fuel directly from fuel vendors, which reduced our total fuel costs and related passenger revenue. The
following table summarizes the gallons of fuel we purchased directly, and the change in fuel price per gallon on our fuel expense, for the periods indicated:

For the year ended December 31,(in thousands, except per gallon amounts)

2008

2007

% ChangeFuel gallons purchased


366,540


440,044


(16.7
)%Average price per gallon

$
3.33

$
2.41


38.2
%Fuel expense

$
1,220,618

$
1,062,079


14.9
%


We
are at risk for increased fuel prices on our pro-rate flying operations, whereby we receive a pro-rated portion of the passenger fare as revenue. As of
December 31, 2008, we operated a total of 32 Brasilia turboprops under separate pro-rate agreements with Delta and United. During the year ended December 31, 2008, the cost
of fuel associated with the pro-rate operations increased approximately $6.5 million (pre-tax) compared to the year ended December 31, 2007.

Salaries Wages and Employee Benefits.Salaries, wages and employee benefits decreased $2.9 million, or 0.4%, during the year ended
December 31, 2008, compared to the year ended December 31, 2007. The average number of full-time equivalent employees decreased 2.6% to 14,315 for the year
ended December 31, 2008, from 14,694 for the year ended December 31, 2007. The decrease in number of employees was significantly due to Delta assuming responsibility from ASA in June
2007 for the performance of customer service functions in Atlanta and United transitioning 16 stations from SkyWest Airlines to other ground handlers during the second quarter of 2008.

Aircraft maintenance, materials and repairs.Maintenance costs increased $83.7 million, or 28.1%, during the year ended
December 31,
2008, compared to the year ended December 31, 2007. The increase was primarily related to the timing of engine overhaul events. Our engine overhaul expense increased approximately
$54.8 million during the year ended December 31, 2008 compared to the year ended December 31, 2007. The majority of the engine overhauls related to aircraft operated under our
Delta Connection Agreements and we were reimbursed for such engine overhaul costs by Delta. Such reimbursements are reflected as passenger revenue in our consolidated statements of income. The
increase in maintenance excluding engine overhaul costs was principally due to other scheduled maintenance events on our aging CRJ200 and CRJ 700 aircraft and repairs incurred on aircraft damaged
during the normal course of business. Additionally, since December 31, 2007, we added four used CRJ200s and two used CRJ700s to our fleet. Compared to new aircraft, used aircraft typically
experience higher maintenance costs during the first year of service.

Under
the SkyWest Airlines United Express and Midwest Services Agreements, we recognized revenue in our consolidated statement of income at a fixed hourly rate for mature engine
maintenance on regional jet engines and we recognize engine maintenance expense on our CRJ200 regional jet engines in our consolidated statement of income on an as-incurred basis as
maintenance expense. During the year ended December 31,2008, our CRJ200 engine expense under our SkyWest Airlines United Express and Midwest Services Agreements increased $1.8 million.
Under our Delta Connection Agreements we were reimbursed for engine overhaul costs by Delta. Such reimbursements are reflected as passenger revenue in our consolidated statements of income.

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Aircraft rentals.Aircraft rentals increased $1.3 million or 0.5% during the year ended December 31, 2008, compared to the
year ended
December 31, 2007. The increase in aircraft rentals was primarily due to the addition of two used CRJ700s that were financed through long-term leases.

Depreciation and amortization.Depreciation and amortization expense increased $11.3 million , or 5.4%, during the year ended
December 31, 2008, compared to the year ended December 31, 2007. The increase in depreciation and amortization was primarily due to the addition of four CRJ200 and three CRJ900s that
were financed using long-term debt.

Station rentals and landing fees.Station rentals and landing fees expense decreased $3.7 million , or 2.8%, during the year ended
December 31, 2008, compared to the year ended December 31, 2007. Our station rentals and landing fee costs can be impacted based upon the volume of passengers carried and the number of
departures. The decrease in station rentals and landing fees expense was primarily due to a 2.7% decrease in passengers carried and a 3.6% decrease in departures during the year ended
December 31, 2008.

Ground handling service.Ground handling service expense decreased $34.2 million , or 24.4%, during the year ended
December 31, 2008,
compared to the year ended December 31, 2007. The decrease in ground handling was due primarily to Delta assuming responsibility from ASA in June 2007 for the performance of customer service
functions in Atlanta and United transitioning 16 stations from SkyWest Airlines to other ground handlers during the second quarter of 2008.

Other expenses.Other expense, primarily consisting of property taxes, hull and liability insurance, crew simulator training and crew
hotel costs,
decreased $2.8 million , or 1.7%, during the year ended December 31, 2008, compared to the year ended December 31, 2007. The decrease in other expenses was primarily due to the
decrease in crew simulator training and crew hotel costs. These decreases were due primarily to fewer training events in 2008, primarily caused by lower production such as a decrease of 3.6% in
departures during the year ended December 31, 2008.

Interest.Interest expense decreased $20.3 million, or 16.0% during the year ended December 31, 2008 compared to the year
ended
December 31, 2007. The decrease in interest expense was substantially due to a decrease in interest rates. At December 31, 2008, we had variable rate notes representing 46.6% of our
total long-term debt . The majority of our variable rate notes are based on the three-month and six-month LIBOR rates. At December 31, 2008, the three-month and
six-month LIBOR rates were 1.43% and 1.75%, respectively. At December 31, 2007, the three-month and six-month LIBOR rates were 4.70% and 4.60%, respectively.

Total Airline Expenses.Total airline expenses (consisting of total operating and interest expenses) increased $191.0 million, or
6.1%, during
the year ended December 31, 2008, compared to the year ended December 31, 2007. We are reimbursed for our actual fuel costs by our major partners under our contract flying arrangements.
We record the amount of those reimbursements as revenue. Under the SkyWest, SkyWest Airlines and ASA Delta Connection Agreements, we are reimbursed for our engine overhaul expense, which we record as
revenue. The following table summarizes the amount of

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fuel
and engine overhaul expenses which are included in our total airline expenses for the periods indicated (dollar amounts in thousands).

For the year ended December 31,2008

2007

$ Change

% ChangeTotal airline expense

$
3,347,082

$
3,156,128

$
190,954


6.1
%Less: Fuel expense


1,220,618


1,062,079


158,539


14.9
%Less: Engine overhaul reimbursement from major partners


120,101


67,961


52,140


76.7
%Total airline expense excluding fuel and engine overhauls

$
2,006,363

$
2,026,088

$
(19,725
)

(1.0
)%


Excluding
fuel and engine overhaul costs, our total airline expense decreased $19.7 million, or 1.0%, during the year ended December 31, 2008, compared to the year ended
December 31, 2007. The
percentage decrease in total airline expenses excluding fuel and engine overhauls, was less than the percentage decrease in ASMs, which is primarily due to increases in non-engine overhaul
maintenance expenses attributable to the increased age of our fleet.

Income taxes.The provision for income taxes, as a percentage of income before taxes, decreased to 35.9% in 2008 from 36.4% in 2007. The
lower 2008
rate includes the impact of a decrease to the effective state income tax rate as the result of state tax law changes in Utah and other states. The impact of the decreased effective tax rate was
partially offset by the decrease in tax exempt interest income in 2008 from 2007.

Net Income.Primarily due to the factors described above, net income decreased to $112.9 million, or $1.93 per diluted share, for
the year
ended December 31, 2008, compared to $159.2 million, or $2.49 per diluted share, for the year ended December 31, 2007.

Liquidity and Capital Resources

We had working capital of $804.3 million and a current ratio of 2.8:1 at December 31, 2009, compared to working capital
of $834.1 million and a current ratio of 3.2:1 at December 31, 2008. The decrease was principally attributable to $80.0 million we loaned to United in October 2009. We also agreed
to defer $49.0 million otherwise payable to SkyWest Airlines under the SkyWest Airlines United Express Agreement, offset by cash generated from operating activities. The principal sources of
cash during the year ended December 31, 2009 were $389.5 million provided by operating activities, $300.7 million of proceeds from the issuance of long-term debt,
$18.7 million from the sale of property and equipment, $16.1 million from returns on aircraft deposits, $8.8 million from the sale of common stock in connection with the exercise
of stock options under our stock option and employee stock purchase plans and $0.7 million from repayment of the United note receivable. We invested $82.1 million in marketable
securities, invested $419.0 million in flight equipment, made principal payments on long-term debt of $147.3 million, repurchased $18.4 million of outstanding shares
of our common stock, invested $2.6 million in buildings and ground equipment, paid $9.1 million in cash dividends, invested $25.5 million in other assets and issued a note
receivable of $80.0 million to United. These factors resulted in a $49.5 million decrease in cash and cash equivalents during the year ended December 31, 2009.

Our
position in marketable securities, consisting primarily of bonds, bond funds and commercial paper, increased to $645.3 million at December 31, 2009, compared to
$568.6 million at December 31, 2008. The increase in marketable securities was due primarily to cash generated from operations in 2009 that was invested in marketable securities.

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At
December 31, 2009, our total capital mix was 42.7% equity and 57.3% debt, compared to 43.1% equity and 56.9% debt at December 31, 2008.

As
of December 31, 2009, SkyWest Airlines had a $25 million line of credit. As of December 31, 2009 and 2008, SkyWest Airlines had no amount outstanding under the
facility. The facility expires on March 31, 2010 and has a fixed interest rate of 4.96%.

As
of December 31, 2009, we had $49.7 million in letters of credit and surety bonds outstanding with various banks and surety institutions.

As
of December 31, 2009 and 2008, we classified $10.7 million as restricted cash, related to our workers compensation policies.

Significant Commitments and Obligations

General

The following table summarizes our commitments and obligations as noted for each of the next five years and thereafter (in thousands):

Total

2010

2011

2012

2013

2014

ThereafterFirm aircraft commitments

$
98,011

$
98,011

$


$


$


$


$
Operating lease payments for aircraft and facility obligations


2,893,033


329,512


320,526


320,998


313,418


302,013


1,306,566Interest commitments


633,001


83,969


78,418


72,399


65,611


59,595


273,009Principal maturities on long-term debt


1,964,889


148,571


152,747


199,446


153,117


158,750


1,152,258Total commitments and obligations

$
5,588,934

$
660,063

$
551,691

$
592,843

$
532,146

$
520,358

$
2,731,833


Purchase Commitments and Options

On October 12, 2007, we announced SkyWest Airlines' plans to acquire 22 additional regional jet aircraft through 2010, 18 of
which SkyWest Airlines has placed into operation under the SkyWest Airlines United Express Agreement as part of an aircraft transition plan, allowing United to remove 23 30-seat Brasilia
turboprops from the contract reimbursement model contemplated by the United Express Agreement and add 66-seat regional jet aircraft for United Express flying. Additionally, SkyWest
Airlines exchanged four CRJ200s for four CRJ900s in its Delta Connection operations. These four 50-seat CRJ200s were placed into service under other capacity purchase agreements. In
November 2007, SkyWest Airlines placed a firm order with Bombardier for the 22 new aircraft. As of December 31, 2009, SkyWest Airlines had taken delivery of four CRJ900s and 14 CRJ700s pursuant
to that order. SkyWest Airlines is scheduled to take delivery of the remaining four aircraft during the first quarter of 2010.

Total
expenditures for these aircraft and related flight equipment, including amounts for contractual price escalations, are estimated to be approximately $98.0 million through
the first quarter of 2010. Additionally, SkyWest Airlines' agreement with Bombardier includes options for another 22 aircraft that can be delivered in either 70 or 90-seat configurations.
Delivery dates for these aircraft remain subject to final determination as SkyWest Airlines agrees upon with its major partners.

We
have not historically funded a substantial portion of our aircraft acquisitions with working capital. Rather, we have generally funded our aircraft acquisitions through a combination
of operating leases and long-term debt financing. At the time of each aircraft acquisition, we evaluate the financing

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alternatives
available to us, and select one or more of these methods to fund the acquisition. In the event that alternative financing cannot be arranged at the time of delivery, Bombardier has
typically financed our aircraft acquisitions until more permanent arrangements can be made. Subsequent to this initial acquisition of an aircraft, we may also refinance the aircraft or convert one
form of financing to another (e.g., replacing debt financing with leveraged lease financing).

At
present, we intend to satisfy our 2009 firm aircraft purchase commitment, as well as our acquisition of any additional aircraft, through a combination of operating leases and debt
financing, consistent with our historical practices. Based on current market conditions and discussions with prospective leasing organizations and financial institutions, we currently believe that we
will be able to obtain financing for our committed acquisitions, as well as additional aircraft, without materially reducing the amount of working capital available for our operating activities.
Nonetheless, recent disruptions in the credit markets have resulted in greater volatility, decreased liquidity and limited availability of capital, and there is no assurance that we will be able to
obtain necessary funding or that, if we are able to obtain necessary capital, the corresponding terms will be favorable or acceptable to us.

Aircraft Lease and Facility Obligations

We also have significant long-term lease obligations primarily relating to our aircraft fleet. At December 31, 2009,
we had 284 aircraft under lease with remaining terms ranging from one to 17 years. Future minimum lease payments due under all long-term operating leases were approximately
$2.9 billion at December 31, 2009. Assuming a 5.8% discount rate, which is the average rate used to approximate the implicit rates within the applicable aircraft leases, the present
value of these lease obligations would have been equal to approximately $2.1 billion at December 31, 2009.

Long-term Debt Obligations

As of December 31, 2009, we had $1,964.9 million of long term debt obligations related to the acquisition of Brasilia
turboprop, CRJ200, CRJ700 and CRJ900 aircraft. The
average effective interest rate on the debt related to the Brasilia turboprop and CRJ aircraft was approximately 4.3% at December 31, 2009.

Guarantees

We have guaranteed the obligations of SkyWest Airlines under the SkyWest Airlines Delta Connection Agreement and the obligations of ASA
under the ASA Delta Connection Agreement.

New Accounting Standards

In June 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") ASC 810 (originally
issued as Statement of Financial Accounting Standards ("SFAS") No. 167,Amendments to FASB Interpretation No. 46(R). Among other items,
ASC 810 responds to concerns about the application of certain key provisions of FIN 46(R), including those regarding the transparency of the involvement with variable interest entities. ASC 810
is effective for calendar year companies beginning on January 1, 2010. We do not believe the adoption of ASC 810 will have a significant impact on our financial position, results of operations
or cash flows.

On
September 23, 2009, the FASB ratified Emerging Issues Task Force Issue No. 08-1,Revenue Arrangements with Multiple
Deliverables("EITF 08-1"). EITF 08-1 updates the current guidance pertaining to multiple-element revenue arrangements included in ASC
Subtopic 605-25, which originated primarily from EITF 00-21, also titledRevenue Arrangements with Multiple Deliverables.
EITF 08-1 will be effective for annual reporting periods beginning January 1, 2011 for calendar-year entities. We are currently evaluating the impact of
EITF 08-1 on our financial position, results of operations and cash flows.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Aircraft Fuel

In the past, we have not experienced difficulties with fuel availability and we currently expect to be able to obtain fuel at
prevailing prices in quantities sufficient to meet our future needs. Pursuant to our contract flying arrangements, United has agreed to bear the economic risk of fuel price fluctuations on our
contracted United Express flights. On our Delta Connection regional jet flights, Delta has agreed to bear the economic risk of fuel price fluctuations. We bear the economic risk of fuel price
fluctuations on our pro-rate operations. For the year ended December 31, 2009, essentially all of our Brasilia turboprops flown for Delta were flown under pro-rate
arrangements while, approximately 47% of our Brasilia turboprops flown in the United system were flown under pro-rate arrangements and approximately 4% of our CRJ200s flown in the United
system were flown under pro-rate arrangements. As of December 31, 2009, we operated 14 CRJ 200s under a pro-rate agreement with United and two CRJ200s with AirTran. The
average price per gallon of aircraft fuel decreased 43.8% to $1.87 for the year ended December 31, 2009, from $3.33 for the year ended December 31, 2008. For illustrative purposes only,
we have estimated the impact of the market risk of fuel on our pro-rate operations using a hypothetical increase of 25% in the price per gallon we purchase. Based on this hypothetical
assumption, we would have incurred an additional $7.5 million in fuel expense for the year ended December 31, 2009.

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 cash and
securities held at the time; however, the market value of our available-for-sale securities would likely decline. At December 31, 2009, we had variable rate notes
representing 38.6% of our total long-term debt compared to 46.6% of our long-term debt at December 31, 2008. 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 variable rate long-term debt and cash and securities. Based on this hypothetical assumption,
we would have incurred an additional $8.0 million in interest expense and received $7.4 million in additional interest income for the year ended December 31,
2009 and we would have incurred an additional $8.8 million in interest expense and received $6.7 million in additional interest income for the year ended December 31, 2008.
However, under our contractual arrangement with our major partners, the majority of the increase in interest expense would be passed through and recorded as passenger revenue in our consolidated
statements of income. Also for illustrative purposes only, we have likewise estimated the impact of a hypothetical decrease in interest rates of one percentage point for both variable rate
long-term debt and cash and securities. Based upon this hypothetical example, we would have recognized $8.0 million less in interest expense and received $7.4 less in interest income for
the year ended December 31, 2009, and we would have recognized $8.8 million less in interest expense and received $6.7 less in interest income for the year ended December 31, 2008. If
interest rates were to decline, our major partners would receive the principal benefit of the decline, since interest expense is generally passed through to our major partners, resulting in a
reduction to passenger revenue in our consolidated statement of income.

We
currently intend to finance the acquisition of aircraft through manufacturer financing, third-party leases or long-term borrowings. Changes in interest rates may impact
our actual costs of acquiring these aircraft.

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Auction Rate Securities

We have investments in auction rate securities, which are classified as available for sale securities and reflected at fair value. Due
primarily to instability in credit markets over the past two years, we sold a portion of these investments. As of December 31, 2009, we had investments valued at a total of $4.3 million
which were classified as Other assets on our consolidated balance sheet. For a more detailed discussion on auction rate securities, including our methodology for estimating their fair value, see
Note 6 to our consolidated financial statements appearing in Item 8 of this Report.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information set forth below should be read together with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations," appearing elsewhere herein.

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Table of Contents

Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
SkyWest, Inc.

We
have audited the accompanying consolidated balance sheets of SkyWest, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of
income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SkyWest, Inc. and subsidiaries at
December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with
U.S. generally accepted accounting principles.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), SkyWest, Inc. and subsidiaries' internal control over
financial reporting as of December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 22, 2010 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Salt
Lake City, Utah
February 22, 2010

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SKYWEST, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        (Dollars in thousands)

ASSETS

December 31,
2009

December 31,
2008CURRENT ASSETS:Cash and cash equivalents

$
76,414

$
125,892Marketable securities


645,301


568,567Restricted cash


10,730


10,728Income tax receivable


12,608


14,868Receivables, net


111,902


55,458Inventories, net


89,876


104,383Prepaid aircraft rents


237,350


226,474Deferred tax assets


45,197


76,093Other current assets


24,721


38,205Total current assets


1,254,099


1,220,668PROPERTY AND EQUIPMENT:Aircraft and rotable spares


3,612,658


3,273,705Deposits on aircraft


4,247


20,390Buildings and ground equipment


240,438


239,5733,857,343


3,533,668Less-accumulated depreciation and amortization


(977,637
)

(824,293
)Total property and equipment, net


2,879,706


2,709,375OTHER ASSETSIntangible assets, net


23,997


26,247Other assets


153,000


58,001Total other assets


176,997


84,248Total assets

$
4,310,802

$
4,014,291


See
accompanying notes to consolidated financial statements.

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Table of Contents

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands)

LIABILITIES AND STOCKHOLDERS' EQUITY

December 31,
2009

December 31,
2008CURRENT LIABILITIES:Current maturities of long-term debt

$
148,571

$
129,783Accounts payable


165,825


110,902Accrued salaries, wages and benefits


67,377


66,553Accrued aircraft rents


17,661


25,676Taxes other than income taxes


17,476


16,651Other current liabilities


32,925


37,039Total current liabilities


449,835


386,604OTHER LONG TERM LIABILITIES


38,540


41,525LONG TERM DEBT, net of current maturities


1,816,318


1,681,705DEFERRED INCOME TAXES PAYABLE


536,540


507,113DEFERRED AIRCRAFT CREDITS


117,350


121,823COMMITMENTS AND CONTINGENCIES (Note 5)STOCKHOLDERS' EQUITY:Preferred stock, 5,000,000 shares authorized; none issued





Common stock, no par value, 120,000,000 shares authorized; 74,626,660 and 73,520,292 shares issued, respectively


578,153


562,395Retained earnings


1,052,375


977,736Treasury stock, at cost, 19,017,645 and 17,150,580 shares, respectively


(279,619
)

(261,174
)Accumulated other comprehensive income (loss) (Note 1)


1,310


(3,436
)Total stockholders' equity


1,352,219


1,275,521Total liabilities and stockholders' equity

$
4,310,802

$
4,014,291


See
accompanying notes to consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF INCOME        (In thousands, except per share amounts)

Year Ended December 31,2009

2008

2007OPERATING REVENUES:Passenger

$
2,582,238

$
3,466,287

$
3,342,131Ground handling and other


31,376


29,962


32,201Total operating revenues


2,613,614


3,496,249


3,374,332OPERATING EXPENSES:Aircraft fuel


390,739


1,220,618


1,062,079Salaries, wages and benefits


698,326


724,094


726,947Aircraft maintenance, materials and repairs


436,039


381,653


297,960Aircraft rentals


300,773


295,784


294,443Depreciation and amortization


221,548


220,195


208,944Station rentals and landing fees


116,312


132,017


135,757Ground handling services


95,805


106,135


140,374Other, net


141,877


160,522


163,304Total operating expenses


2,401,419


3,241,018


3,029,808OPERATING INCOME


212,195


255,231


344,524OTHER INCOME (EXPENSE):Interest income


11,121


20,776


31,650Interest expense


(86,330
)

(106,064
)

(126,320
)Impairment on marketable securities


(7,115
)




Other


1,862


6,240


467Total other expense, net


(80,462
)

(79,048
)

(94,203
)INCOME BEFORE INCOME TAXES


131,733


176,183


250,321PROVISION FOR INCOME TAXES


48,075


63,254


91,129NET INCOME

$
83,658

$
112,929

$
159,192BASIC EARNINGS PER SHARE

$
1.50

$
1.95

$
2.54DILUTED EARNINGS PER SHARE

$
1.47

$
1.93

$
2.49Weighted average common shares:Basic


55,854


57,790


62,710Diluted


56,814


58,633


64,044


See
accompanying notes to consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND        COMPREHENSIVE INCOME        (In thousands)

Common Stock



Treasury Stock

Accumulated
Other
Comprehensive
Income (Loss)Retained
EarningsShares

Amount

Shares

Amount

TotalBalance at December 31, 2006


70,753

$
491,405

$
720,784


(6,794
)
$
(32,551
)
$
(1,345
)
$
1,178,293Comprehensive income:Net income








159,192











159,192Net unrealized appreciation on marketable securities net of tax of $304

















475


475Total comprehensive income




















159,667Exercise of common stock options


1,066


19,572














19,572Sale of common stock under employee stock purchase plan


454


9,378














9,378Stock based compensation expense related to the issuance of stock options and the employee stock purchase plan





13,121














13,121Tax benefit from exercise of common stock options





69














69Treasury stock purchases











(5,000
)

(125,991
)




(125,991
)Cash dividends declared ($0.12 per share)








(8,102
)










(8,102
)Balance at December 31, 2007


72,273

$
533,545

$
871,874


(11,794
)
$
(158,542
)
$
(870
)
$
1,246,007Comprehensive income:Net income








112,929











112,929Net unrealized depreciation on marketable securities net of tax of $1,573

















(2,566
)

(2,566
)Total comprehensive income




















110,363Exercise of common stock options


439


6,135














6,135Sale of common stock under employee stock purchase plan


808


11,227














11,227Stock based compensation expense related to the issuance of stock options and the employee stock purchase plan





11,489














11,489Tax deficiency from exercise of common stock options





(1
)













(1
)Treasury stock purchases











(5,357
)

(102,632
)




(102,632
)Cash dividends declared ($0.13 per share)








(7,067
)










(7,067
)Balance at December 31, 2008


73,520

$
562,395

$
977,736


(17,151
)
$
(261,174
)
$
(3,436
)
$
1,275,521Comprehensive income:Net income








83,658











83,658Proportionate share of other companies foreign currency translation adjustment, net of tax $596

















972


972Net unrealized appreciation on marketable securities net of tax of $2,158

















3,774


3,774Total comprehensive income




















88,404Exercise of common stock options and issuance of restricted stock


271


215














215Sale of common stock under employee stock purchase plan


836


8,572














8,572Stock based compensation expense related to the issuance of stock options





7,944














7,944Tax deficiency from exercise of common stock options





(973
)













(973
)Treasury stock purchases











(1,867
)

(18,445
)




(18,445
)Cash dividends declared ($0.16 per share)








(9,019
)










(9,019
)Balance at December 31, 2009


74,627

$
578,153

$
1,052,375


(19,018
)
$
(279,619
)
$
1,310

$
1,352,219


See accompanying notes to consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

Year Ended December 31,2009

2008

2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
83,658

$
112,929

$
159,192Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


221,548


220,195


208,944Stock based compensation expense


7,944


11,489


13,121Loss (gain) on sale of property and equipment


(77
)

68


(467
)Undistributed earnings of other companies


(1,785
)




Impairment on marketable securities


7,115





Net increase in deferred income taxes


59,350


55,541


106,112Changes in operating assets and liabilities:Decrease (increase) in restricted cash


(2
)

3,977


1,704Decrease (increase) in receivables


(56,444
)

25,758


(51,785
)Decrease (increase) in income tax receivable


2,260


8,246


(21,295
)Decrease (increase) in inventories


14,507


1,355


(20,578
)Decrease (increase) in other current assets and prepaid aircraft rents


10,608


4,437


(145
)Increase (decrease) in deferred aircraft credits


(3,658
)

(5,140
)

21,163Increase (decrease) in accounts payable and accrued aircraft rents


46,908


(23,666
)

(20,660
)Increase (decrease) in other current liabilities


(2,432
)

354


710NET CASH PROVIDED BY OPERATING ACTIVITIES


389,500


415,543


396,016CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of marketable securities


(854,715
)

(1,305,015
)

(1,370,189
)Sales of marketable securities


772,616


1,254,574


1,067,815Issuance of United Air Lines note receivable


(80,000
)




Payments received on note receivable from United Air Lines


667





Proceeds from the sale of property and equipment


18,662


4,580


11,290Acquisition of property and equipment:Aircraft and rotable spare parts


(419,028
)

(194,189
)

(298,519
)Deposits on aircraft








(32,326
)Buildings and ground equipment


(2,556
)

(37,627
)

(37,547
)Increase in other assets


(25,458
)

(6,559
)

(2,783
)NET CASH USED IN INVESTING ACTIVITIES


(589,812
)

(284,236
)

(662,259
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of long-term debt


300,716


80,361


177,792Principal payments on long-term debt


(147,315
)

(119,823
)

(110,973
)Return of deposits on aircraft and rotable spare parts


16,143


3,458


11,697Tax benefit from exercise of common stock options





9


177Net proceeds from issuance of common stock


8,787


17,361


28,950Purchase of treasury stock


(18,445
)

(102,632
)

(125,991
)Payment of cash dividends


(9,052
)

(6,951
)

(8,061
)NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES


150,834


(128,217
)

(26,409
)Increase (decrease) in cash and cash equivalents


(49,478
)

3,090


(292,652
)Cash and cash equivalents at beginning of year


125,892


122,802


415,454CASH AND CASH EQUIVALENTS AT END OF YEAR

$
76,414

$
125,892

$
122,802SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the year for:Interest, net of capitalized amounts

$
90,572

$
111,717

$
112,547Income taxes

$
2,896

$
23,876

$
1,420


See accompanying notes to consolidated financial statements.

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SKYWEST, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies

SkyWest, Inc. (the "Company"), through its wholly-owned subsidiaries, SkyWest Airlines, Inc. ("SkyWest Airlines") and Atlantic Southeast Airlines, Inc. ("ASA"),
operates the largest regional airline in the United States. As of December 31, 2009, SkyWest and ASA offered scheduled passenger and air freight service with approximately 2,300 total daily
departures to 217 different destinations in the United States, Canada, Mexico and the Caribbean. Additionally, the Company provides ground handling services for approximately eight other airlines
throughout its system. As of December 31, 2009, the Company operated a fleet of 449 aircraft consisting of 250 50-seat Bombardier CRJ200 Regional Jet aircraft ("CRJ200s") (81
assigned to United Air Lines, Inc. ("United"), 164 assigned to Delta Air Lines, Inc. ("Delta"), three assigned to Midwest Airlines, Inc. ("Midwest") and two assigned to AirTran,
117 70-seat Bombardier CRJ 700 Regional Jet aircraft ("CRJ700s") (66 assigned to United and 51 assigned to Delta), 31 70-90-seat Bombardier CRJ900 Regional Jet
aircraft ("CRJ900") (all assigned to Delta) and 51 Embraer Brasilia EMB-120 turboprops ("Brasilia Turboprops") (39 assigned to United and 12 assigned to Delta) For the year ended
December 31, 2009, approximately 55.8% of the Company's capacity was operated under the Delta code, approximately 42.4% was operated under the United code, approximately 1.7% was operated under
the Midwest code and approximately 0.1% was operated under the AirTran code.

SkyWest
Airlines has been a partner with Delta in Salt Lake City and United in Los Angeles since 1987 and 1997, respectively. In 1998, SkyWest Airlines expanded its relationship with
United to provide service in Portland, Seattle/Tacoma, San Francisco and additional Los Angeles markets. In 2004,
SkyWest Airlines expanded its United Express operations to provide service in Chicago. In December 2007, SkyWest Airlines and Midwest entered into the Midwest Services Agreement. Effective
January 1, 2010, SkyWest Airlines terminated its agreement with Midwest. In December 2009, SkyWest Airlines entered into a flying agreement with AirTran. SkyWest Airlines currently serves
markets from AirTran's hub in Milwaukee. As of December 31, 2009, SkyWest Airlines operated as a Delta Connection carrier in Salt Lake City, a United Express carrier in Los Angeles, San
Francisco, Denver, Chicago and the Pacific Northwest, a Midwest Connect carrier and an AirTran carrier in Milwaukee operating more than 1,500 total daily flights.

ASA
has been a code-share partner with Delta in Atlanta since 1984. ASA expanded its operations as a Delta Connection carrier to also include Cincinnati and Salt Lake City in
September 2002 and April 2003, respectively. As of December 31, 2009, ASA operated approximately 780 daily flights, all in the Delta Connection system.

Basis of Presentation

The Company's consolidated financial statements include the accounts of SkyWest, Inc. and its wholly-owned subsidiaries, SkyWest
Airlines and ASA, with all inter-company transactions and balances having been eliminated.

In
preparing the accompanying consolidated financial statements, the Company has reviewed, as determined necessary by the Company's management, events that have occurred after
December 31, 2009, up until the issuance of the consolidated financial statements, which occurred on February 22, 2010.

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SKYWEST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The
Company classified $10.7 million of cash as restricted cash as required by the Company's workers' compensation policy and classified it accordingly in the consolidated balance sheets as of
December 31, 2009 and 2008.

Marketable Securities

The Company's investments in marketable debt and equity securities are deemed by management to be available for sale and are reported
at fair market value with the net unrealized appreciation or depreciation reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. At the time of sale, any
realized appreciation or depreciation, calculated by the specific identification method, is recognized in other income and expense. The Company's position in marketable securities as of
December 31, 2009 and 2008 was as follows (in thousands):

2009

2008Investment Types

Cost

Market Value

Cost

Market ValueCommercial paper

$


$


$
24,855

$
22,790Bond and bond funds


647,965


648,498


546,003


542,733Asset backed securities


1,051


1,062


5,330


5,277649,016


649,560


576,188


570,800Unrealized gain (loss)


544





(5,388
)

Total

$
649,560

$
649,560

$
570,800

$
570,800


Marketable
securities had the following maturities as of December 31, 2009 (in thousands):

Maturities

AmountYear 2010

$
303,072Years 2011 through 2014


76,685Years 2015 through 2019


15,458Thereafter


254,345


The
Company has classified $645.3 million of marketable securities as short-term since it has the intent to maintain a liquid portfolio and the ability to redeem the
securities within one year. The Company has classified approximately $4.3 million of investments as non-current and has identified

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

them
as "Other assets" in the Company's consolidated balance sheet as of December 31, 2009 (see Note 6).

Inventories

Inventories include expendable parts, fuel and supplies and are valued at cost (FIFO basis) less an allowance for obsolescence based on
historical results and management's expectations of future operations. Expendable inventory parts are charged to expense as used. An obsolescence allowance for flight equipment expendable parts is
accrued based on estimated lives of the corresponding fleet types and salvage values. The inventory allowance as of December 31, 2009 and 2008 was $6.6 million and $5.5 million,
respectively. These allowances are based on management estimates, which are subject to change.

Property and Equipment

Property and equipment are stated at cost and depreciated over their useful lives to their estimated residual values using the
straight-line method as follows:

Assets

Depreciable
Life

Residual
ValueAircraft and rotable spares

10 - 18 years


0 - 30
%Ground equipment

5 - 10 years


0
%Office equipment

5 - 7 years


0
%Leasehold improvements

15 years
or life of
the lease


0
%Buildings

20 - 39.5 years


0
%


Change in Accounting Estimates

During the first quarter of 2009, the Company changed its estimate of depreciable lives on ground equipment from five to seven years to
five to ten years and maintained the residual value of zero percent. The impact of this change increased the Company's pre-tax income for the year ended December, 31 2009 by
$4.0 million ($.07 per share Basic EPS and Diluted EPS), respectively. The impact of this change, net of tax, increased the Company's net income for the year ended December 31, 2009 by
$2.5 million ($.05 per share Basic EPS and $.04 per share Diluted EPS), respectively.

Impairment of Long Lived and Intangible Assets

As of December 31, 2009, the Company had approximately $2.9 billion of property and equipment and related assets.
Additionally, as of December 31, 2009, the Company had approximately $24.0 million in intangible assets. In accounting for these long-lived and intangible assets, the Company
makes estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the
cash flows they generate. On September 7, 2005, the Company completed the acquisition of all of the issued and

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DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

outstanding
capital stock of ASA. The Company recorded an intangible asset of approximately $33.7 million relating to the acquisition of ASA. The intangible asset is being amortized over
fifteen years under the straight-line method. As of December 31, 2009 and 2008, the Company had $9.7 million and $7.5 million in accumulated amortization expense,
respectively. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the
condition of the long-lived assets and operating cash flow losses associated with the use of the long-lived assets. On a periodic basis, the Company evaluates whether the book
value of its aircraft is impaired. Based on the results of the evaluations, the Company's management concluded no impairment was necessary as of December 31, 2009.

Capitalized Interest

Interest is capitalized on aircraft purchase deposits as a portion of the cost of the asset and is depreciated over the estimated
useful life of the asset. During the years ended December 31, 2009, 2008 and 2007, the Company capitalized interest costs of approximately $843,000, $1.4 million, and $0, respectively.

Maintenance

The Company operates under an FAA-approved continuous inspection and maintenance program. The Company uses the direct
expense method of accounting for its regional jet engine overhauls wherein the expense is recorded when the overhaul event occurs. The Company has an engine services agreement with a third party
vendor to provide
long-term engine services covering the scheduled and unscheduled repairs for certain of its CRJ700 regional jet aircraft. Under the terms of the agreement, the Company pays a set dollar
amount per engine hour flown on a monthly basis and the third party vendor will assume the responsibility to repair the engines at no additional cost to the Company, subject to certain specified
exclusions. Maintenance costs under these contracts are recognized when the engine hour is flown pursuant to the terms of the contract. The Company uses the "deferral method" of accounting for its
Brasilia Turboprop engine overhauls wherein the overhaul costs are capitalized and depreciated over the estimated useful life of the engine. The costs of maintenance for airframe and avionics
components, landing gear and normal recurring maintenance are expensed as incurred. For leased aircraft, the Company is subject to lease return provisions that require a minimum portion of the "life"
of an overhaul be remaining on the engine at the lease return date. For Brasilia Turboprop engine overhauls related to leased aircraft to be returned, the Company adjusts the estimated useful lives of
the final engine overhauls based on the respective lease return dates.

Passenger and Ground Handling Revenues

The Company recognizes passenger and ground handling revenues when the service is provided. Under the Company's contract and
pro-rate flying agreements with Delta, United and AirTran, revenue is considered earned when the flight is completed. Revenue is recognized under the Company's pro-rate flying
agreements based upon the portion of the pro-rate passenger fare the Company anticipates that it will receive.

The
Delta Connection Agreements executed by SkyWest Airlines and ASA provide for fifteen-year terms, subject to early termination by Delta, SkyWest Airlines or ASA, as
applicable, upon the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

occurrence
of certain events. Delta's termination rights include (i) cross-termination rights between the two Delta Connection Agreements, (ii) the right to terminate each of the Delta
Connection Agreements upon the occurrence of certain force majeure events, including certain labor-related events, that prevent SkyWest Airlines or ASA from performance for certain periods, and
(iii) the right to terminate each of the Delta Connection Agreements if SkyWest Airlines or ASA fails to maintain competitive base rate costs, subject to certain adjustment rights. The SkyWest
Airlines and ASA Delta Connection Agreements contain multi-year rate reset provisions beginning in 2010 and each 5th year thereafter. In the Delta Connection
Agreements, the fixed-fee rates are specifically defined through 2009. The parties agreed that on or after a specified date in 2010 the parties would reset such rates to reflect SkyWest
Airlines' actual costs in 2010 (with a similar process on each 5th year thereafter). In addition to the termination rights, Delta has the right to extend the term of the Delta Connection
Agreements upon the occurrence of certain events or at the expiration of the initial term. SkyWest Airlines and ASA have the right to terminate their respective Delta Connection Agreement upon the
occurrence of certain breaches by Delta, including the failure to cure payment defaults. SkyWest Airlines and ASA also have cross-termination rights between the two Delta Connection Agreements.

Under
the terms of the SkyWest Airlines Delta Connection Agreement, Delta has agreed to compensate SkyWest Airlines for the direct costs associated with operating the Delta Connection
flights, plus a payment based on block hours flown. Under the terms of the ASA Delta Connection Agreement, Delta has agreed to compensate ASA for its direct costs associated with operating the Delta
Connection flights, plus, if ASA completes a certain minimum percentage of its Delta Connection flights, an additional percentage of such costs. Additionally, ASA's Delta Connection Agreement provides
for the payment of incentive compensation upon satisfaction of certain performance goals. The incentives are defined in the ASA Delta Connection Agreement as being measured and determined on a monthly
and quarterly basis. At the end of each quarter, the Company calculates the incentives achieved during the quarter and recognizes revenue accordingly. The parties to the Delta Connection Agreements
make customary representations, warranties and covenants, including with respect to various operational, marketing and administrative matters.

SkyWest
Airlines and ASA have each entered into a Delta Connection Agreement with Delta, pursuant to which SkyWest Airlines and ASA provide contract flight services for Delta. In the
event that the contractual rates under those agreements have not been finalized at quarterly or annual financial statement dates, the Company records revenues based on the lower of prior period's
approved rates, as adjusted to reflect any contract negotiations and our estimate of rates that will be implemented in accordance with revenue recognition guidelines. Among other provisions, those
Delta Connection Agreements provide that, beginning with the third anniversary of the execution of the agreements (September 8, 2008), Delta has the right to require that certain contractual
rates under those agreements shall not exceed the average rate of all carriers within the Delta Connection Program. On October 23, 2009, Delta sent letters to SkyWest Airlines and ASA requiring
them to either adjust the rates payable under their respective Delta Connection Agreements or accept termination of those agreements Delta's letter also notified SkyWest Airlines and ASA of Delta's
estimate of the average rates to be applied under those agreements. On October 28, 2009, SkyWest Airlines and ASA notified Delta of their election to adjust the rates payable under the Delta
Connection Agreements; however, they also notified Delta of their disagreement with Delta's estimated rates and their belief that the methodology Delta used to calculate its estimated rates is
inconsistent with the terms of the Delta

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

Connection
Agreements. SkyWest Airlines and ASA and Delta have exchanged subsequent correspondence, and SkyWest Airlines and ASA continue to negotiate with Delta in an effort to determine an
appropriate methodology for calculating the average rates of the carriers within the Delta Connection Program. Because SkyWest Airlines and ASA have not reached an agreement with Delta regarding the
final contractual rates to be established under the Delta Connection Agreements, the Company has evaluated the method for calculating the average rate of the carriers within the Delta Connection
Program under the revenue recognition accounting guidance and recorded revenue under those agreements based on management's understanding of the applicable terms in the Delta Connection Agreements and
management's best estimate of the revenue that will ultimately be realized upon settlement of the contractual rates with Delta with respect to the year ended December 31, 2009.

The
SkyWest Airlines and the ASA Delta Connection Agreements provides that, beginning with the fifth anniversary of the execution of the agreements (September 8, 2010), Delta has
the right to require
that certain contractual rates under those agreements shall not exceed the 2nd lowest of all carriers within the Delta Connection Program.

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. During the quarter ended December 31, 2007, Delta notified
the Company, SkyWest Airlines and ASA of a dispute under the Delta Connection Agreements executed by Delta with SkyWest Airlines and ASA. The dispute relates to allocation of liability for certain
irregular operations ("IROP") expenses that are paid by SkyWest Airlines and ASA to their passengers under certain situations. As a result, Delta withheld a combined total of approximately
$25 million (pretax) from one of the weekly scheduled wire payments to SkyWest Airlines and ASA during December 2007. Delta continues to withhold a portion of the funds the Company believes are
payable as weekly scheduled wire payments to SkyWest Airlines and ASA (See Note 5 for additional details).

SkyWest
Airlines and United have entered into a United Express Agreement, which sets forth the principal terms and conditions governing SkyWest Airlines' United Express operations. Under
the terms of the United Express Agreement, SkyWest Airlines is compensated primarily on a fee-per-completed-block hour and departure basis and is reimbursed for fuel and other
costs. Additionally, SkyWest Airlines is eligible for incentive compensation upon the achievement of certain performance criteria. The incentives are defined in the United Express Agreement as being
measured and determined on a monthly basis. At the end of each month, the Company calculates the incentives achieved during the month and recognizes revenue accordingly.

On
June 10, 2009, SkyWest Airlines and Midwest reached a mutual understanding to terminate the service SkyWest Airlines provided under the Midwest Services Agreement. As a result,
SkyWest Airlines removed its remaining 12 CRJ200 regional jet aircraft from Midwest in stages through January 2010. Additionally, SkyWest Airlines agreed to cancel an unsecured note from Midwest in
the amount of approximately $9.3 million in exchange for a $4.0 million payment from Midwest that was collected and recorded as revenue by SkyWest Airlines.

On
November 4, 2009, SkyWest Airlines entered into a code-share agreement with AirTran. Under the terms of the code-share agreement, SkyWest Airlines has
agreed to operate five CRJ200s for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

AirTran
under a pro-rate arrangement. SkyWest Airlines commenced AirTran service with two aircraft in December 2009 and added three additional aircraft in January and February of 2010. The
code-share agreement has a three-year term; however, after May 15, 2010, either party may terminate the agreement upon 120 days written notice.

Under
the Company's code-share agreements with Delta, United and Midwest, the Company earns revenue for an amount per aircraft designed to reimburse the Company for certain
aircraft ownership costs. The Company has concluded that a component of its revenue under these agreements is rental income, inasmuch as the agreements identify the "right of use" of a specific type
and number of aircraft over a stated period of time. The amounts deemed to be rental income under the agreements for the years ended December 31, 2009, 2008 and 2007 were $490.1 million,
$496.5 million and $516.9 million, respectively. These amounts were recorded as passenger revenue on the Company's consolidated statements of income. Under the SkyWest Inc. Delta
Connection Agreement and the SkyWest Airlines United Express Agreement, the Company receives a reimbursement for direct costs associated with placing each additional aircraft into service. The
reimbursement is applicable to incremental costs specific to placing each additional aircraft into service. The Company recognizes the revenue associated with these reimbursement payments once the
aircraft is placed into service.

The
Company's passenger and ground handling revenues could be impacted by a number of factors, including changes to the Company's code-share agreements with Delta, United or
AirTran, contract modifications resulting from contract re-negotiations, the Company's ability to earn incentive payments contemplated under the Company's code-share
agreements, settlement of reimbursement disputes with the Company's major partners and settlement of the Delta rates.

Deferred Aircraft Credits

The Company accounts for incentives provided by aircraft manufacturers as deferred credits. The deferred credits related to leased
aircraft are amortized on a straight-line basis as a reduction to rent expense over the lease term. Credits related to owned aircraft reduce the purchase price of the aircraft, which has
the effect of amortizing the credits on a straight-line basis as a reduction in depreciation expense over the life of the related aircraft. The incentives are credits that may be used to
purchase spare parts and pay for training and other expenses.

Income Taxes

The Company recognizes a liability or asset for the deferred tax consequences of all temporary differences between the tax basis of
assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and
liabilities are recovered or settled.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

Net Income Per Common Share

Basic net income per common share ("Basic EPS") excludes dilution and is computed by dividing net income by the weighted average number
of common shares outstanding during the period. Diluted net income per common share ("Diluted EPS") reflects the potential dilution that could occur if stock options or other contracts to issue common
stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net
income per common share. During the years ended December 31, 2009, 2008 and 2007, 4,356,000, 3,665,000 and 529,000 shares reserved for issuance upon the exercise of outstanding options were
excluded from the computation of Diluted EPS respectively, as their inclusion would be anti-dilutive.

The
calculation of the weighted average number of common shares outstanding for Basic EPS and Diluted EPS are as follows for the years ended December 31, 2009, 2008 and 2007 (in
thousands):

Year Ended December 31,2009

2008

2007Numerator:Numerator for earnings per share

$
83,658

$
112,929

$
159,192Denominator:Denominator for basic earnings per-share weighted average shares


55,854


57,790


62,710Dilution due to stock options and restricted stock


960


843


1,334Denominator for diluted earnings per-share weighted average shares


56,814


58,633


64,044Basic earnings per-share

$
1.50

$
1.95

$
2.54Diluted earnings per-share

$
1.47

$
1.93

$
2.49


Comprehensive Income

Comprehensive income includes charges and credits to stockholders' equity that are not the result of transactions with shareholders.
Also, comprehensive income consisted of net income plus changes in unrealized appreciation on marketable securities and unrealized loss on foreign currency translation adjustment related to the
Company's equity investment in Trip Linhas Aereas (see note 8), net of tax, for the periods indicated (in thousands):

Year Ended December 31,2009

2008

2007Net Income

$
83,658

$
112,929

$
159,192Proportionate share of other companies foreign currency translation adjustment, net of tax


972





Unrealized appreciation (depreciation) on marketable securities, net of tax


3,774


(2,566
)

475Comprehensive income

$
88,404

$
110,363

$
159,667


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for receivables and accounts payable approximate fair values because
of the immediate or short-term maturity of these financial instruments. Marketable securities are reported at fair value based on market quoted prices in the consolidated balance sheets.
However, due to recent events in credit markets, the auction events for some of these instruments held by the Company failed during the year ended December 31, 2009. Therefore, quoted prices in
active markets are no longer available and the Company has estimated the fair values of these securities utilizing a discounted cash flow analysis as of December 31, 2009. These analyses
consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected future cash flows, and the expectation of the
next time the security is expected to have a successful auction. The fair value of the Company's long-term debt is estimated based on current rates offered to the Company for similar debt
and approximates $2,095.6 million as of December 31, 2009, as compared to the carrying amount of $1,964.9 million as of December 31, 2009. The Company's fair value of
long-term debt as of December 31, 2008 was $1,913.5 million as compared to the carrying amount of $1,811.5 million as of December 31, 2008.

Segment Reporting

The accounting guidance requires disclosures related to components of a company for which separate financial information is available
that is evaluated regularly by the Company's chief operating decision maker in deciding how to allocate resources and in assessing performance. Management believes that the Company has only one
reportable segment in accordance with accounting guidance because the Company's business consists of scheduled regional airline service.

New Accounting Standards

In June 2009, the Financial Accounting Standards Board ("FASB") issued ASC 810 (originally issued as SFAS No. 167, Amendments to FASB Interpretation
No. 46(R). Among other items, ASC 810 responds to concerns about the application of certain key provisions of
FIN 46(R), including those regarding the transparency of the involvement with variable interest entities. ASC 810 is effective for calendar year companies beginning on January 1, 2010.
The Company does not believe the adoption of ASC 810 will have a significant impact on its financial position, results of operations, cash flows, or disclosures.

On
September 23, 2009, the FASB ratified Emerging Issues Task Force Issue No. 08-1,Revenue Arrangements with Multiple
Deliverables("EITF 08-1"). EITF 08-1 updates the current guidance pertaining to multiple-element revenue arrangements included in ASC
Subtopic 605-25, which originated primarily from EITF 00-21, also titledRevenue Arrangements with Multiple Deliverables.
EITF 08-1 will be effective for annual reporting periods beginning January 1, 2011 for calendar-year entities. The Company is currently evaluating the impact of
EITF 08-1 on its financial position, results of operations, cash flows, and disclosures.

The
Company retrospectively adopted the provisions of ASC 260Earnings per Share(formerly FASB Staff Position
EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment

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DECEMBER 31, 2009

(1) Nature of Operations and Summary of Significant Accounting Policies (Continued)

Transactions Are Participating Securities) on April 1, 2009. ASC 260 addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described. This provision of ASC
260 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. The adoption of this provision of ASC 260 did not
have a material impact on the Company's consolidated financial position, results of operations or cash flows.

(2) Long-term Debt

Long-term debt consisted of the following as of December 31, 2009 and 2008 (in thousands):

December 31,
2009

December 31,
2008Notes payable to banks, due in semi-annual installments, variable interest based on LIBOR, or with interest rates ranging from 0.46% to 3.51% through
2012 to 2020, secured by aircraft

$
469,663

$
529,625Notes payable to a financing company, due in semi-annual installments, variable interest based on LIBOR, or with interest rates ranging from 0.73% to
7.52% through 2010 to 2021, secured by aircraft


557,293


594,999Notes payable to banks, due in semi-annual installments plus interest at 6.06% to 7.18% through 2021, secured by aircraft


231,002


248,731Notes payable to a financing company, due in semi-annual installments plus interest at 5.78% to 6.23% through 2019, secured by aircraft


67,963


74,455Notes payable to banks, due in monthly installments plus interest of 3.15% to 8.18% through 2025, secured by aircraft


611,829


325,834Notes payable to banks, due in semi-annual installments, plus interest at 6.05% through 2020, secured by aircraft


23,939


25,857Notes payable to banks, due in semi-annual installments, plus interest at 3.72% to 3.86%, net of the benefits of interest rate subsidies through the
Brazilian Export financing program, through 2011, secured by aircraft


3,200


5,936Notes payable to a bank, due in monthly installments interest based on LIBOR, interest rate at 7.9% secured by building





6,051Long-term debt

$
1,964,889

$
1,811,488Less current maturities


(148,571
)

(129,783
)Long-term debt, net of current maturities

$
1,816,318

$
1,681,705


At
December 31, 2009, the three-month and six-month LIBOR rates were 0.25% and 0.43%, respectively.

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DECEMBER 31, 2009

(2) Long-term Debt (Continued)

The
aggregate amounts of principal maturities of long-term debt as of December 31, 2009 were as follows (in thousands):

2010

$
148,5712011


152,7472012


199,4462013


153,1172014


158,750Thereafter


1,152,258$
1,964,889


As
of December 31, 2009 and 2008, SkyWest Airlines had a $25 million line of credit. As of December 31, 2009 and 2008, SkyWest Airlines had no amount outstanding
under the facility. The facility expires on March 31, 2010 and has a fixed interest rate of 4.96%.

As
of December 31, 2009, the Company had $49.7 million in letters of credit and surety bonds outstanding with various banks and surety institutions.

During
2009, the Company issued $300.7 million of long-term debt related to the purchase of 14 new CRJ 700s and one CRJ900.

Certain
of the Company's long-term debt arrangements contain limitations on, among other things, the sale or lease of assets and ratio of long-term debt to
tangible net worth. As of December 31, 2009, the Company was in compliance with all debt covenants. Management believes that in the absence of unusual circumstances, the working capital
available to the Company will be sufficient to meet the present financial requirements, including expansion, capital expenditures, lease payments and debt service obligations for at least the next
12 months.

(3) Note Receivable

On October 16, 2009, SkyWest Airlines extended to United a secured term loan in the amount of $80 million. The term loan bears interest at a rate of 11%, with a
ten-year amortization period. The loan is secured by certain ground equipment and certain airport slot rights held by United. As of December 31, 2009, the Company has classified
$71.3 million as non-current and has identified the note receivable as "Other assets" in its Consolidated Balance Sheet. The Company has also classified $8.0 million as
current and has identified the note receivable as "Receivables, net" in its Consolidated Balance Sheet.

SkyWest
Airlines also agreed to defer certain amounts otherwise payable to SkyWest Airlines under the existing United Express Agreement for a maximum period of 30 days. The
maximum deferral amount is $49 million and any amounts deferred accrue a deferral fee of 8%, payable weekly. As of December 31, 2009, $49 million was deferred for 30 days.
United's right to defer such payments continues through October 16, 2019 subject to certain conditions. As of December 31, 2009, the Company has classified $49.0 million as
current and has identified the deferred amount as "Receivables, net" in its Consolidated Balance Sheet.

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DECEMBER 31, 2009

(4) Income Taxes

The provision for income taxes includes the following components (in thousands):

Year ended December 31,2009

2008

2007Current tax provision (benefit):Federal

$
(11,309
)
$
5,360

$
(14,355
)State


110


(85
)

(736
)(11,199
)

5,275


(15,091
)Deferred tax provision:Federal


54,942


53,748


99,026State


4,332


4,231


7,19459,274


57,979


106,220Provision for income taxes

$
48,075

$
63,254

$
91,129


The
following is a reconciliation between the statutory Federal income tax rate of 35% and the effective rate which is derived by dividing the provision for income taxes by income before
provision for income taxes (in thousands):

Year ended December 31,2009

2008

2007Computed "expected" provision for income taxes at the statutory rates

$
45,884

$
60,324

$
87,612Increase (decrease) in income taxes resulting from:State income taxes, net of Federal income tax benefit


3,741


5,032


6,268Other, net


(1,550
)

(2,102
)

(2,751
)Provision for income taxes

$
48,075

$
63,254

$
91,129


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DECEMBER 31, 2009

(4) Income Taxes (Continued)

The
significant components of the net deferred tax assets and liabilities are as follows (in thousands):

As of December 31,2009

2008Deferred tax assets:Accrued benefits

$
22,729

$
22,423Net operating loss carryforward


39,368


23,300AMT credit carryforward


23,379


30,180Deferred aircraft credits


38,283


46,831Accrued reserves and other


14,881


14,463Total deferred tax assets


138,640


137,197Deferred tax liabilities:Accelerated depreciation


(629,586
)

(568,217
)Maintenance and other


(397
)

Total deferred tax liabilities


(629,983
)

(568,217
)Net deferred tax liability

$
(491,343
)
$
(431,020
)


The
Company's deferred tax liabilities were primarily generated through accelerated bonus depreciation on newly purchased aircraft and support equipment in accordance with the Job
Creation and Worker Assistance Act of 2002.

At
December 31, 2009, the Company had federal net operating losses of approximately $82.1 million and state net operating losses of approximately $408.1 million
which will start to expire in 2026 and 2010 respectively. As of December 31, 2009, the Company also had an alternative minimum tax credit of approximately $23.4 million which does not
expire.

(5) Commitments and Contingencies

Lease Obligations

The Company leases 284 aircraft, as well as airport facilities, office space, and various other property and equipment under
non-cancelable operating leases which are generally on a long-term net rent basis where the Company pays taxes, maintenance, insurance and certain other operating expenses
applicable to the leased property. Management expects that, in the normal course of business, leases that expire will be renewed or replaced by other leases. The following table summarizes future

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(5) Commitments and Contingencies (Continued)

minimum
rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2009 (in thousands):

Year ending December 31,2010

$
329,5122011


320,5262012


320,9982013


313,4182014


302,013Thereafter


1,306,566$
2,893,033


The
majority of the Company's leased aircraft are owned and leased through trusts whose sole purpose is to purchase, finance and lease these aircraft to the Company; therefore, they meet
the criteria of a variable interest entity. However, since these are single owner trusts in which the Company does not participate, the Company is not considered at risk for losses and is not
considered the primary beneficiary. As a result, based on the current rules, the Company is not required to consolidate any of these trusts or any other entities in applying the accounting guidance.
Management believes that the Company's maximum exposure under these leases is the remaining lease payments.

Total
rental expense for non-cancelable aircraft operating leases was approximately $300.8 million, $295.8 million and $294.4 million for the years ended
December 31, 2009, 2008 and 2007, respectively. The minimum rental expense for airport station rents was approximately $47.7 million, $59.4 million and $61.7 million for
the years ended December 31, 2009, 2008 and 2007, respectively.

The
Company's leveraged lease agreements, typically obligate the Company to indemnify the equity/owner participant against liabilities that may arise due to changes in benefits from tax
ownership of the respective leased aircraft. The terms of these contracts range up to 17 years. The Company did not accrue any liability relating to the indemnification to the equity/owner
participant because of management's assessment that the probability of this occurring is remote.

Self-insurance

The Company self-insures a portion of its potential losses from claims related to workers' compensation, environmental
issues, property damage, medical insurance for employees and general liability. Losses are accrued based on an estimate of the ultimate aggregate liability for claims incurred, using standard industry
practices and the Company's actual experience. Actual results could differ from these estimates.

Purchase Commitments and Options

On October 12, 2007, the Company announced SkyWest Airlines' plans to acquire 22 additional regional jet aircraft through 2010,
18 of which SkyWest Airlines has begun operating under its United Express Agreement as part of an aircraft transition plan, allowing United to remove 23 30-seat Brasilia turboprops from
the contract reimbursement model contemplated by the United Express Agreement

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(5) Commitments and Contingencies (Continued)

and
add 66-seat regional jet aircraft for United Express flying. Additionally, SkyWest Airlines exchanged four CRJ200s for four CRJ900s in its Delta Connection operations. These four
50-seat CRJ200s were placed into service under other capacity purchase agreements. In November 2007, SkyWest Airlines placed a firm order with Bombardier for the 22 new aircraft. As of
December 31, 2009, SkyWest Airlines had taken delivery of four CRJ900s and 14 CRJ700s pursuant to that order. SkyWest Airlines is scheduled to take delivery of the remaining four aircraft
during the first quarter of 2010.

Total
expenditures for these aircraft and related flight equipment, including amounts for contractual price escalations, are estimated to be approximately $98.0 million through
the first quarter of 2010. Additionally, SkyWest Airlines' agreement with Bombardier includes options for another 22 aircraft that can be delivered in either 70 or 90-seat configurations.
Delivery dates for these aircraft remain subject to final determination as the Company agrees upon with the Company's major partners.

Legal Matters

The Company is subject to certain legal actions which it considers routine to its business activities. As of December 31, 2009,
management believes, after consultation with legal counsel, that the ultimate outcome of such legal matters is not likely to have a material adverse effect on the Company's financial position,
liquidity or results of operations. However, the following is a significant outstanding legal matter.

ASA and SkyWest Airlines v. Delta

During the quarter ended December 31, 2007, Delta notified the Company, SkyWest Airlines and ASA of a dispute under the Delta
Connection Agreements executed by Delta with SkyWest Airlines and ASA. The dispute relates to allocation of liability for IROP expenses that are paid by SkyWest Airlines and ASA to their passengers
under certain situations. As a result, Delta withheld a combined total of approximately $25 million (pretax) from one of the weekly scheduled wire payments to SkyWest Airlines and ASA during
December 2007. Delta continues to withhold a portion of the funds the Company believes are payable as weekly scheduled wire payments to SkyWest Airlines and ASA. As of December 31, 2009, the
Company had recognized a cumulative total of $32.4 million of revenue associated with the funds withheld by Delta. On February 1, 2008, SkyWest Airlines and ASA filed a lawsuit in
Georgia state court disputing Delta's treatment of the matter (the "Complaint"). Delta filed an Answer to the Complaint and a Counterclaim against SkyWest Airlines and ASA on March 24, 2008.
Delta's Counterclaim alleges that ASA and SkyWest Airlines breached the Delta Connection Agreements by invoicing Delta for the IROP expenses that were paid pursuant to Delta's policies, and claims
only a portion of those expenses may be invoiced to Delta. Delta seeks unspecified damages in its counterclaim.

On
March 24, 2008, Delta filed a Motion to Dismiss the Complaint (the "Motion to Dismiss"). A hearing on the Motion to Dismiss was held September 5, 2008. In an order
entered September 13, 2008, the Court granted in part and denied in part the Motion to Dismiss. The Court denied the Motion to Dismiss with respect to the breach of contract claim contained in
the Complaint. The Court denied in part the Motion to Dismiss with respect to the action for declaratory judgment contained in the Complaint, and granted in part the Motion to Dismiss to the extent
the Complaint seeks to read

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(5) Commitments and Contingencies (Continued)

alternative
or supplemental obligations created by prior conduct into the Delta Connection Agreements. The Court granted the Motion to Dismiss with respect to claims for estoppel, unilateral mistake,
and mutual mistake contained in the Complaint. The Court's ruling affects the current posture of the case, but does not preclude pursuit of the claim for breach of contract or the claim for
declaratory relief, under which SkyWest Airlines and ASA continue to seek recovery of all amounts withheld by Delta.

On
July 31, 2009, SkyWest Airlines and ASA filed an Amended Complaint in the lawsuit adding claims under Georgia law for voluntary payment and mutual departure from the strict
terms of the Delta Connection Agreements. Under those claims, SkyWest Airlines and ASA seek recovery of all of the approximately $25 million withheld by Delta during December 2007. SkyWest
Airlines and ASA are also seeking recovery of additional amounts withheld by Delta subsequent to December 2007. Discovery on all of SkyWest's Airlines' and ASA's claims and defenses is in process. On
September 4, 2009, Delta filed a motion to dismiss the Amended Complaint in part. Delta asserts that the claims added by SkyWest Airlines and ASA in the Amended Complaint should be dismissed
based on legal arguments set forth in Delta's memorandum in support of its motion. SkyWest Airlines and ASA filed an opposition to the motion on October 9, 2009. On January 22, 2010, the
Court granted Delta's motion in part, dismissing the claims under Georgia law for voluntary payment and mutual departure from the strict terms of the Connection Agreements. SkyWest Airlines and ASA
have filed an application seeking interlocutory appeal of the Court's order and continue to vigorously pursue their claims set forth in the Amended Complaint, to the extent permitted by the Court's
ruling on the Motion to Dismiss, and their defenses to Delta's counterclaims.

For
financial reporting purposes the Company accrues an estimated loss if the loss is probable and reasonably estimable. Because these conditions have not been satisfied, the Company had
not recorded a loss related to the preceding dispute as of December 31, 2009.

Concentration Risk and Significant Customers

The Company requires no collateral from its major partners or customers but monitors the financial condition of its major partners. The
Company maintains an allowance for doubtful accounts receivable based upon expected collectability of all accounts receivable. The Company's allowance for doubtful accounts totaled $47,000 as of
December 31, 2009 and 2008. For the years ended December 31, 2009, 2008 and 2007, the Company's contractual relationships with Delta and United combined accounted for approximately
97.3%, 94.1% and 93.3%, respectively of the Company's total revenues.

Employees

As of December 31, 2009 the Company and SkyWest Airlines collectively employed 8,654 full-time equivalent employees
consisting of 4,232 pilots and flight attendants, 2,833 customer service personnel, 1,106 mechanics and other maintenance personnel, and
483 administration and support personnel. None of these employees are currently represented by a union. The Company is aware, however, that collective bargaining group organization efforts among
SkyWest Airlines' employees occur from time to time and the Company anticipates that such efforts will continue in the future.

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(5) Commitments and Contingencies (Continued)

As of December 31, 2009, ASA employed approximately 3,604 full-time equivalent
employees consisting of 2,227 pilots and flight attendants, 240 customer service personnel, 901 mechanics and other maintenance personnel, and 236 administration and support personnel. Three of ASA's
employee groups are represented by unions. ASA's pilots are represented by the Air Line Pilots Association International ("ALPA"), ASA's flight attendants are represented by the Association of Flight
AttendantsCWA, and ASA's flight controllers are represented by the Professional Airline Flight Control Association. ASA's collective bargaining agreement with its pilots will become
amendable on November 20, 2010. ASA's collective bargaining agreement with its flight attendants will become amendable in July 20, 2011.The collective bargaining agreements between ASA
and its flight controllers became amendable in April 2006 and ASA is currently engaged in negotiations with its flight controllers.

(6) Fair Value Measurements

The Company holds certain assets that are required to be measured at fair value in accordance with United States GAAP. The Company determined fair value of these assets based on the
following three levels of inputs:

Level 1 

Quoted prices in active markets for identical assets or liabilities.Level 2 

Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities. Some of the Company's marketable securities primarily utilize broker quotes in a non-active market for valuation of these securities.Level 3 

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, therefore requiring an entity to develop its own assumptions.


As
of December 31, 2009, the Company held certain assets that are required to be measured at fair value on a recurring basis. The Company has invested in auction rate security
instruments, which are classified as available for sale securities and reflected at fair value. However, due primarily to credit market events beginning during the first quarter of 2008, the auction
events for most of these instruments failed. Therefore, quoted prices in active markets are no longer available and the Company has estimated the fair values of these securities utilizing a discounted
cash flow analysis as of December 31, 2009. These analyses consider, among other items, the collateralization underlying the security investments, the creditworthiness of the counterparty, the
timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction.

As
of December 31, 2009, the Company owned $4.3 million of auction rate security instruments. The auction rate security instruments held by the Company at
December 31, 2009 were tax-exempt municipal bond investments, for which the market has experienced some successful auctions. The Company has classified the investments as
non-current and has identified them as "Other assets" in its Consolidated Balance Sheet as of December 31, 2009. The Company has classified these securities as non current due to
the Company's belief that the market for these securities may take in excess of twelve months to fully recover. As of December 31, 2009, the Company continued to record interest on

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(6) Fair Value Measurements (Continued)

all
of its auction rate security instruments. Any future fluctuations in fair value related to these instruments that the Company deems to be temporary, including any recoveries of previous write
downs, would be recorded to accumulated other comprehensive income. If the Company determines that any future valuation adjustment was other than temporary, a charge would be recorded to earnings as
appropriate.

As
of December 31, 2009, the Company held certain assets that are required to be measured at fair value on a recurring basis. Assets measured at fair value on a recurring basis
are summarized below (in thousands):

Fair Value Measurements as of
December 31, 2009Total

Level 1

Level 2

Level 3Cash, Cash Equivalents and Restricted Cash

$
87,144

$
87,144

$


$
Marketable Securities


645,301





645,301


Other Assets


4,259








4,259Total Assets Measured at Fair Value

$
736,704

$
87,144

$
645,301

$
4,259


Based
on market conditions, the Company uses a discounted cash flow valuation methodology for auction rate securities. Accordingly, for purposes of the foregoing consolidated financial statements,
these securities were categorized as Level 3 securities.

The
following table presents the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2009 (in
thousands):

Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)

Auction Rate
SecuritiesBalance at January 1, 2009

$
4,686Total realized and unrealized gains or (losses)Included in earnings


Included in other comprehensive income


(427
)Transferred out


Settlements


Balance at December 31, 2009

$
4,259


(7) Investment Securities

The Company reviews investment securities on an ongoing basis for the presence of other-than-temporary-impairment ("OTTI") with formal reviews performed
quarterly. OTTI losses on individual equity investment securities are recognized as a realized loss through earnings when fair value is significantly below cost, the decline in fair value has existed
for an extended period of time,

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(7) Investment Securities (Continued)

and
recovery is not expected in the near term. OTTI losses on individual perpetual preferred securities are recognized as a realized loss through earnings when a decline in the cash flows has occurred
or the rating of the security has been downgraded below investment grade.

This
accounting guidance requires the Company to take into consideration current market conditions, fair value in relationship to cost, extent and nature of change in fair value, issuer
rating changes and trends, volatility of earnings, current analysts' evaluations, all available information relevant to the securities, the Company's ability and intent to hold investments until a
recovery of fair value, which may be maturity, and other factors when evaluating for the existence of OTTI in the Company's securities portfolio.

As
a result of an ongoing valuation review of the Company's marketable securities portfolio, the Company recognized a pre-tax charge of approximately $7.1 million
during the year ended December 31, 2009 for certain marketable securities deemed to have other-than-temporary impairment.

(8) Investment in Other Companies

On September 4, 2008, the Company announced its intention to acquire a 20% interest in a Brazilian regional airline, Trip Linhas Aereas ("Trip"), for $30 million. As of
December 31, 2009, the Company's investment balance was $23.4 million for a 16.4% interest in Trip, which is recorded as an "Other asset" on the Company's consolidated balance sheet. If
Trip meets or exceeds certain financial targets, the Company is scheduled to make another $10 million investment on March 1, 2010. The Company accounts for its interest in Trip using the
equity method of accounting. The Company records its equity in Trip's earnings on a one-quarter lag. The Company's allocated portion of Trip's earnings during the year ended
December 31, 2009 was $1.8 million.

(9) Capital Transactions

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock in one or more series without shareholder approval. No shares of
preferred stock are presently outstanding. The Company's Board of Directors is authorized, without any further action by the shareholders of the Company, to (i) divide the preferred stock into
series; (ii) designate each such series; (iii) fix and determine dividend rights; (iv) determine the price, terms and conditions on which shares of preferred stock may be
redeemed; (v) determine the amount payable to holders of preferred stock in the event of voluntary or involuntary liquidation; (vi) determine any sinking fund provisions; and
(vii) establish any conversion privileges.

Stock Compensation

Effective January 1, 2001, the Company adopted two stock option plans: the Executive Stock Incentive Plan (the "Executive Plan")
and the 2001 Allshare Stock Option Plan (the "Allshare Plan"). These plans replaced the Company's Combined Incentive and Non-Statutory Stock Option Plans (the "Prior Plans"). There are no
additional shares of common stock available for issuance under these plans. However, as of December 31, 2009, options to purchase approximately 360,000 shares of the

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(9) Capital Transactions (Continued)

Company's
common stock remained outstanding under the Prior Plans and 3,025,949 shares of the Company's common stock remained outstanding under the Executive Plan and the Allshare Plan.

On
May 2, 2006, the Company's shareholders approved the adoption of the SkyWest Inc. Long-Term Incentive Plan, which provides for the issuance of up to
6,000,000 shares of common stock to the Company's directors, employees, consultants and advisors (the "2006 Incentive Plan"). The 2006 Incentive Plan provides for awards in the form of options to
acquire shares of common stock, stock appreciation rights, restricted stock grants and performance awards. The 2006 Incentive Plan is administered by the Compensation Committee of the Company's Board
of Directors (the "Compensation Committee") who is authorized to designate option grants as either incentive or non-statutory. Incentive stock options are granted at not less than 100% of
the market value of the underlying common stock on the date of grant. Non-statutory stock options are granted at a price as determined by the Compensation Committee.

The
fair value of stock options has been estimated as of the grant date using the Black-Scholes option pricing model. The Company uses historical data to estimate option exercises and
employee
termination in the option pricing model. The expected term of options granted is derived from the output of the option pricing model and represents the period of time that options granted are expected
to be outstanding. The expected volatilities are based on the historical volatility of the Company's traded stock and other factors. During the year ended December 31, 2009, the Company granted
457,397 stock options to employees under the 2006 Incentive Plan. The following table shows the assumptions used and weighted average fair value for grants in the years ended December 31, 2009,
2008 and 2007.

2009

2008

2007Expected annual dividend rate


1.05
%

0.47
%

0.45
%Risk-free interest rate


1.67
%

2.39
%

4.77
%Average expected life (years)


4.6


4.3


4.5Expected volatility of common stock


0.351


0.264


0.272Forfeiture rate


1.0
%

4.4
%

4.7
%Weighted average fair value of option grants

$
4.42

$
6.32

$
8.06


The
Company recorded share-based compensation expense only for those options that are expected to vest. The estimated fair value of the stock options is amortized over the vesting period
of the respective stock option grants.

During
the year ended December 31, 2009, the Company granted 201,204 shares of restricted stock to the Company's employees under the 2006 Incentive Plan. The restricted stock has
a three-year vesting period, during which the recipient must remain employed with the Company or its subsidiaries. The weighted average fair value of the restricted stock on the date of
grants made during the year ended December 31, 2009 was $15.24 per share. Additionally, the Company granted 26,247 fully-vested shares of common stock to the Company's directors with a weighted
average grant-date fair value of

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(9) Capital Transactions (Continued)

$15.24.
The following table summarizes the restricted stock activity as of December 31, 2009, 2008 and 2007:

Number of
Shares

Weighted-Average
Grant-Date
Fair ValueNon-vested shares outstanding at December 31, 2006


312,751

$
23.80Granted


311,211


26.84Vested


(1,579
)

24.07Cancelled


(87,948
)

25.30Non-vested shares outstanding at December 31, 2007


534,435

$
25.35Granted


296,245


25.77Vested


(5,848
)

24.79Cancelled


(69,705
)

25.60Non-vested shares outstanding at December 31, 2008


755,127

$
25.50Granted


227,451


15.24Vested


(260,575
)

22.94Cancelled


(35,417
)

24.10Non-vested shares outstanding at December 31, 2009


686,586

$
23.13


During
the year ended December 31, 2009, 2008 and 2007, the Company recorded equity-based compensation expense of $7.9 million, $11.5 million and
$13.1 million, respectively.

As
of December 31, 2009, the Company had $6.6 million of total unrecognized compensation cost related to non-vested stock options and non-vested
restricted stock grants. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize this cost over a weighted average period of
1.6 years.

Options
are exercisable for a period as defined by the Compensation Committee on the date granted; however, no stock option will be exercisable before six months have elapsed from the
date it is granted and no incentive stock option shall be exercisable after ten years from the date of grant. The

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(9) Capital Transactions (Continued)

following
table summarizes the stock option activity for all of the Company's plans for the years ended December 31, 2009, 2008 and 2007:

2009

2008

2007Number of
Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
($000)

Number of
Options

Weighted
Average
Exercise
Price

Number of
Options

Weighted
Average
Exercise
PriceOutstanding at beginning of year


4,470,734

$
20.90

4.4 years

$



4,681,915

$
20.01


5,504,572

$
19.36Granted


457,397


15.24







357,716


25.70


382,467


26.87Exercised


(13,011
)

14.64







(420,670
)

14.27


(1,048,072
)

18.67Cancelled


(174,425
)

19.66







(148,227
)

23.38


(157,052
)

22.51Outstanding at end of year


4,740,695


20.37

3.8 years





4,470,734


20.90


4,681,915


20.01Exercisable at December 31, 2009


3,652,528


20.00

3.3 years





3,550,283


19.71Exercisable at December 31, 2008


3,550,283


19.71

4.2 years





2,518,685


20.35


The total intrinsic value of options to acquire shares of the Company's common stock that were exercised during the years ended
December 31, 2009, 2008 and 2007 was $38,000, $2.4 million and $8.7 million, respectively.

The
following table summarizes the status of the Company's non-vested stock options as of December 31, 2009:

Number of
Shares

Weighted-Average
Grant-Date
Fair ValueNon-vested shares at beginning of year


920,451

$
7.02Granted


457,397


4.42Vested


(274,906
)

6.80Cancelled


(14,775
)

7.08Non-vested shares at end of year


1,088,167

$
5.98


The
following table summarizes information about the Company's stock options outstanding at December 31, 2009:

Options Outstanding

Options ExercisableRange of Exercise Prices

Number
Outstanding

Weighted Average
Remaining
Contractual Life

Weighted Average
Exercise Price

Number
Exercisable

Weighted Average
Exercise Price$10 to $15


754,995

4.9 years

$
13.43


296,294

$
10.64$16 to $21


2,139,786

4.0 years


18.10


2,134,810


18.09$22 to $28


1,845,914

2.9 years


25.83


1,221,424


25.60$10 to $28


4,740,695

3.8 years


20.37


3,652,528


20.00


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(9) Capital Transactions (Continued)

Taxes

A portion of the Company's granted options qualify as incentive stock options (ISO) for income tax purposes. As such, a tax benefit is
not recorded at the time the compensation cost related to the options is recorded for book purposes due to the fact that an ISO does not ordinarily result in a tax benefit unless there is a
disqualifying disposition. Stock option grants of non-qualified options result in the creation of a deferred tax asset, which is a temporary difference, until the time that the option is
exercised. Due to the treatment of incentive stock options for tax purposes, the Company's effective tax rate from year to year is subject to variability.

(10) Retirement Plans and Employee Stock Purchase Plans

SkyWest Retirement Plan

The Company sponsors the SkyWest, Inc. Employees' Retirement Plan (the "SkyWest Plan"). Employees who have completed
90 days of service and are at least 18 years of age are eligible for participation in the SkyWest Plan. Employees may elect to make contributions to the SkyWest Plan. The Company matches
100% of such contributions up to 2%, 4% or 6% of the individual participant's compensation, based upon length of service. Additionally, a discretionary contribution may be made by the Company. The
Company's combined contributions to the SkyWest Plan were $11.8 million, $9.3 million and $9.0 million for the years ended December 31, 2009, 2008 and 2007, respectively.

ASA Retirement Plan

ASA sponsors the Atlantic Southeast Airlines, Inc. Investment Savings Plan (the "ASA Plan"). Employees who have completed
90 days of service and are 18 years of age are eligible for participation in the ASA Plan. Employees may elect to make contributions to the ASA Plan however, ASA limits the amount of
company match at 6% of each participant's total compensation, except for those with 10 or more years of service whose company match is limited to 8% of total compensation. Additionally, ASA matches
the individual participant's contributions from 20% to 75%, depending on the length of the participant's service. ASA's contribution to the ASA Plan was $4.7 million, $4.6 million and
$4.0 million for the years ended December 31, 2009, 2008 and 2007, respectively. Additionally, participants are 100% vested in their elective deferrals and rollover amounts and from 10%
to 100% vested in company matching contributions based on length of service.

Employee Stock Purchase Plans

In May 2009, the Company's Board of Directors approved the SkyWest, Inc. 2009 Employee Stock Purchase Plan (the "2009 Stock
Purchase Plan"). All employees who have completed 90 days of employment with the Company or one of its subsidiaries are eligible to participate, except employees who own five percent or more of
the Company's common stock. The 2009 Stock Purchase Plan enables employees to purchase shares of the Company's common stock at a 5% discount, through payroll deductions. Employees can contribute up to
15% of their base pay, not to exceed $21,250 each calendar year, for the purchase of shares. Shares are purchased semi-annually at a 5% discount based on the end of the period price.
Employees can terminate their participation in the 2009 Stock Purchase Plan at anytime upon written notice.

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(10) Retirement Plans and Employee Stock Purchase Plans (Continued)

In
February 1996, the Company's Board of Directors approved the SkyWest, Inc. 1995 Employee Stock Purchase Plan (the "1995 Stock Purchase Plan"). The 1995 Stock Purchase Plan
enabled employees to purchase shares of the Company's common stock at a 15% discount, through payroll deductions. There are no additional shares of common stock available for issuance under this plan.

The
following table summarizes purchases made under the 2009 and 1995 Employee Stock Purchase Plans:

Year Ended December 31,2009

2008

2007Number of share purchased


835,469


807,797


454,162Average price of shares purchased

$
10.26

$
13.90

$
20.65


The
2009 Stock Purchase Plan is a non-compensatory plan under the accounting guidance. Therefore, no compensation expense was recorded for the year ended December 31,
2009. The 1995 Stock Purchase Plan was a compensatory plan under the accounting guidance because the shares were purchased semi-annually at a 15% discount based on the lower of the
beginning or the end of the period price. During the years ended December 31, 2008 and 2007, the Company recorded compensation expense of $3.0 million and $2.8 million related to
1995 Stock Purchase Plan, respectively. The fair value of the shares purchased under the Stock Purchase Plan was determined using the Black-Scholes option pricing model with the following assumptions:

2008

2007Expected annual dividend rate


0.80
%

0.47
%Risk-free interest rate


2.51
%

5.07
%Average expected life (months)


6


6Expected volatility of common stock


0.264


0.272


(11) Stock Repurchase

The Company's Board of Directors authorized the repurchase of up to 15,000,000 shares of the Company's common stock in the public market. During the years ended December 31, 2009
and 2008, the Company repurchased 1.9 and 5.4 million shares of common stock for approximately $18.4 million and $102.6 million at a weighted average price per share of $9.88 and
$19.16, respectively.

(12) Related-Party Transactions

The Company's President, Chairman of the Board and Chief Executive Officer, serves on the Board of Directors of Zions Bancorporation ("Zions"). The Company maintains a line of credit
(see Note 2) and certain bank accounts with Zions. Zions is an equity participant in leveraged leases on three CRJ200, two CRJ700 and five Brasilia turboprop aircraft operated by the Company.
Zions also serves as the Company's transfer agent. The Company's cash balance in the accounts held at Zions as of December 31, 2009 and 2008 was $22.1 million and $11.7 million,
respectively.

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SKYWEST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2009

(13) Quarterly Financial Data (Unaudited)

Unaudited summarized financial data by quarter for 2009 and 2008 is as follows (in thousands, except per share data):

Year Ended December 31, 2009First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

YearOperating revenues (000)

$
672,642

$
698,823

$
637,748

$
604,401

$
2,613,614Operating income (000)


40,824


59,769


63,253


48,349


212,195Net income (000)


9,372


26,219


28,566


19,501


83,658Net income per common share:Basic

$
0.17

$
0.47

$
0.51

$
0.35

$
1.50Diluted


0.16


0.46


0.50


0.34


1.47Weighted average common shares:Basic:


56,546


55,657


55,605


55,606


55,854Diluted:


57,427


56,558


56,652


56,621


56,814




Year Ended December 31, 2008First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

YearOperating revenues (000)

$
868,023

$
950,820

$
934,112

$
743,294

$
3,496,249Operating income (000)


68,222


72,951


60,259


53,799


255,231Net income (000)


29,140


36,434


26,156


21,199


112,929Net income per common share:Basic

$
0.49

$
0.63

$
0.46

$
0.37

$
1.95Diluted


0.47


0.63


0.45


0.37


1.93Weighted average common shares:Basic:


60,013


57,377


57,027


56,744


57,790Diluted:


61,351


58,009


57,682


57,488


58,633


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ITEM 9.    CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), within 90 days of the filing date of this Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective in alerting them on a timely basis to material information required to be included in our reports filed or submitted under the Exchange Act. There have
been no other significant changes (including corrective actions with regard to material weaknesses) in our internal controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced above.

Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial
reporting includes those written policies and procedures that:



Internal
control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our
management assessed the effectiveness our internal control over financial reporting as of December 31, 2009. Our management's assessment was based on criteria for effective
internal control over financial reporting described in "Internal ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our
management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the

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operational
effectiveness of our internal control over financial reporting. Our management reviewed the results of its assessment with the Audit Committee of our Board of Directors. Based on this
assessment, our management determined that, as of December 31, 2009, we maintained effective internal control over financial reporting. Ernst & Young LLP, the independent
registered public accounting firm who audited our consolidated financial statements included in this Report, has issued a report on our internal control over financial reporting, which is included
herein.

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Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
SkyWest, Inc.

We
have audited SkyWest, Inc. and subsidiaries' internal control over financial reporting as of December 31, 2009, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). SkyWest, Inc. and subsidiaries' management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, SkyWest, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on
the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of SkyWest, Inc. and
subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in
the period ended December 31, 2009 of SkyWest, Inc. and subsidiaries and our report dated February 22, 2010 expressed an unqualified opinion thereon.

/s/
Ernst & Young LLP

Salt
Lake City, Utah
February 22, 2010

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ITEM 9B.    OTHER INFORMATION

None.

PART III

Items 10, 11, 12, 13 and 14 in Part III of this Report are incorporated herein by reference to our definitive proxy
statement for our 2010 Annual Meeting of Shareholders scheduled for May 4, 2010. We intend to file our definitive proxy statement with the SEC not later than 120 days after
December 31, 2009, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended.



Headings in Proxy StatementITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

"Election of Directors", "Corporate Governance" and "Executive Compensation"ITEM 11.

EXECUTIVE COMPENSATION

"Executive Compensation" and "Compensation Committee Report"ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

"Election of Directors" and "Security Ownership"ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

"Executive Compensation"ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

"Audit Committee Disclosure"


PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



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Table of Contents

Number

Exhibit

Incorporated
by Reference3.1

Restated Articles of Incorporation

(1)3.2

Amended and Restated Bylaws

(2)4.1

Specimen of Common Stock Certificate

(3)10.1

Amended and Restated Delta Connection Agreement, dated as of September 8, 2005, between SkyWest Airlines, Inc. and Delta Air Lines, Inc.

(4)10.2

Second Amended and Restated Delta Connection Agreement, dated as of September 8, 2005, between Atlantic Southeast Airlines, Inc. and Delta Air Lines, Inc.

(4)10.3

United Express Agreement dated September 9, 2003, between United Air Lines, Inc., and SkyWest Airlines, Inc.

(5)10.4

Stock Option Agreement dated January 28, 1987 between Delta Air Lines, Inc. and SkyWest, Inc.

(6)10.5

Lease Agreement dated December 1,1989 between Salt Lake City Corporation and SkyWest Airlines, Inc.

(7)10.6(a)

Master Purchase Agreement between Bombardier and SkyWest Airlines, Inc.

(8)10.6(b)

Supplement to Master Purchase Agreement between Bombardier, and SkyWest Airlines, Inc.

(5)10.7

SkyWest, Inc. Amended and Combined Incentive and Non-Statutory Stock Option Plan

(9)10.8

SkyWest Inc. 2007 Employee Stock Purchase Plan

(10)10.8(a)

First Amendment to SkyWest, Inc. 2007 Employee Stock Purchase Plan

(13)10.9

SkyWest Inc. Executive Stock Incentive Plan

(11)10.10

SkyWest Inc. Allshare Stock Option Plan

(11)10.11

Airline Services Agreement dated December 20, 2007 by and between SkyWest Airlines, Inc. and Midwest Airlines, Inc

(12)10.12

SkyWest, Inc. 2002 Deferred Compensation Plan, as amended and restated effective January 1, 2009

(13)10.12(a)

First Amendment to the Restated SkyWest, Inc. 2002 Deferred Compensation Plan

(13)10.13

SkyWest, Inc. 2007 Long-Term Incentive Plan

(13)10.13(a)

First Amendment to the SkyWest, Inc. 2007 Long-Term Incentive Plan

(13)10.13(b)

Second Amendment to the SkyWest, Inc. 2007 Long-Term Incentive Plan

(13)10.14

SkyWest, Inc. 2009 Employee Stock Purchase Plan

(13)21.1

Subsidiaries of the Registrant

(1)23.1

Consent of Independent Registered Public Accounting Firm

Filed herewith31.1

Certification of Chief Executive Officer

Filed herewith31.2

Certification of Chief Financial Officer

Filed herewith32.1

Certification of Chief Executive Officer

Filed herewith32.2

Certification of Chief Financial Officer

Filed herewith


(1)Incorporated
by reference to the exhibits to a Registration Statement on Form S-3, File No. 333-129832(2)Incorporated
by reference to a Registration Statement on Form S-3, File No. 33-74290(3)Incorporated
by reference to a Registration Statement on Form S-3, File No. 333-42508


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(4)Incorporated
by reference to Registrant's Form 8-K/A filed on February 12, 2007(5)Incorporated
by reference to exhibits to Registrant's Form 10-Q filed on September 30, 2003(6)Incorporated
by reference to the exhibits to Registrant's Forms 8-K filed on January 21, 1998 and February 11, 1998(7)Incorporated
by reference to the exhibits to Registrant's Form 10-Q filed for the quarter ended December 31, 1986(8)Incorporated
by reference to the exhibits to Registrant's Form 10-Q filed on February 13, 2003(9)Incorporated
by reference to the exhibits to a Registration Statement on Form S-8, Filed No. 33-41285(10)Incorporated
by reference to the exhibits to a Registration Statement on Form S-8, File No, 333-130848(11)Incorporated
by reference to the exhibits to Registrant's Form 10-Q filed on July 28, 2000(12)Incorporated
by reference to the exhibits to the Registrant's Form 10-K filed February 28, 2008.(13)Incorporated
by reference to the exhibits to the Registrant's Form 10-K filed February 23, 2009.


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Report of Independent Registered Public Accounting Firm

We have audited the consolidated financial statements of SkyWest, Inc. and subsidiaries (the "Company") as of
December 31, 2009 and 2008, and for each of the three years in the period ended December 31, 2009, and have issued our report thereon dated February 22, 2010 (included elsewhere
in this Form 10-K). Our audits also included the financial statement schedule listed in Item 15(a) of this Form 10-K. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based on our audits.

In
our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

/s/
Ernst & Young LLP

Salt
Lake City, Utah
February 22, 2010

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SKYWEST, INC. AND SUBSIDIARIES

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2009, 2008 and 2007

(Dollars in thousands)

Description

Balance at
Beginning
of Year

Additions
Charged to
Costs and
Expenses

Deductions

Balance at
End of YearYear Ended December 31, 2009:Allowance for inventory obsolescence

$
5,533

$
1,082




$
6,615Allowance for doubtful accounts receivable


47








47$
5,580

$
1,082




$
6,662Year Ended December 31, 2008:Allowance for inventory obsolescence

$
4,681

$
852




$
5,533Allowance for doubtful accounts receivable


47








47$
4,728

$
852




$
5,580Year Ended December 31, 2007:Allowance for inventory obsolescence

$
3,605

$
1,076




$
4,681Allowance for doubtful accounts receivable


47








47$
3,652

$
1,076




$
4,728


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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Act of 1934, as amended, the Registrant has duly
caused this Annual Report on Form 10-K for the year ended December 31, 2009, to be signed on its behalf by the undersigned, thereunto duly authorized, on February 22,
2010.

SKYWEST, INC.By:

/s/ BRADFORD R. RICH Bradford R. Rich Executive Vice President and
Chief Financial Officer


ADDITIONAL SIGNATURES

Pursuant to the requirement of the Securities Act of 1934, as amended, this Annual Report on Form 10-K has been
signed below by the following persons in the capacities and on the dates indicated.

Name

Capacities

Date/s/ JERRY C. ATKIN Jerry C. Atkin

Chairman of the Board and Chief Executive Officer

February 22, 2010/s/ BRADFORD R. RICH Bradford R. Rich

Executive Vice President and Chief Financial Officer

February 22, 2010/s/ STEVEN F. UDVAR-HAZY Steven F. Udvar-Hazy

Lead Director

February 22, 2010/s/ J. RALPH ATKIN J. Ralph Atkin

Director

February 22, 2010/s/ IAN M. CUMMING Ian M. Cumming

Director

February 22, 2010/s/ ROBERT G. SARVER Robert G. Sarver

Director

February 22, 2010/s/ MARGARET S. BILLSON Margaret S. Billson

Director

February 22, 2010/s/ HENRY J. EYRING Henry J. Eyring

Director

February 22, 2010/s/ JAMES L. WELCH James L. Welch

Director

February 22, 2010/s/ MICHAEL K. YOUNG Michael K. Young

Director

February 22, 2010


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