January 15, 2021

SKYWEST AIRLINES, INC.

444 South River Road

St. George, Utah 84790

Re: Amendments to Loan and Guarantee Agreement

Reference is made to that certain Loan and Guarantee Agreement, dated as of September 

29, 2020 and amended and restated pursuant to that certain Restatement Agreement, dated as of October 

28, 2020 (the “Existing Loan and Guarantee Agreement”, and as amended hereby and as may be further 

amended, supplemented and restated or otherwise modified from time to time, the “Loan and Guarantee 

Agreement”), among SKYWEST AIRLINES, INC., a corporation organized under the laws of Utah

(the “Borrower”), SKYWEST, INC., a corporation organized under the laws of Utah (the “Parent”), the 

United States Department of the Treasury (“Treasury”) and The Bank of New York Mellon as 

Administrative Agent and Collateral Agent. Capitalized terms used herein but not otherwise defined 

shall have the meanings ascribed to such terms in the Loan and Guarantee Agreement.

WHEREAS, Pursuant to Section 11.02 of the Loan and Guarantee Agreement, the Borrower 

has requested amendments to the Existing Loan and Guarantee Agreement as set forth herein; and

WHEREAS, Treasury, as the Initial Lender and constituting the Required Lenders, has agreed 

to amend the Existing Loan and Guarantee Agreement as set forth herein.

NOW, THEREFORE, in consideration of the mutual promises contained herein and other 

good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the 

parties hereto agree as follows:

1. Effective as of the date hereof, Section 1.01 of the Existing Loan and Guarantee Agreement is 

hereby amended by inserting the following definition, in alphabetical order:

““PSP2 Warrant Agreement” means that certain warrant agreement, dated as of January 15,

2021 between SkyWest, Inc. and Treasury.”

2. Effective as of the date hereof, the definition of “Warrants” in Section 1.01 of the Existing 

Loan and Guarantee Agreement is hereby amended and restated in its entirety as follows:

““Warrants” means, collectively, those certain warrants issued to Treasury under the Warrant 

Agreement, the PSP Warrant Agreement or the PSP2 Warrant Agreement.”

3. Effective as of the date hereof, Section 2.07 of the Existing Loan and Guarantee Agreement is 

hereby amended by deleting the reference to “March 26, 2021” and replacing it with “May 28, 2021”.

4. This letter agreement shall be limited as written and nothing herein shall be deemed to 

constitute an amendment or waiver of any other term, provision or condition of the Loan and 

Guarantee Agreement or any of the other Loan Documents in any other instance than as expressly set 

forth herein or prejudice any right or remedy that any Lender, the Administrative Agent or the 

Collateral Agent may now have or may in the future have under the Loan and Guarantee Agreement 

or any of the other Loan Documents. For the avoidance of doubt, this letter agreement is hereby 

deemed to be a Loan Document under the Loan and Guarantee Agreement. Except as herein 

provided, the Loan and Guarantee Agreement and the other Loan Documents shall remain unchanged 

and in full force and effect. This letter agreement shall not constitute a novation of the Loan and 

Guarantee Agreement or any other Loan Documents.
5. The Agents assume no responsibility for, and shall be entitled to rely on, without any 

obligation to ascertain or investigate, the correctness of the recitals and statements contained herein. 

The Agents shall not be liable or responsible in any manner whatsoever for, or in respect of, the 

validity or sufficiency of the amendments contained in this letter agreement.

6. Sections 11.06(b) (Electronic Execution), 11.09 (Governing Law; Jurisdiction; Etc.) and 

11.10 (Waiver of Jury Trial) of the Loan and Guarantee Agreement shall apply mutatis mutandis to 

this letter agreement as if set out herein.

7. This letter agreement may be executed in counterparts (and by different parties hereto in 

different counterparts), each of which shall constitute an original, but all of which when taken 

together shall constitute a single contract. Delivery of an executed counterpart of a signature page of 

this letter agreement by facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as 

delivery of a manually executed counterpart of this letter agreement. 

The Lenders party hereto hereby authorize and direct the Administrative Agent and the Collateral 

Agent to acknowledge this letter agreement.

[Remainder of this page intentionally left blank.]


[Signature Page to Letter Agreement – SkyWest] 

Acknowledged: 

THE BANK OF NEW YORK MELLON, as Administrative Agent 

By: _______________________ 

Name: 

Title: 

THE BANK OF NEW YORK MELLON, as Collateral Agent 

By: _______________________ 

Name: 

Title: 

Bret S. Derman

Vice President

Bret S. Derman

Vice President
Execution

RESTATEMENT AGREEMENT

RESTATEMENT AGREEMENT, dated as of October 28, 2020 (this “Restatement 

Agreement”), to that certain Loan and Guarantee Agreement, dated as of September 29, 2020 (the 

“Existing Loan and Guarantee Agreement”, and as amended and restated by this Restatement 

Agreement, and as may be further amended, restated, amended and restated, supplemented or 

otherwise modified from time to time, the “Loan and Guarantee Agreement”), among SKYWEST 

AIRLINES, INC., a corporation organized under the laws of Utah (the “Borrower”), SKYWEST,

INC., a corporation organized under the laws of Utah (the “Parent”), the Guarantors party hereto 

from time to time, the UNITED STATES DEPARTMENT OF THE TREASURY (“Treasury”), 

as Initial Lender and THE BANK OF NEW YORK MELLON, as Administrative Agent and as

Collateral Agent. Capitalized terms used and not otherwise defined herein shall have the meanings 

assigned to such terms in the Loan and Guarantee Agreement.

W I T N E S S E T H:

WHEREAS, the Parent, the Borrower, Treasury and the Agents are each party to 

the Existing Loan and Guarantee Agreement;

WHEREAS, the Borrower has requested that Treasury extend additional

Commitments to the Borrower (the “Additional Commitments”) as is permissible under the 

Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (Mar. 27, 2020), as the 

same may be amended form time to time (the “CARES Act”) to the Borrower, and Treasury is 

willing to do so on the terms and conditions set forth herein; 

WHEREAS, pursuant to Section 4003(h)(1) of the CARES Act, for purposes of the 

Code, the Loans made pursuant to the Commitments (as increased by the Additional Commitments

being provided hereby) shall be treated as indebtedness and as having been issued for their 

aggregate stated principal amount, and the interest payable pursuant to Section 2.09(a) of the Loan 

and Guarantee Agreement shall be treated as qualified stated interest;

WHEREAS, Loans made pursuant to the Commitments (as increased by the

Additional Commitments being provided hereby) will be secured by Liens on the Collateral 

securing the existing Obligations, together with Liens on any Additional Collateral, subject to the 

distribution priorities set forth in the Loan and Guarantee Agreement; 

WHEREAS, pursuant to Section 11.02 of the Loan and Guarantee Agreement, the 

Borrower has requested amendments to the Existing Loan and Guarantee Agreement as set forth 

in this Restatement Agreement; and

WHEREAS, Treasury has agreed to amend the Existing Loan and Guarantee

Agreement as more particularly set forth in this Restatement Agreement.

NOW, THEREFORE, in consideration of the mutual promises contained herein 

and other good and valuable consideration, the receipt and sufficiency of which is hereby 

acknowledged, the parties hereto agree as follows:
2

Section 1. Additional Commitments. Treasury hereby agrees to provide 

Additional Commitments to the Borrower on the Restatement Effective Date on the terms set forth 

herein and in the Loan and Guarantee Agreement and the other Loan Documents, and subject to 

the conditions set forth below, in an aggregate principal amount, together with the Closing Date

Commitment, not to exceed the amount of the Commitments as defined in the Loan and Guarantee 

Agreement (as amended hereby). The Additional Commitments shall be deemed to be 

“Commitments” under and as defined in the Loan and Guarantee Agreement (as amended hereby) 

for all purposes of the Loan and Guarantee Agreement and the other Loan Documents, and shall 

be secured by the applicable Liens granted to the Collateral Agent for the benefit of the Secured 

Parties and entitled to the benefits of the applicable Security Documents.

Section 2. Amendments. Effective as of the Restatement Effective Date, (a) 

the Existing Loan and Guarantee Agreement is hereby amended and restated, in its entirety, to be 

in the form attached as Annex A hereto and (b) all of the other Schedules and Exhibits to the 

Existing Loan and Guarantee Agreement remain in the forms attached to the Existing Loan and 

Guarantee Agreement.

Section 3. Representations and Warranties. The Credit Parties represent 

and warrant to the Administrative Agent, the Collateral Agent and the Lenders as of the 

Restatement Effective Date that:

(a) The execution, delivery and performance by each Credit Party of this 

Restatement Agreement and each other Loan Document to which it is party have been duly 

authorized by all necessary corporate or other organizational action, and do not and will not 

(a) contravene the terms of its Organizational Documents, (b) conflict with or result in any 

breach or contravention of, or the creation of any Lien under, or require any payment to be made 

under (i) any material Contractual Obligation to which each Credit Party is a party or affecting 

each Credit Party or the material properties of any Credit Party or (ii) any material order, 

injunction, writ or decree of any Governmental Authority or any arbitral award to which any 

Credit Party or its property is subject or (c) violate any Law, except to the extent such violation 

could not reasonably be expected to have a Material Adverse Effect.

(b) No approval, consent, exemption, authorization, or other action by, or 

notice to, or filing with, any Governmental Authority or any other Person is necessary or required 

in connection with the execution, delivery or performance by, or enforcement against, each 

Credit Party of this Restatement Agreement or any other Loan Document, except for (i) such 

approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, 

taken or made and in full force and effect and (ii) filings and consents contemplated by the 

Security Documents or Section 5.14 of the Loan and Guarantee Agreement.

(c) This Restatement Agreement has been, and each other Loan 

Document, when delivered hereunder, will have been, duly executed and delivered by each 

Credit Party set forth on the signature pages to this Restatement Agreement. This Restatement 

Agreement constitutes, and each other Loan Document when so delivered will constitute, the 

legal, valid and binding obligation of each Credit Party hereto enforceable against such Credit

Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, 
3

insolvency, reorganization, receivership, moratorium or other Laws affecting the creditors’ 

rights generally and by general principles of equity.

(d) No Default exists under the Loan and Guarantee Agreement.

(e) All representations and warranties contained in the Loan and 

Guarantee Agreement and the other Loan Documents are true and correct in all material respects 

as of the date hereof, except to the extent that (A) such representations or warranties are qualified 

by a materiality standard, in which case they are true and correct in all respects, and (B) such 

representations or warranties expressly relate to an earlier date (in which case such 

representations and warranties are true and correct in all material respects as of such earlier date).

Section 4. Conditions Precedent to Effectiveness. The effectiveness of this 

Restatement Agreement and the Additional Commitments provided hereby are subject to the 

satisfaction (or waiver in accordance with Section 11.02 of the Loan and Guarantee Agreement) 

of the following conditions (and, in the case of each document specified in this Section to be 

received by the Initial Lender (and the applicable Agent or Agents), such document shall be in 

form and substance satisfactory to the Initial Lender and/or the applicable Agent or Agents) (the 

date on which such conditions are satisfied or waived being the “Restatement Effective Date”) 

when:

(a) Executed Counterparts. The Initial Lender and the Agents shall have 

received from each Credit Party hereto a counterpart of this Restatement Agreement and an 

amendment to the Pledge and Security Agreement, substantially in the form attached hereto as 

Annex B (such amendment, the “First Amendment to the Pledge and Security Agreement”), each 

signed on behalf of such Credit Party. Notwithstanding anything herein to the contrary, delivery 

of an executed counterpart of a signature page of this Restatement Agreement or the First 

Amendment to the Pledge and Security Agreement by telecopy or other electronic means, or 

confirmation of the execution of this Restatement Agreement and the First Amendment to the 

Pledge and Security Agreement on behalf of a party by an email from an authorized signatory of 

such party shall be effective as delivery of a manually executed counterpart of this Restatement 

Agreement and the First Amendment to the Pledge and Security Agreement.

(b) Certificates. The Initial Lender and any applicable Agent shall have 

received such customary certificates of resolutions or other action, incumbency certificates 

and/or other certificates of Responsible Officers of the Credit Parties as the Lenders may require 

evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to 

act as a Responsible Officer in connection with the Loan Documents;

(c) Organizational Documents. The Initial Lender shall have received 

customary resolutions or evidence of corporate authorization, secretary’s certificates and such 

other documents and certificates (including Organizational Documents and good standing 

certificates) as the Initial Lender may request relating to the organization, existence and good 

standing of each Credit Party and any other legal matters relating to the Credit Parties, the Loan 

Documents or the transactions contemplated thereby.
4

(d) Opinion of Counsel to Credit Parties. The Initial Lender and the 

applicable Agent or Agents shall have received all opinions of counsel (including opinions of 

counsel covering the creation and perfection, or the continuing creation and perfection, of the 

security interests on Collateral, consistent with the opinions delivered on the Closing Date, and 

including substantially similar opinions with respect to any Additional Collateral) to the Credit 

Parties that is acceptable to the Initial Lender, addressed to the Initial Lender and the applicable 

Agent or Agents and dated as of the Restatement Effective Date, in form and substance 

satisfactory to the Initial Lender and the applicable Agent (and the Parent hereby instructs such 

counsel to deliver such opinions to such Persons).

(e) Expenses. The Borrower shall have paid all reasonable fees, expenses 

(including the reasonable fees and expenses of legal counsel) and other amounts due to the Initial 

Lender, the Administrative Agent and the Collateral Agent (to the extent that statements for such 

expenses shall have been delivered to the Borrower on or prior to the Restatement Effective 

Date); provided that such expenses payable by the Borrower may be offset against the proceeds 

of any Loans funded on the Restatement Effective Date.

(f) Officer’s Certificate. The Initial Lender shall have received a 

certificate executed by a Responsible Officer of the Parent and the Borrower confirming (i) that 

the representations and warranties contained in Section 3 of this Restatement Agreement are true 

and correct on and as of the Restatement Effective Date, (ii) that the information provided in the 

Loan Application Form submitted by the Borrower was true and correct on and as of the date of 

delivery thereof, (iii) the satisfaction of Sections 4(j) and (l) herein as of the Restatement 

Effective Date, (iv) the satisfaction of all other conditions precedent to the Restatement Effective 

Date described in this Section 4 and (v) that no Default or Event of Default exists or will result 

from the terms of this Restatement Agreement on the Restatement Effective Date.

(g) Appraisals. The Initial Lender shall have received Appraisals of 

Additional Collateral satisfactory in form and substance and performed by an Eligible Appraiser 

dated as of a date no earlier than thirty (30) days prior to the Restatement Effective Date.

(h) Consents and Authorizations. Each Credit Party shall have obtained 

all consents and authorizations from Governmental Authorities and all consents of other Persons 

(including shareholder approvals, if applicable) that are necessary or advisable in connection 

with this Restatement Agreement, any Loan Document, any of the transactions contemplated 

hereby or thereby or the continuing operations of the Credit Parties and each of the foregoing 

shall be in full force and effect and in form and substance satisfactory to the Initial Lender.

(i) Lien Searches. The Initial Lender shall have received (i) UCC and 

other applicable lien searches, including tax and judgment liens searches, conducted in the 

jurisdictions and offices where such liens on material assets of the Credit Parties are required to 

be filed or recorded, in each case, as of the date that such lien searches were last conducted 

pursuant to the Loan and Guarantee Agreement and (ii) to the extent any Additional Collateral 

consists of (x) Aircraft and Engine Assets (as defined in the Pledge and Security Agreement), 

aircraft registry lien searches conducted with the FAA and the International Registry or (y) Spare 

Part Assets (as defined in the Pledge and Security Agreement), registry lien searches conducted 

with the FAA (with reference to each Designated Spare Parts Location set forth on Schedule 2.1 
5

of the Pledge and Security Agreement), in each case, reflecting the absence of Liens on the assets 

of the Credit Parties, other than Permitted Liens or Liens to be discharged on or prior to the 

Restatement Effective Date pursuant to documentation satisfactory to the Initial Lender.

(j) Collateral Coverage Ratio. On the Restatement Effective Date (and 

after giving pro forma effect to any Borrowings on such date), the Collateral Coverage Ratio 

shall not be less than 2.0 to 1.0.

(k) Solvency Certificate. The Initial Lender shall have received a 

certificate of the chief financial officer or treasurer (or other comparable officer) of the Parent 

certifying that the Borrower and its Subsidiaries (taken as a whole) are, and will be immediately 

after giving effect to the Restatement Agreement, Solvent.

(l) No Material Adverse Effects. Since the Closing Date, (i) there has 

been no event or circumstance that, either individually or in the aggregate, has had or could 

reasonably be expected to have a Material Adverse Effect and (ii) none of the Credit Parties has 

made a Disposition (including any sale of Currency) of any assets of the type that would be 

included in the Collateral other than as would have been permitted under the Loan and Guarantee 

Agreement.

(m) Audits. On the Restatement Effective Date, the opinion of the 

independent public accountants (after giving effect to any reissuance or revision of such opinion) 

on the most recent audited consolidated financial statements delivered by the Parent pursuant to 

Section 5.01(a) of the Loan and Guarantee Agreement shall not include a “going concern” 

qualification under GAAP as in effect on the date of this Restatement Agreement or, if there is 

a change in the relevant provisions of GAAP thereafter, any like qualification or exception under 

GAAP after giving effect to such change; and 

(n) Perfection Certificate. The Initial Lender and the Agents shall have 

received from each Credit Party hereto an amended and restated Perfection Certificate or 

supplement thereof, updated to include all Additional Collateral, signed on behalf of such Credit 

Party. Notwithstanding anything herein to the contrary, delivery of an executed signature page 

of an amended and restated Perfection Certificate or supplement thereof by telecopy or other 

electronic means, or confirmation of the execution of an amended and restated Perfection 

Certificate or supplement thereof on behalf of a party by an email from an authorized signatory 

of such party shall be effective as delivery of a manually executed counterpart of an amended 

and restated Perfection Certificate or supplement thereof.

(o) Perfection of Liens on Collateral. On or prior to the Restatement 

Effective Date, in connection with the execution of the Pledge and Security Agreement, the 

Perfection Requirement (as defined in the Pledge and Security Agreement) shall have been 

satisfied and all of the perfection steps thereunder shall have been completed, and copies or 

evidence, if available, of any relevant filings, recordings and other perfection documentation 

shall have been provided to the Initial Lender, the Administrative Agent and the Collateral 

Agent.
6

Section 5. Miscellaneous. 

(a) Fees. The Borrower shall pay all fees required to be paid to the 

Administrative Agent, the Collateral Agent and the Lenders and all expenses (including fees and 

expenses of counsel) required to be paid to the Administrative Agent, Collateral Agent and the 

Lenders, in each case as required by and in accordance with the terms of the Loan and Guarantee

Agreement, as they are due and payable in connection with this Restatement Agreement.

(b) Continued Effectiveness. Notwithstanding anything contained herein, 

the terms of this Restatement Agreement shall not constitute a novation or termination of the 

Existing Loan and Guarantee Agreement or any other Loan Documents and are not intended to 

and do not serve to effect a novation or termination of the obligations outstanding under the 

Existing Loan and Guarantee Agreement or instruments guaranteeing or securing the same, 

which instruments shall remain and continue in full force and effect.

(c) Governing Law; Jurisdiction, Etc. THIS RESTATEMENT 

AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE 

WITH, THE FEDERAL LAW OF THE UNITED STATES IF AND TO THE EXTENT SUCH 

LAW IS APPLICABLE, AND OTHERWISE IN ACCORDANCE WITH THE LAW OF THE 

STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE 

PERFORMED ENTIRELY WITHIN SUCH STATE.

(d) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED 

BY APPLICABLE LAW, EACH CREDIT PARTY AND EACH LENDER HEREBY 

UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION 

OR PROCEEDING RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS 

OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

(e) Entire Agreement. This Restatement Agreement, the Loan and 

Guarantee Agreement and the other Loan Documents constitute the entire contract among the 

parties relating to the subject matter hereof and supersede any and all previous agreements and 

understandings, oral or written, relating to the subject matter hereof. The Borrower and the 

Agents hereby designate this Restatement Agreement as a Loan Document.

(f) Counterparts. This Restatement Agreement may be executed in 

counterparts (and by different parties hereto in different counterparts), each of which shall 

constitute an original, but all of which when taken together shall constitute a single contract. 

Delivery of an executed counterpart of a signature page of this Restatement Agreement by 

facsimile or in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually 

executed counterpart of this Agreement.

(g) Electronic Execution. The words “execution,” “signed,” “signature,” 

and words of like import in this Restatement Agreement shall be deemed to include electronic 

signatures or the keeping of records in electronic form, each of which shall be of the same legal 

effect, validity or enforceability as a manually executed signature or the use of a paper-based 

recordkeeping system, as the case may be, to the extent and as provided for in any Applicable 

Law, including the Federal Electronic Signatures in Global and National Commerce Act, the 
7

New York State Electronic Signatures and Records Act, or any other similar state laws based on 

the Uniform Electronic Transactions Act.

(h) Successors and Assigns. When this Restatement Agreement has been 

executed by the Parent, the Borrower, the Agents and the Lenders party hereto, this Restatement 

Agreement shall thereafter be binding upon and inure to the benefit of the parties and their 

respective successors and assigns, in accordance with the terms of the Loan and Guarantee 

Agreement.

(i) Severability. If any provision of this Restatement Agreement or the 

other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity 

and enforceability of the remaining provisions of this Restatement Agreement and the other Loan 

Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good 

faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions 

the economic effect of which comes as close as possible to that of the illegal, invalid or 

unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not 

invalidate or render unenforceable such provision in any other jurisdiction.

(j) Headings. The headings of this Restatement Agreement are for 

purposes of reference only and shall not limit or otherwise affect the meaning hereof.

(k) Direction to Agents. The Lenders party hereto hereby authorize and 

direct the Administrative Agent and the Collateral Agent to execute and deliver this Restatement 

Agreement. 

(l) Release by Credit Parties. Each Credit Party hereto hereby 

acknowledges and agrees that it has no actual knowledge of any defenses or claims against any 

Lender, the Agents, any of their respective Affiliates or any of their respective officers, directors, 

employees, attorneys, representatives, predecessors, successors or assigns with respect to the 

Obligations, and that if such Credit Party now has, or ever did have, any defenses or claims with 

respect to the Obligations against any Lender, the Agents, any of the respective Affiliates or any 

of their respective officers, directors, employees, attorneys, representatives, predecessors, 

successors, or assigns, whether known or unknown, at law or in equity, from the beginning of 

the world through this date and through the time of effectiveness of this Restatement Agreement, 

all of them are hereby expressly WAIVED, and the Borrower hereby RELEASES each Lender, 

each Agent, their respective Affiliates and their respective officers, directors, employees, 

attorneys, representatives, predecessors, successors and assigns from any liability therefor.

(m) No Liability of Agents. The Agents assume no responsibility for, and

shall be entitled to rely on, without any obligation to ascertain or investigate, the correctness of 

the recitals and statements contained herein. The Agents shall not be liable or responsible in any 

manner whatsoever for, or in respect of, the validity or sufficiency of this Restatement 

Agreement.

Section 6. Reaffirmation.

(a) Each Credit Party hereto hereby consents to the execution, delivery 

and performance of this Restatement Agreement and agrees that each reference to “the Loan and 
8

Guarantee Agreement,” “this Agreement,” “hereunder,” “hereof” or words of like import 

referring to the Loan and Guarantee Agreement in the Loan Documents shall, on and after the 

Restatement Effective Date, be deemed to be a reference to the Loan and Guarantee Agreement, 

as amended and restated by this Restatement Agreement.

(b) Each Credit Party hereto hereby reaffirms all of its respective 

obligations and liabilities under the Loan Documents to which it is a party, as such obligations 

and liabilities have been amended by this Restatement Agreement, and acknowledges and agrees 

that such obligations and liabilities remain in full force and effect.

(c) Each Credit Party hereto hereby irrevocably and unconditionally 

ratifies each Loan Document to which it is a party (as such Loan Documents are amended to and 

including the date hereof) and ratifies and reaffirms such Credit Party’s guarantee and grant of 

liens and security interests under the Security Documents and confirms that the guarantees, liens 

and security interests granted thereunder continue to secure the Obligations, including, without 

limitation, any additional Obligations resulting from or incurred pursuant to the Loan and 

Guarantee Agreement.

[Remainder of this page intentionally left blank.]


[Signature Page to Restatement Agreement – SkyWest]

THE BANK OF NEW YORK MELLON, as 

Administrative Agent 

By: _______________________

Name: Bret S. Derman

Title: Vice President

THE BANK OF NEW YORK MELLON, as 

Collateral Agent

By: _______________________

Name: Bret S. Derman

Title: Vice President
Annex A 

Form of Amended and Restated Loan and Guarantee Agreement

See Attached.
EXECUTION

LOAN AND GUARANTEE AGREEMENT

dated as of

September 29, 2020,

and as amended and restated as of

October 28, 2020

among

SKYWEST AIRLINES, INC., as Borrower,

the Guarantors party hereto from time to time,

THE UNITED STATES DEPARTMENT OF THE TREASURY,

and

THE BANK OF NEW YORK MELLON,

as Administrative Agent and Collateral Agent

__________
EXECUTION

LOAN AND GUARANTEE AGREEMENT

dated as of

September 29, 2020,

and as amended and restated as of

October 28, 2020

among

SKYWEST AIRLINES, INC., as Borrower,

the Guarantors party hereto from time to time,

THE UNITED STATES DEPARTMENT OF THE TREASURY,

and

THE BANK OF NEW YORK MELLON,

as Administrative Agent and Collateral Agent

__________
i

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms............................................................................................................ 1

SECTION 1.02 Terms Generally ....................................................................................................... 29

SECTION 1.03 Accounting Terms; Changes in GAAP..................................................................... 29

SECTION 1.04 Rates......................................................................................................................... 29

SECTION 1.05 Divisions................................................................................................................... 29

ARTICLE II

COMMITMENTS AND BORROWINGS

SECTION 2.01 Commitments ........................................................................................................... 30

SECTION 2.02 Loans and Borrowings.............................................................................................. 30

SECTION 2.03 Borrowing Requests ................................................................................................. 30

SECTION 2.04 [Reserved]................................................................................................................. 31

SECTION 2.05 [Reserved]................................................................................................................. 31

SECTION 2.06 Prepayments ............................................................................................................. 31

SECTION 2.07 Reduction and Termination of Commitments.......................................................... 32

SECTION 2.08 Repayment of Loans................................................................................................. 32

SECTION 2.09 Interest...................................................................................................................... 32

SECTION 2.10 Benchmark Replacement Setting.............................................................................. 32

SECTION 2.11 Evidence of Debt ...................................................................................................... 34

SECTION 2.12 Payments Generally.................................................................................................. 34

SECTION 2.13 Sharing of Payments................................................................................................. 35

SECTION 2.14 Compensation for Losses.......................................................................................... 35

SECTION 2.15 Increased Costs......................................................................................................... 36

SECTION 2.16 Taxes......................................................................................................................... 37

SECTION 2.17 [Reserved]................................................................................................................. 40

SECTION 2.18 [Reserved]................................................................................................................. 40

SECTION 2.19 Mitigation Obligations; Replacement of Lenders..................................................... 40

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.01 Existence, Qualification and Power.......................................................................... 41

SECTION 3.02 Authorization; No Contravention ............................................................................. 41

SECTION 3.03 Governmental Authorization; Other Consents......................................................... 41

SECTION 3.04 Execution and Delivery; Binding Effect .................................................................. 42

SECTION 3.05 Financial Statements; No Material Adverse Change................................................ 42

SECTION 3.06 Litigation .................................................................................................................. 42

SECTION 3.07 Contractual Obligations; No Default........................................................................ 42

SECTION 3.08 Property .................................................................................................................... 42

SECTION 3.09 Taxes......................................................................................................................... 42
ii

SECTION 3.10 Disclosure ................................................................................................................. 43

SECTION 3.11 Compliance with Laws............................................................................................. 43

SECTION 3.12 ERISA Compliance .................................................................................................. 43

SECTION 3.13 Environmental Matters............................................................................................. 44

SECTION 3.14 Investment Company Act......................................................................................... 44

SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws...................................... 44

SECTION 3.16 Solvency ................................................................................................................... 45

SECTION 3.17 Subsidiaries............................................................................................................... 45

SECTION 3.18 Senior Indebtedness.................................................................................................. 45

SECTION 3.19 Insurance Matters ..................................................................................................... 45

SECTION 3.20 Labor Matters ........................................................................................................... 45

SECTION 3.21 Insolvency Proceedings............................................................................................ 45

SECTION 3.22 Margin Regulations.................................................................................................. 45

SECTION 3.23 Liens......................................................................................................................... 46

SECTION 3.24 Perfected Security Interests...................................................................................... 46

SECTION 3.25 US Citizenship.......................................................................................................... 46

SECTION 3.26 Air Carrier Status...................................................................................................... 46

ARTICLE IV

CONDITIONS

SECTION 4.01 Closing Date and Initial Borrowing.......................................................................... 46

SECTION 4.02 Each Borrowing........................................................................................................ 48

ARTICLE V

AFFIRMATIVE COVENANTS

SECTION 5.01 Financial Statements................................................................................................. 49

SECTION 5.02 Certificates; Other Information ................................................................................ 50

SECTION 5.03 Notices...................................................................................................................... 51

SECTION 5.04 Preservation of Existence, Etc.................................................................................. 52

SECTION 5.05 Maintenance of Properties........................................................................................ 52

SECTION 5.06 Maintenance of Insurance......................................................................................... 52

SECTION 5.07 Payment of Obligations............................................................................................ 52

SECTION 5.08 Compliance with Laws............................................................................................. 52

SECTION 5.09 Environmental Matters............................................................................................. 52

SECTION 5.10 Books and Records................................................................................................... 52

SECTION 5.11 Inspection Rights...................................................................................................... 53

SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws....................... 53

SECTION 5.13 Guarantors; Additional Collateral ............................................................................ 53

SECTION 5.14 Post-Closing Matters................................................................................................ 54

SECTION 5.15 Further Assurances................................................................................................... 54

SECTION 5.16 Delivery of Appraisals.............................................................................................. 54

SECTION 5.17 Ratings...................................................................................................................... 55

SECTION 5.18 Regulatory Matters................................................................................................... 55
iii

ARTICLE VI

NEGATIVE COVENANTS

SECTION 6.01 [Reserved]................................................................................................................. 55

SECTION 6.02 Liens......................................................................................................................... 55

SECTION 6.03 Fundamental Changes............................................................................................... 55

SECTION 6.04 Dispositions.............................................................................................................. 56

SECTION 6.05 Restricted Payments ................................................................................................. 57

SECTION 6.06 Investments............................................................................................................... 58

SECTION 6.07 Transactions with Affiliates...................................................................................... 59

SECTION 6.08 [Reserved]................................................................................................................. 60

SECTION 6.09 [Reserved]................................................................................................................. 60

SECTION 6.10 Changes in Nature of Business................................................................................. 60

SECTION 6.11 Sanctions; AML Laws.............................................................................................. 60

SECTION 6.12 Amendments to Organizational Documents............................................................. 60

SECTION 6.13 [Reserved]................................................................................................................. 60

SECTION 6.14 Prepayments of Junior Indebtedness ........................................................................ 60

SECTION 6.15 Lobbying................................................................................................................... 60

SECTION 6.16 Use of Proceeds........................................................................................................ 60

SECTION 6.17 Financial Covenants ................................................................................................. 61

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01 Events of Default...................................................................................................... 61

SECTION 7.02 Application of Payments .......................................................................................... 64

ARTICLE VIII

AGENCY

SECTION 8.01 Appointment and Authority...................................................................................... 65

SECTION 8.02 Collateral Matters. .................................................................................................... 65

SECTION 8.03 Removal or Resignation of Administrative Agent ................................................... 65

SECTION 8.04 Exculpatory Provisions............................................................................................. 66

SECTION 8.05 Reliance by Agent .................................................................................................... 67

SECTION 8.06 Delegation of Duties................................................................................................. 68

SECTION 8.07 Non-Reliance on Agents and Other Lenders............................................................ 68

SECTION 8.08 Administrative Agent May File Proofs of Claim ..................................................... 68

ARTICLE IX

GUARANTEE

SECTION 9.01 Guarantee of the Obligations.................................................................................... 69

SECTION 9.02 Payment or Performance by a Guarantor.................................................................. 69

SECTION 9.03 Liability of Guarantors Absolute.............................................................................. 69

SECTION 9.04 Waivers by Guarantors............................................................................................. 70

SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc.............................................. 71
iv

SECTION 9.06 Subordination ........................................................................................................... 71

SECTION 9.07 Continuing Guarantee............................................................................................... 71

SECTION 9.08 Financial Condition of the Borrower........................................................................ 71

SECTION 9.09 Reinstatement ........................................................................................................... 71

SECTION 9.10 Discharge of Guarantees........................................................................................... 72

ARTICLE X

CARES ACT REQUIREMENTS

SECTION 10.01 CARES Act Compliance .......................................................................................... 72

SECTION 10.02 Dividends and Buybacks.......................................................................................... 72

SECTION 10.03 Maintenance of Employment Levels........................................................................ 72

SECTION 10.04 United States Business.............................................................................................. 73

SECTION 10.05 Limitations on Certain Compensation...................................................................... 73

SECTION 10.06 Continuation of Certain Air Service......................................................................... 73

SECTION 10.07 Treasury Access........................................................................................................ 74

SECTION 10.08 Additional Defined Terms........................................................................................ 74

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Notices; Public Information...................................................................................... 75

SECTION 11.02 Waivers; Amendments ............................................................................................. 77

SECTION 11.03 Expenses; Indemnity; Damage Waiver .................................................................... 78

SECTION 11.04 Successors and Assigns............................................................................................ 80

SECTION 11.05 Survival..................................................................................................................... 82

SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution............................... 83

SECTION 11.07 Severability............................................................................................................... 83

SECTION 11.08 Right of Setoff.......................................................................................................... 83

SECTION 11.09 Governing Law; Jurisdiction; Etc............................................................................. 84

SECTION 11.10 Waiver of Jury Trial ................................................................................................. 84

SECTION 11.11 Headings................................................................................................................... 84

SECTION 11.12 Treatment of Certain Information; Confidentiality .................................................. 84

SECTION 11.13 Money Laundering; Sanctions.................................................................................. 85

SECTION 11.14 Interest Rate Limitation............................................................................................ 85

SECTION 11.15 Payments Set Aside .................................................................................................. 85

SECTION 11.16 No Advisory or Fiduciary Responsibility................................................................. 86

SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions............... 86
v

SCHEDULES

SCHEDULE 3.05 - Financial Statements

SCHEDULE 3.17 - Subsidiaries

SCHEDULE 5.14 - Post-Closing Matters

SCHEDULE 6.05(i) - Restricted Payments

SCHEDULE 6.06 - Investments

SCHEDULE 6.07 - Affiliate Transactions

EXHIBITS

EXHIBIT A - Assignment and Assumption

EXHIBIT B-1 - Form of U.S. Tax Compliance Certificate

EXHIBIT B-2 - Form of U.S. Tax Compliance Certificate

EXHIBIT B-3 - Form of U.S. Tax Compliance Certificate

EXHIBIT B-4 - Form of U.S. Tax Compliance Certificate

EXHIBIT C - Form of Note

EXHIBIT D - Form of Borrowing Request
LOAN AND GUARANTEE AGREEMENT dated as of September 29, 2020 (as 

amended and restated by the Restatement Agreement, this “Agreement”), among SKYWEST AIRLINES, 

INC., a corporation organized under the laws of Utah (the “Borrower”), SKYWEST, INC., a corporation 

organized under the laws of Utah (the “Parent”), the Guarantors party hereto from time to time, the 

UNITED STATES DEPARTMENT OF THE TREASURY (“Treasury”) and THE BANK OF NEW 

YORK MELLON as Administrative Agent and Collateral Agent.

WHEREAS, the Borrower has requested that the Initial Lender (as defined below) extend 

credit as is permissible under the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 

(Mar. 27, 2020), as the same may be amended form time to time (the “CARES Act”) to the Borrower, and 

the Initial Lender is willing to do so on the terms and conditions set forth herein; and

WHEREAS, pursuant to Section 4003(h)(1) of the CARES Act, for purposes of the Code 

(as defined below) the Loans (as defined below) shall be treated as indebtedness and as having been 

issued for their aggregate stated principal amount, and the interest payable pursuant to Section 2.09(a)

shall be treated as qualified stated interest.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein 

contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms. As used in this Agreement, the following terms have the 

meanings specified below:

“Additional Collateral” shall mean (a) cash and Cash Equivalents pledged to the 

Collateral Agent for the benefit of the Secured Parties under the Security Documents (and subject to an 

account control agreement in form and substance satisfactory to the Appropriate Party), (b) airframes, 

aircraft, engines and Spare Parts, registered, habitually located, or located in a designated location, 

respectively, in the United States and that are eligible for the benefits of Section 1110 of the Bankruptcy 

Code, 11 U.S.C. § 1110 or otherwise acceptable to the Required Lenders (provided that any airframe must 

be less than 20 years old at the time of its designation as Additional Collateral), (c) Route Authorities for 

routes with at least one end point located in the United States and all Slots and Gate Leaseholds related 

from time to time thereto or otherwise acceptable to the Required Lenders, (d) real property, (e) ground 

support equipment, (f) flight simulators and (g) any other assets acceptable to the Required Lenders, and 

all of which assets shall (i) (other than Additional Collateral of the type described in clause (a)) be valued

by a new Appraisal at the time the Parent designates such assets as Additional Collateral, (ii) as of any 

date of addition of such assets as Collateral, be subject, to the extent purported to be created by the 

applicable Security Document, to a perfected first priority Lien and/or mortgage (or comparable Lien), in 

favor of the Collateral Agent for the benefit of the Secured Parties and otherwise subject only to 

Permitted Liens (excluding those referred to in clause (4) of the definition of “Permitted Lien”), (iii) 

pledged to the Collateral Agent for the benefit of the Secured Parties pursuant to security agreement(s) or 

mortgage(s), as applicable, in a form satisfactory to the Appropriate Party and (iv) at the time of their 

designation as Additional Collateral, be accompanied by a legal opinion in form satisfactory to the 

Appropriate Party; provided that, in accordance with Section 8.06, the Collateral Agent may designate a 

sub-agent to accept the security interest in any Additional Collateral for the benefit of the Secured Parties; 

provided further that, with respect to Additional Collateral of the type described in clause (c), (d) and (g), 

the Borrower agrees to notify the Collateral Agent as promptly as practicable of any new categories of 

assets which are expected to be designated as Additional Collateral or any new jurisdictions in which any 

asset is to be secured or located; provided further that, with respect to Additional Collateral of the type 

described in clause (d), (e) or (f), (i) such assets are acceptable to the Required Lenders, (ii) the Borrower 
shall have delivered Appraisals acceptable in form and substance to the Required Lenders with respect to 

such assets, (iii) such assets are subject to a loan to value framework acceptable to the Required Lenders, 

(iv) such assets are pledged pursuant to documentation acceptable in form and substance to the Required 

Lenders and (v) the benefits of pledging such assets outweigh the associated cost, burden, difficulty or

other consequences, as determined by the Required Lenders in their sole discretion.

“Adjusted LIBO Rate” means, as to any Borrowing for any Interest Period, an interest 

rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for 

such Interest Period divided by (b) one minus the Eurodollar Reserve Percentage.

“Administrative Account” means the account opened with the Administrative Agent in 

the name of the Initial Lender as notified to the Borrower and the Initial Lender, or such other account as 

the Administrative Agent shall advise the Borrower and each Lender from time to time. 

“Administrative Agency Fee Letter” means any fee letter entered into between the 

Borrower, the Administrative Agent and the Collateral Agent, or with any successor administrative agent

or collateral agent, in its capacity as administrative agent and in its capacity as collateral agent under any 

of the Loan Documents.

“Administrative Agent” means The Bank of New York Mellon, in its capacity as 

administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Questionnaire” means an Administrative Questionnaire in a form 

supplied by or otherwise acceptable to the Administrative Agent.

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK 

Financial Institution.

“Affiliate” means any Person that directly or indirectly controls, is controlled by, or is 

under common control with, any other Person. For purposes of this definition, “control” of a Person shall 

mean having the power, directly or indirectly, to direct or cause the direction of the management and 

policies of such Person, whether by ownership of voting equity, by contract, or otherwise.

“Agent Parties” has the meaning specified in Section 11.01(d)(ii).

“Agent Responsible Officer” means, when used with respect to an Agent, any vice 

president, assistant vice president, assistant treasurer or trust officer in the corporate trust and agency 

administration of the Agent or any other officer of the Agent customarily performing functions similar to 

those performed by any of the above-designated officers, and, in each case, who shall have direct 

responsibility for the administration of this Agreement and also means, with respect to a particular agency 

matter, any other officer to whom such matter is referred because of his or her knowledge of and 

familiarity with the particular subject.

“Agents” means any of the Administrative Agent and the Collateral Agent.

“Agreement” has the meaning specified in introductory paragraph hereof.

“Air Carrier” has the meaning such term has under Section 40102 of Title 49, United 

States Code.

“Alternate Base Rate” means, for any day, a rate per annum equal to the highest of (a) the 

Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50% 

and (c) the Adjusted LIBO Rate for a one-month term in effect on such day (taking into account any 
LIBO Rate floor under the definition of “Adjusted LIBO Rate”) plus 1.00%. Any change in the Alternate 

Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or such Adjusted LIBO 

Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal 

Funds Effective Rate or such Adjusted LIBO Rate, respectively.

“AML Laws” means (a) the USA Patriot Act of 2001 (Pub. L. No. 107-56), (b) the U.S. 

Money Laundering Control Act of 1986, as amended, (c) the Bank Secrecy Act, 31 U.S.C. sections 5301 

et seq., (d) Laundering of Monetary Instruments, 18 U.S.C. section 1956, (e) Engaging in Monetary 

Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957, (f) the 

Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations (Title 31 Part 

103 of the US Code of Federal Regulations), or (g) any other applicable money laundering or financial 

recordkeeping Laws. 

“Applicable Law” means, as to any Person, all applicable Laws binding upon such 

Person or to which such a Person is subject.

“Applicable Percentage” means, with respect to any Lender, the percentage of the total 

Outstanding Amount of Loans of all Lenders represented by the aggregate Outstanding Amount of Loans 

of such Lender at such time.

“Applicable Rate” means 3.00%.

“Appraisal” means any appraisal specifying a value in Dollars (and not a range of 

values), dated as of the delivery thereof, prepared by an Eligible Appraiser that certifies, at the time of 

determination, in reasonable detail the Appraised Value of Eligible Collateral; provided that any 

methodology, form of presentation, and all assumptions must be acceptable to the Appropriate Party; 

provided further that the methodology, form of presentation and assumptions in the Appraisal delivered 

on the Closing Date pursuant to Section 4.01(i) shall be satisfactory for any subsequent Appraisal with 

respect to the same category and specific type of Eligible Collateral.

“Appraised Value” means, as of any date, (a) the specific value in Dollars (and not a 

range of values) of any property constituting Eligible Collateral (other than cash and Cash Equivalents) as 

reflected in the most recent Appraisal, (b) with respect to any cash pledged or being pledged at such time 

as Collateral, 160% of the face amount and (c) with respect to any Cash Equivalents pledged or being 

pledged at such time as Collateral, 100% of the fair market value thereof as determined by the Parent in 

accordance with customary financial market practices determined no earlier than 45 days prior to such 

date; provided that (i) if no Appraisal relating to such Eligible Collateral has been delivered to the 

Collateral Agent prior to such date, the Appraised Value of such Eligible Collateral shall be deemed to be 

zero and (ii) in the case of any such property consisting of ground support equipment, the Appraised 

Value shall be deemed to be 50% of the value set forth in the most recent Appraisal..

“Appropriate Party” means (i) while the Initial Lender holds any Commitment or Loan, 

the Initial Lender and (ii) if the Initial Lender is no longer a Lender, the Administrative Agent (acting at 

the direction of the Required Lenders). 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, 

(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a 

Lender.

“Assignment and Assumption” means an assignment and assumption entered into by a 

Lender and an Eligible Assignee (with the consent of any party whose consent is required by 

Section 11.04), and accepted by the Administrative Agent, in substantially the form of Exhibit A or any 

other form approved by the Administrative Agent.
“Attributable Indebtedness” means, as of any date of determination, (a) in respect of any 

Capitalized Lease Obligations of any Person, the capitalized amount thereof that would appear on a 

balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any 

Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant 

lease that would appear on a balance sheet of such Person prepared as of such date in accordance with 

GAAP if such lease were accounted for as a capital lease.

“Available Tenor” means, as of any date of determination and with respect to the thencurrent Benchmark, as applicable, any tenor for such Benchmark or payment period for interest 

calculated with reference to such Benchmark, as applicable, that is or may be used for determining 

the length of an Interest Period pursuant to this Agreement as of such date and not including, for the 

avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of 

“Interest Period” pursuant to clause (d) of Section 2.10.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by an 

applicable Resolution Authority in respect of any liability of any Affected Financial Institution.

“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing 

Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European 

Union, the implementing Law for such EEA Member Country from time to time which is described in the 

EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United 

Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule 

applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms 

or other financial institutions or their affiliates (other than through liquidation, administration or other 

insolvency proceedings).

“Benchmark” means, initially, USD LIBO Rate; provided that if a Benchmark 

Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement 

Date have occurred with respect to USD LIBO Rate or the then-current Benchmark, then 

“Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark 

Replacement has replaced such prior benchmark rate pursuant to Section 2.10(a).

“Benchmark Replacement” means, for any Available Tenor, the first alternative set 

forth in the order below that can be determined by the Required Lenders for the applicable 

Benchmark Replacement Date:

(1) the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;

(2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark

Replacement Adjustment;

(3) the sum of: (a) the alternate benchmark rate that has been selected by (y) so long as the 

Initial Lender is a Lender, the Initial Lender and (z) otherwise, the Required Lenders 

and the Borrower, in each case, as the replacement for the then-current Benchmark for 

the applicable Corresponding Tenor giving due consideration to (i) any selection or 

recommendation of a replacement benchmark rate or the mechanism for determining 

such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing 

market convention for determining a benchmark rate as a replacement for the thencurrent Benchmark for U.S. dollar-denominated syndicated credit facilities at such time 

and (b) the related Benchmark ReplacementAdjustment;

provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a 

screen or other information service that publishes such rate from time to time as selected by the 

Required Lenders in their reasonable discretion and such screen is administratively acceptable as 
determined by the Administrative Agent in its reasonable discretion. If the Benchmark 

Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the 

Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the 

other Loan Documents; provided further that any such Benchmark Replacement shall be 

administratively feasible as determined by the Administrative Agent in its reasonable discretion.

“Benchmark Replacement Adjustment” means, with respect to any replacement of the 

then- current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest 

Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:

(1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the 

first alternative set forth in the order below that can be determined by the Required 

Lenders:

(a) the spread adjustment, or method for calculating or determining such spread 

adjustment, (which may be a positive or negative value or zero) as of the 

Reference Time such Benchmark Replacement is first set for such Interest Period 

that has been selected or recommended by the Relevant Governmental Body for 

the replacement of such Benchmark with the applicable Unadjusted Benchmark 

Replacement for the applicable Corresponding Tenor;

(b) the spread adjustment (which may be a positive or negative value or zero) as of 

the Reference Time such Benchmark Replacement is first set for such Interest 

Period that would apply to the fallback rate for a derivative transaction 

referencing the ISDA Definitions to be effective upon an index cessation event

with respect to such Benchmark for the applicable Corresponding Tenor; and

(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” the spread 

adjustment, or method for calculating or determining such spread adjustment, (which may be a

positive or negative value or zero) that has been selected by (y) so long as the Initial Lender is 

a Lender, the Initial Lender and (z) otherwise, the Required Lenders and the Borrower, in 

each case, for the applicable Corresponding Tenor giving due consideration to (i) any 

selection or recommendation of a spread adjustment, or method for calculating or determining 

such spread adjustment, for the replacement of such Benchmark with the applicable 

Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable 

Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for 

determining a spread adjustment, or method for calculating or determining such spread 

adjustment, for the replacement of such Benchmark with the applicable Unadjusted 

Benchmark Replacement for U.S. dollar- denominated syndicated credit facilities;

provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other 

information service that publishes such Benchmark Replacement Adjustment from time to time 

as selected by the Required Lenders in their reasonable discretion and such screen is 

administratively acceptable as determined by the Administrative Agent in its reasonable 

discretion; provided that, any such Benchmark Replacement Adjustment shall be 

administratively feasible as determined by the Administrative Agent in its reasonable 

discretion.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark 

Replacement, any technical, administrative or operational changes (including changes to the definition 

of “Alternate Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing 

and frequency of determining rates and making payments of interest, timing of borrowing requests or 

prepayment, conversion or continuation notices, length of lookback periods, the applicability of 

breakage provisions, and other technical, administrative or operational matters) that the Administrative 

Agent (after consultation with the Required Lenders) decides may be appropriate to reflect the 
adoption and implementation of such Benchmark Replacement and to permit the administration thereof 

by the Administrative Agent in a manner substantially consistent with market practice (or, if the 

Administrative Agent (after consultation with the Required Lenders) decides that adoption of any 

portion of such market practice is not administratively feasible or if the Administrative Agent (after 

consultation with the Required Lenders) determines that no market practice for the administration of 

such Benchmark Replacement exists, in such other manner of administration as the Administrative 

Agent (after consultation with the Required Lenders) decides is reasonably necessary in connection 

with the administration of this Agreement and the other Loan Documents). The Required Lenders 

shall cooperate in good faith with the Administrative Agent so that the Administrative Agent may 

determine such Benchmark Replacement Conforming Changes.

“Benchmark Replacement Date” means the earliest to occur of the following events with 

respect to the then-current Benchmark:

(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of

(a) the date of the public statement or publication of information referenced therein and (b) 

the date on which the administrator of such Benchmark (or the published component used in 

the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of 

such Benchmark (or such component thereof);

(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the 

public statement or publication of information referenced therein;or

(3) in the case of an Early Opt-in Election, (y) so long as the Initial Lender is a Lender, the sixth 

(6th) Business Day after the date notice of such Early Opt-in Election is provided to the 

Administrative Agent and (z) otherwise, the sixth (6th) Business Day after the date notice of 

such Early Opt-in Election is provided to the Administrative Agent, so long as the 

Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) 

Business Day after the date notice of such Early Opt-in Election is provided to the Lenders,

written notice of objection to such Early Opt-in Election from Lenders comprising the 

RequiredLenders.

For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on 

the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark 

Replacement Date will be deemed to have occurred prior to the Reference Time for such 

determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the 

case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or 

events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the 

published component used in the calculation thereof).

“Benchmark Transition Event” means the occurrence of one or more of the following 

events with respect to the then-current Benchmark:

(1) a public statement or publication of information by or on behalf of the administrator of 

such Benchmark (or the published component used in the calculation thereof) announcing 

that such administrator has ceased or will cease to provide all Available Tenors of such 

Benchmark (or such component thereof), permanently or indefinitely, provided that, at the 

time of such statement or publication, there is no successor administrator that will continue 

to provide any Available Tenor of such Benchmark (or such componentthereof);

(2) a public statement or publication of information by the regulatory supervisor for the 

administrator of such Benchmark (or the published component used in the calculation 

thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency 
official with jurisdiction over the administrator for such Benchmark (or such component), a 

resolution authority with jurisdiction over the administrator for such Benchmark (or such 

component) or a court or an entity with similar insolvency or resolution authority over the 

administrator for such Benchmark (or such component), which states that the administrator of 

such Benchmark (or such component) has ceased or will cease to provide all Available Tenors 

of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at 

the time of such statement or publication, there is no successor administrator that will 

continue to provide any Available Tenor of such Benchmark (or such component thereof); or

(3) a public statement or publication of information by the regulatory supervisor for the 

administrator of such Benchmark (or the published component used in the calculation 

thereof) announcing that all Available Tenors of such Benchmark (or such component 

thereof) are no longer representative.

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with 

respect to any Benchmark if a public statement or publication of information set forth above has 

occurred with respect to each then-current Available Tenor of such Benchmark (or the published 

component used in the calculation thereof).

“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time 

that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at 

such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes 

hereunder and under any Loan Document in accordance with Section 2.10 and (y) ending at the time 

that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder 

and under any Loan Document in accordance with Section 2.10.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” 

(as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have 

beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise 

of other securities, whether such right is currently exercisable or is exercisable only after the passage of 

time. 

“Beneficial Ownership Certification” means a certification regarding beneficial 

ownership as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Borrower” has the meaning specified in introductory paragraph hereof.

“Borrower Materials” has the meaning specified in Section 11.01(e).

“Borrowing” means a borrowing of Loans.

“Borrowing Request” means a request for a Borrowing in substantially the form of 

Exhibit D or any other form approved by the Administrative Agent.

“Business Day” means any day on which Treasury and the Federal Reserve Bank of New 

York are both open for business that is not a Saturday, Sunday or other day that is a legal holiday under 

the laws of the State of New York or is a day on which banking institutions in such state are authorized or 

required by Law to close; provided that, when used in connection with a Loan, the term “Business Day” 

means any such day that is also a day on which dealings in Dollar deposits are conducted by and between 

banks in the London interbank market.
“Capital Markets Offering” means any offering of “securities” (as defined under the 

Securities Act and, including, for the avoidance of doubt, any offering of pass-through certificates by any 

pass-through trust established by the Parent or any of its Subsidiaries) in (a) a public offering registered 

under the Securities Act, or (b) an offering not required to be registered under the Securities Act 

(including, without limitation, a private placement under Section 4(a)(2) of the Securities Act, an exempt 

offering pursuant to Rule 144A and/or Regulation S of the Securities Act and an offering of exempt 

securities).

“Capitalized Lease Obligations” means, at the time any determination thereof is to be 

made, the amount of the liability in respect of a Capitalized Lease that would at such time be required to 

be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in 

accordance with GAAP; provided that all leases of such Person that are or would have been treated as 

operating leases for purposes of GAAP prior to the issuance of the ASU shall continue to be accounted 

for as operating leases for purposes of all financial definitions and calculations for purposes of this 

Agreement (whether or not such operating lease obligations were in effect on such date) notwithstanding 

the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive 

basis or otherwise) to be treated as capitalized lease obligations for other purposes.

“Capitalized Leases” means all leases that have been or should be, in accordance with 

GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes 

hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted 

for as a liability in accordance with GAAP; provided, further, that all leases of such Person that are or 

would have been treated as operating leases for purposes of GAAP prior to the issuance of the ASU shall 

continue to be accounted for as operating leases for purposes of all financial definitions and calculations 

for purposes of this Agreement (whether or not such operating lease obligations were in effect on such 

date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a 

prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations for other 

purposes.

“CARES Act” has the meaning specified in the preamble to this Agreement.

“Cash Equivalents” means:

(a) direct obligations of, or obligations the principal of and interest on which are 

unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such 

obligations are backed by the full faith and credit of the United States of America), in each case maturing 

within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within one year from the date of 

acquisition thereof and having, at such date of acquisition, a rating of at least A-2 from S&P or at least P2 from Moody’s;

(c) investments in certificates of deposit, banker’s acceptances and time deposits 

maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and 

money market deposit accounts issued or offered by, any domestic office of any commercial bank 

organized under the laws of the United States of America or any State thereof that has a combined capital 

and surplus and undivided profits of not less than $250,000,000;

(d) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 

under the Investment Company Act of 1940, (ii) are rated AAA and Aaa (or equivalent rating) by at least 

two (2) Credit Rating Agencies and (iii) have portfolio assets of at least $5,000,000,000; 
(e) deposits available for withdrawal on demand with commercial banks organized 

in the United States having capital and surplus in excess of $100,000,000; and 

(f) other short-term liquid investments held by the Parent and the Subsidiaries as of 

the Closing Date in accordance with their normal investment policies and practices for cash management.

“CCR Certificate” has the meaning specified in Section 6.17(b).

“CCR Certificate Delivery Date” has the meaning specified in Section 6.17(b).

“CCR Reference Date” has the meaning specified in Section 6.17(b).

“CFC” means a controlled foreign corporation within the meaning of Section 957 of the 

Code. 

“CFC Holdco” means any Domestic Subsidiary that has no material assets other than 

Equity Interests of one or more Foreign Subsidiaries that are CFCs.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the 

following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any 

law, rule, regulation or treaty or in the administration, interpretation, implementation or application 

thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or 

directive (whether or not having the force of law) by any Governmental Authority; provided that 

notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer 

Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection 

therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International 

Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the 

United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be 

deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Change of Control” means the occurrence of any of the following: (a) the sale, lease, 

transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a 

series of related transactions, of all or substantially all of the properties or assets of the Borrower and its 

Subsidiaries, or if the Borrower is a direct or indirect Subsidiary of the Parent, the Parent and its 

Subsidiaries, taken as a whole to any Person (including any “person” (as that term is used in Section 

13(d)(3) of the Exchange Act)); (b) the consummation of any transaction (including, without limitation, 

any merger or consolidation), the result of which is that any Person (including any “person” (as defined 

above)) becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of 

the Borrower or the Parent, as applicable, (measured by voting power rather than number of shares), other 

than (i) any such transaction where the Voting Stock of the Borrower or the Parent, as applicable, 

(measured by voting power rather than number of shares) outstanding immediately prior to such 

transaction constitutes or is converted into or exchanged for at least a majority of the outstanding shares 

of the Voting Stock of such Beneficial Owner (measured by voting power rather than number of shares), 

or (ii) the consummation of any merger or consolidation of the Borrower or the Parent, as applicable, with 

or into any Person (including any “person” (as defined above)) which owns or operates (directly or 

indirectly through a contractual arrangement) a Permitted Business (a “Permitted Person”) or a Subsidiary 

of a Permitted Person, in each case, if immediately after such transaction no Person (including any 

“person” (as defined above)) is the Beneficial Owner, directly or indirectly, of more than 50% of the total 

Voting Stock of such Permitted Person (measured by voting power rather than number of shares); (c) if 

the Borrower is a direct or indirect Subsidiary of the Parent, the Parent ceasing to own, directly or 

indirectly, 100% of the Equity Interests of the Borrower; (d) the adoption of a plan relating to the 

liquidation or dissolution of the Borrower or the Parent or (e) the occurrence of a “change of control”, 
“change in control” or similar event under any Material Indebtedness of the Borrower, the Parent or any 

parent entity of the foregoing.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are 

satisfied.

“Closing Date Commitment” means the commitment of the Initial Lender on the Closing

Date to make Loans in the amount of $573,000,000, as such commitment may have been reduced or 

terminated pursuant to Section 2.07.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Collateral Agent” means The Bank of New York Mellon, in its capacity as collateral 

agent under any of the Loan Documents, or any successor collateral agent.

“Collateral Coverage Ratio” means, as of any date of determination, the ratio of (i) the 

Appraised Value of the Eligible Collateral as of the date of the Appraisal most recently delivered pursuant 

to Section 5.16 (or in the case of cash and Cash Equivalents, as of such date of determination) to (ii) the 

aggregate principal amount of all Loans and Commitments outstanding as of such date; provided that for 

the purposes of calculating clause (i) above, (x) no more than 25% of the Appraised Value of the Eligible 

Collateral may correspond to ground support equipment and (y) any amounts held in the Collateral 

Proceeds Account shall not be included.

“Collateral Proceeds Account” means a deposit account in the name of the Borrower that 

is subject to an agreement, in form and substance satisfactory to the Appropriate Party, establishing 

Control (as defined in the Pledge and Security Agreement) of such account by the Collateral Agent.

“Commitment” means the commitment of the Initial Lender to make Loans in the amount 

of $725,000,000 (which, for the avoidance of doubt, is an increase of the Closing Date Commitment by 

$152,000,000, pursuant to that certain Restatement Agreement), as such commitment may be reduced or 

terminated pursuant to Section 2.07.

“Communications” has the meaning specified in Section 11.01(d)(ii).

“Competitor” means (i) any Person operating an Air Carrier or a commercial passenger 

air carrier business and (ii) any Affiliate of any Person described in clause (i) (other than any Affiliate of 

such Person as a result of common control by a Governmental Authority or instrumentality thereof and 

any Affiliate of such Person under common control with such Person which Affiliate is not actively 

involved in the management and/or operations of such Person).

“Connection Income Taxes” means Other Connection Taxes that are imposed on or 

measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Contractual Obligation” means, as to any Person, any provision of any security issued 

by such Person or of any agreement, instrument or other undertaking to which such Person is a party or 

by which it or any of its property is bound.

“Control” means the possession, directly or indirectly, of the power to direct or cause the 

direction of the management or policies of a Person, whether through the ability to exercise voting power, 

by contract or otherwise. “Controlling” and “Controlled” have meanings analogous thereto.
“Convertible Indebtedness” means Indebtedness of the Parent that is convertible into 

common Equity Interests of the Parent (and cash in lieu of fractional shares) and/or cash (in an amount 

determined by reference to the price of such common Equity Interests).

“Corresponding Tenor” with respect to any Available Tenor means, as applicable, 

either a tenor (including overnight) or an interest payment period having approximately the same 

length (disregarding business day adjustment) as such Available Tenor.

“Credit Parties” means the Borrower and the Guarantors.

“Credit Rating” means a rating as determined by a Credit Rating Agency of the Parent’s 

non-credit-enhanced, senior unsecured long-term indebtedness.

“Credit Rating Agency” means a nationally recognized credit rating agency that evaluates 

the financial condition of issuers of debt instruments and then assigns a rating that reflects its assessment 

of the issuer’s ability to make debt payments.

“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate 

(which will include a lookback) being established by the Required Lenders in accordance with the 

conventions for this rate selected or recommended by the Relevant Governmental Body for determining 

“Daily Simple SOFR” for business loans; provided, that if the Administrative Agent decides that any 

such convention is not administratively feasible for the Administrative Agent, then the Required 

Lenders may establish another convention in its reasonable discretion, subject to the determination by 

the Administrative Agent of the administrative feasibility of such convention.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and 

all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, 

rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States 

or other applicable jurisdictions from time to time in effect.

“Default” means any event or condition that constitutes an Event of Default or that, with 

the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate (before as well as after judgment) equal to the 

applicable interest rate plus 2.00% per annum.

“Disposition” or “Dispose” means the sale, transfer (including through a plan of 

division), license, lease or other disposition of any property by any Person (including (i) any sale and 

leaseback transaction, any issuance of Equity Interests by a Subsidiary of such Person and (ii) with 

respect to Intellectual Property, any covenant not to sue, release, abandonment, lapse, forfeiture, 

dedication to the public or other similar disposition of Intellectual Property ), including any sale, 

assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or 

any rights and claims associated therewith.

“Disqualified Equity Interest” means any Equity Interest that, by its terms (or the terms 

of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or 

upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely 

for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or 

otherwise (except as a result of a change of control or asset sale so long as any rights of the holders 

thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior 

repayment in full of the Loans and all other Obligations that are accrued and payable and the termination 
of the Commitments), (b) is redeemable at the option of the holder thereof, in whole or in part, 

(c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or 

exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity 

Interests, in each case, prior to the date that is ninety-one (91) days after the Maturity Date; provided that 

if such Equity Interests are issued pursuant to a plan for the benefit of employees of the Parent or any 

Subsidiary or by any such plan to such employees, such Equity Interests shall not constitute Disqualified 

Equity Interests solely because they may be required to be repurchased by the Parent or its Subsidiaries in 

order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s 

termination, death or disability.

“Dollar” and “$” mean lawful money of the United States.

“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of the 

United States of America, any state thereof, or the District of Columbia.

“DOT” means the U.S. Department of Transportation.

“Early Opt-in Election” means, if the then-current Benchmark is USD LIBO Rate, the 

occurrence of:

(1) (x) so long as the Initial Lender is a Lender, the Initial Lender and (y) otherwise, the Required 

Lenders, in each case notifying to the Administrative Agent that the Initial Lender or the 

Required Lenders have determined that at least five currently outstanding U.S. dollardenominated syndicated credit facilities at such time contain (as a result of amendment or as 

originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based 

upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such 

notice and are publicly available for review), and

(2) (x) so long as the Initial Lender is a Lender, the election by the Initial Lender and (y) otherwise, 

the joint election by the Required Lenders and the Borrower to trigger a fallback from USD 

LIBO Rate and, in each case, the provision to the Administrative Agent and the other Lenders 

of written notice of such election.

“EEA Financial Institution” means (a) any credit institution or investment firm 

established in any EEA Member Country that is subject to the supervision of an EEA Resolution 

Authority, (b) any entity established in an EEA Member Country that is a parent of an institution 

described in clause (a) of this definition, or (c) any financial institution established in an EEA Member 

Country that is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject 

to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, 

Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person 

entrusted with public administrative authority of any EEA Member Country (including any delegee) 

having responsibility for the resolution of any EEA Financial Institution.

“Eligible Appraiser” means (a) with respect to aircraft or engines: Morten Beyer & 

Agnew, International Bureau of Aviation, Ascend Worldwide Group, ICF International Inc., BK 

Associates, Inc., Aircraft Information Services Inc., AVITAS, Inc., PAC Appraisal Inc., Aviation 

Specialists Group, Aviation Asset Management Inc. or IBA Group Ltd., (b) with respect to slots, gates or 

routes: Morten Beyer & Agnew, ICF International Inc., PAC Appraisal Inc. or BK Associates, Inc., (c) 

with respect to parts, Morten Beyer & Agnew, ICF International Inc., Sage-Popovich, Inc., PAC 
Appraisal Inc., Aviation Asset Management Inc. or Alton Aviation Consultancy LLC, (d) with respect to 

any other type of property, Deloitte & Touche LLP, Andersen Tax LLC, BBC Aviation Enterprises 

Aviation Advisors Group, LLC, PricewaterhouseCoopers, CBRE Group Inc. and Jones Lang LaSalle 

Incorporated, and (e) any independent appraisal firm appointed by the Borrower and acceptable to the 

Appropriate Party.

“Eligible Assignee” means any Person that meets the requirements to be an assignee 

under Section 11.04(b)(iii), 11.04(b)(v) and 11.04(b)(vi) (subject to such consents, if any, as may be 

required under Section 11.04(b)(iii)); provided that no Competitor shall be an Eligible Assignee. 

“Eligible Collateral” means, as of any date, all Collateral on which the Collateral Agent 

has, as of such date, to the extent purported to be created by the applicable Security Document, a valid 

and perfected first priority Lien and/or mortgage (or comparable Lien) for the benefit of the Secured 

Parties and which is otherwise subject only to Permitted Liens and satisfies the requirements set out in the 

Loan Documents for such type of Collateral.

“Environmental Laws” means any and all federal, state, local, and foreign statutes, Laws, 

regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, 

licenses, agreements or governmental restrictions, including all common law, relating to pollution or the 

protection of health, safety or the environment or the release of any materials into the environment, 

including those related to Hazardous Materials, air emissions, discharges to waste or public systems and 

health and safety matters.

“Environmental Liability” means any liability or obligation, contingent or otherwise 

(including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), 

directly or indirectly, resulting from or based upon (a) violation of any Environmental Law, (b) the 

generation, use, handling, transportation, storage, treatment, disposal or permitting or arranging for the 

disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or 

threatened release of any Hazardous Materials or (e) any contract, agreement or other consensual 

arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means, as to any Person, all of the shares of capital stock of (or other 

ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase 

or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) 

such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other 

ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition 

from such Person of such shares (or such other interests), and all of the other ownership or profit interests 

in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, 

and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of 

determination (other than Convertible Indebtedness or any other debt security that is convertible into or 

exchangeable for Equity Interests of such Person and the Warrants). 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, 

and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under 

common control with any Credit Party within the meaning of Section 414(b) or (c) of the Code (and 

Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or 

Section 302 of ERISA).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the 

failure by any Credit Party or any ERISA Affiliate to meet all applicable requirements under the Pension 

Funding Rules or the filing of an application for the waiver of the minimum funding standards under the 
Pension Funding Rules; (c) the incurrence by any Credit Party or any ERISA Affiliate of any liability 

pursuant to Section 4063 or 4064 of ERISA or a cessation of operations with respect to a Pension Plan 

within the meaning of Section 4062(e) of ERISA; (d) a complete or partial withdrawal by any Credit 

Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in 

reorganization or insolvent (within the meaning of Title IV of ERISA); (e) the filing of a notice of intent 

to terminate a Pension Plan under, or the treatment of a Pension Plan amendment as a termination under, 

Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Pension Plan; 

(g) any event or condition that constitutes grounds under Section 4042 of ERISA for the termination of, 

or the appointment of a trustee to administer, any Pension Plan; (h) the determination that any Pension 

Plan is in at-risk status (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a 

Multiemployer Plan is in endangered or critical status (within the meaning of Section 432 of the Code or 

Section 305 of ERISA); (i) the imposition or incurrence of any liability under Title IV of ERISA, other 

than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Credit Party or 

any ERISA Affiliate; (j) the engagement by any Credit Party or any ERISA Affiliate in a transaction that 

could be subject to Section 4069 or Section 4212(c) of ERISA; (k) the imposition of a lien upon any 

Credit Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA; or (l) the making of an 

amendment to a Pension Plan that could result in the posting of bond or security under Section 436(f)(1) 

of the Code.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published 

by the Loan Market Association (or any successor person), as in effect from time to time.

“Eurodollar Reserve Percentage” means, for any day during any Interest Period, the 

reserve percentage in effect on such day, whether or not applicable to any Lender, under regulations 

issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement 

(including any emergency, special, supplemental or other marginal reserve requirement) with respect to 

eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). The Adjusted 

LIBO Rate for each outstanding Loan shall be adjusted automatically as of the effective date of any 

change in the Eurodollar Reserve Percentage.

“Event of Default” has the meaning specified in Article VII.

“Excluded Assets” has the meaning assigned to such term in the Pledge and Security 

Agreement. 

“Excluded Subsidiary” means any Subsidiary of the Parent (other than the Borrower) that 

(i) is not wholly-owned, directly or indirectly, by the Parent, (ii) is a captive insurance company, (iii) is an 

Immaterial Subsidiary, (iv) is a Receivables Subsidiary or (v) is a Foreign Subsidiary or a CFC Holdco 

existing on the Closing Date; provided that, notwithstanding the foregoing, (1) a Subsidiary will not be an 

Excluded Subsidiary if it (x) owns assets that are intended to be included in the Collateral, (y) owns 

individually, or in the aggregate with other Subsidiaries (including any Subsidiary that would otherwise 

qualify as an Excluded Subsidiary), a majority of the Equity Interests of any Subsidiary that owns any 

assets that are intended to be included in the Collateral or (z) guarantees Material Indebtedness of the 

Parent or any of its Subsidiaries (other than any acquired Subsidiary that guarantees assumed 

Indebtedness of a Person acquired pursuant to an acquisition permitted under this Agreement that is 

existing at the time of such acquisition or investment; provided that such Indebtedness was not created in 

contemplation of or in connection with such acquisition and the amount of such Indebtedness is not 

increased), and (2) SkyWest Leasing, Inc. and SkyWest Insurance Company, Inc. shall be Excluded 

Subsidiaries.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a 

Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or 

measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, 
(i) imposed as a result of such Recipient being organized under the laws of, or having its principal office 

or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax 

(or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, 

U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with 

respect to an applicable interest in a Loan pursuant to a law in effect on the date on which (i) such Lender 

acquires such interest in the Loans (other than pursuant to an assignment request by the Borrower under 

Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, 

pursuant to Section 2.16, amounts with respect to such Taxes were payable either to such Lender's 

assignor immediately before such Lender became a party hereto or to such Lender immediately before it 

changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with 

Section 2.16(g) and (d) any withholding Taxes imposed under FATCA.

“Export Control Laws” means any applicable export control Laws including the 

International Traffic in Arms Regulations (22 C.F.R. 120 et seq.) and the Export Administration 

Regulations (15 C.F.R. 730 et seq.).

“FAA” means the United States Federal Aviation Administration and any successor 

thereto.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this 

Agreement (or any amended or successor version that is substantively comparable and not materially 

more onerous to comply with), any current or future regulations or official interpretations thereof, any 

agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory 

legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention 

among Governmental Authorities and implementing such Sections of the Code.

“FCPA” has the meaning specified in Section 3.15(b).

“Federal Funds Effective Rate” means, for any day, the greater of (a) the rate calculated 

by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary 

institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its 

public website from time to time) and published on the next succeeding Business Day by the Federal 

Reserve Bank of New York as the Federal funds effective rate and (b) 0%.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System 

of the United States.

“Finance Entity” means any Person created or formed by or at the direction of the Parent 

or any of its Subsidiaries for the purpose of financing aircraft and aircraft related assets and related predelivery payment obligations of Parent or such Subsidiaries that; provided, that, such (i) Person holds no 

material assets other than the aircraft or aircraft related assets to be financed or assets pursuant to which 

related pre-delivery payment obligations arise, (ii) financing is in the ordinary course of business of the 

Parent and its Subsidiaries or otherwise customary for airlines based in the United States and (iii) Person 

holds no assets constituting, or otherwise intended to be included in, Collateral.

“Financial Officer” means, as to any Person, the chief financial officer, principal 

accounting officer, treasurer or controller of such Person.

“Fitch” means Fitch Ratings and any successor to its rating agency business.

“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as 

of the execution of this Agreement, the modification, amendment or renewal of this Agreement or 

otherwise) with respect to USD LIBO Rate. As of the Closing Date, the Floor shall be 0%. 
“Foreign Lender” means any Lender that is not a U.S. Person.

“Foreign Plan” means any employee pension benefit plan, program, policy, arrangement 

or agreement maintained or contributed to by the Parent or any Subsidiary with respect to employees 

employed outside the United States (other than any governmental arrangement).

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in 

making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of 

credit in the ordinary course of its activities.

“GAAP” means, subject to Section 1.03, United States generally accepted accounting 

principles as in effect from time to time; provided that if at any time any change in GAAP would affect 

the computation of any financial ratio or financial requirement, or compliance with any covenant, set 

forth in any Loan Document, the Required Lenders and the Borrower will negotiate in good faith to 

amend such ratio, requirement or covenant to preserve the original intent thereof in light of such change 

in GAAP (subject to the approval of the Required Lenders); provided that until so amended, (a) such 

ratio, requirement or covenant will continue to be computed in accordance with GAAP prior to such 

change therein and (b) the Borrower will provide to the Administrative Agent and the Lenders 

reconciliation statements to the extent requested.

“Gate Leasehold” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Governmental Authority” means the government of the United States of America or any 

other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, 

instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, 

judicial, taxing, regulatory or administrative powers or functions of or pertaining to government 

(including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such 

Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation 

payable or performable by another Person (the “primary obligor”) in any manner, whether directly or 

indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or 

advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to 

purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such 

Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, 

(iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or 

level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such 

Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the 

obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to 

protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of 

such Person securing any Indebtedness or other obligation of any other Person, whether or not such 

Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any 

holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not 

include endorsements for collection or deposit in the ordinary course of business. The amount of any 

Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related 

primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or 

determinable, the maximum reasonably anticipated liability in respect thereof as determined by the 

guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

“Guaranteed Obligations” has the meaning specified in Section 9.01.
“Guarantor” means the Parent and each other Guarantor listed on the signature page to 

this Agreement and any other Person that Guarantees the Obligations under this Agreement and any other 

Loan Document.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all 

hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, 

asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical 

wastes, and other substances or wastes of any nature regulated under or with respect to which liability or 

standards of conduct are imposed pursuant to any Environmental Law.

“Immaterial Subsidiaries” means one or more Subsidiaries, for which (a) the assets of all 

such Subsidiaries constitute, in the aggregate, no more than 7.50% of the total assets of the Parent and its 

Subsidiaries on a consolidated basis (determined as of the last day of the most recent fiscal quarter of 

Parent for which financial statements are available), and (b) the revenues of all such Subsidiaries account 

for, in the aggregate, no more than 7.50% of the total revenues of the Parent and its Subsidiaries on a 

consolidated basis for the four (4) fiscal quarter period ending on the last day of the most recent fiscal 

quarter of Parent for which financial statements are available; provided that (x) a Subsidiary will not be 

an Immaterial Subsidiary if it (i) directly or indirectly guarantees, or pledges any property or assets to 

secure, any Obligations,(ii) owns any assets that are intended to be included in the Collateral or is party to 

any agreements that constitute (or would constitute) Collateral or (iii) owns a majority of the Equity 

Interests of any Subsidiary that owns any assets that are intended to be included in the Collateral and (y)

the Borrower shall not be an Immaterial Subsidiary.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of 

the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such 

Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) all direct or contingent obligations of such Person arising under (i) letters of 

credit (including standby and commercial), bankers’ acceptances and bank guaranties and (ii) surety 

bonds, performance bonds and similar instruments issued or created by or for the account of such Person;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of property or 

services (other than trade accounts payable in the ordinary course of business);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property 

owned or being purchased by such Person (including indebtedness arising under conditional sales or other 

title retention agreements), whether or not such indebtedness shall have been assumed by such Person or 

is limited in recourse;

(f) all Attributable Indebtedness;

(g) all obligations of such Person in respect of Disqualified Equity Interests; and

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership 

or joint venture (other than a joint venture that is itself a corporation or limited liability company) in 

which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made 

non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date 
shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any 

Indebtedness of any Person for purposes of clause (e) that is expressly made non-recourse or limitedrecourse (limited solely to the assets securing such Indebtedness) to such Person shall be deemed to be 

equal to the lesser of (i) the aggregate principal amount of such Indebtedness and (ii) the fair market value 

of the property encumbered thereby as determined by such Person in good faith.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with 

respect to any payment made by or on account of any obligation of the Borrower under any Loan 

Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitee” has the meaning specified in Section 11.03(b).

“Information” has the meaning specified in Section 11.12.

“Initial Lender” means Treasury or its designees (but, for the avoidance of doubt, 

excluding any assignee of the Loans). 

“Intellectual Property” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Interest Payment Date” means the first Business Day following the 14th day of each 

March, June, September and December (beginning with September 15, 2021), and the Maturity Date.

“Interest Period” means, as to any Borrowing, (a) for the initial Interest Period, the period 

commencing on the date of such Borrowing and ending on the next succeeding Interest Payment Date and 

(b) for each Interest Period thereafter, the period commencing on the last day of the next preceding 

Interest Period and ending on the next succeeding Interest Payment Date.

“International Registry” has the meaning assigned to such term in the Pledge and 

Security Agreement. 

“Interpolated Rate” means, at any time, the rate per annum determined by the 

Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be 

equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the 

Bloomberg “LIBOR01” screen page (or any successor or replacement screen on such service; in each 

case the “Screen Rate”) for the longest period (for which that Screen Rate is available) that is shorter than 

three (3) months and (b) the Screen Rate for the shortest period (for which that Screen Rate is available) 

that is equal to or exceeds three (3) months, in each case, at approximately 11:00 a.m., London time, two 

(2) Business Days prior to the commencement of such Interest Period.

“Investment” means, as to any Person, any direct or indirect acquisition or investment by 

such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other 

securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of 

debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another 

Person, including any partnership or joint venture interest in such other Person and any arrangement 

pursuant to which the investor incurs Indebtedness of the type referred to in clause (h) of the definition of 

“Indebtedness” in respect of such other Person, or (c) the purchase or other acquisition (in one transaction 

or a series of transactions) of all or substantially all of the property and assets or business of another 

Person or assets constituting a business unit, line of business or division of such Person. For purposes of 

covenant compliance, the amount of any Investment shall be the amount actually invested, without 

adjustment for subsequent increases or decreases in the value of such Investment but giving effect to any 

returns or distributions of capital or repayment of principal actually received in case by such Person with 

respect thereto.
“IRS” means the United States Internal Revenue Service. 

“ISDA Definitions” means the 2006 ISDA Definitions published by the International 

Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time 

to time, or any successor definitional booklet for interest rate derivatives published from time to time by 

the International Swaps and Derivatives Association, Inc. or such successor thereto.

“Laws” means, collectively, all international, foreign, federal, state and local statutes, 

treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or 

authorities, including the interpretation or administration thereof by any Governmental Authority charged 

with the enforcement, interpretation or administration thereof, and all applicable administrative orders, 

directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental 

Authority, in each case whether or not having the force of law.

“Lenders” means the Initial Lender and any other Person that shall have become party 

hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party 

hereto pursuant to an Assignment and Assumption. 

“LIBO Rate” means, the greater of (a) the rate appearing on the Bloomberg “LIBOR01” 

screen page (or any successor or replacement screen on such service) at approximately 11:00 a.m., 

London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for 

dollar deposits with a maturity of three (3) months; provided that (i) if such rate is not available at such 

time for any reason, then the “LIBO Rate” shall be the Interpolated Rate, and (ii) if the Interpolated Rate 

is not available (except as set forth in Section 2.10), the “LIBO Rate” shall be the LIBO Rate for the 

immediately preceding Interest Period, two (2) Business Days prior to the commencement of such Interest 

Period and (b) 0%.

“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit 

arrangement, encumbrance, lien (statutory or other), charge, any option or other agreement to sell or give 

a security interest in an asset, or preference, priority, or other security interest or preferential arrangement 

of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any 

easement, right of way or other encumbrance on title to real property, and any financing lease having 

substantially the same economic effect as any of the foregoing).

“Liquidity” means the sum of (i) all unrestricted cash and Cash Equivalents of Parent and 

its Subsidiaries, (ii) cash or Cash Equivalents of the Parent and its Subsidiaries restricted in favor of the 

Obligations or in connection with the Payroll Support Program Agreement (other than any amounts held 

in the Collateral Proceeds Account), (iii) the aggregate principal amount committed and available to be 

drawn by the Parent and its Subsidiaries (taking into account all borrowing base limitations or other 

restrictions) under all revolving credit facilities of the Parent and its Subsidiaries, (iv) any remaining 

aggregate principal amount committed and available to be drawn (taking into account any applicable 

restrictions) by the Parent and its Subsidiaries in respect of the Loans and (v) the scheduled net proceeds 

(after giving effect to any expected repayment of existing Indebtedness using such proceeds) of any 

Capital Markets Offering of the Parent or any of its Subsidiaries that has priced but has not yet closed 

(until the earliest of the closing thereof, the termination thereof without closing or the date that falls five 

(5) Business Days after the initial scheduled closing date thereof).

“Loan” means a loan made by a Lender to the Borrower pursuant to this Agreement.

“Loan Application Form” means the application form and any related materials submitted 

by the Borrower to the Initial Lender in connection with an application for the Loans under Division A, 

Title IV, Subtitle A of the CARES Act.
“Loan Documents” means, collectively, this Agreement, any Security Document, any 

promissory notes issued pursuant to Section 2.11(b) and any other documents entered into in connection 

herewith (including an Administrative Agency Fee Letter, if any).

“Margin Stock” means margin stock within the meaning of Regulations T, U and X.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse 

effect on, the operations, business, properties, liabilities (actual or contingent), condition (financial or 

otherwise) or prospects of the Parent and its Subsidiaries taken as a whole; or (b) a material adverse effect 

on (i) the ability of the Borrower or any Credit Party to perform its Obligations, (ii) the legality, validity, 

binding effect or enforceability against the Borrower or any Credit Party of any Loan Document to which 

it is a party or the validity, perfection and first priority of the Liens on the Collateral in favor of the 

Collateral Agent taken as a whole or with respect to a substantial portion of the Collateral, or (iii) the 

rights, remedies and benefits available to, or conferred upon, the Lenders or the Agents under any Loan 

Documents; provided that the impacts of the COVID-19 disease outbreak will be disregarded for purposes 

of clauses (a) of this definition to the extent (i) publicly disclosed in any SEC filing of the Parent or 

otherwise provided to the Initial Lender prior to the Closing Date and (ii) the scope of such adverse effect 

is no greater than that which has been disclosed as of the Closing Date.

“Material Indebtedness” means Indebtedness of the Parent or any of its Subsidiaries

(other than the Loans) outstanding under the same agreement in a principal amount exceeding 

$50,000,000.

“Material Subsidiary” means any Subsidiary that is not an Immaterial Subsidiary.

“Maturity Date” means the date that is five (5) years after the Closing Date (except that, 

if such date is not a Business Day, the Maturity Date shall be the preceding Business Day).

“Maximum Rate” has the meaning specified in Section 11.14.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency 

business.

“Multiemployer Plan” means any employee benefit plan of the type described in 

Section 4001(a)(3) of ERISA, to which any Credit Party or any ERISA Affiliate makes or is obligated to 

make contributions, during the preceding five (5) plan years has made or been obligated to make 

contributions, or has any liability.

“Multiple Employer Plan” means a Plan with respect to which any Credit Party or any 

ERISA Affiliate is a contributing sponsor, and that has two (2) or more contributing sponsors at least two

(2) of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

“Net Proceeds” means in connection with any Disposition or Recovery Event, the 

aggregate cash and Cash Equivalents received by the Parent or any of its Subsidiaries in respect of a 

Disposition of Collateral (including, without limitation, any cash or Cash Equivalents received in respect 

of or upon the Disposition of any non-cash consideration received in any such Disposition of Collateral) 

or Recovery Event, net of the direct costs and expenses relating to such Disposition and incurred by the 

Parent or a Subsidiary (including the sale or disposition of such non-cash consideration) or any such 

Recovery Event, including, without limitation, legal, accounting and investment banking fees, and sales 

commissions, and any relocation expenses incurred as a result of the Disposition or Recovery Event, taxes 

paid or reasonably estimated to be payable as a result of the Disposition or Recovery Event, in each case, 

after taking into account any available tax credits or deductions and any tax sharing arrangements.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver 

or amendment that (a) requires the approval of all or all affected Lenders in accordance with the terms of 

Section 11.02 and (b) has been approved by the Required Lenders.

“Note” means the promissory note executed by the Borrower pursuant to Section 2.11(b).

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and 

duties of, each Credit Party arising under any Loan Document or otherwise with respect to any Loan, 

whether direct or indirect (including those acquired by assumption), absolute or contingent, due or 

required to be performed, or to become due or to be performed, now existing or hereafter arising and 

including interest and fees that accrue after the commencement by or against any Credit Party or any 

Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in 

such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. 

Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest, 

charges, expenses, fees, indemnities and other amounts payable by the Borrower or any other Credit Party 

under any Loan Document, (b) the obligation of any Credit Party to reimburse any amount in respect of 

any of the foregoing that the Lenders, in each case in their sole discretion, may elect to pay or advance on 

behalf of any Credit Party and (c) the obligation of any Credit Party or any of its Subsidiaries to take any 

action or refrain from taking any action as required by the covenants and other provisions contained in 

this Agreement and any other Loan Document.

“Obligee Guarantor” has the meaning specified in Section 9.06.

“Organizational Documents” means (a) as to any corporation, the charter or certificate or 

articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect 

to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of 

formation or organization and operating or limited liability agreement and (c) as to any partnership, joint 

venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement 

of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in 

connection with its formation or organization with the applicable Governmental Authority in the 

jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or 

organization of such entity.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a 

result of a present or former connection between such Recipient and the jurisdiction imposing such Tax 

(other than connections arising from such Recipient having executed, delivered, become a party to, 

performed its obligations under, received payments under, received or perfected a security interest under, 

engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an 

interest in the Loans or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, 

recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, 

performance, enforcement or registration of, from the receipt or perfection of a security interest under, or 

otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes 

imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19(b)).

“Outstanding Amount” means, with respect to Loans on any date, the aggregate 

outstanding principal amount thereof after giving effect to any borrowings and prepayments or 

repayments of Loans occurring on such date.

“Parent” has the meaning specified in introductory paragraph hereof.

“Participant” has the meaning specified in Section 11.04(d).
“Participant Register” has the meaning specified in Section 11.04(d).

“Payroll Support Program Agreement” means that certain Payroll Support Program 

Agreement dated as of April 23, 2020, between the Borrower and Treasury.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Funding Rules” means the rules of the Code and ERISA (as modified by the 

CARES Act) regarding minimum funding standards and minimum required contributions (including any 

installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to 

plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 

of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 

of the Code and Sections 302, 303, 304 and 305 of ERISA.

“Pension Plan” means any employee pension benefit plan (including a Multiple 

Employer Plan, but excluding a Multiemployer Plan) that is maintained or is contributed to by any Credit 

Party or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum 

funding standards under Section 412 of the Code.

“Perfection Requirement” has the meaning specified in the Pledge and Security 

Agreement.

“Permitted Bond Hedge Transaction” means any call or capped call option (or 

substantively equivalent derivative transaction) on the Parent’s common Equity Interests purchased by the 

Parent in connection with the issuance of any Convertible Indebtedness; provided that the purchase price 

for such Permitted Bond Hedge Transaction does not exceed the net proceeds received by the Parent from 

the sale of such Convertible Indebtedness issued in connection with the Permitted Bond Hedge 

Transaction.

“Permitted Business” means any business that is the same as, or reasonably related, 

ancillary, supportive or complementary to, the business in which the Parent and its Subsidiaries are 

engaged on the date of this Agreement.

“Permitted Liens” means:

(1) Liens created for the benefit of (or to secure the payment and performance of) the 

Obligations or any Guaranteed Obligations;

(2) Liens for taxes, assessments or governmental charges or claims that are not yet 

delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and 

diligently concluded; provided that any reserve or other appropriate provision as is required in conformity 

with GAAP has been made therefor;

(3) Liens imposed by law, including carriers’, vendors’, materialmen’s, 

warehousemen’s, landlord’s, mechanics’, repairmen’s, employees’ or other like Liens, in each case, 

incurred in the ordinary course of business;

(4) Liens arising by operation of law in connection with judgments, attachments or 

awards which do not constitute an Event of Default hereunder;

(5) Liens in favor of customs and revenue authorities arising as a matter of law to 
secure payment of customs duties in connection with the importation of goods in the ordinary course of 

business; 

(6) [Reserved];

(7) to the extent applicable, salvage or similar rights of insurers, in each case as it 

relates to Collateral; and

(8) Liens expressly permitted by the Pledge and Security Agreement.

“Permitted Refinancing” means with respect to any Person, any refinancings, renewals, 

or extensions of any Indebtedness of such Person so long as: (a) such refinancings, renewals, or 

extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed, 

or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in 

connection therewith and by the amount of unfunded commitments with respect thereto; (b) such 

refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity

(measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or 

extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected 

to be materially adverse to the interests of the Lenders; (c) if the Indebtedness that is refinanced, renewed, 

or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the 

refinancing, renewal, or extension must include subordination terms and conditions that are at least as 

favorable to the Lenders as those that were applicable to the refinanced, renewed, or extended 

Indebtedness; (d) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person 

that is liable on account of the Obligations other than those Persons which were obligated with respect to 

the Indebtedness that was refinanced, renewed, or extended and (e) to the extent the Indebtedness that is 

refinanced, renewed, or extended is unsecured, the Indebtedness resulting from such refinancing, renewal 

or extension must be unsecured.

“Person” means any natural person, corporation, limited liability company, trust, joint 

venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA, 

maintained for employees of the Parent or any Subsidiary, or any such plan to which the Parent or any 

Subsidiary is required to contribute on behalf of any of its employees or with respect to which any Credit 

Party has any liability.

“Platform” means Debt Domain, Intralinks, Syndtrak, DebtX or a substantially similar 

electronic transmission system.

“Pledge and Security Agreement” means the Pledge and Security Agreement executed 

and delivered by the Borrower and each Guarantor on the Closing Date in form and substance acceptable 

to the Initial Lender and the Collateral Agent, as amended and restated pursuant to that certain First 

Amendment to the Pledge and Security Agreement, dated as of October 28, 2020, by the Borrower, the 

Parent, the Guarantors party thereto and the Collateral Agent, and as it may be further amended, 

supplemented, restated or otherwise modified from time to time. For the avoidance of doubt, the terms of 

the “Pledge and Security Agreement” shall include the terms of all Applicable Annexes (as defined in the 

Pledge and Security Agreement).

“Prepayment Notice” means a notice by the Borrower to prepay Loans, which shall be in 

such form as the Appropriate Party may approve.

“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal 

as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per 
annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 

(519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, 

any similar rate quoted therein (as determined by the Required Lenders) or any similar release by the 

Federal Reserve Board (as determined by the Required Lenders). Any change in the Prime Rate shall 

take effect at the opening of business on the day such change is publicly announced or quoted as being 

effective.

“Proceeds” means “proceeds,” as defined in Article 9 of the UCC.

“PSP Warrant Agreement” means that certain warrant agreement, dated as of April 23, 

2020 between the Parent and Treasury.

“Public Lender” has the meaning specified in Section 11.01(e).

“Receivables Subsidiary” means (x) a Wholly-Owned Subsidiary of the Parent formed 

for the purpose of and which engages in no activities other than in connection with the financing or 

securitization of accounts receivables (a) no portion of the Indebtedness or any other obligations 

(contingent or otherwise) of which (1) is guaranteed by the Parent by any Subsidiary of the Parent, and 

excluding any guarantees of obligations (other than the principal of, and interest on, Indebtedness) 

pursuant to Standard Securitization Undertakings, (2) is recourse to or obligates the Parent or any 

Subsidiary of the Parent in any way other than pursuant to Standard Securitization Undertakings or (3) 

subjects any property or asset of the Parent or any Subsidiary of the Parent (other than accounts 

receivable and related assets) or any property or asset of the type that is intended to be include in the 

Collateral, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant 

to Standard Securitization Undertakings, (b) with which neither the Parent nor any Subsidiary of the 

Parent (other than another Receivables Subsidiary) has any material contract, agreement, arrangement or 

understanding (other than pursuant to the related financing of accounts receivable) other than on terms no 

less favorable to the Parent or such Subsidiary than those that might be obtained at the time from Persons 

who are not Affiliates of the Parent and (c) with which neither the Parent nor any Subsidiary of the Parent 

has any obligation to maintain or preserve such Subsidiary’s financial condition, other than a minimum 

capitalization in customary amounts, or to cause such Subsidiary to achieve certain levels of operating 

results or (y) any Subsidiary of a Receivables Subsidiary. For the avoidance of doubt, the Parent and any 

Subsidiary of the Parent may enter into Standard Securitization Undertakings for the benefit of a 

Receivables Subsidiary..

“Recipient” means (a) the Administrative Agent, (b) the Collateral Agent or (c) any 

Lender, as applicable.

“Recovery Event” means any settlement of or payment in respect of any property or 

casualty insurance claim or any condemnation proceeding relating to any Collateral or any Event of Loss 

(as defined in the Pledge and Security Agreement).

“Reference Time” with respect to any setting of the then-current Benchmark means (1) if 

such Benchmark is USD LIBO Rate, 11:00 a.m. (London time) on the day that is two London banking 

days preceding the date of such setting, and (2) if such Benchmark is not USD LIBO Rate, the time 

determined by the Required Lenders in their reasonable discretion, provided that such time is determined 

to be administratively feasible by the Administrative Agent.

“Register” has the meaning specified in Section 11.04(c).

“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.

“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the 

partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and 

representatives of such Person and of such Person’s Affiliates.

“Relevant Governmental Body” means the Federal Reserve Board or the Federal 

Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve 

Board or the Federal Reserve Bank of New York, or any successor thereto.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other 

than events for which the thirty (30)-day notice period has been waived.

“Required Lenders” means, at any time, Lenders having Loans representing more than 

50% of the aggregate Outstanding Amount of Loans of all Lenders at such time. 

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK 

Financial Institution, a UK Resolution Authority. 

“Responsible Officer” means (a) the chief executive officer, president, executive vice 

president or a Financial Officer of the Borrower or such Credit Party, as applicable, (b) solely for 

purposes of the delivery of incumbency certificates and certified Organizational Documents and 

resolutions pursuant to Section 4.01, any vice president, secretary or assistant secretary of the Borrower or 

such Credit Party and (c) solely for purposes of Borrowing Requests, prepayment notices and notices for 

Commitment terminations or reductions given pursuant to Article II, any other officer or employee of the 

Borrower so designated from time to time by one of the officers described in clause (a) in a notice to the 

Administrative Agent (together with evidence of the authority and capacity of each such Person to so act 

in form and substance satisfactory to the Administrative Agent). Any document delivered hereunder that 

is signed by a Responsible Officer of the a Credit Party shall be conclusively presumed to have been 

authorized by all necessary corporate, partnership or other action on the part of such Credit Party and such 

Responsible Officer shall be conclusively presumed to have acted on behalf of such Credit Party.

“Restatement Agreement” means that certain Restatement Agreement, dated as of 

October 28, 2020, to this Agreement, between the Borrower, the Parent, the Guarantors party thereto from 

time to time, Treasury, the Administrative Agent and the Collateral Agent.

“Restricted Payment” means any dividend or other distribution (whether in cash, 

securities or other property) with respect to any Equity Interest of any Person, or any payment (whether in 

cash, securities or other property), including any sinking fund or similar deposit, on account of the 

purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest, or 

on account of any return of capital to such Person’s shareholders, partners or members (or the equivalent 

Persons thereof).

“Route Authority” has the meaning assigned to such term in the Pledge and Security 

Agreement. “S&P” means S&P Global Ratings, and any successor to its rating agency business.
“Sanctioned Country” has the meaning specified in Section 3.15(a).

“Sanctioned Person” has the meaning specified in Section 3.15(a).

“Sanctions” has the meaning specified in Section 3.15(a).

“Screen Rate” has the meaning specified in the definition of the term “Interpolated Rate”.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority 

succeeding to any of its principal functions.

“Secured Parties” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

“Security Document” means the Pledge and Security Agreement and any security or 

pledge agreement, mortgage, hypothecation or other agreement, instrument or document relating to 

collateral for the Loans (including any short form agreements, supplements, control agreements, collateral 

access agreements and registrations executed or made) that may exist at any time and from time to time, 

as amended from time to time.

“Slot” has the meaning assigned to such term in the Pledge and Security Agreement.

“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured 

overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR 

Administrator’s Website at approximately 8:00 a.m. (New York City time) on the immediately 

succeeding Business Day.

“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor 

administrator of the secured overnight financing rate).

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New 

York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight 

financing rate identified as such by the SOFR Administrator from time to time.

“Solvent” means, as to any Person as of any date of determination, that on such date 

(a) the fair value of the property of such Person is greater than the total amount of liabilities, including 

contingent liabilities, of such Person, (b) the present fair saleable value of such Person is not less than the 

amount that will be required to pay the probable liability of such Person on its debts as they become 

absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or 

liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such 

Person is not engaged in a business or a transaction, and is not about to engage in a business or a 

transaction, for which such Person’s property would constitute an unreasonably small capital. The 

amount of any contingent liability at any time shall be computed as the amount that, in light of all of the 

facts and circumstances existing at such time, represents the amount that can reasonably be expected to 

become an actual or matured liability. For the avoidance of doubt, a Person shall not fail to be Solvent on 

any date solely as a result of such person’s audit having a “going concern” or like qualification, exception 

or explanatory paragraph or any qualification, exception or explanatory paragraph as to the scope of such 

audit solely due to the COVID-19 disease outbreak.

“Spare Parts” has the meaning assigned to such term in the Pledge and Security 

Agreement.
“Standard Securitization Undertakings” means all representations, warranties, covenants, 

indemnities, performance Guarantees and servicing obligations entered into by the Parent or any 

Subsidiary (other than a Receivables Subsidiary), which are customary in connection with any financing 

of accounts receivable.

“Subsidiary” of a Person means a corporation, partnership, limited liability company, 

association or joint venture or other business entity of which a majority of the Equity Interests having 

ordinary voting power for the election of directors or other governing body (other than securities or 

interests having such power only by reason of the happening of a contingency) are at the time owned or 

the management of which is controlled, directly, or indirectly through one or more intermediaries, by such 

Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer 

to a Subsidiary or Subsidiaries of the Parent.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit 

derivative transactions, forward rate transactions, commodity swaps, commodity options, forward 

commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or 

options or forward bond or forward bond price or forward bond index transactions, interest rate options, 

forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency 

swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other 

similar transactions or any combination of any of the foregoing (including any options to enter into any of 

the foregoing), whether or not any such transaction is governed by or subject to any master agreement, 

and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms 

and conditions of, or governed by, any form of master agreement published by the International Swaps 

and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other 

master agreement (any such master agreement, together with any related schedules, a “Master 

Agreement”), including any such obligations or liabilities under any Master Agreement.

“Swap Termination Value” means, as to any one or more Swap Contracts, after taking 

into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, 

(a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) 

determined in accordance therewith, such termination value(s), and (b) for any date prior to the date 

referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap 

Contracts, as determined based upon one or more mid-market or other readily available quotations 

provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate 

of a Lender).

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a socalled synthetic, off-balance sheet or tax retention lease or (b) an agreement for the use or possession of 

property creating obligations that do not appear on the balance sheet of such Person but, upon the 

insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person 

(without regard to accounting treatment).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, 

withholdings (including backup withholding), assessments, fees or other charges imposed by any 

Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable 

Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by 

the Relevant Governmental Body.

“Trade Date” means the date on which an assigning Lender enters into a binding 

agreement to sell and assign all or a portion of its rights and obligations under this Agreement to another 

Person.
“Treasury” has the meaning specified in the preamble to this Agreement.

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under 

the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential 

Regulation Authority) or any Person falling within IFPRU 11.6 of the FCA Handbook (as amended from 

time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain 

credit institutions and investment firms, and certain affiliates of such credit institutions or investment 

firms.

“UK Resolution Authority” means the Bank of England or any other public 

administrative authority having responsibility for the resolution of any UK Financial Institution.

“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement 

excluding the related Benchmark Replacement Adjustment.

“Uniform Commercial Code” and “UCC” means the Uniform Commercial Code as in 

effect from time to time in the State of New York or, when the context implies, the Uniform Commercial 

Code as in effect from time to time in any other applicable jurisdiction.

“United States” and “U.S.” mean the United States of America.

“USD LIBO Rate” means the LIBO Rate for U.S. dollars.

“U.S. Person” means any Person that is a “United States Person” as defined in 

Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(g).

“Voting Stock” of any specified Person as of any date means the equity interests of such 

Person that is at the time entitled to vote in the election of the board of directors of such Person.

“Warrant Agreement” means the warrant agreement, dated as of the date hereof between 

the Parent and Treasury, pursuant to which the Parent agrees to issue Warrants to Treasury upon each 

Borrowing.

“Warrants” means, collectively, those certain warrants issued to Treasury under the 

Warrant Agreement or the PSP Warrant Agreement.

“Wholly-Owned” means, as to a Subsidiary of a Person, a Subsidiary of such Person all 

of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) shares 

issued to foreign nationals to the extent required by Applicable Law) are owned by such Person and/or by 

one or more Wholly-Owned Subsidiaries of such Person.

“Withholding Agent” means the Borrower and the Administrative Agent or other person 

making or transferring to any Lender any payment on behalf of the Borrower.

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution 

Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time 

under the Bail-In Legislation for the applicable EEA Member Country, which powers are described in the 

EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the 

applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the 

form of a liability of any UK Financial Institution or any contract or instrument under which that liability 

arises, to convert all or part of that liability into shares, securities or obligations of such Person or any 
other Person, to provide that any such contract or instrument is to have effect as if a right had been 

exercised under it or to suspend any obligation in respect of that liability or any of the powers under that 

Bail-In Legislation that are related to or ancillary to any of those power .

SECTION 1.02 Terms Generally. The definitions of terms herein shall apply equally to the 

singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall 

include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and 

“including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be 

construed to have the same meaning and effect as the word “shall.” The word “or” is not exclusive. The 

word “year” shall refer (i) in the case of a leap year, to a year of three hundred sixty-six (366) days, and (ii) 

otherwise, to a year of three hundred sixty-five (365) days. Unless the context requires otherwise (a) any 

definition of or reference to any agreement, instrument or other document herein shall be construed as 

referring to such agreement, instrument or other document as from time to time amended, supplemented or 

otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth 

herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and 

assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed 

to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein 

to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and 

Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless 

otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to 

time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and 

to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and 

contract rights.

SECTION 1.03 Accounting Terms; Changes in GAAP. 

(a) Accounting Terms. Except as otherwise expressly provided herein, all accounting 

terms not otherwise defined herein shall be construed in conformity with GAAP. Financial statements 

and other information required to be delivered by the Parent to the Lenders pursuant to Sections 5.01(a)

and 5.01(b) shall be prepared in accordance with GAAP as in effect at the time of such preparation. 

Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the 

computation of any financial covenant) contained herein, Indebtedness of the Parent and its Subsidiaries 

shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of 

FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

(b) Changes in GAAP. If the Borrower notifies the Administrative Agent (who will 

forward such notification to the Lenders) that the Borrower requests an amendment to any provision 

hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application 

thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the 

Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether 

any such notice is given before or after such change in GAAP or in the application thereof, then such 

provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such 

change shall have become effective until such notice shall have been withdrawn, the Required Lenders 

shall have notified the Borrower (with a copy to the Administrative Agent) of their objection to such 

amendment or such provision shall have been amended in accordance herewith.

SECTION 1.04 Rates. The Administrative Agent does not warrant or accept responsibility 

for, and shall not have any liability with respect to, the administration, submission or any other matter 

related to the rates in the definition of “LIBO Rate” or with respect to any comparable or successor rate 

thereto.

SECTION 1.05 Divisions. For all purposes under the Loan Documents, in connection with 

any division or plan of division under Delaware law (or any comparable event under a different 
jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, 

obligation or liability of a different Person, then it shall be deemed to have been transferred from the 

original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person 

shall be deemed to have been organized on the first date of its existence by the holders of its Equity 

Interests at such time.

ARTICLE II

COMMITMENTS AND BORROWINGS

SECTION 2.01 Commitments. Subject to the terms and conditions set forth herein, the 

Initial Lender agrees to make the Loans to the Borrower in one or more installments on or after the Closing 

Date in an aggregate principal amount not to exceed the Initial Lender’s Commitment. Amounts borrowed 

under this Section 2.01 and repaid or prepaid may not be reborrowed. 

SECTION 2.02 Loans and Borrowings.

(a) Borrowings. The Borrower shall request the initial Borrowing of the Loans on 

the Closing Date and may request one or more subsequent Borrowings of the Loans; provided that the 

Borrower shall request no more than three (3) total Borrowings. 

(b) Minimum Amounts. Each Borrowing shall be in an aggregate amount of 

$60,000,000 or a larger multiple of $5,000,000; provided that, the final Borrowing may be in an amount 

equal to the aggregate remaining outstanding Commitment available to the Borrower under the terms and 

conditions of this Agreement.

(c) Funding of Borrowings. Each Lender shall make the amount of each Borrowing 

to be made by it hereunder available to the Administrative Agent by wire transfer of immediately 

available funds to the Administrative Account not later than 12:00 noon (New York City time) on the 

proposed date thereof. The Administrative Agent will make all such funds so received available to the 

Borrower in like funds, by wire transfer of such funds in accordance with the instructions provided in the 

applicable Borrowing Request; provided that if all such requested funds are not received by the 

Administrative Agent by 12:00 noon (New York City time) on the proposed date for such Borrowing, the 

Administrative Agent shall distribute such funds on the next succeeding Business Day.

SECTION 2.03 Borrowing Requests.

(a) Notice by Borrower. In order to request a Borrowing, the Borrower shall notify 

the Administrative Agent of such request in writing not later than 11:00 a.m. (New York City time) (i) 

with respect to the initial Borrowing under this Agreement, three (3) Business Days prior to the date of 

the requested Borrowing and (ii) for each subsequent Borrowing, five (5) Business Days before such 

Borrowing. Each such notice shall be irrevocable and shall be in the form of a written Borrowing 

Request, appropriately completed and signed by a Responsible Officer of the Borrower. The 

Administrative Agent shall promptly advise the applicable Lenders of any Borrowing Request given 

pursuant to this Section 2.03(a) (and the contents thereof), and of each Lender’s portion of the requested 

Borrowing.

(b) Content of Borrowing Requests. Each Borrowing Request for a Borrowing 

pursuant to this Section shall specify the following information in compliance with Section 2.02: (i) the 

aggregate amount of the requested Borrowing; (ii) the date of such Borrowing (which shall be a Business 

Day); and (iii) the location and number of the Borrower’s account to which funds are to be disbursed.
SECTION 2.04 [Reserved].

SECTION 2.05 [Reserved].

SECTION 2.06 Prepayments.

(a) Optional Prepayments. The Borrower may, upon written notice to the 

Administrative Agent, at any time and from time to time prepay the Loans in whole or in part without 

premium or penalty, subject to the requirements of this Section. Partial prepayments of the Loans shall be 

in a minimum aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in excess 

thereof. Notwithstanding anything herein to the contrary, the Borrower may at any time elect to prepay 

the loans with funds contained in the Collateral Proceeds Account.

(b) Mandatory Prepayments.

(i) Dispositions of Collateral. Within three (3) Business Days of the receipt 

by the Parent or any of its Subsidiaries of any Net Proceeds from a Disposition of Collateral not 

permitted by Section 6.04, the Borrower shall prepay the Loans in an amount equal to 100% of 

such Net Proceeds. 

(ii) Recovery Events. Within three (3) Business Days of the receipt by the 

Parent or any of its Subsidiaries of any Net Proceeds from a Recovery Event in respect of 

Collateral, the Borrower shall either (x) prepay the Loans in an amount equal to 100% of such 

Net Proceeds or (y) deposit such Net Proceeds into the Collateral Proceeds Account for such 

purpose and thereafter such Net Proceeds shall be applied (to the extent not otherwise applied 

pursuant to the immediately succeeding proviso) to prepay the Loans; provided that (I) the 

Borrower may use such Net Proceeds to (A) replace the assets which are the subject of such 

Recovery Event with assets that are of the same type of Collateral, or (B) repair the assets which 

are the subject of such Recovery Event, in each case, within 270 days after such deposit is made, 

(II) all such Net Proceeds amount may, at the option of the Borrower at any time, be applied to 

repay the Loans, and (III) upon the occurrence of an Event of Default, the amount of any such 

deposit may be applied by the Administrative Agent to repay the Loans.

(iii) Certain Debt Issuances. Immediately upon receipt by the Parent or any

of its Subsidiaries of any proceeds from the incurrence of any Indebtedness that is secured by 

Liens on the Collateral (other than Permitted Liens), the Borrower shall prepay the Loans in an 

amount equal to 100% of any such proceeds from any such Indebtedness. 

(iv) Change of Control. Immediately upon the occurrence of a Change of 

Control, the Borrower shall prepay the Loans in an amount equal to 100% of the aggregate

outstanding principal amount of Loans.

(c) Notices. Each such notice pursuant to this Section shall be in the form of a 

written Prepayment Notice, appropriately completed and signed by a Responsible Officer of the 

Borrower, and must be received by the Administrative Agent not later than 11:00 a.m. (New York City

time) three (3) Business Days before the date of prepayment (which delivery may initially be by 

electronic communication including fax or email and shall be followed by an original authentic 

counterpart thereof) . Each Prepayment Notice shall specify (x) the prepayment date and (y) the principal 

amount of the Loans or portion thereof to be prepaid. Each Prepayment Notice shall be irrevocable.

(d) Payments. Any prepayment of the Loans pursuant to this Section 2.06 shall be 

accompanied by accrued interest on the principal amount prepaid as set forth in Section 2.09(c).
SECTION 2.07 Reduction and Termination of Commitments. The Initial Lender’s 

Commitment shall (x) automatically and permanently be reduced by the amount of any Borrowing of a Loan

and (y) automatically and permanently terminate on March 26, 2021. The Borrower may, upon not less than 

three (3) Business Days’ notice to the Initial Lender and the Administrative Agent, terminate the Commitment 

or, from time to time, reduce the Commitment. Any such reduction in the Commitment shall be in an amount 

equal to $1,000,000 or a whole multiple thereof, and shall permanently reduce the Commitment.

SECTION 2.08 Repayment of Loans. The Borrower shall repay to the Administrative Agent 

for the ratable account of the Lenders the aggregate principal amount of all Loans outstanding on the Maturity 

Date. 

SECTION 2.09 Interest.

(a) Interest Rates. Subject to paragraph (b) of this Section, the Loans shall bear 

interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Rate.

(b) Default Interest. If any amount payable by the Borrower under this Agreement 

or any other Loan Document (including principal of any Loan, interest, fees and other amount) is not paid 

when due, whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear 

interest at a rate per annum equal to the applicable Default Rate. Upon the request of the Required 

Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all 

Loans outstanding hereunder at a rate per annum equal to the applicable Default Rate.

(c) Payment Dates. Accrued interest on each Loan shall be payable in arrears on or 

before 12:00 noon (New York City time) on each Interest Payment Date applicable thereto and at such 

other times as may be specified herein; provided that (i) interest accrued pursuant to paragraph (b) of this 

Section shall be payable on demand and (ii) in the event of any repayment or prepayment of any Loan

(including mandatory prepayments under Section 2.06(b)), accrued interest on the principal amount 

repaid or prepaid shall be payable on the date of such repayment or prepayment.

(d) Interest Computation. All interest hereunder shall be computed on the basis of a 

year of three hundred sixty (360) days and shall be payable for the actual number of days elapsed 

(including the first day but excluding the last day). The Adjusted LIBO Rate shall be determined by the 

Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.10 Benchmark Replacement Setting.

(a) Benchmark Replacement. Notwithstanding anything to the contrary herein or in 

any other Loan Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable, 

and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any 

setting of the then-current Benchmark, as notified by the Required Lenders to the Administrative Agent in 

writing, then (x) if a Benchmark Replacement is determined in accordance with clause (1) or (2) of the 

definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark 

Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in 

respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or 

further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a 

Benchmark Replacement is determined in accordance with clause (3) of the definition of “Benchmark 

Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such 

Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark

setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of 

such Benchmark Replacement is provided to the Lenders and the Administrative Agent by the Required 

Lenders without any amendment to, or further action or consent of any other party to, this Agreement or 
any other Loan Document so long as the Administrative Agent has not received, by such time, written 

notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders.

(b) Benchmark Replacement Conforming Changes. In connection with the 

implementation of a Benchmark Replacement, the Administrative Agent (after consultation with the 

Required Lenders) will have the right to make Benchmark Replacement Conforming Changes from time 

to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any 

amendments implementing such Benchmark Replacement Conforming Changes will become effective

without any further action or consent of any other party to this Agreement or any other Loan Document.

(c) Notices; Standards for Decisions and Determinations. The Initial Lender or the 

Required Lenders, as the case may be, will promptly notify the Administrative Agent, which will then 

promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or 

an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the 

implementation of any Benchmark Replacement, (iii) the removal or reinstatement of any tenor of a 

Benchmark pursuant to clause (d) below and (iv) the commencement or conclusion of any Benchmark 

Unavailability Period. The Administrative Agent will promptly notify the Borrower and the Lenders of 

the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or 

election that may be made by any Lender (or group of Lenders) or the Administrative Agent, if 

applicable, pursuant to this Section 2.10, including any determination with respect to a tenor, rate or 

adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to 

take or refrain from taking any action or any selection, will be conclusive and binding absent manifest 

error and may be made in its or their sole discretion and without consent from any other party to this 

Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this 

Section 2.10. Notwithstanding anything in this Agreement to the contrary, the Administrative Agent does 

not warrant or accept any responsibility for, and shall not have any liability with respect to, any 

determination made by it in connection with the adoption of Benchmark Replacement Conforming 

Changes or for the impact of such Benchmark Replacement Conforming Changes, nor for the failure to 

adopt any Benchmark Replacement Conforming Changes due to the failure of the Required Lenders to 

cooperate in good faith in connection with the determination of any Benchmark Replacement Conforming 

Changes.

(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary 

herein or in any other Loan Document, at any time (including in connection with the implementation of a 

Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD 

LIBO Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other 

information service that publishes such rate from time to time as selected by the Administrative Agent in 

its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has 

provided a public statement or publication of information announcing that any tenor for such Benchmark 

is or will be no longer representative, then the definition of “Interest Period” may be modified for any 

Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if 

a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or 

information service for a Benchmark (including a Benchmark Replacement) used by the Administrative 

Agent or (B) is not, or is no longer, subject to an announcement that it is or will no longer be 

representative for a Benchmark (including a Benchmark Replacement), then the definition of “Interest 

Period” may be modified for all Benchmark settings at or after such time to reinstate such previously 

removed tenor.

(e) Benchmark Unavailability Period. During any Benchmark Unavailability Period, 

all calculations of interest by reference to a LIBO Rate hereunder shall instead be made by reference to 

the Alternate Base Rate.
SECTION 2.11 Evidence of Debt.

(a) Maintenance of Records. The Administrative Agent shall maintain the Register 

in accordance with Section 11.04(c). The entries made in the records maintained pursuant to this 

paragraph (a) shall be prima facie evidence absent manifest error of the existence and amounts of the 

obligations recorded therein. Any failure of the Administrative Agent to maintain such records or make 

any entry therein or any error therein shall not in any manner affect the obligations of the Borrower under 

this Agreement and the other Loan Documents. 

(b) Promissory Notes. The Borrower shall prepare, execute and deliver to such 

Lender a promissory note of the Borrower payable to such Lender (or, if requested by such Lender, to 

such Lender and its registered assigns) and a form attached as Exhibit C hereto, which shall evidence such 

Lender’s Loan.

SECTION 2.12 Payments Generally.

(a) Payments by Borrower. All payments to be made by the Borrower hereunder and 

the other Loan Documents shall be made without condition or deduction for any counterclaim, defense, 

recoupment or setoff. Except as otherwise expressly provided herein, all such payments shall be made to 

the Administrative Agent, for the account of the respective Lenders to which such payment is owed, to 

the Administrative Account in immediately available funds not later than 12:00 noon (New York City

time) on the date specified herein. All amounts received by a Lender or the Administrative Agent after 

such time on any date shall be deemed to have been received on the next succeeding Business Day and 

any applicable interest or fees shall continue to accrue. The Administrative Agent will promptly 

distribute to each Lender its ratable share (or other applicable share as provided herein) of such payment 

in like funds as received by wire transfer to such Lender’s applicable lending office (or otherwise 

distribute such payment in like funds as received to the Person or Persons entitled thereto as provided 

herein). If any payment to be made by the Borrower shall fall due on a day that is not a Business Day, 

payment shall be made on the next succeeding Business Day and such extension of time shall be reflected 

in computing interest or fees, as the case may be; provided that, if such next succeeding Business Day 

would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day. 

Except as otherwise expressly provided herein, all payments hereunder or under any other Loan 

Document shall be made in Dollars.

(b) Application of Insufficient Payments. Subject to Section 7.02, if at any time 

insufficient funds are received by and available to the Lenders or the Administrative Agent to pay fully all 

amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied 

(i) first, to pay interest, fees and other amounts then due hereunder, ratably among the parties entitled 

thereto in accordance with the amounts of interest, fees and other amounts then due to such parties, and 

(ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance 

with the amounts of principal then due to such parties.

(c) Presumptions by Administrative Agent. Unless the Administrative Agent shall 

have received notice from the Borrower prior to the date on which any payment is due to the 

Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such 

payment, the Administrative Agent may assume that the Borrower has made such payment on such date 

in accordance herewith and may, in reliance upon such assumption, but shall not be obligated to distribute 

to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then 

each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the 

amount so distributed to such Lender, with interest thereon, for each day from and including the date such 

amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater 

of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance 

with banking industry rules on interbank compensation. Notwithstanding the foregoing, the 
Administrative Agent is not required to make any payment to the Lenders until it is in possession of 

cleared funds from the Borrower.

(d) Deductions by Administrative Agent. If any Lender (other than the Initial 

Lender) shall fail to make any payment required to be made by it pursuant to Section 2.13 or 11.03(c), 

then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, 

(i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender for 

the benefit of the Administrative Agent to satisfy such Lender’s obligations to the Administrative Agent 

until all such unsatisfied obligations are fully paid or (ii) hold any such amounts in a segregated account 

as cash collateral for, and for application to, any future funding obligations of such Lender under any such 

Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative 

Agent in its discretion.

(e) Several Obligations of Lenders. The obligations of the Lenders hereunder to 

make Loans and to make payments pursuant to Section 11.03(c) are several and not joint. The failure of 

any Lender to make any Loan or to make any such payment on any date required hereunder shall not 

relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be 

responsible for the failure of any other Lender to so make its Loan or to make its payment under 

Section 11.03(c).

SECTION 2.13 Sharing of Payments. If any Lender shall, by exercising any right of setoff 

or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or 

other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate 

amount of its Loans and accrued interest thereon or other such obligations greater than its pro rata share 

thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the 

Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and 

such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the 

benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount 

of principal of and accrued interest on their respective Loans and other amounts owing them; provided that:

(i) if any such participations are purchased and all or any portion of the 

payment giving rise thereto is recovered, such participations shall be rescinded and the purchase 

price restored to the extent of such recovery, without interest; and

(ii) the provisions of this paragraph shall not be construed to apply to (x) any 

payment made by the Borrower pursuant to and in accordance with the express terms of this 

Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or 

sale of a participation in any of its Loans to any assignee or participant, other than to the 

Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).

The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under 

Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may 

exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully 

as if such Lender were a direct creditor of the Borrower in the amount of such participation.

SECTION 2.14 Compensation for Losses. In the event of (a) the payment of any principal 

of the Loans other than on the last day of an Interest Period (including as a result of an Event of Default), 

(b) the failure to borrow or prepay the Loans (or any portion thereof) on the date specified in any notice 

delivered pursuant hereto, or (c) the assignment of the Loans (or any portion thereof) other than on the last 

day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to 

Section 2.19(b), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and 

expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an 

amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have 
accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that 

would have been applicable to such Loan, for the period from the date of such event to the last day of the 

then current Interest Period therefor (or, in the case of a failure to borrow, for the date that would have been 

the applicable Interest Period), over (ii) the amount of interest that would accrue on such principal amount 

for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such 

period, for dollar deposits of a comparable amount and period from other banks in the London interbank 

eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is 

entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent 

manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate 

promptly after receipt thereof.

SECTION 2.15 Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, 

compulsory loan, insurance charge or similar requirement against assets of, deposits with or for 

the account of, or credit extended or participated in by, any Lender (except any reserve 

requirement reflected in the Adjusted LIBO Rate);

(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, 

(B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and 

(C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or 

other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on any Lender or the London interbank market any other 

condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such 

Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient 

of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such 

Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon 

request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the 

case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as 

the case may be, for such additional costs incurred or reduction suffered.

(b) [Reserved]. 

(c) Certificates for Reimbursement. A certificate of a Lender setting forth the 

amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as 

specified in paragraph (a) of this Section and delivered to the Borrower, shall be conclusive absent 

manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate 

within ten (10) days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender to demand 

compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such 

compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this 

Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date 

that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or 

reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in 

Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to 

above shall be extended to include the period of retroactive effect thereof).
SECTION 2.16 Taxes.

(a) Defined Terms. For purposes of this Section, the term “Applicable Law” 

includes FATCA.

(b) Payments Free of Taxes. Any and all payments by or on account of any 

obligation of the Borrower under any Loan Document shall be made without deduction or withholding for 

any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith 

discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from 

any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to 

make such deduction or withholding and shall timely pay the full amount deducted or withheld to the 

relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified 

Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or 

withholding has been made (including such deductions and withholdings applicable to additional sums 

payable under this Section) the applicable Recipient receives an amount equal to the sum it would have 

received had no such deduction or withholding been made. Borrower acknowledges and agrees that, 

absent a Change in Law, Borrower is not required to withhold or deduct from any such payments to the 

Initial Lender on account of any U.S. federal withholding taxes or Taxes imposed pursuant to FATCA.

(c) Payment of Other Taxes by Borrower. The Borrower shall timely pay to the 

relevant Governmental Authority in accordance with Applicable Law, or at the option of the Initial 

Lender, the Required Lenders or the Administrative Agent timely reimburse it for the payment of, any 

Other Taxes.

(d) Indemnification by Borrower. The Borrower shall indemnify each Recipient, 

within thirty (30) days after demand therefor, for the full amount of any Indemnified Taxes (including 

Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable 

or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and 

any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes 

were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to 

the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the 

Administrative Agent if such Lender is not the Initial Lender), or by the Administrative Agent on its own 

behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e) Indemnification by the Lenders. Each Lender (other than the Initial Lender) shall 

severally indemnify the Administrative Agent, within thirty (30) days after demand therefor, for (i) any 

Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already 

indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of 

the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions 

of Section 11.04(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes 

attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in 

connection with any Loan Document, and any reasonable expenses arising therefrom or with respect 

thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant 

Governmental Authority. A certificate as to the amount of such payment or liability delivered to any such 

Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender (other than 

the Initial Lender) hereby authorizes the Administrative Agent to set off and apply any and all amounts at 

any time owing to such Lender under any Loan Document or otherwise payable by the Administrative 

Agent to such Lender from any other source against any amount due to the Administrative Agent under 

this paragraph (e).

(f) Evidence of Payments. As soon as practicable after any payment of Taxes by the 

Borrower to a Governmental Authority pursuant to this Section, the Borrower shall deliver to the 

Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority 
evidencing such payment, a copy of the return reporting such payment or other evidence of such payment 

reasonably satisfactory to the Administrative Agent.

(g) Status of Lenders. (i) Any Lender (other than the Initial Lender) that is entitled 

to an exemption from or reduction of withholding Tax with respect to payments made under any Loan 

Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably 

requested by the Borrower or the Administrative Agent, such properly completed and executed 

documentation reasonably requested by the Borrower (or, if such Lender is not the Initial Lender, the 

Administrative Agent) as will permit such payments to be made without withholding or at a reduced rate 

of withholding. In addition, any Lender (other than the Initial Lender), if reasonably requested by the 

Borrower (or the Administrative Agent), shall deliver such other documentation prescribed by Applicable 

Law or reasonably requested by the Borrower (or the Administrative Agent) as will enable the Borrower 

(or the Administrative Agent) to determine whether or not such Lender is subject to backup withholding 

or information reporting requirements. Notwithstanding anything to the contrary in the preceding two 

sentences, the completion, execution and submission of such documentation (other than such 

documentation set forth in paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section) shall not be required if 

in the Lender’s reasonable judgment such completion, execution or submission would subject such 

Lender to any material unreimbursed cost or expense or would materially prejudice the legal or 

commercial position of such Lender.

(ii) Without limiting the generality of the foregoing,

(A) any Lender (other than the Initial Lender) that is a U.S. Person 

shall deliver to the Borrower and the Administrative Agent on or about the date on which 

such Lender becomes a Lender under this Agreement (and from time to time thereafter 

upon the reasonable request of the Borrower or the Administrative Agent), executed 

copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup 

withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do 

so, deliver to the Borrower and the Administrative Agent (in such number of copies as 

shall be requested by the recipient) on or prior to the date on which such Foreign Lender 

becomes a Lender under this Agreement (and from time to time thereafter upon the 

reasonable request of the Borrower or the Administrative Agent), whichever of the 

following is applicable:

(1) in the case of a Foreign Lender claiming the benefits of 

an income tax treaty to which the United States is a party (x) with respect to 

payments of interest under any Loan Document, executed copies of IRS 

Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or 

reduction of, U.S. federal withholding Tax pursuant to the “interest” article of 

such tax treaty and (y) with respect to any other applicable payments under any 

Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an 

exemption from, or reduction of, U.S. federal withholding Tax pursuant to the 

“business profits” or “other income” article of such tax treaty;

(2) executed copies of IRS Form W-8ECI (or any successor 

forms) and, in the case of an Agent, a withholding certificate that satisfies the 

requirements of Treasury Regulation Sections 1.1441-1(b)(2)(iv) and 1.1441-

1(e)(3)(v) as applicable to a U.S. branch that has agreed to be treated as a U.S. 

Person for withholding tax purposes;
(3) in the case of a Foreign Lender claiming the benefits of 

the exemption for portfolio interest under Section 881(c) of the Code, (x) a 

certificate substantially in the form of Exhibit B-1 to the effect that such Foreign 

Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a 

“10 percent shareholder” of the Borrower within the meaning of 

Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” related to 

the Borrower as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax 

Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS 

Form W-8BEN-E; or

(4) to the extent a Foreign Lender is not the beneficial 

owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance 

Certificate substantially in the form of Exhibit B-2 or Exhibit B-3, IRS Form W9, and/or other certification documents from each beneficial owner, as applicable; 

provided that if the Foreign Lender is a partnership and one or more direct or 

indirect partners of such Foreign Lender are claiming the portfolio interest

exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate 

substantially in the form of Exhibit B-4 on behalf of each such direct and indirect 

partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do 

so, deliver to the Borrower and the Administrative Agent (in such number of copies as 

shall be requested by the recipient) on or about the date on which such Foreign Lender 

becomes a Lender under this Agreement (and from time to time thereafter upon the 

reasonable request of the Borrower or the Administrative Agent), executed copies of any 

other form prescribed by Applicable Law as a basis for claiming exemption from or a 

reduction in U.S. federal withholding Tax, duly completed, together with such 

supplementary documentation as may be prescribed by Applicable Law to permit the 

Borrower or the Administrative Agent to determine the withholding or deduction 

required to be made; and

(D) if a payment made to a Lender (other than the Initial Lender) 

under any Loan Document would be subject to U.S. federal withholding Tax imposed by 

FATCA if such Lender were to fail to comply with the applicable reporting requirements 

of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as 

applicable), such Lender shall deliver to the Borrower and the Administrative Agent at 

the time or times prescribed by law and at such time or times reasonably requested by the 

Borrower or the Administrative Agent such documentation prescribed by Applicable Law 

(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional 

documentation reasonably requested by the Borrower or the Administrative Agent as may 

be necessary for the Borrower and the Administrative Agent to comply with their 

obligations under FATCA and to determine that such Lender has complied with such 

Lender’s obligations under FATCA or to determine the amount, if any, to deduct and 

withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall 

include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or 

becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify 

the Borrower and the Administrative Agent in writing of its legal inability to do so. Notwithstanding 

anything to the contrary in this Agreement, the Initial Lender shall be entitled to the benefits of this 

Section 2.16 and all related provisions under this Agreement without regard to whether it provides any 

documentation described in Section 2.16(g).
(h) Treatment of Certain Refunds. If any party determines, in its sole discretion 

exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified 

pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall 

pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity 

payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-ofpocket expenses (including Taxes) of such indemnified party and without interest (other than any interest 

paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, 

upon the request of such indemnified party, shall repay to such indemnified party the amount paid over 

pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant 

Governmental Authority) in the event that such indemnified party is required to repay such refund to such 

Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will 

the indemnified party be required to pay any amount to an indemnifying party pursuant to this

paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax 

position than the indemnified party would have been in if the Tax subject to indemnification and giving 

rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification 

payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not 

be construed to require any indemnified party to make available its Tax returns (or any other information 

relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i) Survival. Each party’s obligations under this Section shall survive the 

resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement 

of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all 

obligations under any Loan Document.

SECTION 2.17 [Reserved].

SECTION 2.18 [Reserved]. 

SECTION 2.19 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests compensation 

under Section 2.15, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any 

Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such 

Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office 

for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of 

its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment 

(i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.16, as the case may be, in the 

future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not 

otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs 

and expenses incurred by any Lender in connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under 

Section 2.15, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any 

Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 and, in 

each case, such Lender has declined or is unable to designate a different lending office in accordance with 

paragraph (a) of this Section, or if any Lender is a Non-Consenting Lender, then the Borrower may, at its 

sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to 

assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and 

consents required by, Section 11.04), all of its interests, rights (other than its existing rights to payments 

pursuant to Section 2.15 or Section 2.16) and obligations under this Agreement and the related Loan 

Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another 

Lender, if a Lender accepts such assignment); provided that:
(i) the Borrower shall have paid to the Administrative Agent the assignment 

fee (if any) specified in Section 11.04;

(ii) such Lender shall have received payment of an amount equal to the 

outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts 

payable to it hereunder and under the other Loan Documents (including any amounts under 

Section 2.14) from the assignee (to the extent of such outstanding principal and accrued interest 

and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for 

compensation under Section 2.15 or payments required to be made pursuant to Section 2.16, such 

assignment will result in a reduction in such compensation or payments thereafter;

(iv) such assignment does not conflict with Applicable Law; and

(v) in the case of any assignment resulting from a Lender becoming a NonConsenting Lender, the applicable assignee shall have consented to the applicable amendment, 

waiver or consent.

A Lender shall not be required to make any such assignment or delegation if, prior 

thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to 

require such assignment and delegation cease to apply.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Credit Parties represent and warrant to the Administrative Agent, the Collateral 

Agent and the Lenders on the Closing Date and on the date of each Borrowing that:

SECTION 3.01 Existence, Qualification and Power. Each of the Credit Parties and their 

respective Material Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good 

standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power 

and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or 

lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan 

Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good 

standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the 

conduct of its business requires such qualification or license, except, in each case referred to in clause (a) 

(other than with respect to any Credit Party), (b)(i) or (c), to the extent that failure to do so could not 

reasonably be expected to have a Material Adverse Effect.

SECTION 3.02 Authorization; No Contravention. The execution, delivery and 

performance by each Credit Party of each Loan Document to which it is party have been duly authorized by 

all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of its 

Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of 

any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which 

each Credit Party is a party or affecting each Credit Party or the material properties of any Credit Party or 

(ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to 

which any Credit Party or its property is subject or (c) violate any Law, except to the extent such violation 

could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.03 Governmental Authorization; Other Consents. No approval, consent, 

exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any 
other Person is necessary or required in connection with the execution, delivery or performance by, or 

enforcement against, each Credit Party of this Agreement or any other Loan Document, except for (i) such 

approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or 

made and in full force and effect, and (ii) filings and consents contemplated by the Security Documents or 

Section 5.14.

SECTION 3.04 Execution and Delivery; Binding Effect. This Agreement has been, and 

each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each 

Credit Party. This Agreement constitutes, and each other Loan Document when so delivered will 

constitute, a legal, valid and binding obligation of each Credit Party, enforceable against each Credit Party 

in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, 

reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general 

principles of equity.

SECTION 3.05 Financial Statements; No Material Adverse Change.

(a) Financial Statements. The financial statements described in Schedule 3.05 were 

prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as 

otherwise expressly noted therein, and fairly present in all material respects the financial condition of the 

Parent and its Subsidiaries as of the date thereof and their results of operations and cash flows for the 

period covered thereby in accordance with GAAP consistently applied throughout the period covered 

thereby, except as otherwise expressly noted therein.

(b) No Material Adverse Change. Since the date of the most recent audited balance 

sheet included in the financial statements described in Schedule 3.05, there has been no event or 

circumstance that, either individually or in the aggregate, has had or could reasonably be expected to have 

a Material Adverse Effect.

SECTION 3.06 Litigation. Except for those matters which have been publicly disclosed in 

any SEC filing of the Parent filed prior to the Closing Date, there are no actions, suits, proceedings, claims, 

disputes or investigations pending or, to the knowledge of any Credit Party, threatened, at Law, in equity, in 

arbitration or before any Governmental Authority, by or against any Credit Party or any of its Subsidiaries 

or against any of their properties or revenues that (a) either individually or in the aggregate could 

reasonably be expected to have a Material Adverse Effect or (b) purport to affect or pertain to this 

Agreement or any other Loan Document or any of the transactions contemplated hereby.

SECTION 3.07 Contractual Obligations; No Default. None of the Credit Parties and their 

respective Subsidiaries is in default under or with respect to any Contractual Obligation that, either 

individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No 

Default has occurred and is continuing or would result from the consummation of the transactions 

contemplated by this Agreement or any other Loan Document.

SECTION 3.08 Property. Ownership of Properties and Collateral. Each of the Credit 

Parties and their respective Subsidiaries has good record and marketable title in fee simple to, or valid 

leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for 

such defects in title that, either individually or in the aggregate, could not reasonably be expected to have a 

Material Adverse Effect. Each Credit Party has good title to the Collateral owned by it, free and clear of all 

Liens other than Permitted Liens. 

SECTION 3.09 Taxes. The Credit Parties and their respective Subsidiaries have filed all 

federal, state and other tax returns and reports required to be filed, and have paid all federal, state and other 

taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, 

income or assets otherwise due and payable, except (a) Taxes that are being contested in good faith by 
appropriate proceedings diligently conducted and for which adequate reserves are being maintained in 

accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to 

have a Material Adverse Effect.

SECTION 3.10 Disclosure. (a) The Credit Parties and their respective Subsidiaries have 

disclosed to the Administrative Agent, the Collateral Agent and the Lenders all agreements, instruments and 

corporate or other restrictions to which they are subject, and all other matters known to them, that, either 

individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Loan 

Application Form, reports, financial statements, certificates and other written information (other than 

projected or pro forma financial information) furnished by or on behalf of the Credit Parties and their 

respective Subsidiaries to any Agent or any Lender in connection with the transactions contemplated hereby 

and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as 

modified or supplemented by other information so furnished), taken as a whole, do not contain any material 

misstatement of fact or omit to state any material fact necessary to make the statements therein (when taken 

as a whole), in the light of the circumstances under which they were made, not misleading; provided that, 

with respect to projected or pro forma financial information, the Credit Parties represent only that such 

information was prepared in good faith based upon assumptions believed to be reasonable at the time of 

preparation and delivery (it being understood that such projected information may vary from actual results 

and that such variances may be material) and (b) as of the Closing Date, the information included in the 

Beneficial Ownership Certification is true and correct in all respects.

SECTION 3.11 Compliance with Laws. Each of the Credit Parties and their respective 

Subsidiaries is in compliance with the requirements of all Laws (including Environmental Laws) and all 

orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which 

(a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by 

appropriate proceedings diligently conducted or (b) the failure to so comply, either individually or in the 

aggregate, could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.12 ERISA Compliance.

(a) Except as could not reasonably be expected, either individually or in the 

aggregate, to have a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions 

of ERISA, the Code and other federal or state Laws and (ii) each Plan that is intended to be a qualified 

plan under Section 401(a) of the Code has received a favorable determination letter, opinion letter or 

advisory letter from the IRS to the effect that the form of such Plan is qualified under Section 401(a) of 

the Code and the trust related thereto has been determined by the IRS to be exempt from federal income 

tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by 

the IRS, and, to the knowledge of any Credit Party, nothing has occurred that would prevent or cause the 

loss of such tax-qualified status.

(b) There are no pending or, to the knowledge of any Credit Party, threatened or 

contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any 

Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse 

Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with 

respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected 

to have a Material Adverse Effect.

(c) No ERISA Event has occurred, and neither any Credit Party nor any ERISA 

Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could 

reasonably be expected to constitute or result in an ERISA Event that, either individually or in the 

aggregate, has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as would not reasonably be expected to have individually or in the 

aggregate, a Material Adverse Effect, the present value of all accrued benefits under each Pension Plan 

(based on those assumptions used to fund such Pension Plan) did not, as of the last annual valuation date 

prior to the date on which this representation is made or deemed made, exceed the value of the assets of 

such Pension Plan allocable to such accrued benefits by a material amount. 

(e) To the extent applicable, each Foreign Plan has been maintained in compliance 

with its terms and with the requirements of any and all applicable requirements of Law and has been 

maintained, where required, in good standing with applicable regulatory authorities, except to the extent 

that the failure so to comply could not reasonably be expected, either individually or in the aggregate, to 

have a Material Adverse Effect. Neither the Parent nor any Subsidiary has incurred any obligation in 

connection with the termination of or withdrawal from any Foreign Plan that, either individually or in the 

aggregate, would reasonably be expected to have individually or in the aggregate, a Material Adverse 

Effect. Except as would not reasonably be expected to have individually or in the aggregate, a Material 

Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each 

Foreign Plan that is funded, determined as of the end of the most recently ended fiscal year of the Parent 

or Subsidiary, as applicable, on the basis of actuarial assumptions, each of which is reasonable, did not 

exceed the current value of the property of such Foreign Plan by a material amount, and for each Foreign 

Plan that is not funded, the obligations of such Foreign Plan are properly accrued.

SECTION 3.13 Environmental Matters. Except with respect to any matters that, either 

individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, none 

of the Credit Parties and their respective Subsidiaries (a) has failed to comply with any Environmental Law 

or to obtain, maintain or comply with any permit, license or other approval required under any 

Environmental Law, (b) knows of any basis for any permit, license or other approval required under any 

Environmental Law to be revoked, canceled, limited, terminated, modified, appealed or otherwise 

challenged, (c) has or could reasonably be expected to become subject to any Environmental Liability, 

(d) has received notice of any claim, complaint, proceeding, investigation or inquiry with respect to any 

Environmental Liability (and no such claim, complaint, proceeding, investigation or inquiry is pending or, 

to the knowledge of the Parent, is threatened or contemplated) or (e) knows of any facts, events or 

circumstances that could give rise to any basis for any Environmental Liability with respect thereto.

SECTION 3.14 Investment Company Act. None of the Credit Parties is an “investment 

company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws.

(a) None of the Credit Parties and their respective Subsidiaries and no director, 

officer, or affiliate of the foregoing is a Person that is: (i) the subject of any sanctions administered or 

enforced by the United States (including, but not limited to, those administered by the U.S. Department of 

the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, and the U.S. Department 

of Commerce’s Bureau of Industry and Security) (“Sanctions”), (ii) organized or resident in a country or 

territory that is the subject of country-wide or region-wide Sanctions (including, currently, Crimea, Cuba, 

Iran, North Korea, and Syria) (each a “Sanctioned Country”) or located in a Sanctioned Country except to 

the extent authorized under Sanctions or (iii) a Person with whom dealings are restricted or prohibited by 

Sanctions as a result of a relationship of ownership or control with a Person listed in (i) or (ii) (each of (i), 

(ii) and (iii) is a “Sanctioned Person”). 

(b) For the period beginning eight (8) years prior to the date hereof, each of the 

Credit Parties and their respective Subsidiaries and their respective directors, officers and employees and, 

to the knowledge of the Credit Parties, such respective affiliates, have been, in all material respects, in 

compliance with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations 

thereunder (the “FCPA”) and any other applicable anti-bribery or anti-corruption laws and regulations 
(collectively with the FCPA, the “Anticorruption Laws”) and all applicable Sanctions, Export Control 

Laws, and AML Laws.

SECTION 3.16 Solvency. The Borrower and its Subsidiaries are Solvent on a consolidated 

basis after giving effect to the borrowing of the Loans.

SECTION 3.17 Subsidiaries. Schedule 3.17 sets forth the name of, and the ownership 

interests of the Parent and each of its Subsidiaries and indicates which of such Subsidiaries are Excluded 

Subsidiaries as of the date hereof.

SECTION 3.18 Senior Indebtedness. The Loans, the Obligations and the Guaranteed 

Obligations constitute “senior indebtedness” (or any other similar or comparable term) under and as defined 

in the documentation governing any Indebtedness of the Credit Parties that is subordinated in right of 

payment to any other Indebtedness thereof. 

SECTION 3.19 Insurance Matters. The properties of the Credit Parties are insured 

pursuant to Section 5.06 hereof. Each insurance policy required to be maintained by the Credit Parties

pursuant to Section 5.06 is in full force and effect and all premiums in respect thereof that are due and 

payable have been paid.

SECTION 3.20 Labor Matters. Except as would not reasonably be expected to have 

individually or in the aggregate, a Material Adverse Effect, (a) there are no strikes, lockouts, slowdowns or 

other material labor disputes against any Credit Party or any of its Subsidiary thereof pending or, to the 

knowledge of the Credit Parties, threatened, (b) the Credit Parties and their respective Subsidiaries have 

complied with all applicable federal, state, local and foreign Laws relating to the employment (or 

termination thereof), the hours worked by and payments made to employees of the Parent and its 

Subsidiaries comply with the Fair Labor Standards Act and any other applicable federal, state, local or 

foreign Law dealing with such matters and (c) all payments due from the Credit Parties and their respective 

Subsidiaries, or for which any claim may be made against the Credit Parties and their respective 

Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been 

paid or properly accrued in accordance with GAAP as a liability on the books of the Parent or such 

Subsidiary. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair 

employment practices charges or any other claims or complaints against the Credit Parties or their 

respective Subsidiaries pending or, to the knowledge of the Credit Parties, threatened to be filed with any 

Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to 

the employment or termination of employment of any employee of the Credit Parties and their respective 

Subsidiaries that would, individually or in the aggregate, be reasonably expected to result in a Material 

Adverse Effect. 

SECTION 3.21 Insolvency Proceedings. None of the Credit Parties has taken, and none of 

the Credit Parties is currently evaluating taking, any action to seek relief or commence proceedings under 

any Debtor Relief Law in any applicable jurisdiction. 

SECTION 3.22 Margin Regulations. The Borrower is not engaged and will not engage, 

principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or 

extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any 

Borrowing hereunder will be used to buy or carry any Margin Stock. Following the application of the 
proceeds of each Borrowing, not more than 25% of the value of the assets (either of the Borrower only or of 

the Borrower and its Subsidiaries on a consolidated basis) will be Margin Stock. 

SECTION 3.23 Liens. There are no Liens of any nature whatsoever on any Collateral other 

than Liens permitted under Section SECTION 6.02 hereof. 

SECTION 3.24 Perfected Security Interests. 

(a) As of the Closing Date (or such later date as permitted under Section 5.14) and as 

of the date of each Borrowing, the Security Documents, taken as a whole, are effective to create in favor 

of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority 

security interest in all of the Collateral to the extent purported to be created thereby. 

(b) As of the Closing Date (or such later date as permitted under Section 5.14) and as 

of the date of each Borrowing, each Credit Party has or shall have satisfied the Perfection Requirement 

with respect to the Collateral.

SECTION 3.25 US Citizenship. The Borrower is a “citizen of the United States” as 

defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been interpreted by the DOT 

pursuant to its policies. 

SECTION 3.26 Air Carrier Status. The Borrower is an “air carrier” within the meaning of 

Section 40102 of Title 49, holds a certificate under Section 41102 of Title 49 and, during the time period 

from April 1, 2019 to September 30, 2019, derived more than 50% of its air transportation revenue from the 

transportation of passengers. The Borrower holds an air carrier operating certificate issued pursuant to 

Chapter 447 of Title 49. The Borrower possesses all necessary certificates, franchises, licenses, permits, 

rights, designations, authorizations, exemptions, concessions, frequencies and consents which relate to the 

operation of the routes flown by it and the conduct of its business and operations as currently conducted, 

except where failure to do so, either individually or in the aggregate, could not reasonably be expected to 

have a Material Adverse Effect.

ARTICLE IV

CONDITIONS

SECTION 4.01 Closing Date and Initial Borrowing. The effectiveness of this Agreement 

and the funding of the initial Borrowing hereunder are subject to the satisfaction (or waiver in accordance 

with Section 11.02) of the following conditions (and, in the case of each document specified in this Section 

to be received by the Initial Lender (and the applicable Agent or Agents), such document shall be in form 

and substance satisfactory to the Initial Lender and/or the applicable Agent or Agents):

(a) Executed Counterparts. The Initial Lender and the Agents shall have received 

from each party hereto a counterpart of this Agreement, any Security Documents to which it is a 

party and the Note, each signed on behalf of such party. Notwithstanding anything herein to the 

contrary, delivery of an executed counterpart of a signature page of this Agreement or any 

Security Documents by telecopy or other electronic means, or confirmation of the execution of 

this Agreement on behalf of a party by an email from an authorized signatory of such party shall 

be effective as delivery of a manually executed counterpart of this Agreement.

(b) Certificates. The Initial Lender and any applicable Agent shall have received 

such customary certificates of resolutions or other action, incumbency certificates and/or other 

certificates of Responsible Officers of the Credit Parties as the Lenders may require evidencing 
the identity, authority and capacity of each Responsible Officer thereof authorized to act as a 

Responsible Officer in connection with the Loan Documents;

(c) Organizational Documents. The Initial Lender shall have received customary 

resolutions or evidence of corporate authorization, secretary’s certificates and such other 

documents and certificates (including Organizational Documents and good standing certificates) 

as the Initial Lender may request relating to the organization, existence and good standing of each 

Credit Party and any other legal matters relating to the Credit Parties, the Loan Documents or the 

transactions contemplated thereby.

(d) Opinion of Counsel to Credit Parties. The Initial Lender and the applicable

Agent or Agents shall have received all opinions of counsel (including any additional opinions of 

counsel as required under any Security Document) to the Credit Parties that is acceptable to the 

Initial Lender, addressed to the Initial Lender and the applicable Agent or Agents and dated the 

Closing Date, in form and substance satisfactory to the Initial Lender and the applicable Agent 

(and the Parent hereby instructs such counsel to deliver such opinions to such Persons).

(e) Beneficial Ownership Regulation Information. At least five (5) days prior to the 

Closing Date, the Borrower shall deliver to the Initial Lender a Beneficial Ownership 

Certification.

(f) Expenses. The Borrower shall have paid all reasonable fees, expenses (including 

the fees and expenses of legal counsel) and other amounts due to the Initial Lender, the 

Administrative Agent and the Collateral Agent (to the extent that statements for such expenses 

shall have been delivered to the Borrower on or prior to the Closing Date); provided that such 

expenses payable by the Borrower may be offset against the proceeds of the Loans funded on the 

Closing Date.

(g) Officer’s Certificate. The Initial Lender shall have received a certificate 

executed by a Responsible Officer of the Parent and the Borrower confirming (i) that the 

representations and warranties contained in Article III of this Agreement are true and correct on 

and as of the Closing Date, (ii) that the information provided in the Loan Application Form 

submitted by the Borrower was true and correct on and as of the date of delivery thereof, (iii) the 

satisfaction of such condition and (iv) that no Default or Event of Default exists or will result 

from the borrowing of the Loans on the Closing Date.

(h) Other Documents. The Initial Lender and the Agents shall have received such 

other documents as it may request.

(i) Appraisals. The Initial Lender shall have received Appraisals satisfactory in 

form and substance and performed by an Eligible Appraiser dated as of a date no earlier than 

thirty (30) days prior to the Closing Date.

(j) Security Interests. Each Credit Party shall have, and caused its Subsidiaries to, 

take any action and execute and deliver, or cause to be executed and delivered, any agreement, 

document or instrument required in order to create a valid, perfected first priority security interest 

in the Collateral in favor of the Collateral Agent for the benefit of the Secured Parties (including 

delivery of UCC financing statements in appropriate form for filing under the UCC and entering 

into control agreements). Each Credit Party shall have satisfied, and caused its Subsidiaries to 

satisfy, the Perfection Requirement with respect to the Collateral. In addition, the Credit Parties 

shall have delivered a completed Perfection Certificate (as defined in the Pledge and Security 

Agreement). 
(k) Consents and Authorizations. Each Credit Party shall have obtained all consents 

and authorizations from Governmental Authorities and all consents of other Persons (including 

shareholder approvals, if applicable) that are necessary or advisable in connection with this 

Agreement, any Loan Document, any of the transactions contemplated hereby or thereby or the 

continuing operations of the Credit Parties and each of the foregoing shall be in full force and 

effect and in form and substance satisfactory to the Initial Lender.

(l) Lien Searches. The Initial Lender shall have received (i) UCC and other lien 

searches conducted in the jurisdictions and offices where liens on material assets of the Credit 

Parties are required to be filed or recorded and (ii) to the extent Collateral consists of (x) Aircraft 

and Engine Assets (as defined in the Pledge and Security Agreement), aircraft registry lien 

searches conducted with the FAA and the International Registry, and (y) Spare Part Assets (as 

defined in the Pledge and Security Agreement), registry lien searches conducted with the FAA 

(with reference to each Designated Spare Parts Location set forth on Schedule 2.1 of the Pledge 

and Security Agreement), in each case, reflecting the absence of Liens on the assets of the Credit 

Parties other than Permitted Liens or Liens to be discharged on or prior to the Closing Date 

pursuant to documentation satisfactory to the Initial Lender.

(m) Collateral Coverage Ratio. On the Closing Date (and after giving pro forma 

effect to any Borrowings on such date), the Collateral Coverage Ratio shall not be less than 2.0 to 

1.0.

(n) Solvency Certificate. The Initial Lender shall have received a certificate of the 

chief financial officer or treasurer (or other comparable officer) of the Parent certifying that the 

Borrower and its Subsidiaries (taken as a whole) are, and will be immediately after giving effect 

to any Loans borrowed on the Closing Date, Solvent. 

(o) Warrant Agreement. Treasury and the Parent shall have entered into the Warrant 

Agreement. 

(p) Other Matters. Since June 29, 2020, (i) there has been no event or circumstance 

that, either individually or in the aggregate, has had or could reasonably be expected to have a 

Material Adverse Effect and (ii) none of the Credit Parties has made a Disposition of any assets

constituting Collateral had this Agreement been in effect at such time.

SECTION 4.02 Each Borrowing. The funding by the Lenders of each Borrowing 

(including the Borrowing to be requested on the Closing Date) is additionally subject to the satisfaction of 

the following conditions:

(a) the Administrative Agent shall have received a written Borrowing Request in 

accordance with the requirements of Section 2.03(a), with a copy to the Initial Lender (solely to 

the extent the Initial Lender is a Lender at the time of such Borrowing);

(b) the representations and warranties of the Credit Parties set forth in this 

Agreement and in any other Loan Document shall be true and correct in all material respects (or, 

in the case of any such representation or warranty already qualified by materiality, in all respects) 

on and as of the date of such Borrowing (or, in the case of any such representation or warranty 

expressly stated to have been made as of a specific date, as of such specific date); 

(c) no Default shall have occurred and be continuing or would result from such 

Borrowing or from the application of proceeds thereof; 
(d) on the date of the funding of such Borrowing (and after giving pro forma effect 

thereto and the pledge of any Additional Collateral), the Collateral Coverage Ratio shall not be 

less than 2.0 to 1.0 as evidenced by a certificate of a Responsible Officer of the Parent;

(e) on the date of such Borrowing, the opinion of the independent public accountants 

(after giving effect to any reissuance or revision of such opinion) on the most recent audited 

consolidated financial statements delivered by the Parent pursuant to Section 5.01(a) shall not 

include a “going concern” qualification under GAAP as in effect on the date of this Agreement 

or, if there is a change in the relevant provisions of GAAP thereafter, any like qualification or 

exception under GAAP after giving effect to such change; and

(f) on or prior to the date of such Borrowing, each Credit Party shall have satisfied 

the Perfection Requirement with respect to the Collateral.

Each Borrowing Request by the Borrower hereunder and each Borrowing shall be deemed to constitute a 

representation and warranty by the Borrower on and as of the date of the applicable Borrowing as to the 

matters specified in clauses (b)(b) and (c) above in this Section.

ARTICLE V

AFFIRMATIVE COVENANTS

Until all the later of (i) the date on which all of the Obligations shall have been paid in 

full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the 

Lenders that:

SECTION 5.01 Financial Statements. The Parent will furnish to the Administrative Agent 

and each Lender:

(a) as soon as available, and in any event within ninety (90) days after the end of 

each fiscal year of the Parent (or, if earlier, five (5) days after the date required to be filed with 

the SEC) (commencing with the fiscal year ended prior to the Closing Date), a consolidated 

balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year and the related 

consolidated statements of income or operations, shareholders’ equity and cash flows for such 

fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, 

audited and accompanied by a report and opinion of independent public accountants of nationally 

recognized standing, which report and opinion shall be prepared in accordance with generally 

accepted auditing standards (and shall not be subject to any “going concern” or like qualification

(other than a qualification solely resulting from (x) the impending maturity of any Indebtedness 

or (y) any prospective or actual default under any financial covenant), exception or explanatory 

paragraph or any qualification, exception or explanatory paragraph as to the scope of such audit)

to the effect that such consolidated financial statements present fairly in all material respects the 

financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its 

Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; 

(b) as soon as available, but in any event within forty-five (45) days after the end of 

each of the first three (3) fiscal quarters of each fiscal year of the Parent (or, if earlier, five 

(5) days after the date required to be filed with the SEC) (commencing with the first of such fiscal 

quarters ended prior to the Closing Date), a consolidated balance sheet of the Parent and its 

Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or 

operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the 

Parent’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the 

figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding 
portion of the previous fiscal year, certified by a Financial Officer of the Parent as fairly 

presenting in all material respects the financial condition, results of operations, shareholders’ 

equity and cash flows of the Parent and its Subsidiaries on a consolidated basis in accordance 

with GAAP consistently applied, subject only to normal year-end audit adjustments and the 

absence of notes; 

(c) for so long as the Initial Lender is the only Lender, as soon as available, but in 

any event no later than seventy-five (75) days after the beginning of each fiscal year of the Parent, 

forecasts prepared by management of the Parent and a summary of material assumptions used to 

prepare such forecasts, in form satisfactory to the Initial Lender, including projected consolidated 

balance sheets and statements of income or operations and cash flows of the Parent and its 

Subsidiaries on a quarterly basis for such fiscal year; and

(d) solely at the request of the Appropriate Party (which shall be no more than 

quarterly), at a time mutually agreed with the Appropriate Party and the Parent, participate in a 

conference call for Lenders to discuss the financial condition and results of operations of the 

Parent and its Subsidiaries and any forecasts which have been delivered pursuant to this Section 

5.01.

SECTION 5.02 Certificates; Other Information. The Parent will deliver to the 

Administrative Agent and each Lender:

(a) [reserved];

(b) concurrently with the delivery of the financial statements referred to in 

Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the 

Parent certifying as to whether a Default has occurred and, if a Default has occurred, specifying 

the details thereof and any action taken or proposed to be taken with respect thereto;

(c) [reserved];

(d) promptly after the furnishing thereof, copies of any notice of default or potential 

default or other material written notice received by the Parent or any Subsidiary from, or 

furnished by the Parent or any Subsidiary to, any holder of Material Indebtedness of the Parent or 

any Subsidiary;

(e) promptly after receipt thereof by any Credit Party or any Subsidiary thereof, 

copies of each material notice or other material written correspondence received from the SEC (or 

comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or 

possible investigation or other inquiry by such agency regarding material financial or other 

material operational results of any Credit Party or any Subsidiary thereof; 

(f) [reserved]; 

(g) promptly following any request therefor, (i) such other information regarding the 

operations, business, properties, liabilities (actual or contingent), condition (financial or 

otherwise) or prospects of any Credit Party or any Subsidiary, or compliance with the terms of the 

Loan Documents, as the Administrative Agent, the Initial Lender or any other Lender (acting 

through the Administrative Agent) may from time to time request; or (ii) beneficial ownership 

information and documentation reasonably requested by the Administrative Agent or any Lender 

from time to time for purposes of ensuring compliance with Sanctions and AML Laws. For 

purposes of determining whether or not a representation with respect to any indirect ownership is 

true or a covenant is being complied with under this Section, the Parent shall not be required to 
make any investigation into (i) the ownership of publicly traded stock or other publicly traded 

securities or (ii) the ownership of assets by a collective investment fund that holds assets for 

employee benefit plans or retirement arrangements; and

(h) concurrently with the delivery of the financial statements referred to in 

Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the 

Borrower certifying as to its compliance with Article X of this Agreement.

Documents required to be delivered pursuant to Section 5.01(a) or (b) or Section 5.02(c), 

(d) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may 

be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on 

which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and 

Retrieval system (EDGAR); or (ii) on which such documents are posted on the Parent’s behalf on an 

Internet or intranet website, if any, to which each Lender and the Administrative Agent have access 

(whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided

that: (A) upon written request by the Administrative Agent, the Parent shall deliver paper copies of such 

documents to the Administrative Agent or any Lender upon its request to the Parent to deliver such paper 

copies until a written request to cease delivering paper copies is given by the Administrative Agent or 

such Lender and (B) the Parent shall notify the Administrative Agent and each Lender (by facsimile or 

electronic mail) of the posting of any such documents and provide to the Lenders by electronic mail 

electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no 

obligation to request the delivery of or to maintain paper copies of the documents referred to above.

SECTION 5.03 Notices. The Parent will promptly notify the Administrative Agent and each 

Lender of:

(a) promptly after any Responsible Officer of Parent or any of its Subsidiaries 

obtains knowledge thereof, the occurrence of any Default;

(b) the filing or commencement of any action, suit, investigation or proceeding by or 

before any arbitrator or Governmental Authority against or affecting the Parent or any Controlled 

Affiliate thereof, including pursuant to any applicable Environmental Laws, that could reasonably 

be expected to be adversely determined, and, if so determined, could reasonably be expected to 

have a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, either individually or together with any 

other ERISA Events, could reasonably be expected to have a Material Adverse Effect;

(d) notice of any action arising under any Environmental Law or of any 

noncompliance by any Credit Party or any Subsidiary with any Environmental Law or any 

permit, approval, license or other authorization required thereunder that, if adversely determined, 

could reasonably be expected to have a Material Adverse Effect;

(e) to the extent not publicly disclosed pursuant to an SEC filing of the Parent, any 

material change in accounting or financial reporting practices by the Parent, any Credit Party or 

any Subsidiary;

(f) any change in the Credit Ratings from a Credit Rating Agency with negative 

implications, or the cessation by a Credit Rating Agency of, or its intent to cease, rating the 

Borrower’s or the Parent’s debt; and

(g) any matter or development that has had or could reasonably be expected to have 

a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a 

Responsible Officer of the Parent setting forth the details of the occurrence requiring such notice and 

stating what action the Parent has taken and proposes to take with respect thereto.

SECTION 5.04 Preservation of Existence, Etc. Each Credit Party will, and will cause each 

of its Subsidiaries to, (a) preserve, renew and maintain in full force and effect its legal existence and good 

standing under the Laws of the jurisdiction of its organization except in a transaction permitted by 

Section 6.03 or 6.04; (b) take all reasonable action to maintain all rights, licenses, permits, privileges and 

franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do 

so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its 

registered patents, trademarks, trade names and service marks, the non-preservation of which could 

reasonably be expected to have a Material Adverse Effect.

SECTION 5.05 Maintenance of Properties. Each Credit Party will, and will cause each of 

its Subsidiaries to, (a) maintain, preserve and protect all of its properties and equipment necessary in the 

operation of its business in good working order and condition (ordinary wear and tear excepted) and

(b) make all necessary repairs thereto and renewals and replacements thereof, except to the extent that the 

failure to do so could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.06 Maintenance of Insurance. Subject to any additional requirements under 

any Security Document, each Credit Party will maintain with financially sound and reputable insurance 

companies, insurance with respect to its properties and business against loss or damage of the kinds 

customarily insured against by Persons engaged in the same or similar business, of such types and in such 

amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons 

engaged in the same or similar businesses as Parent and its Subsidiaries; provided that, insurance in respect 

of Collateral shall be maintained with such third party insurance companies except to the extent expressly 

permitted in the Pledge and Security Agreement) as are customarily carried under similar circumstances by 

such Persons.

SECTION 5.07 Payment of Obligations. Each Credit Party will pay, discharge or 

otherwise satisfy as the same shall become due and payable, all of its obligations and liabilities, including 

Tax liabilities, except to the extent (a) the same are being contested in good faith by appropriate 

proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by 

the Parent or such Credit Party or (b) the failure to do so could not reasonably be expected to have a 

Material Adverse Effect.

SECTION 5.08 Compliance with Laws. Each Credit Party will, and will cause each of its 

Subsidiaries to, comply with the requirements of all Laws and all orders, writs, injunctions and decrees 

applicable to it or to its business or property, except to the extent that the failure to do so could not 

reasonably be expected to have a Material Adverse Effect.

SECTION 5.09 Environmental Matters. Except to the extent that the failure to do so could 

not reasonably be expected to have a Material Adverse Effect, each Credit Party will, and will cause each of 

its Subsidiaries to, (a) comply with all Environmental Laws, (b) obtain, maintain in full force and effect and 

comply with any permits, licenses or approvals required for the facilities or operations of the Parent or any 

of its Subsidiaries, and (c) conduct and complete any investigation, study, sampling or testing, and 

undertake any corrective, cleanup, removal, response, remedial or other action necessary to identify, report, 

remove and clean up all Hazardous Materials present or released at, on, in, under or from any of the 

facilities or real properties of the Parent or any of its Subsidiaries.

SECTION 5.10 Books and Records. Each Credit Party will maintain proper books of 

record and account, in which full, true and correct entries in conformity with GAAP consistently applied 
shall be made of all financial transactions and matters involving the assets and business of the Parent or 

such Subsidiary, as the case may be. 

SECTION 5.11 Inspection Rights. Each Credit Party will, and, to the extent relevant for 

inspections of Collateral will cause each of its Subsidiaries to, permit representatives, agents and 

independent contractors of the Administrative Agent, the Initial Lender and the Special Inspector General 

for Pandemic Recovery to visit and inspect any of its properties (including all Collateral), to examine its 

corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its 

affairs, finances and accounts with its directors, officers, and independent public accountants, all at the 

reasonable expense of the Parent and at such reasonable times during normal business hours and as often as 

may be reasonably requested; provided that, other than with respect to such visits and inspections during the 

continuation of an Event of Default or by the Initial Lender or the Special Inspector General for Pandemic 

Recovery, (a) only the Administrative Agent (or its representatives, agents and independent contractors) at 

the direction of a Lender may exercise rights under this Section and (b) the Administrative Agent (or its 

representatives, agents and independent contractors) shall not exercise such rights more often than two (2)

times during any calendar year; provided, further, that when an Event of Default exists the Administrative 

Agent, any Lender or the Special Inspector General for Pandemic Recovery (or any of their respective 

representatives, agents or independent contractors) may do any of the foregoing under this Section at the 

expense of the Parent and at any time during normal business hours and without advance notice. 

SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws. Each 

Credit Party and its Subsidiaries will remain in compliance in all material respects with applicable 

Sanctions, Export Control Laws, Anticorruption Laws, and AML Laws. Until all Obligations have been 

paid in full, neither any Credit Party; any Subsidiary of a Credit Party; nor any director or officer of any 

Credit Party or any Subsidiary of a Credit Party shall become a Sanctioned Person or a Person that is 

organized or resident in a Sanctioned Country or located in a Sanctioned Country except to the extent 

authorized under Sanctions. 

SECTION 5.13 Guarantors; Additional Collateral. 

(a) The Guarantors listed on the signature page to this Agreement hereby Guarantee 

the Guaranteed Obligations as set forth in ArticleARTICLE IX. If any Subsidiary (other than an 

Excluded Subsidiary) is formed or acquired after the Closing Date, if any Subsidiary ceases to be an 

Excluded Subsidiary or if required in connection with the addition of Additional Collateral, then the 

Parent will cause such Subsidiary, promptly (in any event, within thirty (30) days of such Subsidiary 

being formed or acquired or of such Subsidiary ceasing to be an Excluded Subsidiary) (i) to become a 

Guarantor of the Loans pursuant to joinder documentation reasonably acceptable to the Appropriate Party 

and on the terms and conditions set forth in ArticleARTICLE IX, (ii) to become a party to each applicable 

Security Document and all other agreements, instruments or documents that create or purport to create 

and perfect a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit 

of the Secured Parties in its assets that are of a type that are intended to be included in the Collateral 

(other than any Excluded Assets), subject to and in accordance with the terms, conditions and provisions 

of the Loan Documents, (iii) to satisfy the Perfection Requirement, (iv) to deliver a secretary’s certificate 

of such Subsidiary, in form and substance reasonably acceptable to the Appropriate Party, with 

appropriate insertions and attachments, and (v) to deliver legal opinions relating to the matters described 

above, which opinions shall be in form and substance, and from counsel, satisfactory to the Appropriate 

Party.

(b) If the Parent or any Subsidiary desires, or is required pursuant to the terms of this 

Agreement, to add Additional Collateral or, if any Subsidiary acquires any existing Collateral from a 

Grantor (as defined in the Pledge and Security Agreement) that it is required pursuant to the terms of this 

Agreement to maintain as Collateral, in each case, after the Closing Date, the Parent shall, in each case at 

its own expense, promptly (in any event, unless any other time period is specified in this Agreement or 
any other Loan Document within thirty (30) days of the relevant date) (i) cause any such Subsidiary to 

become a Grantor (to the extent such Subsidiary is not already a Grantor) pursuant to joinder 

documentation acceptable to the Appropriate Party and on the terms and conditions set forth in the 

relevant Security Documents, (ii) cause any such Subsidiary to become a party to each applicable Security 

Document and all other agreements, instruments or documents that create or purport to create and perfect 

a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the 

Secured Parties applicable to such Collateral, in form and substance satisfactory to the Appropriate Party 

(it being understood that in the case of any Additional Collateral of a type, or in a jurisdiction, that has not 

been theretofore included in the Collateral, such Additional Collateral may be subject to such additional 

terms and conditions as requested by the Appropriate Party), (iii) promptly execute and deliver (or cause 

such Subsidiary to execute and deliver) to the Collateral Agent such documents and take such actions to 

create, grant, establish, preserve and perfect the first priority Liens (subject to Permitted Liens) (including 

to obtain any release or termination of Liens not permitted under the definition of “Additional Collateral” 

in Section 1.01 or under Section6.02 and to satisfy all Perfection Requirements, including the filing of 

UCC financing statements, filings with the FAA and registrations with the International Registry, as 

applicable) in favor of the Collateral Agent for the benefit of the Secured Parties on such assets of the 

Parent or such Subsidiary, as applicable, to secure the Obligations to the extent required under the 

applicable Security Documents or reasonably requested by the Appropriate Party, and to ensure that such 

Collateral shall be subject to no other Liens other than Permitted Liens and (iv) if requested by the 

Appropriate Party, deliver (or cause such Subsidiary to deliver) legal opinions to the Collateral Agent, for 

the benefit of the Secured Parties, relating to the matters described above, which opinions shall be in form 

and substance, and from counsel, satisfactory to the Appropriate Party.

SECTION 5.14 Post-Closing Matters. As promptly as practicable, and in any event within 

the time periods after the Closing Date specified on Schedule 5.14 or such later date as the Initial Lender 

may agree to in writing in its sole discretion, the Parent shall deliver the documents or take the actions 

specified on Schedule 5.14 that would have been required to be delivered or taken on the Closing Date.

SECTION 5.15 Further Assurances. In each case subject to the terms, conditions and 

limitations in the Loan Documents, (a) each Credit Party shall remain in compliance with the Perfection 

Requirement with respect to all Collateral (including any assets, rights and properties that (x) become 

Collateral after the Closing Date and (y) any permitted replacement or substitute assets, rights and 

properties thereof (including any Additional Collateral) and (b) each Credit Party shall, promptly and at its 

expense, execute any and all further documents and instruments and take all further actions, that may be 

required or advisable under applicable law or that the Initial Lender, the Administrative Agent or the 

Collateral Agent may request, in order to create, grant, establish, preserve, protect, renew or perfect the 

validity, perfection or first priority of the Liens and security interests created or intended to be created by 

the Security Documents, in each case to the extent required under this Agreement or the Security 

Documents (including with respect to any additions to the Collateral (including any Additional Collateral) 

or replacements, substitutes or proceeds thereof or with respect to any other property or assets hereafter 

acquired by any Credit Party that are of a type that are intended to be included in the Collateral).

SECTION 5.16 Delivery of Appraisals. The Parent shall (1) within ten (10) Business Days 

prior to the last Business Day of March and September of each year, beginning with March 31, 2021 and (2) 

promptly (but in any event within thirty (30) days) following request by the Administrative Agent (acting at 

the direction of the Required Lenders) if an Event of Default has occurred and is occurring, deliver to the 

Administrative Agent one or more Appraisals determining the Appraised Value of the Collateral. In 

addition, on the date upon which any Additional Collateral is pledged as Collateral to the Collateral Agent 

for the benefit of the Secured Parties to secure the Obligations, but only with respect to such Additional 
Collateral, the Parent shall deliver to the Administrative Agent one or more Appraisals determining the 

Appraised Value of such Additional Collateral. 

SECTION 5.17 Ratings. At any time when the Initial Lender is a Lender, the Borrower 

shall, upon request by the Initial Lender, use its reasonable best efforts to obtain a public rating (or, if the 

Borrower does not have a public family corporate rating at such time, a private rating) in respect of the 

Loans by any two of S&P, Moody’s and Fitch in connection with any contemplated assignment of, or 

participation in, the Loans. 

SECTION 5.18 Regulatory Matters. 

(a) US Citizenship. The Borrower will at all times maintain its status as a “citizen of 

the United States” as defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been 

interpreted by the DOT pursuant to its policies. 

(b) Air Carrier Status. The Borrower will at all times maintain its status as an “air 

carrier” within the meaning of Section 40102 of Title 49 and holds a certificate under Section 41102 of 

Title 49. The Borrower will at all times possess an air carrier operating certificate issued pursuant to 

Chapter 447 of Title 49. The Borrower will at all times possess all necessary certificates, franchises, 

licenses, permits, rights, designations, authorizations, exemptions, concessions, frequencies and consents 

which relate to the operation of the routes flown by it and the conduct of its business and operations as 

currently conducted, except where failure to do so, either individually or in the aggregate, could not 

reasonably be expected to have a Material Adverse Effect.

ARTICLE VI

NEGATIVE COVENANTS

Until all the later of (i) the date on which all of the Obligations shall have been paid in 

full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the 

Lenders that:

SECTION 6.01 [Reserved].

SECTION 6.02 Liens. Parent will not, and will not permit any of its Subsidiaries to, create, 

incur, assume or suffer to exist any Lien upon any property or assets constituting Collateral, whether now 

owned or hereafter acquired, except for Permitted Liens.

SECTION 6.03 Fundamental Changes. Parent will not, and will not permit any of its 

Subsidiaries to, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in 

one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or 

hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result 

therefrom:

(a) any Subsidiary may merge with (i) the Borrower; provided that the Borrower 

shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries; provided

that (x) when any Wholly-Owned Subsidiary is merging with another Subsidiary, a WhollyOwned Subsidiary shall be the continuing or surviving Person and (y) when any Subsidiary that is 

a Credit Party is merging with another Subsidiary, then such other Subsidiary shall be a Credit 

Party; 

(b) any Subsidiary may Dispose of all or substantially all of its assets (upon 

voluntary liquidation or otherwise) to the Parent or to another Subsidiary; provided that (x) if the 
transferor in such a transaction is a Wholly-Owned Subsidiary, then the transferee shall either be 

the Parent or another Wholly-Owned Subsidiary and (y) if the transferor in such a transaction is a 

Credit Party, then the transferee shall be a Credit Party; 

(c) the Parent and its Subsidiaries may make Dispositions permitted by Section 6.04; 

(d) any Investment permitted by Section 6.06 may be structured as a merger, 

consolidation or amalgamation; 

(e) any Subsidiary may dissolve, liquidate or wind up its affairs if it owns no 

material assets, engages in no business and otherwise has no activities other than activities related 

to the maintenance of its existence and good standing; and

(f) any Subsidiary may Dispose of all or substantially all of its assets (upon 

voluntary liquidation or otherwise); provided that such assets do not constitute all or substantially 

all of the consolidated assets of the Parent and its Subsidiaries. 

SECTION 6.04 Dispositions. Parent will not, and will not permit any of its Subsidiaries to, 

sell or otherwise make any Disposition of Collateral or enter into any agreement to make any sale or other 

Disposition of Collateral (in each case, including, without limitation by way of any sale or other Disposition 

of any Guarantor), except, subject to Article X and so long as no Default shall have occurred and be continuing 

at the time of any action described below, or would result therefrom:

(a) [reserved]; 

(b) Dispositions of Collateral among the Credit Parties (including any Person that 

shall become a Credit Party simultaneous with such Disposition in the manner contemplated by 

Section 5.13); provided that:

(i) such Collateral remains at all times subject to a Lien with the same 

priority and level of perfection as was the case immediately prior to such Disposition (and 

otherwise subject only to Permitted Liens) in favor of the Collateral Agent for the benefit of the 

Secured Parties following such Disposition;

(ii) concurrently therewith, the Credit Parties shall execute any documents 

and take any actions reasonably required to create, grant, establish, preserve or perfect such Lien 

in accordance with the other provisions of this Agreement or the Security Documents;

(iii) if requested by the Appropriate Party, concurrently therewith, the 

Appropriate Party shall receive an opinion of counsel to the applicable Credit Party (x) in the case 

of Collateral that consists of Route Authorities, Slots and/or Gate Leaseholds, as to the creation 

and perfection under Article 9 of the UCC of the Lien of the security agreement or mortgage, as 

applicable, and subject to assumptions and qualifications (including as provided in the opinion(s) 

delivered on the Closing Date), and (y) in the case of any other Collateral, as to the creation and 

perfection of the Lien of such security agreement or mortgage, as applicable, in form and 

substance satisfactory to the Appropriate Party; and

(iv) concurrently with any Disposition of Collateral to any Person that shall 

become a Credit Party simultaneous with such Disposition in the manner contemplated by 

Section 5.13, such Person shall have complied with the requirements of Section 5.13.

(c) to the extent constituting a Disposition of Collateral, the incurrence of Liens that 

are permitted to be incurred pursuant to Section 6.02; 
(d) Disposition of cash or Cash Equivalents in exchange for other cash or Cash 

Equivalents constituting Collateral and having reasonably equivalent value therefor; 

(e) the abandonment or Disposition of assets no longer useful or used in the 

business; provided that such abandonment or Disposition is (A) in the ordinary course of business 

and (B) with respect to assets that are not material to the business of the Parent and the 

Subsidiaries taken as a whole;

(f) [reserved];

(g) any Disposition of property resulting from an event of loss with respect to any 

aircraft, airframe, engine, spare engine or Spare Parts if the Credit Party is replacing such aircraft, 

airframe, engine, spare engine or Spare Parts in accordance with the terms of the Loan 

Documents; and

(h) any Disposition of Collateral permitted by any of the Security Documents.

SECTION 6.05 Restricted Payments. Parent will not, and will not permit any of its 

Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation 

(contingent or otherwise) to do so, except, that, subject to additional restrictions set forth in Article X, so 

long as no Default shall have occurred and be continuing at the time of any action described below or would 

result therefrom:

(a) each Subsidiary may make Restricted Payments to the Parent and any other 

Person that owns an Equity Interest in such Subsidiary, ratably according to their respective 

holdings of such Equity Interests in respect of which such Restricted Payment is being made;

(b) the Parent and each Subsidiary may declare and make dividend payments or 

other distributions payable solely in common Equity Interests of such Person;

(c) the Parent and each Subsidiary may purchase, redeem or otherwise acquire 

Equity Interests issued by it with the proceeds received from the substantially concurrent issue of 

new common Equity Interests; 

(d) the Parent and each Subsidiary may pay withholding or similar taxes payable by 

any future, present or former employee, director or officer (or any spouses, former spouses, 

successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) in 

connection with any repurchases of Equity Interests or the exercise of stock options; 

(e) the repurchase of Equity Interests or other securities deemed to occur upon (A) 

the exercise of stock options, warrants or other securities convertible or exchangeable into Equity

Interests or any other securities, to the extent such Equity Interests or other securities represent a 

portion of the exercise price of those stock options, warrants or other securities convertible or 

exchangeable into Equity Interests or any other securities or (B) the withholding of a portion of 

Equity Interests issued to employees and other participants under an equity compensation 

program of the Parent or its Subsidiaries to cover withholding tax obligations of such persons in 

respect of such issuance;

(f) payments of cash, dividends, distributions, advances, common stock or other 

Restricted Payments by the Parent or any of its Subsidiaries to allow the payment of cash in lieu 

of the issuance of fractional shares upon (A) the exercise of options or warrants, (B) the 

conversion or exchange of capital stock of any such Person or (C) the conversion or exchange of 

Indebtedness or hybrid securities into capital stock of any such Person;
(g) the Parent may make cash payments in connection with any conversion or 

exchange of Convertible Indebtedness in amount equal to the sum of (i) the principal amount of 

such Convertible Indebtedness and (ii) the proceeds of any payments received by the Parent or 

any of its Subsidiaries pursuant to the exercise, settlement or termination of any related Permitted 

Bond Hedge Transaction; 

(h) the Parent may make payments in connection with a Permitted Bond Hedge 

Transaction (i) by delivery of shares of the Parent’s Equity Interests upon net share settlement 

thereof or (ii) by (A) set-off against the related Permitted Bond Hedge Transaction and (B) 

payment of an early termination amount thereof in common Equity Interests of the Parent upon 

any early termination thereof; and 

(i) Restricted Payments not to exceed the amount allowable pursuant to Schedule 

6.05(i).

SECTION 6.06 Investments. Parent will not, and will not permit any of its Subsidiaries to,

make any Investments, except:

(a) Investments held by the Parent or such Subsidiary in the form of cash or Cash 

Equivalents;

(b) (i) Investments in Subsidiaries in existence on the Closing Date, (ii) other 

Investments in existence on the Closing Date and listed in Section I to Schedule 6.06 and (iii)

other Investments described on Section II of Schedule 6.06, and, in each case, any refinancing, 

refunding, renewal or extension of any such Investment that does not increase the amount thereof;

(c) advances to officers, directors and employees of the Parent and its Subsidiaries in 

an aggregate amount not exceeding, at any time outstanding, an amount that is customary and 

consistent with past practice, for travel, entertainment, relocation and similar ordinary business 

purposes;

(d) (x) Investments of the Parent in the Borrower or any other Credit Party, (y) 

Investments of any Subsidiary in the Parent or any other Credit Party and (z) Investments made 

between Subsidiaries that are not Credit Parties; provided that any such Investments made 

pursuant to this clause (d) in the form of intercompany indebtedness incurred by a Credit Party 

and owed to a Subsidiary that is not a Credit Party shall be subordinated to the Obligations and 

the Guaranteed Obligations on customary terms (it being understood and agreed that any 

Investments permitted under this clause (d) in the form of intercompany indebtedness that are not 

already subordinated on such terms as of the Closing Date shall not be required to be so 

subordinated until the date that is thirty (30) days after the Closing Date); 

(e) Investments consisting of extensions of credit in the nature of accounts 

receivable or notes receivable arising from the grant of trade credit in the ordinary course of 

business, and Investments received in satisfaction or partial satisfaction thereof from financially 

troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

(f) Investments consisting of the indorsement by the Parent or any Subsidiary of 

negotiable instruments payable to such Person for deposit or collection in the ordinary course of 

business; 

(g) to the extent constituting an Investment, transactions otherwise permitted by 

Sections 6.03 and 6.05; 
(h) any Investments received in compromise or resolution of (i) obligations of trade 

creditors or customers that were incurred in the ordinary course of business of Parent or any of its 

Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the 

bankruptcy or insolvency of any trade creditor or customer or (ii) litigation, arbitration or other 

disputes; 

(i) Investments represented by obligations in respect of Swap Contracts that are not 

speculative in nature and that are entered into to hedge or mitigate risks to which the Parent or 

any of its Subsidiaries has (or will have) actual exposure (other than those in respect of the Equity 

Interests or Indebtedness of the Parent or any of its Subsidiaries); 

(j) accounts receivable arising in the ordinary course of business; 

(k) any guarantee of Indebtedness of Parent or any Subsidiary of Parent other than 

any guarantee of Indebtedness secured by Liens that would not be permitted under Section 6.02; 

(l) Investments to the extent that payment for such Investment is made with the 

capital stock of the Parent;

(m) Investments having an aggregate fair market value (measured on the date each 

such Investment was made and without giving effect to subsequent changes in value other than a 

reduction for all returns of principal in cash and capital dividends in cash), when taken together 

with all Investments made pursuant to this clause (n) that are at the time outstanding, not to 

exceed 30% of the total consolidated assets of the Parent and its Subsidiaries at the time of such 

Investment; 

(n) Permitted Bond Hedge Transactions to the extent constituting Investments; and 

(o) Investments in Finance Entities in the ordinary course of business of the Parent 

and its Subsidiaries or that are otherwise customary for airlines based in the United States.

SECTION 6.07 Transactions with Affiliates. Parent will not, and will not permit any of its 

Subsidiaries to, enter into any transaction of any kind involving aggregate payments or consideration in 

excess of $50,000,000 with any Affiliate of the Parent, whether or not in the ordinary course of business, 

other than on fair and reasonable terms substantially as favorable to the Parent or such Subsidiary as would 

be obtainable by the Parent or such Subsidiary at the time in a comparable arm’s-length transaction with a 

Person other than an Affiliate, subject to delivery of (x) with respect to any transaction or series of related 

transactions involving aggregate consideration in excess of $100,000,000, a certificate of a Responsible 

Officer of the Parent certifying as to compliance with the foregoing and (y) with respect to any transaction 

or series of related transactions involving aggregate consideration in excess of $150,000,000, an opinion as 

to the fairness to the Parent or such Subsidiary of such transaction from a financial point of view issued by 

an accounting, appraisal or investment banking firm of national standing (provided that this clause (y) shall 

not apply to any transaction between or among the Parent or any of its Subsidiaries and any Finance 

Entities); provided that, subject to Article X, the foregoing restriction shall not apply to: 

(a) transactions between or among the Parent and any Wholly-Owned Subsidiaries, 

(b) Restricted Payments permitted by Section 6.05, 

(c) Investments permitted by Section 6.06(b), or (c) or (d), 

(d) transactions described in Schedule 6.07, 
(e) any employment agreement, confidentiality agreement, non-competition 

agreement, incentive plan, employee stock option agreement, long-term incentive plan, profit sharing 

plan, employee benefit plan, officer or director indemnification agreement or any similar arrangement 

entered into by the Parent or any of its Subsidiaries in the ordinary course of business and payments 

pursuant thereto, and 

(f) payment of fees, compensation, reimbursements of expenses (pursuant to 

indemnity arrangements or otherwise) and reasonable and customary indemnities provided to or on behalf 

of officers, directors, employees or consultants of the Parent or any of its Subsidiaries.

SECTION 6.08 [Reserved].

SECTION 6.09 [Reserved].

SECTION 6.10 Changes in Nature of Business. Parent will not, and will not permit any of 

its Subsidiaries to, engage to any material extent in any business other than those businesses conducted by 

the Parent and its Subsidiaries on the date hereof or any business reasonably related or incidental thereto or 

representing a reasonable expansion thereof.

SECTION 6.11 Sanctions; AML Laws. Parent will not, and will not permit any of its 

Subsidiaries to, directly or knowingly indirectly, use the proceeds of the Loans, or lend, contribute or 

otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person to fund any 

activities or business of or with any Person in a manner that would result in a violation of Sanctions or 

AML Laws by any Person.

SECTION 6.12 Amendments to Organizational Documents. Parent will not, and will not 

permit any of its Subsidiaries to amend, modify, or grant any waiver or release under or terminate in any 

manner, any Organizational Documents in any manner materially adverse to, or which would impair the 

rights of, the Lenders.

SECTION 6.13 [Reserved].

SECTION 6.14 Prepayments of Junior Indebtedness. Parent will not, and will not permit 

any of its Subsidiaries to, make any principal payment on, or redeem, repurchase, defease or otherwise 

acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or 

maturity, any Indebtedness secured by junior Liens on the Collateral or that is subordinated in right of 

payment to the Obligations, in each case other than in connection with a Permitted Refinancing of such 

Indebtedness.

SECTION 6.15 Lobbying. Parent will not, and will not permit any of its Subsidiaries to, 

directly, or to the Parent or such Subsidiary’s knowledge, indirectly, use the proceeds of the Loans, or lend, 

contribute, or otherwise make available such proceeds to any other Person (i) for publicity or propaganda 

purposes designated to support or defeat legislation pending before the U.S. Congress or (ii) to fund any 

activities that would constitute “lobbying activities” as defined under 2 U.S.C. § 1602. The Parent shall, 

and shall cause its subsidiaries to, comply with the provisions of 31 U.S.C. § 1352, as amended, and with 

the regulations at 31 CFR Part 21.

SECTION 6.16 Use of Proceeds. Parent will not, and will not permit any of its 

Subsidiaries to, use the proceeds of the Loans for any purpose other than for general corporate purposes and 

operating expenses (including payroll, rent, utilities, materials and supplies, repair and maintenance, and 

scheduled interest payments on other Indebtedness incurred before February 15, 2020), in each case in 

compliance with all applicable law to the extent permitted by the CARES Act; provided however that the 

proceeds of the Loans shall not be used for any non-operating expenses (including capital expenses, 
delinquent taxes and payments of principal on other Indebtedness), unless the Parent can demonstrate, to the 

satisfaction of the Initial Lender, that payment of any such non-operating expense is necessary to optimize 

the continued operations of the Parent’s business and does not merely constitute a transfer of risk from an 

existing creditor or investor to the Federal taxpayer.

SECTION 6.17 Financial Covenants.

(a) Liquidity. The Parent will not permit the aggregate amount of Liquidity at the 

close of any Business Day to be less than $400,000,000.

(b) Collateral Coverage Ratio.

(i) Within ten (10) Business Days after (x) the last day of March and 

September of each year (beginning with March 2021) or (y) any date on which an Appraisal is 

delivered pursuant to clause (2) of Section 5.16 (each such date in clauses (x) and (y), a “CCR 

Reference Date” and the tenth Business Day after a CCR Reference Date, a “CCR Certificate 

Delivery Date”), the Parent shall deliver to the Administrative Agent a certificate of a 

Responsible Officer of the Parent containing a calculation of the Collateral Coverage Ratio (a 

“CCR Certificate”).

(ii) If the Collateral Coverage Ratio with respect to any CCR Reference Date 

is less than 1.60 to 1.00, the Borrower shall, no later than ten (10) Business Days after the 

applicable CCR Certificate Delivery Date, (x) prepay any outstanding Loans such that following 

such prepayment, the Collateral Coverage Ratio with respect to such CCR Reference Date, 

recalculated by subtracting any such prepaid portion of the Loans, shall be no less than 1.60 to 

1.00 and/or (y) designate Additional Collateral as additional Eligible Collateral and comply with 

Sections 5.13 and 5.15, collectively, in an amount such that following such designation, the 

Collateral Coverage Ratio with respect to such CCR Reference Date, recalculated by adding such 

Additional Collateral, shall be no less than 1.60 to 1.00.

(iii) At the Parent’s request, the Lien on any Collateral will be released, 

provided, in each case, that the following conditions are satisfied or waived: (a) no Event of 

Default shall have occurred and be continuing, (b) either (x) after giving effect to such release, 

the Collateral Coverage Ratio is not less than 2.00 to 1.00 (or in the case of a swap or exchange of 

existing Additional Collateral with new Additional Collateral, less than 1.60 to 1.00) or (y) the 

Parent shall prepay or cause to be prepaid the Loans and/or shall designate Eligible Collateral as 

Additional Collateral and comply with Sections 5.13 and 5.15, collectively, in an amount 

necessary to cause the Collateral Coverage Ratio to not be less than 2.00 to 1.00 (or in the case of 

a swap or exchange of existing Additional Collateral with new Additional Collateral, less than 

1.60 to 1.00) and (c) the Parent shall deliver a certificate executed by a Responsible Officer

demonstrating compliance with this Section 6.17(b)(iii). 

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01 Events of Default. If any of the following events (each, an “Event of 

Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan when and as the same 

shall become due and payable, whether at the due date thereof or at a date fixed for prepayment 

thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan, or any fee or any other 

amount (other than an amount referred to in clause (a)(a) of this Section) payable under this 

Agreement or under any other Loan Document, when and as the same shall become due and 

payable, and such failure shall continue unremedied for a period of two (2) or more Business 

Days;

(c) any representation or warranty made or deemed made by or on behalf of any 

Credit Party, including those made prior to the Closing Date, in or in connection with this 

Agreement, the Loan Application Form or any other Loan Document or any amendment or 

modification hereof or thereof, or any waiver hereunder or thereunder, or in any report, 

certificate, financial statement or other document furnished pursuant to or in connection with this 

Agreement, the Loan Application Form or any other Loan Document or any amendment or 

modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been 

incorrect in any material respect (or, in the case of any such representation or warranty under this 

Agreement, the Loan Application Form or any other Loan Document already qualified by 

materiality, such representation or warranty shall prove to have been incorrect) when made or 

deemed made;

(d) any Credit Party shall fail to observe or perform any covenant, condition or 

agreement contained in Section 5.03(a), 5.04 (with respect to the Borrower’s existence) or in 

Article VI or Article X;

(e) any Credit Party shall fail to observe or perform any covenant, condition or 

agreement contained in this Agreement or any other Loan Document (other than those specified 

in clause (a), (b) or (d) of this Section) and such failure shall continue unremedied for a period of 

thirty (30) or more days after notice thereof by the Administrative Agent or the Initial Lender to 

the Parent;

(f) (i) Any Credit Party or any Subsidiary thereof shall fail to make any payment 

when due (whether by scheduled maturity, required prepayment, acceleration, demand, or 

otherwise) in respect of any Material Indebtedness (other than Indebtedness under this 

Agreement) and such failure shall continue after the applicable grace period, if any, specified in 

the agreement or instrument governing such Material Indebtedness; or (ii) any Credit Party or any 

Subsidiary thereof shall fail to observe or perform any other agreement or condition relating to 

any such Indebtedness or contained in any instrument or agreement evidencing, securing or 

relating thereto, or any other event occurs, the effect of which default or other event results in the 

holder or holders or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on 

behalf of such holder or holders or beneficiary or beneficiaries) causing such Indebtedness to 

become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or

causing an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to 

its stated maturity; provided that this clause (f)(ii) shall not apply to secured Indebtedness that 

becomes due as a result of the voluntary sale or transfer (or disposition of property as a result of a 

casualty or condemnation event) of the property or assets securing such Indebtedness, if such sale 

or transfer is permitted hereunder and under the documents providing for such Indebtedness and 

such Indebtedness is repaid when required under the documents providing for such Indebtedness;

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be 

filed seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or any 

Material Subsidiary thereof or its debts, or of a substantial part of its assets, under any Debtor 

Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, 

sequestrator, conservator or similar official for any Credit Party or any Material Subsidiary 

thereof or for a substantial part of its assets, and, in any such case, such proceeding or petition 
shall continue undismissed for a period of sixty (60) or more days or an order or decree approving 

or ordering any of the foregoing shall be entered;

(h) any Credit Party or any Material Subsidiary thereof shall (i) voluntarily 

commence any proceeding or file any petition seeking liquidation, reorganization or other relief 

under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to

contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of 

this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, 

sequestrator, conservator or similar official for the Parent or any of its Subsidiaries or for a 

substantial part of its assets, (iv) file an answer admitting the material allegations of a petition 

filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors 

or (vi) take any action for the purpose of effecting any of the foregoing;

(i) any Credit Party or any Material Subsidiary thereof shall become unable, admit 

in writing its inability or fail generally to pay its debts as they become due;

(j) there is entered against any Credit Party or any Material Subsidiary thereof (i) a 

final judgment or order for the payment of money in an aggregate amount (as to all such 

judgments and orders) exceeding $50,000,000 (to the extent not covered by independent thirdparty insurance as to which the insurer has been notified of such judgment or order and has not 

denied or failed to acknowledge coverage), or (ii) a non-monetary final judgment or order that, 

either individually or in the aggregate, has or could reasonably be expected to have a Material 

Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor 

upon such judgment or order, or (B) there is a period of thirty (30) consecutive days during which 

a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in 

effect;

(k) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan 

that has resulted or could reasonably be expected to result in liability of any Credit Party under 

Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC that, either individually 

or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect;

(l) [reserved]; 

(m) any material provision of any Loan Document, at any time after its execution and 

delivery and for any reason other than as expressly permitted hereunder or thereunder or 

satisfaction in full of all Obligations, ceases to be in full force and effect; or any Credit Party or 

any other Person who is a party to any Loan Document contests in writing the validity or 

enforceability of any provision of any Loan Document; or any Credit Party denies in writing that 

it has any or further liability or obligation under any Loan Document, or purports in writing to 

revoke, terminate or rescind any Loan Document;

(n) any Lien purported to be created under any Security Document shall cease to be, 

or shall be asserted in writing by any Credit Party not to be, a legal, valid and perfected Lien on 

any material portion of the Collateral (individually or in the aggregate), with the priority required 

by the applicable Security Documents, except (i) as a result of the sale or other Disposition of the 

applicable Collateral to a Person that is not a Credit Party in a transaction not prohibited under the 

Loan Documents or (ii) as a result of either Agent’s failure to maintain possession of any stock 

certificates, promissory notes or other instruments delivered to it under the Security Documents 

or (iii) as a result of acts or omissions with respect to possessory collateral held by the Collateral 

Agent pursuant to this Agreement; or
(o) any Guarantee of any Obligations by any Credit Party under any Loan Document 

shall cease to be in full force in effect (other than in accordance with the terms of the Loan 

Documents);

then, and in every such event (other than an event described in clause (g) or (h) of this Section), and at 

any time thereafter during the continuance of such event, the Initial Lender may, and the Administrative 

Agent may, and at the request of the Required Lenders or the Initial Lender shall, by notice to the 

Borrower, take any or all of the following actions, at the same or different times:

(i) declare the Loans then outstanding to be due and payable in whole (or in 

part, in which case any principal not so declared to be due and payable may thereafter be declared 

to be due and payable), and thereupon the principal of the Loans so declared to be due and 

payable, together with accrued interest thereon and all fees and other Obligations of the Credit 

Parties accrued hereunder, shall become due and payable immediately, without presentment, 

demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and 

the other Credit Parties; and

(ii) exercise on behalf of itself and the Lenders all rights and remedies 

available to it and the Lenders under the Loan Documents and Applicable Law;

provided that, in case of any event described in clause (g) or (h) of this Section, the principal of the Loans 

then outstanding, together with accrued interest thereon and all fees and other Obligations accrued 

hereunder, shall automatically become due and payable, in each case without presentment, demand, 

protest or other notice of any kind, all of which are hereby waived by the Credit Parties.

SECTION 7.02 Application of Payments. Notwithstanding anything herein to the contrary, 

following the occurrence and during the continuance of an Event of Default, and notice thereof to the Initial 

Lender and the Administrative Agent by the Borrower or the Required Lenders, all payments received on 

account of the Obligations shall be applied by the Administrative Agent as follows:

(i) first, to payment of that portion of the Obligations constituting fees, 

indemnities, expenses and other amounts (including fees and disbursements and other charges of 

counsel payable under Section 11.03 and amounts payable under an Administrative Agency Fee 

Letter (if any)) payable to the Administrative Agent and the Collateral Agent in their respective 

capacities as such;

(ii) second, to payment of that portion of the Obligations constituting fees, 

indemnities and other amounts (other than principal and interest) payable to the Lenders 

(including fees and disbursements and other charges of counsel payable under Section 11.03) 

arising under the Loan Documents, ratably among them in proportion to the respective amounts 

described in this clause (ii) payable to them;

(iii) third, to payment of that portion of the Obligations constituting accrued 

and unpaid interest on the Loans, ratably among the Lenders in proportion to the respective 

amounts described in this clause (iii) payable to them;

(iv) fourth, to payment of that portion of the Obligations constituting unpaid 

principal of the Loans ratably among the Lenders in proportion to the respective amounts 

described in this clause (iv) payable to them;

(v) fifth, to the payment in full of all other Obligations, in each case ratably 

among the Administrative Agent and the Lenders based upon the respective aggregate amounts of 
all such Obligations owing to them in accordance with the respective amounts thereof then due 

and payable; and

(vi) finally, the balance, if any, after all Obligations have been indefeasibly 

paid in full, to the Borrower or as otherwise required by Law.

ARTICLE VIII

AGENCY

SECTION 8.01 Appointment and Authority. Each Lender hereby irrevocably appoints The 

Bank of New York Mellon to act on its behalf as the Administrative Agent and as the Collateral Agent 

hereunder and under the other Loan Documents and authorizes the Agents to take such actions on its behalf 

and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together 

with such actions and powers as are reasonably incidental or related thereto; provided that notwithstanding 

anything in this Article VIII or this Agreement to the contrary, the terms and conditions of the relationship 

between the Initial Lender and the Agents shall be governed by a separate agreement between the Initial 

Lender and the Agents. The Borrower and the Guarantors acknowledge and agree that the Agents are 

Agents of the Lenders and not of the Borrower or the Guarantors. In connection with an assignment of the 

Loans by the Initial Lender, upon the Administrative Agent’s request, the Borrower and the Agents shall 

enter into an Administrative Agency Fee Letter. The provisions of this Article are solely for the benefit of 

the Agents and the Lenders, and the Borrower shall not have rights as a third-party beneficiary of any of 

such provisions. Without limiting the generality of the foregoing, the Agents are hereby expressly 

authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the 

rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions 

of this Agreement and the other Loan Documents and (ii) negotiate, enforce or settle any claim, action or 

proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which 

negotiation, enforcement or settlement will be binding upon each Lender. 

SECTION 8.02 Collateral Matters. Each of the Lenders hereby irrevocably appoints and 

authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and 

enforcing any and all Liens on Collateral granted by any of the Credit Parties to secure any of the 

Obligations, together with such powers and discretion as are reasonably incidental thereto and to enter into 

and perform the other Loan Documents. 

SECTION 8.03 Removal or Resignation of Administrative Agent. While the Initial Lender 

is a Lender, the Administrative Agent may be removed or give notice of its resignation subject to any 

conditions as separately agreed between the Initial Lender and the Administrative Agent. Any such 

resignation as Administrative Agent pursuant to this Section 8.03 shall also constitute its resignation as the 

Collateral Agent; provided that in the case of any collateral security held by the Collateral Agent on behalf 

of the Lenders under any of the Loan Documents, the retiring or removed Collateral Agent shall continue to 

hold such collateral security until such time as a successor Collateral Agent is appointed. Upon such 

removal or receipt of any such notice of resignation, the Initial Lender shall have the right to appoint a 

successor. After the Initial Lender is no longer a Lender, either Agent may resign at any time by notifying 

the Lenders and the Borrower in writing, and either Agent may be removed at any time with or without 

cause by an instrument or concurrent instruments in writing delivered to the Borrower and such Agent and 

signed by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have 

the right, with the consent of the Borrower (which consent shall not be required during the continuance of 

an Event of Default), to appoint a successor. If no successor shall have been so appointed by the Required 

Lenders (with the consent of the Borrower (which consent shall not be required during the continuance of 

an Event of Default)) and shall have accepted such appointment within 30 days after (i) the retiring Agent 

gives notice of its resignation or (ii) the Required Lenders deliver removal instructions, then the retiring or 

removed Agent may, on behalf of the Lenders (with the consent of the Borrower (which consent shall not 
be required during the continuance of an Event of Default)), appoint a successor Agent which shall be a 

bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has 

been appointed pursuant to the immediately preceding sentence, such Agent’s resignation or removal shall 

become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder 

and/or under any other Loan Document until such time, if any, as the Required Lenders (with the consent of 

the Borrower (which consent shall not be required during the continuance of an Event of Default)) appoint a 

successor Administrative Agent and/or Collateral Agent, as the case may be. Upon the acceptance of its 

appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all 

the rights, powers, privileges and duties of its predecessor Agent, and its predecessor Agent shall be 

discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor 

Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower 

and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.03 

shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related 

Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.

SECTION 8.04 Exculpatory Provisions.

(a) The Agents shall not have any duties or obligations except those expressly set 

forth herein and in the other Loan Documents or as separately agreed between the Initial Lender and the 

Agents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the 

foregoing:

(i) neither Agent shall be subject to any fiduciary or other implied duties, regardless 

of whether a Default has occurred and is continuing, except that The Bank of New York Mellon shall 

always have a fiduciary duty to Treasury while serving as its Agent in accordance with the provisions of 

the separate writing between The Bank of New York Mellon and Treasury;

(ii) neither Agent shall have any duty to take any discretionary action or exercise any 

discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the 

other Loan Documents that such Agent is required to exercise as directed in writing by the Required 

Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in 

the other Loan Documents); and

(iii) except as expressly set forth herein and in the other Loan Documents, neither 

Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information 

relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank 

serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity.

(b) Neither Agent shall be required to expend or risk its own funds or otherwise 

incur liability in the performance of any of its duties hereunder or under any other Loan Document or in 

the exercise of any of its rights or powers. Notwithstanding anything in any Loan Document to the 

contrary, prior to taking any action under this Agreement or any other Loan Document, each Agent shall 

be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses in 

connection with taking such action. Neither Agent shall be liable for any action taken or not taken by it 

with the consent or at the request of the Required Lenders (or such other number or percentage of the 

Lenders as shall be necessary under the circumstances as provided in Sections 7.01 and 11.02) or in the 

absence of its own gross negligence or willful misconduct as determined by the final non-appealable 

judgment of a court of competent jurisdiction. Notwithstanding the foregoing, no action nor any omission 

to act, taken by either Agent at the direction of the Required Lenders (or such other number of percentage 

of Lenders as shall be expressly provided for herein or in the other Loan Documents) shall constitute 

gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default 

unless and until written notice thereof, conspicuously labeled as a “notice of default” and specifically 

describing such Default, is given to an Agent Responsible Officer by the Borrower or a Lender.
(c) Neither Agent shall be responsible for or have any duty to ascertain or inquire 

into (i) any statement, warranty or representation made in or in connection with this Agreement or any 

other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or 

thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the 

covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any 

Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan 

Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set 

forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be 

delivered to the Administrative Agent.

(d) In no event shall either Agent be responsible or liable for any failure or delay in 

the performance of its obligations hereunder or under any other Loan Document arising out of or caused 

by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, 

epidemics, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural 

catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or 

computer (software and hardware) services (it being understood that such Agent shall use reasonable 

efforts which are consistent with accepted practices in the banking industry to resume performance as 

soon as practicable under the circumstances).

(e) Each Agent shall be entitled to rely upon, and shall not incur any liability for 

relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing 

believed by it in good faith to be genuine and to have been signed or sent by the proper Person. Each 

Agent may also rely upon any statement made to it orally or by telephone and believed by it in good faith 

to have been made by the proper Person, and shall not incur any liability for relying thereon. Delivery of 

reports, information and documents to an Agent is for informational purposes only and an Agent’s receipt 

of the foregoing will not constitute actual or constructive knowledge or notice of any information 

contained therein or determinable from information contained therein, including the Borrower’s 

compliance with any of its covenants hereunder. Each Agent may consult with legal counsel (who may be 

counsel for the Borrower), independent accountants and other experts selected by it, and shall not be 

liable for any action taken or not taken by it in reliance on the advice of any such counsel, accountants or 

experts. Any funds held by an Agent shall, unless otherwise agreed in writing with the Borrower, be held 

uninvested in a non-interest bearing account.

(f) Neither Agent shall have any obligation to calculate or confirm the calculation of 

any financial covenant contained herein.

(g) Notwithstanding anything to the contrary in any Loan Documents, neither Agent 

shall be responsible for the existence, genuineness or value of any of the Collateral; for filing any 

financing or continuation statements or recording any documents or instruments in any public office or 

otherwise perfecting or maintaining the perfection of any security interest in the Collateral (except, in the 

case of possessory Collateral, for the Collateral Agent maintaining possession of any such Collateral 

received by it in accordance with the terms of the Loan Documents); for the validity, perfection, priority 

or enforceability of the Liens in any of the Collateral; for the validity or sufficiency of the Collateral or 

any agreement or assignment contained therein; for the validity of the title of any grantor to the 

Collateral; for insuring the Collateral; or for the payment of taxes, charges or assessments on the 

Collateral. The Collateral Agent agrees that it will check any possessory Collateral received by it against 

any itemized list in the Pledge and Security Agreement of Collateral to be delivered to it in accordance 

with the Pledge and Security Agreement.

SECTION 8.05 Reliance by Agents. Each Agent shall be entitled to rely upon, and shall 

not incur any liability for relying upon, any notice, request, certificate, opinion, consent, statement, 

instrument, document or other writing believed by it in good faith to be genuine and to have been signed 

or sent by the proper Person. Each Agent may also rely upon any statement made to it orally or by 
telephone and believed by it in good faith to have been made by the proper Person, and shall not incur any 

liability for relying thereon. Delivery of reports, information and documents to an Agent is for 

informational purposes only and an Agent’s receipt of the foregoing will not constitute actual or 

constructive knowledge or notice of any information contained therein or determinable from information 

contained therein, including the Borrower’s compliance with any of its covenants hereunder. Each Agent 

may consult with legal counsel (who may be counsel for the Borrower), independent accountants and 

other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance 

with the advice of any such counsel, accountants or experts.

SECTION 8.06 Delegation of Duties. Each Agent may perform any and all its duties and 

exercise its rights and powers by or through any one or more sub-agents or attorneys appointed by it and 

will not be responsible for the misconduct or negligence of any agent appointed with due care. Each 

Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or 

through their respective Related Parties.

SECTION 8.07 Non-Reliance on Agents and Other Lenders. Each Lender (other than 

the Initial Lender) acknowledges that it has, independently and without reliance upon the Administrative 

Agent or any other Lender or any of their Related Parties and based on such documents and information 

as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. 

Each Lender (other than the Initial Lender) also acknowledges that it will, independently and without 

reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on 

such documents and information as it shall from time to time deem appropriate, continue to make its own 

decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or 

any related agreement or any document furnished hereunder or thereunder.

SECTION 8.08 Administrative Agent May File Proofs of Claim. In case of the pendency 

of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit 

Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and 

payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative 

Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) 

by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and 

unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such 

other documents as may be necessary or advisable in order to have the claims of the Lenders and 

the Agents (including any claim for the reasonable compensation, expenses, disbursements and 

advances of the Lenders and the Agents and their respective agents and counsel and all other 

amounts due the Lenders and the Agents under Section 11.03) allowed in such judicial 

proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such 

claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such 

judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative 

Agent and, in the event that the Administrative Agent shall consent to the making of such payments 

directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable 

compensation, expenses, disbursements and advances of the Agents and their respective agents and 

counsel, and any other amounts due the Agents under the Loan Documents. Nothing contained herein 

shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on 

behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the 

Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the 

claim of any Lender in any such proceeding.
ARTICLE IX

GUARANTEE

SECTION 9.01 Guarantee of the Obligations. Each Guarantor jointly and severally hereby 

irrevocably and unconditionally guarantees to the Secured Parties, the due and punctual payment in full and 

performance of all Obligations (or such lesser amount as agreed by the Required Lenders in their sole 

discretion with respect to Obligations owed to the Lenders) when the same shall become due or required to 

be performed, whether at stated maturity, by required prepayment, declaration, acceleration, performance, 

demand or otherwise (including amounts that would become and any performance that would have been 

required to be taken due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy 

Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”).

SECTION 9.02 Payment or Performance by a Guarantor. Each Guarantor hereby jointly 

and severally agrees, in furtherance of the foregoing and the other terms of this Article IX and not in 

limitation of any other right which the Secured Parties may have at law or in equity against any Guarantor 

by virtue hereof, that upon the failure of the Borrower to pay or perform any of the Guaranteed Obligations 

when and as the same shall become due or required to be performed, whether at stated maturity, by required 

prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but 

for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), 

such Guarantor will pay, or cause to be paid, in cash, or perform, or cause to be performed, to the Secured 

Parties an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due 

as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for 

the Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such 

Guaranteed Obligations, whether or not a claim is allowed against the Borrower for such interest in the 

related bankruptcy case) and all other Guaranteed Obligations then owed or required to be performed to the 

Secured Parties as aforesaid.

SECTION 9.03 Liability of Guarantors Absolute. Each Guarantor agrees that its 

obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by 

any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than 

payment and performance in full of the Guaranteed Obligations. In furtherance of the foregoing and 

without limiting the generality thereof, each Guarantor agrees as follows:

(a) this Guarantee is a guarantee of payment and performance when due and not 

merely of collection;

(b) either Agent and any of the other Secured Parties may enforce this Guarantee 

upon the occurrence of an Event of Default notwithstanding the existence of any dispute between the 

Borrower and the Secured Parties with respect to the existence of such Event of Default;

(c) a separate action or actions may be brought and prosecuted against such 

Guarantor whether or not any action is brought against the Borrower or any other Guarantors and whether 

or not Borrower or such Guarantors are joined in any such action or actions;

(d) payment or performance by any Guarantor of a portion, but not all, of the 

Guaranteed Obligations shall in no way limit, affect, modify or abridge any other Guarantor’s liability for 

any portion of the Guaranteed Obligations which has not been paid or performed; 

(e) the Required Lenders, upon such terms as they deem appropriate, without notice 

or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, 

limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time 
may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, 

manner or terms of payment or performance of the Guaranteed Obligations; (ii) settle, compromise, 

release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the 

Guaranteed Obligations or subordinate the payment of the same to the payment of any other obligations; 

(iii) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or 

modify, with or without consideration, any security for payment or performance of the Guaranteed 

Obligations, any other guarantees of the Guaranteed Obligations, or any other obligation of any Person 

(including any other Guarantor) with respect to the Guaranteed Obligations; and (iv) enforce its rights and 

remedies even though such action may operate to impair or extinguish any right of reimbursement or 

subrogation or other right or remedy of any Guarantor against the Borrower or any security for the 

Guaranteed Obligations; and

(f) this Guarantee and the obligations of each Guarantor hereunder shall be legal, 

valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or 

termination for any reason (other than payment or performance in full of the Guaranteed Obligations), 

including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to 

any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, 

illegality or unenforceability of any of the Guaranteed Obligations, any impossibility in the performance 

of any of the Guaranteed Obligations, or otherwise. Without limiting the generality of the foregoing, 

except for the payment and performance in full of the Guaranteed Obligations and to the fullest extent 

permitted by Applicable Law, the obligations of each Guarantor hereunder shall not be discharged or 

impaired or otherwise affected by: (i) any failure, delay or omission to assert or enforce or agreement or 

election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or 

otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with 

respect to the Guaranteed Obligations, or with respect to any security for the payment and performance of 

the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to 

departure from, any of the terms or provisions hereof or any other Loan Document; (iii) the Guaranteed 

Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or 

unenforceable in any respect; (iv) the Lender’s consent to the change, reorganization or termination of the 

corporate structure or existence of the Borrower or any of its Subsidiaries and to any corresponding 

restructuring of the Guaranteed Obligations; (v) the release of, or any impairment of or failure to perfect 

or continue perfection of or protect a security interest in, any collateral which secures any of the 

Guaranteed Obligations; (vi) any defenses, set-offs or counterclaims which the Borrower or any 

Guarantor may allege or assert against either Agent or the Lenders in respect of the Guaranteed 

Obligations, including failure of consideration, lack of authority, validity or enforceability, breach of 

warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; (vii) any 

change in the corporate existence, structure or ownership of any Credit Party, or any insolvency, 

bankruptcy, reorganization, examinership or other similar proceeding affecting any Credit Party or its 

assets or any resulting release or discharge of any of the Guaranteed Obligations; (viii) the fact that any 

Person that, pursuant to the Loan Documents, was required to become a party hereto may not have 

executed or is not effectually bound by this Agreement, whether or not this fact is known to the Secured 

Parties; (ix) any action permitted or authorized hereunder; (x) any other circumstance, or any existence of 

or reliance on any representation by the Agents, any Secured Party or any other Person, that might 

otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower, any Guarantor or any 

other guarantor or surety; and (xi) any other event or circumstance that might in any manner vary the risk 

of any Guarantor as an obligor in respect of the Guaranteed Obligations.

SECTION 9.04 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of 

the Lender: (a) any right to require the Lender, as a condition of payment or performance by such 

Guarantor, to (i) proceed against Borrower, any Guarantor or any other Person; (ii) proceed against or 

exhaust any security in favor of the Lender; or (iii) pursue any other remedy in the power of the Agents or 

Secured Parties whatsoever or (b) presentment to, demand for payment or performance from and protest to 

the Borrower or any Guarantor or notice of acceptance; and (c) any defenses or benefits that may be derived 
from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may 

conflict with the terms hereof. The Agents and the other Secured Parties may, at their election, foreclose on 

any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment 

of any such security in lieu of foreclosure or exercise any other right or remedy available to them against 

the Borrower or any other Credit Party without affecting or impairing in any way the liability of any 

Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. To the fullest 

extent permitted by Applicable Law, each Credit Party waives any defense arising out of any such election 

even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of 

reimbursement or subrogation or other right or remedy of such Credit Party against the Borrower or any 

other Credit Party, as the case may be, or any security.

SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed 

Obligations shall have been paid in full, each Guarantor hereby waives any claim, right or remedy, direct or 

indirect, that such Guarantor now has or may hereafter have against the Borrower or any other Guarantor or 

any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations 

hereunder, including without limitation (a) any right of subrogation, reimbursement or indemnification that 

such Guarantor now has or may hereafter have against the Borrower with respect to the Guaranteed 

Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that the Agents or the

Secured Parties now has or may hereafter have against the Borrower, and (c) any benefit of, and any right to 

participate in, any collateral or security now or hereafter held by the Agents or the Secured Parties. In 

addition, until the Guaranteed Obligations shall have been paid in full, each Guarantor shall withhold 

exercise of any right of contribution such Guarantor may have against any other guarantor (including any 

other Guarantor) of the Guaranteed Obligations. If any amount shall be paid to any Guarantor on account 

of any such subrogation, reimbursement, indemnification or contribution rights at any time when all 

Guaranteed Obligations shall not have been finally and paid in full, such amount shall be held in trust for 

the Secured Parties and shall forthwith be paid over to the Secured Parties to be credited and applied against 

the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

SECTION 9.06 Subordination. Any Indebtedness of the Borrower or any Guarantor now 

or hereafter and all rights of indemnity, contribution or subrogation under Applicable Law or otherwise held 

by any Guarantor (the “Obligee Guarantor”) are hereby subordinated in right of payment or performance to 

the Guaranteed Obligations until the Guaranteed Obligations is paid and performed in full. Any amount in 

respect of such indebtedness or rights collected or received by the Obligee Guarantor after an Event of 

Default has occurred and is continuing shall be held in trust for the Secured Parties and shall forthwith be 

paid over to the Secured Parties to be credited and applied against the Guaranteed Obligations but without 

affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other 

provision hereof.

SECTION 9.07 Continuing Guarantee. This Guarantee is a continuing guarantee and shall 

remain in effect until all of the Guaranteed Obligations shall have been paid and performed in full. Each 

Guarantor hereby irrevocably waives any right to revoke this Guarantee as to future transactions giving rise 

to any Guaranteed Obligations.

SECTION 9.08 Financial Condition of the Borrower. The Loans may be made to the 

Borrower without notice to or authorization from any Guarantor regardless of the financial or other 

condition of the Borrower at the time of such grant. Each Guarantor has adequate means to obtain 

information from the Borrower on a continuing basis concerning the financial condition of the Borrower 

and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the 

responsibility for being and keeping informed of the financial condition of the Borrower and of all 

circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.

SECTION 9.09 Reinstatement. In the event that all or any portion of the Guaranteed 

Obligations are paid by the Borrower or any Guarantor, the obligations of any other Guarantor hereunder 
shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or 

any part of such payment(s) are rescinded or recovered directly or indirectly from the Secured Parties as a 

preference, fraudulent transfer or otherwise must be so recovered or returned, and any such payments and 

amounts which are so rescinded, recovered or returned shall constitute Guaranteed Obligations for all 

purposes hereunder.

SECTION 9.10 Discharge of Guarantees. If, in compliance with the terms and provisions 

of the Loan Documents, (x) all of the Equity Interests of any Guarantor that is a Subsidiary of the Parent or 

any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or 

consolidation) to any Person (other than to the Parent or to any other Subsidiary of Parent), the Guarantee of 

such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be 

discharged and released without any further action by any beneficiary or any other Person effective as of the 

time of such asset sale or (y) a Guarantor becomes an Excluded Subsidiary (other than as a result of a 

Guarantor becoming a non-Wholly Owned Subsidiary), the Borrower may request the release of the 

Guarantee of such Guarantor, whereupon the Guarantee of such Guarantor shall be discharged and released.

ARTICLE X

CARES ACT REQUIREMENTS

Notwithstanding anything in this Agreement to the contrary, the Credit Parties, on behalf 

of themselves and their Affiliates, represent, warrant, and agree with the Lenders that:

SECTION 10.01 CARES Act Compliance. Each Credit Party and its Subsidiaries are in 

compliance, and will at all times comply, with all applicable requirements under Title IV of the CARES 

Act, including any applicable requirements pertaining to the Borrower’s eligibility to receive the Loans. 

The Parent, the Borrower and their Subsidiaries will provide any information requested by the Initial 

Lender or Agents to assess the Borrower’s compliance with applicable requirements under Title IV of the 

CARES Act, its obligations under this Article X or its eligibility to receive the Loans under the CARES 

Act. The Borrower is not a “covered entity” as defined in Section 4019 of the CARES Act. 

SECTION 10.02 Dividends and Buybacks

(a) Until the date that is twelve (12) months after the date on which the Loans are no 

longer outstanding, neither any Borrower Air Carrier nor any of its Affiliates (other than an Affiliate that 

is a natural person) shall, in any transaction, purchase an equity security of any Borrower Air Carrier or of 

any direct or indirect parent company of a Borrower Air Carrier or of any Subsidiary of the Parent that, in 

each case, is listed on a national securities exchange, except to the extent required under a contractual 

obligation in effect as of the date of enactment of the CARES Act.

(b) Until the date that is twelve (12) months after the date on which the Loans are no 

longer outstanding, no Borrower Air Carrier shall pay dividends, or make any other capital distributions, 

with respect to the common stock of any Borrower Air Carrier.

SECTION 10.03 Maintenance of Employment Levels. Until September 30, 2020, each 

Borrower Air Carrier shall maintain its employment levels as of March 24, 2020, to the extent practicable, 
and in any case shall not reduce its employment levels by more than ten percent (10%) from the levels on 

March 24, 2020.

SECTION 10.04 United States Business. Each Borrower Air Carrier is created or 

organized in the United States or under the laws of the United States and has significant operations in and a 

majority of its employees based in the United States.

SECTION 10.05 Limitations on Certain Compensation.

(a) Beginning on the Closing Date, and ending on the date that is one (1) year after 

the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall 

not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation 

exceeded $425,000 in calendar year 2019 or the Subsequent Reference Period (other than an Employee 

whose compensation is determined through an existing collective bargaining agreement entered into 

before March 1, 2020):

(i) Total Compensation which exceeds, during any twelve (12) consecutive 

months of the period beginning on the Closing Date and ending on the date that is one (1) year 

after the date on which the Loans are no longer outstanding, the Total Compensation the 

Corporate Officer or Employee received in calendar year 2019 or the Subsequent Reference 

Period; or

(ii) Severance Pay or Other Benefits in connection with a termination of 

employment with any Borrower Air Carrier which exceed twice the maximum Total 

Compensation received by such Corporate Officer or Employee in calendar year 2019 or the 

Subsequent Reference Period.

(b) Beginning on the Closing Date, and ending on the date that is one (1) year after 

the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall 

not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation 

exceeded $3,000,000 in calendar year 2019 or the Subsequent Reference Period, Total Compensation 

which exceeds, during any twelve (12) consecutive months of such period, in excess of the sum of:

(i) $3,000,000; and

(ii) Fifty percent (50%) of the excess over $3,000,000 of the Total 

Compensation received by such Corporate Officer or Employee in calendar year 2019 or the 

Subsequent Reference Period.

(c) For purposes of determining applicable amounts under this Section with respect 

to any Corporate Officer or Employee who was employed by any Borrower Air Carrier or any of their 

Affiliates for less than all of calendar year 2019, the amount of Total Compensation in calendar year 2019 

shall mean such Corporate Officer’s or Employee’s Total Compensation on an annualized basis.

SECTION 10.06 Continuation of Certain Air Service. Until March 1, 2022, each 

Borrower Air Carrier shall comply with any applicable requirement issued by the Secretary of 

Transportation under section 4005 of the CARES Act to maintain scheduled air transportation service to 

any point served by any Borrower Air Carrier before March 1, 2020. The Borrower acknowledges that 

neither Treasury, nor any other actor, department, or agency of the Federal Government, shall condition the 

issuance of any loan under this Loan Agreement on the Borrower’s implementation of measures to enter 

into negotiations with the certified bargaining representative of a craft or class of employees of the 
Borrower Air Carrier under the Railway Labor Act (45 U.S.C. 151 et seq.) or the National Labor Relations 

Act (29 U.S.C. 151 et seq.), regarding pay or other terms and conditions of employment.

SECTION 10.07 Treasury Access. Provide Treasury, the Treasury Inspector General, the 

Special Inspector General for Pandemic Recovery, and such other entities as authorized by Treasury timely 

and unrestricted access to all documents, papers, or other records, including electronic records, of the 

Borrower related to the Loans, to enable Treasury, the Treasury Inspector General, and the Special 

Inspector General for Pandemic Recovery to make audits, examinations, and otherwise evaluate the 

Borrower’s compliance with the terms of this Agreement. This right also includes timely and reasonable 

access to the Borrower’s and its Affiliates’ personnel for the purpose of interview and discussion related to 

such documents.

SECTION 10.08 Additional Defined Terms. As used in this Article, the following terms 

have the meanings specified below:

“Borrower Air Carrier” means, collectively, the Borrower, its Affiliates that are Air 

Carriers, and their respective heirs, executors, administrators, successors, and assigns. Notwithstanding 

anything to the contrary herein, for purposes of this Article X, an “Affiliate” of the Borrower shall not 

include any Person(s) that become affiliated with the Borrower solely by virtue of the consummation of a 

Change of Control transaction resulting in repayment of the Loans in full.

“Corporate Officer” means, with respect to any Borrower Air Carrier, its president; any 

vice president in charge of a principal business unit, division, or function (such as sales, administration or 

finance); any other officer who performs a policy-making function; or any other person who performs 

similar policy making functions for the Borrower Air Carrier. Executive officers of subsidiaries or 

parents of any Borrower Air Carrier may be deemed Corporate Officers of the Borrower Air Carrier if 

they perform such policy-making functions for the Borrower Air Carrier. 

“Employee” has the meaning given to the term in section 2 of the National Labor 

Relations Act (29 U.S.C. 152 and includes any individual employed by an employer subject to the 

Railway Labor Act (45 U.S.C. 151 et seq.), and for the avoidance of doubt includes all individuals who 

are employed by the Borrower Air Carrier who are not Corporate Officers.

“Severance Pay or Other Benefits” means any severance payment or other similar 

benefits, including cash payments, health care benefits, perquisites, the enhancement or acceleration of 

the payment or vesting of any payment or benefit or any other in-kind benefit payable (whether in lump 

sum or over time, including after March 24, 2022) by any Borrower Air Carrier or its Affiliates to a 

Corporate Officer or Employee in connection with any termination of such Corporate Officer’s or 

Employee’s employment (including, without limitation, resignation, severance, retirement, or constructive 

termination), which shall be determined and calculated in respect of any Employee or Corporate Officer 

of the Borrower Air Carrier in the manner prescribed in 17 CFR 229.402(j) (without regard to its 

limitation to the five (5) most highly compensated executives and using the actual date of termination of 

employment rather than the last business day of the Borrower Air Carrier’s last completed fiscal year as 

the trigger event).

“Subsequent Reference Period” means (i) for a Corporate Officer or Employee whose 

employment with the Borrower Air Carrier or an Affiliate started during 2019 or later, the twelve (12) 

month period starting from the end of the month in which the officer or employee commenced 

employment, if such officer’s or employee’s total compensation exceeds $425,000 (or $3,000,000) during 

such period and (ii) for a Corporate Officer or Employee whose Total Compensation first exceeds 

$425,000 during a 12-month period ending after 2019, the 12-month period starting from the end of the 

month in which the Corporate Officer’s or Employee’s Total Compensation first exceeded $425,000 (or 

$3,000,000).
“Total Compensation” means compensation including salary, wages, bonuses, awards of 

stock, and any other financial benefits provided by the Borrower Air Carrier or an Affiliate, as applicable, 

which shall be determined and calculated for the 2019 calendar year or any applicable twelve (12)-month 

period in respect of any Employee or Corporate Officer of the Borrower Air Carrier in the manner 

prescribed under paragraph e.5 of the award term in 2 CFR part 170, App. A, but excluding any 

Severance Pay or Other Benefits in connection with a termination of employment. 

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Notices; Public Information.

(a) Notices Generally. Except in the case of notices and other communications 

expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices 

and other communications provided for herein shall be in writing in English and shall be delivered by 

hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email as 

follows:

(i) if to a Credit Party, to it at 444 South River Road, St. George, Utah 

84790, Attention of Chief Financial Officer (Facsimile No. 435-634-3305; [REDACTED];

(ii) if to the Administrative Agent or the Collateral Agent, to The Bank of 

New York Mellon at 240 Greenwich Street, 7th Floor, New York, NY 10286, Attention of Joanna 

Shapiro, Managing Director (Telephone No. 212-815-4949; Email: 

joanna.g.shapiro@bnymellon.com with a copy to UST.Cares.Program@bnymellon.com); 

(iii) if to Treasury, as the Initial Lender, to The Department of the Treasury 

of the United States at 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220, Attention of 

Assistant General Counsel (Banking and Finance) (Telephone No. 202-622-0283; Email: 

eric.froman@treasury.gov); and

(iv) if to any other Lender, to it at its address (or facsimile number or email 

address) set forth in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be 

deemed to have been given when received. Notices delivered through electronic communications, to the 

extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b) Electronic Communications. Notices and other communications to the Lenders 

hereunder may be delivered or furnished by electronic communication (including e-mail, FpML, and 

Internet or intranet websites) pursuant to procedures approved by the Lenders and reasonably acceptable 

to the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant 

to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices 

under such Article by electronic communication. The Administrative Agent, the Collateral Agent, the 

Parent or the Borrower may, in its discretion, agree to accept notices and other communications to it 

hereunder by electronic communications pursuant to procedures approved by it; provided that approval of 

such procedures may be limited to particular notices or communications.

Unless the Administrative Agent, the Collateral Agent or a Lender otherwise prescribes, 

(i) notices and other communications sent to an e-mail address shall be deemed received upon the 

sender’s receipt of an acknowledgement from the intended recipient (such as by return e-mail or other 

written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website 

shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as 
described in the foregoing clause (i), of notification that such notice or communication is available and 

identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, 

email or other communication is not sent during the normal business hours of the recipient, such notice or 

communication shall be deemed to have been sent at the opening of business on the next Business Day for 

the recipient.

(c) Change of Address, etc. Any party hereto may change its address or facsimile 

number for notices and other communications hereunder by notice to the other parties hereto.

(d) Platform.

(i) The Borrower and the Lenders agree that the Administrative Agent may, 

but shall not be obligated to, make the Communications (as defined below) available to the other 

Lenders by posting the Communications on the Platform.

(ii) The Platform is provided “as is” and “as available.” The Agent Parties 

(as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability 

for errors or omissions in the Communications. No warranty of any kind, express, implied or 

statutory, including any warranty of merchantability, fitness for a particular purpose, noninfringement of third-party rights or freedom from viruses or other code defects, is made by any 

Agent Party in connection with the Communications or the Platform. In no event shall the 

Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any 

liability to the Credit Parties, any Lender or any other Person or entity for damages of any kind, 

including direct or indirect, special, incidental or consequential damages, losses or expenses 

(whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative 

Agent’s transmission of communications through the Platform. “Communications” means, 

collectively, any notice, demand, communication, information, document or other material 

provided by or on behalf of the Credit Parties pursuant to any Loan Document or the transactions 

contemplated therein that is distributed to the Administrative Agent or any Lender by means of 

electronic communications pursuant to this Section, including through the Platform.

(e) Public Information. The Borrower hereby acknowledges that certain of the 

Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public 

information with respect to the Borrower or its Affiliates, or the respective securities of any of the 

foregoing, and who may be engaged in investment and other market-related activities with respect to such 

Persons’ securities. The Borrower hereby agrees that it will use commercially reasonable efforts to 

identify that portion of the materials and information provided by or on behalf of the Borrower hereunder 

and under the other Loan Documents (collectively, “Borrower Materials”) that may be distributed to the 

Public Lenders and that (i) all such Borrower Materials shall be clearly and conspicuously marked 

“PUBLIC,” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the 

first page thereof; (ii) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have 

authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing 

any material non-public information with respect to the Borrower or its securities for purposes of U.S. 

federal and state securities Laws (provided, however, that to the extent that such Borrower Materials 

constitute Information, they shall be subject to Section 11.12); (iii) all Borrower Materials marked 

“PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side 

Information;” and (iv) the Administrative Agent shall be entitled to treat any Borrower Materials that are 

not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated 

“Public Side Information”. Each Public Lender will designate one or more representatives that shall be 

permitted to receive information that is not designated as being available for Public Lenders. 

Notwithstanding the foregoing, financial statements and related documentation, in each case, provided 

pursuant to Section 5.01(a) or 5.01(b) shall be deemed to be marked “PUBLIC”, unless the Parent notifies 

the Administrative Agent promptly that any such document contains material non-public information.
SECTION 11.02 Waivers; Amendments.

(a) No Waiver; Remedies Cumulative; Enforcement. No failure or delay by the 

Administrative Agent, the Collateral Agent or any Lender in exercising any right, remedy, power or 

privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any 

single or partial exercise of any such right, remedy, power or privilege, or any abandonment or 

discontinuance of steps to enforce such a right remedy, power or privilege, preclude any other or further 

exercise thereof or the exercise of any other right remedy, power or privilege. The rights, remedies, 

powers and privileges of the Administrative Agent, the Collateral Agent and the Lenders hereunder and 

under the Loan Documents are cumulative and are not exclusive of any rights, remedies, powers or 

privileges that any such Person would otherwise have. 

Notwithstanding anything to the contrary contained herein or in any other Loan 

Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents 

against the Credit Parties shall be vested exclusively in, and all actions and proceedings at law in 

connection with such enforcement shall be instituted and maintained exclusively by, (i) so long as the 

Initial Lender is a Lender, either the Initial Lender or, at the Initial’s Lender’s option, the Administrative 

Agent in accordance with Section 7.01 for the benefit of all the Lenders and (ii) if the Initial Lender is no 

longer a Lender, the Required Lenders or the Administrative Agent (acting at the direction of the 

Required Lenders) in accordance with Section 7.01 for the benefit of all the Lenders; provided that the 

foregoing shall not prohibit (i) the Administrative Agent from exercising on its own behalf the rights and 

remedies that inure to its benefit (solely in its capacities as Administrative Agent and as Collateral Agent) 

hereunder and under the other Loan Documents, (ii) any Lender from exercising setoff rights in 

accordance with Section 11.08 (subject to the terms of Section 2.13) or (iii) any Lender from filing proofs 

of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative 

to a Credit Party under any Debtor Relief Law; provided, further, that if at any time there is no Person 

acting as Administrative Agent hereunder and under the other Loan Documents, then (x) the Required 

Lenders shall have the rights otherwise provided to the Administrative Agent pursuant to Section 7.01

and (y) in addition to the matters set forth in clauses (ii) and (iii) of the preceding proviso and subject to 

Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights or remedies 

available to it and as authorized by the Required Lenders.

(b) Amendments, Etc. Except as otherwise expressly set forth in this Agreement 

(including Section 2.10 and Section 8.01), no amendment or waiver of any provision of this Agreement or 

any other Loan Document, and no consent to any departure by the Borrower therefrom, shall be effective 

unless in writing executed by the Borrower and the Required Lenders, and acknowledged by the 

Administrative Agent, or by the Borrower and the Administrative Agent with the consent of the Required 

Lenders, and each such waiver or consent shall be effective only in the specific instance and for the 

specific purpose for which given; provided that no such amendment, waiver or consent shall:

(i) extend or increase any Commitment of any Lender without the written 

consent of such Lender;

(ii) reduce the principal of, or rate of interest specified herein on, any Loan, 

or any fees or other amounts payable hereunder or under any other Loan Document, without the 

written consent of each Lender directly and adversely affected thereby (provided that only the 

consent of the Required Lenders shall be necessary (x) to amend the definition of “Default Rate” 

or to waive the obligation of the Borrower to pay interest at the Default Rate or (y) to amend any 

financial covenant (or any defined term directly or indirectly used therein), even if the effect of 

such amendment would be to reduce the rate of interest on any Loan or other Obligation or to 

reduce any fee payable hereunder);
(iii) postpone any date scheduled for any payment of principal of, or interest 

on, any Loan, or any fees or other amounts payable hereunder or under any other Loan 

Document, or reduce the amount of, waive or excuse any such payment, without the written 

consent of each Lender directly and adversely affected thereby;

(iv) change Section 2.12(b) or Section 2.13 in a manner that would alter the 

pro rata sharing of payments required thereby without the written consent of each Lender directly 

and adversely affected thereby; 

(v) waive any condition set forth in Section 4.01 without the written consent 

of the Initial Lender; or

(vi) change any provision of this Section or the percentage in the definition of 

“Required Lenders” or any other provision hereof specifying the number or percentage of 

Lenders required to amend, waive or otherwise modify any rights hereunder or make any 

determination or grant any consent hereunder, without the written consent of each Lender; 

provided, further, that no such amendment, waiver or consent shall amend, modify or otherwise affect the 

rights or duties hereunder or under any other Loan Document of either of the Agents, unless in writing 

executed by such Agent, in each case in addition to the Borrower and the Lenders required above.

In addition, notwithstanding anything in this Section to the contrary, (i) if the Borrower 

shall have identified an obvious error or any error or omission of a technical nature, in each case, in any 

provision of the Loan Documents, then, upon the delivery of a certificate of a Responsible Officer of the 

Borrower to the Administrative Agent identifying such error and directing the Administrative Agent to 

execute an amendment to correct such error, the Administrative Agent and the Borrower shall be 

permitted to amend such provision, and, in each case, such amendment shall become effective without 

any further action or consent of any other party to any Loan Document if the same is not objected to in 

writing by the Required Lenders to the Administrative Agent within ten (10) Business Days following 

receipt of notice thereof and (ii) that any Security Document may be amended, supplemented or otherwise 

modified with the consent of the applicable Grantor (as defined in the Pledge and Security Agreement) 

and the Administrative Agent to add assets (or categories of assets) to the Collateral covered by such 

Security Document, as contemplated by the definition of Additional Collateral, or to remove any assets or 

categories of assets (including after-acquired assets of that category) from the Collateral covered by such 

Security Document to the extent the release thereof is permitted by Section 6.17(b)(iii).

SECTION 11.03 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket 

expenses incurred by the Initial Lender, the Administrative Agent, the Collateral Agent and their

Affiliates (including the reasonable fees, charges and disbursements of any counsel for the Initial Lender, 

the Administrative Agent or the Collateral Agent), and shall pay all fees and time charges and 

disbursements for attorneys who may be employees of the Administrative Agent or the Collateral Agent, 

in connection with the preparation, negotiation, execution, delivery and administration of this Agreement, 

the Loan Documents, any other agreements or documents executed in connection herewith or therewith or 

any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the 

transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses 

incurred by the Administrative Agent, the Collateral Agent or any Lender (including the fees, charges and 

disbursements of any counsel for the Administrative Agent, the Collateral Agent or any Lender), and shall 

pay all fees and time charges for attorneys who may be employees of the Administrative Agent, the 

Collateral Agent or any Lender, in connection with the enforcement or protection of its rights (A) in 

connection with this Agreement and the Loan Documents, any other agreements or documents executed 

in connection herewith or therewith, or any amendments, modifications or waivers of the provisions 
hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) 

including its rights under this Section, or (B) in connection with the Loans made hereunder, including all 

such out-of-pocket expenses incurred during any workout, restructuring, negotiations or enforcement in 

respect of this Agreement, the Loan Documents and other agreements or documents executed in 

connection herewith or therewith.

(b) Indemnification by the Borrower. The Borrower shall indemnify the 

Administrative Agent and Collateral Agent (and any sub-agents thereof) and each Lender, and each 

Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, 

and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, obligations, 

penalties, fines, settlements, judgments, disbursements and related costs and related expenses (including 

the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold 

harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be 

employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any 

Person (including the Parent) arising out of, in connection with, or as a result of (i) the execution or 

delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated 

hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or 

thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the 

use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous 

Materials on or from any property owned or operated by the Parent or any of its Subsidiaries, or any 

Environmental Liability related in any way to the Parent or any of its Subsidiaries, or (iv) any actual or 

prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based 

on contract, tort or any other theory, whether brought by a third party or by the Parent, and regardless of 

whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee 

other than the Initial Lender, be available to the extent that such losses, claims, damages, liabilities or 

related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment 

to have resulted from the gross negligence or willful misconduct of such Indemnitee. This paragraph (b) 

shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. 

arising from any non-Tax claim.

(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails 

to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the 

Administrative Agent or Collateral Agent (or any sub-agents thereof) or any Related Party of any of the 

foregoing, each Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent 

or Collateral Agent (or any such sub-agents) or such Related Party, as the case may be, such Lender’s pro 

rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is 

sought based on each Lender’s Applicable Percentage at such time) of such unpaid amount (including any 

such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed 

expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred 

by or asserted against the Administrative Agent or Collateral Agent (or any such sub-agents), or against 

any Related Party of any of the foregoing acting for the Administrative Agent or Collateral Agent (or any 

such sub-agents) in connection with such capacity. The obligations of the Lenders under this 

paragraph (c) are subject to the provisions of Section 2.12(e).

(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by 

Applicable Law, no Credit Party shall assert, and each hereby waives, any claim against any Indemnitee, 

on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or 

actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan 

Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or 

thereby, any Loan, or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above 

shall be liable for any damages arising from the use by unintended recipients of any information or other 

materials distributed by it through telecommunications, electronic or other information transmission 
systems in connection with this Agreement or the other Loan Documents or the transactions contemplated 

hereby or thereby.

(e) Payments. All amounts due under this Section shall be payable not later than 

five (5) days after demand therefor; provided that the terms of this Section shall not apply to the Initial 

Lender.

(f) Survival. Each party’s obligations under this Section shall survive the 

termination of the Loan Documents and payment of the obligations hereunder and the resignation or 

removal of the Administrative Agent or the Collateral Agent.

SECTION 11.04 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be 

binding upon and inure to the benefit of the parties hereto and their respective successors and assigns 

permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or 

obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and 

any other attempted assignment or transfer by any party hereto shall be null and void), and no Lender may 

assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in 

accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance 

with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security 

interest subject to the restrictions of paragraph (e) of this Section. Nothing in this Agreement, expressed 

or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective 

successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this 

Section and, to the extent expressly contemplated hereby, the Related Parties of each of the 

Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of 

this Agreement.

(b) Assignments by Lenders. Any Lender may at any time assign to one or more 

Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a 

portion of the Loans at the time owing to it); provided that any such assignment by any Lender (other than 

the Initial Lender) shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of 

the assigning Lender’s Loans at the time owing to it or contemporaneous assignments to 

and/or by related Approved Funds (determined after giving effect to such assignments) 

that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the 

aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an 

Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in paragraph (b)(i)(A) of this Section, 

the principal outstanding balance of the Loans of the assigning Lender subject to each 

such assignment (determined as of the date the Assignment and Assumption with respect 

to such assignment is delivered to the Administrative Agent or, if “Trade Date” is 

specified in the Assignment and Assumption, as of the Trade Date) shall not be less than 

$5,000,000, unless each of the Administrative Agent and, so long as no Default or Event 

of Default has occurred and is continuing, the Borrower otherwise consents (each such 

consent not to be unreasonably withheld or delayed).
(ii) Proportionate Amounts. Each partial assignment shall be made as an 

assignment of a proportionate part of all the assigning Lender’s rights and obligations under this 

Agreement with respect to the Loans assigned.

(iii) Required Consents. No consent shall be required for any assignment by 

the Initial Lender. The consent of the Borrower (such consent not to be unreasonably withheld, 

delayed or conditioned) shall be required for any assignment by any Lender other than the Initial 

Lender unless (x) a Default or Event of Default has occurred and is continuing at the time of such 

assignment, or (y) such assignment is to a Lender or an Affiliate of a Lender; provided that the 

Borrower shall be deemed to have consented to any such assignment unless it shall object thereto 

by written notice to the Administrative Agent within five (5) Business Days after having received 

notice thereof. 

(iv) Assignment and Assumption. The parties to each assignment shall 

execute and deliver to the Administrative Agent an Assignment and Assumption, together with a 

processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole 

discretion, elect to waive such processing and recordation fee in the case of any assignment. The 

assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative 

Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made 

to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made 

to a natural person (or a holding company, investment vehicle or trust for, or owned and operated 

for the primary benefit of, a natural person).

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this 

Section, from and after the effective date specified in each Assignment and Assumption, the assignee 

thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such 

Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the 

assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and 

Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment 

and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such 

Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 11.03

with respect to facts and circumstances occurring prior to the effective date of such assignment. Any 

assignment or transfer by a Lender other than the Initial Lender of rights or obligations under this 

Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a 

sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of 

this Section.

(c) Register. The Administrative Agent, acting solely for this purpose as an agent of 

the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to 

it and a register for the recordation of the names and addresses of the Lenders, and the principal amounts 

(and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time 

(the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, 

the Administrative Agent, the Collateral Agent and the Lenders shall treat each Person whose name is 

recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this 

Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any 

reasonable time and from time to time upon reasonable prior notice.

(d) Participations. Any Lender may at any time, without the consent of, or notice to, 

the Borrower or the Administrative Agent, sell participations to any Person (other than a Competitor, a
natural person, or a holding company, investment vehicle or trust for, or owned and operated for the 

primary benefit of, a natural person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) 

(each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement 

(including all or a portion of the Loans owing to it); provided that (i) such Lender’s obligations under this 

Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties 

hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the 

Collateral Agent and Lenders shall continue to deal solely and directly with such Lender in connection 

with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender 

shall be responsible for the indemnity under Section 11.03(b) with respect to any payments made by such 

Lender to its Participant(s).

Any agreement or instrument pursuant to which a Lender sells such a participation shall 

provide that such Lender shall retain the sole right to enforce this Agreement and to approve any 

amendment, modification or waiver of any provision of this Agreement; provided that such agreement or 

instrument may provide that such Lender will not, without the consent of the Participant, agree to any 

amendment, modification or waiver described in Section 11.02(b)(i) through (v) that affects such 

Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 

2.15 and 2.16 (subject to the requirements and limitations therein, including the requirements under 

Section 2.16(g) (it being understood that the documentation required under Section 2.16(g) shall be 

delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its 

interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees 

to be subject to the provisions of Section 2.19 as if it were an assignee under paragraph (b) of this 

Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.16, with 

respect to any participation, than its participating Lender would have been entitled to receive, except to 

the extent such entitlement to receive a greater payment results from a Change in Law that occurs after 

the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the 

Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the 

provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each 

Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that 

such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a 

participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a 

register on which it enters the name and address of each Participant and the principal amounts (and stated 

interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the 

“Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of 

the Participant Register (including the identity of any Participant or any information relating to a 

Participant's interest in any loans or its other obligations under any Loan Document) to any Person except 

to the extent that such disclosure is necessary to establish that such loan or other obligation is in registered 

form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant 

Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is 

recorded in the Participant Register as the owner of such participation for all purposes of this Agreement 

notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its 

capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest 

in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any 

pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or 

assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee 

or assignee for such Lender as a party hereto.

SECTION 11.05 Survival. All covenants, agreements, representations and warranties 

made by any Credit Party herein and in any Loan Document or other documents delivered in connection 

herewith or therewith or pursuant hereto or thereto shall be considered to have been relied upon by the other 

parties hereto and shall survive the execution and delivery hereof and thereof and the making of the 
Borrowings hereunder, regardless of any investigation made by any such other party or on its behalf and 

notwithstanding that the Administrative Agent, the Collateral Agent or any Lender may have had notice or 

knowledge of any Default at the time of any Borrowing, and shall continue in full force and effect as long 

as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied and so long as the 

Commitments have not expired or been terminated. The provisions of Sections 2.14, 2.15, 11.03, 11.15 and 

Article VIII shall survive and remain in full force and effect regardless of the consummation of the 

transactions contemplated hereby, the payment in full of the Obligations, the expiration or termination of 

the Commitments or the termination of this Agreement or any provision hereof.

SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution.

(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in 

counterparts (and by different parties hereto in different counterparts), each of which shall constitute an 

original, but all of which when taken together shall constitute a single contract. This Agreement and the 

other Loan Documents, constitute the entire contract among the parties relating to the subject matter 

hereof and supersede any and all previous agreements and understandings, oral or written, relating to the 

subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it 

shall have been executed by the Administrative Agent and when the Administrative Agent shall have 

received counterparts hereof that, when taken together, bear the signatures of each of the other parties 

hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in 

electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of 

this Agreement.

(b) Electronic Execution. The words “execution,” “signed,” “signature,” and words 

of like import in this Agreement and in any Assignment and Assumption shall be deemed to include 

electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal 

effect, validity or enforceability as a manually executed signature or the use of a paper-based 

recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, 

including the Federal Electronic Signatures in Global and National Commerce Act, the New York State 

Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic 

Transactions Act. Notwithstanding anything herein to the contrary, delivery of an executed counterpart of 

a signature page of this Agreement by telecopy or other electronic means, or confirmation of the 

execution of this Agreement on behalf of a party by an email from an authorized signatory of such party

shall be effective as delivery of a manually executed counterpart of this Agreement. 

SECTION 11.07 Severability. If any provision of this Agreement or the other Loan 

Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the 

remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired 

thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or 

unenforceable provisions with valid provisions the economic effect of which comes as close as possible to 

that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular 

jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

SECTION 11.08 Right of Setoff. If an Event of Default shall have occurred and be 

continuing, each Lender, and each of their respective Affiliates is hereby authorized at any time and from 

time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits 

(general or special, time or demand, provisional or final, in whatever currency) at any time held, and other 

obligations (in whatever currency) at any time owing, by such Lender or any such Affiliate, to or for the 

credit or the account of the Borrower against any and all of the due and unpaid Obligations of the Borrower 

now or hereafter existing under this Agreement or any other Loan Document to such Lender or its 

respective Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand 

under this Agreement or any other Loan Document and although such obligations of the Borrower may be 

contingent or unmatured or are owed to a branch office or Affiliate of such Lender different from the 
branch office or Affiliate holding such deposit or obligated on such indebtedness. The rights of each 

Lender and their respective Affiliates under this Section are in addition to other rights and remedies 

(including other rights of setoff) that such Lender or its respective Affiliates may have. Each Lender (other 

than the Initial Lender) agrees to notify the Borrower and the Administrative Agent promptly after any such 

setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff 

and application.

SECTION 11.09 Governing Law; Jurisdiction; Etc.

(a) Governing Law. This Agreement and the other Loan Documents will be 

governed by and construed in accordance with the federal law of the United States if and to the extent 

such law is applicable, and otherwise in accordance with the law of the State of New York applicable to 

contracts made and to be performed entirely within such State.

(b) Jurisdiction and Venue. Each of the Credit Parties and each Lender agrees (a) to 

submit to the exclusive jurisdiction and venue of the United States District Court for the District of 

Columbia for any civil action, suit or proceeding arising out of or relating to this Agreement, the Loan 

Documents, or the transactions contemplated hereby or thereby.

(c) Service of Process. Each party hereto irrevocably consents to service of process 

in the manner provided for notices in Section 11.01. Nothing in this Agreement will affect the right of 

any party hereto to serve process in any other manner permitted by Applicable Law.

SECTION 11.10 Waiver of Jury Trial. To the extent permitted by Applicable Law, each 

Credit Party and each Lender hereby unconditionally waives trial by jury in any civil legal action or 

proceeding relating to this Agreement, the Loan Documents or the transactions contemplated hereby or 

thereby.

SECTION 11.11 Headings. Article and Section headings and the Table of Contents used 

herein are for convenience of reference only, are not part of this Agreement and shall not affect the 

construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 11.12 Treatment of Certain Information; Confidentiality. Each of the Agents

and the Lenders (other than the Initial Lender) agree to maintain the confidentiality of the Information (as 

defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it 

being understood that the Persons to whom such disclosure is made will be informed of the confidential 

nature of such Information and instructed to keep such Information confidential); (b) to the extent required 

or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related 

Parties (including any self-regulatory authority, such as the National Association of Insurance 

Commissioners); (c) to the extent required by Applicable Laws or by any subpoena or similar legal process; 

(d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any 

other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document 

or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions 

substantially the same as (or no less restrictive than) those of this Section, to (i) any assignee of or 

Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this 

Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other 

transaction under which payments are to be made by reference to the Borrower and its obligations, this 

Agreement or payments hereunder; provided that, in each case under this clause (f)(ii), such actual or 

prospective party is not a Competitor; (g) on a confidential basis to (i) any rating agency in connection with 

rating the Borrower or its Subsidiaries or the Loans or (ii) the CUSIP Service Bureau or any similar agency 

in connection with the issuance and monitoring of CUSIP numbers with respect to the Loans; (h) with the 

consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a 

result of a breach of this Section, or (y) becomes available to either Agent, any Lender or any of their 
respective Affiliates on a nonconfidential basis from a source other than the Borrower who did not acquire 

such information as a result of a breach of this Section. 

For purposes of this Section, “Information” means all information received from the 

Parent or any of its Subsidiaries relating to the Parent or any of its Subsidiaries or any of their respective 

businesses, other than any such information that is available to the Administrative Agent or any Lender 

on a nonconfidential basis prior to disclosure by the Parent or any of its Subsidiaries; provided that, in the 

case of information received from the Parent or any of its Subsidiaries after the date hereof, such 

information is clearly identified at the time of delivery as confidential. Any Person required to maintain 

the confidentiality of Information as provided in this Section shall be considered to have complied with 

its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality 

of such Information as such Person would accord to its own confidential information.

SECTION 11.13 Money Laundering; Sanctions. The Borrower shall provide to the 

Administrative Agent, the Collateral Agent, and the Lenders information and documentation that the 

Lenders may reasonably request that identifies the Borrower and its Affiliates, which information may 

include the name and address of the Borrower and its Affiliates and other information regarding beneficial 

ownership of the Borrower and its Affiliates that will allow the Lenders to ensure compliance with 

Sanctions and the AML Laws. For purposes of determining whether or not a representation with respect to 

any indirect ownership is true or a covenant is being complied with under this Section 11.13, the Borrower 

shall not be required to make any investigation into (i) the ownership of publicly traded stock or other 

publicly traded securities or (ii) the ownership of assets by a collective investment fund that holds assets for 

employee benefit plans or retirement arrangements.

SECTION 11.14 Interest Rate Limitation. Notwithstanding anything herein to the 

contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other 

amounts that are treated as interest on such Loan under Applicable Law (collectively, “charges”), shall 

exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, 

received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of 

interest payable in respect of such Loan hereunder, together with all charges payable in respect thereof, 

shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been 

paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated 

and the interest and charges payable to such Lender in respect of other Loans or periods shall be increased 

(but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together 

with interest thereon at the Federal Funds Effective Rate for each day to the date of repayment, shall have 

been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount 

collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or 

refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of such 

Loan exceed the maximum amount collectible at the Maximum Rate. 

SECTION 11.15 Payments Set Aside. To the extent that any payment by or on behalf of 

the Borrower is made to the Administrative Agent or any Lender, or any Lender exercises its right of setoff, 

and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to 

be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the 

Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, 

in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such 

recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in 

full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each 

Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent upon demand its 

applicable share (without duplication) of any amount so recovered from or repaid by the Administrative 
Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per 

annum equal to the Federal Funds Effective Rate from time to time in effect.

SECTION 11.16 No Advisory or Fiduciary Responsibility. In connection with all aspects 

of each transaction contemplated hereby (including in connection with any amendment, waiver or other 

modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and 

acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship 

between any Credit Party and any of their respective Subsidiaries and the Administrative Agent, the 

Collateral Agent or any Lender is intended to be or has been created in respect of the transactions 

contemplated hereby or by the other Loan Documents, irrespective of whether the Administrative Agent, 

the Collateral Agent or any Lender has advised or is advising any Credit Party or any of their respective 

Subsidiaries on other matters, (ii) the lending and other services regarding this Agreement provided by the 

Administrative Agent, the Collateral Agent and the Lenders are arm’s-length commercial transactions 

between Credit Parties and their Affiliates, on the one hand, and the Administrative Agent, the Collateral 

Agent and the Lenders, on the other hand, (iii) the Credit Parties have consulted their own legal, accounting, 

regulatory and tax advisors to the extent that they has deemed appropriate and (iv) the Credit Parties are 

capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions 

contemplated hereby and by the other Loan Documents; and (b) (i) the Administrative Agent, the Collateral 

Agent and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in 

writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary 

for the Credit Parties or any of their respective Affiliates, or any other Person; (ii) none of the 

Administrative Agent, the Collateral Agent and the Lenders has any obligation to the Credit Parties or any 

of their respective Affiliates with respect to the transactions contemplated hereby except those obligations 

expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the 

Collateral Agent and the Lenders and their respective Affiliates may be engaged, in a broad range of 

transactions that involve interests that differ from those of the Credit Parties and their respective Affiliates, 

and none of the Administrative Agent, the Collateral Agent and the Lenders has any obligation to disclose 

any of such interests to the Credit Parties or any of their respective Affiliates. To the fullest extent 

permitted by Law, the Credit Parties hereby waive and release any claims that they may have against any of 

the Administrative Agent, the Collateral Agent and the Lenders with respect to any breach or alleged breach 

of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. 

Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or 

understanding among the parties, each party hereto (including each Credit Party) acknowledges that any 

liability arising under a Loan Document of any Credit Party that is an Affected Financial Institution, to the 

extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable 

Resolution Authority, and agrees and consents to, and acknowledges and agrees to be bound by: (a) the 

application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such 

liabilities arising under any Loan Documents which may be payable to it by any Credit Party that is an 

Affected Financial Institution; and (b) the effects of any Bail-In Action on any such liability, including (i) a 

reduction in full or in part or cancellation of any such liability, (ii) a conversion of all, or a portion of, such 

liability into shares or other instruments of ownership in such Affected Financial Institution, its parent 

undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares 

or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such 

liability under any Loan Document, or (iii) the variation of the terms of such liability in connection with the 

exercise of the write-down and conversion powers of the applicable Resolution Authority.

[Signature pages follow]
[Signature Page to Loan and Guarantee Agreement – SkyWest]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly 

executed by their respective authorized officers as of the day and year first above written.

SKYWEST, INC., as Parent

By: ____________________________

Name: 

Title: 

SKYWEST AIRLINES, INC., as Borrower

By: ____________________________

Name: 

Title:
[Signature Page to Loan and Guarantee Agreement – SkyWest]

THE BANK OF NEW YORK MELLON,

as Administrative Agent and Collateral Agent 

By_________________________

Name:

Title:
[Signature Page to Loan and Guarantee Agreement – SkyWest]

UNITED STATES DEPARTMENT OF THE 

TREASURY, as the Initial Lender

By_________________________

Name:

Title:
Annex B

Form of Pledge Amendment and Supplement
FORM OF PLEDGE AMENDMENT AND SUPPLEMENT

REDACTED
Execution Version

LOAN AND GUARANTEE AGREEMENT

dated as of

September 29, 2020

among

SKYWEST AIRLINES, INC., as Borrower,

the Guarantors party hereto from time to time,

THE UNITED STATES DEPARTMENT OF THE TREASURY,

and

THE BANK OF NEW YORK MELLON,

as Administrative Agent and Collateral Agent

__________
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TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms............................................................................................................ 1

SECTION 1.02 Terms Generally ....................................................................................................... 28

SECTION 1.03 Accounting Terms; Changes in GAAP .................................................................... 29

SECTION 1.04 Rates......................................................................................................................... 29

SECTION 1.05 Divisions................................................................................................................... 29

ARTICLE II

COMMITMENTS AND BORROWINGS

SECTION 2.01 Commitments ........................................................................................................... 30

SECTION 2.02 Loans and Borrowings.............................................................................................. 30

SECTION 2.03 Borrowing Requests ................................................................................................. 30

SECTION 2.04 [Reserved]................................................................................................................. 31

SECTION 2.05 [Reserved]................................................................................................................. 31

SECTION 2.06 Prepayments ............................................................................................................. 31

SECTION 2.07 Reduction and Termination of Commitments .......................................................... 32

SECTION 2.08 Repayment of Loans................................................................................................. 32

SECTION 2.09 Interest ...................................................................................................................... 32

SECTION 2.10 Benchmark Replacement Setting.............................................................................. 32

SECTION 2.11 Evidence of Debt ...................................................................................................... 34

SECTION 2.12 Payments Generally.................................................................................................. 34

SECTION 2.13 Sharing of Payments................................................................................................. 35

SECTION 2.14 Compensation for Losses.......................................................................................... 35

SECTION 2.15 Increased Costs......................................................................................................... 36

SECTION 2.16 Taxes ........................................................................................................................ 37

SECTION 2.17 [Reserved]................................................................................................................. 40

SECTION 2.18 [Reserved]................................................................................................................. 40

SECTION 2.19 Mitigation Obligations; Replacement of Lenders..................................................... 40

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.01 Existence, Qualification and Power.......................................................................... 41

SECTION 3.02 Authorization; No Contravention ............................................................................. 41

SECTION 3.03 Governmental Authorization; Other Consents ......................................................... 41

SECTION 3.04 Execution and Delivery; Binding Effect .................................................................. 42

SECTION 3.05 Financial Statements; No Material Adverse Change................................................ 42

SECTION 3.06 Litigation .................................................................................................................. 42

SECTION 3.07 Contractual Obligations; No Default........................................................................ 42

SECTION 3.08 Property .................................................................................................................... 42

SECTION 3.09 Taxes ........................................................................................................................ 42
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SECTION 3.10 Disclosure ................................................................................................................. 43

SECTION 3.11 Compliance with Laws............................................................................................. 43

SECTION 3.12 ERISA Compliance .................................................................................................. 43

SECTION 3.13 Environmental Matters............................................................................................. 44

SECTION 3.14 Investment Company Act......................................................................................... 44

SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws...................................... 44

SECTION 3.16 Solvency ................................................................................................................... 45

SECTION 3.17 Subsidiaries............................................................................................................... 45

SECTION 3.18 Senior Indebtedness.................................................................................................. 45

SECTION 3.19 Insurance Matters ..................................................................................................... 45

SECTION 3.20 Labor Matters ........................................................................................................... 45

SECTION 3.21 Insolvency Proceedings............................................................................................ 45

SECTION 3.22 Margin Regulations.................................................................................................. 45

SECTION 3.23 Liens......................................................................................................................... 46

SECTION 3.24 Perfected Security Interests...................................................................................... 46

SECTION 3.25 US Citizenship.......................................................................................................... 46

SECTION 3.26 Air Carrier Status...................................................................................................... 46

ARTICLE IV

CONDITIONS

SECTION 4.01 Closing Date and Initial Borrowing.......................................................................... 46

SECTION 4.02 Each Borrowing........................................................................................................ 48

ARTICLE V

AFFIRMATIVE COVENANTS

SECTION 5.01 Financial Statements................................................................................................. 49

SECTION 5.02 Certificates; Other Information ................................................................................ 50

SECTION 5.03 Notices...................................................................................................................... 51

SECTION 5.04 Preservation of Existence, Etc.................................................................................. 52

SECTION 5.05 Maintenance of Properties........................................................................................ 52

SECTION 5.06 Maintenance of Insurance......................................................................................... 52

SECTION 5.07 Payment of Obligations............................................................................................ 52

SECTION 5.08 Compliance with Laws............................................................................................. 52

SECTION 5.09 Environmental Matters............................................................................................. 52

SECTION 5.10 Books and Records................................................................................................... 52

SECTION 5.11 Inspection Rights...................................................................................................... 53

SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws....................... 53

SECTION 5.13 Guarantors; Additional Collateral ............................................................................ 53

SECTION 5.14 Post-Closing Matters................................................................................................ 54

SECTION 5.15 Further Assurances................................................................................................... 54

SECTION 5.16 Delivery of Appraisals.............................................................................................. 54

SECTION 5.17 Ratings...................................................................................................................... 55

SECTION 5.18 Regulatory Matters................................................................................................... 55
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ARTICLE VI

NEGATIVE COVENANTS

SECTION 6.01 [Reserved]................................................................................................................. 55

SECTION 6.02 Liens......................................................................................................................... 55

SECTION 6.03 Fundamental Changes .............................................................................................. 55

SECTION 6.04 Dispositions.............................................................................................................. 56

SECTION 6.05 Restricted Payments ................................................................................................. 57

SECTION 6.06 Investments............................................................................................................... 58

SECTION 6.07 Transactions with Affiliates...................................................................................... 59

SECTION 6.08 [Reserved]................................................................................................................. 60

SECTION 6.09 [Reserved]................................................................................................................. 60

SECTION 6.10 Changes in Nature of Business................................................................................. 60

SECTION 6.11 Sanctions; AML Laws.............................................................................................. 60

SECTION 6.12 Amendments to Organizational Documents............................................................. 60

SECTION 6.13 [Reserved]................................................................................................................. 60

SECTION 6.14 Prepayments of Junior Indebtedness ........................................................................ 60

SECTION 6.15 Lobbying................................................................................................................... 60

SECTION 6.16 Use of Proceeds........................................................................................................ 60

SECTION 6.17 Financial Covenants ................................................................................................. 61

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01 Events of Default...................................................................................................... 61

SECTION 7.02 Application of Payments .......................................................................................... 64

ARTICLE VIII

AGENCY

SECTION 8.01 Appointment and Authority...................................................................................... 65

SECTION 8.02 Collateral Matters. .................................................................................................... 65

SECTION 8.03 Removal or Resignation of Administrative Agent ................................................... 65

SECTION 8.04 Exculpatory Provisions............................................................................................. 66

SECTION 8.05 Reliance by Agent .................................................................................................... 67

SECTION 8.06 Delegation of Duties................................................................................................. 68

SECTION 8.07 Non-Reliance on Agents and Other Lenders............................................................ 68

SECTION 8.08 Administrative Agent May File Proofs of Claim ..................................................... 68

ARTICLE IX

GUARANTEE

SECTION 9.01 Guarantee of the Obligations.................................................................................... 69

SECTION 9.02 Payment or Performance by a Guarantor ................................................................. 69

SECTION 9.03 Liability of Guarantors Absolute.............................................................................. 69

SECTION 9.04 Waivers by Guarantors............................................................................................. 70

SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc.............................................. 71
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SECTION 9.06 Subordination ........................................................................................................... 71

SECTION 9.07 Continuing Guarantee............................................................................................... 71

SECTION 9.08 Financial Condition of the Borrower........................................................................ 71

SECTION 9.09 Reinstatement ........................................................................................................... 71

SECTION 9.10 Discharge of Guarantees........................................................................................... 72

ARTICLE X

CARES ACT REQUIREMENTS

SECTION 10.01 CARES Act Compliance .......................................................................................... 72

SECTION 10.02 Dividends and Buybacks.......................................................................................... 72

SECTION 10.03 Maintenance of Employment Levels........................................................................ 72

SECTION 10.04 United States Business ............................................................................................. 73

SECTION 10.05 Limitations on Certain Compensation...................................................................... 73

SECTION 10.06 Continuation of Certain Air Service......................................................................... 73

SECTION 10.07 Treasury Access........................................................................................................ 74

SECTION 10.08 Additional Defined Terms........................................................................................ 74

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Notices; Public Information...................................................................................... 75

SECTION 11.02 Waivers; Amendments ............................................................................................. 77

SECTION 11.03 Expenses; Indemnity; Damage Waiver .................................................................... 78

SECTION 11.04 Successors and Assigns............................................................................................ 80

SECTION 11.05 Survival..................................................................................................................... 82

SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution............................... 83

SECTION 11.07 Severability............................................................................................................... 83

SECTION 11.08 Right of Setoff.......................................................................................................... 83

SECTION 11.09 Governing Law; Jurisdiction; Etc............................................................................. 84

SECTION 11.10 Waiver of Jury Trial ................................................................................................. 84

SECTION 11.11 Headings................................................................................................................... 84

SECTION 11.12 Treatment of Certain Information; Confidentiality .................................................. 84

SECTION 11.13 Money Laundering; Sanctions.................................................................................. 85

SECTION 11.14 Interest Rate Limitation............................................................................................ 85

SECTION 11.15 Payments Set Aside .................................................................................................. 85

SECTION 11.16 No Advisory or Fiduciary Responsibility................................................................. 86

SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions............... 86
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SCHEDULES

SCHEDULE 3.05 - Financial Statements

SCHEDULE 3.17 - Subsidiaries

SCHEDULE 5.14 - Post-Closing Matters

SCHEDULE 6.05(i) - Restricted Payments

SCHEDULE 6.06 - Investments

SCHEDULE 6.07 - Affiliate Transactions

EXHIBITS

EXHIBIT A - Assignment and Assumption

EXHIBIT B-1 - Form of U.S. Tax Compliance Certificate

EXHIBIT B-2 - Form of U.S. Tax Compliance Certificate

EXHIBIT B-3 - Form of U.S. Tax Compliance Certificate

EXHIBIT B-4 - Form of U.S. Tax Compliance Certificate

EXHIBIT C - Form of Note

EXHIBIT D - Form of Borrowing Request
LOAN AND GUARANTEE AGREEMENT dated as of September 29, 2020 (this 

“Agreement”), among SKYWEST AIRLINES, INC., a corporation organized under the laws of Utah (the 

“Borrower”), SKYWEST, INC., a corporation organized under the laws of Utah (the “Parent”), the 

Guarantors party hereto from time to time, the UNITED STATES DEPARTMENT OF THE 

TREASURY (“Treasury”) and THE BANK OF NEW YORK MELLON as Administrative Agent and 

Collateral Agent.

WHEREAS, the Borrower has requested that the Initial Lender (as defined below) extend 

credit as is permissible under the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 

(Mar. 27, 2020), as the same may be amended form time to time (the “CARES Act”) to the Borrower, and 

the Initial Lender is willing to do so on the terms and conditions set forth herein; and

WHEREAS, pursuant to Section 4003(h)(1) of the CARES Act, for purposes of the Code 

(as defined below) the Loans (as defined below) shall be treated as indebtedness and as having been 

issued for their aggregate stated principal amount, and the interest payable pursuant to Section 2.09(a)

shall be treated as qualified stated interest.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein 

contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms. As used in this Agreement, the following terms have the 

meanings specified below:

“Additional Collateral” shall mean (a) cash and Cash Equivalents pledged to the 

Collateral Agent for the benefit of the Secured Parties under the Security Documents (and subject to an 

account control agreement in form and substance satisfactory to the Appropriate Party), (b) airframes, 

aircraft, engines and Spare Parts, registered, habitually located, or located in a designated location, 

respectively, in the United States and that are eligible for the benefits of Section 1110 of the Bankruptcy 

Code, 11 U.S.C. § 1110 or otherwise acceptable to the Required Lenders (provided that any airframe must 

be less than 20 years old at the time of its designation as Additional Collateral), (c) Route Authorities for 

routes with at least one end point located in the United States and all Slots and Gate Leaseholds related 

from time to time thereto or otherwise acceptable to the Required Lenders, (d) real property, (e) ground 

support equipment, (f) flight simulators and (g) any other assets acceptable to the Required Lenders, and 

all of which assets shall (i) (other than Additional Collateral of the type described in clause (a)) be valued 

by a new Appraisal at the time the Parent designates such assets as Additional Collateral, (ii) as of any 

date of addition of such assets as Collateral, be subject, to the extent purported to be created by the 

applicable Security Document, to a perfected first priority Lien and/or mortgage (or comparable Lien), in 

favor of the Collateral Agent for the benefit of the Secured Parties and otherwise subject only to 

Permitted Liens (excluding those referred to in clause (4) of the definition of “Permitted Lien”), (iii) 

pledged to the Collateral Agent for the benefit of the Secured Parties pursuant to security agreement(s) or 

mortgage(s), as applicable, in a form satisfactory to the Appropriate Party and (iv) at the time of their 

designation as Additional Collateral, be accompanied by a legal opinion in form satisfactory to the 

Appropriate Party; provided that, in accordance with Section 8.06, the Collateral Agent may designate a 

sub-agent to accept the security interest in any Additional Collateral for the benefit of the Secured Parties; 

provided further that, with respect to Additional Collateral of the type described in clause (c), (d) and (g), 

the Borrower agrees to notify the Collateral Agent as promptly as practicable of any new categories of 

assets which are expected to be designated as Additional Collateral or any new jurisdictions in which any 

asset is to be secured or located; provided further that, with respect to Additional Collateral of the type 

described in clause (d), (e) or (f), (i) such assets are acceptable to the Required Lenders, (ii) the Borrower 
shall have delivered Appraisals acceptable in form and substance to the Required Lenders with respect to 

such assets, (iii) such assets are subject to a loan to value framework acceptable to the Required Lenders, 

(iv) such assets are pledged pursuant to documentation acceptable in form and substance to the Required 

Lenders and (v) the benefits of pledging such assets outweigh the associated cost, burden, difficulty or 

other consequences, as determined by the Required Lenders in their sole discretion.

“Adjusted LIBO Rate” means, as to any Borrowing for any Interest Period, an interest 

rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for 

such Interest Period divided by (b) one minus the Eurodollar Reserve Percentage.

“Administrative Account” means the account opened with the Administrative Agent in 

the name of the Initial Lender as notified to the Borrower and the Initial Lender, or such other account as 

the Administrative Agent shall advise the Borrower and each Lender from time to time. 

“Administrative Agency Fee Letter” means any fee letter entered into between the 

Borrower, the Administrative Agent and the Collateral Agent, or with any successor administrative agent

or collateral agent, in its capacity as administrative agent and in its capacity as collateral agent under any 

of the Loan Documents.

“Administrative Agent” means The Bank of New York Mellon, in its capacity as 

administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Questionnaire” means an Administrative Questionnaire in a form 

supplied by or otherwise acceptable to the Administrative Agent.

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK 

Financial Institution.

“Affiliate” means any Person that directly or indirectly controls, is controlled by, or is 

under common control with, any other Person. For purposes of this definition, “control” of a Person shall 

mean having the power, directly or indirectly, to direct or cause the direction of the management and 

policies of such Person, whether by ownership of voting equity, by contract, or otherwise.

“Agent Parties” has the meaning specified in Section 11.01(d)(ii).

“Agent Responsible Officer” means, when used with respect to an Agent, any vice 

president, assistant vice president, assistant treasurer or trust officer in the corporate trust and agency 

administration of the Agent or any other officer of the Agent customarily performing functions similar to 

those performed by any of the above-designated officers, and, in each case, who shall have direct 

responsibility for the administration of this Agreement and also means, with respect to a particular agency 

matter, any other officer to whom such matter is referred because of his or her knowledge of and 

familiarity with the particular subject.

“Agents” means any of the Administrative Agent and the Collateral Agent.

“Agreement” has the meaning specified in introductory paragraph hereof.

“Air Carrier” has the meaning such term has under Section 40102 of Title 49, United 

States Code.

“Alternate Base Rate” means, for any day, a rate per annum equal to the highest of (a) the 

Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50% 

and (c) the Adjusted LIBO Rate for a one-month term in effect on such day (taking into account any 
LIBO Rate floor under the definition of “Adjusted LIBO Rate”) plus 1.00%. Any change in the Alternate 

Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or such Adjusted LIBO 

Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal 

Funds Effective Rate or such Adjusted LIBO Rate, respectively.

“AML Laws” means (a) the USA Patriot Act of 2001 (Pub. L. No. 107-56), (b) the U.S. 

Money Laundering Control Act of 1986, as amended, (c) the Bank Secrecy Act, 31 U.S.C. sections 5301 

et seq., (d) Laundering of Monetary Instruments, 18 U.S.C. section 1956, (e) Engaging in Monetary 

Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957, (f) the 

Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations (Title 31 Part 

103 of the US Code of Federal Regulations), or (g) any other applicable money laundering or financial 

recordkeeping Laws. 

“Applicable Law” means, as to any Person, all applicable Laws binding upon such 

Person or to which such a Person is subject.

“Applicable Percentage” means, with respect to any Lender, the percentage of the total 

Outstanding Amount of Loans of all Lenders represented by the aggregate Outstanding Amount of Loans 

of such Lender at such time.

“Applicable Rate” means 3.00%.

“Appraisal” means any appraisal specifying a value in Dollars (and not a range of 

values), dated as of the delivery thereof, prepared by an Eligible Appraiser that certifies, at the time of 

determination, in reasonable detail the Appraised Value of Eligible Collateral; provided that any 

methodology, form of presentation, and all assumptions must be acceptable to the Appropriate Party; 

provided further that the methodology, form of presentation and assumptions in the Appraisal delivered 

on the Closing Date pursuant to Section 4.01(i) shall be satisfactory for any subsequent Appraisal with 

respect to the same category and specific type of Eligible Collateral.

“Appraised Value” means, as of any date, (a) the specific value in Dollars (and not a 

range of values) of any property constituting Eligible Collateral (other than cash and Cash Equivalents) as 

reflected in the most recent Appraisal, (b) with respect to any cash pledged or being pledged at such time 

as Collateral, 160% of the face amount and (c) with respect to any Cash Equivalents pledged or being 

pledged at such time as Collateral, 100% of the fair market value thereof as determined by the Parent in 

accordance with customary financial market practices determined no earlier than 45 days prior to such 

date; provided that (i) if no Appraisal relating to such Eligible Collateral has been delivered to the 

Collateral Agent prior to such date, the Appraised Value of such Eligible Collateral shall be deemed to be 

zero and (ii) in the case of any such property consisting of ground support equipment, the Appraised 

Value shall be deemed to be 50% of the value set forth in the most recent Appraisal..

“Appropriate Party” means (i) while the Initial Lender holds any Commitment or Loan, 

the Initial Lender and (ii) if the Initial Lender is no longer a Lender, the Administrative Agent (acting at 

the direction of the Required Lenders). 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, 

(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a 

Lender.

“Assignment and Assumption” means an assignment and assumption entered into by a 

Lender and an Eligible Assignee (with the consent of any party whose consent is required by 

Section 11.04), and accepted by the Administrative Agent, in substantially the form of Exhibit A or any 

other form approved by the Administrative Agent.
“Attributable Indebtedness” means, as of any date of determination, (a) in respect of any 

Capitalized Lease Obligations of any Person, the capitalized amount thereof that would appear on a 

balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any 

Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant 

lease that would appear on a balance sheet of such Person prepared as of such date in accordance with 

GAAP if such lease were accounted for as a capital lease.

“Available Tenor” means, as of any date of determination and with respect to the thencurrent Benchmark, as applicable, any tenor for such Benchmark or payment period for interest 

calculated with reference to such Benchmark, as applicable, that is or may be used for determining 

the length of an Interest Period pursuant to this Agreement as of such date and not including, for the 

avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of 

“Interest Period” pursuant to clause (d) of Section 2.10.

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by an 

applicable Resolution Authority in respect of any liability of any Affected Financial Institution.

“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing 

Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European 

Union, the implementing Law for such EEA Member Country from time to time which is described in the 

EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United 

Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule 

applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms 

or other financial institutions or their affiliates (other than through liquidation, administration or other 

insolvency proceedings).

“Benchmark” means, initially, USD LIBO Rate; provided that if a Benchmark 

Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement 

Date have occurred with respect to USD LIBO Rate or the then-current Benchmark, then 

“Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark 

Replacement has replaced such prior benchmark rate pursuant to Section 2.10(a).

“Benchmark Replacement” means, for any Available Tenor, the first alternative set 

forth in the order below that can be determined by the Required Lenders for the applicable 

Benchmark Replacement Date:

(1) the sum of: (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;

(2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark

Replacement Adjustment;

(3) the sum of: (a) the alternate benchmark rate that has been selected by (y) so long as the 

Initial Lender is a Lender, the Initial Lender and (z) otherwise, the Required Lenders 

and the Borrower, in each case, as the replacement for the then-current Benchmark for 

the applicable Corresponding Tenor giving due consideration to (i) any selection or 

recommendation of a replacement benchmark rate or the mechanism for determining 

such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing 

market convention for determining a benchmark rate as a replacement for the thencurrent Benchmark for U.S. dollar-denominated syndicated credit facilities at such time 

and (b) the related Benchmark ReplacementAdjustment;

provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a 

screen or other information service that publishes such rate from time to time as selected by the 

Required Lenders in their reasonable discretion and such screen is administratively acceptable as 
determined by the Administrative Agent in its reasonable discretion. If the Benchmark 

Replacement as determined pursuant to clause (1), (2) or (3) above would be less than the Floor, the 

Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the 

other Loan Documents; provided further that any such Benchmark Replacement shall be 

administratively feasible as determined by the Administrative Agent in its reasonable discretion.

“Benchmark Replacement Adjustment” means, with respect to any replacement of the 

then- current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest 

Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:

(1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the 

first alternative set forth in the order below that can be determined by the Required 

Lenders:

(a) the spread adjustment, or method for calculating or determining such spread 

adjustment, (which may be a positive or negative value or zero) as of the 

Reference Time such Benchmark Replacement is first set for such Interest Period 

that has been selected or recommended by the Relevant Governmental Body for 

the replacement of such Benchmark with the applicable Unadjusted Benchmark 

Replacement for the applicable Corresponding Tenor;

(b) the spread adjustment (which may be a positive or negative value or zero) as of 

the Reference Time such Benchmark Replacement is first set for such Interest 

Period that would apply to the fallback rate for a derivative transaction 

referencing the ISDA Definitions to be effective upon an index cessation event

with respect to such Benchmark for the applicable Corresponding Tenor; and

(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” the spread 

adjustment, or method for calculating or determining such spread adjustment, (which may be a

positive or negative value or zero) that has been selected by (y) so long as the Initial Lender is 

a Lender, the Initial Lender and (z) otherwise, the Required Lenders and the Borrower, in 

each case, for the applicable Corresponding Tenor giving due consideration to (i) any 

selection or recommendation of a spread adjustment, or method for calculating or determining 

such spread adjustment, for the replacement of such Benchmark with the applicable 

Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable 

Benchmark Replacement Date or (ii) any evolving or then-prevailing market convention for 

determining a spread adjustment, or method for calculating or determining such spread 

adjustment, for the replacement of such Benchmark with the applicable Unadjusted 

Benchmark Replacement for U.S. dollar- denominated syndicated credit facilities;

provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other 

information service that publishes such Benchmark Replacement Adjustment from time to time 

as selected by the Required Lenders in their reasonable discretion and such screen is 

administratively acceptable as determined by the Administrative Agent in its reasonable 

discretion; provided that, any such Benchmark Replacement Adjustment shall be 

administratively feasible as determined by the Administrative Agent in its reasonable 

discretion.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark 

Replacement, any technical, administrative or operational changes (including changes to the definition 

of “Alternate Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing 

and frequency of determining rates and making payments of interest, timing of borrowing requests or 

prepayment, conversion or continuation notices, length of lookback periods, the applicability of 

breakage provisions, and other technical, administrative or operational matters) that the Administrative 

Agent (after consultation with the Required Lenders) decides may be appropriate to reflect the 
adoption and implementation of such Benchmark Replacement and to permit the administration thereof 

by the Administrative Agent in a manner substantially consistent with market practice (or, if the 

Administrative Agent (after consultation with the Required Lenders) decides that adoption of any 

portion of such market practice is not administratively feasible or if the Administrative Agent (after 

consultation with the Required Lenders) determines that no market practice for the administration of 

such Benchmark Replacement exists, in such other manner of administration as the Administrative 

Agent (after consultation with the Required Lenders) decides is reasonably necessary in connection 

with the administration of this Agreement and the other Loan Documents). The Required Lenders 

shall cooperate in good faith with the Administrative Agent so that the Administrative Agent may 

determine such Benchmark Replacement Conforming Changes.

“Benchmark Replacement Date” means the earliest to occur of the following events with 

respect to the then-current Benchmark:

(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of

(a) the date of the public statement or publication of information referenced therein and (b) 

the date on which the administrator of such Benchmark (or the published component used in 

the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of 

such Benchmark (or such component thereof);

(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the 

public statement or publication of information referenced therein;or

(3) in the case of an Early Opt-in Election, (y) so long as the Initial Lender is a Lender, the sixth 

(6th) Business Day after the date notice of such Early Opt-in Election is provided to the 

Administrative Agent and (z) otherwise, the sixth (6th) Business Day after the date notice of 

such Early Opt-in Election is provided to the Administrative Agent, so long as the 

Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) 

Business Day after the date notice of such Early Opt-in Election is provided to the Lenders,

written notice of objection to such Early Opt-in Election from Lenders comprising the 

RequiredLenders.

For the avoidance of doubt, (i) if the event giving rise to the Benchmark Replacement Date occurs on 

the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark 

Replacement Date will be deemed to have occurred prior to the Reference Time for such 

determination and (ii) the “Benchmark Replacement Date” will be deemed to have occurred in the 

case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or 

events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the 

published component used in the calculation thereof).

“Benchmark Transition Event” means the occurrence of one or more of the following 

events with respect to the then-current Benchmark:

(1) a public statement or publication of information by or on behalf of the administrator of 

such Benchmark (or the published component used in the calculation thereof) announcing 

that such administrator has ceased or will cease to provide all Available Tenors of such 

Benchmark (or such component thereof), permanently or indefinitely, provided that, at the 

time of such statement or publication, there is no successor administrator that will continue 

to provide any Available Tenor of such Benchmark (or such componentthereof);

(2) a public statement or publication of information by the regulatory supervisor for the 

administrator of such Benchmark (or the published component used in the calculation 

thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency 
official with jurisdiction over the administrator for such Benchmark (or such component), a 

resolution authority with jurisdiction over the administrator for such Benchmark (or such 

component) or a court or an entity with similar insolvency or resolution authority over the 

administrator for such Benchmark (or such component), which states that the administrator of 

such Benchmark (or such component) has ceased or will cease to provide all Available Tenors 

of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at 

the time of such statement or publication, there is no successor administrator that will 

continue to provide any Available Tenor of such Benchmark (or such component thereof); or

(3) a public statement or publication of information by the regulatory supervisor for the 

administrator of such Benchmark (or the published component used in the calculation 

thereof) announcing that all Available Tenors of such Benchmark (or such component 

thereof) are no longer representative.

For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with 

respect to any Benchmark if a public statement or publication of information set forth above has 

occurred with respect to each then-current Available Tenor of such Benchmark (or the published 

component used in the calculation thereof).

“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time 

that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at 

such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes 

hereunder and under any Loan Document in accordance with Section 2.10 and (y) ending at the time 

that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder 

and under any Loan Document in accordance with Section 2.10.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” 

(as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have 

beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise 

of other securities, whether such right is currently exercisable or is exercisable only after the passage of 

time. 

“Beneficial Ownership Certification” means a certification regarding beneficial 

ownership as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Borrower” has the meaning specified in introductory paragraph hereof.

“Borrower Materials” has the meaning specified in Section 11.01(e).

“Borrowing” means a borrowing of Loans.

“Borrowing Request” means a request for a Borrowing in substantially the form of 

Exhibit D or any other form approved by the Administrative Agent.

“Business Day” means any day on which Treasury and the Federal Reserve Bank of New 

York are both open for business that is not a Saturday, Sunday or other day that is a legal holiday under 

the laws of the State of New York or is a day on which banking institutions in such state are authorized or 

required by Law to close; provided that, when used in connection with a Loan, the term “Business Day” 

means any such day that is also a day on which dealings in Dollar deposits are conducted by and between 

banks in the London interbank market.
“Capital Markets Offering” means any offering of “securities” (as defined under the 

Securities Act and, including, for the avoidance of doubt, any offering of pass-through certificates by any 

pass-through trust established by the Parent or any of its Subsidiaries) in (a) a public offering registered 

under the Securities Act, or (b) an offering not required to be registered under the Securities Act 

(including, without limitation, a private placement under Section 4(a)(2) of the Securities Act, an exempt 

offering pursuant to Rule 144A and/or Regulation S of the Securities Act and an offering of exempt 

securities).

“Capitalized Lease Obligations” means, at the time any determination thereof is to be 

made, the amount of the liability in respect of a Capitalized Lease that would at such time be required to 

be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in 

accordance with GAAP; provided that all leases of such Person that are or would have been treated as 

operating leases for purposes of GAAP prior to the issuance of the ASU shall continue to be accounted 

for as operating leases for purposes of all financial definitions and calculations for purposes of this 

Agreement (whether or not such operating lease obligations were in effect on such date) notwithstanding 

the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive 

basis or otherwise) to be treated as capitalized lease obligations for other purposes.

“Capitalized Leases” means all leases that have been or should be, in accordance with 

GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes 

hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted 

for as a liability in accordance with GAAP; provided, further, that all leases of such Person that are or 

would have been treated as operating leases for purposes of GAAP prior to the issuance of the ASU shall 

continue to be accounted for as operating leases for purposes of all financial definitions and calculations 

for purposes of this Agreement (whether or not such operating lease obligations were in effect on such 

date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a 

prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations for other 

purposes.

“CARES Act” has the meaning specified in the preamble to this Agreement.

“Cash Equivalents” means:

(a) direct obligations of, or obligations the principal of and interest on which are 

unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such 

obligations are backed by the full faith and credit of the United States of America), in each case maturing 

within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within one year from the date of 

acquisition thereof and having, at such date of acquisition, a rating of at least A-2 from S&P or at least P2 from Moody’s;

(c) investments in certificates of deposit, banker’s acceptances and time deposits 

maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and 

money market deposit accounts issued or offered by, any domestic office of any commercial bank 

organized under the laws of the United States of America or any State thereof that has a combined capital 

and surplus and undivided profits of not less than $250,000,000;

(d) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 

under the Investment Company Act of 1940, (ii) are rated AAA and Aaa (or equivalent rating) by at least 

two (2) Credit Rating Agencies and (iii) have portfolio assets of at least $5,000,000,000; 
(e) deposits available for withdrawal on demand with commercial banks organized 

in the United States having capital and surplus in excess of $100,000,000; and 

(f) other short-term liquid investments held by the Parent and the Subsidiaries as of 

the Closing Date in accordance with their normal investment policies and practices for cash management.

“CCR Certificate” has the meaning specified in Section 6.17(b).

“CCR Certificate Delivery Date” has the meaning specified in Section 6.17(b).

“CCR Reference Date” has the meaning specified in Section 6.17(b).

“CFC” means a controlled foreign corporation within the meaning of Section 957 of the 

Code. 

“CFC Holdco” means any Domestic Subsidiary that has no material assets other than 

Equity Interests of one or more Foreign Subsidiaries that are CFCs.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the 

following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any 

law, rule, regulation or treaty or in the administration, interpretation, implementation or application 

thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or 

directive (whether or not having the force of law) by any Governmental Authority; provided that 

notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer 

Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection 

therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International 

Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the 

United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be 

deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Change of Control” means the occurrence of any of the following: (a) the sale, lease, 

transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a 

series of related transactions, of all or substantially all of the properties or assets of the Borrower and its 

Subsidiaries, or if the Borrower is a direct or indirect Subsidiary of the Parent, the Parent and its 

Subsidiaries, taken as a whole to any Person (including any “person” (as that term is used in Section 

13(d)(3) of the Exchange Act)); (b) the consummation of any transaction (including, without limitation, 

any merger or consolidation), the result of which is that any Person (including any “person” (as defined 

above)) becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of 

the Borrower or the Parent, as applicable, (measured by voting power rather than number of shares), other 

than (i) any such transaction where the Voting Stock of the Borrower or the Parent, as applicable, 

(measured by voting power rather than number of shares) outstanding immediately prior to such 

transaction constitutes or is converted into or exchanged for at least a majority of the outstanding shares 

of the Voting Stock of such Beneficial Owner (measured by voting power rather than number of shares), 

or (ii) the consummation of any merger or consolidation of the Borrower or the Parent, as applicable, with 

or into any Person (including any “person” (as defined above)) which owns or operates (directly or 

indirectly through a contractual arrangement) a Permitted Business (a “Permitted Person”) or a Subsidiary 

of a Permitted Person, in each case, if immediately after such transaction no Person (including any 

“person” (as defined above)) is the Beneficial Owner, directly or indirectly, of more than 50% of the total 

Voting Stock of such Permitted Person (measured by voting power rather than number of shares); (c) if 

the Borrower is a direct or indirect Subsidiary of the Parent, the Parent ceasing to own, directly or 

indirectly, 100% of the Equity Interests of the Borrower; (d) the adoption of a plan relating to the 

liquidation or dissolution of the Borrower or the Parent or (e) the occurrence of a “change of control”, 
“change in control” or similar event under any Material Indebtedness of the Borrower, the Parent or any 

parent entity of the foregoing.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are 

satisfied.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Collateral Agent” means The Bank of New York Mellon, in its capacity as collateral 

agent under any of the Loan Documents, or any successor collateral agent.

“Collateral Coverage Ratio” means, as of any date of determination, the ratio of (i) the 

Appraised Value of the Eligible Collateral as of the date of the Appraisal most recently delivered pursuant 

to Section 5.16 (or in the case of cash and Cash Equivalents, as of such date of determination) to (ii) the 

aggregate principal amount of all Loans and Commitments outstanding as of such date; provided that for 

the purposes of calculating clause (i) above, (x) no more than 25% of the Appraised Value of the Eligible 

Collateral may correspond to ground support equipment and (y) any amounts held in the Collateral 

Proceeds Account shall not be included.

“Collateral Proceeds Account” means a deposit account in the name of the Borrower that 

is subject to an agreement, in form and substance satisfactory to the Appropriate Party, establishing 

Control (as defined in the Pledge and Security Agreement) of such account by the Collateral Agent.

“Commitment” means the commitment of the Initial Lender to make Loans in the amount 

of $573,000,000, as such commitment may be reduced or terminated pursuant to Section 2.07.

“Communications” has the meaning specified in Section 11.01(d)(ii).

“Competitor” means (i) any Person operating an Air Carrier or a commercial passenger 

air carrier business and (ii) any Affiliate of any Person described in clause (i) (other than any Affiliate of 

such Person as a result of common control by a Governmental Authority or instrumentality thereof and 

any Affiliate of such Person under common control with such Person which Affiliate is not actively 

involved in the management and/or operations of such Person).

“Connection Income Taxes” means Other Connection Taxes that are imposed on or 

measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Contractual Obligation” means, as to any Person, any provision of any security issued 

by such Person or of any agreement, instrument or other undertaking to which such Person is a party or 

by which it or any of its property is bound.

“Control” means the possession, directly or indirectly, of the power to direct or cause the 

direction of the management or policies of a Person, whether through the ability to exercise voting power, 

by contract or otherwise. “Controlling” and “Controlled” have meanings analogous thereto.

“Convertible Indebtedness” means Indebtedness of the Parent that is convertible into 

common Equity Interests of the Parent (and cash in lieu of fractional shares) and/or cash (in an amount 

determined by reference to the price of such common Equity Interests).

“Corresponding Tenor” with respect to any Available Tenor means, as applicable, 
either a tenor (including overnight) or an interest payment period having approximately the same 

length (disregarding business day adjustment) as such Available Tenor.

“Credit Parties” means the Borrower and the Guarantors.

“Credit Rating” means a rating as determined by a Credit Rating Agency of the Parent’s 

non-credit-enhanced, senior unsecured long-term indebtedness.

“Credit Rating Agency” means a nationally recognized credit rating agency that evaluates 

the financial condition of issuers of debt instruments and then assigns a rating that reflects its assessment 

of the issuer’s ability to make debt payments.

“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate 

(which will include a lookback) being established by the Required Lenders in accordance with the 

conventions for this rate selected or recommended by the Relevant Governmental Body for determining 

“Daily Simple SOFR” for business loans; provided, that if the Administrative Agent decides that any 

such convention is not administratively feasible for the Administrative Agent, then the Required 

Lenders may establish another convention in its reasonable discretion, subject to the determination by 

the Administrative Agent of the administrative feasibility of such convention.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and 

all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, 

rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States 

or other applicable jurisdictions from time to time in effect.

“Default” means any event or condition that constitutes an Event of Default or that, with 

the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate (before as well as after judgment) equal to the 

applicable interest rate plus 2.00% per annum.

“Disposition” or “Dispose” means the sale, transfer (including through a plan of 

division), license, lease or other disposition of any property by any Person (including (i) any sale and 

leaseback transaction, any issuance of Equity Interests by a Subsidiary of such Person and (ii) with 

respect to Intellectual Property, any covenant not to sue, release, abandonment, lapse, forfeiture, 

dedication to the public or other similar disposition of Intellectual Property ), including any sale, 

assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or 

any rights and claims associated therewith.

“Disqualified Equity Interest” means any Equity Interest that, by its terms (or the terms 

of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or 

upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely 

for Equity Interests that are not Disqualified Equity Interests), pursuant to a sinking fund obligation or 

otherwise (except as a result of a change of control or asset sale so long as any rights of the holders 

thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior 

repayment in full of the Loans and all other Obligations that are accrued and payable and the termination 

of the Commitments), (b) is redeemable at the option of the holder thereof, in whole or in part, 

(c) provides for scheduled payments of dividends in cash, or (d) is or becomes convertible into or 

exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity 

Interests, in each case, prior to the date that is ninety-one (91) days after the Maturity Date; provided that 

if such Equity Interests are issued pursuant to a plan for the benefit of employees of the Parent or any 
Subsidiary or by any such plan to such employees, such Equity Interests shall not constitute Disqualified 

Equity Interests solely because they may be required to be repurchased by the Parent or its Subsidiaries in 

order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s 

termination, death or disability.

“Dollar” and “$” mean lawful money of the United States.

“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of the 

United States of America, any state thereof, or the District of Columbia.

“DOT” means the U.S. Department of Transportation.

“Early Opt-in Election” means, if the then-current Benchmark is USD LIBO Rate, the 

occurrence of:

(1) (x) so long as the Initial Lender is a Lender, the Initial Lender and (y) otherwise, the Required 

Lenders, in each case notifying to the Administrative Agent that the Initial Lender or the 

Required Lenders have determined that at least five currently outstanding U.S. dollardenominated syndicated credit facilities at such time contain (as a result of amendment or as 

originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based 

upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such 

notice and are publicly available for review), and

(2) (x) so long as the Initial Lender is a Lender, the election by the Initial Lender and (y) otherwise, 

the joint election by the Required Lenders and the Borrower to trigger a fallback from USD 

LIBO Rate and, in each case, the provision to the Administrative Agent and the other Lenders 

of written notice of such election.

“EEA Financial Institution” means (a) any credit institution or investment firm 

established in any EEA Member Country that is subject to the supervision of an EEA Resolution 

Authority, (b) any entity established in an EEA Member Country that is a parent of an institution 

described in clause (a) of this definition, or (c) any financial institution established in an EEA Member 

Country that is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject 

to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, 

Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person 

entrusted with public administrative authority of any EEA Member Country (including any delegee) 

having responsibility for the resolution of any EEA Financial Institution.

“Eligible Appraiser” means (a) with respect to aircraft or engines: Morten Beyer & 

Agnew, International Bureau of Aviation, Ascend Worldwide Group, ICF International Inc., BK 

Associates, Inc., Aircraft Information Services Inc., AVITAS, Inc., PAC Appraisal Inc., Aviation 

Specialists Group, Aviation Asset Management Inc. or IBA Group Ltd., (b) with respect to slots, gates or 

routes: Morten Beyer & Agnew, ICF International Inc., PAC Appraisal Inc. or BK Associates, Inc., (c) 

with respect to parts, Morten Beyer & Agnew, ICF International Inc., Sage-Popovich, Inc., PAC 

Appraisal Inc., Aviation Asset Management Inc. or Alton Aviation Consultancy LLC, (d) with respect to 

any other type of property, Deloitte & Touche LLP, Andersen Tax LLC, BBC Aviation Enterprises 

Aviation Advisors Group, LLC, PricewaterhouseCoopers, CBRE Group Inc. and Jones Lang LaSalle 

Incorporated, and (e) any independent appraisal firm appointed by the Borrower and acceptable to the 

Appropriate Party.
“Eligible Assignee” means any Person that meets the requirements to be an assignee 

under Section 11.04(b)(iii), 11.04(b)(v) and 11.04(b)(vi) (subject to such consents, if any, as may be 

required under Section 11.04(b)(iii)); provided that no Competitor shall be an Eligible Assignee. 

“Eligible Collateral” means, as of any date, all Collateral on which the Collateral Agent 

has, as of such date, to the extent purported to be created by the applicable Security Document, a valid 

and perfected first priority Lien and/or mortgage (or comparable Lien) for the benefit of the Secured 

Parties and which is otherwise subject only to Permitted Liens and satisfies the requirements set out in the 

Loan Documents for such type of Collateral.

“Environmental Laws” means any and all federal, state, local, and foreign statutes, Laws, 

regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, 

licenses, agreements or governmental restrictions, including all common law, relating to pollution or the 

protection of health, safety or the environment or the release of any materials into the environment, 

including those related to Hazardous Materials, air emissions, discharges to waste or public systems and 

health and safety matters.

“Environmental Liability” means any liability or obligation, contingent or otherwise 

(including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), 

directly or indirectly, resulting from or based upon (a) violation of any Environmental Law, (b) the 

generation, use, handling, transportation, storage, treatment, disposal or permitting or arranging for the 

disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or 

threatened release of any Hazardous Materials or (e) any contract, agreement or other consensual 

arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means, as to any Person, all of the shares of capital stock of (or other 

ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase 

or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) 

such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other 

ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition 

from such Person of such shares (or such other interests), and all of the other ownership or profit interests 

in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, 

and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of 

determination (other than Convertible Indebtedness or any other debt security that is convertible into or 

exchangeable for Equity Interests of such Person and the Warrants). 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, 

and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under 

common control with any Credit Party within the meaning of Section 414(b) or (c) of the Code (and 

Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or 

Section 302 of ERISA).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the 

failure by any Credit Party or any ERISA Affiliate to meet all applicable requirements under the Pension 

Funding Rules or the filing of an application for the waiver of the minimum funding standards under the 

Pension Funding Rules; (c) the incurrence by any Credit Party or any ERISA Affiliate of any liability 

pursuant to Section 4063 or 4064 of ERISA or a cessation of operations with respect to a Pension Plan 

within the meaning of Section 4062(e) of ERISA; (d) a complete or partial withdrawal by any Credit 

Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in 

reorganization or insolvent (within the meaning of Title IV of ERISA); (e) the filing of a notice of intent 

to terminate a Pension Plan under, or the treatment of a Pension Plan amendment as a termination under, 
Section 4041 of ERISA; (f) the institution by the PBGC of proceedings to terminate a Pension Plan; 

(g) any event or condition that constitutes grounds under Section 4042 of ERISA for the termination of, 

or the appointment of a trustee to administer, any Pension Plan; (h) the determination that any Pension 

Plan is in at-risk status (within the meaning of Section 430 of the Code or Section 303 of ERISA) or that a 

Multiemployer Plan is in endangered or critical status (within the meaning of Section 432 of the Code or 

Section 305 of ERISA); (i) the imposition or incurrence of any liability under Title IV of ERISA, other 

than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Credit Party or 

any ERISA Affiliate; (j) the engagement by any Credit Party or any ERISA Affiliate in a transaction that 

could be subject to Section 4069 or Section 4212(c) of ERISA; (k) the imposition of a lien upon any 

Credit Party pursuant to Section 430(k) of the Code or Section 303(k) of ERISA; or (l) the making of an 

amendment to a Pension Plan that could result in the posting of bond or security under Section 436(f)(1) 

of the Code.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published 

by the Loan Market Association (or any successor person), as in effect from time to time.

“Eurodollar Reserve Percentage” means, for any day during any Interest Period, the 

reserve percentage in effect on such day, whether or not applicable to any Lender, under regulations 

issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement 

(including any emergency, special, supplemental or other marginal reserve requirement) with respect to 

eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D). The Adjusted 

LIBO Rate for each outstanding Loan shall be adjusted automatically as of the effective date of any 

change in the Eurodollar Reserve Percentage.

“Event of Default” has the meaning specified in Article VII.

“Excluded Assets” has the meaning assigned to such term in the Pledge and Security 

Agreement. 

“Excluded Subsidiary” means any Subsidiary of the Parent (other than the Borrower) that 

(i) is not wholly-owned, directly or indirectly, by the Parent, (ii) is a captive insurance company, (iii) is an 

Immaterial Subsidiary, (iv) is a Receivables Subsidiary or (v) is a Foreign Subsidiary or a CFC Holdco 

existing on the Closing Date; provided that, notwithstanding the foregoing, (1) a Subsidiary will not be an 

Excluded Subsidiary if it (x) owns assets that are intended to be included in the Collateral, (y) owns 

individually, or in the aggregate with other Subsidiaries (including any Subsidiary that would otherwise 

qualify as an Excluded Subsidiary), a majority of the Equity Interests of any Subsidiary that owns any 

assets that are intended to be included in the Collateral or (z) guarantees Material Indebtedness of the 

Parent or any of its Subsidiaries (other than any acquired Subsidiary that guarantees assumed 

Indebtedness of a Person acquired pursuant to an acquisition permitted under this Agreement that is 

existing at the time of such acquisition or investment; provided that such Indebtedness was not created in 

contemplation of or in connection with such acquisition and the amount of such Indebtedness is not 

increased), and (2) SkyWest Leasing, Inc. and SkyWest Insurance Company, Inc. shall be Excluded 

Subsidiaries.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a 

Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or 

measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, 

(i) imposed as a result of such Recipient being organized under the laws of, or having its principal office 

or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax 

(or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, 

U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with 

respect to an applicable interest in a Loan pursuant to a law in effect on the date on which (i) such Lender 

acquires such interest in the Loans (other than pursuant to an assignment request by the Borrower under 
Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, 

pursuant to Section 2.16, amounts with respect to such Taxes were payable either to such Lender's 

assignor immediately before such Lender became a party hereto or to such Lender immediately before it 

changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with 

Section 2.16(g) and (d) any withholding Taxes imposed under FATCA.

“Export Control Laws” means any applicable export control Laws including the 

International Traffic in Arms Regulations (22 C.F.R. 120 et seq.) and the Export Administration 

Regulations (15 C.F.R. 730 et seq.).

“FAA” means the United States Federal Aviation Administration and any successor 

thereto.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this 

Agreement (or any amended or successor version that is substantively comparable and not materially 

more onerous to comply with), any current or future regulations or official interpretations thereof, any 

agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory 

legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention 

among Governmental Authorities and implementing such Sections of the Code.

“FCPA” has the meaning specified in Section 3.15(b).

“Federal Funds Effective Rate” means, for any day, the greater of (a) the rate calculated 

by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary 

institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its 

public website from time to time) and published on the next succeeding Business Day by the Federal 

Reserve Bank of New York as the Federal funds effective rate and (b) 0%.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System 

of the United States.

“Finance Entity” means any Person created or formed by or at the direction of the Parent 

or any of its Subsidiaries for the purpose of financing aircraft and aircraft related assets and related predelivery payment obligations of Parent or such Subsidiaries that; provided, that, such (i) Person holds no 

material assets other than the aircraft or aircraft related assets to be financed or assets pursuant to which 

related pre-delivery payment obligations arise, (ii) financing is in the ordinary course of business of the 

Parent and its Subsidiaries or otherwise customary for airlines based in the United States and (iii) Person 

holds no assets constituting, or otherwise intended to be included in, Collateral.

“Financial Officer” means, as to any Person, the chief financial officer, principal 

accounting officer, treasurer or controller of such Person.

“Fitch” means Fitch Ratings and any successor to its rating agency business.

“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as 

of the execution of this Agreement, the modification, amendment or renewal of this Agreement or 

otherwise) with respect to USD LIBO Rate. As of the Closing Date, the Floor shall be 0%. 

“Foreign Lender” means any Lender that is not a U.S. Person.

“Foreign Plan” means any employee pension benefit plan, program, policy, arrangement 

or agreement maintained or contributed to by the Parent or any Subsidiary with respect to employees 

employed outside the United States (other than any governmental arrangement).
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in 

making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of 

credit in the ordinary course of its activities.

“GAAP” means, subject to Section 1.03, United States generally accepted accounting 

principles as in effect from time to time; provided that if at any time any change in GAAP would affect 

the computation of any financial ratio or financial requirement, or compliance with any covenant, set 

forth in any Loan Document, the Required Lenders and the Borrower will negotiate in good faith to 

amend such ratio, requirement or covenant to preserve the original intent thereof in light of such change 

in GAAP (subject to the approval of the Required Lenders); provided that until so amended, (a) such 

ratio, requirement or covenant will continue to be computed in accordance with GAAP prior to such 

change therein and (b) the Borrower will provide to the Administrative Agent and the Lenders 

reconciliation statements to the extent requested.

“Gate Leasehold” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Governmental Authority” means the government of the United States of America or any 

other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, 

instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, 

judicial, taxing, regulatory or administrative powers or functions of or pertaining to government 

(including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such 

Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation 

payable or performable by another Person (the “primary obligor”) in any manner, whether directly or 

indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or 

advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to 

purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such 

Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, 

(iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or 

level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such 

Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the 

obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to 

protect such obligee against loss in respect thereof (in whole or in part) or (b) any Lien on any assets of 

such Person securing any Indebtedness or other obligation of any other Person, whether or not such 

Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any 

holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not 

include endorsements for collection or deposit in the ordinary course of business. The amount of any 

Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related 

primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or 

determinable, the maximum reasonably anticipated liability in respect thereof as determined by the 

guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.

“Guaranteed Obligations” has the meaning specified in Section 9.01.

“Guarantor” means the Parent and each other Guarantor listed on the signature page to 

this Agreement and any other Person that Guarantees the Obligations under this Agreement and any other 

Loan Document.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all 

hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, 

asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical 

wastes, and other substances or wastes of any nature regulated under or with respect to which liability or 

standards of conduct are imposed pursuant to any Environmental Law.

“Immaterial Subsidiaries” means one or more Subsidiaries, for which (a) the assets of all 

such Subsidiaries constitute, in the aggregate, no more than 7.50% of the total assets of the Parent and its 

Subsidiaries on a consolidated basis (determined as of the last day of the most recent fiscal quarter of 

Parent for which financial statements are available), and (b) the revenues of all such Subsidiaries account 

for, in the aggregate, no more than 7.50% of the total revenues of the Parent and its Subsidiaries on a 

consolidated basis for the four (4) fiscal quarter period ending on the last day of the most recent fiscal 

quarter of Parent for which financial statements are available; provided that (x) a Subsidiary will not be 

an Immaterial Subsidiary if it (i) directly or indirectly guarantees, or pledges any property or assets to 

secure, any Obligations,(ii) owns any assets that are intended to be included in the Collateral or is party to 

any agreements that constitute (or would constitute) Collateral or (iii) owns a majority of the Equity 

Interests of any Subsidiary that owns any assets that are intended to be included in the Collateral and (y)

the Borrower shall not be an Immaterial Subsidiary.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of 

the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such 

Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) all direct or contingent obligations of such Person arising under (i) letters of 

credit (including standby and commercial), bankers’ acceptances and bank guaranties and (ii) surety 

bonds, performance bonds and similar instruments issued or created by or for the account of such Person;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of property or 

services (other than trade accounts payable in the ordinary course of business);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property 

owned or being purchased by such Person (including indebtedness arising under conditional sales or other 

title retention agreements), whether or not such indebtedness shall have been assumed by such Person or 

is limited in recourse;

(f) all Attributable Indebtedness;

(g) all obligations of such Person in respect of Disqualified Equity Interests; and

(h) all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership 

or joint venture (other than a joint venture that is itself a corporation or limited liability company) in 

which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made 

non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date 

shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any 

Indebtedness of any Person for purposes of clause (e) that is expressly made non-recourse or limitedrecourse (limited solely to the assets securing such Indebtedness) to such Person shall be deemed to be 
equal to the lesser of (i) the aggregate principal amount of such Indebtedness and (ii) the fair market value 

of the property encumbered thereby as determined by such Person in good faith.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with 

respect to any payment made by or on account of any obligation of the Borrower under any Loan 

Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitee” has the meaning specified in Section 11.03(b).

“Information” has the meaning specified in Section 11.12.

“Initial Lender” means Treasury or its designees (but, for the avoidance of doubt, 

excluding any assignee of the Loans). 

“Intellectual Property” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Interest Payment Date” means the first Business Day following the 14th day of each 

March, June, September and December (beginning with September 15, 2021), and the Maturity Date.

“Interest Period” means, as to any Borrowing, (a) for the initial Interest Period, the period 

commencing on the date of such Borrowing and ending on the next succeeding Interest Payment Date and 

(b) for each Interest Period thereafter, the period commencing on the last day of the next preceding 

Interest Period and ending on the next succeeding Interest Payment Date.

“International Registry” has the meaning assigned to such term in the Pledge and 

Security Agreement. 

“Interpolated Rate” means, at any time, the rate per annum determined by the 

Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be 

equal to the rate that results from interpolating on a linear basis between: (a) the rate as displayed on the 

Bloomberg “LIBOR01” screen page (or any successor or replacement screen on such service; in each 

case the “Screen Rate”) for the longest period (for which that Screen Rate is available) that is shorter than 

three (3) months and (b) the Screen Rate for the shortest period (for which that Screen Rate is available) 

that is equal to or exceeds three (3) months, in each case, at approximately 11:00 a.m., London time, two 

(2) Business Days prior to the commencement of such Interest Period.

“Investment” means, as to any Person, any direct or indirect acquisition or investment by 

such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other 

securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of 

debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another 

Person, including any partnership or joint venture interest in such other Person and any arrangement 

pursuant to which the investor incurs Indebtedness of the type referred to in clause (h) of the definition of 

“Indebtedness” in respect of such other Person, or (c) the purchase or other acquisition (in one transaction 

or a series of transactions) of all or substantially all of the property and assets or business of another 

Person or assets constituting a business unit, line of business or division of such Person. For purposes of 

covenant compliance, the amount of any Investment shall be the amount actually invested, without 

adjustment for subsequent increases or decreases in the value of such Investment but giving effect to any 

returns or distributions of capital or repayment of principal actually received in case by such Person with 

respect thereto.

“IRS” means the United States Internal Revenue Service. 
“ISDA Definitions” means the 2006 ISDA Definitions published by the International 

Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time 

to time, or any successor definitional booklet for interest rate derivatives published from time to time by 

the International Swaps and Derivatives Association, Inc. or such successor thereto.

“Laws” means, collectively, all international, foreign, federal, state and local statutes, 

treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or 

authorities, including the interpretation or administration thereof by any Governmental Authority charged 

with the enforcement, interpretation or administration thereof, and all applicable administrative orders, 

directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental 

Authority, in each case whether or not having the force of law.

“Lenders” means the Initial Lender and any other Person that shall have become party 

hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party 

hereto pursuant to an Assignment and Assumption. 

“LIBO Rate” means, the greater of (a) the rate appearing on the Bloomberg “LIBOR01” 

screen page (or any successor or replacement screen on such service) at approximately 11:00 a.m., 

London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for 

dollar deposits with a maturity of three (3) months; provided that (i) if such rate is not available at such 

time for any reason, then the “LIBO Rate” shall be the Interpolated Rate, and (ii) if the Interpolated Rate 

is not available (except as set forth in Section 2.10), the “LIBO Rate” shall be the LIBO Rate for the 

immediately preceding Interest Period, two (2) Business Days prior to the commencement of such Interest 

Period and (b) 0%.

“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit 

arrangement, encumbrance, lien (statutory or other), charge, any option or other agreement to sell or give 

a security interest in an asset, or preference, priority, or other security interest or preferential arrangement 

of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any 

easement, right of way or other encumbrance on title to real property, and any financing lease having 

substantially the same economic effect as any of the foregoing).

“Liquidity” means the sum of (i) all unrestricted cash and Cash Equivalents of Parent and 

its Subsidiaries, (ii) cash or Cash Equivalents of the Parent and its Subsidiaries restricted in favor of the 

Obligations or in connection with the Payroll Support Program Agreement (other than any amounts held 

in the Collateral Proceeds Account), (iii) the aggregate principal amount committed and available to be 

drawn by the Parent and its Subsidiaries (taking into account all borrowing base limitations or other 

restrictions) under all revolving credit facilities of the Parent and its Subsidiaries, (iv) any remaining 

aggregate principal amount committed and available to be drawn (taking into account any applicable 

restrictions) by the Parent and its Subsidiaries in respect of the Loans and (v) the scheduled net proceeds 

(after giving effect to any expected repayment of existing Indebtedness using such proceeds) of any 

Capital Markets Offering of the Parent or any of its Subsidiaries that has priced but has not yet closed 

(until the earliest of the closing thereof, the termination thereof without closing or the date that falls five 

(5) Business Days after the initial scheduled closing date thereof).

“Loan” means a loan made by a Lender to the Borrower pursuant to this Agreement.

“Loan Application Form” means the application form and any related materials submitted 

by the Borrower to the Initial Lender in connection with an application for the Loans under Division A, 

Title IV, Subtitle A of the CARES Act.
“Loan Documents” means, collectively, this Agreement, any Security Document, any 

promissory notes issued pursuant to Section 2.11(b) and any other documents entered into in connection 

herewith (including an Administrative Agency Fee Letter, if any).

“Margin Stock” means margin stock within the meaning of Regulations T, U and X.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse 

effect on, the operations, business, properties, liabilities (actual or contingent), condition (financial or 

otherwise) or prospects of the Parent and its Subsidiaries taken as a whole; or (b) a material adverse effect 

on (i) the ability of the Borrower or any Credit Party to perform its Obligations, (ii) the legality, validity, 

binding effect or enforceability against the Borrower or any Credit Party of any Loan Document to which 

it is a party or the validity, perfection and first priority of the Liens on the Collateral in favor of the 

Collateral Agent taken as a whole or with respect to a substantial portion of the Collateral, or (iii) the 

rights, remedies and benefits available to, or conferred upon, the Lenders or the Agents under any Loan 

Documents; provided that the impacts of the COVID-19 disease outbreak will be disregarded for purposes 

of clauses (a) of this definition to the extent (i) publicly disclosed in any SEC filing of the Parent or 

otherwise provided to the Initial Lender prior to the Closing Date and (ii) the scope of such adverse effect 

is no greater than that which has been disclosed as of the Closing Date.

“Material Indebtedness” means Indebtedness of the Parent or any of its Subsidiaries

(other than the Loans) outstanding under the same agreement in a principal amount exceeding 

$50,000,000.

“Material Subsidiary” means any Subsidiary that is not an Immaterial Subsidiary.

“Maturity Date” means the date that is five (5) years after the Closing Date (except that, 

if such date is not a Business Day, the Maturity Date shall be the preceding Business Day).

“Maximum Rate” has the meaning specified in Section 11.14.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency 

business.

“Multiemployer Plan” means any employee benefit plan of the type described in 

Section 4001(a)(3) of ERISA, to which any Credit Party or any ERISA Affiliate makes or is obligated to 

make contributions, during the preceding five (5) plan years has made or been obligated to make 

contributions, or has any liability.

“Multiple Employer Plan” means a Plan with respect to which any Credit Party or any 

ERISA Affiliate is a contributing sponsor, and that has two (2) or more contributing sponsors at least two

(2) of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

“Net Proceeds” means in connection with any Disposition or Recovery Event, the 

aggregate cash and Cash Equivalents received by the Parent or any of its Subsidiaries in respect of a 

Disposition of Collateral (including, without limitation, any cash or Cash Equivalents received in respect 

of or upon the Disposition of any non-cash consideration received in any such Disposition of Collateral) 

or Recovery Event, net of the direct costs and expenses relating to such Disposition and incurred by the 

Parent or a Subsidiary (including the sale or disposition of such non-cash consideration) or any such 

Recovery Event, including, without limitation, legal, accounting and investment banking fees, and sales 

commissions, and any relocation expenses incurred as a result of the Disposition or Recovery Event, taxes 

paid or reasonably estimated to be payable as a result of the Disposition or Recovery Event, in each case, 

after taking into account any available tax credits or deductions and any tax sharing arrangements.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver 

or amendment that (a) requires the approval of all or all affected Lenders in accordance with the terms of 

Section 11.02 and (b) has been approved by the Required Lenders.

“Note” means the promissory note executed by the Borrower pursuant to Section 2.11(b).

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and 

duties of, each Credit Party arising under any Loan Document or otherwise with respect to any Loan, 

whether direct or indirect (including those acquired by assumption), absolute or contingent, due or 

required to be performed, or to become due or to be performed, now existing or hereafter arising and 

including interest and fees that accrue after the commencement by or against any Credit Party or any 

Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in 

such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. 

Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest, 

charges, expenses, fees, indemnities and other amounts payable by the Borrower or any other Credit Party 

under any Loan Document, (b) the obligation of any Credit Party to reimburse any amount in respect of 

any of the foregoing that the Lenders, in each case in their sole discretion, may elect to pay or advance on 

behalf of any Credit Party and (c) the obligation of any Credit Party or any of its Subsidiaries to take any 

action or refrain from taking any action as required by the covenants and other provisions contained in 

this Agreement and any other Loan Document.

“Obligee Guarantor” has the meaning specified in Section 9.06.

“Organizational Documents” means (a) as to any corporation, the charter or certificate or 

articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect 

to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of 

formation or organization and operating or limited liability agreement and (c) as to any partnership, joint 

venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement 

of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in 

connection with its formation or organization with the applicable Governmental Authority in the 

jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or 

organization of such entity.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a 

result of a present or former connection between such Recipient and the jurisdiction imposing such Tax 

(other than connections arising from such Recipient having executed, delivered, become a party to, 

performed its obligations under, received payments under, received or perfected a security interest under, 

engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an 

interest in the Loans or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, 

recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, 

performance, enforcement or registration of, from the receipt or perfection of a security interest under, or 

otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes 

imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19(b)).

“Outstanding Amount” means, with respect to Loans on any date, the aggregate 

outstanding principal amount thereof after giving effect to any borrowings and prepayments or 

repayments of Loans occurring on such date.

“Parent” has the meaning specified in introductory paragraph hereof.

“Participant” has the meaning specified in Section 11.04(d).
“Participant Register” has the meaning specified in Section 11.04(d).

“Payroll Support Program Agreement” means that certain Payroll Support Program 

Agreement dated as of April 23, 2020, between the Borrower and Treasury.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Funding Rules” means the rules of the Code and ERISA (as modified by the 

CARES Act) regarding minimum funding standards and minimum required contributions (including any 

installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to 

plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 

of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 

of the Code and Sections 302, 303, 304 and 305 of ERISA.

“Pension Plan” means any employee pension benefit plan (including a Multiple 

Employer Plan, but excluding a Multiemployer Plan) that is maintained or is contributed to by any Credit 

Party or any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum 

funding standards under Section 412 of the Code.

“Perfection Requirement” has the meaning specified in the Pledge and Security 

Agreement.

“Permitted Bond Hedge Transaction” means any call or capped call option (or 

substantively equivalent derivative transaction) on the Parent’s common Equity Interests purchased by the 

Parent in connection with the issuance of any Convertible Indebtedness; provided that the purchase price 

for such Permitted Bond Hedge Transaction does not exceed the net proceeds received by the Parent from 

the sale of such Convertible Indebtedness issued in connection with the Permitted Bond Hedge 

Transaction.

“Permitted Business” means any business that is the same as, or reasonably related, 

ancillary, supportive or complementary to, the business in which the Parent and its Subsidiaries are 

engaged on the date of this Agreement.

“Permitted Liens” means:

(1) Liens created for the benefit of (or to secure the payment and performance of) the 

Obligations or any Guaranteed Obligations;

(2) Liens for taxes, assessments or governmental charges or claims that are not yet 

delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and 

diligently concluded; provided that any reserve or other appropriate provision as is required in conformity 

with GAAP has been made therefor;

(3) Liens imposed by law, including carriers’, vendors’, materialmen’s, 

warehousemen’s, landlord’s, mechanics’, repairmen’s, employees’ or other like Liens, in each case, 

incurred in the ordinary course of business;

(4) Liens arising by operation of law in connection with judgments, attachments or 

awards which do not constitute an Event of Default hereunder;

(5) Liens in favor of customs and revenue authorities arising as a matter of law to 
secure payment of customs duties in connection with the importation of goods in the ordinary course of 

business; 

(6) [Reserved];

(7) to the extent applicable, salvage or similar rights of insurers, in each case as it 

relates to Collateral; and

(8) Liens expressly permitted by the Pledge and Security Agreement.

“Permitted Refinancing” means with respect to any Person, any refinancings, renewals, 

or extensions of any Indebtedness of such Person so long as: (a) such refinancings, renewals, or 

extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed, 

or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in 

connection therewith and by the amount of unfunded commitments with respect thereto; (b) such 

refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity

(measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or 

extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected 

to be materially adverse to the interests of the Lenders; (c) if the Indebtedness that is refinanced, renewed, 

or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the 

refinancing, renewal, or extension must include subordination terms and conditions that are at least as 

favorable to the Lenders as those that were applicable to the refinanced, renewed, or extended 

Indebtedness; (d) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person 

that is liable on account of the Obligations other than those Persons which were obligated with respect to 

the Indebtedness that was refinanced, renewed, or extended and (e) to the extent the Indebtedness that is 

refinanced, renewed, or extended is unsecured, the Indebtedness resulting from such refinancing, renewal 

or extension must be unsecured.

“Person” means any natural person, corporation, limited liability company, trust, joint 

venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA, 

maintained for employees of the Parent or any Subsidiary, or any such plan to which the Parent or any 

Subsidiary is required to contribute on behalf of any of its employees or with respect to which any Credit 

Party has any liability.

“Platform” means Debt Domain, Intralinks, Syndtrak, DebtX or a substantially similar 

electronic transmission system.

“Pledge and Security Agreement” means the Pledge and Security Agreement executed 

and delivered by the Borrower and each Guarantor on the Closing Date in form and substance acceptable 

to the Initial Lender and the Collateral Agent, as it may be amended, supplemented, restated or otherwise 

modified from time to time. For the avoidance of doubt, the terms of the “Pledge and Security 

Agreement” shall include the terms of all Applicable Annexes (as defined in the Pledge and Security 

Agreement).

“Prepayment Notice” means a notice by the Borrower to prepay Loans, which shall be in 

such form as the Appropriate Party may approve.

“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal 

as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per 

annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 

(519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, 
any similar rate quoted therein (as determined by the Required Lenders) or any similar release by the 

Federal Reserve Board (as determined by the Required Lenders). Any change in the Prime Rate shall 

take effect at the opening of business on the day such change is publicly announced or quoted as being 

effective.

“Proceeds” means “proceeds,” as defined in Article 9 of the UCC.

“PSP Warrant Agreement” means that certain warrant agreement, dated as of April 23, 

2020 between the Parent and Treasury.

“Public Lender” has the meaning specified in Section 11.01(e).

“Receivables Subsidiary” means (x) a Wholly-Owned Subsidiary of the Parent formed 

for the purpose of and which engages in no activities other than in connection with the financing or 

securitization of accounts receivables (a) no portion of the Indebtedness or any other obligations 

(contingent or otherwise) of which (1) is guaranteed by the Parent by any Subsidiary of the Parent, and 

excluding any guarantees of obligations (other than the principal of, and interest on, Indebtedness) 

pursuant to Standard Securitization Undertakings, (2) is recourse to or obligates the Parent or any 

Subsidiary of the Parent in any way other than pursuant to Standard Securitization Undertakings or (3) 

subjects any property or asset of the Parent or any Subsidiary of the Parent (other than accounts 

receivable and related assets) or any property or asset of the type that is intended to be include in the 

Collateral, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant 

to Standard Securitization Undertakings, (b) with which neither the Parent nor any Subsidiary of the 

Parent (other than another Receivables Subsidiary) has any material contract, agreement, arrangement or 

understanding (other than pursuant to the related financing of accounts receivable) other than on terms no 

less favorable to the Parent or such Subsidiary than those that might be obtained at the time from Persons 

who are not Affiliates of the Parent and (c) with which neither the Parent nor any Subsidiary of the Parent 

has any obligation to maintain or preserve such Subsidiary’s financial condition, other than a minimum 

capitalization in customary amounts, or to cause such Subsidiary to achieve certain levels of operating 

results or (y) any Subsidiary of a Receivables Subsidiary. For the avoidance of doubt, the Parent and any 

Subsidiary of the Parent may enter into Standard Securitization Undertakings for the benefit of a 

Receivables Subsidiary..

“Recipient” means (a) the Administrative Agent, (b) the Collateral Agent or (c) any 

Lender, as applicable.

“Recovery Event” means any settlement of or payment in respect of any property or 

casualty insurance claim or any condemnation proceeding relating to any Collateral or any Event of Loss 

(as defined in the Pledge and Security Agreement).

“Reference Time” with respect to any setting of the then-current Benchmark means (1) if 

such Benchmark is USD LIBO Rate, 11:00 a.m. (London time) on the day that is two London banking 

days preceding the date of such setting, and (2) if such Benchmark is not USD LIBO Rate, the time 

determined by the Required Lenders in their reasonable discretion, provided that such time is determined 

to be administratively feasible by the Administrative Agent.

“Register” has the meaning specified in Section 11.04(c).

“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.

“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time 

to time and all official rulings and interpretations thereunder or thereof.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the 

partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and 

representatives of such Person and of such Person’s Affiliates.

“Relevant Governmental Body” means the Federal Reserve Board or the Federal 

Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve 

Board or the Federal Reserve Bank of New York, or any successor thereto.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other 

than events for which the thirty (30)-day notice period has been waived.

“Required Lenders” means, at any time, Lenders having Loans representing more than 

50% of the aggregate Outstanding Amount of Loans of all Lenders at such time. 

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK 

Financial Institution, a UK Resolution Authority. 

“Responsible Officer” means (a) the chief executive officer, president, executive vice 

president or a Financial Officer of the Borrower or such Credit Party, as applicable, (b) solely for 

purposes of the delivery of incumbency certificates and certified Organizational Documents and 

resolutions pursuant to Section 4.01, any vice president, secretary or assistant secretary of the Borrower or 

such Credit Party and (c) solely for purposes of Borrowing Requests, prepayment notices and notices for 

Commitment terminations or reductions given pursuant to Article II, any other officer or employee of the 

Borrower so designated from time to time by one of the officers described in clause (a) in a notice to the 

Administrative Agent (together with evidence of the authority and capacity of each such Person to so act 

in form and substance satisfactory to the Administrative Agent). Any document delivered hereunder that 

is signed by a Responsible Officer of the a Credit Party shall be conclusively presumed to have been 

authorized by all necessary corporate, partnership or other action on the part of such Credit Party and such 

Responsible Officer shall be conclusively presumed to have acted on behalf of such Credit Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, 

securities or other property) with respect to any Equity Interest of any Person, or any payment (whether in 

cash, securities or other property), including any sinking fund or similar deposit, on account of the 

purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest, or 

on account of any return of capital to such Person’s shareholders, partners or members (or the equivalent 

Persons thereof).

“Route Authority” has the meaning assigned to such term in the Pledge and Security 

Agreement. “S&P” means S&P Global Ratings, and any successor to its rating agency business.

“Sanctioned Country” has the meaning specified in Section 3.15(a).

“Sanctioned Person” has the meaning specified in Section 3.15(a).

“Sanctions” has the meaning specified in Section 3.15(a).

“Screen Rate” has the meaning specified in the definition of the term “Interpolated Rate”.
“SEC” means the Securities and Exchange Commission, or any Governmental Authority 

succeeding to any of its principal functions.

“Secured Parties” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

“Security Document” means the Pledge and Security Agreement and any security or 

pledge agreement, mortgage, hypothecation or other agreement, instrument or document relating to 

collateral for the Loans (including any short form agreements, supplements, control agreements, collateral 

access agreements and registrations executed or made) that may exist at any time and from time to time, 

as amended from time to time.

“Slot” has the meaning assigned to such term in the Pledge and Security Agreement.

“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured 

overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR 

Administrator’s Website at approximately 8:00 a.m. (New York City time) on the immediately 

succeeding Business Day.

“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor 

administrator of the secured overnight financing rate).

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New 

York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight 

financing rate identified as such by the SOFR Administrator from time to time.

“Solvent” means, as to any Person as of any date of determination, that on such date 

(a) the fair value of the property of such Person is greater than the total amount of liabilities, including 

contingent liabilities, of such Person, (b) the present fair saleable value of such Person is not less than the 

amount that will be required to pay the probable liability of such Person on its debts as they become 

absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or 

liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such 

Person is not engaged in a business or a transaction, and is not about to engage in a business or a 

transaction, for which such Person’s property would constitute an unreasonably small capital. The 

amount of any contingent liability at any time shall be computed as the amount that, in light of all of the 

facts and circumstances existing at such time, represents the amount that can reasonably be expected to 

become an actual or matured liability. For the avoidance of doubt, a Person shall not fail to be Solvent on 

any date solely as a result of such person’s audit having a “going concern” or like qualification, exception 

or explanatory paragraph or any qualification, exception or explanatory paragraph as to the scope of such 

audit solely due to the COVID-19 disease outbreak.

“Spare Parts” has the meaning assigned to such term in the Pledge and Security 

Agreement.

“Standard Securitization Undertakings” means all representations, warranties, covenants, 

indemnities, performance Guarantees and servicing obligations entered into by the Parent or any 

Subsidiary (other than a Receivables Subsidiary), which are customary in connection with any financing 

of accounts receivable.

“Subsidiary” of a Person means a corporation, partnership, limited liability company, 

association or joint venture or other business entity of which a majority of the Equity Interests having 
ordinary voting power for the election of directors or other governing body (other than securities or 

interests having such power only by reason of the happening of a contingency) are at the time owned or 

the management of which is controlled, directly, or indirectly through one or more intermediaries, by such 

Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer 

to a Subsidiary or Subsidiaries of the Parent.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit 

derivative transactions, forward rate transactions, commodity swaps, commodity options, forward 

commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or 

options or forward bond or forward bond price or forward bond index transactions, interest rate options, 

forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency 

swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other 

similar transactions or any combination of any of the foregoing (including any options to enter into any of 

the foregoing), whether or not any such transaction is governed by or subject to any master agreement, 

and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms 

and conditions of, or governed by, any form of master agreement published by the International Swaps 

and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other 

master agreement (any such master agreement, together with any related schedules, a “Master 

Agreement”), including any such obligations or liabilities under any Master Agreement.

“Swap Termination Value” means, as to any one or more Swap Contracts, after taking 

into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, 

(a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) 

determined in accordance therewith, such termination value(s), and (b) for any date prior to the date 

referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap 

Contracts, as determined based upon one or more mid-market or other readily available quotations 

provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate 

of a Lender).

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a socalled synthetic, off-balance sheet or tax retention lease or (b) an agreement for the use or possession of 

property creating obligations that do not appear on the balance sheet of such Person but, upon the 

insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person 

(without regard to accounting treatment).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, 

withholdings (including backup withholding), assessments, fees or other charges imposed by any 

Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term SOFR” means, for the applicable Corresponding Tenor as of the applicable 

Reference Time, the forward-looking term rate based on SOFR that has been selected or recommended by 

the Relevant Governmental Body.

“Trade Date” means the date on which an assigning Lender enters into a binding 

agreement to sell and assign all or a portion of its rights and obligations under this Agreement to another 

Person.

“Treasury” has the meaning specified in the preamble to this Agreement.

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under 

the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential 

Regulation Authority) or any Person falling within IFPRU 11.6 of the FCA Handbook (as amended from 

time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain 
credit institutions and investment firms, and certain affiliates of such credit institutions or investment 

firms.

“UK Resolution Authority” means the Bank of England or any other public 

administrative authority having responsibility for the resolution of any UK Financial Institution.

“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement 

excluding the related Benchmark Replacement Adjustment.

“Uniform Commercial Code” and “UCC” means the Uniform Commercial Code as in 

effect from time to time in the State of New York or, when the context implies, the Uniform Commercial 

Code as in effect from time to time in any other applicable jurisdiction.

“United States” and “U.S.” mean the United States of America.

“USD LIBO Rate” means the LIBO Rate for U.S. dollars.

“U.S. Person” means any Person that is a “United States Person” as defined in 

Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning specified in Section 2.16(g).

“Voting Stock” of any specified Person as of any date means the equity interests of such 

Person that is at the time entitled to vote in the election of the board of directors of such Person.

“Warrant Agreement” means the warrant agreement, dated as of the date hereof between 

the Parent and Treasury, pursuant to which the Parent agrees to issue Warrants to Treasury upon each 

Borrowing.

“Warrants” means, collectively, those certain warrants issued to Treasury under the 

Warrant Agreement or the PSP Warrant Agreement.

“Wholly-Owned” means, as to a Subsidiary of a Person, a Subsidiary of such Person all 

of the outstanding Equity Interests of which (other than (a) director’s qualifying shares and (b) shares 

issued to foreign nationals to the extent required by Applicable Law) are owned by such Person and/or by 

one or more Wholly-Owned Subsidiaries of such Person.

“Withholding Agent” means the Borrower and the Administrative Agent or other person 

making or transferring to any Lender any payment on behalf of the Borrower.

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution 

Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time 

under the Bail-In Legislation for the applicable EEA Member Country, which powers are described in the 

EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the 

applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the 

form of a liability of any UK Financial Institution or any contract or instrument under which that liability 

arises, to convert all or part of that liability into shares, securities or obligations of such Person or any 

other Person, to provide that any such contract or instrument is to have effect as if a right had been 

exercised under it or to suspend any obligation in respect of that liability or any of the powers under that 

Bail-In Legislation that are related to or ancillary to any of those power .

SECTION 1.02 Terms Generally. The definitions of terms herein shall apply equally to the 

singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall 
include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and 

“including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be 

construed to have the same meaning and effect as the word “shall.” The word “or” is not exclusive. The 

word “year” shall refer (i) in the case of a leap year, to a year of three hundred sixty-six (366) days, and (ii) 

otherwise, to a year of three hundred sixty-five (365) days. Unless the context requires otherwise (a) any 

definition of or reference to any agreement, instrument or other document herein shall be construed as 

referring to such agreement, instrument or other document as from time to time amended, supplemented or 

otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth 

herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and 

assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed 

to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein 

to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and 

Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless 

otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to 

time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and 

to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and 

contract rights.

SECTION 1.03 Accounting Terms; Changes in GAAP. 

(a) Accounting Terms. Except as otherwise expressly provided herein, all accounting 

terms not otherwise defined herein shall be construed in conformity with GAAP. Financial statements 

and other information required to be delivered by the Parent to the Lenders pursuant to Sections 5.01(a)

and 5.01(b) shall be prepared in accordance with GAAP as in effect at the time of such preparation. 

Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the 

computation of any financial covenant) contained herein, Indebtedness of the Parent and its Subsidiaries 

shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of 

FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

(b) Changes in GAAP. If the Borrower notifies the Administrative Agent (who will 

forward such notification to the Lenders) that the Borrower requests an amendment to any provision 

hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application 

thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the 

Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether 

any such notice is given before or after such change in GAAP or in the application thereof, then such 

provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such 

change shall have become effective until such notice shall have been withdrawn, the Required Lenders 

shall have notified the Borrower (with a copy to the Administrative Agent) of their objection to such 

amendment or such provision shall have been amended in accordance herewith.

SECTION 1.04 Rates. The Administrative Agent does not warrant or accept responsibility 

for, and shall not have any liability with respect to, the administration, submission or any other matter 

related to the rates in the definition of “LIBO Rate” or with respect to any comparable or successor rate 

thereto.

SECTION 1.05 Divisions. For all purposes under the Loan Documents, in connection with 

any division or plan of division under Delaware law (or any comparable event under a different 

jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, 

obligation or liability of a different Person, then it shall be deemed to have been transferred from the 

original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person 
shall be deemed to have been organized on the first date of its existence by the holders of its Equity 

Interests at such time.

ARTICLE II

COMMITMENTS AND BORROWINGS

SECTION 2.01 Commitments. Subject to the terms and conditions set forth herein, the 

Initial Lender agrees to make the Loans to the Borrower in one or more installments on or after the Closing 

Date in an aggregate principal amount not to exceed the Initial Lender’s Commitment. Amounts borrowed 

under this Section 2.01 and repaid or prepaid may not be reborrowed. 

SECTION 2.02 Loans and Borrowings.

(a) Borrowings. The Borrower shall request the initial Borrowing of the Loans on 

the Closing Date and may request one or more subsequent Borrowings of the Loans; provided that the 

Borrower shall request no more than three (3) total Borrowings. 

(b) Minimum Amounts. Each Borrowing shall be in an aggregate amount of 

$60,000,000 or a larger multiple of $5,000,000; provided that, the final Borrowing may be in an amount 

equal to the aggregate remaining outstanding Commitment available to the Borrower under the terms and 

conditions of this Agreement.

(c) Funding of Borrowings. Each Lender shall make the amount of each Borrowing 

to be made by it hereunder available to the Administrative Agent by wire transfer of immediately 

available funds to the Administrative Account not later than 12:00 noon (New York City time) on the 

proposed date thereof. The Administrative Agent will make all such funds so received available to the 

Borrower in like funds, by wire transfer of such funds in accordance with the instructions provided in the 

applicable Borrowing Request; provided that if all such requested funds are not received by the 

Administrative Agent by 12:00 noon (New York City time) on the proposed date for such Borrowing, the 

Administrative Agent shall distribute such funds on the next succeeding Business Day.

SECTION 2.03 Borrowing Requests.

(a) Notice by Borrower. In order to request a Borrowing, the Borrower shall notify 

the Administrative Agent of such request in writing not later than 11:00 a.m. (New York City time) (i) 

with respect to the initial Borrowing under this Agreement, three (3) Business Days prior to the date of 

the requested Borrowing and (ii) for each subsequent Borrowing, five (5) Business Days before such 

Borrowing. Each such notice shall be irrevocable and shall be in the form of a written Borrowing 

Request, appropriately completed and signed by a Responsible Officer of the Borrower. The 

Administrative Agent shall promptly advise the applicable Lenders of any Borrowing Request given 

pursuant to this Section 2.03(a) (and the contents thereof), and of each Lender’s portion of the requested 

Borrowing.

(b) Content of Borrowing Requests. Each Borrowing Request for a Borrowing 

pursuant to this Section shall specify the following information in compliance with Section 2.02: (i) the 

aggregate amount of the requested Borrowing; (ii) the date of such Borrowing (which shall be a Business 

Day); and (iii) the location and number of the Borrower’s account to which funds are to be disbursed.
SECTION 2.04 [Reserved].

SECTION 2.05 [Reserved].

SECTION 2.06 Prepayments.

(a) Optional Prepayments. The Borrower may, upon written notice to the 

Administrative Agent, at any time and from time to time prepay the Loans in whole or in part without 

premium or penalty, subject to the requirements of this Section. Partial prepayments of the Loans shall be 

in a minimum aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in excess 

thereof. Notwithstanding anything herein to the contrary, the Borrower may at any time elect to prepay 

the loans with funds contained in the Collateral Proceeds Account.

(b) Mandatory Prepayments.

(i) Dispositions of Collateral. Within three (3) Business Days of the receipt 

by the Parent or any of its Subsidiaries of any Net Proceeds from a Disposition of Collateral not 

permitted by Section 6.04, the Borrower shall prepay the Loans in an amount equal to 100% of 

such Net Proceeds. 

(ii) Recovery Events. Within three (3) Business Days of the receipt by the 

Parent or any of its Subsidiaries of any Net Proceeds from a Recovery Event in respect of 

Collateral, the Borrower shall either (x) prepay the Loans in an amount equal to 100% of such 

Net Proceeds or (y) deposit such Net Proceeds into the Collateral Proceeds Account for such 

purpose and thereafter such Net Proceeds shall be applied (to the extent not otherwise applied 

pursuant to the immediately succeeding proviso) to prepay the Loans; provided that (I) the 

Borrower may use such Net Proceeds to (A) replace the assets which are the subject of such 

Recovery Event with assets that are of the same type of Collateral, or (B) repair the assets which 

are the subject of such Recovery Event, in each case, within 270 days after such deposit is made, 

(II) all such Net Proceeds amount may, at the option of the Borrower at any time, be applied to 

repay the Loans, and (III) upon the occurrence of an Event of Default, the amount of any such 

deposit may be applied by the Administrative Agent to repay the Loans.

(iii) Certain Debt Issuances. Immediately upon receipt by the Parent or any 

of its Subsidiaries of any proceeds from the incurrence of any Indebtedness that is secured by 

Liens on the Collateral (other than Permitted Liens), the Borrower shall prepay the Loans in an 

amount equal to 100% of any such proceeds from any such Indebtedness. 

(iv) Change of Control. Immediately upon the occurrence of a Change of 

Control, the Borrower shall prepay the Loans in an amount equal to 100% of the aggregate

outstanding principal amount of Loans.

(c) Notices. Each such notice pursuant to this Section shall be in the form of a 

written Prepayment Notice, appropriately completed and signed by a Responsible Officer of the 

Borrower, and must be received by the Administrative Agent not later than 11:00 a.m. (New York City

time) three (3) Business Days before the date of prepayment (which delivery may initially be by 

electronic communication including fax or email and shall be followed by an original authentic 

counterpart thereof) . Each Prepayment Notice shall specify (x) the prepayment date and (y) the principal 

amount of the Loans or portion thereof to be prepaid. Each Prepayment Notice shall be irrevocable.

(d) Payments. Any prepayment of the Loans pursuant to this Section 2.06 shall be 

accompanied by accrued interest on the principal amount prepaid as set forth in Section 2.09(c).
SECTION 2.07 Reduction and Termination of Commitments. The Initial Lender’s 

Commitment shall (x) automatically and permanently be reduced by the amount of any Borrowing of a Loan

and (y) automatically and permanently terminate on March 26, 2021. The Borrower may, upon not less than 

three (3) Business Days’ notice to the Initial Lender and the Administrative Agent, terminate the Commitment 

or, from time to time, reduce the Commitment. Any such reduction in the Commitment shall be in an amount 

equal to $1,000,000 or a whole multiple thereof, and shall permanently reduce the Commitment.

SECTION 2.08 Repayment of Loans. The Borrower shall repay to the Administrative Agent 

for the ratable account of the Lenders the aggregate principal amount of all Loans outstanding on the Maturity 

Date. 

SECTION 2.09 Interest.

(a) Interest Rates. Subject to paragraph (b) of this Section, the Loans shall bear 

interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Rate.

(b) Default Interest. If any amount payable by the Borrower under this Agreement 

or any other Loan Document (including principal of any Loan, interest, fees and other amount) is not paid 

when due, whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear 

interest at a rate per annum equal to the applicable Default Rate. Upon the request of the Required 

Lenders, while any Event of Default exists, the Borrower shall pay interest on the principal amount of all 

Loans outstanding hereunder at a rate per annum equal to the applicable Default Rate.

(c) Payment Dates. Accrued interest on each Loan shall be payable in arrears on or 

before 12:00 noon (New York City time) on each Interest Payment Date applicable thereto and at such 

other times as may be specified herein; provided that (i) interest accrued pursuant to paragraph (b) of this 

Section shall be payable on demand and (ii) in the event of any repayment or prepayment of any Loan

(including mandatory prepayments under Section 2.06(b)), accrued interest on the principal amount 

repaid or prepaid shall be payable on the date of such repayment or prepayment.

(d) Interest Computation. All interest hereunder shall be computed on the basis of a 

year of three hundred sixty (360) days and shall be payable for the actual number of days elapsed

(including the first day but excluding the last day). The Adjusted LIBO Rate shall be determined by the 

Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.10 Benchmark Replacement Setting.

(a) Benchmark Replacement. Notwithstanding anything to the contrary herein or in 

any other Loan Document, if a Benchmark Transition Event or an Early Opt-in Election, as applicable, 

and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any 

setting of the then-current Benchmark, as notified by the Required Lenders to the Administrative Agent in 

writing, then (x) if a Benchmark Replacement is determined in accordance with clause (1) or (2) of the 

definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark 

Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in 

respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or 

further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a 

Benchmark Replacement is determined in accordance with clause (3) of the definition of “Benchmark 

Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such 

Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark 

setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of 

such Benchmark Replacement is provided to the Lenders and the Administrative Agent by the Required 

Lenders without any amendment to, or further action or consent of any other party to, this Agreement or 
any other Loan Document so long as the Administrative Agent has not received, by such time, written 

notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders.

(b) Benchmark Replacement Conforming Changes. In connection with the 

implementation of a Benchmark Replacement, the Administrative Agent (after consultation with the 

Required Lenders) will have the right to make Benchmark Replacement Conforming Changes from time 

to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any 

amendments implementing such Benchmark Replacement Conforming Changes will become effective

without any further action or consent of any other party to this Agreement or any other Loan Document.

(c) Notices; Standards for Decisions and Determinations. The Initial Lender or the 

Required Lenders, as the case may be, will promptly notify the Administrative Agent, which will then 

promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or 

an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date, (ii) the 

implementation of any Benchmark Replacement, (iii) the removal or reinstatement of any tenor of a 

Benchmark pursuant to clause (d) below and (iv) the commencement or conclusion of any Benchmark 

Unavailability Period. The Administrative Agent will promptly notify the Borrower and the Lenders of 

the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or 

election that may be made by any Lender (or group of Lenders) or the Administrative Agent, if 

applicable, pursuant to this Section 2.10, including any determination with respect to a tenor, rate or 

adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to 

take or refrain from taking any action or any selection, will be conclusive and binding absent manifest 

error and may be made in its or their sole discretion and without consent from any other party to this 

Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this 

Section 2.10. Notwithstanding anything in this Agreement to the contrary, the Administrative Agent does 

not warrant or accept any responsibility for, and shall not have any liability with respect to, any 

determination made by it in connection with the adoption of Benchmark Replacement Conforming 

Changes or for the impact of such Benchmark Replacement Conforming Changes, nor for the failure to 

adopt any Benchmark Replacement Conforming Changes due to the failure of the Required Lenders to 

cooperate in good faith in connection with the determination of any Benchmark Replacement Conforming 

Changes.

(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary 

herein or in any other Loan Document, at any time (including in connection with the implementation of a 

Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or USD 

LIBO Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other 

information service that publishes such rate from time to time as selected by the Administrative Agent in 

its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has 

provided a public statement or publication of information announcing that any tenor for such Benchmark 

is or will be no longer representative, then the definition of “Interest Period” may be modified for any 

Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if 

a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or 

information service for a Benchmark (including a Benchmark Replacement) used by the Administrative 

Agent or (B) is not, or is no longer, subject to an announcement that it is or will no longer be 

representative for a Benchmark (including a Benchmark Replacement), then the definition of “Interest 

Period” may be modified for all Benchmark settings at or after such time to reinstate such previously 

removed tenor.

(e) Benchmark Unavailability Period. During any Benchmark Unavailability Period, 

all calculations of interest by reference to a LIBO Rate hereunder shall instead be made by reference to 

the Alternate Base Rate.
SECTION 2.11 Evidence of Debt.

(a) Maintenance of Records. The Administrative Agent shall maintain the Register 

in accordance with Section 11.04(c). The entries made in the records maintained pursuant to this 

paragraph (a) shall be prima facie evidence absent manifest error of the existence and amounts of the 

obligations recorded therein. Any failure of the Administrative Agent to maintain such records or make 

any entry therein or any error therein shall not in any manner affect the obligations of the Borrower under 

this Agreement and the other Loan Documents. 

(b) Promissory Notes. The Borrower shall prepare, execute and deliver to such 

Lender a promissory note of the Borrower payable to such Lender (or, if requested by such Lender, to 

such Lender and its registered assigns) and a form attached as Exhibit C hereto, which shall evidence such 

Lender’s Loan.

SECTION 2.12 Payments Generally.

(a) Payments by Borrower. All payments to be made by the Borrower hereunder and 

the other Loan Documents shall be made without condition or deduction for any counterclaim, defense, 

recoupment or setoff. Except as otherwise expressly provided herein, all such payments shall be made to 

the Administrative Agent, for the account of the respective Lenders to which such payment is owed, to 

the Administrative Account in immediately available funds not later than 12:00 noon (New York City

time) on the date specified herein. All amounts received by a Lender or the Administrative Agent after 

such time on any date shall be deemed to have been received on the next succeeding Business Day and 

any applicable interest or fees shall continue to accrue. The Administrative Agent will promptly 

distribute to each Lender its ratable share (or other applicable share as provided herein) of such payment 

in like funds as received by wire transfer to such Lender’s applicable lending office (or otherwise 

distribute such payment in like funds as received to the Person or Persons entitled thereto as provided 

herein). If any payment to be made by the Borrower shall fall due on a day that is not a Business Day, 

payment shall be made on the next succeeding Business Day and such extension of time shall be reflected 

in computing interest or fees, as the case may be; provided that, if such next succeeding Business Day 

would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day. 

Except as otherwise expressly provided herein, all payments hereunder or under any other Loan 

Document shall be made in Dollars.

(b) Application of Insufficient Payments. Subject to Section 7.02, if at any time 

insufficient funds are received by and available to the Lenders or the Administrative Agent to pay fully all 

amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied 

(i) first, to pay interest, fees and other amounts then due hereunder, ratably among the parties entitled 

thereto in accordance with the amounts of interest, fees and other amounts then due to such parties, and 

(ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance 

with the amounts of principal then due to such parties.

(c) Presumptions by Administrative Agent. Unless the Administrative Agent shall 

have received notice from the Borrower prior to the date on which any payment is due to the 

Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such 

payment, the Administrative Agent may assume that the Borrower has made such payment on such date 

in accordance herewith and may, in reliance upon such assumption, but shall not be obligated to distribute 

to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then 

each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the 

amount so distributed to such Lender, with interest thereon, for each day from and including the date such 

amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater 

of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance 

with banking industry rules on interbank compensation. Notwithstanding the foregoing, the 
Administrative Agent is not required to make any payment to the Lenders until it is in possession of 

cleared funds from the Borrower.

(d) Deductions by Administrative Agent. If any Lender (other than the Initial 

Lender) shall fail to make any payment required to be made by it pursuant to Section 2.13 or 11.03(c), 

then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, 

(i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender for 

the benefit of the Administrative Agent to satisfy such Lender’s obligations to the Administrative Agent 

until all such unsatisfied obligations are fully paid or (ii) hold any such amounts in a segregated account 

as cash collateral for, and for application to, any future funding obligations of such Lender under any such 

Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative 

Agent in its discretion.

(e) Several Obligations of Lenders. The obligations of the Lenders hereunder to 

make Loans and to make payments pursuant to Section 11.03(c) are several and not joint. The failure of 

any Lender to make any Loan or to make any such payment on any date required hereunder shall not 

relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be 

responsible for the failure of any other Lender to so make its Loan or to make its payment under 

Section 11.03(c).

SECTION 2.13 Sharing of Payments. If any Lender shall, by exercising any right of setoff 

or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or 

other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate 

amount of its Loans and accrued interest thereon or other such obligations greater than its pro rata share 

thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the 

Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and 

such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the 

benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount 

of principal of and accrued interest on their respective Loans and other amounts owing them; provided that:

(i) if any such participations are purchased and all or any portion of the 

payment giving rise thereto is recovered, such participations shall be rescinded and the purchase 

price restored to the extent of such recovery, without interest; and

(ii) the provisions of this paragraph shall not be construed to apply to (x) any 

payment made by the Borrower pursuant to and in accordance with the express terms of this 

Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or 

sale of a participation in any of its Loans to any assignee or participant, other than to the 

Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).

The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under 

Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may 

exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully 

as if such Lender were a direct creditor of the Borrower in the amount of such participation.

SECTION 2.14 Compensation for Losses. In the event of (a) the payment of any principal 

of the Loans other than on the last day of an Interest Period (including as a result of an Event of Default), 

(b) the failure to borrow or prepay the Loans (or any portion thereof) on the date specified in any notice 

delivered pursuant hereto, or (c) the assignment of the Loans (or any portion thereof) other than on the last 

day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to 

Section 2.19(b), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and 

expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an 

amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have 
accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that 

would have been applicable to such Loan, for the period from the date of such event to the last day of the 

then current Interest Period therefor (or, in the case of a failure to borrow, for the date that would have been 

the applicable Interest Period), over (ii) the amount of interest that would accrue on such principal amount 

for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such 

period, for dollar deposits of a comparable amount and period from other banks in the London interbank 

eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is 

entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent 

manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate 

promptly after receipt thereof.

SECTION 2.15 Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, 

compulsory loan, insurance charge or similar requirement against assets of, deposits with or for 

the account of, or credit extended or participated in by, any Lender (except any reserve 

requirement reflected in the Adjusted LIBO Rate);

(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, 

(B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and 

(C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or 

other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on any Lender or the London interbank market any other 

condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such 

Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient 

of making or maintaining any Loan or to reduce the amount of any sum received or receivable by such 

Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon 

request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the 

case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as 

the case may be, for such additional costs incurred or reduction suffered.

(b) [Reserved]. 

(c) Certificates for Reimbursement. A certificate of a Lender setting forth the 

amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as 

specified in paragraph (a) of this Section and delivered to the Borrower, shall be conclusive absent 

manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate 

within ten (10) days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender to demand 

compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such 

compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this 

Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date 

that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or 

reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in 

Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to 

above shall be extended to include the period of retroactive effect thereof).
SECTION 2.16 Taxes.

(a) Defined Terms. For purposes of this Section, the term “Applicable Law” 

includes FATCA.

(b) Payments Free of Taxes. Any and all payments by or on account of any 

obligation of the Borrower under any Loan Document shall be made without deduction or withholding for 

any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith 

discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from 

any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to 

make such deduction or withholding and shall timely pay the full amount deducted or withheld to the 

relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified 

Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or 

withholding has been made (including such deductions and withholdings applicable to additional sums 

payable under this Section) the applicable Recipient receives an amount equal to the sum it would have 

received had no such deduction or withholding been made. Borrower acknowledges and agrees that, 

absent a Change in Law, Borrower is not required to withhold or deduct from any such payments to the 

Initial Lender on account of any U.S. federal withholding taxes or Taxes imposed pursuant to FATCA.

(c) Payment of Other Taxes by Borrower. The Borrower shall timely pay to the 

relevant Governmental Authority in accordance with Applicable Law, or at the option of the Initial 

Lender, the Required Lenders or the Administrative Agent timely reimburse it for the payment of, any 

Other Taxes.

(d) Indemnification by Borrower. The Borrower shall indemnify each Recipient, 

within thirty (30) days after demand therefor, for the full amount of any Indemnified Taxes (including 

Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable 

or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and 

any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes 

were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to 

the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the 

Administrative Agent if such Lender is not the Initial Lender), or by the Administrative Agent on its own 

behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e) Indemnification by the Lenders. Each Lender (other than the Initial Lender) shall 

severally indemnify the Administrative Agent, within thirty (30) days after demand therefor, for (i) any 

Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already 

indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of 

the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions 

of Section 11.04(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes 

attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in 

connection with any Loan Document, and any reasonable expenses arising therefrom or with respect 

thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant 

Governmental Authority. A certificate as to the amount of such payment or liability delivered to any such 

Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender (other than 

the Initial Lender) hereby authorizes the Administrative Agent to set off and apply any and all amounts at 

any time owing to such Lender under any Loan Document or otherwise payable by the Administrative 

Agent to such Lender from any other source against any amount due to the Administrative Agent under 

this paragraph (e).

(f) Evidence of Payments. As soon as practicable after any payment of Taxes by the 

Borrower to a Governmental Authority pursuant to this Section, the Borrower shall deliver to the 

Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority 
evidencing such payment, a copy of the return reporting such payment or other evidence of such payment 

reasonably satisfactory to the Administrative Agent.

(g) Status of Lenders. (i) Any Lender (other than the Initial Lender) that is entitled 

to an exemption from or reduction of withholding Tax with respect to payments made under any Loan 

Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably 

requested by the Borrower or the Administrative Agent, such properly completed and executed 

documentation reasonably requested by the Borrower (or, if such Lender is not the Initial Lender, the 

Administrative Agent) as will permit such payments to be made without withholding or at a reduced rate 

of withholding. In addition, any Lender (other than the Initial Lender), if reasonably requested by the 

Borrower (or the Administrative Agent), shall deliver such other documentation prescribed by Applicable 

Law or reasonably requested by the Borrower (or the Administrative Agent) as will enable the Borrower 

(or the Administrative Agent) to determine whether or not such Lender is subject to backup withholding 

or information reporting requirements. Notwithstanding anything to the contrary in the preceding two 

sentences, the completion, execution and submission of such documentation (other than such 

documentation set forth in paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section) shall not be required if 

in the Lender’s reasonable judgment such completion, execution or submission would subject such 

Lender to any material unreimbursed cost or expense or would materially prejudice the legal or 

commercial position of such Lender.

(ii) Without limiting the generality of the foregoing,

(A) any Lender (other than the Initial Lender) that is a U.S. Person 

shall deliver to the Borrower and the Administrative Agent on or about the date on which 

such Lender becomes a Lender under this Agreement (and from time to time thereafter 

upon the reasonable request of the Borrower or the Administrative Agent), executed 

copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup 

withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do 

so, deliver to the Borrower and the Administrative Agent (in such number of copies as 

shall be requested by the recipient) on or prior to the date on which such Foreign Lender 

becomes a Lender under this Agreement (and from time to time thereafter upon the 

reasonable request of the Borrower or the Administrative Agent), whichever of the 

following is applicable:

(1) in the case of a Foreign Lender claiming the benefits of 

an income tax treaty to which the United States is a party (x) with respect to 

payments of interest under any Loan Document, executed copies of IRS 

Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or 

reduction of, U.S. federal withholding Tax pursuant to the “interest” article of 

such tax treaty and (y) with respect to any other applicable payments under any 

Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an 

exemption from, or reduction of, U.S. federal withholding Tax pursuant to the 

“business profits” or “other income” article of such tax treaty;

(2) executed copies of IRS Form W-8ECI (or any successor 

forms) and, in the case of an Agent, a withholding certificate that satisfies the 

requirements of Treasury Regulation Sections 1.1441-1(b)(2)(iv) and 1.1441-

1(e)(3)(v) as applicable to a U.S. branch that has agreed to be treated as a U.S. 

Person for withholding tax purposes;
(3) in the case of a Foreign Lender claiming the benefits of 

the exemption for portfolio interest under Section 881(c) of the Code, (x) a 

certificate substantially in the form of Exhibit B-1 to the effect that such Foreign 

Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a 

“10 percent shareholder” of the Borrower within the meaning of 

Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” related to 

the Borrower as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax 

Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS 

Form W-8BEN-E; or

(4) to the extent a Foreign Lender is not the beneficial 

owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance 

Certificate substantially in the form of Exhibit B-2 or Exhibit B-3, IRS Form W9, and/or other certification documents from each beneficial owner, as applicable; 

provided that if the Foreign Lender is a partnership and one or more direct or 

indirect partners of such Foreign Lender are claiming the portfolio interest 

exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate 

substantially in the form of Exhibit B-4 on behalf of each such direct and indirect 

partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do 

so, deliver to the Borrower and the Administrative Agent (in such number of copies as 

shall be requested by the recipient) on or about the date on which such Foreign Lender 

becomes a Lender under this Agreement (and from time to time thereafter upon the 

reasonable request of the Borrower or the Administrative Agent), executed copies of any 

other form prescribed by Applicable Law as a basis for claiming exemption from or a 

reduction in U.S. federal withholding Tax, duly completed, together with such 

supplementary documentation as may be prescribed by Applicable Law to permit the 

Borrower or the Administrative Agent to determine the withholding or deduction 

required to be made; and

(D) if a payment made to a Lender (other than the Initial Lender) 

under any Loan Document would be subject to U.S. federal withholding Tax imposed by 

FATCA if such Lender were to fail to comply with the applicable reporting requirements 

of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as 

applicable), such Lender shall deliver to the Borrower and the Administrative Agent at 

the time or times prescribed by law and at such time or times reasonably requested by the 

Borrower or the Administrative Agent such documentation prescribed by Applicable Law 

(including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional 

documentation reasonably requested by the Borrower or the Administrative Agent as may 

be necessary for the Borrower and the Administrative Agent to comply with their 

obligations under FATCA and to determine that such Lender has complied with such 

Lender’s obligations under FATCA or to determine the amount, if any, to deduct and 

withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall 

include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or 

becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify 

the Borrower and the Administrative Agent in writing of its legal inability to do so. Notwithstanding 

anything to the contrary in this Agreement, the Initial Lender shall be entitled to the benefits of this 

Section 2.16 and all related provisions under this Agreement without regard to whether it provides any 

documentation described in Section 2.16(g).
(h) Treatment of Certain Refunds. If any party determines, in its sole discretion 

exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified 

pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall 

pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity 

payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-ofpocket expenses (including Taxes) of such indemnified party and without interest (other than any interest 

paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, 

upon the request of such indemnified party, shall repay to such indemnified party the amount paid over 

pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant 

Governmental Authority) in the event that such indemnified party is required to repay such refund to such 

Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will 

the indemnified party be required to pay any amount to an indemnifying party pursuant to this 

paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax 

position than the indemnified party would have been in if the Tax subject to indemnification and giving 

rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification 

payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not 

be construed to require any indemnified party to make available its Tax returns (or any other information 

relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(i) Survival. Each party’s obligations under this Section shall survive the 

resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement 

of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all 

obligations under any Loan Document.

SECTION 2.17 [Reserved].

SECTION 2.18 [Reserved]. 

SECTION 2.19 Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests compensation 

under Section 2.15, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any 

Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such 

Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office 

for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of 

its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment 

(i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.16, as the case may be, in the 

future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not 

otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs 

and expenses incurred by any Lender in connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under 

Section 2.15, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any 

Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 and, in 

each case, such Lender has declined or is unable to designate a different lending office in accordance with 

paragraph (a) of this Section, or if any Lender is a Non-Consenting Lender, then the Borrower may, at its 

sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to 

assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and 

consents required by, Section 11.04), all of its interests, rights (other than its existing rights to payments 

pursuant to Section 2.15 or Section 2.16) and obligations under this Agreement and the related Loan 

Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another 

Lender, if a Lender accepts such assignment); provided that:
(i) the Borrower shall have paid to the Administrative Agent the assignment 

fee (if any) specified in Section 11.04;

(ii) such Lender shall have received payment of an amount equal to the 

outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts 

payable to it hereunder and under the other Loan Documents (including any amounts under 

Section 2.14) from the assignee (to the extent of such outstanding principal and accrued interest 

and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for 

compensation under Section 2.15 or payments required to be made pursuant to Section 2.16, such 

assignment will result in a reduction in such compensation or payments thereafter;

(iv) such assignment does not conflict with Applicable Law; and

(v) in the case of any assignment resulting from a Lender becoming a NonConsenting Lender, the applicable assignee shall have consented to the applicable amendment, 

waiver or consent.

A Lender shall not be required to make any such assignment or delegation if, prior 

thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to 

require such assignment and delegation cease to apply.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Credit Parties represent and warrant to the Administrative Agent, the Collateral 

Agent and the Lenders on the Closing Date and on the date of each Borrowing that:

SECTION 3.01 Existence, Qualification and Power. Each of the Credit Parties and their 

respective Material Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good 

standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power 

and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or 

lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan 

Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good 

standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the 

conduct of its business requires such qualification or license, except, in each case referred to in clause (a) 

(other than with respect to any Credit Party), (b)(i) or (c), to the extent that failure to do so could not 

reasonably be expected to have a Material Adverse Effect.

SECTION 3.02 Authorization; No Contravention. The execution, delivery and 

performance by each Credit Party of each Loan Document to which it is party have been duly authorized by 

all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of its 

Organizational Documents, (b) conflict with or result in any breach or contravention of, or the creation of 

any Lien under, or require any payment to be made under (i) any material Contractual Obligation to which 

each Credit Party is a party or affecting each Credit Party or the material properties of any Credit Party or 

(ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to 

which any Credit Party or its property is subject or (c) violate any Law, except to the extent such violation 

could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.03 Governmental Authorization; Other Consents. No approval, consent, 

exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any 
other Person is necessary or required in connection with the execution, delivery or performance by, or 

enforcement against, each Credit Party of this Agreement or any other Loan Document, except for (i) such 

approvals, consents, exemptions, authorizations, actions or notices that have been duly obtained, taken or 

made and in full force and effect, and (ii) filings and consents contemplated by the Security Documents or 

Section 5.14.

SECTION 3.04 Execution and Delivery; Binding Effect. This Agreement has been, and 

each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each 

Credit Party. This Agreement constitutes, and each other Loan Document when so delivered will 

constitute, a legal, valid and binding obligation of each Credit Party, enforceable against each Credit Party 

in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, 

reorganization, receivership, moratorium or other Laws affecting creditors’ rights generally and by general 

principles of equity.

SECTION 3.05 Financial Statements; No Material Adverse Change.

(a) Financial Statements. The financial statements described in Schedule 3.05 were 

prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as 

otherwise expressly noted therein, and fairly present in all material respects the financial condition of the 

Parent and its Subsidiaries as of the date thereof and their results of operations and cash flows for the 

period covered thereby in accordance with GAAP consistently applied throughout the period covered 

thereby, except as otherwise expressly noted therein.

(b) No Material Adverse Change. Since the date of the most recent audited balance 

sheet included in the financial statements described in Schedule 3.05, there has been no event or 

circumstance that, either individually or in the aggregate, has had or could reasonably be expected to have 

a Material Adverse Effect.

SECTION 3.06 Litigation. Except for those matters which have been publicly disclosed in 

any SEC filing of the Parent filed prior to the Closing Date, there are no actions, suits, proceedings, claims, 

disputes or investigations pending or, to the knowledge of any Credit Party, threatened, at Law, in equity, in 

arbitration or before any Governmental Authority, by or against any Credit Party or any of its Subsidiaries 

or against any of their properties or revenues that (a) either individually or in the aggregate could 

reasonably be expected to have a Material Adverse Effect or (b) purport to affect or pertain to this 

Agreement or any other Loan Document or any of the transactions contemplated hereby.

SECTION 3.07 Contractual Obligations; No Default. None of the Credit Parties and their 

respective Subsidiaries is in default under or with respect to any Contractual Obligation that, either 

individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No 

Default has occurred and is continuing or would result from the consummation of the transactions 

contemplated by this Agreement or any other Loan Document.

SECTION 3.08 Property. Ownership of Properties and Collateral. Each of the Credit 

Parties and their respective Subsidiaries has good record and marketable title in fee simple to, or valid 

leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for 

such defects in title that, either individually or in the aggregate, could not reasonably be expected to have a 

Material Adverse Effect. Each Credit Party has good title to the Collateral owned by it, free and clear of all 

Liens other than Permitted Liens. 

SECTION 3.09 Taxes. The Credit Parties and their respective Subsidiaries have filed all 

federal, state and other tax returns and reports required to be filed, and have paid all federal, state and other 

taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, 

income or assets otherwise due and payable, except (a) Taxes that are being contested in good faith by 
appropriate proceedings diligently conducted and for which adequate reserves are being maintained in 

accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to 

have a Material Adverse Effect.

SECTION 3.10 Disclosure. (a) The Credit Parties and their respective Subsidiaries have 

disclosed to the Administrative Agent, the Collateral Agent and the Lenders all agreements, instruments and 

corporate or other restrictions to which they are subject, and all other matters known to them, that, either 

individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Loan 

Application Form, reports, financial statements, certificates and other written information (other than 

projected or pro forma financial information) furnished by or on behalf of the Credit Parties and their 

respective Subsidiaries to any Agent or any Lender in connection with the transactions contemplated hereby 

and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as 

modified or supplemented by other information so furnished), taken as a whole, do not contain any material 

misstatement of fact or omit to state any material fact necessary to make the statements therein (when taken 

as a whole), in the light of the circumstances under which they were made, not misleading; provided that, 

with respect to projected or pro forma financial information, the Credit Parties represent only that such 

information was prepared in good faith based upon assumptions believed to be reasonable at the time of 

preparation and delivery (it being understood that such projected information may vary from actual results 

and that such variances may be material) and (b) as of the Closing Date, the information included in the 

Beneficial Ownership Certification is true and correct in all respects.

SECTION 3.11 Compliance with Laws. Each of the Credit Parties and their respective 

Subsidiaries is in compliance with the requirements of all Laws (including Environmental Laws) and all 

orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which 

(a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by 

appropriate proceedings diligently conducted or (b) the failure to so comply, either individually or in the 

aggregate, could not reasonably be expected to have a Material Adverse Effect.

SECTION 3.12 ERISA Compliance.

(a) Except as could not reasonably be expected, either individually or in the 

aggregate, to have a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions 

of ERISA, the Code and other federal or state Laws and (ii) each Plan that is intended to be a qualified 

plan under Section 401(a) of the Code has received a favorable determination letter, opinion letter or 

advisory letter from the IRS to the effect that the form of such Plan is qualified under Section 401(a) of 

the Code and the trust related thereto has been determined by the IRS to be exempt from federal income 

tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by 

the IRS, and, to the knowledge of any Credit Party, nothing has occurred that would prevent or cause the 

loss of such tax-qualified status.

(b) There are no pending or, to the knowledge of any Credit Party, threatened or 

contemplated claims, actions or lawsuits, or action by any Governmental Authority, with respect to any 

Plan that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse 

Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with 

respect to any Plan that, either individually or in the aggregate, has had or could reasonably be expected 

to have a Material Adverse Effect.

(c) No ERISA Event has occurred, and neither any Credit Party nor any ERISA 

Affiliate is aware of any fact, event or circumstance that, either individually or in the aggregate, could 

reasonably be expected to constitute or result in an ERISA Event that, either individually or in the 

aggregate, has had or could reasonably be expected to have a Material Adverse Effect.
(d) Except as would not reasonably be expected to have individually or in the 

aggregate, a Material Adverse Effect, the present value of all accrued benefits under each Pension Plan 

(based on those assumptions used to fund such Pension Plan) did not, as of the last annual valuation date 

prior to the date on which this representation is made or deemed made, exceed the value of the assets of 

such Pension Plan allocable to such accrued benefits by a material amount. 

(e) To the extent applicable, each Foreign Plan has been maintained in compliance 

with its terms and with the requirements of any and all applicable requirements of Law and has been 

maintained, where required, in good standing with applicable regulatory authorities, except to the extent 

that the failure so to comply could not reasonably be expected, either individually or in the aggregate, to 

have a Material Adverse Effect. Neither the Parent nor any Subsidiary has incurred any obligation in 

connection with the termination of or withdrawal from any Foreign Plan that, either individually or in the 

aggregate, would reasonably be expected to have individually or in the aggregate, a Material Adverse 

Effect. Except as would not reasonably be expected to have individually or in the aggregate, a Material 

Adverse Effect, the present value of the accrued benefit liabilities (whether or not vested) under each 

Foreign Plan that is funded, determined as of the end of the most recently ended fiscal year of the Parent 

or Subsidiary, as applicable, on the basis of actuarial assumptions, each of which is reasonable, did not 

exceed the current value of the property of such Foreign Plan by a material amount, and for each Foreign 

Plan that is not funded, the obligations of such Foreign Plan are properly accrued.

SECTION 3.13 Environmental Matters. Except with respect to any matters that, either 

individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, none 

of the Credit Parties and their respective Subsidiaries (a) has failed to comply with any Environmental Law 

or to obtain, maintain or comply with any permit, license or other approval required under any 

Environmental Law, (b) knows of any basis for any permit, license or other approval required under any 

Environmental Law to be revoked, canceled, limited, terminated, modified, appealed or otherwise 

challenged, (c) has or could reasonably be expected to become subject to any Environmental Liability, 

(d) has received notice of any claim, complaint, proceeding, investigation or inquiry with respect to any 

Environmental Liability (and no such claim, complaint, proceeding, investigation or inquiry is pending or, 

to the knowledge of the Parent, is threatened or contemplated) or (e) knows of any facts, events or 

circumstances that could give rise to any basis for any Environmental Liability with respect thereto.

SECTION 3.14 Investment Company Act. None of the Credit Parties is an “investment 

company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

SECTION 3.15 Sanctions; Export Controls; Anti-Corruption; AML Laws.

(a) None of the Credit Parties and their respective Subsidiaries and no director, 

officer, or affiliate of the foregoing is a Person that is: (i) the subject of any sanctions administered or 

enforced by the United States (including, but not limited to, those administered by the U.S. Department of 

the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, and the U.S. Department 

of Commerce’s Bureau of Industry and Security) (“Sanctions”), (ii) organized or resident in a country or 

territory that is the subject of country-wide or region-wide Sanctions (including, currently, Crimea, Cuba, 

Iran, North Korea, and Syria) (each a “Sanctioned Country”) or located in a Sanctioned Country except to 

the extent authorized under Sanctions or (iii) a Person with whom dealings are restricted or prohibited by 

Sanctions as a result of a relationship of ownership or control with a Person listed in (i) or (ii) (each of (i), 

(ii) and (iii) is a “Sanctioned Person”). 

(b) For the period beginning eight (8) years prior to the date hereof, each of the 

Credit Parties and their respective Subsidiaries and their respective directors, officers and employees and, 

to the knowledge of the Credit Parties, such respective affiliates, have been, in all material respects, in 

compliance with the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations 

thereunder (the “FCPA”) and any other applicable anti-bribery or anti-corruption laws and regulations 
(collectively with the FCPA, the “Anticorruption Laws”) and all applicable Sanctions, Export Control 

Laws, and AML Laws.

SECTION 3.16 Solvency. The Borrower and its Subsidiaries are Solvent on a consolidated 

basis after giving effect to the borrowing of the Loans.

SECTION 3.17 Subsidiaries. Schedule 3.17 sets forth the name of, and the ownership 

interests of the Parent and each of its Subsidiaries and indicates which of such Subsidiaries are Excluded 

Subsidiaries as of the date hereof.

SECTION 3.18 Senior Indebtedness. The Loans, the Obligations and the Guaranteed 

Obligations constitute “senior indebtedness” (or any other similar or comparable term) under and as defined 

in the documentation governing any Indebtedness of the Credit Parties that is subordinated in right of 

payment to any other Indebtedness thereof. 

SECTION 3.19 Insurance Matters. The properties of the Credit Parties are insured 

pursuant to Section 5.06 hereof. Each insurance policy required to be maintained by the Credit Parties

pursuant to Section 5.06 is in full force and effect and all premiums in respect thereof that are due and 

payable have been paid.

SECTION 3.20 Labor Matters. Except as would not reasonably be expected to have 

individually or in the aggregate, a Material Adverse Effect, (a) there are no strikes, lockouts, slowdowns or 

other material labor disputes against any Credit Party or any of its Subsidiary thereof pending or, to the 

knowledge of the Credit Parties, threatened, (b) the Credit Parties and their respective Subsidiaries have 

complied with all applicable federal, state, local and foreign Laws relating to the employment (or 

termination thereof), the hours worked by and payments made to employees of the Parent and its 

Subsidiaries comply with the Fair Labor Standards Act and any other applicable federal, state, local or 

foreign Law dealing with such matters and (c) all payments due from the Credit Parties and their respective 

Subsidiaries, or for which any claim may be made against the Credit Parties and their respective 

Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been 

paid or properly accrued in accordance with GAAP as a liability on the books of the Parent or such 

Subsidiary. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair 

employment practices charges or any other claims or complaints against the Credit Parties or their 

respective Subsidiaries pending or, to the knowledge of the Credit Parties, threatened to be filed with any 

Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to 

the employment or termination of employment of any employee of the Credit Parties and their respective 

Subsidiaries that would, individually or in the aggregate, be reasonably expected to result in a Material 

Adverse Effect. 

SECTION 3.21 Insolvency Proceedings. None of the Credit Parties has taken, and none of 

the Credit Parties is currently evaluating taking, any action to seek relief or commence proceedings under 

any Debtor Relief Law in any applicable jurisdiction. 

SECTION 3.22 Margin Regulations. The Borrower is not engaged and will not engage, 

principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or 

extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any 

Borrowing hereunder will be used to buy or carry any Margin Stock. Following the application of the 
proceeds of each Borrowing, not more than 25% of the value of the assets (either of the Borrower only or of 

the Borrower and its Subsidiaries on a consolidated basis) will be Margin Stock. 

SECTION 3.23 Liens. There are no Liens of any nature whatsoever on any Collateral other 

than Liens permitted under Section SECTION 6.02 hereof. 

SECTION 3.24 Perfected Security Interests. 

(a) As of the Closing Date (or such later date as permitted under Section 5.14) and as 

of the date of each Borrowing, the Security Documents, taken as a whole, are effective to create in favor 

of the Collateral Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority 

security interest in all of the Collateral to the extent purported to be created thereby. 

(b) As of the Closing Date (or such later date as permitted under Section 5.14) and as 

of the date of each Borrowing, each Credit Party has or shall have satisfied the Perfection Requirement 

with respect to the Collateral.

SECTION 3.25 US Citizenship. The Borrower is a “citizen of the United States” as 

defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been interpreted by the DOT 

pursuant to its policies. 

SECTION 3.26 Air Carrier Status. The Borrower is an “air carrier” within the meaning of 

Section 40102 of Title 49, holds a certificate under Section 41102 of Title 49 and, during the time period 

from April 1, 2019 to September 30, 2019, derived more than 50% of its air transportation revenue from the 

transportation of passengers. The Borrower holds an air carrier operating certificate issued pursuant to 

Chapter 447 of Title 49. The Borrower possesses all necessary certificates, franchises, licenses, permits, 

rights, designations, authorizations, exemptions, concessions, frequencies and consents which relate to the 

operation of the routes flown by it and the conduct of its business and operations as currently conducted, 

except where failure to do so, either individually or in the aggregate, could not reasonably be expected to 

have a Material Adverse Effect.

ARTICLE IV

CONDITIONS

SECTION 4.01 Closing Date and Initial Borrowing. The effectiveness of this Agreement 

and the funding of the initial Borrowing hereunder are subject to the satisfaction (or waiver in accordance 

with Section 11.02) of the following conditions (and, in the case of each document specified in this Section 

to be received by the Initial Lender (and the applicable Agent or Agents), such document shall be in form 

and substance satisfactory to the Initial Lender and/or the applicable Agent or Agents):

(a) Executed Counterparts. The Initial Lender and the Agents shall have received 

from each party hereto a counterpart of this Agreement, any Security Documents to which it is a 

party and the Note, each signed on behalf of such party. Notwithstanding anything herein to the 

contrary, delivery of an executed counterpart of a signature page of this Agreement or any 

Security Documents by telecopy or other electronic means, or confirmation of the execution of 

this Agreement on behalf of a party by an email from an authorized signatory of such party shall 

be effective as delivery of a manually executed counterpart of this Agreement.

(b) Certificates. The Initial Lender and any applicable Agent shall have received 

such customary certificates of resolutions or other action, incumbency certificates and/or other 

certificates of Responsible Officers of the Credit Parties as the Lenders may require evidencing
the identity, authority and capacity of each Responsible Officer thereof authorized to act as a 

Responsible Officer in connection with the Loan Documents;

(c) Organizational Documents. The Initial Lender shall have received customary 

resolutions or evidence of corporate authorization, secretary’s certificates and such other 

documents and certificates (including Organizational Documents and good standing certificates) 

as the Initial Lender may request relating to the organization, existence and good standing of each 

Credit Party and any other legal matters relating to the Credit Parties, the Loan Documents or the 

transactions contemplated thereby.

(d) Opinion of Counsel to Credit Parties. The Initial Lender and the applicable 

Agent or Agents shall have received all opinions of counsel (including any additional opinions of 

counsel as required under any Security Document) to the Credit Parties that is acceptable to the 

Initial Lender, addressed to the Initial Lender and the applicable Agent or Agents and dated the 

Closing Date, in form and substance satisfactory to the Initial Lender and the applicable Agent 

(and the Parent hereby instructs such counsel to deliver such opinions to such Persons).

(e) Beneficial Ownership Regulation Information. At least five (5) days prior to the 

Closing Date, the Borrower shall deliver to the Initial Lender a Beneficial Ownership 

Certification.

(f) Expenses. The Borrower shall have paid all reasonable fees, expenses (including 

the fees and expenses of legal counsel) and other amounts due to the Initial Lender, the 

Administrative Agent and the Collateral Agent (to the extent that statements for such expenses 

shall have been delivered to the Borrower on or prior to the Closing Date); provided that such 

expenses payable by the Borrower may be offset against the proceeds of the Loans funded on the 

Closing Date.

(g) Officer’s Certificate. The Initial Lender shall have received a certificate 

executed by a Responsible Officer of the Parent and the Borrower confirming (i) that the 

representations and warranties contained in Article III of this Agreement are true and correct on 

and as of the Closing Date, (ii) that the information provided in the Loan Application Form 

submitted by the Borrower was true and correct on and as of the date of delivery thereof, (iii) the 

satisfaction of such condition and (iv) that no Default or Event of Default exists or will result 

from the borrowing of the Loans on the Closing Date.

(h) Other Documents. The Initial Lender and the Agents shall have received such 

other documents as it may request.

(i) Appraisals. The Initial Lender shall have received Appraisals satisfactory in 

form and substance and performed by an Eligible Appraiser dated as of a date no earlier than 

thirty (30) days prior to the Closing Date.

(j) Security Interests. Each Credit Party shall have, and caused its Subsidiaries to, 

take any action and execute and deliver, or cause to be executed and delivered, any agreement, 

document or instrument required in order to create a valid, perfected first priority security interest 

in the Collateral in favor of the Collateral Agent for the benefit of the Secured Parties (including 

delivery of UCC financing statements in appropriate form for filing under the UCC and entering 

into control agreements). Each Credit Party shall have satisfied, and caused its Subsidiaries to 

satisfy, the Perfection Requirement with respect to the Collateral. In addition, the Credit Parties 

shall have delivered a completed Perfection Certificate (as defined in the Pledge and Security 

Agreement). 
(k) Consents and Authorizations. Each Credit Party shall have obtained all consents 

and authorizations from Governmental Authorities and all consents of other Persons (including 

shareholder approvals, if applicable) that are necessary or advisable in connection with this 

Agreement, any Loan Document, any of the transactions contemplated hereby or thereby or the 

continuing operations of the Credit Parties and each of the foregoing shall be in full force and 

effect and in form and substance satisfactory to the Initial Lender.

(l) Lien Searches. The Initial Lender shall have received (i) UCC and other lien 

searches conducted in the jurisdictions and offices where liens on material assets of the Credit 

Parties are required to be filed or recorded and (ii) to the extent Collateral consists of (x) Aircraft 

and Engine Assets (as defined in the Pledge and Security Agreement), aircraft registry lien 

searches conducted with the FAA and the International Registry, and (y) Spare Part Assets (as 

defined in the Pledge and Security Agreement), registry lien searches conducted with the FAA 

(with reference to each Designated Spare Parts Location set forth on Schedule 2.1 of the Pledge 

and Security Agreement), in each case, reflecting the absence of Liens on the assets of the Credit 

Parties other than Permitted Liens or Liens to be discharged on or prior to the Closing Date 

pursuant to documentation satisfactory to the Initial Lender.

(m) Collateral Coverage Ratio. On the Closing Date (and after giving pro forma 

effect to any Borrowings on such date), the Collateral Coverage Ratio shall not be less than 2.0 to 

1.0.

(n) Solvency Certificate. The Initial Lender shall have received a certificate of the 

chief financial officer or treasurer (or other comparable officer) of the Parent certifying that the 

Borrower and its Subsidiaries (taken as a whole) are, and will be immediately after giving effect 

to any Loans borrowed on the Closing Date, Solvent. 

(o) Warrant Agreement. Treasury and the Parent shall have entered into the Warrant 

Agreement. 

(p) Other Matters. Since June 29, 2020, (i) there has been no event or circumstance 

that, either individually or in the aggregate, has had or could reasonably be expected to have a 

Material Adverse Effect and (ii) none of the Credit Parties has made a Disposition of any assets

constituting Collateral had this Agreement been in effect at such time.

SECTION 4.02 Each Borrowing. The funding by the Lenders of each Borrowing 

(including the Borrowing to be requested on the Closing Date) is additionally subject to the satisfaction of 

the following conditions:

(a) the Administrative Agent shall have received a written Borrowing Request in 

accordance with the requirements of Section 2.03(a), with a copy to the Initial Lender (solely to 

the extent the Initial Lender is a Lender at the time of such Borrowing);

(b) the representations and warranties of the Credit Parties set forth in this 

Agreement and in any other Loan Document shall be true and correct in all material respects (or, 

in the case of any such representation or warranty already qualified by materiality, in all respects) 

on and as of the date of such Borrowing (or, in the case of any such representation or warranty 

expressly stated to have been made as of a specific date, as of such specific date); 

(c) no Default shall have occurred and be continuing or would result from such 

Borrowing or from the application of proceeds thereof; 
(d) on the date of the funding of such Borrowing (and after giving pro forma effect 

thereto and the pledge of any Additional Collateral), the Collateral Coverage Ratio shall not be 

less than 2.0 to 1.0 as evidenced by a certificate of a Responsible Officer of the Parent;

(e) on the date of such Borrowing, the opinion of the independent public accountants 

(after giving effect to any reissuance or revision of such opinion) on the most recent audited 

consolidated financial statements delivered by the Parent pursuant to Section 5.01(a) shall not 

include a “going concern” qualification under GAAP as in effect on the date of this Agreement 

or, if there is a change in the relevant provisions of GAAP thereafter, any like qualification or 

exception under GAAP after giving effect to such change; and

(f) on or prior to the date of such Borrowing, each Credit Party shall have satisfied 

the Perfection Requirement with respect to the Collateral.

Each Borrowing Request by the Borrower hereunder and each Borrowing shall be deemed to constitute a 

representation and warranty by the Borrower on and as of the date of the applicable Borrowing as to the 

matters specified in clauses (b) and (c) above in this Section.

ARTICLE V

AFFIRMATIVE COVENANTS

Until all the later of (i) the date on which all of the Obligations shall have been paid in 

full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the 

Lenders that:

SECTION 5.01 Financial Statements. The Parent will furnish to the Administrative Agent 

and each Lender:

(a) as soon as available, and in any event within ninety (90) days after the end of 

each fiscal year of the Parent (or, if earlier, five (5) days after the date required to be filed with 

the SEC) (commencing with the fiscal year ended prior to the Closing Date), a consolidated 

balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year and the related 

consolidated statements of income or operations, shareholders’ equity and cash flows for such 

fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, 

audited and accompanied by a report and opinion of independent public accountants of nationally 

recognized standing, which report and opinion shall be prepared in accordance with generally 

accepted auditing standards (and shall not be subject to any “going concern” or like qualification

(other than a qualification solely resulting from (x) the impending maturity of any Indebtedness 

or (y) any prospective or actual default under any financial covenant), exception or explanatory 

paragraph or any qualification, exception or explanatory paragraph as to the scope of such audit)

to the effect that such consolidated financial statements present fairly in all material respects the 

financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its 

Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; 

(b) as soon as available, but in any event within forty-five (45) days after the end of 

each of the first three (3) fiscal quarters of each fiscal year of the Parent (or, if earlier, five 

(5) days after the date required to be filed with the SEC) (commencing with the first of such fiscal 

quarters ended prior to the Closing Date), a consolidated balance sheet of the Parent and its 

Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or 

operations, shareholders’ equity and cash flows for such fiscal quarter and for the portion of the 

Parent’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the 

figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding 
portion of the previous fiscal year, certified by a Financial Officer of the Parent as fairly 

presenting in all material respects the financial condition, results of operations, shareholders’ 

equity and cash flows of the Parent and its Subsidiaries on a consolidated basis in accordance 

with GAAP consistently applied, subject only to normal year-end audit adjustments and the 

absence of notes; 

(c) for so long as the Initial Lender is the only Lender, as soon as available, but in 

any event no later than seventy-five (75) days after the beginning of each fiscal year of the Parent, 

forecasts prepared by management of the Parent and a summary of material assumptions used to 

prepare such forecasts, in form satisfactory to the Initial Lender, including projected consolidated 

balance sheets and statements of income or operations and cash flows of the Parent and its 

Subsidiaries on a quarterly basis for such fiscal year; and

(d) solely at the request of the Appropriate Party (which shall be no more than 

quarterly), at a time mutually agreed with the Appropriate Party and the Parent, participate in a 

conference call for Lenders to discuss the financial condition and results of operations of the 

Parent and its Subsidiaries and any forecasts which have been delivered pursuant to this Section 

5.01.

SECTION 5.02 Certificates; Other Information. The Parent will deliver to the 

Administrative Agent and each Lender:

(a) [reserved];

(b) concurrently with the delivery of the financial statements referred to in 

Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the 

Parent certifying as to whether a Default has occurred and, if a Default has occurred, specifying 

the details thereof and any action taken or proposed to be taken with respect thereto;

(c) [reserved];

(d) promptly after the furnishing thereof, copies of any notice of default or potential 

default or other material written notice received by the Parent or any Subsidiary from, or 

furnished by the Parent or any Subsidiary to, any holder of Material Indebtedness of the Parent or 

any Subsidiary;

(e) promptly after receipt thereof by any Credit Party or any Subsidiary thereof, 

copies of each material notice or other material written correspondence received from the SEC (or 

comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or 

possible investigation or other inquiry by such agency regarding material financial or other 

material operational results of any Credit Party or any Subsidiary thereof; 

(f) [reserved]; 

(g) promptly following any request therefor, (i) such other information regarding the 

operations, business, properties, liabilities (actual or contingent), condition (financial or 

otherwise) or prospects of any Credit Party or any Subsidiary, or compliance with the terms of the 

Loan Documents, as the Administrative Agent, the Initial Lender or any other Lender (acting 

through the Administrative Agent) may from time to time request; or (ii) beneficial ownership 

information and documentation reasonably requested by the Administrative Agent or any Lender 

from time to time for purposes of ensuring compliance with Sanctions and AML Laws. For 

purposes of determining whether or not a representation with respect to any indirect ownership is 

true or a covenant is being complied with under this Section, the Parent shall not be required to 
make any investigation into (i) the ownership of publicly traded stock or other publicly traded 

securities or (ii) the ownership of assets by a collective investment fund that holds assets for 

employee benefit plans or retirement arrangements; and

(h) concurrently with the delivery of the financial statements referred to in 

Sections 5.01(a) and (b), a duly completed certificate signed by a Responsible Officer of the 

Borrower certifying as to its compliance with Article X of this Agreement.

Documents required to be delivered pursuant to Section 5.01(a) or (b) or Section 5.02(c), 

(d) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may 

be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on 

which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and 

Retrieval system (EDGAR); or (ii) on which such documents are posted on the Parent’s behalf on an 

Internet or intranet website, if any, to which each Lender and the Administrative Agent have access 

(whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided

that: (A) upon written request by the Administrative Agent, the Parent shall deliver paper copies of such 

documents to the Administrative Agent or any Lender upon its request to the Parent to deliver such paper 

copies until a written request to cease delivering paper copies is given by the Administrative Agent or 

such Lender and (B) the Parent shall notify the Administrative Agent and each Lender (by facsimile or 

electronic mail) of the posting of any such documents and provide to the Lenders by electronic mail 

electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no 

obligation to request the delivery of or to maintain paper copies of the documents referred to above.

SECTION 5.03 Notices. The Parent will promptly notify the Administrative Agent and each 

Lender of:

(a) promptly after any Responsible Officer of Parent or any of its Subsidiaries 

obtains knowledge thereof, the occurrence of any Default;

(b) the filing or commencement of any action, suit, investigation or proceeding by or 

before any arbitrator or Governmental Authority against or affecting the Parent or any Controlled 

Affiliate thereof, including pursuant to any applicable Environmental Laws, that could reasonably 

be expected to be adversely determined, and, if so determined, could reasonably be expected to 

have a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, either individually or together with any 

other ERISA Events, could reasonably be expected to have a Material Adverse Effect;

(d) notice of any action arising under any Environmental Law or of any 

noncompliance by any Credit Party or any Subsidiary with any Environmental Law or any 

permit, approval, license or other authorization required thereunder that, if adversely determined, 

could reasonably be expected to have a Material Adverse Effect;

(e) to the extent not publicly disclosed pursuant to an SEC filing of the Parent, any 

material change in accounting or financial reporting practices by the Parent, any Credit Party or 

any Subsidiary;

(f) any change in the Credit Ratings from a Credit Rating Agency with negative 

implications, or the cessation by a Credit Rating Agency of, or its intent to cease, rating the 

Borrower’s or the Parent’s debt; and

(g) any matter or development that has had or could reasonably be expected to have 

a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a 

Responsible Officer of the Parent setting forth the details of the occurrence requiring such notice and 

stating what action the Parent has taken and proposes to take with respect thereto.

SECTION 5.04 Preservation of Existence, Etc. Each Credit Party will, and will cause each 

of its Subsidiaries to, (a) preserve, renew and maintain in full force and effect its legal existence and good 

standing under the Laws of the jurisdiction of its organization except in a transaction permitted by 

Section 6.03 or 6.04; (b) take all reasonable action to maintain all rights, licenses, permits, privileges and 

franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do 

so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its 

registered patents, trademarks, trade names and service marks, the non-preservation of which could 

reasonably be expected to have a Material Adverse Effect.

SECTION 5.05 Maintenance of Properties. Each Credit Party will, and will cause each of 

its Subsidiaries to, (a) maintain, preserve and protect all of its properties and equipment necessary in the 

operation of its business in good working order and condition (ordinary wear and tear excepted) and

(b) make all necessary repairs thereto and renewals and replacements thereof, except to the extent that the 

failure to do so could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.06 Maintenance of Insurance. Subject to any additional requirements under 

any Security Document, each Credit Party will maintain with financially sound and reputable insurance 

companies, insurance with respect to its properties and business against loss or damage of the kinds 

customarily insured against by Persons engaged in the same or similar business, of such types and in such 

amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons 

engaged in the same or similar businesses as Parent and its Subsidiaries; provided that, insurance in respect 

of Collateral shall be maintained with such third party insurance companies except to the extent expressly 

permitted in the Pledge and Security Agreement) as are customarily carried under similar circumstances by 

such Persons.

SECTION 5.07 Payment of Obligations. Each Credit Party will pay, discharge or 

otherwise satisfy as the same shall become due and payable, all of its obligations and liabilities, including 

Tax liabilities, except to the extent (a) the same are being contested in good faith by appropriate 

proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by 

the Parent or such Credit Party or (b) the failure to do so could not reasonably be expected to have a 

Material Adverse Effect.

SECTION 5.08 Compliance with Laws. Each Credit Party will, and will cause each of its 

Subsidiaries to, comply with the requirements of all Laws and all orders, writs, injunctions and decrees 

applicable to it or to its business or property, except to the extent that the failure to do so could not 

reasonably be expected to have a Material Adverse Effect.

SECTION 5.09 Environmental Matters. Except to the extent that the failure to do so could 

not reasonably be expected to have a Material Adverse Effect, each Credit Party will, and will cause each of 

its Subsidiaries to, (a) comply with all Environmental Laws, (b) obtain, maintain in full force and effect and 

comply with any permits, licenses or approvals required for the facilities or operations of the Parent or any 

of its Subsidiaries, and (c) conduct and complete any investigation, study, sampling or testing, and 

undertake any corrective, cleanup, removal, response, remedial or other action necessary to identify, report, 

remove and clean up all Hazardous Materials present or released at, on, in, under or from any of the 

facilities or real properties of the Parent or any of its Subsidiaries.

SECTION 5.10 Books and Records. Each Credit Party will maintain proper books of 

record and account, in which full, true and correct entries in conformity with GAAP consistently applied 
shall be made of all financial transactions and matters involving the assets and business of the Parent or 

such Subsidiary, as the case may be. 

SECTION 5.11 Inspection Rights. Each Credit Party will, and, to the extent relevant for 

inspections of Collateral will cause each of its Subsidiaries to, permit representatives, agents and 

independent contractors of the Administrative Agent, the Initial Lender and the Special Inspector General 

for Pandemic Recovery to visit and inspect any of its properties (including all Collateral), to examine its 

corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its 

affairs, finances and accounts with its directors, officers, and independent public accountants, all at the 

reasonable expense of the Parent and at such reasonable times during normal business hours and as often as 

may be reasonably requested; provided that, other than with respect to such visits and inspections during the 

continuation of an Event of Default or by the Initial Lender or the Special Inspector General for Pandemic 

Recovery, (a) only the Administrative Agent (or its representatives, agents and independent contractors) at 

the direction of a Lender may exercise rights under this Section and (b) the Administrative Agent (or its 

representatives, agents and independent contractors) shall not exercise such rights more often than two (2)

times during any calendar year; provided, further, that when an Event of Default exists the Administrative 

Agent, any Lender or the Special Inspector General for Pandemic Recovery (or any of their respective 

representatives, agents or independent contractors) may do any of the foregoing under this Section at the 

expense of the Parent and at any time during normal business hours and without advance notice. 

SECTION 5.12 Sanctions; Export Controls; Anti-Corruption Laws and AML Laws. Each 

Credit Party and its Subsidiaries will remain in compliance in all material respects with applicable 

Sanctions, Export Control Laws, Anticorruption Laws, and AML Laws. Until all Obligations have been 

paid in full, neither any Credit Party; any Subsidiary of a Credit Party; nor any director or officer of any 

Credit Party or any Subsidiary of a Credit Party shall become a Sanctioned Person or a Person that is 

organized or resident in a Sanctioned Country or located in a Sanctioned Country except to the extent 

authorized under Sanctions. 

SECTION 5.13 Guarantors; Additional Collateral. 

(a) The Guarantors listed on the signature page to this Agreement hereby Guarantee 

the Guaranteed Obligations as set forth in ArticleARTICLE IX. If any Subsidiary (other than an 

Excluded Subsidiary) is formed or acquired after the Closing Date, if any Subsidiary ceases to be an 

Excluded Subsidiary or if required in connection with the addition of Additional Collateral, then the 

Parent will cause such Subsidiary, promptly (in any event, within thirty (30) days of such Subsidiary 

being formed or acquired or of such Subsidiary ceasing to be an Excluded Subsidiary) (i) to become a 

Guarantor of the Loans pursuant to joinder documentation reasonably acceptable to the Appropriate Party 

and on the terms and conditions set forth in ArticleARTICLE IX, (ii) to become a party to each applicable 

Security Document and all other agreements, instruments or documents that create or purport to create 

and perfect a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit 

of the Secured Parties in its assets that are of a type that are intended to be included in the Collateral 

(other than any Excluded Assets), subject to and in accordance with the terms, conditions and provisions 

of the Loan Documents, (iii) to satisfy the Perfection Requirement, (iv) to deliver a secretary’s certificate 

of such Subsidiary, in form and substance reasonably acceptable to the Appropriate Party, with 

appropriate insertions and attachments, and (v) to deliver legal opinions relating to the matters described 

above, which opinions shall be in form and substance, and from counsel, satisfactory to the Appropriate 

Party.

(b) If the Parent or any Subsidiary desires, or is required pursuant to the terms of this 

Agreement, to add Additional Collateral or, if any Subsidiary acquires any existing Collateral from a 

Grantor (as defined in the Pledge and Security Agreement) that it is required pursuant to the terms of this 

Agreement to maintain as Collateral, in each case, after the Closing Date, the Parent shall, in each case at 

its own expense, promptly (in any event, unless any other time period is specified in this Agreement or 
any other Loan Document within thirty (30) days of the relevant date) (i) cause any such Subsidiary to 

become a Grantor (to the extent such Subsidiary is not already a Grantor) pursuant to joinder 

documentation acceptable to the Appropriate Party and on the terms and conditions set forth in the 

relevant Security Documents, (ii) cause any such Subsidiary to become a party to each applicable Security 

Document and all other agreements, instruments or documents that create or purport to create and perfect 

a first priority Lien (subject to Permitted Liens) in favor of the Collateral Agent for the benefit of the 

Secured Parties applicable to such Collateral, in form and substance satisfactory to the Appropriate Party 

(it being understood that in the case of any Additional Collateral of a type, or in a jurisdiction, that has not 

been theretofore included in the Collateral, such Additional Collateral may be subject to such additional 

terms and conditions as requested by the Appropriate Party), (iii) promptly execute and deliver (or cause 

such Subsidiary to execute and deliver) to the Collateral Agent such documents and take such actions to 

create, grant, establish, preserve and perfect the first priority Liens (subject to Permitted Liens) (including 

to obtain any release or termination of Liens not permitted under the definition of “Additional Collateral” 

in Section 1.01 or under Section6.02 and to satisfy all Perfection Requirements, including the filing of 

UCC financing statements, filings with the FAA and registrations with the International Registry, as 

applicable) in favor of the Collateral Agent for the benefit of the Secured Parties on such assets of the 

Parent or such Subsidiary, as applicable, to secure the Obligations to the extent required under the 

applicable Security Documents or reasonably requested by the Appropriate Party, and to ensure that such 

Collateral shall be subject to no other Liens other than Permitted Liens and (iv) if requested by the 

Appropriate Party, deliver (or cause such Subsidiary to deliver) legal opinions to the Collateral Agent, for 

the benefit of the Secured Parties, relating to the matters described above, which opinions shall be in form 

and substance, and from counsel, satisfactory to the Appropriate Party.

SECTION 5.14 Post-Closing Matters. As promptly as practicable, and in any event within 

the time periods after the Closing Date specified on Schedule 5.14 or such later date as the Initial Lender 

may agree to in writing in its sole discretion, the Parent shall deliver the documents or take the actions 

specified on Schedule 5.14 that would have been required to be delivered or taken on the Closing Date.

SECTION 5.15 Further Assurances. In each case subject to the terms, conditions and 

limitations in the Loan Documents, (a) each Credit Party shall remain in compliance with the Perfection 

Requirement with respect to all Collateral (including any assets, rights and properties that (x) become 

Collateral after the Closing Date and (y) any permitted replacement or substitute assets, rights and 

properties thereof (including any Additional Collateral) and (b) each Credit Party shall, promptly and at its 

expense, execute any and all further documents and instruments and take all further actions, that may be 

required or advisable under applicable law or that the Initial Lender, the Administrative Agent or the 

Collateral Agent may request, in order to create, grant, establish, preserve, protect, renew or perfect the 

validity, perfection or first priority of the Liens and security interests created or intended to be created by 

the Security Documents, in each case to the extent required under this Agreement or the Security 

Documents (including with respect to any additions to the Collateral (including any Additional Collateral) 

or replacements, substitutes or proceeds thereof or with respect to any other property or assets hereafter 

acquired by any Credit Party that are of a type that are intended to be included in the Collateral).

SECTION 5.16 Delivery of Appraisals. The Parent shall (1) within ten (10) Business Days 

prior to the last Business Day of March and September of each year, beginning with March 31, 2021 and (2) 

promptly (but in any event within thirty (30) days) following request by the Administrative Agent (acting at 

the direction of the Required Lenders) if an Event of Default has occurred and is occurring, deliver to the 

Administrative Agent one or more Appraisals determining the Appraised Value of the Collateral. In 

addition, on the date upon which any Additional Collateral is pledged as Collateral to the Collateral Agent 

for the benefit of the Secured Parties to secure the Obligations, but only with respect to such Additional 
Collateral, the Parent shall deliver to the Administrative Agent one or more Appraisals determining the 

Appraised Value of such Additional Collateral. 

SECTION 5.17 Ratings. At any time when the Initial Lender is a Lender, the Borrower 

shall, upon request by the Initial Lender, use its reasonable best efforts to obtain a public rating (or, if the 

Borrower does not have a public family corporate rating at such time, a private rating) in respect of the 

Loans by any two of S&P, Moody’s and Fitch in connection with any contemplated assignment of, or 

participation in, the Loans. 

SECTION 5.18 Regulatory Matters. 

(a) US Citizenship. The Borrower will at all times maintain its status as a “citizen of 

the United States” as defined in Section 40102(a)(15) of Title 49 and as that statutory provision has been 

interpreted by the DOT pursuant to its policies. 

(b) Air Carrier Status. The Borrower will at all times maintain its status as an “air 

carrier” within the meaning of Section 40102 of Title 49 and holds a certificate under Section 41102 of 

Title 49. The Borrower will at all times possess an air carrier operating certificate issued pursuant to 

Chapter 447 of Title 49. The Borrower will at all times possess all necessary certificates, franchises, 

licenses, permits, rights, designations, authorizations, exemptions, concessions, frequencies and consents 

which relate to the operation of the routes flown by it and the conduct of its business and operations as 

currently conducted, except where failure to do so, either individually or in the aggregate, could not 

reasonably be expected to have a Material Adverse Effect.

ARTICLE VI

NEGATIVE COVENANTS

Until all the later of (i) the date on which all of the Obligations shall have been paid in 

full and (ii) such later date specified in this Agreement, the Credit Parties covenant and agree with the 

Lenders that:

SECTION 6.01 [Reserved].

SECTION 6.02 Liens. Parent will not, and will not permit any of its Subsidiaries to, create, 

incur, assume or suffer to exist any Lien upon any property or assets constituting Collateral, whether now 

owned or hereafter acquired, except for Permitted Liens.

SECTION 6.03 Fundamental Changes. Parent will not, and will not permit any of its 

Subsidiaries to, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in 

one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or 

hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result 

therefrom:

(a) any Subsidiary may merge with (i) the Borrower; provided that the Borrower 

shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries; provided

that (x) when any Wholly-Owned Subsidiary is merging with another Subsidiary, a WhollyOwned Subsidiary shall be the continuing or surviving Person and (y) when any Subsidiary that is 

a Credit Party is merging with another Subsidiary, then such other Subsidiary shall be a Credit 

Party; 

(b) any Subsidiary may Dispose of all or substantially all of its assets (upon 

voluntary liquidation or otherwise) to the Parent or to another Subsidiary; provided that (x) if the 
transferor in such a transaction is a Wholly-Owned Subsidiary, then the transferee shall either be 

the Parent or another Wholly-Owned Subsidiary and (y) if the transferor in such a transaction is a 

Credit Party, then the transferee shall be a Credit Party; 

(c) the Parent and its Subsidiaries may make Dispositions permitted by Section 6.04; 

(d) any Investment permitted by Section 6.06 may be structured as a merger, 

consolidation or amalgamation; 

(e) any Subsidiary may dissolve, liquidate or wind up its affairs if it owns no 

material assets, engages in no business and otherwise has no activities other than activities related 

to the maintenance of its existence and good standing; and

(f) any Subsidiary may Dispose of all or substantially all of its assets (upon 

voluntary liquidation or otherwise), provided that such assets do not constitute all or substantially 

all of the consolidated assets of the Parent and its Subsidiaries. 

SECTION 6.04 Dispositions. Parent will not, and will not permit any of its Subsidiaries to, 

sell or otherwise make any Disposition of Collateral or enter into any agreement to make any sale or other 

Disposition of Collateral (in each case, including, without limitation by way of any sale or other Disposition 

of any Guarantor), except, subject to Article X and so long as no Default shall have occurred and be continuing 

at the time of any action described below, or would result therefrom:

(a) [reserved]; 

(b) Dispositions of Collateral among the Credit Parties (including any Person that 

shall become a Credit Party simultaneous with such Disposition in the manner contemplated by 

Section 5.13); provided that:

(i) such Collateral remains at all times subject to a Lien with the same 

priority and level of perfection as was the case immediately prior to such Disposition (and 

otherwise subject only to Permitted Liens) in favor of the Collateral Agent for the benefit of the 

Secured Parties following such Disposition;

(ii) concurrently therewith, the Credit Parties shall execute any documents 

and take any actions reasonably required to create, grant, establish, preserve or perfect such Lien 

in accordance with the other provisions of this Agreement or the Security Documents;

(iii) if requested by the Appropriate Party, concurrently therewith, the 

Appropriate Party shall receive an opinion of counsel to the applicable Credit Party (x) in the case 

of Collateral that consists of Route Authorities, Slots and/or Gate Leaseholds, as to the creation 

and perfection under Article 9 of the UCC of the Lien of the security agreement or mortgage, as 

applicable, and subject to assumptions and qualifications (including as provided in the opinion(s) 

delivered on the Closing Date), and (y) in the case of any other Collateral, as to the creation and 

perfection of the Lien of such security agreement or mortgage, as applicable, in form and 

substance satisfactory to the Appropriate Party; and

(iv) concurrently with any Disposition of Collateral to any Person that shall 

become a Credit Party simultaneous with such Disposition in the manner contemplated by 

Section 5.13, such Person shall have complied with the requirements of Section 5.13.

(c) to the extent constituting a Disposition of Collateral, the incurrence of Liens that 

are permitted to be incurred pursuant to Section 6.02; 
(d) Disposition of cash or Cash Equivalents in exchange for other cash or Cash 

Equivalents constituting Collateral and having reasonably equivalent value therefor; 

(e) the abandonment or Disposition of assets no longer useful or used in the 

business; provided that such abandonment or Disposition is (A) in the ordinary course of business 

and (B) with respect to assets that are not material to the business of the Parent and the 

Subsidiaries taken as a whole;

(f) [reserved];

(g) any Disposition of property resulting from an event of loss with respect to any 

aircraft, airframe, engine, spare engine or Spare Parts if the Credit Party is replacing such aircraft, 

airframe, engine, spare engine or Spare Parts in accordance with the terms of the Loan 

Documents; and

(h) any Disposition of Collateral permitted by any of the Security Documents.

SECTION 6.05 Restricted Payments. Parent will not, and will not permit any of its 

Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation 

(contingent or otherwise) to do so, except, that, subject to additional restrictions set forth in Article X, so 

long as no Default shall have occurred and be continuing at the time of any action described below or would 

result therefrom:

(a) each Subsidiary may make Restricted Payments to the Parent and any other 

Person that owns an Equity Interest in such Subsidiary, ratably according to their respective 

holdings of such Equity Interests in respect of which such Restricted Payment is being made;

(b) the Parent and each Subsidiary may declare and make dividend payments or 

other distributions payable solely in common Equity Interests of such Person;

(c) the Parent and each Subsidiary may purchase, redeem or otherwise acquire 

Equity Interests issued by it with the proceeds received from the substantially concurrent issue of 

new common Equity Interests; 

(d) the Parent and each Subsidiary may pay withholding or similar taxes payable by 

any future, present or former employee, director or officer (or any spouses, former spouses, 

successors, executors, administrators, heirs, legatees or distributees of any of the foregoing) in 

connection with any repurchases of Equity Interests or the exercise of stock options; 

(e) the repurchase of Equity Interests or other securities deemed to occur upon (A) 

the exercise of stock options, warrants or other securities convertible or exchangeable into Equity 

Interests or any other securities, to the extent such Equity Interests or other securities represent a 

portion of the exercise price of those stock options, warrants or other securities convertible or 

exchangeable into Equity Interests or any other securities or (B) the withholding of a portion of 

Equity Interests issued to employees and other participants under an equity compensation 

program of the Parent or its Subsidiaries to cover withholding tax obligations of such persons in 

respect of such issuance; 

(f) payments of cash, dividends, distributions, advances, common stock or other 

Restricted Payments by the Parent or any of its Subsidiaries to allow the payment of cash in lieu 

of the issuance of fractional shares upon (A) the exercise of options or warrants, (B) the 

conversion or exchange of capital stock of any such Person or (C) the conversion or exchange of 

Indebtedness or hybrid securities into capital stock of any such Person;
(g) the Parent may make cash payments in connection with any conversion or 

exchange of Convertible Indebtedness in amount equal to the sum of (i) the principal amount of 

such Convertible Indebtedness and (ii) the proceeds of any payments received by the Parent or 

any of its Subsidiaries pursuant to the exercise, settlement or termination of any related Permitted

Bond Hedge Transaction; 

(h) the Parent may make payments in connection with a Permitted Bond Hedge 

Transaction (i) by delivery of shares of the Parent’s Equity Interests upon net share settlement 

thereof or (ii) by (A) set-off against the related Permitted Bond Hedge Transaction and (B) 

payment of an early termination amount thereof in common Equity Interests of the Parent upon 

any early termination thereof; and 

(i) Restricted Payments not to exceed the amount allowable pursuant to Schedule 

6.05(i).

SECTION 6.06 Investments. Parent will not, and will not permit any of its Subsidiaries to,

make any Investments, except:

(a) Investments held by the Parent or such Subsidiary in the form of cash or Cash 

Equivalents;

(b) (i) Investments in Subsidiaries in existence on the Closing Date, (ii) other 

Investments in existence on the Closing Date and listed in Section I to Schedule 6.06 and (iii)

other Investments described on Section II of Schedule 6.06, and, in each case, any refinancing, 

refunding, renewal or extension of any such Investment that does not increase the amount thereof;

(c) advances to officers, directors and employees of the Parent and its Subsidiaries in 

an aggregate amount not exceeding, at any time outstanding, an amount that is customary and 

consistent with past practice, for travel, entertainment, relocation and similar ordinary business 

purposes;

(d) (x) Investments of the Parent in the Borrower or any other Credit Party, (y) 

Investments of any Subsidiary in the Parent or any other Credit Party and (z) Investments made 

between Subsidiaries that are not Credit Parties; provided that any such Investments made 

pursuant to this clause (d) in the form of intercompany indebtedness incurred by a Credit Party 

and owed to a Subsidiary that is not a Credit Party shall be subordinated to the Obligations and 

the Guaranteed Obligations on customary terms (it being understood and agreed that any 

Investments permitted under this clause (d) in the form of intercompany indebtedness that are not 

already subordinated on such terms as of the Closing Date shall not be required to be so 

subordinated until the date that is thirty (30) days after the Closing Date); 

(e) Investments consisting of extensions of credit in the nature of accounts 

receivable or notes receivable arising from the grant of trade credit in the ordinary course of 

business, and Investments received in satisfaction or partial satisfaction thereof from financially 

troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

(f) Investments consisting of the indorsement by the Parent or any Subsidiary of 

negotiable instruments payable to such Person for deposit or collection in the ordinary course of 

business; 

(g) to the extent constituting an Investment, transactions otherwise permitted by 

Sections 6.03 and 6.05; 
(h) any Investments received in compromise or resolution of (i) obligations of trade 

creditors or customers that were incurred in the ordinary course of business of Parent or any of its 

Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the 

bankruptcy or insolvency of any trade creditor or customer or (ii) litigation, arbitration or other 

disputes; 

(i) Investments represented by obligations in respect of Swap Contracts that are not 

speculative in nature and that are entered into to hedge or mitigate risks to which the Parent or 

any of its Subsidiaries has (or will have) actual exposure (other than those in respect of the Equity 

Interests or Indebtedness of the Parent or any of its Subsidiaries); 

(j) accounts receivable arising in the ordinary course of business; 

(k) any guarantee of Indebtedness of Parent or any Subsidiary of Parent other than 

any guarantee of Indebtedness secured by Liens that would not be permitted under Section 6.02; 

(l) Investments to the extent that payment for such Investment is made with the 

capital stock of the Parent;

(m) Investments having an aggregate fair market value (measured on the date each 

such Investment was made and without giving effect to subsequent changes in value other than a 

reduction for all returns of principal in cash and capital dividends in cash), when taken together 

with all Investments made pursuant to this clause (n) that are at the time outstanding, not to 

exceed 30% of the total consolidated assets of the Parent and its Subsidiaries at the time of such 

Investment; 

(n) Permitted Bond Hedge Transactions to the extent constituting Investments; and 

(o) Investments in Finance Entities in the ordinary course of business of the Parent 

and its Subsidiaries or that are otherwise customary for airlines based in the United States.

SECTION 6.07 Transactions with Affiliates. Parent will not, and will not permit any of its 

Subsidiaries to, enter into any transaction of any kind involving aggregate payments or consideration in 

excess of $50,000,000 with any Affiliate of the Parent, whether or not in the ordinary course of business, 

other than on fair and reasonable terms substantially as favorable to the Parent or such Subsidiary as would 

be obtainable by the Parent or such Subsidiary at the time in a comparable arm’s-length transaction with a 

Person other than an Affiliate, subject to delivery of (x) with respect to any transaction or series of related 

transactions involving aggregate consideration in excess of $100,000,000, a certificate of a Responsible 

Officer of the Parent certifying as to compliance with the foregoing and (y) with respect to any transaction 

or series of related transactions involving aggregate consideration in excess of $150,000,000, an opinion as 

to the fairness to the Parent or such Subsidiary of such transaction from a financial point of view issued by 

an accounting, appraisal or investment banking firm of national standing (provided that this clause (y) shall 

not apply to any transaction between or among the Parent or any of its Subsidiaries and any Finance 

Entities); provided that, subject to Article X, the foregoing restriction shall not apply to: 

(a) transactions between or among the Parent and any Wholly-Owned Subsidiaries, 

(b) Restricted Payments permitted by Section 6.05, 

(c) Investments permitted by Section 6.06(b), or (c) or (d), 

(d) transactions described in Schedule 6.07, 
(e) any employment agreement, confidentiality agreement, non-competition 

agreement, incentive plan, employee stock option agreement, long-term incentive plan, profit sharing 

plan, employee benefit plan, officer or director indemnification agreement or any similar arrangement 

entered into by the Parent or any of its Subsidiaries in the ordinary course of business and payments 

pursuant thereto, and 

(f) payment of fees, compensation, reimbursements of expenses (pursuant to 

indemnity arrangements or otherwise) and reasonable and customary indemnities provided to or on behalf 

of officers, directors, employees or consultants of the Parent or any of its Subsidiaries.

SECTION 6.08 [Reserved]. 

SECTION 6.09 [Reserved]. 

SECTION 6.10 Changes in Nature of Business. Parent will not, and will not permit any of 

its Subsidiaries to, engage to any material extent in any business other than those businesses conducted by 

the Parent and its Subsidiaries on the date hereof or any business reasonably related or incidental thereto or 

representing a reasonable expansion thereof.

SECTION 6.11 Sanctions; AML Laws. Parent will not, and will not permit any of its 

Subsidiaries to, directly or knowingly indirectly, use the proceeds of the Loans, or lend, contribute or 

otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person to fund any 

activities or business of or with any Person in a manner that would result in a violation of Sanctions or 

AML Laws by any Person.

SECTION 6.12 Amendments to Organizational Documents. Parent will not, and will not 

permit any of its Subsidiaries to amend, modify, or grant any waiver or release under or terminate in any 

manner, any Organizational Documents in any manner materially adverse to, or which would impair the 

rights of, the Lenders. 

SECTION 6.13 [Reserved]. 

SECTION 6.14 Prepayments of Junior Indebtedness. Parent will not, and will not permit 

any of its Subsidiaries to, make any principal payment on, or redeem, repurchase, defease or otherwise 

acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or 

maturity, any Indebtedness secured by junior Liens on the Collateral or that is subordinated in right of 

payment to the Obligations, in each case other than in connection with a Permitted Refinancing of such 

Indebtedness. 

SECTION 6.15 Lobbying. Parent will not, and will not permit any of its Subsidiaries to, 

directly, or to the Parent or such Subsidiary’s knowledge, indirectly, use the proceeds of the Loans, or lend, 

contribute, or otherwise make available such proceeds to any other Person (i) for publicity or propaganda 

purposes designated to support or defeat legislation pending before the U.S. Congress or (ii) to fund any 

activities that would constitute “lobbying activities” as defined under 2 U.S.C. § 1602. The Parent shall, 

and shall cause its subsidiaries to, comply with the provisions of 31 U.S.C. § 1352, as amended, and with 

the regulations at 31 CFR Part 21.

SECTION 6.16 Use of Proceeds. Parent will not, and will not permit any of its 

Subsidiaries to, use the proceeds of the Loans for any purpose other than for general corporate purposes and 

operating expenses (including payroll, rent, utilities, materials and supplies, repair and maintenance, and 

scheduled interest payments on other Indebtedness incurred before February 15, 2020), in each case in 

compliance with all applicable law to the extent permitted by the CARES Act; provided however that the 

proceeds of the Loans shall not be used for any non-operating expenses (including capital expenses, 
delinquent taxes and payments of principal on other Indebtedness), unless the Parent can demonstrate, to the 

satisfaction of the Initial Lender, that payment of any such non-operating expense is necessary to optimize 

the continued operations of the Parent’s business and does not merely constitute a transfer of risk from an 

existing creditor or investor to the Federal taxpayer.

SECTION 6.17 Financial Covenants.

(a) Liquidity. The Parent will not permit the aggregate amount of Liquidity at the 

close of any Business Day to be less than $400,000,000.

(b) Collateral Coverage Ratio.

(i) Within ten (10) Business Days after (x) the last day of March and 

September of each year (beginning with March 2021) or (y) any date on which an Appraisal is 

delivered pursuant to clause (2) of Section 5.16 (each such date in clauses (x) and (y), a “CCR 

Reference Date” and the tenth Business Day after a CCR Reference Date, a “CCR Certificate 

Delivery Date”), the Parent shall deliver to the Administrative Agent a certificate of a 

Responsible Officer of the Parent containing a calculation of the Collateral Coverage Ratio (a 

“CCR Certificate”).

(ii) If the Collateral Coverage Ratio with respect to any CCR Reference Date 

is less than 1.60 to 1.00, the Borrower shall, no later than ten (10) Business Days after the 

applicable CCR Certificate Delivery Date, (x) prepay any outstanding Loans such that following 

such prepayment, the Collateral Coverage Ratio with respect to such CCR Reference Date, 

recalculated by subtracting any such prepaid portion of the Loans, shall be no less than 1.60 to 

1.00 and/or (y) designate Additional Collateral as additional Eligible Collateral and comply with 

Sections 5.13 and 5.15, collectively, in an amount such that following such designation, the 

Collateral Coverage Ratio with respect to such CCR Reference Date, recalculated by adding such 

Additional Collateral, shall be no less than 1.60 to 1.00.

(iii) At the Parent’s request, the Lien on any Collateral will be released, 

provided, in each case, that the following conditions are satisfied or waived: (a) no Event of 

Default shall have occurred and be continuing, (b) either (x) after giving effect to such release, 

the Collateral Coverage Ratio is not less than 2.00 to 1.00 (or in the case of a swap or exchange of 

existing Additional Collateral with new Additional Collateral, less than 1.60 to 1.00) or (y) the 

Parent shall prepay or cause to be prepaid the Loans and/or shall designate Eligible Collateral as 

Additional Collateral and comply with Sections 5.13 and 5.15, collectively, in an amount 

necessary to cause the Collateral Coverage Ratio to not be less than 2.00 to 1.00 (or in the case of 

a swap or exchange of existing Additional Collateral with new Additional Collateral, less than 

1.60 to 1.00) and (c) the Parent shall deliver a certificate executed by a Responsible Officer

demonstrating compliance with this Section 6.17(b)(iii). 

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.01 Events of Default. If any of the following events (each, an “Event of 

Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan when and as the same 

shall become due and payable, whether at the due date thereof or at a date fixed for prepayment 

thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan, or any fee or any other 

amount (other than an amount referred to in clause (a) of this Section) payable under this 

Agreement or under any other Loan Document, when and as the same shall become due and 

payable, and such failure shall continue unremedied for a period of two (2) or more Business 

Days;

(c) any representation or warranty made or deemed made by or on behalf of any 

Credit Party, including those made prior to the Closing Date, in or in connection with this 

Agreement, the Loan Application Form or any other Loan Document or any amendment or 

modification hereof or thereof, or any waiver hereunder or thereunder, or in any report, 

certificate, financial statement or other document furnished pursuant to or in connection with this 

Agreement, the Loan Application Form or any other Loan Document or any amendment or 

modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been 

incorrect in any material respect (or, in the case of any such representation or warranty under this 

Agreement, the Loan Application Form or any other Loan Document already qualified by 

materiality, such representation or warranty shall prove to have been incorrect) when made or 

deemed made;

(d) any Credit Party shall fail to observe or perform any covenant, condition or 

agreement contained in Section 5.03(a), 5.04 (with respect to the Borrower’s existence) or in 

Article VI or Article X;

(e) any Credit Party shall fail to observe or perform any covenant, condition or 

agreement contained in this Agreement or any other Loan Document (other than those specified 

in clause (a), (b) or (d) of this Section) and such failure shall continue unremedied for a period of 

thirty (30) or more days after notice thereof by the Administrative Agent or the Initial Lender to 

the Parent;

(f) (i) Any Credit Party or any Subsidiary thereof shall fail to make any payment 

when due (whether by scheduled maturity, required prepayment, acceleration, demand, or 

otherwise) in respect of any Material Indebtedness (other than Indebtedness under this 

Agreement) and such failure shall continue after the applicable grace period, if any, specified in 

the agreement or instrument governing such Material Indebtedness; or (ii) any Credit Party or any 

Subsidiary thereof shall fail to observe or perform any other agreement or condition relating to 

any such Indebtedness or contained in any instrument or agreement evidencing, securing or 

relating thereto, or any other event occurs, the effect of which default or other event results in the 

holder or holders or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on 

behalf of such holder or holders or beneficiary or beneficiaries) causing such Indebtedness to 

become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or

causing an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to 

its stated maturity; provided that this clause (f)(ii) shall not apply to secured Indebtedness that 

becomes due as a result of the voluntary sale or transfer (or disposition of property as a result of a 

casualty or condemnation event) of the property or assets securing such Indebtedness, if such sale 

or transfer is permitted hereunder and under the documents providing for such Indebtedness and 

such Indebtedness is repaid when required under the documents providing for such Indebtedness;

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be 

filed seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or any 

Material Subsidiary thereof or its debts, or of a substantial part of its assets, under any Debtor 

Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, 

sequestrator, conservator or similar official for any Credit Party or any Material Subsidiary 

thereof or for a substantial part of its assets, and, in any such case, such proceeding or petition 
shall continue undismissed for a period of sixty (60) or more days or an order or decree approving 

or ordering any of the foregoing shall be entered;

(h) any Credit Party or any Material Subsidiary thereof shall (i) voluntarily 

commence any proceeding or file any petition seeking liquidation, reorganization or other relief 

under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to 

contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of 

this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, 

sequestrator, conservator or similar official for the Parent or any of its Subsidiaries or for a 

substantial part of its assets, (iv) file an answer admitting the material allegations of a petition 

filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors 

or (vi) take any action for the purpose of effecting any of the foregoing;

(i) any Credit Party or any Material Subsidiary thereof shall become unable, admit 

in writing its inability or fail generally to pay its debts as they become due;

(j) there is entered against any Credit Party or any Material Subsidiary thereof (i) a 

final judgment or order for the payment of money in an aggregate amount (as to all such 

judgments and orders) exceeding $50,000,000 (to the extent not covered by independent thirdparty insurance as to which the insurer has been notified of such judgment or order and has not 

denied or failed to acknowledge coverage), or (ii) a non-monetary final judgment or order that, 

either individually or in the aggregate, has or could reasonably be expected to have a Material 

Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor 

upon such judgment or order, or (B) there is a period of thirty (30) consecutive days during which 

a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in 

effect;

(k) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan 

that has resulted or could reasonably be expected to result in liability of any Credit Party under 

Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC that, either individually 

or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect;

(l) [reserved]; 

(m) any material provision of any Loan Document, at any time after its execution and 

delivery and for any reason other than as expressly permitted hereunder or thereunder or 

satisfaction in full of all Obligations, ceases to be in full force and effect; or any Credit Party or 

any other Person who is a party to any Loan Document contests in writing the validity or 

enforceability of any provision of any Loan Document; or any Credit Party denies in writing that 

it has any or further liability or obligation under any Loan Document, or purports in writing to 

revoke, terminate or rescind any Loan Document;

(n) any Lien purported to be created under any Security Document shall cease to be, 

or shall be asserted in writing by any Credit Party not to be, a legal, valid and perfected Lien on 

any material portion of the Collateral (individually or in the aggregate), with the priority required 

by the applicable Security Documents, except (i) as a result of the sale or other Disposition of the 

applicable Collateral to a Person that is not a Credit Party in a transaction not prohibited under the 

Loan Documents or (ii) as a result of either Agent’s failure to maintain possession of any stock 

certificates, promissory notes or other instruments delivered to it under the Security Documents 

or (iii) as a result of acts or omissions with respect to possessory collateral held by the Collateral 

Agent pursuant to this Agreement; or
(o) any Guarantee of any Obligations by any Credit Party under any Loan Document 

shall cease to be in full force in effect (other than in accordance with the terms of the Loan 

Documents);

then, and in every such event (other than an event described in clause (g) or (h) of this Section), and at 

any time thereafter during the continuance of such event, the Initial Lender may, and the Administrative 

Agent may, and at the request of the Required Lenders or the Initial Lender shall, by notice to the 

Borrower, take any or all of the following actions, at the same or different times:

(i) declare the Loans then outstanding to be due and payable in whole (or in 

part, in which case any principal not so declared to be due and payable may thereafter be declared 

to be due and payable), and thereupon the principal of the Loans so declared to be due and 

payable, together with accrued interest thereon and all fees and other Obligations of the Credit 

Parties accrued hereunder, shall become due and payable immediately, without presentment, 

demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and 

the other Credit Parties; and

(ii) exercise on behalf of itself and the Lenders all rights and remedies 

available to it and the Lenders under the Loan Documents and Applicable Law;

provided that, in case of any event described in clause (g) or (h) of this Section, the principal of the Loans 

then outstanding, together with accrued interest thereon and all fees and other Obligations accrued 

hereunder, shall automatically become due and payable, in each case without presentment, demand, 

protest or other notice of any kind, all of which are hereby waived by the Credit Parties. 

SECTION 7.02 Application of Payments. Notwithstanding anything herein to the contrary, 

following the occurrence and during the continuance of an Event of Default, and notice thereof to the Initial 

Lender and the Administrative Agent by the Borrower or the Required Lenders, all payments received on 

account of the Obligations shall be applied by the Administrative Agent as follows:

(i) first, to payment of that portion of the Obligations constituting fees, 

indemnities, expenses and other amounts (including fees and disbursements and other charges of 

counsel payable under Section 11.03 and amounts payable under an Administrative Agency Fee 

Letter (if any)) payable to the Administrative Agent and the Collateral Agent in their respective 

capacities as such;

(ii) second, to payment of that portion of the Obligations constituting fees, 

indemnities and other amounts (other than principal and interest) payable to the Lenders 

(including fees and disbursements and other charges of counsel payable under Section 11.03) 

arising under the Loan Documents, ratably among them in proportion to the respective amounts 

described in this clause (ii) payable to them;

(iii) third, to payment of that portion of the Obligations constituting accrued 

and unpaid interest on the Loans, ratably among the Lenders in proportion to the respective 

amounts described in this clause (iii) payable to them;

(iv) fourth, to payment of that portion of the Obligations constituting unpaid 

principal of the Loans ratably among the Lenders in proportion to the respective amounts 

described in this clause (iv) payable to them;

(v) fifth, to the payment in full of all other Obligations, in each case ratably 

among the Administrative Agent and the Lenders based upon the respective aggregate amounts of 
all such Obligations owing to them in accordance with the respective amounts thereof then due 

and payable; and

(vi) finally, the balance, if any, after all Obligations have been indefeasibly 

paid in full, to the Borrower or as otherwise required by Law.

ARTICLE VIII

AGENCY

SECTION 8.01 Appointment and Authority. Each Lender hereby irrevocably appoints The 

Bank of New York Mellon to act on its behalf as the Administrative Agent and as the Collateral Agent 

hereunder and under the other Loan Documents and authorizes the Agents to take such actions on its behalf 

and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together 

with such actions and powers as are reasonably incidental or related thereto; provided that notwithstanding 

anything in this Article VIII or this Agreement to the contrary, the terms and conditions of the relationship 

between the Initial Lender and the Agents shall be governed by a separate agreement between the Initial 

Lender and the Agents. The Borrower and the Guarantors acknowledge and agree that the Agents are 

Agents of the Lenders and not of the Borrower or the Guarantors. In connection with an assignment of the 

Loans by the Initial Lender, upon the Administrative Agent’s request, the Borrower and the Agents shall 

enter into an Administrative Agency Fee Letter. The provisions of this Article are solely for the benefit of 

the Agents and the Lenders, and the Borrower shall not have rights as a third-party beneficiary of any of 

such provisions. Without limiting the generality of the foregoing, the Agents are hereby expressly 

authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the 

rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions 

of this Agreement and the other Loan Documents and (ii) negotiate, enforce or settle any claim, action or 

proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which 

negotiation, enforcement or settlement will be binding upon each Lender. 

SECTION 8.02 Collateral Matters. Each of the Lenders hereby irrevocably appoints and 

authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and 

enforcing any and all Liens on Collateral granted by any of the Credit Parties to secure any of the

Obligations, together with such powers and discretion as are reasonably incidental thereto and to enter into 

and perform the other Loan Documents. 

SECTION 8.03 Removal or Resignation of Administrative Agent. While the Initial Lender 

is a Lender, the Administrative Agent may be removed or give notice of its resignation subject to any 

conditions as separately agreed between the Initial Lender and the Administrative Agent. Any such 

resignation as Administrative Agent pursuant to this Section 8.03 shall also constitute its resignation as the 

Collateral Agent; provided that in the case of any collateral security held by the Collateral Agent on behalf 

of the Lenders under any of the Loan Documents, the retiring or removed Collateral Agent shall continue to 

hold such collateral security until such time as a successor Collateral Agent is appointed. Upon such 

removal or receipt of any such notice of resignation, the Initial Lender shall have the right to appoint a 

successor. After the Initial Lender is no longer a Lender, either Agent may resign at any time by notifying 

the Lenders and the Borrower in writing, and either Agent may be removed at any time with or without 

cause by an instrument or concurrent instruments in writing delivered to the Borrower and such Agent and 

signed by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have 

the right, with the consent of the Borrower (which consent shall not be required during the continuance of 

an Event of Default), to appoint a successor. If no successor shall have been so appointed by the Required 

Lenders (with the consent of the Borrower (which consent shall not be required during the continuance of 

an Event of Default)) and shall have accepted such appointment within 30 days after (i) the retiring Agent 

gives notice of its resignation or (ii) the Required Lenders deliver removal instructions, then the retiring or 

removed Agent may, on behalf of the Lenders (with the consent of the Borrower (which consent shall not 
be required during the continuance of an Event of Default)), appoint a successor Agent which shall be a 

bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has 

been appointed pursuant to the immediately preceding sentence, such Agent’s resignation or removal shall 

become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder 

and/or under any other Loan Document until such time, if any, as the Required Lenders (with the consent of 

the Borrower (which consent shall not be required during the continuance of an Event of Default)) appoint a 

successor Administrative Agent and/or Collateral Agent, as the case may be. Upon the acceptance of its 

appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all 

the rights, powers, privileges and duties of its predecessor Agent, and its predecessor Agent shall be 

discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor 

Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower 

and such successor. After an Agent’s resignation hereunder, the provisions of this Article and Section 9.03 

shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related 

Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.

SECTION 8.04 Exculpatory Provisions. 

(a) The Agents shall not have any duties or obligations except those expressly set 

forth herein and in the other Loan Documents or as separately agreed between the Initial Lender and the 

Agents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the 

foregoing:

(i) neither Agent shall be subject to any fiduciary or other implied duties, regardless 

of whether a Default has occurred and is continuing, except that The Bank of New York Mellon shall 

always have a fiduciary duty to Treasury while serving as its Agent in accordance with the provisions of 

the separate writing between The Bank of New York Mellon and Treasury; 

(ii) neither Agent shall have any duty to take any discretionary action or exercise any 

discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the 

other Loan Documents that such Agent is required to exercise as directed in writing by the Required 

Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in 

the other Loan Documents); and

(iii) except as expressly set forth herein and in the other Loan Documents, neither 

Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information 

relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank 

serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity.

(b) Neither Agent shall be required to expend or risk its own funds or otherwise 

incur liability in the performance of any of its duties hereunder or under any other Loan Document or in 

the exercise of any of its rights or powers. Notwithstanding anything in any Loan Document to the 

contrary, prior to taking any action under this Agreement or any other Loan Document, each Agent shall 

be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses in 

connection with taking such action. Neither Agent shall be liable for any action taken or not taken by it 

with the consent or at the request of the Required Lenders (or such other number or percentage of the 

Lenders as shall be necessary under the circumstances as provided in Sections 7.01 and 11.02) or in the 

absence of its own gross negligence or willful misconduct as determined by the final non-appealable 

judgment of a court of competent jurisdiction. Notwithstanding the foregoing, no action nor any omission 

to act, taken by either Agent at the direction of the Required Lenders (or such other number of percentage 

of Lenders as shall be expressly provided for herein or in the other Loan Documents) shall constitute 

gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default 

unless and until written notice thereof, conspicuously labeled as a “notice of default” and specifically 

describing such Default, is given to an Agent Responsible Officer by the Borrower or a Lender.
(c) Neither Agent shall be responsible for or have any duty to ascertain or inquire 

into (i) any statement, warranty or representation made in or in connection with this Agreement or any 

other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or 

thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the 

covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any 

Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan 

Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set 

forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be 

delivered to the Administrative Agent.

(d) In no event shall either Agent be responsible or liable for any failure or delay in 

the performance of its obligations hereunder or under any other Loan Document arising out of or caused 

by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, 

epidemics, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural 

catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or 

computer (software and hardware) services (it being understood that such Agent shall use reasonable 

efforts which are consistent with accepted practices in the banking industry to resume performance as 

soon as practicable under the circumstances).

(e) Each Agent shall be entitled to rely upon, and shall not incur any liability for

relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing 

believed by it in good faith to be genuine and to have been signed or sent by the proper Person. Each 

Agent may also rely upon any statement made to it orally or by telephone and believed by it in good faith 

to have been made by the proper Person, and shall not incur any liability for relying thereon. Delivery of 

reports, information and documents to an Agent is for informational purposes only and an Agent’s receipt 

of the foregoing will not constitute actual or constructive knowledge or notice of any information 

contained therein or determinable from information contained therein, including the Borrower’s 

compliance with any of its covenants hereunder. Each Agent may consult with legal counsel (who may be 

counsel for the Borrower), independent accountants and other experts selected by it, and shall not be 

liable for any action taken or not taken by it in reliance on the advice of any such counsel, accountants or 

experts. Any funds held by an Agent shall, unless otherwise agreed in writing with the Borrower, be held 

uninvested in a non-interest bearing account.

(f) Neither Agent shall have any obligation to calculate or confirm the calculation of 

any financial covenant contained herein.

(g) Notwithstanding anything to the contrary in any Loan Documents, neither Agent 

shall be responsible for the existence, genuineness or value of any of the Collateral; for filing any 

financing or continuation statements or recording any documents or instruments in any public office or 

otherwise perfecting or maintaining the perfection of any security interest in the Collateral (except, in the 

case of possessory Collateral, for the Collateral Agent maintaining possession of any such Collateral 

received by it in accordance with the terms of the Loan Documents); for the validity, perfection, priority 

or enforceability of the Liens in any of the Collateral; for the validity or sufficiency of the Collateral or 

any agreement or assignment contained therein; for the validity of the title of any grantor to the 

Collateral; for insuring the Collateral; or for the payment of taxes, charges or assessments on the 

Collateral. The Collateral Agent agrees that it will check any possessory Collateral received by it against 

any itemized list in the Pledge and Security Agreement of Collateral to be delivered to it in accordance 

with the Pledge and Security Agreement.

SECTION 8.05 Reliance by Agents. Each Agent shall be entitled to rely upon, and shall 

not incur any liability for relying upon, any notice, request, certificate, opinion, consent, statement, 

instrument, document or other writing believed by it in good faith to be genuine and to have been signed 

or sent by the proper Person. Each Agent may also rely upon any statement made to it orally or by 
telephone and believed by it in good faith to have been made by the proper Person, and shall not incur any 

liability for relying thereon. Delivery of reports, information and documents to an Agent is for 

informational purposes only and an Agent’s receipt of the foregoing will not constitute actual or 

constructive knowledge or notice of any information contained therein or determinable from information 

contained therein, including the Borrower’s compliance with any of its covenants hereunder. Each Agent 

may consult with legal counsel (who may be counsel for the Borrower), independent accountants and 

other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance 

with the advice of any such counsel, accountants or experts.

SECTION 8.06 Delegation of Duties. Each Agent may perform any and all its duties and 

exercise its rights and powers by or through any one or more sub-agents or attorneys appointed by it and 

will not be responsible for the misconduct or negligence of any agent appointed with due care. Each 

Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or 

through their respective Related Parties.

SECTION 8.07 Non-Reliance on Agents and Other Lenders. Each Lender (other than 

the Initial Lender) acknowledges that it has, independently and without reliance upon the Administrative 

Agent or any other Lender or any of their Related Parties and based on such documents and information 

as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. 

Each Lender (other than the Initial Lender) also acknowledges that it will, independently and without 

reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on 

such documents and information as it shall from time to time deem appropriate, continue to make its own 

decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or 

any related agreement or any document furnished hereunder or thereunder.

SECTION 8.08 Administrative Agent May File Proofs of Claim. In case of the pendency 

of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit 

Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and 

payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative 

Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) 

by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and 

unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such 

other documents as may be necessary or advisable in order to have the claims of the Lenders and 

the Agents (including any claim for the reasonable compensation, expenses, disbursements and 

advances of the Lenders and the Agents and their respective agents and counsel and all other 

amounts due the Lenders and the Agents under Section 11.03) allowed in such judicial 

proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such 

claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such 

judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative 

Agent and, in the event that the Administrative Agent shall consent to the making of such payments 

directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable 

compensation, expenses, disbursements and advances of the Agents and their respective agents and 

counsel, and any other amounts due the Agents under the Loan Documents. Nothing contained herein 

shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on 

behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the 

Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the 

claim of any Lender in any such proceeding.
ARTICLE IX

GUARANTEE

SECTION 9.01 Guarantee of the Obligations. Each Guarantor jointly and severally hereby 

irrevocably and unconditionally guarantees to the Secured Parties, the due and punctual payment in full and 

performance of all Obligations (or such lesser amount as agreed by the Required Lenders in their sole

discretion with respect to Obligations owed to the Lenders) when the same shall become due or required to 

be performed, whether at stated maturity, by required prepayment, declaration, acceleration, performance, 

demand or otherwise (including amounts that would become and any performance that would have been 

required to be taken due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy 

Code, 11 U.S.C. § 362(a)) (collectively, the “Guaranteed Obligations”).

SECTION 9.02 Payment or Performance by a Guarantor. Each Guarantor hereby jointly 

and severally agrees, in furtherance of the foregoing and the other terms of this Article IX and not in 

limitation of any other right which the Secured Parties may have at law or in equity against any Guarantor 

by virtue hereof, that upon the failure of the Borrower to pay or perform any of the Guaranteed Obligations 

when and as the same shall become due or required to be performed, whether at stated maturity, by required 

prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but 

for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), 

such Guarantor will pay, or cause to be paid, in cash, or perform, or cause to be performed, to the Secured 

Parties an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due 

as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for 

the Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such 

Guaranteed Obligations, whether or not a claim is allowed against the Borrower for such interest in the 

related bankruptcy case) and all other Guaranteed Obligations then owed or required to be performed to the 

Secured Parties as aforesaid. 

SECTION 9.03 Liability of Guarantors Absolute. Each Guarantor agrees that its 

obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by 

any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than 

payment and performance in full of the Guaranteed Obligations. In furtherance of the foregoing and 

without limiting the generality thereof, each Guarantor agrees as follows:

(a) this Guarantee is a guarantee of payment and performance when due and not 

merely of collection; 

(b) either Agent and any of the other Secured Parties may enforce this Guarantee 

upon the occurrence of an Event of Default notwithstanding the existence of any dispute between the 

Borrower and the Secured Parties with respect to the existence of such Event of Default;

(c) a separate action or actions may be brought and prosecuted against such 

Guarantor whether or not any action is brought against the Borrower or any other Guarantors and whether 

or not Borrower or such Guarantors are joined in any such action or actions;

(d) payment or performance by any Guarantor of a portion, but not all, of the 

Guaranteed Obligations shall in no way limit, affect, modify or abridge any other Guarantor’s liability for 

any portion of the Guaranteed Obligations which has not been paid or performed; 

(e) the Required Lenders, upon such terms as they deem appropriate, without notice 

or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, 

limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time 
may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, 

manner or terms of payment or performance of the Guaranteed Obligations; (ii) settle, compromise, 

release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the 

Guaranteed Obligations or subordinate the payment of the same to the payment of any other obligations; 

(iii) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or 

modify, with or without consideration, any security for payment or performance of the Guaranteed 

Obligations, any other guarantees of the Guaranteed Obligations, or any other obligation of any Person 

(including any other Guarantor) with respect to the Guaranteed Obligations; and (iv) enforce its rights and 

remedies even though such action may operate to impair or extinguish any right of reimbursement or 

subrogation or other right or remedy of any Guarantor against the Borrower or any security for the 

Guaranteed Obligations; and

(f) this Guarantee and the obligations of each Guarantor hereunder shall be legal, 

valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or 

termination for any reason (other than payment or performance in full of the Guaranteed Obligations), 

including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to 

any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, 

illegality or unenforceability of any of the Guaranteed Obligations, any impossibility in the performance 

of any of the Guaranteed Obligations, or otherwise. Without limiting the generality of the foregoing, 

except for the payment and performance in full of the Guaranteed Obligations and to the fullest extent 

permitted by Applicable Law, the obligations of each Guarantor hereunder shall not be discharged or 

impaired or otherwise affected by: (i) any failure, delay or omission to assert or enforce or agreement or 

election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or 

otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with 

respect to the Guaranteed Obligations, or with respect to any security for the payment and performance of 

the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to 

departure from, any of the terms or provisions hereof or any other Loan Document; (iii) the Guaranteed 

Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or 

unenforceable in any respect; (iv) the Lender’s consent to the change, reorganization or termination of the 

corporate structure or existence of the Borrower or any of its Subsidiaries and to any corresponding 

restructuring of the Guaranteed Obligations; (v) the release of, or any impairment of or failure to perfect 

or continue perfection of or protect a security interest in, any collateral which secures any of the 

Guaranteed Obligations; (vi) any defenses, set-offs or counterclaims which the Borrower or any 

Guarantor may allege or assert against either Agent or the Lenders in respect of the Guaranteed 

Obligations, including failure of consideration, lack of authority, validity or enforceability, breach of 

warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; (vii) any 

change in the corporate existence, structure or ownership of any Credit Party, or any insolvency, 

bankruptcy, reorganization, examinership or other similar proceeding affecting any Credit Party or its 

assets or any resulting release or discharge of any of the Guaranteed Obligations; (viii) the fact that any 

Person that, pursuant to the Loan Documents, was required to become a party hereto may not have 

executed or is not effectually bound by this Agreement, whether or not this fact is known to the Secured 

Parties; (ix) any action permitted or authorized hereunder; (x) any other circumstance, or any existence of 

or reliance on any representation by the Agents, any Secured Party or any other Person, that might 

otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower, any Guarantor or any 

other guarantor or surety; and (xi) any other event or circumstance that might in any manner vary the risk 

of any Guarantor as an obligor in respect of the Guaranteed Obligations. 

SECTION 9.04 Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of 

the Lender: (a) any right to require the Lender, as a condition of payment or performance by such 

Guarantor, to (i) proceed against Borrower, any Guarantor or any other Person; (ii) proceed against or 

exhaust any security in favor of the Lender; or (iii) pursue any other remedy in the power of the Agents or 

Secured Parties whatsoever or (b) presentment to, demand for payment or performance from and protest to 

the Borrower or any Guarantor or notice of acceptance; and (c) any defenses or benefits that may be derived 
from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may 

conflict with the terms hereof. The Agents and the other Secured Parties may, at their election, foreclose on 

any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment 

of any such security in lieu of foreclosure or exercise any other right or remedy available to them against 

the Borrower or any other Credit Party without affecting or impairing in any way the liability of any 

Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. To the fullest 

extent permitted by Applicable Law, each Credit Party waives any defense arising out of any such election 

even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of 

reimbursement or subrogation or other right or remedy of such Credit Party against the Borrower or any 

other Credit Party, as the case may be, or any security.

SECTION 9.05 Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed 

Obligations shall have been paid in full, each Guarantor hereby waives any claim, right or remedy, direct or 

indirect, that such Guarantor now has or may hereafter have against the Borrower or any other Guarantor or 

any of its assets in connection with this Guarantee or the performance by such Guarantor of its obligations 

hereunder, including without limitation (a) any right of subrogation, reimbursement or indemnification that 

such Guarantor now has or may hereafter have against the Borrower with respect to the Guaranteed 

Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that the Agents or the

Secured Parties now has or may hereafter have against the Borrower, and (c) any benefit of, and any right to 

participate in, any collateral or security now or hereafter held by the Agents or the Secured Parties. In 

addition, until the Guaranteed Obligations shall have been paid in full, each Guarantor shall withhold 

exercise of any right of contribution such Guarantor may have against any other guarantor (including any 

other Guarantor) of the Guaranteed Obligations. If any amount shall be paid to any Guarantor on account 

of any such subrogation, reimbursement, indemnification or contribution rights at any time when all 

Guaranteed Obligations shall not have been finally and paid in full, such amount shall be held in trust for 

the Secured Parties and shall forthwith be paid over to the Secured Parties to be credited and applied against 

the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

SECTION 9.06 Subordination. Any Indebtedness of the Borrower or any Guarantor now 

or hereafter and all rights of indemnity, contribution or subrogation under Applicable Law or otherwise held 

by any Guarantor (the “Obligee Guarantor”) are hereby subordinated in right of payment or performance to 

the Guaranteed Obligations until the Guaranteed Obligations is paid and performed in full. Any amount in 

respect of such indebtedness or rights collected or received by the Obligee Guarantor after an Event of 

Default has occurred and is continuing shall be held in trust for the Secured Parties and shall forthwith be 

paid over to the Secured Parties to be credited and applied against the Guaranteed Obligations but without 

affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other 

provision hereof.

SECTION 9.07 Continuing Guarantee. This Guarantee is a continuing guarantee and shall 

remain in effect until all of the Guaranteed Obligations shall have been paid and performed in full. Each 

Guarantor hereby irrevocably waives any right to revoke this Guarantee as to future transactions giving rise 

to any Guaranteed Obligations.

SECTION 9.08 Financial Condition of the Borrower. The Loans may be made to the 

Borrower without notice to or authorization from any Guarantor regardless of the financial or other 

condition of the Borrower at the time of such grant. Each Guarantor has adequate means to obtain 

information from the Borrower on a continuing basis concerning the financial condition of the Borrower 

and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the 

responsibility for being and keeping informed of the financial condition of the Borrower and of all 

circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations.

SECTION 9.09 Reinstatement. In the event that all or any portion of the Guaranteed 

Obligations are paid by the Borrower or any Guarantor, the obligations of any other Guarantor hereunder 
shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or 

any part of such payment(s) are rescinded or recovered directly or indirectly from the Secured Parties as a 

preference, fraudulent transfer or otherwise must be so recovered or returned, and any such payments and 

amounts which are so rescinded, recovered or returned shall constitute Guaranteed Obligations for all 

purposes hereunder. 

SECTION 9.10 Discharge of Guarantees. If, in compliance with the terms and provisions 

of the Loan Documents, (x) all of the Equity Interests of any Guarantor that is a Subsidiary of the Parent or 

any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or 

consolidation) to any Person (other than to the Parent or to any other Subsidiary of Parent), the Guarantee of 

such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be 

discharged and released without any further action by any beneficiary or any other Person effective as of the 

time of such asset sale or (y) a Guarantor becomes an Excluded Subsidiary (other than as a result of a 

Guarantor becoming a non-Wholly Owned Subsidiary), the Borrower may request the release of the 

Guarantee of such Guarantor, whereupon the Guarantee of such Guarantor shall be discharged and released.

ARTICLE X

CARES ACT REQUIREMENTS

Notwithstanding anything in this Agreement to the contrary, the Credit Parties, on behalf 

of themselves and their Affiliates, represent, warrant, and agree with the Lenders that:

SECTION 10.01 CARES Act Compliance. Each Credit Party and its Subsidiaries are in 

compliance, and will at all times comply, with all applicable requirements under Title IV of the CARES 

Act, including any applicable requirements pertaining to the Borrower’s eligibility to receive the Loans. 

The Parent, the Borrower and their Subsidiaries will provide any information requested by the Initial 

Lender or Agents to assess the Borrower’s compliance with applicable requirements under Title IV of the 

CARES Act, its obligations under this Article X or its eligibility to receive the Loans under the CARES 

Act. The Borrower is not a “covered entity” as defined in Section 4019 of the CARES Act. 

SECTION 10.02 Dividends and Buybacks

(a) Until the date that is twelve (12) months after the date on which the Loans are no 

longer outstanding, neither any Borrower Air Carrier nor any of its Affiliates (other than an Affiliate that 

is a natural person) shall, in any transaction, purchase an equity security of any Borrower Air Carrier or of 

any direct or indirect parent company of a Borrower Air Carrier or of any Subsidiary of the Parent that, in 

each case, is listed on a national securities exchange, except to the extent required under a contractual 

obligation in effect as of the date of enactment of the CARES Act.

(b) Until the date that is twelve (12) months after the date on which the Loans are no 

longer outstanding, no Borrower Air Carrier shall pay dividends, or make any other capital distributions, 

with respect to the common stock of any Borrower Air Carrier.

SECTION 10.03 Maintenance of Employment Levels. Until September 30, 2020, each 

Borrower Air Carrier shall maintain its employment levels as of March 24, 2020, to the extent practicable, 
and in any case shall not reduce its employment levels by more than ten percent (10%) from the levels on 

March 24, 2020.

SECTION 10.04 United States Business. Each Borrower Air Carrier is created or 

organized in the United States or under the laws of the United States and has significant operations in and a 

majority of its employees based in the United States.

SECTION 10.05 Limitations on Certain Compensation. 

(a) Beginning on the Closing Date, and ending on the date that is one (1) year after 

the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall 

not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation 

exceeded $425,000 in calendar year 2019 or the Subsequent Reference Period (other than an Employee 

whose compensation is determined through an existing collective bargaining agreement entered into 

before March 1, 2020):

(i) Total Compensation which exceeds, during any twelve (12) consecutive 

months of the period beginning on the Closing Date and ending on the date that is one (1) year 

after the date on which the Loans are no longer outstanding, the Total Compensation the 

Corporate Officer or Employee received in calendar year 2019 or the Subsequent Reference 

Period; or

(ii) Severance Pay or Other Benefits in connection with a termination of 

employment with any Borrower Air Carrier which exceed twice the maximum Total 

Compensation received by such Corporate Officer or Employee in calendar year 2019 or the 

Subsequent Reference Period. 

(b) Beginning on the Closing Date, and ending on the date that is one (1) year after 

the date on which the Loans are no longer outstanding, each Borrower Air Carrier and its Affiliates shall 

not pay any of each Borrower Air Carrier’s Corporate Officers or Employees whose Total Compensation 

exceeded $3,000,000 in calendar year 2019 or the Subsequent Reference Period, Total Compensation 

which exceeds, during any twelve (12) consecutive months of such period, in excess of the sum of:

(i) $3,000,000; and

(ii) Fifty percent (50%) of the excess over $3,000,000 of the Total 

Compensation received by such Corporate Officer or Employee in calendar year 2019 or the 

Subsequent Reference Period. 

(c) For purposes of determining applicable amounts under this Section with respect 

to any Corporate Officer or Employee who was employed by any Borrower Air Carrier or any of their 

Affiliates for less than all of calendar year 2019, the amount of Total Compensation in calendar year 2019 

shall mean such Corporate Officer’s or Employee’s Total Compensation on an annualized basis. 

SECTION 10.06 Continuation of Certain Air Service. Until March 1, 2022, each 

Borrower Air Carrier shall comply with any applicable requirement issued by the Secretary of 

Transportation under section 4005 of the CARES Act to maintain scheduled air transportation service to 

any point served by any Borrower Air Carrier before March 1, 2020. The Borrower acknowledges that 

neither Treasury, nor any other actor, department, or agency of the Federal Government, shall condition the 

issuance of any loan under this Loan Agreement on the Borrower’s implementation of measures to enter 

into negotiations with the certified bargaining representative of a craft or class of employees of the 
Borrower Air Carrier under the Railway Labor Act (45 U.S.C. 151 et seq.) or the National Labor Relations 

Act (29 U.S.C. 151 et seq.), regarding pay or other terms and conditions of employment. 

SECTION 10.07 Treasury Access. Provide Treasury, the Treasury Inspector General, the 

Special Inspector General for Pandemic Recovery, and such other entities as authorized by Treasury timely 

and unrestricted access to all documents, papers, or other records, including electronic records, of the 

Borrower related to the Loans, to enable Treasury, the Treasury Inspector General, and the Special 

Inspector General for Pandemic Recovery to make audits, examinations, and otherwise evaluate the 

Borrower’s compliance with the terms of this Agreement. This right also includes timely and reasonable 

access to the Borrower’s and its Affiliates’ personnel for the purpose of interview and discussion related to 

such documents.

SECTION 10.08 Additional Defined Terms. As used in this Article, the following terms 

have the meanings specified below:

“Borrower Air Carrier” means, collectively, the Borrower, its Affiliates that are Air 

Carriers, and their respective heirs, executors, administrators, successors, and assigns. Notwithstanding 

anything to the contrary herein, for purposes of this Article X, an “Affiliate” of the Borrower shall not 

include any Person(s) that become affiliated with the Borrower solely by virtue of the consummation of a 

Change of Control transaction resulting in repayment of the Loans in full.

“Corporate Officer” means, with respect to any Borrower Air Carrier, its president; any 

vice president in charge of a principal business unit, division, or function (such as sales, administration or 

finance); any other officer who performs a policy-making function; or any other person who performs 

similar policy making functions for the Borrower Air Carrier. Executive officers of subsidiaries or 

parents of any Borrower Air Carrier may be deemed Corporate Officers of the Borrower Air Carrier if 

they perform such policy-making functions for the Borrower Air Carrier. 

“Employee” has the meaning given to the term in section 2 of the National Labor 

Relations Act (29 U.S.C. 152 and includes any individual employed by an employer subject to the 

Railway Labor Act (45 U.S.C. 151 et seq.), and for the avoidance of doubt includes all individuals who 

are employed by the Borrower Air Carrier who are not Corporate Officers. 

“Severance Pay or Other Benefits” means any severance payment or other similar 

benefits, including cash payments, health care benefits, perquisites, the enhancement or acceleration of 

the payment or vesting of any payment or benefit or any other in-kind benefit payable (whether in lump 

sum or over time, including after March 24, 2022) by any Borrower Air Carrier or its Affiliates to a 

Corporate Officer or Employee in connection with any termination of such Corporate Officer’s or 

Employee’s employment (including, without limitation, resignation, severance, retirement, or constructive 

termination), which shall be determined and calculated in respect of any Employee or Corporate Officer 

of the Borrower Air Carrier in the manner prescribed in 17 CFR 229.402(j) (without regard to its 

limitation to the five (5) most highly compensated executives and using the actual date of termination of 

employment rather than the last business day of the Borrower Air Carrier’s last completed fiscal year as 

the trigger event).

“Subsequent Reference Period” means (i) for a Corporate Officer or Employee whose 

employment with the Borrower Air Carrier or an Affiliate started during 2019 or later, the twelve (12) 

month period starting from the end of the month in which the officer or employee commenced 

employment, if such officer’s or employee’s total compensation exceeds $425,000 (or $3,000,000) during 

such period and (ii) for a Corporate Officer or Employee whose Total Compensation first exceeds 

$425,000 during a 12-month period ending after 2019, the 12-month period starting from the end of the 

month in which the Corporate Officer’s or Employee’s Total Compensation first exceeded $425,000 (or 

$3,000,000).
“Total Compensation” means compensation including salary, wages, bonuses, awards of 

stock, and any other financial benefits provided by the Borrower Air Carrier or an Affiliate, as applicable, 

which shall be determined and calculated for the 2019 calendar year or any applicable twelve (12)-month 

period in respect of any Employee or Corporate Officer of the Borrower Air Carrier in the manner 

prescribed under paragraph e.5 of the award term in 2 CFR part 170, App. A, but excluding any 

Severance Pay or Other Benefits in connection with a termination of employment. 

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Notices; Public Information. 

(a) Notices Generally. Except in the case of notices and other communications 

expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices 

and other communications provided for herein shall be in writing in English and shall be delivered by 

hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email as 

follows:

(i) if to a Credit Party, to it at 444 South River Road, St. George, Utah 

84790, Attention of Chief Financial Officer (Facsimile No. 435-634-3305; [REDACTED]; 

(ii) if to the Administrative Agent or the Collateral Agent, to The Bank of 

New York Mellon at 240 Greenwich Street, 7th Floor, New York, NY 10286, Attention of Joanna 

Shapiro, Managing Director (Telephone No. 212-815-4949; Email: 

joanna.g.shapiro@bnymellon.com with a copy to UST.Cares.Program@bnymellon.com); 

(iii) if to Treasury, as the Initial Lender, to The Department of the Treasury 

of the United States at 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220, Attention of 

Assistant General Counsel (Banking and Finance) (Telephone No. 202-622-0283; Email: 

eric.froman@treasury.gov); and

(iv) if to any other Lender, to it at its address (or facsimile number or email 

address) set forth in its Administrative Questionnaire.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be 

deemed to have been given when received. Notices delivered through electronic communications, to the 

extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b). 

(b) Electronic Communications. Notices and other communications to the Lenders 

hereunder may be delivered or furnished by electronic communication (including e-mail, FpML, and 

Internet or intranet websites) pursuant to procedures approved by the Lenders and reasonably acceptable 

to the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant 

to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices 

under such Article by electronic communication. The Administrative Agent, the Collateral Agent, the 

Parent or the Borrower may, in its discretion, agree to accept notices and other communications to it 

hereunder by electronic communications pursuant to procedures approved by it; provided that approval of 

such procedures may be limited to particular notices or communications.

Unless the Administrative Agent, the Collateral Agent or a Lender otherwise prescribes, 

(i) notices and other communications sent to an e-mail address shall be deemed received upon the 

sender’s receipt of an acknowledgement from the intended recipient (such as by return e-mail or other 

written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website 
shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as 

described in the foregoing clause (i), of notification that such notice or communication is available and 

identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, 

email or other communication is not sent during the normal business hours of the recipient, such notice or 

communication shall be deemed to have been sent at the opening of business on the next Business Day for 

the recipient.

(c) Change of Address, etc. Any party hereto may change its address or facsimile 

number for notices and other communications hereunder by notice to the other parties hereto.

(d) Platform. 

(i) The Borrower and the Lenders agree that the Administrative Agent may, 

but shall not be obligated to, make the Communications (as defined below) available to the other 

Lenders by posting the Communications on the Platform.

(ii) The Platform is provided “as is” and “as available.” The Agent Parties 

(as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability 

for errors or omissions in the Communications. No warranty of any kind, express, implied or 

statutory, including any warranty of merchantability, fitness for a particular purpose, noninfringement of third-party rights or freedom from viruses or other code defects, is made by any 

Agent Party in connection with the Communications or the Platform. In no event shall the 

Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any 

liability to the Credit Parties, any Lender or any other Person or entity for damages of any kind, 

including direct or indirect, special, incidental or consequential damages, losses or expenses 

(whether in tort, contract or otherwise) arising out of the Borrower’s or the Administrative 

Agent’s transmission of communications through the Platform. “Communications” means, 

collectively, any notice, demand, communication, information, document or other material 

provided by or on behalf of the Credit Parties pursuant to any Loan Document or the transactions 

contemplated therein that is distributed to the Administrative Agent or any Lender by means of 

electronic communications pursuant to this Section, including through the Platform.

(e) Public Information. The Borrower hereby acknowledges that certain of the 

Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public 

information with respect to the Borrower or its Affiliates, or the respective securities of any of the 

foregoing, and who may be engaged in investment and other market-related activities with respect to such 

Persons’ securities. The Borrower hereby agrees that it will use commercially reasonable efforts to 

identify that portion of the materials and information provided by or on behalf of the Borrower hereunder 

and under the other Loan Documents (collectively, “Borrower Materials”) that may be distributed to the 

Public Lenders and that (i) all such Borrower Materials shall be clearly and conspicuously marked 

“PUBLIC,” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the 

first page thereof; (ii) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have 

authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing 

any material non-public information with respect to the Borrower or its securities for purposes of U.S. 

federal and state securities Laws (provided, however, that to the extent that such Borrower Materials 

constitute Information, they shall be subject to Section 11.12); (iii) all Borrower Materials marked 

“PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side 

Information;” and (iv) the Administrative Agent shall be entitled to treat any Borrower Materials that are 

not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated 

“Public Side Information”. Each Public Lender will designate one or more representatives that shall be 

permitted to receive information that is not designated as being available for Public Lenders. 

Notwithstanding the foregoing, financial statements and related documentation, in each case, provided 
pursuant to Section 5.01(a) or 5.01(b) shall be deemed to be marked “PUBLIC”, unless the Parent notifies 

the Administrative Agent promptly that any such document contains material non-public information.

SECTION 11.02 Waivers; Amendments.

(a) No Waiver; Remedies Cumulative; Enforcement. No failure or delay by the 

Administrative Agent, the Collateral Agent or any Lender in exercising any right, remedy, power or 

privilege hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any 

single or partial exercise of any such right, remedy, power or privilege, or any abandonment or 

discontinuance of steps to enforce such a right remedy, power or privilege, preclude any other or further 

exercise thereof or the exercise of any other right remedy, power or privilege. The rights, remedies, 

powers and privileges of the Administrative Agent, the Collateral Agent and the Lenders hereunder and 

under the Loan Documents are cumulative and are not exclusive of any rights, remedies, powers or 

privileges that any such Person would otherwise have. 

Notwithstanding anything to the contrary contained herein or in any other Loan 

Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents 

against the Credit Parties shall be vested exclusively in, and all actions and proceedings at law in 

connection with such enforcement shall be instituted and maintained exclusively by, (i) so long as the 

Initial Lender is a Lender, either the Initial Lender or, at the Initial’s Lender’s option, the Administrative 

Agent in accordance with Section 7.01 for the benefit of all the Lenders and (ii) if the Initial Lender is no 

longer a Lender, the Required Lenders or the Administrative Agent (acting at the direction of the 

Required Lenders) in accordance with Section 7.01 for the benefit of all the Lenders; provided that the 

foregoing shall not prohibit (i) the Administrative Agent from exercising on its own behalf the rights and 

remedies that inure to its benefit (solely in its capacities as Administrative Agent and as Collateral Agent) 

hereunder and under the other Loan Documents, (ii) any Lender from exercising setoff rights in 

accordance with Section 11.08 (subject to the terms of Section 2.13) or (iii) any Lender from filing proofs 

of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative 

to a Credit Party under any Debtor Relief Law; provided, further, that if at any time there is no Person 

acting as Administrative Agent hereunder and under the other Loan Documents, then (x) the Required 

Lenders shall have the rights otherwise provided to the Administrative Agent pursuant to Section 7.01

and (y) in addition to the matters set forth in clauses (ii) and (iii) of the preceding proviso and subject to 

Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights or remedies 

available to it and as authorized by the Required Lenders.

(b) Amendments, Etc. Except as otherwise expressly set forth in this Agreement 

(including Section 2.10 and Section 8.01), no amendment or waiver of any provision of this Agreement or 

any other Loan Document, and no consent to any departure by the Borrower therefrom, shall be effective 

unless in writing executed by the Borrower and the Required Lenders, and acknowledged by the 

Administrative Agent, or by the Borrower and the Administrative Agent with the consent of the Required 

Lenders, and each such waiver or consent shall be effective only in the specific instance and for the 

specific purpose for which given; provided that no such amendment, waiver or consent shall:

(i) extend or increase any Commitment of any Lender without the written 

consent of such Lender;

(ii) reduce the principal of, or rate of interest specified herein on, any Loan, 

or any fees or other amounts payable hereunder or under any other Loan Document, without the 

written consent of each Lender directly and adversely affected thereby (provided that only the 

consent of the Required Lenders shall be necessary (x) to amend the definition of “Default Rate” 

or to waive the obligation of the Borrower to pay interest at the Default Rate or (y) to amend any 

financial covenant (or any defined term directly or indirectly used therein), even if the effect of 
such amendment would be to reduce the rate of interest on any Loan or other Obligation or to 

reduce any fee payable hereunder);

(iii) postpone any date scheduled for any payment of principal of, or interest 

on, any Loan, or any fees or other amounts payable hereunder or under any other Loan 

Document, or reduce the amount of, waive or excuse any such payment, without the written 

consent of each Lender directly and adversely affected thereby;

(iv) change Section 2.12(b) or Section 2.13 in a manner that would alter the 

pro rata sharing of payments required thereby without the written consent of each Lender directly 

and adversely affected thereby; 

(v) waive any condition set forth in Section 4.01 without the written consent 

of the Initial Lender; or

(vi) change any provision of this Section or the percentage in the definition of 

“Required Lenders” or any other provision hereof specifying the number or percentage of 

Lenders required to amend, waive or otherwise modify any rights hereunder or make any 

determination or grant any consent hereunder, without the written consent of each Lender; 

provided, further, that no such amendment, waiver or consent shall amend, modify or otherwise affect the 

rights or duties hereunder or under any other Loan Document of either of the Agents, unless in writing 

executed by such Agent, in each case in addition to the Borrower and the Lenders required above.

In addition, notwithstanding anything in this Section to the contrary, (i) if the Borrower 

shall have identified an obvious error or any error or omission of a technical nature, in each case, in any 

provision of the Loan Documents, then, upon the delivery of a certificate of a Responsible Officer of the 

Borrower to the Administrative Agent identifying such error and directing the Administrative Agent to 

execute an amendment to correct such error, the Administrative Agent and the Borrower shall be 

permitted to amend such provision, and, in each case, such amendment shall become effective without 

any further action or consent of any other party to any Loan Document if the same is not objected to in 

writing by the Required Lenders to the Administrative Agent within ten (10) Business Days following 

receipt of notice thereof and (ii) that any Security Document may be amended, supplemented or otherwise 

modified with the consent of the applicable Grantor (as defined in the Pledge and Security Agreement) 

and the Administrative Agent to add assets (or categories of assets) to the Collateral covered by such 

Security Document, as contemplated by the definition of Additional Collateral, or to remove any assets or 

categories of assets (including after-acquired assets of that category) from the Collateral covered by such 

Security Document to the extent the release thereof is permitted by Section 6.17(b)(iii).

SECTION 11.03 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket 

expenses incurred by the Initial Lender, the Administrative Agent, the Collateral Agent and their

Affiliates (including the reasonable fees, charges and disbursements of any counsel for the Initial Lender, 

the Administrative Agent or the Collateral Agent), and shall pay all fees and time charges and 

disbursements for attorneys who may be employees of the Administrative Agent or the Collateral Agent, 

in connection with the preparation, negotiation, execution, delivery and administration of this Agreement, 

the Loan Documents, any other agreements or documents executed in connection herewith or therewith or 

any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the 

transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses 

incurred by the Administrative Agent, the Collateral Agent or any Lender (including the fees, charges and 

disbursements of any counsel for the Administrative Agent, the Collateral Agent or any Lender), and shall 

pay all fees and time charges for attorneys who may be employees of the Administrative Agent, the 
Collateral Agent or any Lender, in connection with the enforcement or protection of its rights (A) in 

connection with this Agreement and the Loan Documents, any other agreements or documents executed 

in connection herewith or therewith, or any amendments, modifications or waivers of the provisions 

hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) 

including its rights under this Section, or (B) in connection with the Loans made hereunder, including all 

such out-of-pocket expenses incurred during any workout, restructuring, negotiations or enforcement in 

respect of this Agreement, the Loan Documents and other agreements or documents executed in 

connection herewith or therewith.

(b) Indemnification by the Borrower. The Borrower shall indemnify the 

Administrative Agent and Collateral Agent (and any sub-agents thereof) and each Lender, and each 

Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, 

and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities, obligations, 

penalties, fines, settlements, judgments, disbursements and related costs and related expenses (including 

the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold 

harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be 

employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any 

Person (including the Parent) arising out of, in connection with, or as a result of (i) the execution or 

delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated 

hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or 

thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the 

use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous 

Materials on or from any property owned or operated by the Parent or any of its Subsidiaries, or any 

Environmental Liability related in any way to the Parent or any of its Subsidiaries, or (iv) any actual or 

prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based 

on contract, tort or any other theory, whether brought by a third party or by the Parent, and regardless of 

whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee 

other than the Initial Lender, be available to the extent that such losses, claims, damages, liabilities or 

related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment 

to have resulted from the gross negligence or willful misconduct of such Indemnitee. This paragraph (b) 

shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. 

arising from any non-Tax claim.

(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails 

to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the 

Administrative Agent or Collateral Agent (or any sub-agents thereof) or any Related Party of any of the 

foregoing, each Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent 

or Collateral Agent (or any such sub-agents) or such Related Party, as the case may be, such Lender’s pro 

rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is 

sought based on each Lender’s Applicable Percentage at such time) of such unpaid amount (including any 

such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed 

expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred 

by or asserted against the Administrative Agent or Collateral Agent (or any such sub-agents), or against 

any Related Party of any of the foregoing acting for the Administrative Agent or Collateral Agent (or any 

such sub-agents) in connection with such capacity. The obligations of the Lenders under this 

paragraph (c) are subject to the provisions of Section 2.12(e).

(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by 

Applicable Law, no Credit Party shall assert, and each hereby waives, any claim against any Indemnitee, 

on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or 

actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan 

Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or 

thereby, any Loan, or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above 
shall be liable for any damages arising from the use by unintended recipients of any information or other 

materials distributed by it through telecommunications, electronic or other information transmission 

systems in connection with this Agreement or the other Loan Documents or the transactions contemplated 

hereby or thereby.

(e) Payments. All amounts due under this Section shall be payable not later than 

five (5) days after demand therefor; provided that the terms of this Section shall not apply to the Initial 

Lender.

(f) Survival. Each party’s obligations under this Section shall survive the 

termination of the Loan Documents and payment of the obligations hereunder and the resignation or 

removal of the Administrative Agent or the Collateral Agent.

SECTION 11.04 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be 

binding upon and inure to the benefit of the parties hereto and their respective successors and assigns 

permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or 

obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and 

any other attempted assignment or transfer by any party hereto shall be null and void), and no Lender may 

assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in 

accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance 

with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security 

interest subject to the restrictions of paragraph (e) of this Section. Nothing in this Agreement, expressed 

or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective 

successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this 

Section and, to the extent expressly contemplated hereby, the Related Parties of each of the 

Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of 

this Agreement.

(b) Assignments by Lenders. Any Lender may at any time assign to one or more 

Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a 

portion of the Loans at the time owing to it); provided that any such assignment by any Lender (other than 

the Initial Lender) shall be subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of 

the assigning Lender’s Loans at the time owing to it or contemporaneous assignments to 

and/or by related Approved Funds (determined after giving effect to such assignments) 

that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the 

aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an 

Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in paragraph (b)(i)(A) of this Section, 

the principal outstanding balance of the Loans of the assigning Lender subject to each 

such assignment (determined as of the date the Assignment and Assumption with respect 

to such assignment is delivered to the Administrative Agent or, if “Trade Date” is 

specified in the Assignment and Assumption, as of the Trade Date) shall not be less than 

$5,000,000, unless each of the Administrative Agent and, so long as no Default or Event 

of Default has occurred and is continuing, the Borrower otherwise consents (each such 

consent not to be unreasonably withheld or delayed).
(ii) Proportionate Amounts. Each partial assignment shall be made as an 

assignment of a proportionate part of all the assigning Lender’s rights and obligations under this 

Agreement with respect to the Loans assigned.

(iii) Required Consents. No consent shall be required for any assignment by 

the Initial Lender. The consent of the Borrower (such consent not to be unreasonably withheld, 

delayed or conditioned) shall be required for any assignment by any Lender other than the Initial

Lender unless (x) a Default or Event of Default has occurred and is continuing at the time of such 

assignment, or (y) such assignment is to a Lender or an Affiliate of a Lender; provided that the 

Borrower shall be deemed to have consented to any such assignment unless it shall object thereto 

by written notice to the Administrative Agent within five (5) Business Days after having received 

notice thereof. 

(iv) Assignment and Assumption. The parties to each assignment shall 

execute and deliver to the Administrative Agent an Assignment and Assumption, together with a 

processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole 

discretion, elect to waive such processing and recordation fee in the case of any assignment. The 

assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative 

Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made 

to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made 

to a natural person (or a holding company, investment vehicle or trust for, or owned and operated 

for the primary benefit of, a natural person).

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this 

Section, from and after the effective date specified in each Assignment and Assumption, the assignee 

thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such 

Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the 

assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and 

Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment 

and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such 

Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 11.03

with respect to facts and circumstances occurring prior to the effective date of such assignment. Any 

assignment or transfer by a Lender other than the Initial Lender of rights or obligations under this 

Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a 

sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of 

this Section.

(c) Register. The Administrative Agent, acting solely for this purpose as an agent of 

the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to 

it and a register for the recordation of the names and addresses of the Lenders, and the principal amounts 

(and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time 

(the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, 

the Administrative Agent, the Collateral Agent and the Lenders shall treat each Person whose name is 

recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this 

Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any 

reasonable time and from time to time upon reasonable prior notice.

(d) Participations. Any Lender may at any time, without the consent of, or notice to, 

the Borrower or the Administrative Agent, sell participations to any Person (other than a Competitor, a
natural person, or a holding company, investment vehicle or trust for, or owned and operated for the 

primary benefit of, a natural person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) 

(each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement 

(including all or a portion of the Loans owing to it); provided that (i) such Lender’s obligations under this 

Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties 

hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the 

Collateral Agent and Lenders shall continue to deal solely and directly with such Lender in connection 

with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender 

shall be responsible for the indemnity under Section 11.03(b) with respect to any payments made by such 

Lender to its Participant(s).

Any agreement or instrument pursuant to which a Lender sells such a participation shall 

provide that such Lender shall retain the sole right to enforce this Agreement and to approve any 

amendment, modification or waiver of any provision of this Agreement; provided that such agreement or 

instrument may provide that such Lender will not, without the consent of the Participant, agree to any 

amendment, modification or waiver described in Section 11.02(b)(i) through (v) that affects such 

Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 

2.15 and 2.16 (subject to the requirements and limitations therein, including the requirements under 

Section 2.16(g) (it being understood that the documentation required under Section 2.16(g) shall be 

delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its 

interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees 

to be subject to the provisions of Section 2.19 as if it were an assignee under paragraph (b) of this 

Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.16, with 

respect to any participation, than its participating Lender would have been entitled to receive, except to 

the extent such entitlement to receive a greater payment results from a Change in Law that occurs after 

the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the 

Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the 

provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each 

Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided that 

such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a 

participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a 

register on which it enters the name and address of each Participant and the principal amounts (and stated 

interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the 

“Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of 

the Participant Register (including the identity of any Participant or any information relating to a 

Participant's interest in any loans or its other obligations under any Loan Document) to any Person except 

to the extent that such disclosure is necessary to establish that such loan or other obligation is in registered 

form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant 

Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is 

recorded in the Participant Register as the owner of such participation for all purposes of this Agreement 

notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its 

capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest 

in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any 

pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or 

assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee 

or assignee for such Lender as a party hereto.

SECTION 11.05 Survival. All covenants, agreements, representations and warranties 

made by any Credit Party herein and in any Loan Document or other documents delivered in connection 

herewith or therewith or pursuant hereto or thereto shall be considered to have been relied upon by the other 

parties hereto and shall survive the execution and delivery hereof and thereof and the making of the 
Borrowings hereunder, regardless of any investigation made by any such other party or on its behalf and 

notwithstanding that the Administrative Agent, the Collateral Agent or any Lender may have had notice or 

knowledge of any Default at the time of any Borrowing, and shall continue in full force and effect as long 

as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied and so long as the 

Commitments have not expired or been terminated. The provisions of Sections 2.14, 2.15, 11.03, 11.15 and 

Article VIII shall survive and remain in full force and effect regardless of the consummation of the 

transactions contemplated hereby, the payment in full of the Obligations, the expiration or termination of 

the Commitments or the termination of this Agreement or any provision hereof.

SECTION 11.06 Counterparts; Integration; Effectiveness; Electronic Execution.

(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in 

counterparts (and by different parties hereto in different counterparts), each of which shall constitute an 

original, but all of which when taken together shall constitute a single contract. This Agreement and the 

other Loan Documents, constitute the entire contract among the parties relating to the subject matter 

hereof and supersede any and all previous agreements and understandings, oral or written, relating to the 

subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it 

shall have been executed by the Administrative Agent and when the Administrative Agent shall have 

received counterparts hereof that, when taken together, bear the signatures of each of the other parties 

hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in 

electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of 

this Agreement.

(b) Electronic Execution. The words “execution,” “signed,” “signature,” and words 

of like import in this Agreement and in any Assignment and Assumption shall be deemed to include 

electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal 

effect, validity or enforceability as a manually executed signature or the use of a paper-based 

recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, 

including the Federal Electronic Signatures in Global and National Commerce Act, the New York State 

Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic 

Transactions Act. Notwithstanding anything herein to the contrary, delivery of an executed counterpart of 

a signature page of this Agreement by telecopy or other electronic means, or confirmation of the 

execution of this Agreement on behalf of a party by an email from an authorized signatory of such party

shall be effective as delivery of a manually executed counterpart of this Agreement. 

SECTION 11.07 Severability. If any provision of this Agreement or the other Loan 

Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the 

remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired 

thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or 

unenforceable provisions with valid provisions the economic effect of which comes as close as possible to 

that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular 

jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

SECTION 11.08 Right of Setoff. If an Event of Default shall have occurred and be 

continuing, each Lender, and each of their respective Affiliates is hereby authorized at any time and from 

time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits 

(general or special, time or demand, provisional or final, in whatever currency) at any time held, and other 

obligations (in whatever currency) at any time owing, by such Lender or any such Affiliate, to or for the 

credit or the account of the Borrower against any and all of the due and unpaid Obligations of the Borrower 

now or hereafter existing under this Agreement or any other Loan Document to such Lender or its 

respective Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand 

under this Agreement or any other Loan Document and although such obligations of the Borrower may be 

contingent or unmatured or are owed to a branch office or Affiliate of such Lender different from the 
branch office or Affiliate holding such deposit or obligated on such indebtedness. The rights of each 

Lender and their respective Affiliates under this Section are in addition to other rights and remedies 

(including other rights of setoff) that such Lender or its respective Affiliates may have. Each Lender (other 

than the Initial Lender) agrees to notify the Borrower and the Administrative Agent promptly after any such 

setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff 

and application.

SECTION 11.09 Governing Law; Jurisdiction; Etc.

(a) Governing Law. This Agreement and the other Loan Documents will be 

governed by and construed in accordance with the federal law of the United States if and to the extent 

such law is applicable, and otherwise in accordance with the law of the State of New York applicable to 

contracts made and to be performed entirely within such State.

(b) Jurisdiction and Venue. Each of the Credit Parties and each Lender agrees (a) to 

submit to the exclusive jurisdiction and venue of the United States District Court for the District of 

Columbia for any civil action, suit or proceeding arising out of or relating to this Agreement, the Loan 

Documents, or the transactions contemplated hereby or thereby.

(c) Service of Process. Each party hereto irrevocably consents to service of process 

in the manner provided for notices in Section 11.01. Nothing in this Agreement will affect the right of 

any party hereto to serve process in any other manner permitted by Applicable Law.

SECTION 11.10 Waiver of Jury Trial. To the extent permitted by Applicable Law, each 

Credit Party and each Lender hereby unconditionally waives trial by jury in any civil legal action or 

proceeding relating to this Agreement, the Loan Documents or the transactions contemplated hereby or 

thereby.

SECTION 11.11 Headings. Article and Section headings and the Table of Contents used 

herein are for convenience of reference only, are not part of this Agreement and shall not affect the 

construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 11.12 Treatment of Certain Information; Confidentiality. Each of the Agents

and the Lenders (other than the Initial Lender) agree to maintain the confidentiality of the Information (as 

defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it 

being understood that the Persons to whom such disclosure is made will be informed of the confidential 

nature of such Information and instructed to keep such Information confidential); (b) to the extent required 

or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related 

Parties (including any self-regulatory authority, such as the National Association of Insurance 

Commissioners); (c) to the extent required by Applicable Laws or by any subpoena or similar legal process; 

(d) to any other party hereto; (e) in connection with the exercise of any remedies hereunder or under any 

other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document 

or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions 

substantially the same as (or no less restrictive than) those of this Section, to (i) any assignee of or 

Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this 

Agreement, or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other 

transaction under which payments are to be made by reference to the Borrower and its obligations, this 

Agreement or payments hereunder; provided that, in each case under this clause (f)(ii), such actual or 

prospective party is not a Competitor; (g) on a confidential basis to (i) any rating agency in connection with 

rating the Borrower or its Subsidiaries or the Loans or (ii) the CUSIP Service Bureau or any similar agency 

in connection with the issuance and monitoring of CUSIP numbers with respect to the Loans; (h) with the 

consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a 

result of a breach of this Section, or (y) becomes available to either Agent, any Lender or any of their 
respective Affiliates on a nonconfidential basis from a source other than the Borrower who did not acquire 

such information as a result of a breach of this Section. 

For purposes of this Section, “Information” means all information received from the 

Parent or any of its Subsidiaries relating to the Parent or any of its Subsidiaries or any of their respective 

businesses, other than any such information that is available to the Administrative Agent or any Lender 

on a nonconfidential basis prior to disclosure by the Parent or any of its Subsidiaries; provided that, in the 

case of information received from the Parent or any of its Subsidiaries after the date hereof, such 

information is clearly identified at the time of delivery as confidential. Any Person required to maintain 

the confidentiality of Information as provided in this Section shall be considered to have complied with 

its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality 

of such Information as such Person would accord to its own confidential information.

SECTION 11.13 Money Laundering; Sanctions. The Borrower shall provide to the 

Administrative Agent, the Collateral Agent, and the Lenders information and documentation that the 

Lenders may reasonably request that identifies the Borrower and its Affiliates, which information may 

include the name and address of the Borrower and its Affiliates and other information regarding beneficial 

ownership of the Borrower and its Affiliates that will allow the Lenders to ensure compliance with 

Sanctions and the AML Laws. For purposes of determining whether or not a representation with respect to 

any indirect ownership is true or a covenant is being complied with under this Section 11.13, the Borrower 

shall not be required to make any investigation into (i) the ownership of publicly traded stock or other 

publicly traded securities or (ii) the ownership of assets by a collective investment fund that holds assets for 

employee benefit plans or retirement arrangements.

SECTION 11.14 Interest Rate Limitation. Notwithstanding anything herein to the 

contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other 

amounts that are treated as interest on such Loan under Applicable Law (collectively, “charges”), shall 

exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, 

received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of 

interest payable in respect of such Loan hereunder, together with all charges payable in respect thereof, 

shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been 

paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated 

and the interest and charges payable to such Lender in respect of other Loans or periods shall be increased 

(but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together 

with interest thereon at the Federal Funds Effective Rate for each day to the date of repayment, shall have 

been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount 

collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or 

refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of such 

Loan exceed the maximum amount collectible at the Maximum Rate. 

SECTION 11.15 Payments Set Aside. To the extent that any payment by or on behalf of 

the Borrower is made to the Administrative Agent or any Lender, or any Lender exercises its right of setoff, 

and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to 

be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the 

Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, 

in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such 

recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in 

full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each 

Lender (other than the Initial Lender) severally agrees to pay to the Administrative Agent upon demand its 

applicable share (without duplication) of any amount so recovered from or repaid by the Administrative 
Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per 

annum equal to the Federal Funds Effective Rate from time to time in effect.

SECTION 11.16 No Advisory or Fiduciary Responsibility. In connection with all aspects 

of each transaction contemplated hereby (including in connection with any amendment, waiver or other 

modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and 

acknowledges its Affiliates’ understanding, that: (a) (i) no fiduciary, advisory or agency relationship 

between any Credit Party and any of their respective Subsidiaries and the Administrative Agent, the 

Collateral Agent or any Lender is intended to be or has been created in respect of the transactions 

contemplated hereby or by the other Loan Documents, irrespective of whether the Administrative Agent, 

the Collateral Agent or any Lender has advised or is advising any Credit Party or any of their respective 

Subsidiaries on other matters, (ii) the lending and other services regarding this Agreement provided by the 

Administrative Agent, the Collateral Agent and the Lenders are arm’s-length commercial transactions 

between Credit Parties and their Affiliates, on the one hand, and the Administrative Agent, the Collateral 

Agent and the Lenders, on the other hand, (iii) the Credit Parties have consulted their own legal, accounting, 

regulatory and tax advisors to the extent that they has deemed appropriate and (iv) the Credit Parties are 

capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions 

contemplated hereby and by the other Loan Documents; and (b) (i) the Administrative Agent, the Collateral 

Agent and the Lenders each is and has been acting solely as a principal and, except as expressly agreed in 

writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary 

for the Credit Parties or any of their respective Affiliates, or any other Person; (ii) none of the 

Administrative Agent, the Collateral Agent and the Lenders has any obligation to the Credit Parties or any 

of their respective Affiliates with respect to the transactions contemplated hereby except those obligations 

expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the 

Collateral Agent and the Lenders and their respective Affiliates may be engaged, in a broad range of 

transactions that involve interests that differ from those of the Credit Parties and their respective Affiliates, 

and none of the Administrative Agent, the Collateral Agent and the Lenders has any obligation to disclose 

any of such interests to the Credit Parties or any of their respective Affiliates. To the fullest extent 

permitted by Law, the Credit Parties hereby waive and release any claims that they may have against any of 

the Administrative Agent, the Collateral Agent and the Lenders with respect to any breach or alleged breach 

of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby. 

SECTION 11.17 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. 

Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or 

understanding among the parties, each party hereto (including each Credit Party) acknowledges that any 

liability arising under a Loan Document of any Credit Party that is an Affected Financial Institution, to the 

extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable 

Resolution Authority, and agrees and consents to, and acknowledges and agrees to be bound by: (a) the 

application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such 

liabilities arising under any Loan Documents which may be payable to it by any Credit Party that is an 

Affected Financial Institution; and (b) the effects of any Bail-In Action on any such liability, including (i) a 

reduction in full or in part or cancellation of any such liability, (ii) a conversion of all, or a portion of, such 

liability into shares or other instruments of ownership in such Affected Financial Institution, its parent 

undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares 

or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such 

liability under any Loan Document, or (iii) the variation of the terms of such liability in connection with the 

exercise of the write-down and conversion powers of the applicable Resolution Authority.

[Signature pages follow]

 

[Signature Page to Loan and Guarantee Agreement – SkyWest] 

THE BANK OF NEW YORK MELLON, 

as Administrative Agent 

By_________________________ 

Name: Bret S. Derman 

Title: Vice President 

THE BANK OF NEW YORK MELLON, 

as Collateral Agent 

By_________________________ 

Name: Bret S. Derman 

Title: Vice President 

SCHEDULE 3.05 

Financial Statements
SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 

OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 

ACT OF 1934

For the transition period from to 

Commission file number 0-14719

SKYWEST, INC.

Incorporated under the laws of Utah 87-0292166

(I.R.S. Employer ID No.)

444 South River Road

St. George, Utah 84790

(435) 634-3000

(Address of principal executive offices and telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered

Common Stock, No Par Value SKYW The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of 

the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was 

required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be 

submitted 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 such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 

a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated 

filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer  Accelerated filer 

Non-accelerated filer  Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended 

transition period for complying with any new or revised financial accounting standards provided pursuant to 

Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes ☐ No 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest 

practicable date.

Class Outstanding at July 31, 2020

Common stock, no par value 50,181,350
2

SKYWEST, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements 3

Consolidated Balance Sheets 3

Consolidated Statements of Comprehensive Income 5

Consolidated Statements of Stockholders Equity 6

Condensed Consolidated Statements of Cash Flows 8

Notes to Condensed Consolidated Financial Statements 9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24

Item 3. Quantitative and Qualitative Disclosures About Market Risk 41

Item 4. Controls and Procedures 41

PART II OTHER INFORMATION

Item 1. Legal Proceedings 41

Item 1A.Risk Factors 42

Item 6. Exhibits 45

Signature 46

Exhibit 31.1 Certification of Chief Executive Officer

Exhibit 31.2 Certification of Chief Financial Officer

Exhibit 32.1 Certification of Chief Executive Officer

Exhibit 32.2 Certification of Chief Financial Officer
3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

ASSETS

June 30, December 31, 

 2020 2019

(unaudited)

CURRENT ASSETS:

Cash and cash equivalents $ 452,247 $ 87,206

Marketable securities 309,823 432,966

Income tax receivable 18,915 11,141

Receivables, net 42,498 82,977

Inventories, net 97,782 110,503

Other current assets 24,584 35,553

Total current assets 945,849 760,346

PROPERTY AND EQUIPMENT:

Aircraft and rotable spares 7,273,577 7,078,801

Deposits on aircraft 40,263 48,858

Buildings and ground equipment 246,131 265,398

7,559,971 7,393,057

Less-accumulated depreciation and amortization (2,233,275) (1,998,376)

Total property and equipment, net 5,326,696 5,394,681

OTHER ASSETS:

Operating lease right-of-use assets 310,016 336,009

Other assets 190,822 166,093

Total other assets 500,838 502,102

Total assets $ 6,773,383 $ 6,657,129

See accompanying notes to condensed consolidated financial statements.
4

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

June 30, December 31, 

 2020 2019

(unaudited)

CURRENT LIABILITIES:

Current maturities of long-term debt $ 309,159 $ 364,126

Accounts payable 322,460 284,473

Accrued salaries, wages and benefits 108,929 133,856

Current maturities of operating lease liabilities 87,415 94,806

Taxes other than income taxes 20,221 15,004

Other current liabilities 138,003 32,411

Total current liabilities 986,187 924,676

LONG-TERM DEBT, net of current maturities 2,664,122 2,628,989

DEFERRED INCOME TAXES PAYABLE 625,504 623,580

NONCURRENT OPERATING LEASE LIABILITIES 238,572 259,237

OTHER LONG-TERM LIABILITIES 116,036 45,633

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS’ EQUITY:

Preferred stock, 5,000,000 shares authorized; none issued — —

Common stock, no par value, 120,000,000 shares authorized; 82,053,807 and 

81,742,937 shares issued, as of June 30, 2020 and December 31, 2019, 

respectively 694,997 686,806

Retained earnings 2,064,794 2,079,179

Treasury stock, at cost, 31,913,635 and 31,420,179 shares issued, as of June 30, 

2020 and December 31, 2019, respectively (617,136) (590,971)

Unrealized appreciation on securities 307 —

Total stockholders’ equity 2,142,962 2,175,014

Total liabilities and stockholders’ equity $ 6,773,383 $ 6,657,129

See accompanying notes to condensed consolidated financial statements.
5

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars and Shares in Thousands, Except per Share Amounts)

(Unaudited)

Three months ended Six months ended 

June 30, June 30, 

 2020 2019 2020 2019

OPERATING REVENUES:

Flying agreements $ 336,370 $ 725,335 $ 1,045,864 $ 1,425,336

Lease, airport services and other 13,669 19,048 34,111 42,741

Total operating revenues 350,039 744,383 1,079,975 1,468,077

OPERATING EXPENSES:

Salaries, wages and benefits 170,218 243,766 419,379 501,354

Aircraft maintenance, materials and repairs 121,289 124,789 281,505 243,051

Depreciation and amortization 131,638 90,148 243,346 180,134

Airport-related expenses 21,550 30,782 52,190 61,429

Aircraft fuel 6,821 30,851 32,234 56,507

Aircraft rentals 16,697 18,006 33,752 38,164

CARES Act payroll support grant (151,938) — (151,938) —

Special items — — — 21,869

Other operating expenses 38,167 61,948 107,589 125,057

Total operating expenses 354,442 600,290 1,018,057 1,227,565

OPERATING INCOME (LOSS) (4,403) 144,093 61,918 240,512

OTHER INCOME (EXPENSE):

Interest income 1,685 3,731 4,249 7,538

Interest expense (30,926) (32,770) (61,130) (65,278)

Other income (expense), net 402 281 800 47,006

Total other income (expense), net (28,839) (28,758) (56,081) (10,734)

INCOME (LOSS) BEFORE INCOME TAXES (33,242) 115,335 5,837 229,778

PROVISION (BENEFIT) FOR INCOME TAXES (7,527) 27,283 1,564 53,545

NET INCOME (LOSS) $ (25,715) $ 88,052 $ 4,273 $ 176,233

BASIC EARNINGS (LOSS) PER SHARE $ (0.51) $ 1.72 $ 0.09 $ 3.44

DILUTED EARNINGS (LOSS) PER SHARE $ (0.51) $ 1.71 $ 0.08 $ 3.40

Weighted average common shares:

Basic 50,140 51,145 50,208 51,293

Diluted 50,140 51,477 50,357 51,787

COMPREHENSIVE INCOME (LOSS):

Net income (loss) $ (25,715) $ 88,052 $ 4,273 $ 176,233

Net unrealized depreciation on debt securities, net of taxes 307 — 307 32

TOTAL COMPREHENSIVE INCOME (LOSS) $ (25,408) $ 88,052 $ 4,580 $ 176,265

See accompanying notes to condensed consolidated financial statements
6

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(UNAUDITED)

(In Thousands)

Accumulated

Other

Common Stock Retained Treasury Stock Comprehensive

Shares Amount Earnings Shares Amount Income Total

Balance at December 31, 2019 81,743 $ 686,806 $ 2,079,179 (31,420) $ (590,971) $ — $ 2,175,014

Change in accounting principle and other 

(see Note 1) — (11,639) — — — (11,639)

Balance at December 31, 2019, as adjusted 81,743 686,806 2,067,540 (31,420) (590,971) — 2,163,375

Net income — — 29,988 — — — 29,988

Exercise of common stock options and stock 

issued under equity award plan 287 38 — — — — 38

Sale of common stock under employee stock 

purchase plan 24 1,494 — — — — 1,494

Stock-based compensation expense 

associated with equity awards, net of 

forfeitures — 1,727 — — — — 1,727

Treasury shares acquired from vested 

employee stock awards for income tax 

withholdings — — — (108) (6,165) — (6,165)

Treasury stock purchases — — — (386) (20,000) — (20,000)

Cash dividends declared ($0.14 per share) — — (7,019) — — — (7,019)

Balance at March 31, 2020 82,054 $ 690,065 $ 2,090,509 (31,914) $ (617,136) $ — $ 2,163,438

Net loss — — (25,715) — — — (25,715)

Net unrealized appreciation on marketable 

securities, net of tax of $99 — — — — — 307 307

Stock-based compensation expense 

associated with equity awards, net of 

forfeitures — 2,087 — — — — 2,087

CARES Act warrant issuance — 2,845 — — — — 2,845

Balance at June 30, 2020 82,054 $ 694,997 $ 2,064,794 (31,914) $ (617,136) $ 307 $ 2,142,962

See accompanying notes to condensed consolidated financial statements.
7

SKYWEST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(UNAUDITED)

(In Thousands)

Accumulated

Other

Common Stock Retained Treasury Stock Comprehensive

Shares Amount Earnings Shares Amount Income (Loss) Total

Balance at December 31, 2018 81,239 $ 690,910 $ 1,776,585 (29,851) $ (503,182) $ (32) $ 1,964,281

Change in accounting principle and other 

(see Note 7) — (13,141) — — — (13,141)

Balance at December 31, 2018, as adjusted 81,239 690,910 1,763,444 (29,851) (503,182) (32) 1,951,140

Net income — — 88,181 — — — 88,181

Net unrealized appreciation on marketable 

securities, net of tax of $10 — — — — — 32 32

Exercise of common stock options and stock 

issued under equity award plan 521 641 — — — — 641

Sale of common stock under employee stock 

purchase plan 39 1,620 — — — — 1,620

Stock-based compensation expense 

(forfeiture credit) associated with equity 

awards, net — (578) — — — — (578)

Treasury shares acquired from vested 

employee stock awards for income tax 

withholdings — — — (173) (9,311) — (9,311)

Treasury stock purchases — — — (476) (25,000) — (25,000)

Cash dividends declared ($0.12 per share) — — (6,158) — — — (6,158)

Balance at March 31, 2019 81,799 $ 692,593 $ 1,845,467 (30,500) $ (537,493) $ — $ 2,000,567

Net income — — 88,052 — — — 88,052

Exercise of common stock options and stock 

issued under equity award plan 172 2,279 — — — — 2,279

Stock-based compensation expense 

associated with equity awards, net of 

forfeitures — 2,075 — — — — 2,075

Treasury stock purchases — — — (311) (18,476) — (18,476)

Common stock purchased and cancelled (268) (16,145) — — — — (16,145)

Cash dividends declared ($0.12 per share) — — (6,107) — — — (6,107)

Balance at June 30, 2019 81,703 $ 680,802 $ 1,927,412 (30,811) $ (555,969) $ — $ 2,052,245

See accompanying notes to condensed consolidated financial statements.
8

SKYWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In Thousands)

Six months ended 

June 30, 

 2020 2019

NET CASH PROVIDED BY OPERATING ACTIVITIES $ 492,283 $ 362,123

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of marketable securities (475,156) (896,326)

Sales of marketable securities 598,606 961,403

Proceeds from the sale of aircraft, property and equipment 1,366 21,065

Acquisition of property and equipment:

Aircraft and rotable spare parts (161,167) (325,969)

Buildings and ground equipment (8,695) (55,865)

Deposits on aircraft (625) (31,817)

Aircraft deposits applied towards acquired aircraft 9,220 23,298

Net cash received from sale of ExpressJet subsidiary — 53,200

Decrease (increase) in other assets (34,172) 1,962

NET CASH USED IN INVESTING ACTIVITIES (70,623) (249,049)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt 98,059 99,914

Principal payments on long-term debt (115,189) (211,200)

Net proceeds from issuance of common stock 1,532 4,540

Purchase of treasury and common stock and employee income tax paid on equity awards (26,165) (68,932)

Increase in debt issuance and lessor initial direct costs (1,797) (820)

Payment of cash dividends (13,059) (11,299)

NET CASH PROVIDED USED IN FINANCING ACTIVITIES (56,619) (187,797)

Increase (decrease) in cash and cash equivalents 365,041 (74,723)

Cash and cash equivalents at beginning of period 87,206 328,384

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 452,247 $ 253,661

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Non-cash investing activities:

Acquisition of rotable spare parts $ 13,522 $ 3,244

Debt assumed on aircraft acquired under operating leases $ — $ 14,475

Engines contributed to joint venture $ — $ 22,313

Non-cash assets used to acquire aircraft under operating leases $ — $ 150,688

Lease liability arising from the recognition of right-of-use asset $ — $ 456,472

CARES Act warrant issuance $ 2,845 $ —

Cash paid during the period for:

Interest, net of capitalized amounts $ 41,881 $ 67,778

Income taxes $ 303 $ 1,713

SUPPLEMENTAL DISCLOSURE OF SALE OF SUBSIDIARY:

 Decrease in carrying amount of assets $ — $ (101,448)

 Decrease in carrying amount of liabilities — 68,341

 Cash received from buyers — 79,632

Gain on sale of subsidiary $ — $ 46,525

See accompanying notes to condensed consolidated financial statements.
9

SKYWEST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 — Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated financial statements of SkyWest, Inc. (“SkyWest” or the “Company”) and its 

operating subsidiary SkyWest Airlines, Inc. (“SkyWest Airlines”) and its leasing subsidiary SkyWest Leasing, Inc. 

(“SkyWest Leasing”) included herein have been prepared, without audit, pursuant to the rules and regulations of the 

Securities and Exchange Commission (the “SEC”). On January 22, 2019, the Company completed the sale of its former 

wholly owned subsidiary, ExpressJet Airlines, Inc. (“ExpressJet”). The Company’s financial and operating results 

presented in this Report include the financial results of ExpressJet for the period of time ExpressJet was operating as a 

subsidiary of the Company. Certain information and disclosures normally included in financial statements prepared in 

accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been 

condensed or omitted pursuant to such rules and regulations, although the Company believes that the following 

disclosures are adequate to make the information presented not misleading. These condensed consolidated financial 

statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of 

operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise 

disclosed. These condensed consolidated financial statements should be read in conjunction with the consolidated 

financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended 

December 31, 2019. Due in part to the severe affects from the global COVID-19 (coronavirus) pandemic, in addition to 

other factors, the results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of 

the results that may be expected for the year ending December 31, 2020.

The preparation of financial statements in conformity with GAAP 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 will likely differ, and may differ materially, from those estimates and assumptions.

Recent Accounting Pronouncements

Recently Adopted Standards

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 

(“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial 

Instruments” (“Topic 326”), which requires measurement and recognition of expected credit losses for financial assets 

held and requires enhanced disclosure regarding significant estimates and judgments used in estimating credit losses. 

Topic 326 is effective for the Company beginning January 1, 2020. The Company adopted Topic 326 on January 1, 

2020. The Company’s primary financial assets as of December 31, 2019 included trade receivables from its flying 

agreements, a note receivable from the sale of ExpressJet, and receivables from aircraft manufacturers and other third 

parties in the airline industry. The Company recorded a credit loss of $11.6 million net of income tax in conjunction with 

the adoption of Topic 326. The Company recorded this credit loss as a January 1, 2020 beginning balance sheet entry to 

retained earnings (net of income tax). Due to the COVID-19 pandemic, the Company recorded additional reserves 

against certain of the Company’s outstanding financial instruments during the six months ended June 30, 2020. See Note 

3, “Flying Agreements Revenue and Lease, Airport Services and Other Revenues,” for more information. 

Note 2 — Impact of the COVID-19 Pandemic

COVID-19, which was declared a global health pandemic by the World Health Organization in March 2020, 

has surfaced in nearly all regions of the world and driven the implementation of significant, government-imposed 

measures to prevent or reduce its spread, including travel restrictions, closing of borders, “shelter in place” orders and 

business closures. Consequently, the Company and its major airline partners (as defined in Note 3 below), have 
10

experienced an unprecedented decline in the demand for air travel, which has materially and adversely affected the 

Company’s revenues, particularly under its prorate agreements (as defined in Note 3 below). The spread of the virus and 

the resulting global pandemic has affected the majority of the domestic and international networks of the Company’s 

major airline partners for whom it conducts flight operations and relies on to set its flight schedules. While the length and

severity of the reduction in demand due to COVID-19 are uncertain, the Company presently expects a continued 

significant negative impact on its results of operations for the remainder of 2020 and into 2021.

In response to these developments, the Company has implemented measures to focus on the personal safety of 

its passengers and employees, while at the same time seeking to mitigate the impact on the Company’s financial position 

and operations. These measures include, but are not limited to, the following:

Focus on the Personal Safety of Passengers and Employees. The safety and well-being of the Company’s 

passengers and employees are the Company’s priorities in every decision it makes. As the COVID-19 pandemic has 

developed, the Company has taken numerous steps to help passengers and employees take appropriate safety measures 

on the ground and in the air in keeping with current Centers for Disease Control and Prevention recommendations, 

including:

• Working with the Company’s major airline partners to enhance its aircraft cleaning procedures.

• Working with the Company’s major airline partners to provide masks for crewmembers and ensuring that all 

fleet service personnel have the necessary personal protective equipment for disinfecting the aircraft. 

• Providing a number of options to employees who are diagnosed with COVID-19, including pay protection and 

extended leave options.

• Implementing workforce social distancing and protection measures, enhanced cleaning of the Company’s 

facilities, including training facilities, using methods and products similar to what the Company is using on its 

aircraft.

Capacity Reductions. Beginning in March 2020, the Company and its major airline partners experienced an 

unprecedented decrease in demand for air travel and expect this decline from 2019 levels to continue throughout 2020. 

The Company depends on its major airline partners to contract with the Company to schedule flights. Therefore, in 

response to this decreased demand, the Company has significantly reduced its capacity. Prior to the COVID-19 

pandemic, the Company anticipated operating approximately 2,500 to 2,600 daily departures in the month of July 2020. 

However, in July 2020 it typically operated between approximately 1,200 to 1,400 daily departures as a result of 

COVID-19-related schedule reductions. The Company also anticipates similar schedule reductions will likely continue 

throughout the remainder of 2020 and into 2021. The number of daily flights operated by the Company may not return to 

pre-COVID-19 levels for the foreseeable future. The Company will continue to work with its major airline partners 

regarding future schedules and make further demand-driven adjustments to its capacity as needed. The Company 

anticipates certain aircraft with scheduled contract expirations in 2020 will not be extended as a result of decreased 

demand including 36 Canadair CRJ200 regional aircraft (“CRJ200”) operating under the SkyWest Airlines Delta 

Connection Agreement as of June 30, 2020. The Company additionally terminated its American Prorate Agreement on 

seven CRJ200 aircraft in the second quarter of 2020 and the Company may have further reductions in the number of 

CRJ200 aircraft operating under its other prorate agreements. The Company may receive requests by its major airline 

partners to defer deliveries of new or used aircraft that were previously scheduled for 2020, 2021 and 2022.

Cost Reductions. With the reduction in revenue, the Company has, and will continue to implement, cost saving 

initiatives, including:

• Reducing employee-related costs including by:

o Offering voluntary unpaid leave to employees.

o Suspending all non-scale pay increases.

o Instituting a company-wide hiring freeze.

• Delaying non-essential maintenance projects and reducing or suspending other discretionary spending.

Liquidity. At June 30, 2020, the Company had $828.3 million in total available liquidity, consisting of $762.1

million in cash and marketable securities and $66.2 million available under SkyWest Airlines’ line of credit.
11

CARES Act. On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security 

Act (“CARES Act”) into law. The CARES Act is a relief package intended to assist many aspects of the U.S. economy, 

including providing the airline industry with up to $25 billion in grants to be used for employee wages, salaries and 

benefits.

In April 2020, SkyWest Airlines entered into an agreement with the U.S. Department of the Treasury 

(“Treasury”) to receive $438.0 million in emergency relief through the CARES Act payroll support program to be paid 

in installments from April to July 2020. The relief payments are conditioned on the Company’s agreement to, among 

other things, refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other 

conditions include bans on share repurchases and dividends through September 30, 2021, continuing essential air service 

as directed by the U.S. Department of Transportation and certain limitations on executive compensation. The relief 

payments include $336.6 million in a grant and $101.4 million in an unsecured 10-year low interest loan. The loan bears 

interest at an annual rate of 1.00% for the first five years (through April 2025) and the Secured Overnight Financing Rate 

("SOFR") plus 2.00% in the final five years. In return, we agreed to issue to Treasury warrants to purchase 357,317

shares of the Company’s common stock. These warrants have an exercise price of $28.38 per share and a five-year term

from the date of issuance.

The relative fair value of the warrants is recorded within stockholder's equity and as a discount reducing the 

carrying value of the loan, which will be amortized as interest expense in the Company’s income statement over the term 

of the loan. The proceeds of the grant are recorded in cash and cash equivalents when received and will be recognized as 

a reduction in expense in CARES Act payroll support grant in our income statement over the periods that the funds are 

intended to compensate.

In the three months ended June 30, 2020, the Company received $306.6 million under the CARES Act payroll 

support program, which consisted of $244.6 million in a grant and $62.0 million in an unsecured loan. The remaining 

amount was received in July 2020. As of June 30, 2020, the Company recognized $151.9 million of the grant as a 

reduction in expense with the remaining $92.7 million recorded as a deferred reduction in expense in other current 

liabilities on our balance sheet. We expect to recognize the remainder of the grant proceeds from the CARES Act payroll 

support program as a reduction in expense by the end of 2020. See Note 9, "Long-Term Debt," for further discussion of 

the unsecured loans and warrants to acquire the Company’s shares issued under the CARES Act payroll support 

program.

The CARES Act also provides for up to $25 billion in secured loans to the airline industry. The Company has entered 

into a non-binding letter of intent with Treasury for approximately $497.0 million under the secured loan program. The 

Company is evaluating the timing and level of its of participation, and the Company has until September 30, 2020 to 

decide whether to participate in this program.

Note 3 — Flying Agreements Revenue and Lease, Airport Services and Other Revenues

The Company recognizes flying agreements revenue and lease, airport services and other revenues when the 

service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as 

“capacity purchase agreements”) with Delta Air Lines, Inc. (“Delta”), United Airlines, Inc. (“United”), American 

Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major airline partner”), the major airline 

partner generally pays the Company a fixed-fee for each departure, flight hour (measured from takeoff to landing, 

excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per 

aircraft in service each month with additional incentives based on flight completion and on-time performance. The major 

airline partner also directly pays for or reimburses the Company for certain direct expenses incurred under the capacity 

purchase agreement, such as fuel, airport landing fees and airport rents. Under the capacity purchase agreements, the 

Company’s performance obligation is met when each flight is completed and is reflected in flying agreements revenue. 

The transaction price for the capacity purchase agreements is determined from the fixed-fee consideration, incentive 

consideration and directly reimbursed expenses earned as flights are completed over the agreement term. For the six 

months ended June 30, 2020, capacity purchase agreements represented approximately 86.9% of the Company’s flying 

agreements revenue. 
12

Under the Company’s revenue-sharing arrangements (referred to as a “revenue-sharing” or “prorate” 

arrangement), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which 

the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a 

Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying 

agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the 

portion of the prorate passenger fare the Company anticipates that it will receive for each completed flight. The 

transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket 

amount on each completed flight over the agreement term. For the six months ended June 30, 2020, prorate flying 

arrangements represented approximately 13.1% of the Company’s flying agreements revenue.

Lease, airport services and other revenues primarily consist of revenue generated from aircraft and spare 

engines leased to third parties. Of the Company’s $5.3 billion of property and equipment, net as of June 30, 2020, $132.5

million of regional jet aircraft and spare engines was leased to third parties under operating leases as of June 30, 2020. 

The Company mitigates the residual asset risks of these assets by leasing aircraft and engine types that can be operated 

by the Company in the event of a default. Additionally, the operating leases typically have specified lease return 

condition requirements paid by the lessee to the Company and the Company typically maintains inspection rights under 

the leases. The following table summarizes future minimum rental income under operating leases primarily related to 

leased aircraft that had remaining non-cancelable lease terms as of June 30, 2020 (in thousands):

July 2020 through December 2020 $ 11,974

2021 22,508 

2022 22,196 

2023 21,643 

2024 21,336 

Thereafter 70,938 

$ 170,595

Additionally, lease, airport services and other revenues includes airport agent services, such as gate and ramp 

agent services at applicable airports where the Company provides such services. The transaction price for airport 

customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of 

flights handled by the Company over the agreement term. The following represents the Company’s lease, airport services 

and other revenue for the three and six months ended June 30, 2020 and 2019 (in thousands):

For the three months ended June 30, For the six months ended June 30, 

2020 2019 2020 2019

Operating lease revenue $ 9,485 $ 9,016 $ 20,026 $ 18,038

Airport customer service and other revenue 4,184 10,032 14,086 24,703

 Lease, airport services and other $ 13,669 $ 19,048 $ 34,112 $ 42,741

Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee 

revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline 

partners on flights that the Company operates under its code-share agreements. 
13

The following table represents the Company’s flying agreements revenue by type for the three and six month 

periods ended June 30, 2020 and 2019 (in thousands):

For the three months ended June 30, For the six months ended June 30, 

 2020 2019 2020 2019

Capacity purchase agreements revenue: flight operations $ 132,061 $ 383,732 $ 498,469 $ 770,278

Capacity purchase agreements revenue: aircraft lease and 

fixed revenue 168,103 206,678 410,838 414,059

Prorate agreements revenue 36,206 134,925 136,557 240,999

 Flying agreements revenue $ 336,370 $ 725,335 $ 1,045,864 $ 1,425,336

A portion of the Company’s compensation under its capacity purchase agreements is designed to reimburse the 

Company for certain aircraft ownership costs. The consideration for aircraft ownership costs varies by agreement but is 

intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and 

interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the

use of the aircraft under the Company’s capacity purchase agreements is reflected as lease revenue, inasmuch as the 

agreements identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease 

revenue associated with the Company’s capacity purchase agreements is accounted for as an operating lease and is 

reflected as flying agreements revenue on the Company’s consolidated statements of comprehensive income. The 

Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statement of 

comprehensive income since the use of the aircraft is not a separate activity of the total service provided.

Under the Company’s capacity purchase agreements, the Company is paid a fixed amount per aircraft each 

month over the contract term. The Company recognizes revenue related to the fixed amount per aircraft per month 

proportionately to completed flights, which is the Company’s performance obligation. The Company operated a 

materially lower number of flights during the three months ended June 30, 2020 from previous levels due to a reduction 

in flight schedules resulting from the COVID-19 pandemic. The Company’s completed departures decreased 62% and 

completed block hours decreased 66% during the three months ended June 30, 2020 compared to the three months ended 

June 30, 2019. Due to the lower number of flights operated during the three months ended June 30, 2020, the amount of 

cash collected for the fixed amount per aircraft exceeded the revenue recognized based on flights completed. 

Accordingly, the Company deferred $69.1 million of revenue attributed to the fixed amount per month per aircraft 

received during the three months ended June 30, 2020. The Company anticipates the future monthly flight levels will 

increase over the remaining applicable contract terms compared to the three months ended June 30, 2020. The 

Company’s deferred revenue balance will be recognized based on the Company’s completed flight levels each period 

relative to the anticipated flight levels over the remaining contract term.

The Company’s capacity purchase and prorate agreements include weekly provisional cash payments from the 

respective major airline partner based on a projected level of flying each month. The Company and each major airline 

partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis. In 

the event a flying agreement includes a mid-term rate reset to adjust rates prospectively and the contractual rates under 

the Company’s flying agreements have not been finalized at quarterly or annual financial statement dates, the Company 

applies the variable constraint guidance under ASU No. 2014-09, “Revenue from Contracts with Customers, (Topic 

606)” (“Topic 606”), where the Company records revenue to the extent it believes that it is probable that a significant 

reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable 

consideration is subsequently resolved.

In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the 

achievement of certain performance criteria. The incentives are defined in the agreements and are measured and 

determined on a monthly or quarterly basis. At the end of each period during the term of an agreement, the Company 

calculates the incentives achieved during that period and recognizes revenue attributable to that agreement accordingly, 

subject to the variable constraint guidance under Topic 606.

The following table summarizes the significant provisions of each code-share agreement SkyWest Airlines has 

with each major airline partner:
14

Delta Connection Agreements

Agreement Aircraft type 

Number of

Aircraft 

Term / Termination

Dates

Delta Connection Agreement

(capacity purchase agreement)

• CRJ 200

• CRJ 700

• CRJ 900

• E175

36

6

43

67

• Individual aircraft have scheduled 

removal dates from 2020 to 2029

Delta Connection Prorate Agreement 

(prorate arrangement)

• CRJ 200 21 • Terminable with 30-day notice

United Express Agreements

Agreement Aircraft type 

Number of

Aircraft 

Term / Termination

Dates

United Express Agreements

(capacity purchase agreement)

• CRJ 200

• CRJ 700

• E175

70

19

90

• Individual aircraft have scheduled 

removal dates from 2022 to 2029

United Express Prorate Agreement

(prorate arrangement)

• CRJ 200 26 • Terminable with 120-day notice

American Agreements

Agreement Aircraft type 

Number of

Aircraft 

Term / Termination

Dates

American Agreement

(capacity purchase agreement)

• CRJ 700 61 • Individual aircraft have scheduled 

removal dates from 2022 to 2025

Alaska Capacity Purchase Agreement

Agreement Aircraft type 

Number of

Aircraft 

Term / Termination

Dates

Alaska Agreement

(capacity purchase agreement)

• E175 32 • Individual aircraft have scheduled 

removal dates from 2027 to 2030

In addition to the contractual arrangements described above, SkyWest Airlines has entered into capacity 

purchase agreements with Delta and American to place additional new and used Embraer E175 dual-class regional jet 

aircraft (“E175”) into service. The Company is coordinating with its major airline partners on the timing of upcoming 

fleet deliveries under previously announced deals in response to COVID-19 schedule reductions. The anticipated future 

delivery dates summarized below are subject to change. 

As of June 30, 2020, the Company was scheduled to acquire and place into service four new E175 aircraft in 

connection with its agreement with Delta. The delivery dates for these four new E175 aircraft are currently scheduled to 

be completed during 2020. Additionally, the Company is scheduled to place one Canadair CRJ900 regional jet aircraft 

(“CRJ900”) that is financed by Delta under a nine-year capacity purchase agreement in 2020. 

As of June 30, 2020, the Company was scheduled to acquire and place into service 20 new E175 aircraft in 

connection with its agreement with American. The delivery dates for the new E175 aircraft are scheduled to occur from 

the end of 2021 to mid-2022. Additionally, SkyWest Airlines has a flying contract with American to operate a total of 70

used Canadair CRJ700 regional jet aircraft (“CRJ700s”), of which 61 aircraft were under contract at June 30, 2020. The 

Company is also coordinating with American on in-service dates for the remaining nine aircraft and anticipates the 

aircraft will be in service by mid-2021. During the three months ended June 30, 2020, the Company terminated its 

American Prorate Agreement on seven CRJ200 aircraft as a result of COVID-19 related passenger demand restrictions.

As of June 30, 2020, the Company’s capacity purchase agreement with Delta included 36 CRJ200 aircraft that 

are scheduled to expire in increments during the remainder of 2020 and are not expected to be extended as a result of the 

decreased demand caused by the COVID-19 pandemic. The Company owns the 36 CRJ200 aircraft and anticipates 

parking such aircraft following removal from service. The Company has no outstanding financing obligations on 

the 36 owned CRJ200 aircraft. During the three months ended June 30, 2020, the Company returned 19 leased CRJ200 
15

aircraft previously used for the Company’s capacity purchase agreement with Delta to the lessor, which leases were not 

extended by the Company as a result of the decreased demand caused by the COVID-19 pandemic.

Due to the uncertainty of obtaining future contract extensions from its major airline partners for the Company’s 

CRJ200 aircraft as a result of the COVID-19 pandemic and considering the average age of the Company’s CRJ200 fleet 

is 18 years, the Company reduced the estimated useful lives of its CRJ200 aircraft to align with each aircraft’s 

anticipated contract removal dates, which resulted in approximately $30.8 million of incremental depreciation expense 

during the three months ended June 30, 2020. The Company anticipates it will incur $22.3 million of additional 

depreciation expense from July to December 2020 resulting from the shorter estimated useful lives of its owned CRJ200 

aircraft.

When an aircraft is scheduled to be removed from a capacity purchase agreement, the Company may, as 

practical under the circumstances, negotiate an extension with the respective major airline partner, negotiate the 

placement of the aircraft with another major airline partner, return the aircraft to the lessor if the aircraft is leased and the 

lease is expiring, place owned aircraft for sale, or pursue other uses for the aircraft. Other uses for the aircraft may 

include placing the aircraft in a prorate arrangement, leasing the aircraft to a third party, using aircraft parts and engines 

as spare inventory or leasing spare engines to a third party. In the event practical alternative uses for the aircraft removed 

from service are not available, the Company may park and store the aircraft. 

The Company’s operating revenues could be impacted by a number of factors, including the impact of the 

COVID-19 pandemic on the demand for air travel and associated reduction in flight schedules, changes to the 

Company’s code-share agreements with its major airline partners, contract modifications resulting from contract 

renegotiations, the Company’s ability to earn incentive payments contemplated under the Company’s code-share 

agreements and settlement of reimbursement disputes with the Company’s major airline partners.

Allowance for credit losses

The Company monitors publicly available credit ratings for entities for which the Company has a significant 

receivable balance. As of June 30, 2020, the Company had gross receivables of $47.6 million in current assets and gross 

receivables of $73.4 million in other long-term assets. The Company has established credit loss reserves based on 

publicly available historic default rates issued by a third party for companies with similar credit ratings, factoring in the

term of the respective accounts receivable or note receivable. During the six months ended June 30, 2020, the credit 

ratings were lowered on certain entities for which the Company has outstanding accounts receivable or notes receivable, 

which was the primary driver for the increase in the Company’s credit loss reserve when benchmarked against historic 

default rates of similarly rated companies during the six months ended June 30, 2020. 

The following table summarizes the changes in allowance for credit losses: 

 Allowance for

Credit Losses

Balance at January 1, 2020 $ 15,388

Additions to credit loss reserve 4,308

Write-offs charged against the allowance —

Balance at June 30, 2020 $ 19,696

Note 4 — Share-Based Compensation and Stock Repurchases

During the six months ended June 30, 2020, the Company granted 82,505 restricted stock units and 69,132

performance shares to certain employees of the Company and its subsidiaries under the SkyWest, Inc. 2019 Long-Term 

Incentive Plan. Both the restricted stock units and performance shares have a three-year vesting period, during which the 

recipient must remain employed with the Company or one of the Company’s subsidiaries. The number of performance 

shares awardable from the 2020 grants can range from 0% to 200% of the original amount granted depending on the 

Company’s performance over the three-year vesting period against the pre-established targets. Upon vesting, each 

restricted stock unit and performance share will be replaced with one share of common stock. The fair value of these 

restricted stock units and performance shares on their date of grant was $61.45 per share. During the six months ended 
16

June 30, 2020, the Company did not grant any options to purchase shares of common stock. Additionally, during the six 

months ended June 30, 2020, the Company granted 14,643 fully vested shares of common stock to the Company’s 

directors at a grant date fair value of $61.45.

The Company accounts for forfeitures of restricted stock units and performance share grants when forfeitures 

occur. The estimated fair value of the restricted stock units and performance shares is amortized over the applicable 

vesting periods. During the six months ended June 30, 2020 and 2019, the Company recorded pre-tax share-based 

compensation expense of $3.8 million and $7.6 million, respectively. Additionally, the Company incurred $7.9 million 

of employee severance related costs associated with the sale of ExpressJet, partially offset by a forfeiture credit of $4.5

million, primarily resulting from stock-based compensation awards that terminated upon the sale of ExpressJet during 

the six months ended June 30, 2019. 

During the six months ended June 30, 2020, the Company repurchased 385,606 shares of its common stock for 

$20.0 million and paid $6.2 million for the income tax obligation on vested employee equity awards and issued the net, 

after-tax shares to employees. The Company did not repurchase any shares of its common stock or pay cash for the 

income tax obligation on vested employee equity awards during the three months ended June 30, 2020. During the six 

months ended June 30, 2019, the Company repurchased 1,055,355 shares of its common stock for $59.6 million and paid 

$9.3 million for the income tax obligation on vested employee equity awards and issued the net, after-tax shares to 

employees.

In connection with the Company’s receipt of financial support under the Payroll Support Program in April 

2020, the Company agreed not to repurchase shares of or make dividend payments in respect of its common stock 

through September 30, 2021. 

Note 5 — 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 six months 

ended June 30, 2020, 219,000 performance shares (at target performance) were excluded from the computation of 

Diluted EPS since the Company had not achieved the minimum target thresholds as of June 30, 2020. During the six 

months ended June 30, 2019, 165,000 performance shares (at target performance) were excluded from the computation 

of Diluted EPS since the Company had not achieved the minimum target thresholds as of June 30, 2019.

The calculation of the weighted average number of shares of common stock outstanding for Basic EPS and 

Diluted EPS for the periods indicated (in thousands, except per share data) is as follows:

Three Months Ended Six Months Ended

June 30, June 30, 

 2020 2019 2020 2019 

Numerator:

Net Income (loss) $(25,715) $ 88,052 $ 4,273 $ 176,233

Denominator:

Weighted average number of common shares outstanding 50,140 51,145 50,208 51,293

Effect of outstanding share-based awards — 332 149 494

Weighted average number of shares for diluted net 

income per common share 50,140 51,477 50,357 51,787

Basic earnings per share $ (0.51) $ 1.72 $ 0.09 $ 3.44

Diluted earnings per share $ (0.51) $ 1.71 $ 0.08 $ 3.40
17

Note 6 — Segment Reporting

Prior to the Company’s sale of ExpressJet on January 22, 2019, the Company’s three reporting segments 

consisted of the operations of SkyWest Airlines, ExpressJet and SkyWest Leasing activities. The segment information 

presented for ExpressJet reflects the period of time prior to the sale, when ExpressJet was operating as a subsidiary of the 

Company. The Company concluded that the sale of ExpressJet did not meet the criteria for a discontinued operation. 

The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed 

through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s 

capital deployed for ownership and financing of such aircraft. The SkyWest Airlines segment includes revenue earned 

under the applicable capacity purchase agreements attributed to operating such aircraft and the respective operating 

costs. The SkyWest Leasing segment includes applicable revenue earned under the applicable capacity purchase 

agreements attributed to the ownership of new aircraft acquired through the issuance of debt and the respective 

depreciation and interest expense of such aircraft. The SkyWest Leasing segment also includes the activity of leasing 

regional jet aircraft and spare engines to third parties. The SkyWest Leasing segment’s total assets and capital 

expenditures include new aircraft acquired through the issuance of debt and assets leased to third parties.

The following represents the Company’s segment data for the three-month periods ended June 30, 2020 and 

2019 (in thousands):

Three months ended June 30, 2020

SkyWest SkyWest

 Airlines Leasing Consolidated

Operating revenues (1) $ 227,808 $ 122,231 $ 350,039

Operating expense 275,869 78,573 354,442

Depreciation and amortization expense 59,421 72,217 131,638

Interest expense 3,438 27,488 30,926

Segment profit (loss) (2) (51,499) 16,170 (35,329)

Total assets (as of June 30, 2020) 2,789,321 3,984,062 6,773,383

Capital expenditures (including non-cash) 29,247 43,013 72,260

Three months ended June 30, 2019

SkyWest SkyWest

 Airlines Leasing Consolidated

Operating revenues (1) $ 627,088 $ 117,295 $ 744,383

Operating expense 545,419 54,871 600,290

Depreciation and amortization expense 40,641 49,507 90,148

Interest expense 3,716 29,054 32,770

Segment profit (2) 77,953 33,370 111,323

Total assets (as of June 30, 2019) 2,738,868 3,841,151 6,580,019

Capital expenditures (including non-cash) 47,975 87,687 135,662

(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines segment.

(2) Segment profit (loss) is equal to operating income less interest expense.
18

The following represents the Company’s segment data for the six-month periods ended June 30, 2020 and 2019 

(in thousands):

Six months ended June 30, 2020

SkyWest SkyWest

 Airlines Leasing Consolidated

Operating revenues (1) $ 834,650 $ 245,325 $ 1,079,975

Operating expense 870,010 148,047 1,018,057

Depreciation and amortization expense 111,197 132,149 243,346

Interest expense 5,979 55,151 61,130

Segment profit (loss) (2) (41,339) 42,127 788

Total assets (as of June 30, 2020) 2,789,321 3,984,062 6,773,383

Capital expenditures (including non-cash) 68,126 115,258 183,384

Six months ended June 30, 2019

SkyWest SkyWest

 Airlines ExpressJet Leasing Consolidated

Operating revenues (1) $ 1,212,856 $ 24,050 $ 231,171 $ 1,468,077

Operating expense 1,091,320 28,690 107,555 1,227,565

Depreciation and amortization expense 80,694 971 98,469 180,134

Special Items 18,508 3,361 — 21,869

Interest expense 7,534 — 57,744 65,278

Segment profit (loss) (2) 114,002 (4,640) 65,872 175,234

Total assets (as of June 30, 2019) 2,738,868 — 3,841,151 6,580,019

Capital expenditures (including non-cash) 116,625 — 433,616 550,241

(1) Prorate revenue and airport customer service revenue are primarily reflected in the SkyWest Airlines segment.

(2) Segment profit (loss) is equal to operating income less interest expense.

Note 7 — Leases, Commitments and Contingencies

Effective January 1, 2019, the Company adopted Topic 842. The Company leases property and equipment 

under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating 

lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company 

used its incremental borrowing rate to discount the lease payments based on information available at lease 

commencement.

Aircraft

As of June 30, 2020, the Company had 107 aircraft under operating leases with remaining terms ranging from 

less than one year to ten years.

With the adoption of Topic 842 on January 1, 2019, the Company evaluated whether leased aircraft asset groups 

within the Company’s fleet were impaired. Under the transition guidance for Topic 842, a company is permitted to 

recognize a previously unrecognized impairment related to a right-of-use asset in the period prior to the adoption date of 

Topic 842 if the event giving rise to the impairment occurred before the adoption date. In 2016, the Company recorded 

an impairment on certain of its long-lived assets, which included the Company’s CRJ200 aircraft. In 2016, the market 

lease rate was less than the contractual lease rate on the Company’s CRJ200 leased aircraft. The Company recorded an 

impairment of $13.1 million (net of tax) as an adjustment to the Company’s January 1, 2019 retained earnings related to 

the previously unrecognized impairment of these leased CRJ200s. 
19

Airport facilities

The Company has operating leases for facility space including airport terminals, office space, cargo warehouses 

and maintenance facilities. The Company generally leases this space from government agencies that control the use of 

the various airports. The remaining lease terms for facility space vary from one month to 36 years. The Company’s 

operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable 

factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting 

guidance. 

Leases

As of June 30, 2020, the Company’s right-of-use assets were $310.0 million, the Company’s current maturities 

of operating lease liabilities were $87.4 million, and the Company’s noncurrent lease liabilities were $238.6 million. 

During the six months ended June 30, 2020, the Company paid $41.3 million in operating leases reflected as a reduction 

from operating cash flows.

The table below presents lease related terms and discount rates as of June 30, 2020.

June 30, 2020

Weighted-average remaining lease term for operating leases 6.7 years 

Weighted-average discount rate for operating leases 6.1%

The Company’s lease costs for the three and six months ended June 30, 2020 and 2019 included the following 

components (in thousands):

For the three months 

ended June 30, 

For the six months 

ended June 30, 

 2020 2019 2020 2019

Operating lease cost $ 24,140 $ 27,647 $ 49,158 $ 54,868

Variable and short-term lease cost 1,207 1,346 2,551 2,821

Sublease income (1,560) — (3,131) —

Total lease cost $ 23,787 $ 28,993 $ 48,578 $ 57,689

As of June 30, 2020, the Company leased aircraft, airport facilities, office space, and other property and 

equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to 

which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased 

property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed 

or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future 

minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining 

non-cancelable lease terms as of June 30, 2020 (in thousands):

July 2020 through December 2020 $ 49,498 

2021 85,084 

2022 76,132 

2023 69,394 

2024 28,091 

Thereafter 98,424 

$ 406,623 

The Company is coordinating with its major airline partners on the timing of upcoming fleet deliveries under 

previously announced deals in response to COVID-19-related schedule reductions. The anticipated future delivery dates 

are subject to change. As of June 30, 2020, the Company had a firm purchase commitment for 24 E175 aircraft from 

Embraer, S.A. (“Embraer”) with anticipated delivery dates through 2022. 
20

The following table summarizes the Company’s commitments and obligations as noted for each of the next five 

years and thereafter (in thousands):

 Total Jul - Dec 2020 2021 2022 2023 2024 Thereafter

Operating lease payments for 

aircraft and facility obligations $ 406,623 $ 49,498 $ 85,084 $ 76,132 $ 69,394 $ 28,091 $ 98,424

Firm aircraft and spare engine 

commitments 661,406 110,007 159,719 391,680 — — —

Interest commitments (1) 570,669 81,103 111,231 96,260 79,076 63,594 139,405

Principal maturities on long-term 

debt 2,996,869 120,956 388,638 389,593 399,472 353,106 1,345,104

Total commitments and 

obligations $ 4,635,567 $ 361,564 $ 744,672 $ 953,665 $ 547,942 $ 444,791 $ 1,582,933

(1) At June 30, 2020, all of the Company’s total long-term debt had fixed interest rates.

Note 8 — Fair Value Measurements

The Company holds certain assets that are required to be measured at fair value in accordance with GAAP. The 

Company determined the 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 June 30, 2020, and December 31, 2019, 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 June 30, 2020

 Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 452,247 $ 452,247 $ — $ —

Marketable securities

Bonds and bond funds $ 137,183 $ — $ 137,183 $ —

Commercial paper 172,640 — 172,640 —

309,823 — 309,823 —

Total assets measured at fair value $ 762,070 $ 452,247 $ 309,823 $ —

Fair Value Measurements as of December 31, 2019

 Total Level 1 Level 2 Level 3

Cash and cash equivalents $ 87,206 $ 87,206 $ — $ —

Marketable securities

Bonds and bond funds $ 267,243 $ — $ 267,243 $ —

 Commercial paper 165,723 — 165,723 —

432,966 — 432,966 —

Total assets measured at fair value $ 520,172 $ 87,206 $ 432,966 $ —

The Company’s “marketable securities” classified as Level 2 securities primarily utilize broker quotes in a nonactive market for valuation of these securities.
21

The Company did not make any significant transfers of securities between Level 1, Level 2 and Level 3 during 

the six months ended June 30, 2020. The Company’s policy regarding the recording of transfers between levels is to 

record any such transfers at the end of the reporting period.

As of June 30, 2020, and December 31, 2019, the Company classified $309.8 million and $433.0 million of 

marketable securities, respectively, as short-term since it had the intent to maintain a liquid portfolio and the ability to 

redeem the securities within one year. As of June 30, 2020, and December 31, 2019, the cost of the Company’s total 

cash and cash equivalents and available for sale securities was $761.7 million and $520.2 million, respectively. 

The fair value of the Company’s long-term debt classified as Level 2 debt was estimated using discounted cash 

flow analyses, based on the Company’s current estimated incremental borrowing rates for similar types of borrowing 

arrangements. The fair value of the Company’s long-term debt is estimated based on current rates offered to the 

Company for similar debt and was estimated to be $3.1 billion as of June 30, 2020 and $3.0 billion as of December 31, 

2019, as compared to the carrying amount of $3.0 billion as of June 30, 2020 and $3.0 billion as of December 31, 2019.

Note 9 — Long-Term Debt

Long-term debt consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020 December 31, 2019

Current portion of long-term debt $ 312,538 $ 367,954

Current portion of unamortized debt issue cost, net (3,379) (3,828)

Current portion of long-term debt, net of debt issue costs $ 309,159 $ 364,126

Long-term debt, net of current maturities $ 2,684,331 $ 2,649,569

Long-term portion of unamortized debt issue cost, net (20,209) (20,580)

Long-term debt, net of current maturities and debt issue costs $ 2,664,122 $ 2,628,989

Total long-term debt (including current portion) $ 2,996,869 $ 3,017,523

Total unamortized debt issue cost, net (23,588) (24,408)

Total long-term debt, net of debt issue costs $ 2,973,281 $ 2,993,115

During the six months ended June 30, 2020, the Company took delivery of two new E175 aircraft that the 

Company financed through $36.1 million of long-term debt. The debt associated with the two E175 aircraft has a 12-year 

term, is due in quarterly installments with fixed annual interest rates ranging from 2.3% and is secured by the E175 

aircraft. 

During the six months ended June 30, 2020, in connection with the CARES Act payroll support program, the 

Company issued to Treasury a promissory note for an aggregate principal amount of $62.0 million and issued warrants to 

purchase 218,409 shares of the Company’s common stock. The Company has recorded the value of the promissory note 

and warrants on a relative fair value basis as $62.0 million of long-term debt and $2.9 million in common stock, 

respectively. The Company issued the final $39.4 million installment of the promissory note and issue the remaining 

138,908 warrants to purchase shares of the Company’s common stock in July 2020 in connection with receipt of the final 

payments under the payroll support program. These warrants have an exercise price of $28.38 per share and a five-year 

term from the date of issuance. See Note 2, “Impact of the COVID-19 Pandemic,” for further discussion of the terms of 

the payroll support program loan and warrants.

As of June 30, 2020, and December 31, 2019, the Company had $61.8 million and $61.7 million, respectively, 

in letters of credit and surety bonds outstanding with various banks and surety institutions.

As of June 30, 2020, SkyWest Airlines had a $75 million line of credit. The line of credit includes minimum 

liquidity and profitability covenants and is secured by certain assets. As of June 30, 2020, the Company was in 

compliance with the line of credit covenants. As of June 30, 2020, SkyWest Airlines had no amount outstanding under 

the facility. However, at June 30, 2020 SkyWest Airlines had $8.8 million in letters of credit issued under the facility, 
22

which reduced the amount available under the facility to $66.2 million. The Company obtained a waiver under the line of 

credit to allow the Company to receive funding under the CARES Act.

Note 10 — Gain on Sale of ExpressJet

On January 22, 2019, the Company completed the sale of its former wholly owned subsidiary ExpressJet. The 

Company recorded a gain of $46.5 million before income tax from the sale of ExpressJet. The closing of the transaction 

was completed in two parts, through an asset sale and stock sale, as further described below.

Asset Sale

On January 11, 2019, pursuant to the terms and conditions of the Asset Purchase Agreement, dated as of 

December 17, 2018, by and among the Company, ExpressJet and United, United acquired certain specified assets and 

liabilities of ExpressJet, including, among other things, aircraft engines, auxiliary power units, rotable spare parts, ground 

support equipment and flight training equipment for $60.8 million in cash, subject to certain purchase price adjustments 

(the “Asset Sale”). Certain assets and liabilities of ExpressJet were expressly excluded from the Asset Sale.

Stock Sale

Additionally, on January 22, 2019, pursuant to the terms and conditions of the Stock Purchase Agreement, dated 

as of December 17, 2018, by and among the Company and ManaAir, LLC, a company in which United owns a minority 

interest (the “Buyer”), the Buyer acquired all of the outstanding shares of capital stock of ExpressJet from the Company 

for $18.8 million in cash, subject to certain purchase price adjustments (the “Stock Sale,”). To facilitate payment of the 

purchase price for the Stock Sale, at the closing of the Stock Sale, the Company loaned $26 million to Kair Enterprises, 

Inc. (the “Borrower”), the majority owner of the Buyer. Such loan accrues interest at the rate of 6.85% per annum, matures 

on the last business day of the last month immediately preceding the two-year anniversary of the closing of the Stock Sale 

and is secured by, among other things, the Borrower’s ownership interests in the Buyer.

Note 11 — Special Items

During the six months ended June 30, 2019, the Company terminated an agreement with an aircraft 

manufacturer that obligated the Company to future aircraft lease return conditions on aircraft the Company leased. In 

conjunction with the terminated agreement, the aircraft manufacturer released the Company from the future aircraft lease 

return obligations and the Company agreed to terminate aircraft part credits previously issued by the manufacturer to the 

Company. As a result of the terminated agreement, the Company recorded a non-cash expense of $18.5 million (pre-tax) 

during the six months ended June 30, 2019 to write-off the terminated aircraft part credits, which was reflected as a 

special items operating expense in the consolidated statement of comprehensive income.

Additionally, during the six months ended June 30, 2019, the Company incurred $3.4 million of employee 

severance related costs associated with the sale of ExpressJet that are also reflected in special items. The Company had 

no special expense items for the six months ended June 30, 2020.

Note 12 — Investment in Other Companies

During 2019, the Company created a joint venture with Regional One, Inc. (“Regional One”) by investing $22.3

million for a 75% ownership interest in Aero Engines, LLC. (“Aero Engines”). The primary purpose of Aero Engines is 

to lease engines to third parties. Aero Engines requires unanimous approval from the Company and Regional One for its 

engine purchases, dispositions, lease agreements with third parties and all other material transactions. The Company 

determined Aero Engines is a variable interest entity as the Company has a 75% ownership interest in Aero Engines and 

all material decisions require unanimous approval from the Company and Regional One, resulting in disproportionate 

ownership rights relative to voting rights. As unanimous approval is required for all Aero Engines’ material activities. 

Aero Engines has no primary beneficiary. The Company accounts for its investment in Aero Engines under the equity 

method. The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of 

income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage 
23

in Aero Engines’ engines book value. The Company purchased 15 spare engines and sold the 15 spare engines to Aero 

Engines at net book value during 2019. Aero Engines had no debt outstanding as of June 30, 2020. As of June 30, 2020, 

the Company’s investment balance in Aero Engines was $24.7 million. The Company’s investment in Aero Engines has 

been recorded in “Other Assets” on the Company’s consolidated balance sheet. The Company’s portion of the income 

generated by Aero Engines for the six months ended June 30, 2020 was $0.8 million, which is recorded in “Other 

Income” on the Company’s consolidated statements of comprehensive income. 

Note 13 — Income Taxes

The Company’s effective tax rate for the three months ended June 30, 2020 was 22.6% The Company’s 

effective tax rate for the three months ended June 30, 2020 varied from the federal statutory rate of 21.0% primarily due 

to the provision for state income taxes and the impact of non-deductible expenses.

The Company’s effective tax rate for the six months ended June 30, 2020 was 26.8%. The Company’s effective 

tax rate for the six months ended June 30, 2020 varied from the federal statutory rate of 21.0% primarily due to the 

provision for state income taxes and the impact of non-deductible expenses, partially offset by a $1.4 million discrete tax 

benefit from excess tax deductions generated from employee equity transactions that occurred during the six months 

ended June 30, 2020.

The Company’s effective tax rate for the three months ended June 30, 2019 was 23.7%. The Company’s 

effective tax rate for the three months ended June 30, 2019 varied from the federal statutory rate of 21.0% primarily due 

to the provision for state income taxes and the impact of non-deductible expenses, partially offset by a $1.3 million 

discrete tax benefit from excess tax deductions generated from employee equity transactions that occurred during the 

three months ended June 30, 2019.

The Company’s effective tax rate for the six months ended June 30, 2019 was 23.3%. The Company’s effective 

tax rate for the six months ended June 30, 2019 varied from the federal statutory rate of 21.0% primarily due to the 

provision for state income taxes and the impact of non-deductible expenses, partially offset by a $3.5 million discrete tax 

benefit from excess tax deductions generated from employee equity transactions that occurred during the six months 

ended June 30, 2019.

Note 14 — Legal Matters

The Company is subject to certain legal actions which it considers routine to its business activities. As of June 

30, 2020, the Company’s management believed, after consultation with legal counsel, that the ultimate outcome of such 

legal matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of 

operations.

Note 15 — Subsequent Events

Subsequent to June 30, 2020, in connection with the CARES Act payroll support program, the Company 

received $92.0 million in payroll grants and increased the Company’s borrowings under the promissory note to Treasury 

in the amount of $39.4 million. The Company additionally issued warrants to purchase 138,908 shares of the Company’s 

common stock. See Note 2, “Impact of the COVID-19 Pandemic.” for further discussion of the terms of the payroll 

support program loan and warrants.
24

ITEM 2: 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 the results of operations of 

SkyWest, Inc. (“SkyWest” “we” or “us”) during the three- and six-month periods ended June 30, 2020 and 2019. Also 

discussed is our financial condition as of June 30, 2020 and December 31, 2019. You should read this discussion in 

conjunction with our condensed consolidated financial statements for the three and six months ended June 30, 2020, 

including the notes thereto, appearing elsewhere in this Report. This discussion and analysis contains forward-looking 

statements. Please refer to the section of this Report entitled “Cautionary Statement Concerning Forward-Looking 

Statements” for discussion of uncertainties, risks and assumptions associated with these statements.

On January 22, 2019, we completed the sale of our former wholly owned subsidiary ExpressJet Airlines, Inc. 

(“ExpressJet”). Our financial and operating results for the period ended June 30, 2019, contained in this Report, include 

the financial results of ExpressJet for the respective period, as we concluded that the sale of ExpressJet did not meet the 

criteria for presentation of discontinued operations.

Cautionary Statement Concerning Forward-Looking Statements

Certain of the statements contained in this Report 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, 

anticipated operations, the revenue environment, our contractual relationships, and our anticipated financial performance. 

These statements include, but are not limited to, statements regarding the impact of the COVID-19 pandemic on our

business, results of operations and financial condition and the impact of any measures, including travel restrictions, taken 

to mitigate the effect of the pandemic, our future growth and development plans, including our future financial and 

operating results, our plans, 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 for a number of reasons, including but not limited to: 

the consequences of the COVID-19 pandemic to global economic conditions, the travel industry and our major airline 

partners in general and our financial condition and results of operations in particular; the challenges of competing 

successfully in a highly competitive and rapidly changing industry; developments associated with fluctuations in the 

economy and the demand for air travel, including as a result of the COVID-19 pandemic; the financial stability of United 

Airlines, Inc. (“United”), Delta Air Lines, Inc. (“Delta”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. 

(“Alaska”) (each, a “major airline partner”) and any potential impact of their financial condition on our operations; 

fluctuations in flight schedules, which are determined by the major airline partners for whom SkyWest conducts flight 

operations; variations in market and economic conditions; significant aircraft lease and debt commitments; realization of 

manufacturer residual value guarantees on applicable SkyWest aircraft; residual aircraft values and related impairment 

charges; the impact of global instability; labor relations and costs; potential fluctuations in fuel costs, and potential fuel 

shortages; the impact of weather-related or other natural disasters on air travel and airline costs; new aircraft deliveries; 

and the ability to attract and retain qualified pilots, as well as other factors identified under the heading “Risk Factors” in 

Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, under the heading “Risk 

Factors” in Part II, Item 1A of this Report, elsewhere in this Report, in our other filings with the Securities and Exchange 

Commission (the “SEC”) and other unanticipated factors. Additionally, the risks, uncertainties and other factors set forth 

above or otherwise referred to in the reports that we have filed with the SEC may be further amplified by the global 

impact of the COVID-19 pandemic.

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 applicable law.
25

Impact of the COVID-19 Pandemic 

COVID-19, which was declared a global health pandemic by the World Health Organization in March 2020, 

has surfaced in nearly all regions of the world and driven the implementation of significant, government-imposed 

measures to prevent or reduce its spread, including travel restrictions, closing of borders, “shelter in place” orders and 

business closures. Consequently, we and our major airline partners, have experienced an unprecedented decline in the 

demand for air travel, which has materially and adversely affected our revenues, particularly under our prorate 

agreements (as defined below). The spread of the virus and the resulting global pandemic has affected the majority of the 

domestic and international networks of our major airline partners for whom we conduct flight operations and rely on to 

set our flight schedules. While the length and severity of the reduction in demand due to COVID-19 is uncertain, we 

presently expect a continued negative impact on our results of operations for the remainder of 2020 and into 2021.

In response to these developments, we have implemented measures to focus on the personal safety of our 

passengers and employees, while at the same time seeking to mitigate the impact on our financial position and 

operations. These measures include, but are not limited to, the following:

Focus on the Personal Safety of Passengers and Employees. The safety and well-being of our passengers and 

employees are our priorities in every decision we make. As the COVID-19 pandemic has developed, we have taken 

numerous steps to help passengers and employees take appropriate safety measures on the ground and in the air in 

keeping with current Centers for Disease Control and Prevention recommendations, including:

• Working with our major airline partners to enhance our aircraft cleaning procedures.

• Working with our major airline partners to provide masks for crewmembers and ensuring that all fleet service 

personnel have the necessary personal protective equipment for disinfecting the aircraft. 

• Providing a number of options to employees who are diagnosed with COVID-19, including pay protection and 

extended leave options.

• Implementing workforce social distancing and protection measures, enhanced cleaning of our facilities, 

including training facilities, using methods and products similar to what we are using on our aircraft.

Capacity Reductions. Beginning in March 2020, we and our major airline partners experienced an 

unprecedented decrease in demand for air travel and expect this decline from 2019 to continue throughout 2020. We 

depend on our major airline partners to contract with us to schedule flights. Therefore, in response to this decreased 

demand, we have significantly reduced our capacity. Prior to the COVID-19 pandemic, we anticipated operating 

approximately 2,500 to 2,600 daily departures in the month of July 2020; however, in July 2020 we typically operated 

between approximately 1,200 to 1,400 daily departures as a result of COVID-19-related schedule reductions. We also 

anticipate similar schedule reductions will likely continue throughout the remainder of 2020 and into 2021. The number 

of daily flights operated by us may not return to pre-COVID-19 levels for the foreseeable future. We will continue to 

work with our major airline partners regarding future schedules and make further demand-driven adjustments to our 

capacity as needed. We anticipate certain aircraft with scheduled contract expirations in 2020 will not be extended as a 

result of decreased demand including 36 Canadair CRJ200 regional aircraft (“CRJ200”) operating under the SkyWest 

Airlines Delta Connection Agreement as of June 30, 2020. We also terminated our American Prorate Agreement on 

seven CRJ200 aircraft in the second quarter of 2020 and we may have further reductions in the number of CRJ200 

aircraft operating under our prorate agreements. We may receive requests by our major airline partners to defer deliveries 

of new or used aircraft that were previously scheduled for 2020, 2021 and 2022.

Cost Reductions. With the reduction in revenue, we have, and will continue to implement, cost saving 

initiatives, including:

• Reducing employee-related costs including by:

o Offering voluntary unpaid leave to employees.

o Suspending all non-scale pay increases.

o Instituting a company-wide hiring freeze.

• Delaying non-essential maintenance projects and reducing or suspending other discretionary spending.

Liquidity. At June 30, 2020, we had $828.3 million in total available liquidity, consisting of $762.1 million in 

cash and marketable securities and $66.2 million available under SkyWest Airlines’ line of credit. On April 23, 2020, 
26

SkyWest Airlines entered into a Payroll Support Program Agreement (the “PSP Agreement”) with the U.S. Department 

of Treasury (“Treasury”) with respect to the grant program (the “Payroll Support Program”) under the Coronavirus Aid, 

Relief, and Economic Security Act (the “CARES Act”), pursuant to which it expects to receive approximately $438.0 

million in the aggregate, 50% of which was received in April 2020. See Note 2 “Impact of the COVID-19 Pandemic,” to 

the condensed consolidated financial statements for more information on the Payroll Support Program. The CARES Act 

also provides for up to $25 billion in secured loans to the airline industry, and we have applied for and have entered into 

a non-binding letter of intent with Treasury for approximately $497.0 million under the loan program and we are 

currently evaluating the timing and our level of participation.

Overview

We have the largest regional airline operations in the United States through our operating subsidiary SkyWest 

Airlines, Inc. (“SkyWest Airlines”). As of June 30, 2020, SkyWest Airlines offered scheduled passenger service with 

approximately 900 total daily departures under COVID-19 related reduced schedules to destinations in the United States, 

Canada, Mexico and the Caribbean. Our fleet of Embraer E175 regional jet aircraft (“E175”), Canadair CRJ900 regional 

jet aircraft (“CRJ900”) and Canadair CRJ700 regional jet aircraft (“CRJ700”) have a multiple-class seat configuration, 

whereas our CRJ200 aircraft have a single-class seat configuration. As of June 30, 2020, SkyWest Airlines had a total 

fleet of 581 aircraft, of which 471 were in scheduled service, summarized as follows:

 CRJ200 CRJ700 CRJ900 E175 Total

Delta 57 6 43 67 173

United 96 19 — 90 205

American — 61 — — 61

Alaska — — — 32 32

Aircraft in scheduled service 153 86 43 189 471

Subleased to an un-affiliated entity 4 13 5 — 22

Other* 55 33 — — 88

Total 212 132 48 189 581

*As of June 30, 2020, these aircraft have been removed from service and are in the process of being placed under a 

leasing arrangement with a third party, are aircraft transitioning between code-share agreements with our major airline 

partners and being used as supplemental spare aircraft, or are in the process of being parted out.

As of June 30, 2020, approximately 37% of our aircraft in scheduled service was operated for Delta, 

approximately 43% was operated for United, approximately 13% was operated for American and approximately 7% was 

operated for Alaska.

Our business model is based on providing scheduled regional airline service under code-share agreements 

(commercial agreements, typically in the form of capacity purchase agreements or prorate arrangements, each as defined 

below, between airlines that, among other things, allow one airline to use another airline’s flight designator codes on its 

flights) with our major airline partners. Our success is principally dependent on our ability to meet the needs of our 

major airline partners through providing a reliable and safe operation at attractive economics. From June 30, 2019 to 

June 30, 2020, we added seven new E175 aircraft, one new CRJ900 aircraft and 31 used E175 aircraft to our fleet. 

Additionally, we removed thirteen CRJ700 aircraft and 37 CRJ200 aircraft from scheduled service with 19 of the 

CRJ200 aircraft returned to the lessor while the other aircraft were temporarily removed from service in response to the 

COVID-19 schedule reductions, or in transition period between flying contracts with our major partners, or were placed 

under a lease with a third party.

We are coordinating with our major airline partners on the timing of upcoming fleet deliveries under previously 

announced deals in response to COVID-19 schedule reductions. The anticipated future delivery dates summarized below 

are subject to change. As of June 30, 2020, we are scheduled to add four new E175 to our capacity purchase agreement

with Delta during 2020. We also anticipate adding 20 new E175 aircraft with American under a capacity purchase

agreement with delivery dates starting in late 2021 and ending in 2022.
27

As of June 30, 2020, our capacity purchase agreement with Delta included 36 CRJ200 aircraft that are 

scheduled to expire in increments during the remainder of 2020 which we are not expecting to be extended as a result of 

the decreased demand caused by the COVID-19 pandemic. We own the 36 CRJ200 aircraft and anticipate parking 

the 36 CRJ200 aircraft following removal from service. We have no outstanding financing obligations on the 36 owned 

CRJ200 aircraft. 

Due to the uncertainty of obtaining future contract extensions for our CRJ200 aircraft as a result of the COVID19 pandemic and considering the average age of our CRJ200 fleet is 18 years, we reduced the estimated useful lives of 

our CRJ200 aircraft to align with each aircraft’s anticipated contract removal dates, which resulted in approximately 

$30.8 million of incremental depreciation expense during the three months ended June 30, 2020. We anticipate we will 

incur $22.3 million of additional depreciation expense from July to December 2020 resulting from the shorter estimated 

useful lives of our owned CRJ200 aircraft.

Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any 

single major airline code and to enhance and stabilize operating results through a mix of fixed-fee arrangements (referred 

to as “capacity purchase agreements”) and revenue-sharing arrangements (referred to as “prorate” arrangements). For the 

six months ended June 30, 2020, capacity purchase revenue and prorate revenue represented approximately 86.9% and 

13.1%, respectively, of our total flying agreements revenue. 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 completed block hours (measured from takeoff to landing, including taxi time), flight departures and other 

operating measures. On prorate routes, our revenue and profitability may fluctuate based on ticket prices and passenger 

loads and we are responsible for all costs to operate the flight, including fuel.

Second Quarter Summary 

Our total operating revenues of $350.0 million for the three months ended June 30, 2020 decreased 53.0% 

compared to total operating revenues of $744.4 million for the three months ended June 30, 2019. We had a net loss of 

$25.7 million, or $0.51 per diluted share, for the three months ended June 30, 2020, compared to net income of $88.1

million, or $1.71 per diluted share, for the three months ended June 30, 2019.

Significant items affecting our financial performance during the three months ended June 30, 2020 are outlined 

below.

Revenue

The number of aircraft we have in scheduled service and the number of block hours we generate on our flights 

are primary drivers to our flying agreements revenue under our capacity purchase agreements. The number of flights we 

operate and the corresponding number of passengers we carry are the primary drivers to our revenue under our prorate 

flying agreements. From June 30, 2019 to June 30, 2020, we decreased the number of aircraft in scheduled service from 

482 aircraft to 471 aircraft, by removing thirteen CRJ700 aircraft and 37 CRJ200 aircraft and adding 38 E175 aircraft

and one CRJ900 aircraft. Our completed block hours decreased 66.0% over the same period of 2019 primarily due to a 

significant reduction in the number of flights we were scheduled to operate under our flying contracts as a result of the 

COVID-19 pandemic.

Our total revenues decreased $394.3 million for the three months ended June 30, 2020 compared to the three 

months ended June 30, 2019, primarily due to the effects of the COVID-19 pandemic. Additionally, we deferred 

recognizing revenue on $69.1 million of fixed monthly payments received under our capacity purchase agreements 

during the three months ended June 30, 2020, as further described under “Results of Operations—Three Months Ended 

June 20, 2020 and 2019—Operating Revenues.” Since March 2020, the COVID-19 pandemic has had a negative impact 

on our revenues, especially under our prorate agreements. The number of aircraft operating under our prorate agreements 

decreased from 64 aircraft as of June 30, 2019 to 47 aircraft as of June 30, 2020, or 26.6%. Additionally, our prorate 

revenue decreased from $134.9 million for the three months ended June 30, 2019 to $36.2 million for the three months 

ended June 30, 2020, or 73.2%. The negative impact to our revenues as a result of the COVID-19 pandemic and its 
28

associated effects on the travel industry is anticipated to continue throughout the remainder of 2020 and may continue 

through 2021 and subsequent periods.

Operating Expenses

Our total operating expenses decreased $245.8 million for the three months ended June 30, 2020, compared to 

the three months ended June 30, 2019. This decrease was primarily due to a significant reduction in the number of 

flights we operated as a result of the COVID-19 pandemic. Additional details regarding the increase in our operating 

expenses are described in the section of this Report entitled “Results of Operations.”

Fleet activity

The following table summarizes our fleet scheduled for service as of:

Aircraft in Service June 30, 2020 December 31, 2019 June 30, 2019

CRJ200s 153 190 190

CRJ700s 86 94 99

CRJ900s 43 43 42

E175s 189 156 151

Total 471 483 482

Critical Accounting Policies

Our significant accounting policies are summarized in Note 1 to our consolidated financial statements for the 

year ended December 31, 2019, which are presented in our Annual Report on Form 10-K for the year ended 

December 31, 2019. 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 policies relate to revenue 

recognition, aircraft leases, long-lived assets, self-insurance and income tax. 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 

likely differ, and may differ materially, from such estimates.

Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements for a description of recent accounting 

pronouncements. 
29

Results of Operations

Three Months Ended June 30, 2020 and 2019

Operational Statistics. The following table sets forth our major operational statistics and the associated 

percentage changes for the periods identified below:

For the three months ended June 30, 

Block hours by aircraft type: 2020 2019 % Change

 E175s 61,455 133,247 (53.9)%

 CRJ900s 3,433 31,428 (89.1)%

 CRJ700s 30,666 77,068 (60.2)%

 CRJ200s 30,472 129,039 (76.4)%

Total block hours 126,026 370,782 (66.0)%

Departures 80,755 215,052 (62.4)%

Passengers carried 1,802,327 11,383,187 (84.2)%

Passenger load factor 34.4 % 83.9 % (49.5)pts

Average passenger trip length (miles) 487 496 (1.8)%

Operating Revenues

The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):

For the three months ended June 30, 

 2020 2019 $ Change % Change

Flying agreements $ 336,370 $ 725,335 $ (388,965) (53.6)%

Lease, airport services and other 13,669 19,048 (5,379) (28.2)%

Total operating revenues $ 350,039 $ 744,383 $ (394,344) (53.0)%

Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity 

purchase agreements and prorate agreements with our major airline partners. Lease, airport services and other revenues

consist of revenue earned from providing airport counter, gate and ramp services, and revenue from leasing regional jet 

aircraft and spare engines to third parties. Changes in our flying agreements revenue are summarized below (dollar 

amounts in thousands). 

For the three months ended June 30, 

 

2020

 

2019

 

$ Change

 

% Change

Capacity purchase agreements revenue: flight operations $ 132,061 $ 383,732 $ (251,671) (65.6)%

Capacity purchase agreements revenue: aircraft lease and fixed 

revenue 168,103 206,678 (38,575) (18.7)%

Prorate agreements revenue 36,206 134,925 (98,719) (73.2)%

 Flying agreements revenue $ 336,370 $ 725,335 $ (388,965) (53.6)%

The decrease in “Capacity purchase agreements revenue: flight operations” of $251.7 million was primarily due 

to schedule reductions experienced in 2020 resulting from the COVID-19 pandemic. Our completed departures 

decreased 62% and completed block hours decreased 66% during the three months ended June 30, 2020 compared to the

three months ended June 30, 2019.

The decrease in “Capacity purchase agreements revenue: aircraft lease and fixed revenue” of $38.6 million was 

primarily due to the deferral of $69.1 million in fixed amount per aircraft revenue. Under our capacity purchase 

agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per 

aircraft per month proportionately to completed flights, which is our performance obligation. We operated a materially 
30

lower number of flights during the three months ended June 30, 2020 from previous levels due to a reduction in flight 

schedules resulting from the COVID-19 pandemic. We anticipate the future monthly flight levels will increase over the 

remaining applicable contract terms compared to the three months ended June 30, 2020. Due to the materially reduced 

flight activity during the three months ended June 30, 2020, and based on an anticipated increase in future monthly flight 

volumes over the remaining contract terms, we determined the fixed amount per month per aircraft received during the 

three months ended June 30, 2020 was disproportionately high relative to the volume of flights operated during the three 

months ended June 30, 2020. Accordingly, we deferred revenue attributed to the fixed amount per month per aircraft 

received during the three months ended June 30, 2020. Our deferred revenue balance will adjust over the remaining 

contract terms based on our completed flight levels each period relative to the anticipated average monthly flight levels 

over the remaining contract terms. This decrease in “Capacity purchase agreement revenue: aircraft lease revenue” was 

partially offset by the incremental lease revenue generated from seven new E175 aircraft added to our fleet and economic 

improvements made to certain existing capacity purchase agreements since June 30, 2019.

The decrease in prorate agreements revenue of $98.7 million was primarily due to the impact of COVID-19 and 

the corresponding decrease in prorate passengers during the three months ended June 30, 2020 compared to the three 

months ended June 30, 2019.

The $5.4 million decrease in lease, airport services and other revenues was primarily related to a decrease in the 

number of flights at locations where we were contracted to provide airport customer service during the three months 

ended June 30, 2020 compared to the three months ended June 30, 2019.

Operating Expenses

The following table summarizes our operating expenses and interest expense, (collectively, “Total airline 

expenses") for the periods indicated (dollar amounts in thousands):

For the three months ended June 30, 

2020 2019 $ Change % Change

Salaries, wages and benefits $ 170,218 $ 243,766 $ (73,548) (30.2)%

Aircraft maintenance, materials and repairs 121,289 124,789 (3,500) (2.8)%

Depreciation and amortization 131,638 90,148 41,490 46.0 %

Airport-related expenses 21,550 30,782 (9,232) (30.0)%

Aircraft fuel 6,821 30,851 (24,030) (77.9)%

Aircraft rentals 16,697 18,006 (1,309) (7.3)%

CARES Act payroll support grant (151,938) — (151,938) NM

Other operating expenses 38,167 61,948 (23,781) (38.4)%

 Total operating expenses $ 354,442 $ 600,290 $ (245,848) (41.0)%

Interest expense 30,926 32,770 (1,844) (5.6)%

Total airline expenses $ 385,368 $ 633,060 $ (247,692) (39.1)%

Salaries, wages and benefits. The $73.5 million decrease in salaries, wages and benefits was primarily due to a 

reduction in scheduled departures and block hours related to the COVID-19 pandemic. Additionally, in response to the 

COVID-19 pandemic, we have instituted a company-wide hiring freeze, suspended all non-scale pay increases and 

offered voluntary unpaid leave to our employees.

Aircraft maintenance, materials and repairs. The $3.5 million decrease in aircraft maintenance expense was 

primarily due to a significant reduction in departures during the three months ended June 30, 2020 partially offset by 

increased engine maintenance expense during the three months ended June 30, 2020 compared to the three months ended 

June 30, 2019.

Depreciation and amortization. The $41.5 million increase in depreciation and amortization expense was 

primarily due to a reduction in the estimated useful life of our owned CRJ200 fleet that resulted in approximately $30.8 

million of incremental depreciation expense during the three months ended June 30, 2020 and due to the acquisition of 

seven new E175 aircraft and spare engines since June 30, 2019.
31

Airport-related expenses. Airport-related expenses include airport-related customer service costs such as 

outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees 

and station rents (our employee customer service labor costs are reflected in salaries, wages and benefits). The $9.2 

million decrease in airport-related expenses was primarily due to a decrease in scheduled departures resulting from the 

COVID-19 pandemic.

Aircraft fuel. The $24.0 million decrease in fuel cost was primarily due to a reduction in the number of prorate 

flights we operated and the corresponding decrease in gallons of fuel we purchased and a decrease in our average fuel 

cost per gallon from $2.57 for the three months ended June 30, 2019 to $1.45 for the three months ended June 30, 2020.

We purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred 

under our capacity purchase agreements are either purchased directly by our major airline partners or purchased by us 

and reimbursed by our major airline partners, with the direct reimbursement recorded as a reduction to our fuel expense. 

The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods 

indicated:

For the three months ended June 30, 

(in thousands) 2020 2019 % Change

Fuel gallons purchased 4,691 12,019 (61.0)%

Fuel expense $ 6,821 $ 30,851 (77.9)%

Aircraft rentals. The $1.3 million decrease in aircraft rentals was primarily related to a reduction of our fleet 

size that was financed through leases as a result of scheduled lease expirations subsequent to June 30, 2019.

CARES Act payroll support grant. In April 2020, we entered into an agreement with Treasury to receive up to 

$438.0 million in emergency relief through the CARES Act payroll support program, of which $336.6 million will be in 

the form of payroll support grants paid in installments through the end of July 2020. As of June 30, 2020, we received 

$244.6 million in payroll support grants that are being recognized as a reduction in expense over the periods the grants 

are intended to compensate. We recognized $151.9 million as a reduction in expense during the three months ended June 

30, 2020 and expect to recognize the remainder of the grants from the CARES Act payroll support program as a 

reduction in expenses by the end of 2020.

Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability 

insurance, simulator costs, crew per diem, and crew hotel costs. The $23.8 million decrease in other operating expenses 

was primarily related to a decrease in the number of scheduled flights related to the COVID-19 pandemic during the 

three months ended June 30, 2020.

Interest Expense. The $1.8 million decrease in interest expense was primarily related to the reduction in 

outstanding long-term debt from $3.1 billion as of June 30, 2019 to $3.0 billion as of June 30, 2020.

Total airline expenses. The $245.8 million decrease in total airline expenses was primarily related to the 

COVID-19 pandemic and the related decrease in scheduled departures and block hours during the three months ended 

June 30, 2020. 
32

Summary of interest income, other income (expense) and provision for income taxes:

Interest income. Interest income decreased $2.0 million, or 54.8%, during the three months ended June 30, 

2020, compared to the three months ended June 30, 2019. The decrease in interest income was primarily related to a 

decrease in interest rates earned on our marketable securities subsequent to June 30, 2019.

Other income (expense), net. Other income increased $0.1 million, or 43.1%, during the three months ended 

June 30, 2020, compared to the three months ended June 30, 2019. Other income primarily consisted of income related 

to our investment in a joint venture with a third party.

Income taxes. Our provision for income taxes was 22.6% and 23.7% for the three months ended June 30, 2020 

and 2019, respectively. The decrease in the effective tax rate primarily relates to a lower discrete tax benefit from excess 

tax deductions generated from employee equity transactions that occurred during the three months ended June 30, 2020 

compared to the three months ended June 30, 2019 and a greater impact related to non-deductible expenses for the three 

months ended June 30, 2020, compared to the three months ended June 30, 2019 as a result of lower pretax earnings for 

the three months ended June 30, 2020 compared to the same period of 2019.

Net loss. Primarily due to the factors described above, we generated a net loss of $25.7 million, or $0.51 per 

diluted share, for the three months ended June 30, 2020, compared to net income of $88.1 million, or $1.71 per diluted 

share, for the three months ended June 30, 2019.

Six Months Ended June 30, 2020 and 2019

Operational Statistics. The following table sets forth our major operational statistics and the associated 

percentage changes for the periods identified below:

For the six months ended June 30, 

Block hours by aircraft type: 2020 2019 % Change

 E175s 194,134 259,996 (25.3)%

 CRJ900s 32,353 62,393 (48.1)%

 CRJ700s 98,740 148,836 (33.7)%

 CRJ200s 158,022 248,946 (36.5)%

Total block hours 483,249 720,171 (32.9)%

Departures 290,038 408,527 (29.0)%

Passengers carried 10,666,833 20,998,133 (49.2)%

Passenger load factor 58.0 % 81.4 % (23.4)pts

Average passenger trip length (miles) 492 501 (1.8)%

The operating statistics above exclude ExpressJet’s statistics prior to our sale of ExpressJet in January 2019 as 

ExpressJet’s impact on our 2019 statistics was not significant.

Operating Revenues

The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands):

For the six months ended June 30, 

 2020 2019 $ Change % Change

Flying agreements $1,045,864 $1,425,336 $ (379,472) (26.6)%

Lease, airport services and other 34,111 42,741 (8,630) (20.2)%

Total operating revenues $1,079,975 $1,468,077 $ (388,102) (26.4)%
33

Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity 

purchase agreements and prorate agreements with our major airline partners. Lease, airport services and other revenues

consist of revenue earned from providing airport counter, gate and ramp services, and revenue from leasing regional jet 

aircraft and spare engines to third parties. Changes in our flying agreements revenue are summarized below (dollar 

amounts in thousands). 

For the six months ended June 30, 

2020 2019 $ Change % Change

Capacity purchase agreements revenue: flight operations $ 498,469 $ 770,278 $ (271,809) (35.3)%

Capacity purchase agreements revenue: aircraft lease and fixed 

revenue 410,838 414,059 (3,221) (0.8)%

Prorate agreements revenue 136,557 240,999 (104,442) (43.3)%

 Flying agreements revenue $ 1,045,864 $ 1,425,336 $ (379,472) (26.6)%

The decrease in “Capacity purchase agreements revenue: flight operations” of $271.8 million was primarily due 

to schedule reductions experienced from the COVID-19 pandemic. 

The decrease in “Capacity purchase agreements revenue: aircraft lease and fixed revenue” of $3.2 million was 

primarily due to the deferral of $69.1 million in fixed amount per aircraft revenue. Under our capacity purchase 

agreements, we are paid a fixed amount per month per aircraft over the contract term. We recognize the fixed amount per 

aircraft per month proportionately to completed flights, our performance obligation. We operated a materially lower 

number of flights during the six months ended June 30, 2020 from previous levels due to a reduction in flight schedules 

resulting from the COVID-19 pandemic. We anticipate the future monthly flight levels will increase over the remaining 

applicable contract terms compared to the six months ended June 30, 2020. Due to the materially reduced flight activity 

during the six months ended June 30, 2020, and based on an anticipated increase in future monthly flight volumes over 

the remaining contract terms, we determined the fixed amount per month per aircraft received during the six months 

ended June 30, 2020 was disproportionately high relative to the volume of flights operated during the six months ended 

June 30, 2020. Accordingly, we deferred revenue attributed to the fixed amount per month per aircraft received during 

the six months ended June 30, 2020. Our deferred revenue balance will adjust over the remaining contract terms based 

on our completed flight levels each period relative to the anticipated average monthly flight levels over the remaining 

contract terms. This decrease in “Capacity purchase agreement revenue: aircraft lease revenue” was partially offset by 

the incremental lease revenue generated from seven new E175 aircraft added to our fleet and economic improvements 

made to certain existing capacity purchase agreements since June 30, 2019.

The decrease in prorate agreements revenue of $104.4 million was primarily due to the impact of COVID-19 

and the corresponding decrease in prorate passengers during the six months ended June 30, 2020 compared to the six

months ended June 30, 2019.

The $8.6 million decrease in lease, airport services and other revenues was primarily related to a decrease in the 

number of flights at locations where we were contracted to provide airport customer service during the six months ended 

June 30, 2020 compared to the six months ended June 30, 2019.
34

Operating Expenses

The following table summarizes our operating expenses and interest expense, (collectively, “Total airline 

expenses") for the periods indicated (dollar amounts in thousands):

For the six months ended June 30, 

2020 2019 $ Change % Change

Salaries, wages and benefits $ 419,379 $ 501,354 $ (81,975) (16.4)% 

Aircraft maintenance, materials and repairs 281,505 243,051 38,454 15.8 % 

Depreciation and amortization 243,346 180,134 63,212 35.1 % 

Airport-related expenses 52,190 61,429 (9,239) (15.0)% 

Aircraft fuel 32,234 56,507 (24,273) (43.0)% 

Aircraft rentals 33,752 38,164 (4,412) (11.6)% 

Special items — 21,869 (21,869) NM

CARES Act payroll support grant (151,938) — (151,938) NM 

Other operating expenses 107,589 125,057 (17,468) (14.0)% 

 Total operating expenses $ 1,018,057 $ 1,227,565 $ (209,508) (17.1)% 

Interest expense 61,130 65,278 (4,148) (6.4)% 

Total airline expenses $ 1,079,187 $ 1,292,843 $ (213,656) (16.5)% 

Salaries, wages and benefits. The $82.0 million decrease in salaries, wages and benefits was primarily due to a 

reduction in scheduled departures and block hours related to the COVID-19 pandemic. Additionally, in response to the 

COVID-19 pandemic, we have instituted a company-wide hiring freeze, suspended all non-scale pay increases and 

offered voluntary unpaid leave to our employees.

Aircraft maintenance, materials and repairs. The $38.5 million increase in aircraft maintenance expense was 

primarily due to an increase in direct maintenance costs incurred on a portion of SkyWest Airlines’ CRJ200 and CRJ700 

fleet intended to extend the operational performance and reliability of the aircraft and increased engine maintenance 

expense during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Depreciation and amortization. The $63.2 million increase in depreciation and amortization expense was 

primarily due to a reduction in the estimated useful life of our owned CRJ200 fleet that resulted in approximately $45.8 

million of incremental depreciation expense during the six months ended June 30, 2020 and due to the acquisition of 

seven new E175 aircraft and spare engines since June 30, 2019.

Airport-related expenses. Airport-related expenses include airport-related customer service costs such as 

outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees 

and station rents (our employee customer service labor costs are reflected in salaries, wages and benefits). The $9.2 

million decrease in airport-related expenses was primarily due to a decrease in scheduled departures resulting from the 

COVID-19 pandemic.

Aircraft fuel. The $24.3 million decrease in fuel cost was primarily due to a reduction in the number of prorate 

flights we operated and corresponding decrease in gallons of fuel we purchased and a decrease in our average fuel cost 

per gallon from $2.50 for the six months ended June 30, 2019 to $2.00 for the six months ended June 30, 2020. We 

purchase and incur expense for all fuel on flights operated under our prorate agreements. All fuel costs incurred under 

our capacity purchase agreements are either purchased directly by our major airline partners or purchased by us and 

reimbursed by our major airline partners, with the direct reimbursement recorded as a reduction to our fuel expense. The 

following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods indicated:

For the six months ended June 30, 

(in thousands) 2020 2019 % Change

Fuel gallons purchased 16,107 22,598 (28.7)%

Fuel expense $ 32,234 $ 56,507 (43.0)%
35

Aircraft rentals. The $4.4 million decrease in aircraft rentals was primarily related to a reduction of our fleet 

size that was financed through leases as a result of scheduled lease expirations subsequent to June 30, 2019.

Special Items. The $21.9 million special items expense for the six months ended June 30, 2019 related to a noncash write-off of $18.5 million in aircraft manufacturer part credits that we forfeited to settle future lease return 

obligations with the aircraft manufacturer. The $18.5 million of expense was included in the SkyWest Airlines segment. 

The special items expense also included $3.4 million of expense associated with a cash payout of certain ExpressJet 

employees stock equity grants as part of the sale of ExpressJet, which was reflected in the ExpressJet segment. We did 

not have a comparable special items expense during the six months ended June 30, 2020.

CARES Act payroll support grant. In April 2020, we entered into an agreement with Treasury to receive up to 

$438.0 million in emergency relief through the CARES Act payroll support program, of which $336.6 million will be in 

the form of payroll support grants, paid in installments through the end of July 2020. As of June 30, 2020, we received 

$244.6 million in payroll support grants that is being recognized as a reduction in expense over the periods the grants are 

intended to compensate. We recognized $151.9 million as a reduction in expense during the six months ended June 30, 

2020 and expect to recognize the remainder of the grants from the CARES Act payroll support program as a reduction in 

expense by the end of 2020.

Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability 

insurance, simulator costs, crew per diem, and crew hotel costs. The $17.5 million decrease in other operating expenses 

was primarily related to a decrease in the number of scheduled flights related to the COVID-19 pandemic during the six 

months ended June 30, 2020.

Interest Expense. The $4.1 million decrease in interest expense was primarily related to the reduction in

outstanding long-term debt from $3.1 billion as of June 30, 2019 to $3.0 billion as of June 30, 2020.

Total airline expenses. The $213.7 million decrease in total airline expenses was primarily related to the 

COVID-19 pandemic and the related decrease in scheduled departures and block hours during the six months ended June 

30, 2020.

Summary of interest income, other income (expense) and provision for income taxes:

Interest income. Interest income decreased $3.3 million, or 43.6%, during the six months ended June 30, 2020,

compared to the six months ended June 30, 2019. The decrease in interest income was primarily related to a decrease in 

interest rates earned on our marketable securities subsequent to June 30, 2019.

Other income (expense), net. During the six months ended June 30, 2020, we had other income, net of $0.8

million primarily related to income earned from our investment in a joint venture with a third party. During the six

months ended June 30, 2019, we had other income of $47.0 million primarily related to the gain on sale of ExpressJet.

Income taxes. Our provision for income taxes was 26.8% and 23.3% for the six months ended June 30, 2020 

and 2019, respectively. The increase in the effective tax rate primarily relates to a lower discrete tax benefit from excess 

tax deductions generated from employee equity transactions that occurred during the six months ended June 30, 2020 

compared to the six months ended June 30, 2019 and a greater impact related to non-deductible expenses for the six 

months ended June 30, 2020, compared to the six months ended June 30, 2019 as a result of lower pretax earnings for the 

six months ended June 30, 2020 compared to the same period of 2019.

Net income. Primarily due to the factors described above, we generated net income of $4.3 million, or $0.08 per 

diluted share, for the six months ended June 30, 2020, compared to net income of $176.2 million, or $3.40 per diluted 

share, for the six months ended June 30, 2019.
36

Our Business Segments

Three Months Ended June 30, 2020 and 2019

For the three months ended June 30, 2020, we had two reportable segments, which were the basis of our internal 

financial reporting: SkyWest Airlines and SkyWest Leasing. Our segment disclosure relates to components of our 

business for which separate financial information is available to, and regularly evaluated by, our chief operating decision 

maker. 

For the three months ended June 30, 

(dollar amounts in thousands)

 2020 2019 $ Change % Change

Operating Revenues:

SkyWest Airlines operating revenue $ 227,808 $ 627,088 $ (399,280) (63.7)%

SkyWest Leasing operating revenues 122,231 117,295 4,936 4.2 %

Total Operating Revenues $ 350,039 $ 744,383 $ (394,344) (53.0)%

Airline Expenses:

SkyWest Airlines airline expense $ 279,307 $ 549,135 $ (269,828) (49.1)%

SkyWest Leasing airline expense 106,061 83,925 22,136 26.4 %

Total Airline Expenses (1) $ 385,368 $ 633,060 $ (247,692) (39.1)%

Segment profit (loss):

SkyWest Airlines segment profit (loss) $ (51,499) $ 77,953 $ (129,452) (166.1)%

SkyWest Leasing profit 16,170 33,370 (17,200) (51.5)%

Total Segment Profit (Loss) $ (35,329) $ 111,323 $ (146,652) (131.7)%

Interest Income 1,685 3,731 (2,046) (54.8)%

Other Income, net 402 281 121 43.1 %

Consolidated Income (Loss) Before Taxes $ (33,242) $ 115,335 $ (148,577) (128.8)%

(1) Total Airline Expenses includes operating expense and interest expense

SkyWest Airlines Segment Profit. SkyWest Airlines block hour production decreased to 126,026, or 66.0%, for 

the three months ended June 30, 2020, from 370,782 for the three months ended June 30, 2019, primarily related to the 

reduced demand for air travel due to the COVID-19 pandemic. Significant items contributing to the SkyWest Airlines 

segment profit are set forth below.

The $399.3 million, or 63.7%, decrease in SkyWest Airlines Operating Revenues for the three months ended 

June 30, 2020, compared to the three months ended June 30, 2019, was primarily due to the COVID-19 pandemic that 

negatively impacted prorate revenue by $98.7 million and all other revenue (including capacity purchase agreement 

revenue) by $300.6 million.

The $269.8 million, or 49.1%, decrease in SkyWest Airlines Airline Expenses for the three months ended June 

30, 2020, compared to the three months ended June 30, 2019, was primarily due to the following factors:

• SkyWest Airlines’ salaries, wages and benefits expense decreased by $73.7 million, or 30.3%, primarily 

due to the reduction in scheduled departures and block hours related to the COVID-19 pandemic.

• SkyWest Airlines’ depreciation and amortization expense increased by $18.8 million, or 46.2%, primarily 

due to a decrease in the estimated useful life of SkyWest Airlines’ CRJ200 fleet and the related spare 

engines.

• SkyWest Airlines’ fuel expense decreased $24.0 million, or 77.9%, primarily due to a decrease in the 

volume of gallons purchased along with a decrease in the average fuel cost per gallon in 2020 compared to 

2019. The average fuel cost per gallon was $1.45 and $2.57 for the three months ended June 30, 2020 and 

2019, respectively.
37

• SkyWest Airlines recognized $151.9 million as a reduction in expense during the three months ended June 

30, 2020 and expects to recognize the remainder of the grants from the CARES Act payroll support 

program as a reduction in expenses by the end of 2020.

• SkyWest Airlines’ remaining airline expenses decreased $39.0 million, or 16.6%, primarily related to a 

decrease in the number of scheduled flights related to the COVID-19 pandemic during the three months 

ended June 30, 2020.

SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $17.2 million during the three months 

ended June 30, 2020, compared to the three months ended June 30, 2019, primarily due to additional depreciation 

expense resulting from a shortened estimated useful life of certain CRJ200 spare engines as a result of COVID-19, 

partially offset by an additional seven new E175 aircraft added to our fleet subsequent to June 30, 2019.

Six Months Ended June 30, 2020 and 2019

For the six months ended June 30, 2020 and following the sale of ExpressJet, we had two reportable segments, 

which were the basis of our internal financial reporting: SkyWest Airlines and SkyWest Leasing. Our segment disclosure 

relates to components of our business for which separate financial information is available to, and regularly evaluated by, 

our chief operating decision maker. Our operating segments for the six months ended June 30, 2019, prior to the sale of 

ExpressJet, were SkyWest Airlines, ExpressJet and SkyWest Leasing. During 2019, our corporate overhead expense was 

allocated to the operating expenses of SkyWest Airlines and ExpressJet.

For the six months ended June 30, 

(dollar amounts in thousands)

 2020 2019 $ Change % Change

Operating Revenues:

SkyWest Airlines operating revenue $ 834,650 $ 1,212,856 $ (378,206) (31.2)%

ExpressJet operating revenues — 24,050 (24,050) (100.0)%

SkyWest Leasing operating revenues 245,325 231,171 14,154 6.1 %

Total Operating Revenues $ 1,079,975 $ 1,468,077 $ (388,102) (26.4)%

Airline Expenses:

SkyWest Airlines airline expense $ 875,989 $ 1,098,854 $ (222,865) (20.3)%

ExpressJet airline expense — 28,690 (28,690) (100.0)%

SkyWest Leasing airline expense 203,198 165,299 37,899 22.9 %

Total Airline Expenses (1) $ 1,079,187 $ 1,292,843 $ (213,656) (16.5)%

Segment profit (loss):

SkyWest Airlines segment profit (loss) $ (41,339) $ 114,002 $ (155,341) (136.3)%

ExpressJet segment loss — (4,640) 4,640 (100.0)%

SkyWest Leasing profit 42,127 65,872 (23,745) (36.0)%

Total Segment Profit $ 788 $ 175,234 $ (174,446) (99.6)%

Interest Income 4,249 7,538 (3,289) (43.6)%

Other Income, net 800 47,006 (46,206) (98.3)%

Consolidated Income Before Taxes $ 5,837 $ 229,778 $ (223,941) (97.5)%

(1) Total Airline Expenses includes operating expense and interest expense

SkyWest Airlines Segment Profit. SkyWest Airlines block hour production decreased to 483,249, or 32.9%, for 

the six months ended June 30, 2020, from 720,171 for the six months ended June 30, 2019, primarily due to the COVID19 pandemic. Significant items contributing to the SkyWest Airlines segment profit are set forth below.

The $378.2 million, or 31.2%, decrease in SkyWest Airlines Operating Revenues for the six months ended June 

30, 2020, compared to the six months ended June 30, 2019, was primarily due to the COVID-19 pandemic that 

negatively impacted prorate revenue by $104.4 million and all other revenue (including capacity purchase agreement 

revenue) by $273.8 million.
38

The $222.9 million, or 20.3%, decrease in SkyWest Airlines Airline Expenses for the six months ended June 30, 

2020, compared to the six months ended June 30, 2019, was primarily due to the following factors:

• SkyWest Airlines’ salaries, wages and benefits expense decreased by $67.9 million, or 14.0%, primarily 

due to the reduction in scheduled departures and block hours related to the COVID-19 pandemic.

• SkyWest Airlines’ aircraft maintenance, materials and repairs expense increased by $42.7 million, or 

18.5%, primarily attributable to an increase in maintenance parts expense and direct maintenance costs 

incurred on a portion of SkyWest Airlines’ CRJ200 and CRJ700 fleet and increased engine maintenance 

expense during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

• SkyWest Airlines’ depreciation and amortization expense increased by $30.5 million, or 37.8%, primarily 

due to a decrease in the estimated useful life of SkyWest Airlines’ CRJ200 fleet and the related spare 

engines.

• SkyWest Airlines included special items related to a non-cash write-off of $18.5 million in aircraft 

manufacturer part credits that we forfeited to settle future lease return obligations with the aircraft 

manufacturer during the six months ended June 30, 2019.

• SkyWest Airlines’ fuel expense decreased $24.3 million, or 43.0%, primarily due to a decrease in the 

volume of gallons purchased along with a decrease in the average fuel cost per gallon in 2020 compared to 

2019. The average fuel cost per gallon was $2.00 and $2.50 for the six months ended June 30, 2020 and 

2019, respectively.

• SkyWest Airlines recognized $151.9 million as a reduction in expense during the six months ended June 

30, 2020 and expects to recognize the remainder of the grants from the CARES Act payroll support 

program as a reduction in expenses by the end of 2020.

• SkyWest Airlines’ remaining airline expenses decreased $33.5 million, or 14.8%, primarily related to a 

decrease in the number of scheduled flights related to the COVID-19 pandemic during the six months 

ended June 30, 2020.

SkyWest Leasing Segment Profit. SkyWest Leasing profit decreased $23.7 million during the six months ended 

June 30, 2020, compared to the six months ended June 30, 2019, primarily due to additional depreciation expense 

resulting from a shortened estimated useful life of certain CRJ200 spare engines as a result of COVID-19, partially offset 

by an additional seven new E175 aircraft added to our fleet subsequent to June 30, 2019.
39

Liquidity and Capital Resources

Sources and Uses of Cash

Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our 

operating, investing and financing activities for the six months ended June 30, 2020 and 2019, and our total cash and 

marketable securities positions as of June 30, 2020 and December 31, 2019 (in thousands):

For the six months ended June 30, 

 2020 2019 $ Change % Change

Net cash provided by operating activities $ 492,283 $ 362,123 $ 130,160 35.9 %

Net cash used in investing activities (70,623) (249,049) 178,426 (71.6)%

Net cash used in financing activities (56,619) (187,797) 131,178 (69.9)%

 June 30, December 31, 

 

 

2020 2019 $ Change % Change

Cash and cash equivalents $ 452,247 $ 87,206 $ 365,041 418.6 %

Marketable securities 309,823 432,966 (123,143) (28.4)%

Total cash and marketable securities $ 762,070 $ 520,172 $ 241,898 46.5 %

Cash Flows provided by Operating Activities

Cash flows from operating activities increased $130.2 million primarily due to deferred income related to the 

CARES Act payroll grant of $92.7 million as of June 30, 2020, deferred revenue related to the amount of cash allocated 

under our capacity purchase agreements in excess of revenue recognized of $69.1 million as of June 30, 2020 and an 

increase in non-cash depreciation expense of $63.2 million for the six months ended June 30, 2020 compared to the same 

period of 2019, partially offset by a decrease in cash provided by other working capital accounts during the six months 

ended June 30, 2020 compared to the same period of 2019 and by a decrease in pretax income for the six months ended 

June 30, 2020 compared to the same period of 2019.

Cash Flows used in Investing Activities

The $178.4 million decrease in cash used in investing activities was primarily due to the acquisition of 70 

previously leased aircraft and five new E175 aircraft during the six months ended June 30, 2019, compared to the 

acquisition of four used CRJ700 aircraft and two new E175 aircraft for the six months ended June 30, 2020. These 

changes represented a $164.8 million decrease in aircraft purchases and related spare aircraft assets. Additionally, during 

the six months ended June 30, 2019, we sold ExpressJet for $79.6 million partially offset by a note receivable issued to 

the buyer of $26.4 million, resulting in net cash from the sale of ExpressJet of $53.2 million. 

Cash Flows used in Financing Activities

The $131.2 million decrease in cash used in financing activities was primarily related to the decrease in 

principal payments on long-term debt of $96.0 million for the six months ended June 30, 2020, compared to the six 

months ended June 30, 2019. This decrease was primarily related to temporary deferrals on long-term debt payments we 

received with certain lenders during the six months ended June 30, 2020. Additionally, during the six months ended June 

30, 2020, we used an additional $26.2 million to purchase treasury shares and make income tax payments towards vested 

employee equity awards compared to $68.9 million for the six months ended June 30, 2019. 

Liquidity and Capital Resources as of June 30, 2020

Given the measures discussed above that we have implemented to mitigate the impact of the COVID-19 

pandemic on our financial position and operations and our assumptions about its future impact on travel demand, which 

could be materially different due to the inherent uncertainties of the current operating environment, we believe the 

working capital currently available to us (including funds from government assistance provided or to be provided 
40

pursuant to the CARES Act) will be sufficient to meet our present financial requirements, including anticipated 

expansion, planned capital expenditures, and scheduled lease payments and debt service obligations for at least the next 

12 months.

At June 30, 2020, our total capital mix was 44.6% equity and 55.4% long-term debt, compared to 45.3% equity 

and 54.7% long-term debt at December 31, 2019.

In early July 2020, SkyWest Airlines executed a non-binding letter of intent with Treasury for approximately 

$497.0 million in secured loans under the CARES Act and is evaluating the timing and level of participation in this loan 

program.

Significant Commitments and Obligations

General

See Note 7, "Leases, Commitments and Contingencies," to the condensed consolidated financial statements for 

our commitments and obligations for each of the next five years and thereafter.

Purchase Commitments and Options

We are coordinating with our major airline partners and aircraft manufactures on the timing of upcoming fleet 

deliveries under previously announced deals in response to COVID-19 schedule reductions. The anticipated future 

delivery dates summarized below are subject to change. As of June 30, 2020, we had a firm purchase commitment for 24

new E175 aircraft from Embraer, S.A. with delivery dates anticipated through 2022.

We have in recent years funded the majority of our aircraft acquisition cost with long-term debt. At the time of 

each aircraft acquisition, we evaluate the financing alternatives available to us, and select an appropriate method to fund 

the acquisition. At present, we intend to fund our acquisition of any additional aircraft through cash on hand and debt 

financing. 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. We intend to finance the firm order for 24 new E175 aircraft with approximately 85% debt and the 

remaining balance with cash.

Long-term Debt Obligations

As of June 30, 2020, we had $3.0 billion of long-term debt obligations, including current maturities, primarily 

related to the acquisition of E175 aircraft. The average effective interest rate on the debt related to such aircraft was 

approximately 4.1% at June 30, 2020.

Guarantees

We have guaranteed the obligations of SkyWest Airlines under the SkyWest Airlines Delta Connection 

Agreement and the SkyWest Airlines United Express Agreement for the E175 aircraft. In addition, we have guaranteed 

certain other SkyWest Airlines obligations under its aircraft financing and leasing agreements.

Seasonality

Our results of operations for any interim period are not necessarily indicative of those for an entire year, since 

the airline industry is subject to seasonal fluctuations and general economic conditions. Our operations are somewhat 

favorably affected by increased travel on our prorate routes, historically occurring during the summer months, and 

unfavorably affected by decreased travel during the months November through February and by inclement weather, 

which may occasionally or frequently, depending on the severity of the inclement weather in any given winter, result in 

cancelled flights during the winter months. The COVID-19 pandemic has negatively impacted our summer schedule and 

we anticipate that it will continue to have a negative impact throughout the remainder of 2020. The magnitude of the 
41

impact will depend on various factors including passenger demand and the related flight schedules we are requested to 

operate by our major airline partners under our capacity purchase agreements.

ITEM 3: 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 capacity purchase 

agreements, United, Delta, Alaska and American 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 prorate operations. For the six months 

ended June 30, 2020, prorate flying arrangements represented approximately 13.1% of our total flying agreements 

revenue. For illustrative purposes only, we have estimated the impact of the market risk of fuel price fluctuations on our 

prorate 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 $8.1 million in fuel expense for the six months ended June 30, 2020.

Interest Rates

As of June 30, 2020, all of our interest rates on our long-term debt were fixed rates. We currently intend to 

finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may 

impact the actual cost to us to acquire future aircraft. To the extent we place new aircraft in service under our code-share 

agreements with Delta, United, American, Alaska or other carriers, our code-share agreements currently provide that 

reimbursement rates will be adjusted to reflect the interest rates effective at the closing of the respective aircraft 

financing.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation 

of our disclosure controls and procedures, which have been designed to ensure that information we are required to 

disclose in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is 

recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Our 

management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of June 30, 2020, 

those controls and procedures were effective to ensure that information we are required to disclose in the reports we file 

or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive 

Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control

During the six months ended June 30, 2020, we implemented changes to our processes in response to the 

adoption of Accounting Standards Update No. 2016-13, “Financial Instruments- Credit Losses (Topic 326) Measurement 

of Credit Losses on Financial Instruments” (“Topic 326”) that became effective January 1, 2020. The operating 

effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal controls 

over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to certain legal actions which we consider routine to our business activities. As of June 30, 2020, 

our management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters was not 

likely to have a material adverse effect on our financial position, liquidity or results of operations.
42

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Report, you should carefully consider the factors discussed 

in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, in Part II, 

Item 1A “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in our other 

filings with the SEC, which factors could materially affect our business, financial condition and results of operations. 

The risks described in our reports filed with the SEC are not the only risks facing our company. Additional risks and 

uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect 

our business, financial condition and results of operations. The information presented below updates, and should be read 

in conjunction with, the risk factors and information disclosed in our Form 10-K and Form 10-Q for the quarter ended 

March 31, 2020. 

The outbreak and global spread of COVID-19 has resulted in a severe decline in demand for air travel which 

has adversely impacted our and our major airline partners’ business, operating results, financial condition and 

liquidity. The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in 

the future, could result in additional adverse effects on our and our major airline partners’ business, operating 

results, financial condition and liquidity.

In December 2019, a novel strain of coronavirus, COVID-19, was reported in Wuhan, China, and the World 

Health Organization subsequently declared COVID-19 a global health pandemic. On March 11, 2020, the U.S. 

Department of State issued a global Level 3 “reconsider travel” advisory for all travel abroad. On March 13, 2020, the 

U.S. government declared a national emergency. On March 19, 2020, the U.S. Department of State issued a global Level 

4 “do not travel” advisory advising U.S. citizens to avoid all international travel due to the global impact of COVID-19. 

Additionally, the U.S. government has issued a travel advisory for residents of certain areas of the country due to 

extensive community transmission of COVID-19 in the area. The U.S. government has also implemented enhanced 

screenings, mandatory 14-day quarantine requirements and other travel restrictions in connection with the COVID-19 

pandemic, including restrictions on travel from Mexico and Canada, and many foreign and U.S. state governments have 

instituted similar measures and declared states of emergency.

The COVID-19 outbreak, along with the measures governments and private organizations worldwide have 

implemented in an attempt to contain the spread of this pandemic, has resulted in a severe decline in demand for air 

travel, which has adversely affected our and our major airline partners’ business, operations and financial condition to an 

unprecedented extent. Measures ranging from travel restrictions, “shelter in place” and quarantine orders, limitations on 

public gatherings to cancellation of public events have resulted in a precipitous decline in demand for both domestic and 

international business and leisure travel. In response to this material decrease in demand, our major airline partners, upon 

whom we depend to contract with us and to set our flight schedules, have drastically reduced their summer capacity in 

2020 compared to 2019, and possibly more cuts beyond. We in turn have significantly reduced our capacity. Prior to the 

COVID-19 pandemic, we anticipated operating approximately 2,500 to 2,600 daily departures in the month of July 2020; 

however, in July 2020, we typically operated between approximately 1,200 to 1,400 daily departures as a result of 

COVID-19-related schedule reductions. We also anticipate similar schedule reductions will likely continue into the third 

quarter of 2020 and may continue throughout the remainder of 2020 and into 2021. We will continue to work with our 

major airline partners regarding future schedules and make further demand-driven adjustments to our capacity as needed. 

Additionally, we anticipate certain aircraft with scheduled contract expirations in 2020 will not be extended as a result of 

decreased demand, including 36 CRJ200 aircraft operating under the SkyWest Airlines Delta Connection Agreement. 

We also terminated our American Prorate Agreement on seven CRJ200 aircraft in the second quarter of 2020 and we 

may have further reductions in the number of CRJ200 aircraft operating under our prorate agreements. We may have 

further reductions in the number of CRJ200 aircraft operating under prorate agreements with our other major airline 

partners throughout 2020 and into 2021. We also may receive requests by our major airline partners to defer deliveries of 

new or used aircraft that were previously scheduled for 2020, 2021 and 2022. The duration and severity of the COVID19 pandemic remain uncertain, and there can be no assurance that these actions will suffice to sustain our business and 

operations through this pandemic.

During the second quarter of 2020, the COVID-19 pandemic had a negative impact on our revenues. The 

number of aircraft operating under our prorate agreements decreased from 64 aircraft as of June 30, 2019 to 47 aircraft as 
43

of June 30, 2020, or 26.6%. Additionally, our prorate revenue decreased from $134.9 million for the three months ended 

June 30, 2019 to $36.2 million for the three months ended June 30, 2020, or 73.2%. The negative impact to our revenues 

as a result of the COVID-19 pandemic and its associated effects on the travel industry is anticipated to continue into the 

third quarter of 2020 and throughout the remainder of 2020 and into 2021. Additionally, the majority of our code-share 

agreements set forth minimum levels of flight operations which our major airline partners are required to schedule for 

our operations and we are required to provide. These minimum flight operating levels are intended to provide a baseline 

level of expected utilization of aircraft, labor, maintenance facilities and related flight operations support. Historically, 

our major airline partners have utilized our flight operations at levels which exceed the minimum levels set forth in our 

code-share agreements; however, the COVID-19 pandemic will likely cause our major airline partners to reduce our 

utilization below the minimum levels. Given the significant impact COVID-19 has had on the airline industry, including 

our major airline partners, we have waived enforcing such minimum utilization contract provisions during the three 

months ended June 30, 2020. We may continue to waive the minimum utilization contract provisions prospectively. We 

may not be able to maintain operating efficiencies previously obtained, which would negatively impact our operating 

results and financial condition.

On April 23, 2020, SkyWest Airlines entered into the PSP Agreement with Treasury with respect to the Payroll 

Support Program under the CARES Act and, as of June 30, 2020, SkyWest Airlines had received $306.6 million of the 

expected $438.0 million. Of the $438.0 million, approximately $336.6 million will be a direct grant and approximately 

$101.4 million will be in the form of a ten-year, low interest unsecured term loan. The Payroll Support Program includes 

certain restrictions, including limitations on involuntary terminations and furloughs through September 30, 2020, 

requirements to maintain certain levels of scheduled service, restrictions on the payment of dividends and the repurchase 

of our common stock through September 30, 2021, and certain limitations on executive compensation. The substance 

and duration of these restrictions will materially affect our operations, and we may not be successful in managing these 

impacts. 

We may also take additional actions to improve our financial position, including measures to improve liquidity, 

such as drawing down on SkyWest Airlines’ line of credit, the issuance of secured debt securities, and/or the entry into

other debt facilities. There can be no assurance as to the timing of any such drawdown or issuance, which may be in the 

near term, or that any such additional financing will be completed on favorable terms, or at all. Any such actions could 

be conducted in the near term, may be material in nature and could result in significant additional borrowing. Measures 

to improve liquidity or other strategic actions that we may take in the future in response to COVID-19 may not be 

effective in offsetting decreased demand, and we will not be permitted to take certain strategic actions as a result of the 

CARES Act, which could result in a material adverse effect on our business, operating results and financial condition.

The full extent of the ongoing impact of COVID-19 on our longer-term operational and financial performance 

will depend on future developments, many of which are outside of our control, including the effectiveness of the 

mitigation strategies discussed above, the duration and spread of COVID-19 and related travel advisories and 

restrictions, the impact of COVID-19 on overall long-term demand for air travel, the impact of COVID-19 on our 

financial health and operations and that of our major airline partners, and future governmental actions, all of which are 

highly uncertain and cannot be predicted. The COVID-19 pandemic has had a material impact, and the continuation of 

reduced demand could have a material adverse effect, on our business, operating results, financial condition and 

liquidity. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or 

otherwise, they may also have the effect of heightening many of the other risks set forth in our Annual Report on Form 

10-K for the year ended December 31, 2019.

In addition, a further outbreak of COVID-19, an outbreak of another disease or similar public health threat, or 

fear of such an event, that affects travel demand, travel behavior or travel restrictions could have a material adverse 

impact on our business, financial condition and operating results and those of our major airline partners. Outbreaks of 

other diseases could also result in increased government restrictions and regulation, such as those actions described 

above or otherwise, which could adversely affect our operations.

We have a significant amount of contractual long-term debt obligations.
44

As of June 30, 2020, we had a total of approximately $3.0 billion in total long-term debt obligations. 

Substantially all of this long-term debt was incurred in connection with the acquisition of aircraft and engines. We also 

have significant long-term lease obligations primarily relating to our aircraft fleet. As of June 30, 2020, we had 107

aircraft under operating leases with remaining terms ranging from less than one year to ten years. Future minimum lease 

payments due under all long-term operating leases were approximately $406.6 million at June 30, 2020. At a 6.14% 

discount factor, which is the average rate used to approximate the implicit rates within the applicable leases, the present 

value of these lease obligations was equal to approximately $326.0 million at June 30, 2020. 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. 

Under our capacity purchase agreements, our major airline partners compensate us for our costs of owning or 

leasing the aircraft on a monthly basis. The aircraft compensation structure varies by agreement but is intended to cover 

either our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft 

lease expense costs while the aircraft is under contract. In the event any of our major airline partners defaults under a 

capacity purchase agreement or we are unable to extend the flying contract terms on aircraft with ongoing financial 

obligations, our financial position and financial results could be materially adversely affected.

In addition, in response to the travel restrictions, decreased demand and other effects the COVID-19 pandemic 

has had and is expected to have on our business, we may seek material amounts of additional financial liquidity in the 

short-term, which may include drawing down on SkyWest Airlines’ line of credit, the issuance of secured debt securities

and/or the entry into other debt facilities, among other items. There can be no assurance as to the timing of any such 

drawdown or issuance, which may be in the near term, or that any such additional financing will be completed on 

favorable terms, or at all. In addition, we have received financial assistance that is available to the airline industry under 

the CARES Act, which financial assistance subjects us and our business to certain restrictions, including, but not limited 

to, limitations on involuntary terminations and furloughs through September 30, 2020, requirements to maintain certain 

levels of scheduled service, restrictions on the payment of dividends and the repurchase of our common stock through 

September 30, 2021, and certain limitations on executive compensation.

Although the Company's cash flows from operations and its available capital have been sufficient to meet its 

obligations and commitments to date, the Company's liquidity has been, and may in the future be, negatively affected by 

the risk factors discussed in our Form 10-K for the year ended December 31, 2019, as updated by this Quarterly Report, 

including risks related to future results arising from the COVID-19 pandemic. If our liquidity is materially diminished, 

we might not be able to timely pay our leases and debts or comply with certain covenants under SkyWest Airlines’ line 

of credit or with other material provisions of our contractual obligations. 
45

ITEM 6. EXHIBITS

4.1 Warrant Agreement, dated as of April 23, 2020, by and between SkyWest, Inc. and the United States 

Department of the Treasury.

4.2 Form of Warrant (incorporated by reference to Annex B of Exhibit 4.1).

10.1 Payroll Support Program Agreement, dated of April 23, 2020, by and between SkyWest Airlines, Inc. 

and the United States Department of the Treasury.

10.2 Promissory Note, dated as of April 23, 2020, issued by SkyWest Airlines, Inc. to the United States 

Department of the Treasury and guaranteed by SkyWest, Inc.

31.1 Certification of Chief Executive Officer

31.2 Certification of Chief Financial Officer

32.1 Certification of Chief Executive Officer

32.2 Certification of Chief Financial Officer

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because 

its XBRL tags are embedded within the Inline XBRL document.

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

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46

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly 

caused this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, to be signed on its behalf by the 

undersigned, thereunto duly authorized, on August 7, 2020.

SKYWEST, INC.

By /s/ Robert J. Simmons

Robert J. Simmons

Chief Financial Officer
47

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13MAR200820562581 6MAR201519070928

To our Shareholders,

The past several years have been transformative for SkyWest as we look to minimize risk, increase

our market share within scope constraints, and solidify our leasing platform to maximize cash flow. A

key component of this strategy has been a significant fleet transition as we’ve taken on more than 150

new E175 aircraft, completed the sale of ExpressJet Airlines and moved forward with a smaller, more

efficient footprint. Our ability to execute these significant changes as we accept new aircraft and

transition others is only made possible through the dedication and good work of our more than 14,000

employees.

Our customers and the industry continue to expect and demand exceptional safety, reliability and

service. We believe the progress we’ve made at SkyWest uniquely positions us to deliver better than any

other airline in our space. Our operational and cultural successes continue to drive demand for our

product, and our pilot availability and fleet flexibility make us well positioned to deliver on that

demand.

During 2019, we secured substantial market share wins and continued to enhance our partners’

confidence in the SkyWest product. We reached new and extended agreements with our partners

throughout the year, solidifying a key component of our strategy to mitigate tail risk and maintain the

flexibility necessary to adapt and quickly respond to what our partners need and have come to expect

from SkyWest Airlines.

We also continued monetizing our assets within our leasing operation during 2019. Demand for

engines remains especially strong, and our leasing business continues to demonstrate SkyWest’s

creativity and ability to utilize the assets within our operational footprint profitably while maintaining a

clear focus on our contract partnerships.

Much uncertainty has been introduced into the US economy in early 2020 as a result of the spread

of the COVID-19 virus, and we are not immune to this. As we look ahead to the rest of 2020 and

beyond, we don’t know what the economic environment will look like, but we remain very focused on a

few key areas that make up the foundation of our current and future success. We believe our

competitive advantage is and will continue to be our ability to provide best in class operations, maintain

strong liquidity, and invest for the future. We believe as we remain firm in our execution of these

objectives, SkyWest will continue to deliver on its mission for employees, our customers and our

investors. We want to thank our team of professionals for their good work in delivering exceptional

performance and world-class service to our more than 40 million passengers last year.

Jerry C. Atkin Russell A. ‘‘Chip’’ Childs

Chairman Chief Executive Officer and President

SkyWest, Inc. SkyWest, Inc.
(This page has been left blank intentionally.)
UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM 10-K 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 

SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2019 

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 

SECURITIES EXCHANGE ACT OF 1934 

For 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: 

Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered 

Common Stock, No Par Value SKYW The Nasdaq Global Select Market 

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  

No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the 

Act. Yes  No 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file 

such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be 

submitted 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 such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 

smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” 

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period 

for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

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 Global Select Market) on June 28, 2019 was approximately $3,157,616,762. 

As of February 12, 2020, there were 50,474,289 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 2020 Annual Meeting of 

Shareholders are incorporated by reference into Part III of this Report as specified. Such proxy statement will be filed with the 

Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2019. 
2 

SKYWEST, INC. 

ANNUAL REPORT ON FORM 10-K 

TABLE OF CONTENTS 

 Page No.

PART I 

Cautionary Statement Concerning Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 

PART II 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases 

of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 

Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . 25 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . 69 

Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

PART III 

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related 

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

PART IV 

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 

Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 

 
3 

PART I 

Unless otherwise indicated in this Report, “SkyWest,” “we,” “us,” “our” and similar terms refer to 

SkyWest, Inc., including SkyWest’s wholly-owned subsidiary SkyWest Airlines, Inc. “SkyWest Airlines” refers to our 

wholly-owned subsidiary SkyWest Airlines, Inc., and "ExpressJet" refers to our former wholly-owned subsidiary 

ExpressJet Airlines, Inc. 

On January 22, 2019, we completed the sale of ExpressJet. Our financial and operating results for the years 

ended December 31, 2017, 2018 and 2019, and our financial position as of December 31, 2018 contained in this Report, 

include the financial results and position of ExpressJet for those respective periods, as the sale of ExpressJet did not 

qualify for presentation of discontinued operations (see Note 2 in the accompanying financial statements). 

Cautionary Statement Concerning Forward-Looking Statements 

Certain of the statements contained in this Report 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, 

anticipated operations, 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, 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 for a number of reasons, 

including but not limited to: the challenges of competing successfully in a highly competitive and rapidly changing 

industry; developments associated with fluctuations in the economy and the demand for air travel; the financial stability 

of Delta Air Lines, Inc. (“Delta”), United Airlines, Inc. (“United”), American Airlines, Inc. (“American”) and Alaska 

Airlines, Inc. (“Alaska”) (each, a “major airline partner”) and any potential impact of their financial condition on our 

operations; fluctuations in flight schedules, which are determined by the major airline partners for whom SkyWest 

conducts flight operations; variations in market and economic conditions; significant aircraft lease and debt 

commitments; residual aircraft values and related impairment charges; the impact of global instability; labor relations 

and costs; potential fluctuations in fuel costs, and potential fuel shortages; the impact of weather-related or other natural 

disasters on air travel and airline costs; new aircraft deliveries; and the ability to attract and retain qualified pilots, as well 

as the other factors described below in Item 1A. Risk Factors. 

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 applicable law. 

ITEM 1. BUSINESS 

General 

We offer scheduled passenger service to destinations in the United States, Canada, Mexico and the Caribbean. 

Substantially all of our flights are operated as Delta Connection, United Express, American Eagle or Alaska Airlines 

flights under code-share arrangements (commercial agreements between airlines that, among other things, allow one 

airline to use another airline’s flight designator codes on its flights) with Delta, United, American or Alaska, 

respectively. As of December 31, 2019, we offered approximately 2,300 daily departures, of which approximately 960 

were Delta Connection flights, 850 were United Express flights, 340 were American Eagle flights and 150 were Alaska 

Airlines flights. We generally provide regional flying to our major airline partners under long-term, fixed-fee, code-share 

agreements. Under these fixed-fee agreements, our major airline partners generally pay us fixed rates for operating the 

aircraft primarily based on the number of completed flights, flight time and the number of aircraft under contract. The 

major airline partners either directly pay for or reimburse us for specified direct operating expenses (including fuel 
4 

expense). Our operations are conducted principally from airports located in Chicago (O’Hare), Denver, Houston, Los 

Angeles, Minneapolis, Phoenix, Salt Lake City, San Francisco and Seattle. 

SkyWest has been flying since 1972. During our long operating history, we have developed an industry-leading 

reputation for providing quality regional airline service. As of December 31, 2019, we had 483 aircraft in scheduled 

service consisting of the following: 

 

 CRJ200 CRJ700 CRJ900 E175 Total 

Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 13 43 59 199 

United ............................................ 99 19 — 65 183 

American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 62 — — 69 

Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 32 32 

Aircraft in scheduled service . . . . . . . . . . . . . . . . . . . . . . . . . 190 94 43 156 483 

Subleased to an un-affiliated entity .................... 4 10 5 — 19 

Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 22 — — 42 

Total Fleet ........................................ 214 126 48 156 544 

*As of December 31, 2019, these aircraft have been removed from service and are in the process of being placed under a 

leasing arrangement with a third party, are aircraft transitioning between code-share agreements with our major airline 

partners and being used as supplemental spare aircraft, or are in the process of being parted out. 

As of December 31, 2019, our fleet scheduled for service consisted of aircraft manufactured by Bombardier 

Aerospace (“Bombardier”) and Embraer S.A. (“Embraer”) summarized as follows: 

Manufacturer Aircraft Type Seat Configuration 

Bombardier . . . CRJ900s 76 

Bombardier . . . CRJ700s 65-70 

Bombardier . . . CRJ200s 50 

Embraer . . . . . . E175s 70-76 

Bombardier and Embraer are the primary manufacturers of regional jets operated in the United States and offer 

many of the amenities of larger commercial jet aircraft, including flight attendant service, a stand-up cabin, overhead and 

under seat storage, lavatories and in-flight snack and beverage service. The speed of Bombardier and Embraer regional 

jets is comparable to larger aircraft operated by major airlines, and they have a range of approximately 1,600 miles and 

2,100 miles, respectively. 

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 website at 

inc.skywest.com, which provides links to our annual, quarterly and current reports filed with the Securities and Exchange 

Commission (“SEC”). The information on our website does not constitute part of this Report. In addition, we provide 

electronic or paper copies of our SEC filings free of charge upon request. 

We conduct our code-share operations with our major airline partners pursuant to the following agreements: 

 

Major airline partner Agreement 

United . . . . . . . . . . . “United Express Agreements” and “United Express Prorate Agreement” 

Delta . . . . . . . . . . . . “Delta Connection Agreement” and “Delta Connection Prorate Agreement” 

American . . . . . . . . “American Agreement” and “American Prorate Agreement” 

Alaska . . . . . . . . . . . “Alaska Agreement” 

A summary of the terms for each of our code-share agreements is provided under the heading “Code-Share 

Agreements” below on page [6]. 
5 

ExpressJet 

Prior to our sale of ExpressJet in January 2019, ExpressJet provided regional jet service to airports primarily 

located in the Eastern and Midwestern United States, as well as Mexico, Canada and the Caribbean. ExpressJet’s 

operations were conducted principally from airports located in Atlanta, Chicago (O’Hare), Houston, Newark and New 

York. 

SkyWest Leasing 

The SkyWest Leasing segment includes revenue attributed to our Embraer E175 dual-class regional jet aircraft 

(“E175”) ownership cost earned under the applicable fixed-fee contracts, and the depreciation and interest expense of our 

E175 aircraft. The SkyWest Leasing segment’s total assets and capital expenditures include the acquired E175 aircraft. 

The SkyWest Leasing segment additionally includes the revenue and expense from leasing aircraft and engines to third 

parties. 

Competition and Economic Conditions 

The airline industry is highly competitive. SkyWest competes principally with other regional airlines. Our 

operations extend throughout most major geographic markets in the United States. Our competition includes, therefore, 

nearly every other domestic regional airline. Our primary competitors include Air Wisconsin Airlines Corporation (“Air 

Wisconsin”); Endeavor Air, Inc. (“Endeavor”) (owned by Delta); Envoy Air Inc. (“Envoy”), PSA Airlines, Inc. (“PSA”) 

and Piedmont Airlines (“Piedmont”) (Envoy, PSA and Piedmont are owned by American); ExpressJet (subsequent to 

January 2019); Horizon Air Industries, Inc. (“Horizon”) (owned by Alaska Air Group, Inc.); Mesa Air Group, Inc. 

(“Mesa”); Republic Airways Holdings Inc. (“Republic”); and Trans States Airlines, Inc. (“Trans States”). Major airlines 

typically award code-share flying arrangements to regional airlines based primarily upon the following criteria: ability to 

fly contracted schedules, availability of labor resources, including pilots, low operating cost, financial resources, 

geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages 

and the overall image of the regional airline. 

The principal competitive factors for regional airline code-share arrangements include labor resources, 

code-share agreement terms, reliable flight operations, operating cost structure, ability to finance new aircraft, 

certification to operate certain aircraft types and geographical infrastructure and markets and routes served. 

Our operations represent the largest regional airline operations in the United States. However, regional carriers 

owned by major airlines may have access to greater resources than we do through their parent companies. 

Generally, the airline industry is sensitive to changes in general economic conditions. 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 our predominantly contract-based flying arrangements. If, however, any of our major airline partners 

experience a prolonged decline in the number of passengers or are negatively affected by low ticket prices or high fuel 

prices, they may seek rate reductions in future code-share agreements, or materially reduce scheduled flights in order to 

reduce their costs. In addition, adverse weather conditions can impact our ability to complete scheduled flights and can 

have a negative impact on our operations and financial condition. 

Industry Overview 

Majors, Low-Cost Carriers and Regional Airlines 

The airline industry in the United States has traditionally been comprised of several major airlines, including 

Alaska, American, Delta 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”) and JetBlue Airways Corporation (“JetBlue”), 

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. 
6 

Regional airlines, including SkyWest, typically operate smaller aircraft on shorter distance routes than major 

and low-cost carriers. Several regional airlines, including Endeavor, Envoy, Horizon, Piedmont and PSA, are 

wholly-owned subsidiaries of major airlines. 

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 the regional airline receives a 

percentage of applicable passenger ticket revenues, termed “prorate” or “revenue-sharing” flights, as described in more 

detail below. 

Code-Share Agreements 

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 the major airline and to 

market and advertise its status as a carrier for the major airline. Code-share agreements also generally obligate the major 

airline to provide services such as reservations, ticketing, ground support and gate access to the regional airline, and the 

major airline often coordinates marketing, advertising and other promotional efforts. In exchange, the regional airline 

provides a designated number of low-capacity (usually between 50 and 76 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 either fixed-fee arrangements or revenue-sharing 

arrangements as explained below: 

• Fixed-Fee Arrangements. Under a fixed-fee arrangement (referred to as a “fixed-fee arrangement,” “fixedfee contract,” “contract flying” or a “capacity purchase agreement”), the major airline generally pays the 

regional airline a fixed-fee for each departure, flight hour (measured from takeoff to landing, excluding taxi 

time) and block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per 

aircraft in service each month with additional incentives based on completion of flights, on-time 

performance and other operating metrics. The regional airline typically acquires or finances the aircraft 

used under the fixed-fee arrangement, which is considered a lease of the aircraft to our major airline 

partner. In addition, under a fixed fee arrangement, the major airline bears the risk of fuel price fluctuations 

and certain other costs. Regional airlines benefit from fixed-fee arrangements because they are protected 

from some of the elements that cause volatility in airline financial performance, including variations in 

ticket prices, number of passengers and fuel prices. However, regional airlines in fixed-fee arrangements 

generally do not benefit from positive trends in ticket prices, ancillary revenue, such as baggage and food 

and beverage fees, the number of passengers enplaned or fuel prices, because the major airlines retain 

passenger fare volatility risk and fuel costs associated with the regional airline flight. 

• Revenue-Sharing Arrangements. Under a revenue-sharing arrangement (referred to as a “revenue-sharing” 

arrangement or “prorate” arrangement), the major airline and regional airline negotiate a passenger fare 

proration formula for specifically identified routes, pursuant to which the regional airline receives a 

percentage of the ticket revenues for those passengers traveling for one portion of their trip on the regional 

airline and the other portion of their trip on the major airline. On the other hand, the regional airline 

receives all of the passenger fare when a passenger purchases a ticket on a route solely operated by the 

regional airline. Substantially all costs associated with the regional airline flight are borne by the regional 

airline. In a revenue-sharing arrangement, the regional airline may realize increased profits as ticket prices 

and passenger loads increase or fuel prices decrease and, correspondingly, the regional airline may realize 

decreased profits as ticket prices and passenger loads decrease or fuel prices increase. 

We have code-share agreements with Delta, United, American and Alaska. 

During the year ended December 31, 2019, approximately 82.0% of our flying agreements revenue related to 

fixed-fee contract flights, where Delta, United, American and Alaska controlled scheduling, ticketing, pricing and seat 

inventories. The remainder of our flying agreements revenue during the year ended December 31, 2019 related to prorate 
7 

flights for Delta, United or American, where we controlled scheduling, pricing and seat inventories, and shared 

passenger fares with Delta, United or American according to prorate formulas. The routes placed under our prorate 

arrangements typically include flight service between one of our partners’ hub cities and a city not served under our 

fixed-fee arrangements. 

Under our fixed-fee arrangements, our major airline partners compensate us for our costs of owning or leasing 

the aircraft on a monthly basis. The aircraft compensation structure varies by agreement but is intended to cover either 

our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease 

expense costs while the aircraft is under contract. The number of aircraft under our fixed-fee arrangements and our 

prorate arrangements as of December 31, 2019 is reflected in the summary below. The following summaries of our codeshare agreements with our major airline partners do not purport to be complete and are qualified in their entirety by 

reference to the applicable agreement. 

Delta Connection Agreements 

Agreement Aircraft type 

Number of 

Aircraft Term / Termination Dates 

Delta Connection Agreement . . . . . . . . . . . • CRJ 200 55 • Individual aircraft have scheduled 

(fixed-fee arrangement) • CRJ 700 

• CRJ 900 

• E175

13 

43 

59 

removal dates from 2020 to 2029 

• The average remaining term of the 

aircraft under contract is 4.1 years

Delta Connection Prorate Agreement . . . . • CRJ 200 29 • Terminable with 30-day notice 

(revenue-sharing arrangement) 

United Express Agreements 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

United Express Agreements . . . . . . . . . . . • CRJ 200 68 • Individual aircraft have scheduled 

(fixed-fee arrangement) • CRJ 700 

• E175

 19 

65 

removal dates under the agreement 

between 2020 and 2029 

• The average remaining term of the 

aircraft under contract is 4.3 years

United Express Prorate Agreement . . . . . . • CRJ 200 31 • Terminable with 120-day notice 

(revenue-sharing arrangement) 

American Agreements 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

American Agreement . . . . . . . . . . . . . . . . . • CRJ 700 62 • Individual aircraft have scheduled 

(fixed-fee arrangement) removal dates from 2022 to 2025 

• The average remaining term of the 

aircraft under contract is 4.1 years 

American Prorate Agreement . . . . . . . . . . • CRJ 200 7 • Terminable with 120-day notice 

(revenue-sharing arrangement) 

Alaska Capacity Purchase Agreement 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

Alaska Agreement . . . . . . . . . . . . . . . . . . . • E175 32 • Individual aircraft have scheduled 

(fixed-fee arrangement) removal dates from 2027 to 2030 

• The average remaining term of the 

aircraft under contract is 9.2 years 

 

 
8 

In addition to the contractual arrangements described above, SkyWest Airlines has entered into fixed-fee 

agreements with Delta and American to place additional E175 aircraft into service. As of December 31, 2019, SkyWest 

Airlines is scheduled to take delivery of six new E175 aircraft in connection with its agreement with Delta and 20 new 

E175 aircraft in connection with its agreement with American. The delivery dates for the new E175 aircraft are currently 

scheduled to take place by the end of 2021. Final delivery dates may be adjusted based on various factors. Additionally, 

SkyWest Airlines is scheduled to add an additional six used E175 aircraft under the Delta fixed-fee agreement during 

2020. 

SkyWest Airlines also has an agreement with Delta to place one CRJ900 regional jet aircraft (“CRJ900”) in 

2020 under a nine-year fixed-fee agreement. We anticipate Delta will finance the aircraft. 

SkyWest Airlines also has an agreement with American to place ten used CRJ700 regional aircraft (“CRJ700”) under a 

multi-year contract. As of December 31, 2019, SkyWest Airlines had placed two of these CRJ700 aircraft into service 

with American. We anticipate acquiring five CRJ700 aircraft from a third party and internally sourcing three CRJ700s 

through other contract expirations.

Delta Connection Agreements 

We and Delta are parties to a Delta Connection Agreement (the "Delta Connection Agreement"), pursuant to 

which we provide contract flight services for Delta. 

The Delta Connection Agreement has a latest scheduled termination date of 2029. The Delta Connection 

Agreement is subject to early termination in various circumstances, including: 

• if we or Delta commit a material breach of the Delta Connection Agreement, subject to 30-day notice and 

cure rights; 

• if we fail to conduct all flight operations and maintain all aircraft under the Delta Connection Agreement in 

compliance in all material respects with applicable government regulations; 

• if we fail to satisfy certain performance and safety requirements; or 

• if either party files for bankruptcy, reorganization or similar action (subject to limitations imposed by the 

U.S. Bankruptcy Code) or makes an assignment for the benefit of creditors. 

United Express Agreements 

We and United are parties to two United Express agreements: a United Express agreement to operate certain 

CRJ200s regional aircraft (“CRJ200”) and CRJ700s, and a United Express agreement to operate E175 aircraft 

(collectively, the “United Express Agreements”). 

The United Express Agreements have a latest scheduled termination date in 2029. The United Express 

Agreements are subject to early termination in various circumstances including: 

• if we or United fail to fulfill an obligation under the United Express Agreements for a period of 60 days 

after written notice to cure; 

• if our operations fall below certain performance levels for a period of three consecutive months; 

• subject to limitations imposed by the U.S. Bankruptcy Code, if either party becomes insolvent, fails to pay 

its debts when due, takes action leading to its cessation as a going concern, makes an assignment of 

substantially all of its assets, or ceases or suspends operations; or 
9 

• subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced 

against either party and certain specified conditions are not satisfied. 

American Agreement 

We and American are parties to an agreement (the “American Agreement”) for the operation of CRJ700 

aircraft. The American Agreement for CRJ700 aircraft is scheduled to terminate in 2025 and is subject to early 

termination in various circumstances including: 

• if we or American fail to fulfill any obligation under the American Agreement for a period of 30 days after 

written notice to cure; 

• if our operations fall below certain performance levels; 

• subject to limitations imposed by the U.S. Bankruptcy Code, if either party makes a general assignment for 

the benefit of creditors or becomes insolvent; or 

• subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced 

against either party and certain specified conditions are not satisfied 

Alaska Agreement 

We and Alaska are parties to a Capacity Purchase Agreement (the “Alaska Agreement”) for the operation of 

E175 aircraft. The agreement has a 12-year term for each of the aircraft subject to the agreement. The Alaska Agreement 

is subject to early termination in various circumstances including: 

• if we or Alaska fail to fulfill an obligation under the Alaska Capacity Purchase Agreement for a period of 

30 days after written notice to cure; 

• if our operational performance falls below certain performance levels; 

• subject to limitations imposed by the U.S. Bankruptcy Code, if either party makes a general assignment for 

the benefit of creditors or becomes insolvent; or 

• subject to limitations imposed by the U.S. Bankruptcy Code, if bankruptcy proceedings are commenced 

against either party and certain specified conditions are not satisfied. 

Training and Aircraft Maintenance 

SkyWest provides substantially all training to our crew members and maintenance personnel at our training 

facilities. Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment 

at our maintenance facilities. We also use third-party vendors for certain airframe and engine maintenance work. 

Fuel 

Our fixed-fee agreements with Delta, United, American and Alaska require the respective major airline partner 

to either directly pay for or reimburse us for the fuel costs we incur under those agreements, thereby reducing our 

exposure to fuel price fluctuations. Under our prorate agreements with Delta, United and American, we are responsible 

for the costs to operate the flights, including fuel costs, and therefore we are exposed to fuel price fluctuations for flights

operated under our prorate agreements. During the year ended December 31, 2019, United and Delta purchased the 

majority of the fuel for our aircraft flying under their respective fixed-fee agreements directly from their fuel vendors. 

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 fuel 
10 

purchase contracts generally do not provide protection against fuel price increases, nor do they ensure availability of 

supply. We typically purchase fuel from third-party suppliers for our prorate agreements. A substantial increase in the 

price of jet fuel for flights we operate under our prorate agreements, or the lack of adequate fuel supplies in the future, 

could have a material adverse effect on our business, financial condition, results of operations or liquidity. 

Employee Matters 

Collective Bargaining 

As of December 31, 2019, SkyWest and SkyWest Airlines collectively employed approximately 13,700 

full-time equivalent employees, consisting of 5,239 pilots, 4,126 flight attendants, 1,435 airport operations personnel, 

1,284 mechanics, 888 other maintenance personnel, 178 dispatchers and 550 operational support and administrative 

personnel. Approximately 88.4% of these employees were represented by a labor group. Most of these employees are 

represented by in-house labor associations that have entered into collective bargaining agreements regarding employee 

compensation and work rules. None of these employees are currently represented by an outside union. Outside union 

organizing efforts among our employees do occur from time to time and may continue in the future. If unionization 

efforts are successful, we may be subjected to increased risks of work interruption or stoppage and/or incur additional 

expenses associated with a change in labor representation of our employees. Neither SkyWest nor SkyWest Airlines has 

ever experienced a work stoppage due to a strike or other labor dispute, and we consider our relationships with our 

employees to be good. 

Our relations with labor are governed by the Railway Labor Act (the “RLA”), the federal law governing labor 

relations between air carriers and their employees. Under the RLA, a collective bargaining agreement between an airline 

and a labor representative does not expire, but instead becomes amendable as of a stated date. If either party wishes to 

modify the terms of any such agreement, it must notify the other party in the manner prescribed by the RLA and/or 

described in the agreement. After receipt of such notice, the parties must meet for direct negotiations, and if no 

agreement is reached, either party may request the National Mediation Board to initiate a process including mediation, 

arbitration, and a potential “cooling off” period that must be followed before either party may engage in “self-help.” 

“Self-help” includes, among other things, a strike by the representative or the imposition of proposed changes to the 

collective bargaining agreement by the airline. The U.S. Congress and the President have the authority to prevent “selfhelp” by enacting legislation that, among other things, imposes a settlement on the parties. SkyWest Airlines respects all 

employees’ legal rights, including the rights to free association and collective bargaining. This includes the right to 

decide whether to be represented by a union. Our employees are covered by the RLA. Under the RLA, employees have 

the right to decide whether they wish to be represented by a union. They also have the right to reject union 

representation. 

Government Regulation 

All interstate air carriers, including SkyWest, 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 methods, certifications, 

which are necessary for the continued operations of SkyWest, 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 is in compliance in all material respects with FAA regulations and holds all operating and 

airworthiness certificates and licenses which are necessary to conduct our operations. We incur substantial costs in 

maintaining current certifications and otherwise complying with the laws, rules and regulations to which we are subject. 

Our flight operations, maintenance programs, recordkeeping and training programs are conducted under FAA approved 

procedures. All air carriers operating in the United States are required to comply with federal laws and regulations 
11 

pertaining to noise abatement and engine emissions. All such 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 is also subject to certain federal and state laws relating to protection of the environment, labor 

relations and equal employment opportunity. We believe SkyWest is in compliance in all material respects with these 

laws and regulations. 

Environmental Matters 

We 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. 

As the largest regional airline in the United States, we remain committed to lowering our environmental 

footprint while continuing to offer the best service to our customers and the communities we serve. Through the use of 

software and training, we heavily monitor and manage our fuel trends and fuel consumption which leads to better fuel 

conservation and reductions in emissions. When possible, we try to mitigate the use of fuel, including by taxiing with the 

use of a single engine, taking steps to improve the efficiency of aircraft routing and using ground power when the plane 

is parked at the gate. We participate with our major airline partners in recycling programs, and we have implemented 

recycling initiatives in our facilities to reduce the amount of paper, plastic and other recyclables going to landfills. We 

have worked aggressively to reduce our reliance on paper manuals and have converted, or are in the process of 

converting, our manuals and our maintenance logs into electronic form, further eliminating unnecessary waste while 

increasing efficiencies. 

Safety and Security 

We are committed to the safety and security of our passengers and employees. We have taken many steps, both 

voluntarily and as mandated by governmental authorities, to increase the safety and security of our operations. Some of 

the safety and security measures we have taken with our major airline 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. 

Insurance 

We 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 coverage for loss or damage to our flight equipment, 

and workers’ compensation insurance. 

Seasonality 

Our results of operations for any interim period are not necessarily indicative of those for the entire year, in part 

because the airline industry is subject to seasonal fluctuations and changes in general economic conditions. Our 

operations are somewhat favorably affected by pleasure travel on our prorate 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 can result in cancelled flights, principally during the 

winter months. Additionally, a significant portion of our fixed-fee arrangements is based on completing flights and we 

typically have more scheduled flights during the summer months. We generally experience a significantly higher number 

of weather cancellations during the winter months, which negatively impacts our revenue during such months. 
12 

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 

Our business model is dependent on code-share agreements with four major airline partners.

Our business model depends on major airlines electing to contract with us instead of operating their own 

regional jets. Some regional airlines are owned by a major airline. We have no guarantee that in the future our major 

airline partners will choose to enter into contracts with us instead of operating their own regional jets. Our major airline 

partners are not prohibited from doing so under our code-share agreements. A decision by any of our major airline 

partners to phase out code-share relationships and instead acquire and operate their own regional jets could have a 

material adverse effect on our financial results. 

As of December 31, 2019, 382 out of our total 483 aircraft available for scheduled service were operating under 

a fixed-fee arrangement or a revenue-sharing agreement with either Delta or United. If our code-share relationship with 

Delta or United were 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 either of these relationships 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 an airline independent from major airline partners would be a 

significant departure from our business plan and would likely require significant time and resources, which may not be a 

viable alternative. 

Additionally, each of our agreements with our major airline partners is subject to certain early termination 

provisions. For example, Delta’s termination rights include the right to terminate the agreements upon the occurrence of 

certain force majeure events (including certain labor-related events) that prevent us from performing for certain periods. 

United may terminate the United Express Agreements due to our uncured breach of certain operational or performance 

provisions, including measures and standards related to flight completions, baggage handling and on-time arrivals. We 

currently use the systems, facilities and services of Delta and United 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 to maintain any 

of these systems, close any of these facilities 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 obtain alternative systems, facilities or 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 certain airport related 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 facilities. We may be unable to arrange such replacements on satisfactory 

terms, or at all. 

We are reliant on two aircraft manufacturers and one engine manufacturer.

We operate aircraft manufactured by Bombardier and Embraer. The issuance of FAA or manufacturer 

directives restricting or prohibiting the use of any Bombardier or Embraer aircraft types we operate could negatively 

impact our business and financial results. We are also dependent upon General Electric as the sole manufacturer of 

engines used on the aircraft we operate. Our operations could be materially and adversely affected by the failure or 
13 

inability of Bombardier, Embraer or General Electric to provide sufficient parts or related maintenance and support 

services to us on a timely manner. Additionally, timing of aircraft deliveries could be delayed beyond our control. 

Our growth may be limited with our major airline partners' flight systems. 

Additional growth opportunities within our major airline partners’ flight systems are limited by various factors, 

including a limited number of regional aircraft each such major airline partner can operate in its regional network due to 

its own labor agreements. Except as contemplated by our existing code-share agreements, we cannot be sure that our 

major airline partners 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. Given the competitive nature of the airline industry, we believe limited 

growth opportunities may result in competitors accepting 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 airline 

partners, those opportunities may involve economic terms or financing commitments that are unacceptable to us. 

Additionally, our major airline partners may reduce the number of regional jets in their system by not renewing or 

extending existing flying arrangements with regional operators. Any one or more of these factors may reduce or 

eliminate our ability to expand our flight operations with our existing major airline partners. 

Increases in labor costs, including pilot costs, maintenance costs and overhead costs may result in lower operating 

margins under our fixed-fee contracts. 

Labor costs are a significant component of our total expenses. Currently, we believe our labor costs are 

competitive relative to other regional airlines. However, we cannot provide assurance that our labor costs going forward 

will remain competitive because of changes in supply and demand for labor in the regional industry. We compete against 

other airlines and businesses for labor in many highly skilled positions. If we are unable to hire, train and retain qualified 

employees at a reasonable cost, sustain employee engagement in our strategic vision, or if we are unsuccessful at 

implementing succession plans for our key staff, we may be unable to grow or sustain our business. Attrition beyond 

normal levels could negatively impact our operating results, increase our training and labor costs and our business 

prospects could be harmed. 

Additionally, under our fixed-fee contracts with Delta, United, American and Alaska, a portion of our 

compensation is based upon pre-determined rates typically applied to production statistics (such as departures, block 

hours, flight hours and number of aircraft in service each month). The primary operating costs intended to be 

compensated by the pre-determined rates include labor costs, including crew training costs, certain aircraft maintenance 

expenses, and overhead costs. During the year ended December 31, 2019, approximately 90.4% of our code-share 

operating costs were reimbursable at pre-determined rates and 9.6% of our code-share operating costs were pass-through 

costs. Additionally, our aircraft maintenance costs may increase annually as our fleet ages at a higher rate than our predetermined rates allow. Also, on an individual aircraft basis, various in-depth maintenance procedures are typically 

scheduled to occur at multi-year intervals, which can result in maintenance expense fluctuations year-to-year. If our 

operating costs for labor, aircraft maintenance and overhead costs exceed the compensation earned from our 

pre-determined rates under our fixed-fee arrangements, our financial position and operating results will be negatively 

affected. 

We may experience difficulty recruiting and retaining qualified pilots and maintenance technicians. 

Our operations rely on qualified personnel, including pilots and maintenance technicians. Our pilots, flight 

attendants and maintenance technicians may seek employment at mainline airlines, which generally offer higher salaries 

and more extensive benefit programs than regional airlines are financially able to offer. Should the turnover of 

employees, particularly pilots and maintenance technicians, sharply increase, we may not be able to hire sufficient pilots 

and maintenance technicians to replace those leaving. Additionally, FAA regulations regarding personnel certification 

and qualifications, and potential future changes in FAA regulations, could limit the number of qualified new entrants that 

we could hire. In the event we are unable to hire and retain qualified personnel, including pilots and mechanics, our 

business and financial condition could be adversely affected. 
14 

Information technology security breaches, hardware or software failures, or other information technology disruptions 

may negatively impact our operations or reputation. 

The performance and reliability of our technology are critical to our ability to compete effectively. Any internal 

technological error or failure or large-scale external interruption in the technological infrastructure we depend on, such 

as power, telecommunications or the internet, may disrupt our internal network. Any individual, sustained or repeated 

failure of technology could impact our ability to conduct our business and result in increased costs. Our technological 

systems and related data may be vulnerable to a variety of sources of interruption due to events beyond our control, 

including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security 

issues. 

In addition, as a part of our ordinary business operations, we collect and store sensitive data, including personal 

information of our passengers and employees and information of our business partners. Our information systems are 

subject to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain 

access to our systems or information through fraud or other means of deception. The methods used to obtain 

unauthorized access, disable or degrade service or sabotage systems are constantly evolving, and may be difficult to 

anticipate or to detect for long periods of time. We may not be able to prevent all data security breaches or misuse of 

data. The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to, 

customers’, employees’ or business partners’ information could result in legal claims or proceedings, liability or 

regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage 

to our reputation, any or all of which could adversely affect our business and financial condition. 

We may experience disruption in service with key third-party service providers. 

We rely on outside vendors for a variety of services and functions critical to our business, including airframe 

and engine maintenance, ground handling, fueling, computer reservation system hosting, telecommunication systems and 

information technology infrastructure and services. 

 

Even though we strive to formalize agreements with these vendors that define expected service levels, our use 

of outside vendors increases our exposure to several risks. In the event that one or more vendors goes into bankruptcy, 

ceases operation or fails to perform as promised, replacement services may not be readily available at competitive rates, 

or at all. If one of our vendors fails to perform adequately, we may experience increased costs, delays, maintenance 

issues, safety issues or negative public perception of our airline. Vendor bankruptcies, unionization, regulatory 

compliance issues or significant changes in the competitive marketplace among suppliers could adversely affect vendor 

services or force us to renegotiate existing agreements on less favorable terms. These events could result in disruptions in 

our operations or increases in our cost structure. 

We have aircraft lease and debt commitments that extend beyond our existing fixed-fee contractual term on certain 

aircraft. 

Under our fixed-fee arrangements with multiple major airline partners we have a total of 19 CRJ700s with 

flying contract expirations in 2020. Our underlying lease or debt financing obligations associated with each of these 

aircraft are scheduled to terminate in 2024 and 2025 on an aircraft-by-aircraft basis. We may not be successful in 

extending the flying contract term on these aircraft with our major airline partner at acceptable economic terms. In the 

event we are unsuccessful in extending the flying contract terms on these aircraft, we intend to pursue alternative uses for 

the aircraft over the remaining aircraft financing term including, but not limited to, operating the aircraft with another 

major carrier under a negotiated code-share agreement or subleasing the aircraft to another operator. Additionally, we 

may negotiate an early lease return agreement with the aircraft lessor. In the event we are unable to extend the flying 

contract terms for these aircraft at each respective contract’s expiration, we may incur cash and non-cash early lease 

termination costs that would negatively impact our operations and financial condition. Additionally, in the event we are 

unable to extend a flying contract with an existing major airline partner, but reach an agreement to place the aircraft into 

service with a different major airline partner, we likely will incur inefficiencies and incremental costs, such as changing 

the aircraft livery, which would negatively impact our financial results. 
15 

There are long-term risks related to supply and demand of regional aircraft associated with our regional airline 

services strategy. 

Various factors could change our major airline partners’ long-term strategy in using regional aircraft to support 

their network objectives. Such changes could result in a reduction in the number of regional aircraft our major airline 

partners operate in the future. If our major airline partners’ future strategies include a material reduction in regional 

aircraft generally or for specific aircraft types, such as 50-seat regional aircraft, the resulting decrease in demand in the 

aircraft we operate could have a material negative impact on our business and financial condition. 

The residual value of our owned aircraft may be less than estimated in our depreciation policies. 

As of December 31, 2019, we had approximately $5.4 billion of property and equipment and related assets, net 

of accumulated depreciation. In accounting for these long-lived 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. 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. In the event the 

estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in 

our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction 

in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation 

policies. An impairment on any of our aircraft types we operate or an increased level of depreciation expense resulting 

from a change to our depreciation policies could result in a material negative impact to our financial results. 

Interruptions or disruptions in service at one of our hub airports, due to weather, system malfunctions or for any 

other reason, could have a material adverse impact on our operations. 

We currently operate primarily through hubs across the United States. 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 such as hurricanes or tornados can cause flight disruptions, and, during periods of 

storms or adverse weather, our flights may be canceled or significantly delayed. We operate a significant number of 

flights to and from airports with particular weather difficulties, including Salt Lake City, Chicago, San Francisco and 

Denver. A significant interruption or disruption in service at one of our hubs, due to adverse weather, system 

malfunctions, security closures 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. 

Negative economic or industry conditions may result in reductions to our flight schedules, which 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: 

• disruptions in the credit markets, which may impact availability of financing; 

• actual or potential changes in international, national, regional and local economic, business and financial 

conditions, including recession, inflation, higher interest rates, wars, terrorist attacks or political instability; 

• changes in consumer preferences, perceptions, spending patterns or demographic trends; 

• changes in the competitive environment due to industry consolidation, new airlines entering the market, our 

major airline partners operating smaller sized aircraft that may reduce the demand for regional aircraft and 

other factors; 

• actual or potential disruptions to U.S. air traffic control systems; 
16 

• price of jet fuel and oil; 

• outbreaks of diseases that affect travel behavior, including, for example, the recent outbreak of respiratory 

illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China; and 

• weather and natural disasters. 

The 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 and could cause our 

major airline partners to reduce the utilization levels of our aircraft under our code-share agreements. 

The majority of our code-share agreements set forth minimum levels of flight operations which our major 

airline partners are required to schedule for our operations and we are required to provide. These minimum flight 

operating levels are intended to provide a baseline level of expected utilization of aircraft, labor, maintenance facilities 

and related flight operations support. Historically, our major airline partners have utilized our flight operations at levels 

which exceed the minimum levels set forth in our code-share agreements, however, the occurrence of any or all of the 

foregoing economic and industry conditions may cause our major airline partners to reduce our utilization levels. If our 

major airline partners schedule the utilization of our aircraft below historical levels (including taking into account the 

route distances 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. Additionally, our major airline 

partners may change routes and frequencies of flights, which can negatively impact our operating efficiencies. Changes 

in schedules may increase our flight costs, which could exceed the reimbursed rates paid by our major airline partners. 

Continued reduced utilization levels of our aircraft or other changes to our schedules under our code-share agreements 

would adversely impact our financial results. 

We may experience an increase in fuel prices in our prorate operations. 

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. Additionally, our operations may experience disruptions from temporary fuel shortages by our fuel vendors 

resulting from fuel quality issues, refueling disruption, or other challenges. Major reductions in the availability of jet 

fuel or significant increases in its cost, or a continuation of high fuel prices for a significant period of time, would have a

material adverse impact on us. 

Pursuant to our fixed-fee arrangements, our major airline partners have agreed to bear the economic risk of fuel 

price fluctuations on our contracted flights. However, we bear the economic risk of fuel price fluctuations on our prorate 

operations. As of December 31, 2019, we operated 31 CRJ200s under a prorate agreement with United, 29 CRJ200s 

under a prorate agreement with Delta, and seven CRJ200s under a prorate agreement with American. Our operating and 

financial results with respect to these prorate arrangements can be negatively affected by the price of jet fuel in the event 

we are unable to increase our passenger fares. Additionally in the event of prolonged low fuel prices, our competitors 

may lower their passenger ticket prices on routes that compete with our prorate markets, which could negatively impact 

our passenger load factors. 

Our prorate arrangements with our major airline partners are terminable upon notice of 120 days or less.

Our prorate flying agreements with our major airline partners permit the major airline partner to terminate the 

agreement in its discretion by giving us notice of 120 days or less. If one of our major airline partners elects to terminate 

a flying agreement with notice of 120 days or less, our ability to use the aircraft under an alternative agreement with 

similar economics may be limited, which could negatively impact our financial results. Additionally, even if we can 

subsequently place the aircraft into service with a different major airline partner, of which there can be no assurance, we 

likely would incur inefficiencies and incremental costs, such as changing the aircraft livery, during the transition period, 

which would negatively impact our financial results. 
17 

We have a significant amount of contractual obligations. 

As of December 31, 2019, we had a total of approximately $3.0 billion in total long-term debt obligations. 

Substantially all of this long-term debt was incurred in connection with the acquisition of aircraft and engines. We also 

have significant long-term lease obligations primarily relating to our aircraft fleet. At December 31, 2019, we had 94 

aircraft under lease, with remaining terms ranging up to ten years. Future minimum lease payments due under all 

long-term operating leases were approximately $443.7 million at December 31, 2019. At a 6.4% discount factor, which 

is the average rate used to approximate the implicit rates within the applicable leases, the present value of these lease 

obligations was equal to approximately $354.0 million at December 31, 2019. 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. 

Our anticipated fleet replacement would require a significant increase in our leverage and the related cash 

requirements. 

We currently have 214 CRJ200s with an average life of 17.3 years. Over the next several years, we may 

continue to replace the CRJ200s with larger regional jets. If we continue to add new aircraft to our fleet, we anticipate 

using significant amounts of capital to acquire these larger regional jets. 

There can be no assurance that our operations will generate sufficient cash flow or liquidity to enable us to 

obtain the necessary aircraft acquisition financing to replace our current fleet, or to make required debt service payments 

related to our existing or anticipated future obligations. Even if we meet all required debt, lease and purchase obligations, 

the size of these long-term obligations could negatively affect our financial condition, results of operations and the price 

of our common stock in many ways, including: 

• increasing the cost, or limiting the availability of, additional financing for working capital, acquisitions or 

other purposes; 

• limiting the ways in which we can use our cash flow, much of which may have to be used to satisfy debt 

and lease obligations; and 

• adversely affecting our ability to respond to changing business or economic conditions or continue our 

growth strategy. 

If we need additional capital and cannot obtain such capital on acceptable terms, or at all, we may be unable to 

realize our fleet replacement plans or take advantage of unanticipated opportunities. 

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, Russell A. Childs, and our other key 

management and operating personnel. We may have difficulty replacing management or other key personnel who cease 

to be employed by us and, therefore, the loss of the services of any of these individuals could harm our business. We do 

not maintain key-person insurance on any of our executive officers. 

We may decrease our dividends and/or reduce the amount of stock repurchases in the future. 

Historically, we have paid dividends and repurchased shares of our common stock in varying amounts. The 

future payment and amount of cash dividends and our future repurchases of shares of common stock, if any, and the 

number of shares of common stock we may repurchase will depend upon our financial condition and results of 

operations 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. 

There also can be no assurance that we will continue our practice of repurchasing shares of common stock or that we will 

have the financial resources to repurchase shares of common stock in the future. 

In addition, repurchases of our common stock pursuant to our share repurchase program and any future 

dividends could affect our stock price and increase its volatility. The existence of a share repurchase program and any 

future dividends could cause our stock price to be higher than it would otherwise be and could potentially reduce the 
18 

market liquidity for our stock. Additionally, our share repurchase program and any future dividends may reduce our cash 

reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and 

acquisitions. Further, our share repurchase program may fluctuate such that our cash flow may be insufficient to fully 

cover our share repurchases. Although our share repurchase program is intended to enhance long-term shareholder value, 

there is no assurance that it will do so because the market price of our common stock may decline below the levels at 

which we repurchased shares of stock and short-term stock price fluctuations could reduce the program’s effectiveness. 

Disagreements regarding the interpretation of our code-share agreements with our major airline partners could have 

an adverse effect on our operating results and financial condition. 

Long-term 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 airline partners regarding the interpretation 

of various provisions of our code-share agreements. Some of those disagreements have resulted in litigation, and we may 

be subject to additional disputes and litigation in the future. Those disagreements have also required a significant amount 

of management time, financial resources and settlement negotiations of disputed matters. 

To the extent that we 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, settlement negotiations 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 lease aircraft and engines to third parties and the lessee may default under the lease terms, which could 

negatively affect our financial condition, cash flow and results of operations.

Lessee defaults may result in additional costs to us, including legal and other expenses necessary to repossess 

the aircraft or engines, particularly if the lessee is contesting the proceedings or is in bankruptcy. We could also incur 

substantial maintenance, refurbishment or repair costs if a defaulting lessee fails to pay such costs and where such 

maintenance, refurbishment or repairs are necessary to put the aircraft or engines in suitable condition for remarketing or 

sale. We may also incur storage costs associated with any aircraft or engine that we repossess and are unable to place 

immediately with another lessee. Even if we are able to immediately place a repossessed aircraft or engine into service 

ourselves, or place the aircraft and engines under another lessee, we may not be able to do so at a similar or favorable 

lease rate. A lessee default under one of our lease agreements could negatively affect our financial condition, cash flow 

and results of operations.

We have entered into a strategic engine leasing joint venture that operates under joint control with a third party that 

involves significant risk. 

We have entered into a strategic engine joint venture with a third party to lease engines to other parties. This 

strategic venture involves significant risks, including: 

• we may not realize a satisfactory return on our investment; 

• the joint venture may divert management’s attention from our core business; 

• our joint venture partner could have investment goals that are not consistent with our investment objectives, 

including the timing, terms and strategies for any investments; and 

• our joint venture partner might fail to fund their share of required capital contributions or fail to fulfill their 

other obligations. 
19 

Although we currently participate in the management of our engine joint venture, our joint venture agreement 

requires unanimous approval over all significant actions. In addition, if we were unable to resolve a dispute with our 

joint venture partner that retains material managerial veto rights, we might reach an impasse that could require us to 

dissolve the joint venture at a time and in a manner that could negatively affect our financial results. 

We may be a party to litigation in the normal course of business or otherwise, which could affect our financial 

condition and results of operations. 

We may become party to or otherwise involved in legal proceedings, claims and government inspections or 

investigations and other legal matters, arising in the ordinary course of our business or otherwise, including those related 

to tort, environmental, employment and commercial legal issues. Legal proceedings can be complex and take many 

months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which 

are not within our control. Litigation is subject to significant uncertainty and may be expensive, time-consuming, and 

disruptive to our operations. Although we will vigorously defend ourselves in such legal proceedings, their ultimate 

resolution and potential financial and other impacts on us are uncertain. If a legal proceeding is resolved against us, it 

could result in significant compensatory damages or injunctive relief that could materially adversely affect our financial 

condition, results of operations and cash flows. 

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 shares of preferred and common stock 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. 

The adoption of new tax legislation or changes to existing tax laws and regulations could adversely affect our 

financial condition or results of operations. 

The airline industry is one of the most heavily taxed industries in the United States. We are subject to tax laws 

and regulations of the U.S. federal, state and local governments as well as various non-U.S. jurisdictions. Potential 

changes in existing tax laws, including future regulatory guidance, may impact our effective tax rate and tax payments. 

There can be no assurance that changes in tax laws or regulations, both within the United States and the other 

jurisdictions in which we operate, will not materially and adversely affect our effective tax rate, tax payments, financial 

condition and results of operations. Similarly, changes in tax laws and regulations that impact our major airline partners, 

customers or the economy generally may also impact our financial condition and results of operations. 

In addition, tax laws and regulations are complex and subject to varying interpretations, and any significant 

failure to comply with applicable tax laws and regulations in all relevant jurisdictions could give rise to substantial 

penalties and liabilities. Any changes in enacted tax laws, rules or regulatory or judicial interpretations; any adverse 

outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting 

for income taxes could materially and adversely impact our effective tax rate, tax payments, financial condition and 

results of operations. 

Risks Related to the Airline Industry 

The occurrence of an aviation accident involving our aircraft 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 
20 

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. 

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

our business and reduce our profitability. 

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, 2019, our salary, wage and benefit costs constituted approximately 40.7% of our total operating costs. 

Increases in our 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 represented 

employees may be on terms that are not as attractive as our current agreements or comparable to agreements entered into 

by our competitors. 

SkyWest’s employees are represented by in-house associations; however, organizing efforts to join national 

unions among those employees occur from time to time. Such efforts will likely continue in the future and may 

ultimately result in some or all of our employees being represented by one or more national unions. If our employees 

were to unionize or be deemed to be represented by one or more national unions, negotiations with these unions 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. 

We are subject to significant governmental regulation and potential regulatory changes. 

All interstate air carriers, including SkyWest, 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; recordkeeping 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. 

We cannot predict the impact, of potential regulatory changes that may affect our business or the airline 

industry as whole including the potential impact of tariffs on aircraft deliveries. However, it is possible that these 

changes could adversely affect our business. Our business may be subject to additional costs or loss of government 

subsidies as a result of potential regulatory changes, which could have an adverse effect on our operations and financial 

results. 

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, Allegiant, Spirit and JetBlue among others, 

operate at many of our hubs, resulting in significant price competition. Additionally, a large number of other carriers 
21 

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, including the mergers between Alaska and Virgin America Inc. in 2016, 

American and US Airways Group Inc. in 2013, Southwest Airlines Co. and AirTran Holdings, Inc. in 2011, United and 

Continental Airlines, Inc. in 2010 and Delta and Northwest Airlines, Inc. in 2008. 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 could have a material adverse effect on our relationships with our major airline 

partners. 

Due, in part, to the dynamic nature of the airline industry, major airlines may also make other strategic changes 

such as changing or consolidating hub locations. If our major airline partners were to make changes such as these in their 

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. If additional terrorist attacks are launched against the airline industry, there will be lasting

consequences of the attacks, which may include loss of life, property damage, 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 these events will not 

harm the airline industry generally or our operations or financial condition in particular. 

ITEM 1B. UNRESOLVED STAFF COMMENTS 

None 

ITEM 2. PROPERTIES 

Flight Equipment 

As of December 31, 2019, our fleet available for scheduled service consisted of the following types of owned 

and leased aircraft: 

 

 Number of Number of Scheduled Average 

 Owned Leased Passenger Flight Cruising Average 

Aircraft Type Aircraft Aircraft Capacity Range (miles) Speed (mph) Age (years) 

CRJ900s .............................. 19 24 76 1,500 530 9.2 

CRJ700s .............................. 67 27 65-70 1,600 530 13.6 

CRJ200s .............................. 153 37 50 1,500 530 17.3 

E175s ................................ 156 — 70-76 2,100 530 3.1 

Several factors may impact our fleet size throughout 2020 and thereafter, including contract expirations, lease 

expirations, growth opportunities and opportunities to transition to an alternative major airline partner. Below is our 

2020 outlook on our fleet by aircraft type. Our actual future fleet size and/or mix of aircraft types will likely vary, and 

may vary materially, from our current fleet size. 

• CRJ900s/CRJ700s – We anticipate taking delivery of one new CRJ900 aircraft under a nine-year fixed-fee

agreement with Delta during 2020. We also anticipate acquiring and placing five used CRJ700 aircraft into

service with American under a multi-year contract.
22 

• E175s – We anticipate taking delivery of 26 new E175 aircraft (20 with American and six with Delta) and 

six used E175 aircraft with Delta with scheduled delivery dates for the used E175 aircraft during 2020 and 

scheduled delivery dates for the new E175 aircraft to take place by the end of 2021. 

• CRJ200s –We currently anticipate a slight reduction in the total number of CRJ200 aircraft scheduled for 

service during 2020. 

Ground Facilities 

We lease many of the buildings and associated land that we occupy. Most of these leases are with government 

agencies that control the use of the airport. We lease maintenance, training and office facilities in Salt Lake City, Utah, 

and we lease additional maintenance facilities in Boise, Idaho; Fresno, California; Tucson, Arizona; Chicago, Illinois; 

Detroit, Michigan; Nashville, Tennessee; South Bend, Indiana; Fort Wayne, Indiana; Minneapolis, Minnesota; and San 

Luis Obispo, California. We also lease ticket counters, passenger hold rooms, operating areas and other terminal space in 

many of the airports that we serve. 

We own our corporate headquarters facilities located in St. George, Utah and a maintenance accessory shop 

facility in Salt Lake City, Utah. We also own maintenance facilities that we have land leases on in Milwaukee, 

Wisconsin; Oklahoma City, Oklahoma; Colorado Springs, Colorado; and Palm Springs, California. 

ITEM 3. LEGAL PROCEEDINGS 

We are subject to certain legal actions which we consider routine to our business activities. As of December 31, 

2019, our management believed, after consultation with legal counsel, that the ultimate outcome of such legal matters 

was not likely to have a material adverse effect on our financial position, liquidity or results of operations. 

ITEM 4. MINE SAFETY DISCLOSURES 

The disclosure required by this item is not applicable. 

PART II 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS 

AND ISSUER PURCHASES OF EQUITY SECURITIES 

Market Information 

Our common stock is traded on The Nasdaq Global Select Market under the symbol “SKYW.” As of 

February 12, 2020, there were approximately 730 stockholders of record of our common stock. Securities held of record 

do not include shares held in securities position listings. The transfer agent for our common stock is Zions First National 

Bank, Salt Lake City, Utah. 

Dividends 

During 2019, our Board of Directors declared regular quarterly dividends of $0.12 per share. During 2018, our 

Board of Directors declared regular quarterly dividends of $0.10 per share. We intend to continue to pay quarterly 

dividends subject to liquidity, capital availability and quarterly determinations that cash dividends are in the best 

interests of our shareholders. 

Issuer Purchases of Equity Securities 
23 

Our Board of Directors has adopted a stock repurchase program which authorizes us to repurchase shares of our 

common stock in the public market or in private transactions, from time to time, at prevailing prices. Our stock 

repurchase program currently authorizes the repurchase of up to $250.0 million of our common stock. The following 

table summarizes the repurchases under our stock repurchase program during the three months ended December 31, 

2019: 

 

 

Total Number of 

Shares Purchased 

Average Price 

Paid Per Share 

Total Number of Shares

Purchased as Part of a 

Publicly Announced 

Program (1) 

Maximum Dollar Value of

Shares that May Yet Be 

Purchased Under the 

Program (in Thousands) 

October 1, 2019 – October 31, 2019 . . . . . . 87,632 $ 57.05 87,632 $ 164,590

December 1, 2019 - December 31, 2019 ... 79,749 62.07 79,749 159,590

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,381 $ 59.74 167,381 $ 159,590

(1) In February 2019, our Board of Directors authorized a new stock purchase program to repurchase up to $250.0 

million of our common stock. Purchases are made at management’s discretion based on market conditions and 

financial resources. As of December 31, 2019, we had repurchased 1,580,747 shares of our common stock for 

$90.4 million under this authorization. 

Stock Performance Graph 

The following Performance Graph and related information shall not be deemed “soliciting material” or “filed” 

with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 

1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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, 2019, with the cumulative total return during such period of the Nasdaq Stock Market (U.S. 

Companies) and the Nasdaq Stock Market Transportation Index. The following 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. 

 $-

 $100

 $200

 $300

 $400

 $500

 $600

DEC 2014 DEC 2015 DEC 2016 DEC 2017 DEC 2018 DEC 2019

INDEXED RETURNS

SkyWest, Inc.

NASDAQ Composite

NASDAQ Transportation Index
24 

 

INDEXED RETURNS 

 Base 

 Period Years Ending 

Company Name / Index 2014 2015 2016 2017 2018 2019 

SkyWest, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 144.65 279.19 409.17 345.75 506.23 

NASDAQ Composite ..................... 100 106.96 116.45 150.96 146.67 200.49 

NASDAQ Transportation Index ........... 100 77.05 99.57 127.01 115.52 145.48 

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, 

2019 2018 2017 2016 2015 

Operating revenues . . . . . . . . . . . . . . . $ 2,971,963 $ 3,221,679 $ 3,122,592 $ 3,063,702 $ 3,095,563 

Operating income (loss)(1) . . . . . . . . . 512,258 474,280 388,199 (172,684) 234,515 

Net income (loss)(2) . . . . . . . . . . . . . . 340,099 280,372 428,907 (161,586) 117,817 

Net income (loss) per common share: 

Basic . . . . . . . . . . . . . . . . . . . . . . . . $ 6.68 $ 5.40 $ 8.28 $ (3.14) $ 2.31 

Diluted . . . . . . . . . . . . . . . . . . . . . . . $ 6.62 $ 5.30 $ 8.08 $ (3.14) $ 2.27 

Weighted average shares: 

Basic . . . . . . . . . . . . . . . . . . . . . . . . 50,932 51,914 51,804 51,505 51,077 

Diluted . . . . . . . . . . . . . . . . . . . . . . . 51,375 52,871 53,100 51,505 51,825 

Total assets(3) . . . . . . . . . . . . . . . . . . . $ 6,657,129 $ 6,313,212 $ 5,474,400 $ 5,007,966 $ 4,781,984 

Current assets(3) . . . . . . . . . . . . . . . . . 760,346 1,020,794 995,133 917,792 1,017,570 

Current liabilities . . . . . . . . . . . . . . . . . 924,676 924,826 820,825 747,265 748,026 

Long-term debt, net of current 

maturities . . . . . . . . . . . . . . . . . . . . . . 2,628,989 2,809,768 2,377,346 2,240,051 1,659,234 

Stockholders’ equity . . . . . . . . . . . . . . 2,175,014 1,964,281 1,754,322 1,350,943 1,506,435 

Return (loss) on average equity(4) . . . 16.4 % 15.1 % 27.6 % (12.0)% 7.8 %

Cash dividends declared per 

common share . . . . . . . . . . . . . . . . . . $ 0.48 $ 0.40 $ 0.32 $ 0.19 $ 0.16 

(1) Our 2019 operating income included a special charge of $21.9 million, primarily consisting of a non-cash writeoff of aircraft manufacturer part credits that SkyWest Airlines forfeited to settle future lease return obligations. 

Our operating loss for 2016 included a special charge of $465.6 million related to an impairment on our 50-seat 

aircraft and related assets. 

(2) Our net income for 2019 included a $46.5 million gain on the sale of ExpressJet. Our net income for 2017 

included a $246.8 million benefit related to the revaluation of our net deferred tax liability and other tax 

liabilities in accordance with the Tax Cuts and Jobs Act of 2017 that was enacted into law in December 2017. 

(3) Certain reclassifications were made to 2017 balances to conform to the current period presentation, which 

reflects the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with 

Customers (Topic 606) (“Topic 606”). See Note 1 to our Consolidated Financial Statements included in Item 8 

of this Report. 

(4) Calculated by dividing net income (loss) by the average of beginning and ending stockholders’ equity for the 

year. 
25 

Selected Operating Data 

Year ended December 31, 

2019 (1) 2018 2017 2016 2015 

Block hours . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464,405 1,757,047 1,839,779 1,938,492 2,074,804 

Departures . . . . . . . . . . . . . . . . . . . . . . . . . . . 842,098 1,010,053 1,087,052 1,153,480 1,226,897 

Passengers carried . . . . . . . . . . . . . . . . . . . . . 43,660,766 48,350,470 51,483,552 53,539,438 56,228,593 

Average passenger trip length . . . . . . . . . . . 500 523 512 523 528 

Number of operating aircraft at end of 

year(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 596 595 652 660 

(1) Excludes ExpressJet operating data since ExpressJet was sold during January 2019. 

(2) Excludes aircraft leased to third parties. 

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, 2019, 2018 and 2017. Also discussed is our financial position as of December 31, 

2019 and 2018. 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. 

This section of this Annual Report on Form 10-K generally discusses 2019 and 2018 items and year-to-year 

comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons 

between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found in the section entitled 

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 

Company’s Annual Report on Form 10-K for the year ended December 31, 2018. 

Overview 

We have the largest regional airline operation in the United States. As of December 31, 2019, we offered 

scheduled passenger and air freight service with approximately 2,300 total daily departures to destinations in the United 

States, Canada, Mexico and the Caribbean. As of December 31, 2019, we had 483 aircraft available for scheduled 

service consisting of the following: 

 

 CRJ200 CRJ700 CRJ900 E175 Total 

Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 13 43 59 199 

United ............................................ 99 19 — 65 183 

American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 62 — — 69 

Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 32 32 

Aircraft in scheduled service . . . . . . . . . . . . . . . . . . . . . . . . . 190 94 43 156 483 

Subleased to an un-affiliated entity .................... 4 10 5 — 19 

Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 22 — — 42 

Total Fleet ........................................ 214 126 48 156 544 

*As of December 31, 2019, these aircraft have been removed from service and are in the process of being placed under a 

leasing arrangement with a third party, are aircraft transitioning between code-share agreements with our major airline 

partners and being used as a supplemental spare aircraft, or are in the process of being parted out. 

Our business model is based on providing scheduled regional airline service under code-share agreements 

(commercial agreements between airlines that, among other things, allow one airline to use another airline’s flight 
26 

designator codes on its flights) with our major airline partners. Our success is principally centered on our ability to meet 

the needs of our major airline partners through providing a reliable and safe operation at attractive economics. Over the 

last several years, our business has evolved as we have added ten new E175 aircraft and seven new CRJ900 aircraft to 

our fleet since December 31, 2018, and removed 100 unprofitable ERJ145 aircraft through the sale of ExpressJet in 

January 2019, ten CRJ200 aircraft, 15 CRJ700 aircraft and five CRJ900 aircraft. 

We anticipate our fleet will continue to evolve, as we are scheduled to add 26 new E175 aircraft, six used E175 

aircraft and one new CRJ900 aircraft to existing fixed-fee agreements by the end of 2021. We anticipate seven of these 

new aircraft will be replacing older CRJ900 and CRJ700 aircraft currently operating under fixed-fee agreements, with 

the remaining coming from new flying opportunities. Our primary objective in the fleet changes is to improve our 

profitability by adding new aircraft to fixed-fee agreements at improved economics, including the E175 aircraft, 

extending contract terms at improved economics, and potentially removing older, less profitable aircraft from our fleet. 

On January 22, 2019, we completed the sale of ExpressJet. In conjunction with the sale of ExpressJet, we 

retained ownership of the 16 CRJ200 aircraft and the 10 CRJ700 aircraft operated by ExpressJet as of December 31, 

2018. ExpressJet retained operation of the 100 ERJ145 aircraft that ExpressJet leased from United. 

For the year ended December 31, 2019, approximately 41.2% of our aircraft in scheduled service were operated 

for Delta, approximately 37.9% were operated for United, approximately 14.3% were operated for American and 

approximately 6.6% were operated for Alaska. 

Historically, multiple contractual relationships with major airlines have enabled us to reduce our reliance on any 

single major airline code and to enhance and stabilize operating results through a mix of fixed-fee arrangements and our 

prorate flying arrangements. For the year ended December 31, 2019, contract flying revenue and prorate revenue 

represented approximately 82.0% and 18.0%, respectively, of our total flying agreements revenue. 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 completed block hours (measured from takeoff to landing, including 

taxi time), flight departures and other operating measures. 

Our financial and operating results for the years ended December 31, 2017, 2018 and 2019, and our financial 

position as of December 31, 2018 contained in this Report, include the financial results and position of ExpressJet 

through January 22, 2019 for those respective periods. 

Financial Highlights 

We had total operating revenues of $3.0 billion for the year ended December 31, 2019, a 7.8% decrease 

compared to total operating revenues of $3.2 billion for the year ended December 31, 2018. We had a net income of 

$340.1 million, or $6.62 per diluted share, for the year ended December 31, 2019, compared to net income of 

$280.4 million, or $5.30 per diluted share, for the year ended December 31, 2018. 

The significant items affecting our financial performance during the year ended December 31, 2019 are outlined 

below: 

Revenue 

The number of aircraft we have in scheduled service and the number of block hours we generate on our flights 

are primary drivers to our flying agreements revenue under our fixed-fee arrangements. The number of flights we 

operate and the corresponding number of passengers we carry are the primary drivers to our revenue under our prorate 

flying agreements. During the year ended December 31, 2019, we had a net decrease in the number of aircraft operating 

under fixed-fee agreements, primarily related to the sale of ExpressJet during January 2019. As summarized under the 

Fleet Activity section below, from December 31, 2018 to December 31, 2019, we removed 130 aircraft from service that 

were operating under less profitable flying contracts and added 17 aircraft to new fixed-fee arrangements primarily 

through the sale of ExpressJet. The number of aircraft available for scheduled service decreased from 596 aircraft at 

December 31, 2018 to 483 at December 31, 2019. Our completed block hours decreased 15.7% over the same period 

primarily due to the sale of ExpressJet and the corresponding decrease in block hours generated by ExpressJet. 
27 

Our total revenues decreased $249.7 million for the year ended December 31, 2019 compared to the year ended 

December 31, 2018, primarily due to the sale of ExpressJet and the corresponding decrease in revenue associated with 

ExpressJet flying contracts. ExpressJet revenue decreased from $564.2 million for the year ended December 31, 2018 to 

$24.1 million for the year ended December 31, 2019. Revenue from SkyWest Airlines and our leasing subsidiary 

SkyWest Leasing increased from $2.7 billion for the year ended December 31, 2018 to $2.9 billion for the year ended 

December 31, 2019. The increase in revenue excluding the impact from the sale of ExpressJet was primarily related to 

additional revenue generated from 10 new E175 aircraft and seven new CRJ900 aircraft added under fixed-fee contracts 

since December 31, 2018. 

Operating Expenses 

Our total operating expenses decreased $287.7 million for the year ended December 31, 2019 compared to the 

year ended December 31, 2018. This decrease was primarily due to the sale of ExpressJet and the corresponding 

reduction in ExpressJet operating expenses, partially offset by additional operating expenses at SkyWest Airlines and 

SkyWest Leasing that resulted from new, additional aircraft we placed into service since December 31, 2018. ExpressJet 

operating expenses decreased from $577.6 million for the year ended December 31, 2018 to $28.7 million for the year 

ended December 31, 2019. Operating expenses from SkyWest Airlines and SkyWest Leasing increased from $2.2 billion 

for the year ended December 31, 2018 to $2.4 billion for the year ended December 31, 2019. Additional details regarding 

the increase in our operating expenses are described in the section of this Report entitled “Results of Operations.” 

Fleet Activity 

The following table summarizes our fleet activity for 2019: 

Aircraft in Service December 31, 2018 Additions Removals December 31, 2019 

E175s . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 10 — 156 

CRJ900s ........................ 41 7 (5) 43 

CRJ700s . . . . . . . . . . . . . . . . . . . . . . . . 109 — (15) 94 

CRJ200s ........................ 200 6 (16) 190 

ERJ145s . . . . . . . . . . . . . . . . . . . . . . . . 100 — (100) —

Total ........................... 596 23 (136) 483 

During 2019, we took delivery of ten new E175 aircraft and seven new CRJ900 aircraft and placed the aircraft 

into service under fixed-fee flying agreements. We removed five CRJ900 aircraft from service that we are leasing to a 

third party. We also removed 15 CRJ700 aircraft from service during 2019 that we are leasing to a third party or in the 

process of transitioning to another major airline partner. We removed 100 ERJ145s resulting from the sale of ExpressJet. 

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 1 to our Consolidated Financial Statements 

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 policies relate to revenue 

recognition, aircraft leases, long-lived assets, self-insurance and income tax 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 likely differ, and could differ materially, from such estimates. 

Revenue Recognition 

Flying agreements and airport customer service and other revenues are recognized when service is provided. 

Under our fixed-fee and prorate flying agreements with our major airline partners, revenue is considered earned when 

each flight is completed. A portion of our compensation under our fixed-fee flying agreements is designed to reimburse 

us for the use of the aircraft we provide under such agreements. This compensation is deemed to be lease revenue, 

inasmuch as the agreements identify the “right of use” or a specific type and number of aircraft over the agreement term. 
28 

The amount of compensation deemed to be lease revenue is determined from the agreed upon rates for the use of the 

aircraft included in each fixed-fee agreement, which we believe approximates fair value for the aircraft leases. Under our 

airport customer service agreements, revenue is considered earned when each flight we provide customer service for 

departs. Our revenues could be impacted by a number of factors, including changes to the applicable 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 the prior period’s approved rates or our 

estimate of rates that will be implemented upon completion of negotiations. Also, in the event we have a reimbursement 

dispute with a major airline 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. Our rates were finalized under our codeshare agreements as of December 31, 2019. 

Aircraft Leases 

As of December 31, 2019, our fleet of aircraft in scheduled service included 94 aircraft under lease. 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. Under the majority of our operating leases, we 

are required to meet half-time lease return conditions with the aircraft, which presumes at least 50 percent of the eligible 

flight time for certain components since the last overhaul remains when the aircraft is returned to the lessor. A liability 

for probable lease return costs is recorded after the aircraft has completed its last maintenance cycle prior to being 

returned. Several factors can impact the estimated liability for lease return costs including, but not limited to, timing of 

scheduled maintenance events and anticipated condition of the aircraft at the end of the lease term. We believe it is 

unlikely that materially different estimates for lease return obligations would be made or reported based on other 

reasonable assumptions or conditions suggested by actual historical experience and other data available at the time 

estimates were made. Additionally, we adopted Financial Accounting Standards Board issued ASU 2016-02, “Leases 

(Topic 842)” (“Topic 842”) on January 1, 2019. Under Topic 842, we were required to estimate our incremental 

borrowing rate to discount the lease payments based on information available at lease commencement. 

Long-Lived Assets 

As of December 31, 2019, we had approximately $5.4 billion of property and equipment and related assets net 

of accumulated depreciation. In accounting for these long-lived, 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. 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. When considering whether or not 

impairment of long-lived assets exists, we group similar assets together at the lowest level for which identifiable cash 

flows are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows 

for each asset group to the net carrying amount of the assets supporting the asset group. Asset groupings are done at the 

fleet type or contract level. In 2016, we recorded an impairment on certain of our long-lived assets, which included 

CRJ200 aircraft. In 2016, the market lease rate was less than the contractual lease rate on our CRJ200 leased aircraft. 

Prior to the adoption of Topic 842 these lease rate differences were not allowed to be recognized for impairment. With 

the adoption of Topic 842 we recorded an impairment of $13.1 million (net of tax) as an adjustment to our January 1, 

2019 retained earnings related to the previously unrecognized impairment of these leased CRJ200s. 

Self-Insurance 

We use a combination of insurance and self-insurance mechanisms to provide for the potential liability of 

certain risks, including workers’ compensation, healthcare benefits, general liability, product liability, property insurance 

and directors’ and officers’ liability insurance. Liabilities associated with risks retained by us are not discounted and are 
29 

estimated by considering historical claims experience, demographics, exposure and severity factors and other actuarial 

assumptions. 

Our workers’ compensation liability includes estimated outstanding losses of unpaid claims and allocated loss 

adjustment expenses (“ALAE”), which includes case reserves, the development of known claims and incurred but not 

reported claims. ALAE are the direct expenses for settling specific claims. The amounts reflect per occurrence and 

annual aggregate limits maintained by us. The estimated liability analysis does not include estimating a provision for 

unallocated loss adjustment expenses. We believe that the liability recorded at December 31, 2019 is adequate to cover 

all workers' compensation claims incurred through December 31, 2019. If the actual costs of such claims and related 

expenses exceed the amount estimated, additional reserves may be required which could have a material negative effect 

on our operating results. Holding other factors constant, a 10 percent increase in our estimated workers compensation 

liability as of December 31, 2019, would have resulted in additional expense of approximately $2.4 million for the year 

ended December 31, 2019. 

The liability related to our self-insured group medical insurance plans includes an estimate for claims incurred 

but not paid. This estimate is created using general actuarial principles and our historical claims experience. The cost of 

general liability, product liability and commercial auto liability is accrued based on estimates of the aggregate liability 

claims incurred using certain actuarial assumptions and historical claims experience. 

Income Tax 

Deferred income taxes are determined based on the temporary differences between the financial reporting and 

tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to 

reverse. Estimating our tax liabilities involves judgments related to uncertainties in the application of complex tax 

regulations. We make certain estimates and judgments to determine tax expense for financial statement purposes as we 

evaluate the effect of tax credits, tax benefits and deductions, some of which result from differences in the timing of 

recognition of revenue or expense for tax and financial statement purposes. Changes to these estimates may result in 

significant changes to our tax provision in future periods. Each fiscal quarter we re-evaluate our tax provision and 

reconsider our estimates and assumptions related to specific tax assets and liabilities, making adjustments as 

circumstances change. 

Recent Accounting Pronouncements 

See Note 1 to the Consolidated Financial Statements included in Item 8 of this Report for a description of recent 

accounting pronouncements. 

Results of Operations 

2019 Compared to 2018 

Operational Statistics. The following table sets forth our major operational statistics and the associated 

percentages of change for the periods identified below. The decrease in block hours, departures and passengers carried 

during the year ended December 31, 2019, compared to the year ended December 31, 2018, was primarily due to the sale 

of ExpressJet in January 2019. 
30 

 

For the year ended December 31, 

 2019 2018 % Change 

SkyWest Airlines block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464,405 1,380,420 6.1 % 

ExpressJet block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,904 376,627 (95.5)% 

Total block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,481,309 1,757,047 (15.7)% 

 

SkyWest Airlines departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842,098 790,485 6.5 % 

ExpressJet departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,390 219,568 (95.7)% 

Total departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851,488 1,010,053 (15.7)% 

 

SkyWest Airlines passengers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,660,766 40,302,301 8.3 % 

ExpressJet passengers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379,252 8,048,439 (95.3)% 

Total passengers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,040,018 48,350,470 (8.9)% 

 

Passenger load factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.3 % 80.5 % 1.8 pts 

Average passenger trip length (miles) . . . . . . . . . . . . . . . . . . . . . . 500 523 (4.4)% 

Operating Revenues 

The following table summarizes our operating revenue for the periods indicated (dollar amounts in thousands): 

 

For the year ended December 31, 

 2019 2018 $ Change % Change 

Flying agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ (280,255) (8.8)%

Airport customer service and other . . . . . . . . . . . . . . . . . . . . . . . 82,698 52,159 30,539 58.5 %

Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,971,963 $ 3,221,679 $ (249,716) (7.8)%

Flying agreements revenue primarily consists of revenue earned on flights we operate under our capacity 

purchase agreements and prorate agreements with our major airline partners. Airport customer service and other 

revenues primarily consist of revenue earned from providing airport counter, gate and ramp services and lease revenue 

from leasing aircraft and spare engines to third parties separate from our capacity purchase agreements. Changes in our 

flying agreements revenue are summarized below (dollar amounts in thousands). 

 

For the year ended December 31, 

 2019 2018 $ Change % Change 

Capacity purchase agreements revenue: flight operations . . . . . $ 1,538,062 $ 1,856,253 $ (318,191) (17.1)%

Capacity purchase agreements revenue: aircraft lease . . . . . . . . 830,247 814,518 15,729 1.9 %

Prorate agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,956 498,749 22,207 4.5 %

Flying agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ (280,255) (8.8)%

The decrease in “Capacity purchase agreements revenue: flight operations” of $318.2 million, or 17.1%, was 

primarily due to the sale of ExpressJet and the corresponding decrease in revenue, partially offset by the incremental 

revenue generated from ten new E175 aircraft and seven new CRJ900 aircraft added to our fleet and economic 

improvements made to certain existing fixed-fee agreements since December 31, 2018. The increase in “Capacity 

purchase agreement revenue: aircraft lease” of $15.7 million, or 1.9%, was primarily due to the ten new E175 aircraft 

added subsequent to December 31, 2018. The increase in prorate agreements revenue of $22.2 million, or 4.5%, was 

primarily due to an increase in the number of prorate flights operated during 2019 compared to 2018. 

The $30.5 million, or 58.5%, increase in airport customer service and other revenues was primarily related to an 

increase in revenue from leasing aircraft and spare engines to third parties. 

Operating Expenses
31 

Individual expense components attributable to our operations are set forth in the following table (dollar amounts 

in thousands). 

 

 For the year ended December 31, 

2019 2018 $ Change % Change 

 Amount Amount Amount Percent 

Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,001,746 $ 1,201,518 $ (199,772) (16.6)% 

Aircraft maintenance, materials and repairs . . . . . . . . . . . . . . 514,313 556,259 (41,946) (7.5)% 

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 368,098 334,589 33,509 10.0 % 

Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,115 117,657 1,458 1.2 % 

Airport-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,837 109,605 9,232 8.4 % 

Aircraft rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,998 154,945 (82,947) (53.5)% 

Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,869 — 21,869 NM 

Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,729 272,826 (29,097) (10.7)% 

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,459,705 $ 2,747,399 $ (287,694) (10.5)% 

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,755 120,409 7,346 6.1 % 

Total airline expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,587,460 $ 2,867,808 $ (280,348) (9.8)% 

Salaries, wages and benefits. The $199.8 million, or 16.6%, decrease in salaries, wages and benefits was 

primarily due to a decrease in direct labor costs resulting from the sale of ExpressJet, partially offset by increased labor 

costs and employee benefit costs for certain work groups, including flight crews at SkyWest Airlines. 

Aircraft maintenance, materials and repairs. The $41.9 million, or 7.5%, decrease in aircraft maintenance 

expense was primarily due to a decrease in direct maintenance costs corresponding with our sale of ExpressJet. This 

decrease in aircraft maintenance expense was partially offset by an increase in direct maintenance costs incurred on a 

portion of SkyWest Airlines’ CRJ200 fleet and an increase in the percentage of our fleet that is under long-term PowerBy-The-Hour engine maintenance agreements at SkyWest Airlines, including the additional ten E175 aircraft added 

subsequent to December 31, 2018 and increased costs to perform airframe inspections in 2019. 

Depreciation and amortization. The $33.5 million, or 10.0%, increase in depreciation and amortization expense 

was primarily due to the purchase of ten E175 aircraft and spare engines subsequent to December 31, 2018. 

Aircraft fuel. The $1.5 million, or 1.2%, increase in fuel cost was primarily due to an increase in the number of 

prorate flights we operated and corresponding increase in gallons of fuel we purchased, partially offset by a decrease in 

our average fuel cost per gallon from $2.60 for 2018 to $2.51 for 2019. We purchase and incur expense for all fuel on 

flights operated under our prorate agreements. All fuel costs incurred under our fixed-fee contracts are either purchased 

directly by our major airline partner, or if purchased by us, we record the direct reimbursement as a reduction to our fuel 

expense. The following table summarizes the gallons of fuel we purchased under our prorate agreements, for the periods 

indicated: 

For the year ended December 31, 

(in thousands) 2019 2018 % Change 

Fuel gallons purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,535 45,299 4.9 % 

Fuel expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 119,115 $ 117,657 1.2 % 

Airport-related expenses. Airport-related expenses include airport-related customer service costs such as 

outsourced airport gate and ramp agent services, airport security fees, passenger interruption costs, deicing, landing fees 

and station rents (our employee customer service labor costs are reflected in salaries, wages and benefits). The $9.2 

million, or 8.4%, increase in airport-related expenses was primarily due to an increase in airport terminal rents, 

subcontract airport services and deicing events related to our prorate operations during 2019. 

Aircraft rentals. During 2019, we acquired 56 CRJ aircraft under an early lease buyout arrangement. The 

$82.9 million, or 53.5%, decrease in aircraft rentals was primarily due to the acquisition of these 56 CRJ aircraft and a 

reduction of leased aircraft as a result of scheduled lease expirations subsequent to December 31, 2018. 
32 

Special Items. The $21.9 million special items expense for 2019 related to a non-cash write-off of $18.5 million 

in aircraft manufacturer part credits that we forfeited to settle future lease return obligations with the aircraft 

manufacturer. The $18.5 million of expense was included in the SkyWest Airlines segment. The special items expense 

also included $3.4 million of expense associated with a cash payout of certain ExpressJet employees’ stock equity grants 

as part of the sale of ExpressJet, which was reflected in the ExpressJet segment. 

Other operating expenses. Other operating expenses primarily consist of property taxes, hull and liability 

insurance, simulator costs, crew per diem, and crew hotel costs. The $29.1 million, or 10.7%, decrease in other 

operating expenses was primarily related to the sale of ExpressJet and the related decrease in crew costs. 

Interest Expense. The $7.3 million, or 6.1%, increase in interest expense was primarily related to the additional 

interest expense associated with the ten E175 aircraft added to our fleet since December 31, 2018, which were debt 

financed. 

Total airline expenses. The $280.3 million, or 9.8%, decrease in total airline expenses was primarily related to 

the sale of ExpressJet and the related expenses associated with ExpressJet’s prior operations, partially offset by 

additional operating expenses at SkyWest Airlines and SkyWest Leasing that resulted from new, additional aircraft we 

placed into service since December 31, 2018. 

Summary of interest income, other income (expense) and provision for income taxes: 

Interest income. Interest income increased $5.3 million, or 60.2%, during 2019, compared to 2018. The 

increase in interest income was primarily related to an increase in interest rates subsequent to December 31, 2018, and an 

increase in interest earned from loans to third parties executed subsequent to December 31, 2018. 

Other income (expense), net. During 2019, we had other income, net of $47.7 million primarily related to the 

gain on sale of ExpressJet. During 2018, we had other income, net of $3.6 million primarily related to a mark-to-market 

gain on trading securities and excess rotable spare parts sold during 2018. 

Summary of provision for income taxes: 

Provision for income taxes. For the years ended December 31, 2019 and December 31, 2018, we recorded 

income tax provisions of 23.8% and 23.5%, respectively, which include the statutory federal income tax rate of 21% and 

other reconciling income tax items, including state income taxes. We recorded a $3.5 million and $4.5 million benefit 

from share-based compensation in 2019 and 2018, respectively, relating to ASU 2016-09 which requires excess tax 

benefits and deficiencies to be recognized in the income tax provision during the period stock options are 

vested/exercised. 

Net Income. Primarily due to the factors described above, we generated net income of $340.1 million, or $6.62 

per diluted share, for the year ended December 31, 2019, compared to a net income of $280.4 million, or $5.30 per 

diluted share, for the year ended December 31, 2018. 

Our Business Segments 2019 compared to 2018: 

For 2019 and 2018 prior to the sale of ExpressJet in January 2019, we had three reportable segments, which 

were the basis of our internal financial reporting: SkyWest Airlines, ExpressJet and SkyWest Leasing. Following the sale 

of ExpressJet, we have two reportable segments: SkyWest Airlines and SkyWest Leasing. 

Corporate overhead expenses, primarily administrative labor costs, were allocated to the operating expenses of 

SkyWest Airlines, ExpressJet and SkyWest Leasing. 

The segment information presented for ExpressJet for 2019 reflects ExpressJet’s results prior to the sale of 

ExpressJet on January 22, 2019, when ExpressJet was operating as our subsidiary. 
33 

The following table sets forth our segment data for the years ended December 31, 2019 and 2018 (in 

thousands): 

 

 For the year ended December 31, 

 (dollar amounts in thousands) 

 2019 2018 $ Change % Change 

 Amount Amount Amount Percent 

Operating Revenues: 

SkyWest Airlines operating revenue . . . . . . . $ 2,478,681 $ 2,346,251 $ 132,430 5.6 % 

ExpressJet operating revenues . . . . . . . . . . . . 24,050 564,202 (540,152) (95.7)% 

SkyWest Leasing operating revenues . . . . . . 469,232 311,226 158,006 50.8 % 

Total Operating Revenues . . . . . . . . . . . . . . . . . . $ 2,971,963 $ 3,221,679 $ (249,716) (7.8)% 

Airline Expenses: 

SkyWest Airlines airline expense . . . . . . . . . $ 2,228,157 $ 2,039,581 $ 188,576 9.2 % 

ExpressJet airline expense . . . . . . . . . . . . . . . 28,690 579,948 (551,258) (95.1)% 

SkyWest Leasing segment expense . . . . . . . . 330,613 248,279 82,334 33.2 % 

Total Airline Expense(1) . . . . . . . . . . . . . . . . . . . $ 2,587,460 $ 2,867,808 $ (280,348) (9.8)% 

Segment profit (loss): 

SkyWest Airlines segment profit . . . . . . . . . . $ 250,524 $ 306,670 $ (56,146) (18.3)% 

ExpressJet segment loss . . . . . . . . . . . . . . . . . (4,640) (15,746) 11,106 (70.5)% 

SkyWest Leasing segment profit . . . . . . . . . . 138,619 62,947 75,672 120.2 % 

Total Segment Profit (loss) . . . . . . . . . . . . . . . . . $ 384,503 $ 353,871 $ 30,632 8.7 % 

Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . 14,131 8,823 5,308 60.2 % 

Other Income, net . . . . . . . . . . . . . . . . . . . . . . . . 47,671 3,620 44,051 1,216.9 % 

Consolidated Income Before Taxes . . . . . . . . . . $ 446,305 $ 366,314 $ 79,991 21.8 % 

(1) Total Airline Expense includes operating expense and interest expense 

SkyWest Airlines Segment Profit. SkyWest Airlines segment profit decreased $56.1 million, or 18.3%, during 

2019, compared to 2018. 

SkyWest Airlines block hour production increased to 1,464,405, or 6.1%, for 2019 from 1,380,420 for 2018, 

primarily due to the additional block hour production from the new E175 and CRJ900 aircraft added subsequent to 

December 31, 2018. Significant items contributing to the SkyWest Airlines segment profit are set forth below. 

The $132.4 million, or 5.6%, increase to SkyWest Airlines operating revenue during 2019, compared to 2018, 

was primarily due to ten E175 aircraft and seven CRJ900 aircraft placed into service in 2019 and additional aircraft 

operating under prorate agreements since 2018. 

The $188.6 million, or 9.2%, increase in the SkyWest Airlines airline expense during 2019, compared to 2018, 

was primarily due to the following factors: 

• SkyWest Airlines’ salaries, wages and benefits expense increased by $113.2 million, or 13.0%, primarily 

due to increased labor costs and employee benefit costs for certain work groups, including flight crews and 

due to additional block hour production. 

• SkyWest Airlines’ aircraft maintenance, materials and repairs expense increased by $86.5 million, or 

21.1%, primarily attributable to direct maintenance costs incurred on a portion of SkyWest Airlines’ CRJ 

fleet including aircraft airframe inspections and an increase in the percentage of our fleet that is under longterm Power-By-The-Hour engine maintenance agreements at SkyWest Airlines, including the additional 

ten E175 aircraft added subsequent to December 31, 2018. 

• SkyWest Airlines’ aircraft rental expenses decreased $77.0 million, or 52.9%, primarily due to the 

acquisition of 56 CRJ aircraft under an early lease buyout arrangement during 2019 and through a 
34 

reduction of our fleet size that was financed through leases as a result of scheduled lease expirations 

subsequent to December 31, 2018. 

• SkyWest Airlines operating expenses included special items related to a non-cash write-off of $18.5 million 

in aircraft manufacturer part credits that we forfeited to settle future lease return obligations with the 

aircraft manufacturer. 

• SkyWest Airlines other operating expense increased $23.8 million, or 11.0%. The increase in other 

operating expense was primarily due to an increase in the use of hotels for crews, property taxes on 

additional aircraft added subsequent to December 31, 2018 and an increase in direct operating costs 

associated with the increase in block hour production year-over-year. 

• The remaining increase in SkyWest Airlines airline expense was primarily due to an increase in airport 

related costs associated with the prorate operations. 

ExpressJet Segment Loss. ExpressJet’s segment loss decreased $11.1 million, or 70.5%, during 2019, compared 

to 2018, primarily due to the sale of ExpressJet in January 2019. 

SkyWest Leasing Segment Profit. SkyWest Leasing profit increased $75.7 million, or 120.2%, during 2019, 

compared to 2018, primarily due to ten E175 aircraft added to our fleet subsequent to December 31, 2018 and additional 

revenue from leasing aircraft and spare engines to third parties. 

Liquidity and Capital Resources 

Sources and Uses of Cash—2019 Compared to 2018 

Cash Position and Liquidity. The following table provides a summary of the net cash provided by (used in) our 

operating, investing and financing activities for the years ended December 31, 2019 and 2018, and our total cash and 

marketable securities position as of December 31, 2019 and December 31, 2018 (in thousands). 

 

 For the year ended December 31, 

 2019 2018 $ Change % Change 

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . $ 721,030 $ 802,534 $ (81,504) (10.2)% 

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . (657,034) (983,404) 326,370 (33.2)% 

Net cash provided by (used in) financing activities . . . . . . . . . . . (305,174) 327,462 (632,636) (193.2)% 

 

 December 31, December 31, 

 2019 2018 $ Change % Change 

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,206 $ 328,384 $ (241,178) (73.4)% 

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,966 360,945 72,021 20.0 % 

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 520,172 $ 689,329 $ (169,157) (24.5)% 

Cash Flows from Operating Activities. The $81.5 million, or 10.2%, decrease in net cash provided by 

operating activities was primarily due to changes in our working capital accounts during 2019 compared to 2018. This 

decrease in cash provided by operating activities was partially offset by an increase in income before income taxes of 

$80.0 million in 2019 compared to 2018. 

Cash Flows from Investing Activities. The $326.4 million, or 33.2%, decrease in cash used in investing 

activities was primarily due to the reduction of new E175 aircraft acquired from 39 during 2018, compared to ten for 

2019. This reduction was partially offset by the acquisition of 85 used CRJ aircraft during 2019 including the 56 used 

CRJ aircraft purchased under an early lease buyout during the first half of 2019. These changes represented a 

$481.1 million decrease in aircraft purchases. Additionally, during 2019, we sold ExpressJet for $79.6 million partially 

offset by a note receivable issued to the buyer of $26.4 million, resulting in net cash from the sale of ExpressJet of $53.2 

million. 
35 

Cash Flows from Financing Activities. The $632.6 million, or 193.2%, increase in cash used in financing 

activities was primarily related to the decrease in proceeds from the issuance of long-term debt of $200.0 million 

associated with ten E175 aircraft and two previously leased aircraft acquired during 2019, compared to proceeds from 

the issuance of debt of $784.7 million associated with 39 E175 aircraft acquired during 2018. Additionally, during 2019, 

we used an additional $35.9 million to purchase treasury shares and common stock, and for income tax payments 

towards vested employee equity awards. 

Liquidity and Capital Resources as of December 31, 2019 and 2018 

We believe that in the absence of unusual circumstances, the working capital currently available to us, together 

with our projected cash flows from operations, will be sufficient to meet our present financial requirements, including 

anticipated expansion, planned capital expenditures, and scheduled lease payments and debt service obligations for at 

least the next 12 months. 

At December 31, 2019, our total capital mix was 45.3% equity and 54.7% long-term debt, compared to 41.1% 

equity and 58.9% long-term debt at December 31, 2018. 

At December 31, 2019, we had $8.8 million in letters of credit issued under our line of credit facility, which 

reduced the amount available under the facility to $66.2 million. The facility expires on September 1, 2021 and has a 

variable interest rate of LIBOR plus 2.5% at December 31, 2019. 

As of December 31, 2019 and 2018, we had $61.7 million and $78.7 million, respectively, in letters of credit 

and surety bonds outstanding with various banks and surety institutions. 

As of December 31, 2019 and 2018, we had no restricted cash. 

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 2020 2021 2022 2023 2024 Thereafter 

Operating lease payments for 

aircraft and facility obligations . $ 443,660 $ 94,806 $ 84,285 $ 73,960 $ 68,581 $ 27,282 $ 94,746 

Firm aircraft and spare engine 

commitments . . . . . . . . . . . . . . 779,410 489,796 284,114 5,500 — — — 

Interest commitments(A) . . . . . . . 574,577 120,005 104,678 90,251 73,946 59,373 126,324 

Principal maturities on 

long-term debt . . . . . . . . . . . . . 3,017,523 367,954 352,005 365,907 374,906 327,630 1,229,121 

Total commitments and 

obligations . . . . . . . . . . . . . . . . $ 4,815,170 $1,072,561 $ 825,082 $ 535,618 $ 517,433 $ 414,285 $ 1,450,191 

(A) At December 31, 2019, all of our total long-term debt had fixed interest rates. 

Purchase Commitments and Options 

As of December 31, 2019, we had a firm purchase commitment for 26 E175 aircraft from Embraer with 

scheduled delivery dates through 2021. 

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 alternatives available to us, and select one or 

more of these methods to fund the acquisition. At present, we intend to fund our acquisition of any additional aircraft 

through cash on hand and debt financing. 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 
36 

acquisitions, as well as additional aircraft. We intend to finance the firm purchase commitment for 26 E175 aircraft with 

approximately 85% debt and the remaining balance with cash. 

Aircraft Lease and Facility Obligations 

We also have significant long-term lease obligations, primarily relating to our aircraft fleet. At December 31, 

2019, we had 94 aircraft under lease with remaining terms ranging from less than one to ten years. Future minimum lease 

payments due under all long-term operating leases were approximately $443.6 million at December 31, 2019. Assuming 

a 6.4% discount rate, which is the average incremental borrowing rate we anticipate we would have incurred on debt 

obtained over a similar term to acquire these assets, the present value of these lease obligations would have been equal to 

approximately $354.0 million at December 31, 2019. 

Long-term Debt Obligations 

As of December 31, 2019, we had $3.0 billion of long-term debt obligations related to the acquisition of aircraft 

and certain spare engines. The average effective interest rate on those long-term debt obligations was approximately 

4.2% at December 31, 2019. 

Under our fixed-fee arrangements, the major airline partners compensate us for our costs of owning or leasing 

the aircraft on a monthly basis. The aircraft compensation structure varies by agreement, but is intended to cover either 

our aircraft principal and interest debt service costs, our aircraft depreciation and interest expense or our aircraft lease 

expense costs while the aircraft is under contract. 

Guarantees 

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

Express Agreement for the E175 aircraft. In addition, we have guaranteed certain other obligations under aircraft 

financing and leasing agreements. 

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, Delta, United, American and Alaska 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 prorate operations. For each of the 

years ended December 31, 2019, 2018 and 2017, approximately 18%, 16% and 14% of our total flying agreements 

revenue was derived from prorate arrangements. For the years ended December 31, 2019, 2018 and 2017, the average 

price per gallon of aircraft fuel was $2.51, $2.60 and $2.06, respectively. For illustrative purposes only, we have 

estimated the impact of the market risk of fuel on our prorate 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 $29.8 million, 

$29.4 million and $21.3 million in fuel expense for the years ended December 31, 2019, 2018 and 2017, respectively. 

Interest Rates 

As of December 31, 2019, all of our interest rates on our long-term debt were fixed rates. We currently intend to 

finance the acquisition of aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may 

impact the actual cost to us to acquire future aircraft. To the extent we place new aircraft in service under our code-share 

agreements with Delta, United, American, Alaska or other carriers, our code-share agreements currently provide that 

reimbursement rates will be adjusted to reflect the interest rates effective at the closing of the respective aircraft 

financing. 

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.
37 

Report of Independent Registered Public Accounting Firm 

To the Stockholders and the Board of Directors of SkyWest, Inc. 

Opinion on the Financial Statements 

We have audited the accompanying consolidated balance sheets of SkyWest, Inc. and subsidiaries (the 

Company) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income, 

stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related 

notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “financial 

statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial 

position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of 

the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting 

principles. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board 

(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on 

criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of 

the Treadway Commission (2013 framework) and our report dated February 18, 2020 expressed an unqualified opinion 

thereon. 

Adoption of ASU No. 2016-02 

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting 

for leases in the year ended December 31, 2019 due to the adoption of ASU No. 2016-02, “Leases (Topic 842).” 

Basis for Opinion 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express 

an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with 

the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal 

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan 

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 

misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material 

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those 

risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the 

financial statements. Our audits also included evaluating the accounting principles used and significant estimates made 

by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits 

provide a reasonable basis for our opinion. 

Critical Audit Matter 

The critical audit matter communicated below is a matter arising from the current period audit of the financial 

statements that was communicated or required to be communicated to the audit committee and that: (1) relates to 

accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, 

subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion 

on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter 

below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 
38 

Valuation of workers’ compensation liability 

Description of 

the Matter 

At December 31, 2019, the Company’s workers’ compensation liability balance totaled $23.9 

million, presented as a component of other current liabilities and other long-term liabilities on the 

balance sheet. The Company discusses the estimate related to the workers’ compensation within 

Note 5, Commitments and Contingencies. 

Auditing the estimated ultimate losses associated with the workers’ compensation liability is 

complex and highly judgmental due to the significant estimation required in determining the 

ultimate aggregate liabilities for claims incurred. In particular, the estimate was sensitive to 

significant assumptions such as the estimation of loss payment and loss reporting development 

patterns. 

How We 

Addressed the 

Matter in Our 

Audit 

We obtained an understanding, evaluated the design and tested the operating effectiveness of 

controls over the Company’s workers’ compensation liability process. As part of our testing, we 

also considered controls over management’s review of the significant assumptions noted above. 

We also tested controls performed by management to review the historical estimates of the 

workers’ compensation liability for accuracy. 

To test the estimate of the Company’s workers’ compensation liability, we performed audit 

procedures that included, among others, assessing methodologies and testing the significant 

assumptions used in estimating the worker’s compensation liability and the underlying data used 

by the Company in its analysis. We utilized the assistance of our actuarial specialists in assessing 

the reasonableness of the methodologies used and significant assumptions applied, including the 

estimation of loss payment and loss reporting development patterns, as well as developing an 

independent projection of the Company’s unpaid claims obligations. We also assessed the 

historical accuracy of management’s estimates. 

/s/ Ernst & Young LLP 

We have served as the Company’s auditor since 2003. 

Salt Lake City, Utah 

February 18, 2020 
39 

SKYWEST, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(Dollars in thousands) 

ASSETS 

 

 December 31, December 31, 

 2019 2018 

CURRENT ASSETS: 

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,206 $ 328,384 

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,966 360,945 

Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,141 25,936 

Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,977 64,194 

Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,503 127,690 

Prepaid aircraft rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 87,031 

Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,553 26,614 

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760,346 1,020,794 

 

PROPERTY AND EQUIPMENT: 

Aircraft and rotable spares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,078,801 6,433,916 

Deposits on aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,858 42,012 

Buildings and ground equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,398 291,544 

 7,393,057 6,767,472 

Less-accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . (1,998,376) (1,761,728) 

Total property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,394,681 5,005,744 

 

OTHER ASSETS 

Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,009 — 

Long-term prepaid assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 181,830 

Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,093 104,844 

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,102 286,674 

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,657,129 $ 6,313,212 

See accompanying notes to consolidated financial statements. 

 
40 

SKYWEST, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS (Continued) 

(Dollars in thousands) 

LIABILITIES AND STOCKHOLDERS’ EQUITY 

 

 December 31, December 31, 

 2019 2018 

CURRENT LIABILITIES: 

Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 364,126 $ 350,206 

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,473 331,982 

Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,856 161,606 

Current maturities of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 94,806 

Taxes other than income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,004 16,024 

Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,411 65,008 

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,676 924,826 

 

LONG-TERM DEBT, net of current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,628,989 2,809,768 

 

DEFERRED INCOME TAXES PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623,580 518,159 

 

DEFERRED AIRCRAFT CREDITS .................................... — 29,308 

 

NONCURRENT OPERATING LEASE LIABILITIES . . . . . . . . . . . . . . . . . . . . 259,237 —

 

OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,633 66,870 

 

COMMITMENTS 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; 81,742,937 

and 81,239,289 shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . 686,806 690,910 

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,079,179 1,776,585 

Treasury stock, at cost, 31,420,179 and 29,850,999 shares, respectively . . . . (590,971) (503,182)

Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (32)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175,014 1,964,281 

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,657,129 $ 6,313,212 

See accompanying notes to consolidated financial statements. 

 
41 

SKYWEST, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(In thousands, except per share amounts) 

 

Year Ended December 31, 

 2019 2018 2017 (a) 

OPERATING REVENUES: 

Flying agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ 3,078,297 

Airport customer service and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,698 52,159 44,295 

Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,971,963 3,221,679 3,122,592 

OPERATING EXPENSES: 

Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001,746 1,201,518 1,192,067 

Aircraft maintenance, materials and repairs . . . . . . . . . . . . . . . . . . . . . 514,313 556,259 579,463 

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,098 334,589 292,768 

Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,115 117,657 85,136 

Airport-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,837 109,605 118,374 

Aircraft rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,998 154,945 215,807 

Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,869 — — 

Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,729 272,826 250,778 

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,459,705 2,747,399 2,734,393 

OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512,258 474,280 388,199 

OTHER INCOME (EXPENSE): 

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,131 8,823 4,509 

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127,755) (120,409) (104,925) 

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,671 3,620 400 

Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,953) (107,966) (100,016) 

INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 446,305 366,314 288,183 

PROVISION (BENEFIT) FOR INCOME TAXES . . . . . . . . . . . . . . . . . 106,206 85,942 (140,724) 

NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907 

 

BASIC EARNINGS PER SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.68 $ 5.40 $ 8.28 

DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.62 $ 5.30 $ 8.08 

Weighted average common shares: 

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,932 51,914 51,804 

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,375 52,871 53,100 

 

COMPREHENSIVE INCOME: 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907 

Net unrealized appreciation on marketable securities, net of taxes . . 32 18 21 

TOTAL COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,131 $ 280,390 $ 428,928 

(a) Amounts adjusted due to the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from 

Contracts with Customers (Topic 606) (“Topic 606”). See Note 1 to the financial statements of this report for 

additional information. 

See accompanying notes to consolidated financial statements. 

 
42 

SKYWEST, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 

(In thousands) 

 

 Accumulated 

 Other 

 Common Stock Retained Treasury Stock Comprehensive 

 Shares Amount Earnings Shares Amount Income (Loss) Total 

Balance at December 31, 2016 . . . . . . . . . . . 79,781 $ 657,353 $ 1,103,751 (28,015) $ (410,090) $ (71) $ 1,350,943 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . — — 428,907 — — — 428,907 

Net unrealized appreciation on marketable 

securities, net of tax of $7 ............. — — — — — 21 21 

Exercise of common stock options and 

vested restricted stock units . . . . . . . . . . . 529 1,658 — — — — 1,658 

Treasury shares acquired from vested 

employee stock awards for income tax 

withholdings ...................... — — — (145) (5,080) — (5,080)

Sale of common stock under employee 

stock purchase plan . . . . . . . . . . . . . . . . . 88 3,002 — — — — 3,002 

Stock based compensation expense related 

to the issuance of equity awards . . . . . . . . — 10,580 — — — — 10,580 

Impact of adoption of ASU 2016-09 (See 

Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . — — 867 — — — 867 

Treasury stock purchases . . . . . . . . . . . . . . . — — — (484) (20,008) — (20,008)

Cash dividends declared ($0.32 per share) . . — — (16,568) — — — (16,568)

Balance at December 31, 2017 . . . . . . . . . . . 80,398 672,593 1,516,957 (28,644) (435,178) (50) 1,754,322 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . — — 280,372 — — — 280,372 

Net unrealized appreciation on marketable 

securities, net of tax of $6 ............. — — — — — 18 18 

Exercise of common stock options and 

vested restricted stock units . . . . . . . . . . . 780 2,174 — — — — 2,174 

Treasury shares acquired from vested 

employee stock awards for income tax 

withholdings ...................... — — — (239) (13,556) — (13,556)

Sale of common stock under employee 

stock purchase plan . . . . . . . . . . . . . . . . . 61 3,038 — — — — 3,038 

Stock based compensation expense related 

to the issuance of equity awards . . . . . . . . — 13,105 — — — — 13,105 

Treasury stock purchases . . . . . . . . . . . . . . . — — — (968) (54,448) — (54,448)

Cash dividends declared ($0.40 per share) . . — — (20,744) — — — (20,744)

Balance at December 31, 2018 . . . . . . . . . . . 81,239 690,910 1,776,585 (29,851) (503,182) (32) 1,964,281 

Change in accounting principle and other 

(see Note 6) . . . . . . . . . . . . . . . . . . . . . . . — — (13,141) — — — (13,141)

Balance at December 31, 2018, as adjusted . 81,239 690,910 1,763,444 (29,851) (503,182) (32) 1,951,140 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . — — 340,099 — — — 340,099 

Net unrealized appreciation on marketable 

securities, net of tax of $10 ............ — — — — — 32 32 

Exercise of common stock options and 

vested restricted stock units . . . . . . . . . . . 707 3,106 — — — — 3,106 

Treasury shares acquired from vested 

employee stock awards for income tax 

withholdings ...................... — — — (173) (9,313) — (9,313)

Sale of common stock under employee 

stock purchase plan . . . . . . . . . . . . . . . . . 65 3,165 — — — — 3,165 

Stock based compensation expense related 

to the issuance of equity awards, net of 

forfeitures . . . . . . . . . . . . . . . . . . . . . . . . — 5,770 — — — — 5,770 

Common stock purchased and cancelled . . . (268) (16,145) — — — (16,145)

Treasury stock purchases . . . . . . . . . . . . . . . — — — (1,396) (78,476) — (78,476)

Cash dividends declared ($0.48 per share) . . — — (24,364) — — — (24,364)

Balance at December 31, 2019 . . . . . . . . . . . 81,743 $ 686,806 $ 2,079,179 (31,420) $ (590,971) $ — $ 2,175,014 

See accompanying notes to consolidated financial statements. 

 
43 

SKYWEST, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands) 

Year Ended December 31, 

 2019 2018 2017 

CASH FLOWS FROM OPERATING ACTIVITIES: 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907 

Adjustments to reconcile net income to net cash provided by operating activities: 

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368,098 334,589 292,768 

Stock based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,274 13,105 10,580 

Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,525) — — 

Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,869 — — 

Net increase (decrease) in deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,654 99,139 (145,517) 

Changes in operating assets and liabilities: 

Decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 8,243 

Decrease (increase) in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,700) (21,464) 4,201 

Decrease (increase) in income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,795 (20,620) 1,673 

Increase in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,303) (7,935) (1,246) 

Decrease in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,707 77,484 26,017 

Increase in operating lease right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (895) — — 

Decrease in deferred aircraft credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (14,243) (8,520) 

Increase (decrease) in accounts payable and other current liabilities . . . . . . . . . . . . (54,043) 62,107 67,018 

NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . 721,030 802,534 684,124 

 

CASH FLOWS FROM INVESTING ACTIVITIES: 

Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,938,750) (2,308,768) (1,533,867) 

Sales of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,866,761 2,451,344 1,440,283 

Net cash received from sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,200 — — 

Acquisition of property and equipment: 

Aircraft and rotable spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (581,329) (1,062,380) (661,176) 

Buildings and ground equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,586) (34,397) (27,467) 

Proceeds from the sale of aircraft, property and equipment . . . . . . . . . . . . . . . . . . . . 26,008 — 51,994 

Deposits on aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,817) (41,937) (46,733) 

Return of deposits applied towards acquired aircraft . . . . . . . . . . . . . . . . . . . . . . . . . 46,346 49,550 36,533 

Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,133 (36,816) (10,904) 

NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . (657,034) (983,404) (751,337) 

 

CASH FLOWS FROM FINANCING ACTIVITIES: 

Proceeds from issuance of long-term debt ................................. 200,040 784,665 471,677 

Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382,442) (370,775) (330,258) 

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,271 5,212 4,660 

Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,476) (54,448) (20,008) 

Purchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,145) — — 

Employee income tax paid on vested equity awards . . . . . . . . . . . . . . . . . . . . . . . . . (9,313) (13,556) (5,080) 

Increase in debt issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,642) (3,892) (3,737) 

Payment of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,467) (19,744) (15,015) 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .............. (305,174) 327,462 102,239 

 

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (241,178) 146,592 35,026 

Cash and cash equivalents at beginning of period .............................. 328,384 181,792 146,766 

CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 87,206 $ 328,384 $ 181,792 

See accompanying notes to consolidated financial statements. 

 
44 

SKYWEST, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) 

(In thousands) 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 

Non-cash investing activities: 

Acquisition of rotable spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,514 $ 367 $ 755 

Debt assumed on aircraft acquired under operating leases . . . . . . . . . . . . . . . . . . . $ 14,475 $ 59,132 $ —

Engines contributed to joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,313 $ — $ —

Non-cash assets used to acquire aircraft under operating leases . . . . . . . . . . . . . . . $ 153,566 $ — $ —

Lease liability arising from the recognition of right-of-use asset . . . . . . . . . . . . . . . $ 456,472 $ — $ —

Cash paid during the period for: 

Interest, net of capitalized amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,733 $ 118,268 $ 105,639 

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,490 $ 2,661 $ 5,010 

 

SUPPLEMENTAL DISCLOSURE OF SALE OF SUBSIDIARY: 

 Decrease in carrying amount of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (101,448) $ — $ —

 Decrease in carrying amount of liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,341 — —

 Cash received from buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,632 — —

Gain on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,525 $ — $ —

See accompanying notes to consolidated financial statements. 
45 

SKYWEST, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

DECEMBER 31, 2019 

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

SkyWest, Inc. (the “Company”), through its subsidiary, SkyWest Airlines, Inc. (“SkyWest Airlines”) operates 

the largest regional airline in the United States. On January 22, 2019, the Company completed the sale of its former 

wholly owned subsidiary, ExpressJet Airlines, Inc. (“ExpressJet”). As of December 31, 2019, SkyWest Airlines offered 

scheduled passenger service under code-share agreements with Delta, United, American and Alaska with approximately 

2,300 total daily departures to destinations in the United States, Canada, Mexico and the Caribbean. Additionally, the 

Company provides airport customer service and ground handling services for other airlines throughout its system. As of 

December 31, 2019, the Company had 483 aircraft in scheduled service out of a combined fleet of 544 aircraft consisting 

of the following: 

 

 CRJ200 CRJ700 CRJ900 E175 Total 

Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 13 43 59 199 

United ............................................ 99 19 — 65 183 

American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 62 — — 69 

Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 32 32 

Aircraft in scheduled service . . . . . . . . . . . . . . . . . . . . . . . . . 190 94 43 156 483 

Subleased to an un-affiliated entity .................... 4 10 5 — 19 

Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 22 — — 42 

Total Fleet ........................................ 214 126 48 156 544 

*As of December 31, 2019, these aircraft have been removed from service and are in the process of being placed under a 

leasing arrangement with a third party, are aircraft transitioning between code-share agreements with the Company’s 

major airline partners and being used as a supplemental spare aircraft, or are in the process of being parted out. 

For the year ended December 31, 2019, approximately 41.2% of the Company’s aircraft in scheduled service 

operated for Delta, approximately 37.9% was operated for United, approximately 14.3% was operated for American and 

approximately 6.6% was operated for Alaska. 

SkyWest Airlines has been a code-share partner with Delta since 1987, United since 1997, Alaska since 2011 

and American since 2012. As of December 31, 2019, SkyWest Airlines operated as a Delta Connection carrier primarily 

in Salt Lake City and Minneapolis, a United Express carrier primarily in Los Angeles, San Francisco, Denver, Houston, 

Chicago and the Pacific Northwest, an American carrier primarily in Chicago, Los Angeles and Phoenix and an Alaska 

carrier primarily in the Pacific Northwest. 

SkyWest Airlines operates the following aircraft manufactured by Bombardier Aerospace (“Bombardier”): 

CRJ200s, CRJ700s and CRJ900s, and E175s manufactured by Embraer S.A. (“Embraer”). The CRJ200 is a single-class 

50-seat aircraft. The CRJ700, CRJ900 and E175 aircraft have a dual-class seat configuration typically configured with 65 

to 76 seats. 
46 

Basis of Presentation 

The Company’s consolidated financial statements include the accounts of the Company and the SkyWest 

Airlines, ExpressJet (for the periods owned by the Company) and SkyWest Leasing segments, 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, 2019, through the filing date of 

the Company’s annual report with the U.S. Securities and Exchange Commission. The Company reclassified certain 

prior period amounts to conform to the current period presentation (see Recent Accounting Pronouncements). 

Use of Estimates 

The preparation of financial statements in conformity with accounting principles generally accepted in the 

United States 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 had no restricted cash as of December 31, 2019 and 2018. 

Marketable Securities 

The Company’s investments in debt securities are classified as available-for-sale and are reported at fair market 

value with the net unrealized appreciation 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. At December 31, 2019, the fair market value of the 

available-for-sale securities was the amortized cost. The Company’s position in marketable securities as of December 31, 

2019 and 2018 was as follows (in thousands): 

 

 Gross unrealized Gross unrealized 

At December 31, 2019 Amortized Cost holding gains holding losses Fair market value 

Total cash and cash equivalents . . . . . . . . . . . . . $ 87,206 $ — $ — $ 87,206 

Marketable securities: 

Bond and bond funds ................... $ 267,243 $ — $ — $ 267,243 

Commercial Paper ..................... 165,723 — — 165,723 

Total marketable securities ................ $ 432,966 $ — $ — $ 432,966 

Total assets measured at fair value . . . . . . . . . . . $ 520,172 $ — $ — $ 520,172 

 

 

 Gross unrealized Gross unrealized 

At December 31, 2018 Amortized Cost holding gains holding losses Fair market value 

Total cash and cash equivalents . . . . . . . . . . . . . $ 328,384 $ — $ — $ 328,384 

Marketable securities: 

Bond and bond funds ................... $ 229,825 $ — $ (42) $ 229,783 

Commercial Paper ..................... 131,163 — (1) 131,162 

Total marketable securities ................ $ 360,988 $ — $ (43) $ 360,945 

Total assets measured at fair value . . . . . . . . . . . $ 689,372 $ — $ (43) $ 689,329 

As of December 31, 2019 and 2018, the Company had classified $433.0 million and $360.9 million of 

marketable securities, respectively, as short-term since it had the ability to redeem the securities within one year. 
47 

Inventories 

Inventories include expendable parts, fuel and supplies and are valued at cost (FIFO basis) less an allowance for 

obsolescence based on historical results, excess parts 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, 2019 and 2018 was $15.9 million and $22.1 million, respectively. 

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 Current Residual Value 

Aircraft, rotable spares, and spare engines . . . . up to 22 years up to 20 % 

Ground equipment ........................ up to 10 years 0 % 

Office equipment ......................... up to 7 years 0 % 

Leasehold improvements . . . . . . . . . . . . . . . . . . Shorter of 15 years or lease term 0 % 

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 - 39.5 years 0 % 

Impairment of Long-Lived Assets 

As of December 31, 2019, the Company had approximately $5.4 billion of property and equipment and related 

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. 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 impairment indicators are present. When considering whether or not impairment of 

long-lived assets exists, the Company groups similar assets together at the lowest level for which identifiable cash flows 

are largely independent of the cash flows of other assets and liabilities and compare the undiscounted cash flows for each 

asset group to the net carrying amount of the assets supporting the asset group. Asset groupings are done at the fleet or 

contract level. 

The Company did not recognize any impairment charges of long-lived assets during the years ended 

December 31, 2019, 2018 and 2017. 

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, 2019, 2018 and 2017, the Company 

capitalized interest costs of approximately $1.6 million, $1.5 million, and $1.4 million, respectively. 

Maintenance 

The Company operates under a U.S. Federal Aviation Administration 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 engine services agreements with 

third-party vendors to provide long-term engine services covering the scheduled and unscheduled repairs for most of its 

aircraft. Under the terms of the agreements, the Company pays a fixed dollar amount per engine hour flown on a monthly 

basis and the third-party vendors 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 each contract. 
48 

The costs of maintenance for airframe and avionics components, landing gear and other recurring maintenance 

are expensed as incurred. 

Flying Agreements and Airport Customer Service and Other Revenues 

The Company recognizes flying agreements revenue and airport customer service and other revenues when the 

service is provided under its code-share agreements. Under the Company’s fixed-fee arrangements (referred to as “fixedfee arrangements,” “fixed-fee contracts” or “capacity purchase agreements”) with Delta Air Lines, Inc. (“Delta”), United 

Airlines, Inc. (“United”), American Airlines, Inc. (“American”) and Alaska Airlines, Inc. (“Alaska”) (each, a “major 

airline partner”), the major airline partner generally pays the Company a fixed-fee for each departure, flight hour 

(measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi 

time) incurred, and an amount per aircraft in service each month with additional incentives based on flight completion 

and on-time performance. The major airline partner also directly pays for or reimburses the Company for certain direct 

expenses incurred under the fixed-fee arrangement, such as fuel, airport landing fees and airport rents. Under the fixedfee arrangements, the Company’s performance obligation is met and revenue is recognized when each flight is 

completed and is reflected in flying agreements revenue. The transaction price for the fixed-fee agreements is determined 

from the fixed-fee consideration, incentive consideration and directly reimbursed expenses earned as flights are 

completed over the agreement term. For the year ended December 31, 2019, fixed-fee arrangements represented 

approximately 82.0% of the Company’s flying agreements revenue. 

Under the Company’s revenue-sharing arrangements (referred to as a “revenue-sharing” or “prorate” 

arrangement), the major airline partner and the Company negotiate a passenger fare proration formula, pursuant to which 

the Company receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on a 

Company airline and the other portion of their trip on the major airline partner. Under the Company’s prorate flying 

agreements, the performance obligation is met and revenue is recognized when each flight is completed based upon the 

portion of the prorate passenger fare the Company anticipates that it will receive for each completed flight. The 

transaction price for the prorate agreements is determined from the proration formula derived from each passenger ticket 

amount on each completed flight over the agreement term. For the year ended December 31, 2019, prorate flying 

arrangements represented approximately 18.0% of the Company’s flying agreements revenue. 

Airport customer service and other revenues primarily consist of ground handling functions, such as gate and 

ramp agent services at applicable airports where the Company provides such services. The transaction price for airport 

customer service agreements is determined from an agreed-upon rate by location applied to the applicable number of 

flights handled by the Company over the agreement term. Additionally, airport customer service and other revenues 

includes revenue generated from aircraft and spare engines leased to third parties. Of the Company’s $5.4 billion of 

property and equipment, net as of December 31, 2019, $97.0 million of regional jet aircraft and spare engines was leased 

to third parties under operating leases. The Company mitigates the residual asset risks of these assets by leasing aircraft 

and engine types that can be operated by the Company in the event of a default. A portion of the Company’s leases to 

third parties contain variable payments from lessees based on departures where the Company pays for maintenance. 

Additionally, the operating leases typically have specified lease return condition requirements paid by the lessee to the 

Company and the Company typically maintains inspection rights under the leases. 

The following table represents the Company’s airport customer service and other revenue for the years ended 

December 31, 2019, 2018 and 2017 (in thousands): 

 

For the year ended December 31, 

 2019 2018 2017 

Airport customer service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,538 $ 48,236 $ 41,002 

Operating lease income relating to lease payments. . . . . . . . . . . . . . . . . . . . . 27,552 3,923 3,293 

Operating lease income relating to variable lease payments . . . . . . . . . . . . . 9,608 — —

 Airport customer service and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,698 $ 52,159 $ 44,295 
49 

 The following table summarizes future minimum rental income under operating leases primarily related to 

leased aircraft that had remaining non-cancelable lease terms as of December 31, 2019 (in thousands): 

 

 

2020 . . . . . ......................................................... $ 32,724 

2021 . . . . . ......................................................... 31,344 

2022 . . . . . ......................................................... 24,786 

2023 . . . . . ......................................................... 18,530 

2024 . . . . . ......................................................... 18,222 

Thereafter .......................................................... 54,932 

$ 180,538 

Other ancillary revenues commonly associated with airlines, such as baggage fee revenue, ticket change fee 

revenue and the marketing component of the sale of mileage credits, are retained by the Company’s major airline 

partners on flights that the Company operates under its code-share agreements. 

The following table represents the Company’s flying agreements revenue by type for the years ended 

December 31, 2019, 2018 and 2017 (in thousands): 

 

 For the year ended December 31, 

 2019 2018 2017 

Capacity purchase agreements revenue: flight operations . $ 1,538,062 $ 1,856,253 $ 1,805,510 

Capacity purchase agreements revenue: aircraft lease . . . . 830,247 814,518 834,366 

Prorate agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . 520,956 498,749 438,421 

 Flying agreements revenue . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,889,265 $ 3,169,520 $ 3,078,297 

A portion of the Company’s compensation under its fixed-fee agreements is designed to reimburse the 

Company for certain aircraft ownership costs. The consideration for aircraft ownership costs varies by agreement but is 

intended to cover either the Company’s aircraft principal and interest debt service costs, its aircraft depreciation and 

interest expense or its aircraft lease expense costs while the aircraft is under contract. The consideration received for the 

use of the aircraft under the Company’s fixed-fee agreements is reflected as lease revenue, inasmuch as the agreements 

identify the “right of use” of a specific type and number of aircraft over a stated period of time. The lease revenue 

associated with the Company’s fixed-fee agreements is accounted for as an operating lease and is reflected as flying 

agreements revenue on the Company’s consolidated statements of comprehensive income. The Company has not 

separately stated aircraft rental income and aircraft rental expense in the consolidated statement of comprehensive 

income since the use of the aircraft is not a separate activity of the total service provided. 

 The Company’s fixed-fee and prorate agreements include weekly provisional cash payments from the 

respective major airline partner based on a projected level of flying each month. The Company and each major airline 

partner subsequently reconcile these payments to the actual completed flight activity on a monthly or quarterly basis. 

 In the event a flying agreement includes a mid-term rate reset to adjust rates prospectively and the contractual 

rates under the Company’s flying agreements have not been finalized at quarterly or annual financial statement dates, the 

Company applies the variable constraint guidance under Topic 606, where the Company records revenue to the extent it 

believes that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur 

when the uncertainty associated with the variable consideration is subsequently resolved. 

In several of the Company’s agreements, the Company is eligible to receive incentive compensation upon the 

achievement of certain performance criteria. The incentives are defined in the agreements and are measured and 

determined on a monthly, quarterly or semi-annual basis. At the end of each period during the term of an agreement, the 

Company calculates the incentives achieved during that period and recognizes revenue attributable to that agreement 

accordingly, subject to the variable constraint guidance under Topic 606. 

The following summarizes the significant provisions of each code-share agreement the Company has with each 

major airline partner through SkyWest Airlines: 
50 

Delta Connection Agreements 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

Delta Connection Agreement . . . . . . . . . . • CRJ 200 55 • Individual aircraft have scheduled 

(fixed-fee arrangement) • CRJ 700 

• CRJ 900 

• E175

13 

43 

59 

removal dates from 2020 to 2029 

• The average remaining term of the 

aircraft under contract is 4.1 years

Delta Connection Prorate Agreement . . . . • CRJ 200 29 • Terminable with 30-day notice 

(revenue-sharing arrangement) 

United Express Agreements 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

United Express Agreements . . . . . . . . . . . • CRJ 200 68 • Individual aircraft have scheduled 

(fixed-fee arrangement) • CRJ 700 

• E175

 19 

65 

removal dates under the agreement 

between 2020 and 2029 

• The average remaining term of the 

aircraft under contract is 4.3 years

United Express Prorate Agreement . . . . . . • CRJ 200 31 • Terminable with 120-day notice 

(revenue-sharing arrangement) 

American Agreements 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

American Agreement . . . . . . . . . . . . . . . . . • CRJ 700 62 • Individual aircraft have scheduled 

(fixed-fee arrangement) removal dates from 2022 to 2025 

• The average remaining term of the 

aircraft under contract is 4.1 years 

American Prorate Agreement . . . . . . . . . . • CRJ 200 7 • Terminable with 120-day notice 

(revenue-sharing arrangement) 

Alaska Capacity Purchase Agreement 

Agreement Aircraft type 

 Number of 

Aircraft Term / Termination Dates 

Alaska Agreement . . . . . . . . . . . . . . . . . . . • E175 32 • Individual aircraft have scheduled 

(fixed-fee arrangement) removal dates from 2027 to 2030 

• The average remaining term of the 

aircraft under contract is 9.2 years 

In addition to the contractual arrangements described above, SkyWest Airlines has entered into fixed-fee 

agreements with Delta and American to place additional E175 aircraft into service. As of December 31, 2019, the 

Company was scheduled to take delivery of six new E175 aircraft in connection with its agreement with Delta and 20 

new E175 aircraft in connection with its agreement with American. The delivery dates for the new E175 aircraft are 

currently scheduled to be completed by the end of 2021. Final delivery dates may be adjusted based on various factors. 

Additionally, the Company is scheduled to add an additional six used E175 aircraft under the Delta agreement during 

2020. 

SkyWest Airlines also entered into an agreement with Delta to place one CRJ900 aircraft under a nine-year 

fixed-fee agreement in 2020. 

SkyWest Airlines also entered into an agreement with American to place ten used CRJ700s under a multi-year 

contract. As of December 31, 2019, SkyWest Airlines had placed two of these CRJ700 aircraft into service with 

American. 
51 

When an aircraft is scheduled to be removed from a fixed-fee arrangement, the Company may, as practical 

under the circumstances, negotiate an extension with the respective major airline partner, negotiate the placement of the 

aircraft with another major airline partner, return the aircraft to the lessor if the aircraft is leased and the lease is expiring, 

place owned aircraft for sale, or pursue other uses for the aircraft. Other uses for the aircraft may include placing the 

aircraft in a prorate arrangement, leasing the aircraft to a third party or parting out the aircraft to use the engines and 

parts as spare inventory or to lease the engines to a third party. 

Airport customer service and other revenues primarily consist of ground handling functions, such as gate and 

ramp agent services at applicable airports where the Company provides such services. The transaction price for airport 

service agreements is determined from an agreed-upon rate by location applied to the applicable number of flights 

handled (measured by departures) by the Company over the agreement term. 

The Company’s operating revenues could be impacted by a number of factors, including changes to the 

Company’s code-share agreements with its major airline partners, changes in flight schedules, contract modifications 

resulting from contract renegotiations, the Company’s ability to earn incentive payments contemplated under the 

Company’s code-share agreements and settlement of reimbursement disputes with the Company’s major airline partners. 

As of December 31, 2019, the Company had $83.0 million in accounts receivable of which $58.8 million 

related to flying agreements. As of December 31, 2018, the Company had $64.2 million in accounts receivable of which 

$52.7 million related to flying agreements. 

Income Taxes 

The Company recognizes a net 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 are 

expected to result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities 

are recovered or settled. 

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 (loss) per common share. During the year 

ended December 31, 2019, 150,000 performance share units (at target performance) were excluded in the computation of 

Diluted EPS since the Company had not achieved the minimum target thresholds as of December 31, 2019. During the 

year ended December 31, 2018, 207,000 performance share units (at target performance) were excluded in the 

computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of December 31, 

2018. During the year ended December 31, 2017, 284,000 performance share units (at target performance) were 

excluded in the computation of Diluted EPS since the Company had not achieved the minimum target thresholds as of 

December 31, 2017. 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, 2019, 2018 and 2017 (in thousands): 

Year Ended December 31, 

2019 2018 2017 

Numerator: 

Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340,099 $ 280,372 $ 428,907 

Denominator: 

Basic earnings per share weighted average shares . . . . . . . 50,932 51,914 51,804 

Dilution due to stock options and restricted stock units . . . 443 957 1,296 

Diluted earnings per share weighted average shares . . . . . . 51,375 52,871 53,100 

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.68 $ 5.40 $ 8.28 

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.62 $ 5.30 $ 8.08 
52 

Comprehensive Income (Loss) 

Comprehensive income (loss) includes charges and credits to stockholders’ equity that are not the result of 

transactions with the Company’s shareholders, including changes in unrealized appreciation on marketable debt 

securities. 

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. If quoted prices in 

active markets are no longer available, the Company has estimated the fair values of these securities utilizing a 

discounted cash flow analysis. 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 was approximately $3,049.1 million as of 

December 31, 2019, as compared to the carrying amount of $3,017.5 million as of December 31, 2019. The Company’s 

fair value of long-term debt as of December 31, 2018 was $3,157.3 million as compared to the carrying amount of 

$3,185.4 million as of December 31, 2018. 

Segment Reporting 

Generally accepted accounting principles require disclosures related to components of a company for which 

separate financial information is available to, and regularly evaluated by, the Company’s chief operating decision maker 

when deciding how to allocate resources and in assessing performance. The Company’s three operating segments (prior 

to the sale of ExpressJet in January 2019) consist of the operations conducted by SkyWest Airlines, ExpressJet (for the 

periods owned by the Company) and SkyWest Leasing. Following the sale of ExpressJet, the Company has two 

reportable segments: SkyWest Airlines and SkyWest Leasing. Information pertaining to the Company’s reportable 

segments is presented in Note 2, Segment Reporting. 

Recent Accounting Pronouncements 

Standards Effective in Future Years and Not Yet Adopted 

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, “Financial 

Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments” (“Topic 326”), which 

requires measurement and recognition of expected credit losses for financial assets held and requires enhanced disclosure 

regarding significant estimates and judgments used in estimating credit losses. Topic 326 is effective for the Company 

beginning January 1, 2020. The Company will adopt Topic 326, on January 1, 2020. The Company’s primary financial 

assets as of December 31, 2019, include trade receivables from its flying agreements, notes and other receivables from 

third parties. The Company estimates it will record a credit loss amount between $7.0 million and $12.0 million in 

conjunction with the adoption. The Company anticipates that the initial credit loss recorded upon adoption of Topic 326 

will be reflected as a January 1, 2020 beginning balance sheet entry to retained earnings (after income tax). 

Recently Adopted Standards 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“Topic 842”). Topic 842 and 

subsequently issued amendments require certain leases with durations longer than 12 months to be recognized on the 

balance sheet. The Company adopted Topic 842 effective January 1, 2019 and elected the package of transition practical 

expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company’s 

contracts are or contain leases, (2) lease classification and (3) initial direct costs. In July 2018, the FASB issued ASU No. 

2018-11, “Targeted Improvements - Leases (Topic 842).” This update provides an optional transition method that allows 

entities to elect to apply the standard using the modified retrospective approach at its effective date, versus recasting the 

prior years presented. If this adoption method is elected, an entity would recognize a cumulative-effect adjustment to the 
53 

opening balance of retained earnings in the year of adoption. The Company elected this adoption method and recognized 

a cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019. 

 

Additionally, the Company’s adoption of Topic 842 did not have a significant impact on the recognition, 

measurement or presentation of lease revenue and lease expenses within the condensed consolidated statements of 

operations and comprehensive income or the condensed consolidated statements of cash flows. The Company’s adoption 

of Topic 842 did not have a material impact on the timing or amount of the Company’s lease revenue as a lessor. The 

Company’s prepaid aircraft rents, accrued aircraft rents and deferred rent credits that were separately stated in the 

Company’s December 31, 2018 balance sheet have been classified as a component of the Company’s right-of-use assets 

effective January 1, 2019. The consolidated financial statements for 2019 are presented under the new standard, while 

comparative years presented are not adjusted and continue to be reported in accordance with the Company’s historical 

accounting policy. 

See Note 6, "Leases" for more information. 

(2) Segment Reporting 

Generally accepted accounting principles require disclosures related to components of a company for which 

separate financial information is available to, and regularly evaluated by, the Company’s chief operating decision maker 

when deciding how to allocate resources and in assessing performance. 

Prior to the Company’s sale of ExpressJet on January 22, 2019, the Company’s three reporting segments 

consisted of the operations of SkyWest Airlines, ExpressJet and SkyWest Leasing activities. The segment information 

presented for ExpressJet reflects the period of time prior to the sale, when ExpressJet was operating as a subsidiary of the 

Company. The Company concluded that the sale of ExpressJet did not meet the criteria for a discontinued operation. 

Following the sale of ExpressJet, the Company has two reportable segments: SkyWest Airlines and SkyWest Leasing. 

 

The Company’s chief operating decision maker analyzes the profitability of operating new aircraft financed 

through the issuance of debt, including the Company’s E175 fleet, separately from the profitability of the Company’s 

capital deployed for ownership and financing of such aircraft. The SkyWest Airlines segment includes revenue earned 

under the applicable fixed-fee contracts attributed to operating such aircraft and the respective operating costs. The 

SkyWest Leasing segment includes applicable revenue earned under the applicable fixed-fee contracts attributed to the 

ownership of new aircraft acquired through the issuance of debt and the respective depreciation and interest expense of 

such aircraft. The SkyWest Leasing segment also includes the activity of leasing regional jet aircraft and spare engines to 

third parties. The SkyWest Leasing segment’s total assets and capital expenditures include new aircraft acquired through 

the issuance of debt and assets leased to third parties. 

The following represents the Company’s segment data for the years ended December 31, 2019, 2018 and 2017 

(in thousands). 

 Year Ended December 31, 2019 

SkyWest 

 Airlines ExpressJet SkyWest Leasing Consolidated 

Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 2,478,681 $ 24,050 $ 469,232 $ 2,971,963 

Operating expense . . . . . . . . . . . . . . . . . . . . . . . . 2,214,632 28,690 216,383 2,459,705 

Depreciation and amortization expense . . . . . . . 168,246 971 198,881 368,098 

Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,508 3,361 — 21,869 

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 13,525 — 114,230 127,755 

Segment profit (loss) (1) . . . . . . . . . . . . . . . . . . . 250,524 (4,640) 138,619 384,503 

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,728,964 — 3,928,165 6,657,129 

Capital expenditures (including non-cash) . . . . 270,191 — 576,279 846,470 
54 

 

 Year Ended December 31, 2018 

 SkyWest 

 Airlines ExpressJet SkyWest Leasing Consolidated 

Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 2,346,251 $ 564,202 $ 311,226 $ 3,221,679 

Operating expense . . . . . . . . . . . . . . . . . . . . . . . . 2,022,560 577,608 147,231 2,747,399 

Depreciation and amortization expense . . . . . . . 155,511 37,290 141,788 334,589 

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 17,021 2,340 101,048 120,409 

Segment profit (loss) (1) . . . . . . . . . . . . . . . . . . . 306,670 (15,746) 62,947 353,871 

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,531,707 279,303 3,502,202 6,313,212 

Capital expenditures (including non-cash) . . . . 149,731 10,137 996,408 1,156,276 

 

 Year Ended December 31, 2017 

 SkyWest 

 Airlines ExpressJet SkyWest Leasing Consolidated 

Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 2,092,368 $ 790,282 $ 239,942 $ 3,122,592 

Operating expense . . . . . . . . . . . . . . . . . . . . . . . . 1,807,540 818,683 108,170 2,734,393 

Depreciation and amortization expense . . . . . . . 134,563 51,982 106,223 292,768 

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 21,544 4,127 79,254 104,925 

Segment profit (loss) (1) . . . . . . . . . . . . . . . . . . . 263,284 (32,528) 52,518 283,274 

Identifiable intangible assets, other than 

goodwill . . . . . . . . . . . ................... — 4,896 — 4,896 

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,245,051 599,122 2,630,227 5,474,400 

Capital expenditures (including non-cash) . . . . 124,955 14,278 550,165 689,398 

(1) Segment profit is operating income less interest expense 

(3) Long-term Debt 

Long-term debt consisted of the following as of December 31, 2019 and 2018 (in thousands): 

 

 December 31, December 31, 

 2019 2018 

Notes payable to banks, due in semi-annual installments, variable 

interest based on LIBOR, or with an interest rate of 4.00% through 

2019, secured by aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 6,429 

Notes payable to a financing company, due in semi-annual 

installments, with a fixed interest rate of 3.25% through 2021, 

secured by aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,412 36,324 

Notes payable to banks, due in semi-annual installments plus interest 

at 6.10% to 6.51% through 2021, secured by aircraft . . . . . . . . . . . . . . . 22,557 41,592 

Notes payable to banks, due in monthly installments, plus interest at 

1.95% to 6.86% through 2029, secured by aircraft . . . . . . . . . . . . . . . . . 438,878 476,369 

Notes payable to banks, due in quarterly installments, plus interest at 

3.39% to 5.08% through 2031, secured by aircraft . . . . . . . . . . . . . . . . . 2,537,676 2,621,416 

Notes payable to banks due in monthly installments, interest at 3.30% 

through 2019, secured by spare engines . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,308 

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,017,523 $ 3,185,438 

Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (367,954) (354,072) 

Less long-term portion of unamortized debt issue cost, net . . . . . . . . . . . (20,580) (21,598) 

Long-term debt, net of current maturities and debt issue costs . . . . . . . . . $ 2,628,989 $ 2,809,768 

 

Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,954 354,072 

Less current portion of unamortized debt issue cost, net . . . . . . . . . . . . . . (3,828) (3,866) 

Current portion of long-term debt, net of debt issue costs . . . . . . . . . . . . . $ 364,126 $ 350,206 
55 

During the year ended December 31, 2019, the Company took delivery of ten E175 aircraft that the Company 

financed through $200.0 million of long-term debt. The debt associated with the ten E175 aircraft has a 12-year term, is 

due in quarterly installments with fixed annual interest rates ranging from 3.4% to 4.1% and is secured by the E175 

aircraft. Additionally, the Company purchased two previously leased aircraft during the first quarter of 2019, for which 

the Company assumed $14.5 million of long-term debt. The debt associated with the two previously leased aircraft has a 

term of 18 months with monthly interest only payments with a fixed annual interest rate of 2.0% and is secured by the 

previously leased aircraft. 

As of December 31, 2019 and 2018, the Company had $3.0 billion and $3.2 billion, respectively, of long-term 

debt obligations primarily related to the acquisition of aircraft and certain spare engines. The average effective interest 

rate on the debt related to those long-term debt obligations at December 31, 2019 and 2018, was approximately 4.2%. 

During the year ended December 31, 2019, the Company used $30.1 million in cash to extinguish $30.1 million 

in debt early. During the year ended December 31, 2018, the Company used $43.5 million in cash to extinguish $43.5 

million in debt early. These payments did not result in a pre-tax gain or loss in the consolidated statements of 

comprehensive income. 

The aggregate amounts of principal maturities of long-term debt as of December 31, 2019 were as follows (in 

thousands): 

 

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 367,954 

2021 . . . . . .............................................. 352,005 

2022 . . . . . .............................................. 365,907 

2023 . . . . . .............................................. 374,906 

2024 . . . . . .............................................. 327,630 

Thereafter ............................................... 1,229,121 

 $ 3,017,523 

As of December 31, 2019 and 2018, SkyWest Airlines had a $75 million line of credit. The line of credit 

includes minimum liquidity and profitability covenants and is secured by certain assets. As of December 31, 2019, the 

Company was in compliance with the line of credit covenants. As of December 31, 2019 and 2018, SkyWest Airlines 

had no amount outstanding under the facility. However, at December 31, 2019 and 2018 the Company had $8.8 million 

and $9.7 million, respectively, in letters of credit issued under the facility which reduced the amount available under the 

facility to $66.2 million and $65.3 million, respectively. The facility expires on September 1, 2021 and has a variable 

interest rate of LIBOR plus 2.5% at December 31, 2019. 

As of December 31, 2019 and 2018, the Company had $61.7 million and $78.7 million, respectively, in letters 

of credit and surety bonds outstanding with various banks and surety institutions in addition to the letters of credit 

outstanding under the line of credit. 
56 

(4) Income Taxes 

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

 

 Year ended December 31, 

 2019 2018 2017 

Current tax provision (benefit): 

Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,395) $ (21,598) $ 5,853 

State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891 1,465 180 

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,575 — 

 (3,504) (18,558) 6,033 

Deferred tax provision (benefit): 

Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,655 92,250 (166,890) 

State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,055 12,250 20,133 

 109,710 104,500 (146,757) 

Provision (benefit) for income taxes . . . . . . $ 106,206 $ 85,942 $ (140,724) 

The following is a reconciliation between a federal income tax rate of 21% in 2019 and 2018 and 35% for 2017 

of income before income taxes and the effective tax rate which is derived by dividing the provision (benefit) for income 

taxes by the income before the provision for income taxes (in thousands): 

 

 Year ended December 31, 

2019 2018 2017 

Computed provision for income taxes at the statutory rate . . $ 93,724 $ 76,926 $ 100,864 

Increase (decrease) in income taxes resulting from: 

State income tax provision, net of federal income tax 

benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,645 12,711 7,778 

Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,934 1,956 3,230 

Valuation allowance changes affecting the provision for 

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (517) (1,187) 505 

Foreign income taxes, net of federal & state benefit ..... — 1,192 —

Excess tax benefits from share-based compensation . . . . . (3,525) (4,548) (5,377)

Revaluation of net deferred taxes for the Tax Cuts and 

Jobs Act of 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (246,845)

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,055) (1,108) (879)

Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . $ 106,206 $ 85,942 $ (140,724)

For the year ended December 31, 2019, the Company released $0.5 million of valuation allowance against 

certain deferred tax assets primarily associated with ExpressJet state net operating losses. For the year ended December 

31, 2018, the Company released $1.2 million valuation allowance, respectively against certain deferred tax assets 

primarily associated with ExpressJet state net operating losses with a limited carry forward period and Company capital 

losses with a limited carry forward period. For the year ended December 31, 2017, the Company recorded $0.5 million 

of valuation allowance against certain deferred tax assets primarily associated with ExpressJet state net operating losses. 

The decrease in the valuation allowance for 2019 was primarily based on changes in the Company's income tax 

projections which reduced the amount of deferred tax assets that are anticipated to expire before the deferred tax assets 

may be utilized. 

The Company recorded a $3.5 million, $4.5 million and $5.4 million benefit from share-based compensation in 

2019, 2018 and 2017, respectively, relating to ASU 2016-09 which, requires excess tax benefits and deficiencies to be 

recognized in the income tax provision during the period stock options are exercised and when stock awards vest. 
57 

The significant components of the Company’s net deferred tax assets and liabilities as of December 31, 2019 

and 2018 are as follows (in thousands): 

 

 As of December 31, 

2019 2018 

Deferred tax assets: 

Accrued benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,848 $ 32,462 

Net operating loss carryforward . . . . . . . . . . . . . . . . . 358,685 344,375 

AMT credit carryforward . . . . . . . . . . . . . . . . . . . . . . 4,397 15,744 

Aircraft credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,114 35,924 

Accrued reserves and other . . . . . . . . . . . . . . . . . . . . . 17,225 18,710 

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . 410,269 447,215 

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (892) (9,455) 

Deferred tax liabilities: 

Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . (1,032,957) (955,919) 

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . (1,032,957) (955,919) 

Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . $ (623,580) $ (518,159) 

The Company’s deferred tax liabilities were primarily generated through accelerated depreciation, combined 

with shorter depreciable tax lives, allowed under the IRS tax code for purchased aircraft and support equipment 

compared to the Company’s depreciation policy under GAAP for such assets using the straight-line method (see note 1 

Nature of Operations and Summary of Significant Accounting Policies). 

The Company's valuation allowance is related to certain deferred tax assets with a limited carry forward period 

where the Company does not anticipate utilizing these deferred tax assets prior to the lapse of the carry forward period. 

The Company's AMT credit carryforward includes credits from prior acquisitions. 

At December 31, 2019 and 2018, the Company had federal net operating losses of approximately $1,581.1 

million and $1,504.9 million and state net operating losses of approximately $766.4 million and $562.0 million, 

respectively. The estimated effective tax rate applicable to the federal and state net operating losses at December 31, 

2019 was 21.0% and 3.36%, respectively. The Company anticipated that the federal and state net operating losses will 

start to expire in 2030 and 2020, respectively. The Company has recorded a valuation allowance for state net operating 

losses the Company anticipates will expire before the benefit will be realized due to the limited carry forward periods. 

As of December 31, 2019 and 2018, the Company also had an alternative minimum tax credit of approximately 

$4.4 million and $8.8 million, respectively, which does not expire. Under the Tax Cuts and Jobs Act of 2017, the 

Company will realize the alternative minimum tax credit either by offsetting regular tax due or as a refundable credit 

over the next two years. The Company has no ongoing federal or state examinations. Federal tax years 2016, 2017 and 

2018 are open to examination. 

Under ASC Topic 740, the accounting guidance related to uncertainty in tax positions requires that the impact 

of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on 

audit, based on the technical merits of the position. A reconciliation of the beginning and ending amount of unrecognized 

tax benefits for the year ended December 31, 2019 and 2018 is as follows (in thousands): 

 

As of December 31,

 

 2019 2018 

Unrecognized tax benefits at the beginning of 

year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,553 $ 2,223 

Gross increases - current year tax positions . ... — 13,899 

Gross increases - prior year tax positions . . . ... 67 — 

Gross decreases - prior year tax positions . . . ... — (1,569) 

Unrecognized tax benefits at end of year . . . . . . $ 14,620 $ 14,553 

Interest and penalties in year-end balance . . . . . . $ 67 $ — 
58 

For the year ending December 31, 2019, the Company has recorded $67,000 of interest expense related to 

uncertain tax positions not offset by the Company's tax attributes. 

(5) Commitments and Contingencies 

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. The Company uses judgment and estimates in determining the ultimate aggregate 

liabilities for claims incurred in its workers’ compensation liability. The Company also used significant assumptions in 

determining the workers compensation liability such as an estimation of loss payment and loss reporting development 

patterns. At December 31, 2019 and 2018, the Company’s accrued workers’ compensation liability totaled $23.9 million 

and $42.0 million, respectively. Actual results could differ from these estimates. 

Legal Matters 

The Company is subject to certain legal actions which it considers routine to its business activities. As of 

December 31, 2019, management believed, after consultation with legal counsel, that the ultimate outcome of such legal 

matters was not likely to have a material adverse effect on the Company’s financial position, liquidity or results of 

operations. 

Concentration Risk and Significant Customers 

The Company requires no collateral from its major airline partners or customers, but monitors the financial 

condition of its major airline partners. Under the majority of the Company’s code-share agreements, the Company 

receives weekly payments from its major code-share partners that approximate a significant percentage of the 

compensation earned for such period. Additionally, the Company provides certain customer service functions at 

multiple airports for various airlines and 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 $18,000 

and $158,000 as of December 31, 2019 and 2018, respectively. For the years ended December 31, 2019, 2018 and 2017, 

the Company’s contractual relationships with Delta and United combined accounted for approximately 77.6%, 81.4% 

and 82.9%, respectively of the Company’s total revenues. 

Employees Under Collective Bargaining Agreements 

As of December 31, 2019, the Company had approximately 13,700 full-time equivalent employees. Although 

no SkyWest Airlines employees are represented by a national union, certain SkyWest Airline employees are covered 

under a stable and binding collective bargaining agreement that is administered by employee representatives. 

(6) Leases 

Effective January 1, 2019, the Company adopted Topic 842. The Company leases property and equipment 

under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating 

lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company 

used its incremental borrowing rate to discount the lease payments based on information available at lease 

commencement. 

Aircraft 

During the first quarter of 2019, the Company acquired 52 CRJ aircraft under an early lease buyout arrangement 

with the lessor for $111.7 million. During the third quarter of 2019, the Company acquired four CRJ900 aircraft under an 

 
59 

early lease buyout arrangement with the lessor for $30.0 million. As of December 31, 2019, the Company had 94 

aircraft under operating leases with remaining terms ranging from less than one year to ten years. 

With the adoption of Topic 842, the Company evaluated whether leased aircraft asset groups within the 

Company’s fleet were impaired. Under the transition guidance for Topic 842, a company is permitted to recognize a 

previously unrecognized impairment related to a right-of-use asset in the period prior to the adoption date of Topic 842 if 

the event giving rise to the impairment occurred before the adoption date. In 2016, the Company recorded an impairment 

on certain of its long-lived assets, which included the Company’s CRJ200 aircraft. In 2016, the market lease rate was 

less than the contractual lease rate on the Company’s CRJ200 leased aircraft. The Company recorded an impairment of 

$13.1 million (net of tax) as an adjustment to the Company’s January 1, 2019 retained earnings related to the previously 

unrecognized impairment of these leased CRJ200s. 

Airport facilities 

The Company has operating leases for facility space including airport terminals, office space, cargo warehouses 

and maintenance facilities. The Company generally leases this space from government agencies that control the use of 

the airport. The remaining lease terms for facility space vary from one month to 37 years. The Company’s operating 

leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are

excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance. 

Leases 

As of December 31, 2019, the Company’s right-of-use assets were $336.0 million, the Company’s current 

maturities of operating lease liabilities were $94.8 million, and the Company’s noncurrent lease liabilities were $259.2 

million. During 2019, the Company paid $75.4 million in operating leases reflected as a reduction from operating cash 

flows. 

The table below presents lease related terms and discount rates as of December 31, 2019. 

 

 

As of December 31, 2019

Weighted-average remaining lease term 

 Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.84 years 

Weighted-average discount rate 

 Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4% 

The Company’s lease costs for 2019 and 2018 included the following components (in thousands): 

 

For the year ended December 31, 

 2019 2018 

Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 104,011 $ 185,337 

Variable and short-term lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,232 5,143 

Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,436) —

Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 107,807 $ 190,480 
60 

As of December 31, 2019, the Company leased aircraft, airport facilities, office space, and other property and 

equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to 

which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased 

property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed 

or replaced by other leases, or the property may be purchased rather than leased. The following table summarizes future 

minimum rental payments primarily related to leased aircraft required under operating leases that had initial or remaining 

non-cancelable lease terms as of December 31, 2019 (in thousands): 

 

2020 . . . . . ........................................................ $ 94,806 

2021 . . . . . ........................................................ 84,285 

2022 . . . . . ........................................................ 73,960 

2023 . . . . . ........................................................ 68,581 

2024 . . . . . ........................................................ 27,282 

Thereafter ......................................................... 94,746 

$ 443,660 

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 (“Leveraged Lease Agreements”). The Company is not a 

beneficiary of such trusts and the Company does not have an ownership interest in such trusts. The Company’s 

leveraged leases do not require the Company to guarantee a portion of the residual values of the leased assets held by the 

trust and the Company’s leveraged lease agreements do not contain a fixed purchase option or have any other terms that 

represent variable interests in such trusts. As a result, the Company has not consolidated any of these trusts. 

Total rental expense for non-cancelable aircraft operating leases was approximately $72.0 million, $154.9 

million and $215.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. The minimum rental 

expense for airport station rents was approximately $23.1 million, $19.6 million and $30.3 million for the years ended 

December 31, 2019, 2018 and 2017, respectively. 

Disclosures related to periods prior to the adoption of the New Lease Standard 

The following table summarizes future minimum rental payments required under operating leases that had 

non-cancelable lease terms in excess of one year as of December 31, 2018 (in thousands): 

 

2019 . . . . . ...................................................... $ 87,256 

2020 . . . . . ...................................................... 101,741 

2021 . . . . . ...................................................... 90,787 

2022 . . . . . ...................................................... 72,593 

2023 . . . . . ...................................................... 65,749 

Thereafter ....................................................... 59,820 

$ 477,946 

(7) Fair Value Measurements 

The Company holds certain assets that are required to be measured at fair value in accordance with 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. 

 
61 

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, 2019, 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, 2019 

 Total Level 1 Level 2 Level 3 

Marketable Securities 

Bonds and bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 267,243 $ — $ 267,243 $ — 

Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,723 — 165,723 — 

 $ 432,966 $ — $ 432,966 $ — 

Cash, Cash Equivalents and Restricted Cash . . . . . . . . . . . . . . . . . 87,206 87,206 — — 

Total Assets Measured at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . $ 520,172 $ 87,206 $ 432,966 $ — 

 

Fair Value Measurements as of December 31, 2018 

Total Level 1 Level 2 Level 3 

Marketable Securities 

Bonds and bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 229,783 $ — $ 229,783 $ — 

Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,162 — 131,162 — 

 $ 360,945 $ — $ 360,945 $ — 

Cash, Cash Equivalents and Restricted Cash . . . . . . . . . . . . . . . . . 328,384 328,384 — — 

Total Assets Measured at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . $ 689,329 $ 328,384 $ 360,945 $ — 

The Company’s “Marketable Securities” classified as Level 2 primarily utilize broker quotes in a non-active 

market for valuation of these securities. 

No significant transfers between Level 1, Level 2 and Level 3 occurred during the year ended December 31, 

2019. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end 

of the reporting period. 

(8) Special Items 

The following table summarizes the components of the Company's special items, for the year ended 

December 31, 2019, 2018 and 2017 (in thousands): 

 

 Year ended December 31, 

 2019 2018 2017 

Special items: 

Parts credit

1

 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,508 $ — $ —

Employee severance 2

 . . . . . . . . . . . . . . . . . 3,361 — —

Total special items . . . . . . . . . . . . . . . . . . . . . . . $ 21,869 $ — $ —

(1) The Company terminated an agreement with an aircraft manufacturer that obligated the Company to future aircraft 

lease return conditions on aircraft the Company leased. In conjunction with the terminated agreement, the aircraft 

manufacturer released the Company from the future aircraft lease return obligations and the Company agreed to 

terminate aircraft part credits previously issued by the manufacturer to the Company. As a result of the terminated 
62 

agreement, the Company recorded a non-cash expense of $18.5 million (pre-tax) during 2019 to write-off the 

terminated aircraft part credits, which was reflected as a special items operating expense in the consolidated 

statement of comprehensive income. These special items are reflected in the SkyWest Airlines operating expenses 

under Note 2 Segment Reporting. 

(2) During 2019, the Company incurred $3.4 million of employee severance related costs associated with the sale of 

ExpressJet that are also reflected in special items. These special items are reflected in the ExpressJet operating 

expenses under Note 2 Segment Reporting. 

(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 

On May 7, 2019, the Company’s shareholders approved the adoption of the SkyWest, Inc. 2019 Long-Term 

Incentive Plan, which provides for the issuance of up to 4,500,000 shares of common stock to the Company’s directors, 

employees, consultants and advisors (the “2019 Incentive Plan”). The 2019 Incentive Plan provides for awards in the 

form of options to acquire shares of common stock, stock appreciation rights, restricted stock grants, restricted stock 

units and performance awards. The 2019 Incentive Plan is administered by the Compensation Committee of the 

Company’s Board of Directors (the “Compensation Committee”). As of December 31, 2019, the 2019 Incentive Plan had 

4.4 million shares remaining available for future issuance. 

Stock Options 

The fair value of stock options awarded under the Company’s stock option plans 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 

years ended December 31, 2019, 2018 and 2017, the Company did not grant any options to purchase shares of common 

stock. 

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 of grant and no stock option shall be 

exercisable after seven years from the date of grant. The following table summarizes the stock option activity for all of 

the Company’s plans for the years ended December 31, 2019, 2018 and 2017. 

 
63 

 2019 2018 2017 

 Weighted 

 Weighted Average Aggregate Weighted Weighted 

 Average Remaining Intrinsic Average Average 

 Number of Exercise Contractual Value Number of Exercise Number of Exercise 

 Options Price Term ($000) Options Price Options Price 

Outstanding at beginning of 

year . . . . . . . . . . . . . . . . . . . . 300,580 $ 13.70 3.0 years $ 9,249.4 458,103 $ 13.73 819,981 $ 13.58 

Granted ................... — — — — — —

Exercised . . . . . . . . . . . . . . . . . (232,514) 13.36 (157,523) 13.80 (356,209) 13.36 

Cancelled . . . . . . . . . . . . . . . . . (7,835) 15.86 — — (5,669) 14.33 

Outstanding at end of year . . . 60,231 14.74 3.1 years $ 3,005.1 300,580 13.70 458,103 13.73 

Exercisable at December 31, 

2019 . . . . . . . . . . . . . . . . . . . . 60,231 14.74 3.1 years $ 3,005.1 

Exercisable at December 31, 

2018 . . . . . . . . . . . . . . . . . . . . 235,672 13.36 2.7 years $ 7,330.7 

The total intrinsic value of options to acquire shares of the Company’s common stock that were exercised 

during the years ended December 31, 2019, 2018 and 2017 was $10.5 million, $7.1 million and $9.94 million, 

respectively. 

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

2019: 

 

 Weighted-Average 

 Number of Grant-Date 

 Shares Fair Value 

Non-vested shares at beginning of year . . . . . . . . . . . . . . . 64,908 $ 5.32 

Granted ......................................... — — 

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,073) 5.27 

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,835) 5.66 

Non-vested shares at end of year .................... — $ — 

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

2019: 

 

 

 Options Outstanding Options Exercisable 

 Weighted Average 

 Number Remaining Weighted Average Number Weighted Average 

Range of Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price 

$13.00 to $13.99 2,034 2.1 years $ 13.51 2,034 $ 13.51 

$14.00 to $15.00 58,197 3.1 years 14.78 58,197 14.78 

$13.00 to $15.00 60,231 3.1 years $ 14.74 60,231 $ 14.74 

Restricted Stock Units (“RSUs”) 

During the year ended December 31, 2019, the Company granted 104,120 restricted stock units to certain of the 

Company’s employees under the 2019 Incentive Plan. The restricted stock units granted during the year ended December 

31, 2019 have a three-year cliff-vesting period, during which the recipient must remain employed with the Company or 

its subsidiaries. The weighted average fair value of the restricted stock units at the date of grants made during the year 

ended December 31, 2019 was $48.65 per share. 
64 

The following table summarizes the activity of restricted stock units granted to certain Company employees for 

the years ended December 31, 2019, 2018 and 2017: 

 Weighted-Average 

 Grant-Date Fair 

Number of RSUs Value 

Non-vested RSUs outstanding at December 31, 2016 . 926,931 $ 13.65 

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,137 35.81 

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (230,903) 12.01 

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,575) 15.78 

Non-vested RSUs outstanding at December 31, 2017 . 815,590 $ 18.35 

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,044 53.40 

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (330,580) 13.57 

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,273) 27.77 

Non-vested RSUs outstanding at December 31, 2018 . 575,781 $ 27.71 

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,120 48.65 

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251,853) 14.79 

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143,362) 30.85 

Non-vested RSUs outstanding at December 31, 2019 . 284,686 $ 45.21 

Performance Stock Units (“PSUs”) 

During the year ended December 31, 2019, the Compensation Committee granted performance share units, 

which are performance based restricted stock units, to certain Company employees with three-year performance-based 

financial metrics that the Company must meet before those awards may be earned and the performance period is 

measured for the three years ending December 31, 2021. The Company’s compensation expense for performance share 

units is based upon the projected number of performance share units estimated to be awarded at the conclusion of the 

performance period. During 2019, the Compensation Committee awarded 67,853 additional shares of stock related to the 

performance share grant in 2016 based on the Company’s performance for the three years ended December 31, 2018 

measured against the pre-established targets for the same period. The Compensation Committee will determine the 

achievement of performance results and corresponding vesting of performance shares for each year’s grant in 2017, 2018 

and 2019 following the conclusion of the respective performance period. At the end of each performance period, the 

number of shares awarded can range from 0% to 200% of the original granted amount for performance share units 

granted in 2019, 2018 and 2017. 
65 

The following table summarizes the activity of performance share units granted at target as of December 31, 

2019. 

 

 Weighted-Average 

 Grant-Date 

Number of PSUs Fair Value 

Non-vested PSUs outstanding at December 31, 2016 . 363,993 $ 14.23 

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,315 35.81 

Vested ....................................... — —

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,732) 15.00 

Non-vested PSUs outstanding at December 31, 2017 . 468,576 $ 19.70 

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,264 53.41 

Additional PSUs awarded from the 2015 grant . . . . . . 92,335 13.62 

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (277,029) 13.62 

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,229) 30.09 

Non-vested PSUs outstanding at December 31, 2018 . 370,917 $ 30.84 

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,864 48.81 

Additional PSUs awarded from the 2016 grant . . . . . . 67,853 14.80 

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203,582) 14.80 

Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,481) 34.70 

Non-vested PSUs outstanding at December 31, 2019 . 233,571 $ 45.44 

During the years ended December 31, 2019, 2018 and 2017 the Company granted fully-vested shares of 

common stock to the Company’s directors in the amounts of 18,576, 15,165 and 22,617 shares, respectively, with a 

weighted average grant-date fair value of $48.45, $53.40, and $35.81 respectively. 

During the year ended December 31, 2019, 2018 and 2017, the Company recorded equity-based compensation 

expense of $10.3 million, $13.1 million and $10.6 million, respectively. Additionally, the Company incurred $7.9 

million of employee severance related costs associated with the sale of ExpressJet, partially offset by a forfeiture credit 

of $4.5 million, primarily resulting from stock-based compensation awards that terminated upon the sale of ExpressJet 

during 2019. 

As of December 31, 2019, the Company had $10.0 million of total unrecognized compensation cost related to 

non-vested restricted stock grants and non-vested performance stock units. 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 1.7 years. 

Taxes 

The Company’s treatment of stock option grants of non-qualified options, restricted stock units and 

performance shares results in the creation of a deferred tax asset, which is a temporary difference, until the time that the 

option is exercised or the restrictions lapse. 

(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. Generally, the Company matches 100% of such 

contributions up to levels ranging from 2% to 12% of compensation, based on position and years of service. 

Additionally, a discretionary contribution may be made by the Company. The Company’s combined contributions to the 

SkyWest Plan were $40.7 million, $35.6 million and $26.1 million for the years ended December 31, 2019, 2018 and 

2017, respectively. 
66 

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 in the 2009 Stock Purchase Plan, 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 five percent discount, through payroll deductions. Employees can contribute up to 

15% of their base pay, not to exceed $25,000 each calendar year, for the purchase of shares. Shares are purchased semiannually at a five percent discount based on the end of the period price. Employees can terminate their participation in 

the 2009 Stock Purchase Plan at any time upon written notice. 

The following table summarizes purchases made under the 2009 Employee Stock Purchase Plans during the 

years ended December 31, 2019, 2018 and 2017: 

 

Year ended December 31, 

2019 2018 2017 

Number of shares purchased . . . . . . . . . . . . 65,148 60,950 88,362 

Average price of shares purchased . . . . . . . . $ 48.58 $ 49.85 $ 33.96 

The 2009 Stock Purchase Plan is a non-compensatory plan under the accounting guidance. Therefore, no 

compensation expense was recorded for the years ended December 31, 2019, 2018 and 2017. 

(11) Stock Repurchase 

The Company’s Board of Directors has adopted a stock repurchase program which authorizes the Company to 

repurchase shares of the Company’s common stock in the public market or in private transactions, from time to time, at 

prevailing prices. The Company’s stock repurchase program authorizes the repurchase of up to $250.0 million of the 

Company’s common stock commencing on February 5, 2019, of which $159.6 million remained available at December 

31, 2019. 

During the years ended December 31, 2019, 2018 and 2017, the Company repurchased 1.7 million, 1.0 million 

and 0.5 million shares of common stock (including shares purchased from the Company’s Chairman of the Board see 

Note 12 Related-Party Transactions for more details) for approximately $94.6 million, $54.4 million and $20.0 million, 

respectively at a weighted average price per share of $56.86, $56.25 and $41.36, respectively. Additionally, during the 

year ended December 31, 2019, 2018 and 2017, the Company paid $9.3 million, $13.6 million and $5.1 million, 

respectively, for a net settlement of the income tax obligation on employee equity awards that vested during the 

applicable periods. 

(12) Related-Party Transactions 

On June 13, 2019, the Company repurchased 268,025 shares of its common stock from Jerry Atkin, Chairman 

of the Board, at a price of $60.24 per share, representing the volume-weighted average price of the Company’s common 

stock over the five trading days immediately prior to such repurchase. The transaction was part of Mr. Atkin’s personal 

long-term strategy for asset diversification, tax and estate planning and to fund philanthropic and charitable efforts. The 

transaction was approved by the Company’s Audit Committee and was effected pursuant to the Company’s stock 

repurchase plan that commenced on February 5, 2019. 

During the year ended December 31, 2019, the Company purchased $93,540 of spare aircraft parts from an 

entity affiliated with a director of the Company. 
67 

(13) Gain on Sale of ExpressJet 

On January 22, 2019, the Company completed the sale of its former wholly owned subsidiary ExpressJet. The 

Company recorded a gain of $46.5 million (pre-tax) from the sale of ExpressJet. The closing of the transaction was 

completed in two parts, through an asset sale and stock sale, as further described below. 

Asset Sale

On January 11, 2019, pursuant to the terms and conditions of the Asset Purchase Agreement, dated as of 

December 17, 2018, by and among the Company, ExpressJet and United, United acquired certain specified assets and 

liabilities of ExpressJet, including, among other things, aircraft engines, auxiliary power units, rotable spare parts, 

ground support equipment and flight training equipment for $60.8 million in cash, subject to certain purchase price 

adjustments (the “Asset Sale”). Certain assets and liabilities of ExpressJet were expressly excluded from the Asset Sale. 

Stock Sale

Additionally, on January 22, 2019, pursuant to the terms and conditions of the Stock Purchase Agreement, dated 

as of December 17, 2018, by and among the Company and ManaAir, LLC, a company in which United owns a minority 

interest (the “Buyer”), the Buyer acquired all of the outstanding shares of capital stock of ExpressJet from the Company 

for $18.8 million in cash, subject to certain purchase price adjustments (the “Stock Sale,”). To facilitate payment of the 

purchase price for the Stock Sale, at the closing of the Stock Sale, the Company loaned $26 million to Kair Enterprises, 

Inc. (the “Borrower”), the majority owner of the Buyer. Such loan accrues interest at the rate of 6.85% per annum, 

matures on the last business day of the last month immediately preceding the two-year anniversary of the closing of the 

Stock Sale and is secured by, among other things, the Borrower’s ownership interests in the Buyer. The Company also 

leased 16 CRJ200 aircraft to ExpressJet for a portion of the 2019 year. The lease of these 16 CRJ200 aircraft was 

terminated as of December 31, 2019. 

(14) Investment in Other Companies 

During 2019, the Company created a joint venture with Regional One, Inc. (“Regional One”) by investing $22.3 

million for a 75% ownership interest in Aero Engines, LLC. (“Aero Engines”). The primary purpose of Aero Engines is 

to lease engines to third parties. Aero Engines requires unanimous approval from the Company and Regional One for its 

engine purchases, dispositions, lease agreements with third parties and all other material transactions. The Company 

determined Aero Engines is a variable interest entity as the Company has a 75% ownership interest in Aero Engines and 

all material decisions require unanimous approval from the Company and Regional One, resulting in disproportionate 

ownership rights relative to voting rights. As unanimous approval is required for all Aero Engines’ material activities. 

Aero Engines has no primary beneficiary. The Company accounts for its investment in Aero Engines under the equity 

method. The Company’s exposure in its investment in Aero Engines primarily consists of the Company’s portion of 

income or loss from Aero Engines’ engine lease agreements with third parties and the Company’s ownership percentage 

in Aero Engines’ engines book value. The Company purchased 14 spare engines and sold the 14 spare engines to Aero 

Engines at net book value during 2019. Since the initial investment, the Company has invested an additional $1.0 million 

into Aero Engines during 2019. Aero Engines had no debt outstanding as of December 31, 2019. As of December 31, 

2019, the Company’s investment balance in Aero Engines was $23.9 million. The Company’s investment in Aero 

Engines has been recorded in “Other Assets” on the Company’s consolidated balance sheet. The Company’s portion of 

the income generated by Aero Engines for 2019 was $0.6 million. 
68 

(15) Quarterly Financial Data (Unaudited) 

Unaudited summarized financial data by quarter for 2019 and 2018 is as follows (in thousands, except per share 

data): 

 

Year ended December 31, 2019 

First Second Third Fourth 

Quarter Quarter Quarter Quarter Year 

Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 723,694 $ 744,383 $ 760,295 $ 743,591 $ 2,971,963 

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 96,419 144,093 146,441 125,305 512,258 

Net income (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,181 88,052 91,339 72,527 340,099 

Net income per common share: 

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.71 1.72 1.80 1.44 6.68 

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.69 1.71 1.79 1.43 6.62 

Weighted average common shares: 

Basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,440 51,145 50,746 50,395 50,932 

Diluted: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,098 51,477 51,129 50,796 51,375 

(1) Net income for the first quarter of 2019 included a $46.5 million gain related to the sale of ExpressJet (see Note 13 

Gain on Sale of ExpressJet for more details) and a $21.9 million special charge (see Note 8 Special Items for more 

details). 

 

Year ended December 31, 2018 

First Second Third Fourth 

Quarter Quarter Quarter Quarter Year 

Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 783,400 $ 805,515 $ 829,275 $ 803,489 $ 3,221,679 

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 88,175 126,678 137,925 121,502 474,280 

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,362 75,859 83,046 67,105 280,372 

Net income per common share: 

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.05 1.46 1.60 1.30 5.40 

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.03 1.43 1.57 1.28 5.30 

Weighted average common shares: 

Basic: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,921 52,046 52,039 51,650 51,914 

Diluted: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,033 52,913 52,981 52,556 52,871 (1)
69 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 

FINANCIAL DISCLOSURE 

None. 

ITEM 9A. CONTROLS AND PROCEDURES 

Disclosure Controls and Procedures 

Our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation 

of our disclosure controls and procedures, which have been designed to ensure that information we are required to 

disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported 

accurately and within the time periods specified in the SEC rules and forms. Our management, including our Chief 

Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2019, those controls and procedures 

were effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange 

Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial 

Officer, as appropriate to allow timely decisions regarding required disclosure. 

Changes in Internal Control 

During the most recently completed fiscal quarter, we did not make any changes in our internal control over 

financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over 

financial reporting. 

Management’s Annual Report on Internal Control Over Financial Reporting 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, 

as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial 

reporting is 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. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect 

misstatements. 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 may deteriorate. 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of 

December 31, 2019 using the criteria issued by the Committee of Sponsoring Organizations of the Treadway 

Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that evaluation, management 

believes that our internal control over financial reporting was effective as of December 31, 2019. 

The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by 

Ernst & Young LLP (“Ernst & Young”), the independent registered public accounting firm who also has audited our 

Consolidated Financial Statements included in this Report. Ernst & Young’s report on our internal control over financial 

reporting appears on the following page. 

 
70 

Report of Independent Registered Public Accounting Firm 

To the Stockholders and the Board of Directors of SkyWest, Inc. 

Opinion on Internal Control over Financial Reporting 

We have audited SkyWest, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2019, based on 

criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway 

Commission (2013 framework) (the COSO criteria). In our opinion, SkyWest, Inc. and subsidiaries (the Company) maintained, in all 

material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) 

(PCAOB), the consolidated balance sheets of SkyWest, Inc. and subsidiaries as of December 31, 2019 and 2018, and the related 

consolidated statements of comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended 

December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 and our report dated 

February 18, 2020 expressed an unqualified opinion thereon. 

Basis for Opinion 

The Company’s 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 Management’s Annual 

Report 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 are a public accounting firm registered with the PCAOB and are required to be 

independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations 

of the Securities and Exchange Commission and the PCAOB. 

We conducted our audit in accordance with the standards of the PCAOB. 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. 

Definition and Limitations of Internal Control over Financial Reporting 

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. 

/s/ Ernst & Young LLP 

Salt Lake City, Utah 

February 18, 2020
71 

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 2019 Annual Meeting of Shareholders scheduled for May 5, 2020. We intend to file our definitive 

proxy statement with the SEC not later than 120 days after December 31, 2019, pursuant to Regulation 14A of the 

Exchange Act. 

 Headings in Proxy Statement 

ITEM 10. DIRECTORS, EXECUTIVE 

OFFICERS AND CORPORATE 

GOVERNANCE

“Election of Directors,” “Executive Officers,” “Corporate 

Governance,” “Meetings and Committees of the Board” and 

“Delinquent Section 16(a) Reports” 

ITEM 11. EXECUTIVE 

COMPENSATION

“Corporate Governance,” “Meetings and Committees of the Board,” 

“Compensation Discussion and Analysis,” “Compensation 

Committee Report,” “Executive Compensation,” “Director 

Compensation” and “Director Summary Compensation Table” 

ITEM 12. SECURITY OWNERSHIP OF 

CERTAIN BENEFICIAL 

OWNERS AND 

MANAGEMENT AND 

RELATED STOCKHOLDER 

MATTERS

“Security Ownership of Certain Beneficial Owners” “Securities 

Authorized for Issuance Under Equity Compensation Plans” 

ITEM 13. CERTAIN RELATIONSHIPS 

AND RELATED 

TRANSACTIONS

“Certain Relationships and Related Transactions” 

ITEM 14. PRINCIPAL ACCOUNTANT 

FEES AND SERVICES

“Audit and Finance Committee Disclosure” and “Fees Paid to 

Independent Registered Public Accounting Firm” 

PART IV 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 

(a) Documents Filed: 

1. Financial Statements: Reports of Independent Auditors, Consolidated Balance Sheets as of 

December 31, 2019 and 2018, Consolidated Statements of Comprehensive Income (Loss) for the years 

ended December 31, 2019, 2018 and 2017, Consolidated Statements of Cash Flows for the years ended 

December 31, 2019, 2018 and 2017, Consolidated Statements of Stockholders’ Equity for the years 

ended December 31, 2019, 2018, 2017 and 2016 and Notes to Consolidated Financial Statements. 

2. Financial Statement Schedule. The following consolidated financial statement schedule of our 

company is included in this Item 15. 

• Schedule II—Valuation and qualifying accounts 

All other schedules for which provision is made in the applicable accounting regulations of the 

Securities and Exchange Commission are not required under the related instructions or are not 

applicable, and therefore have been omitted. 
72 

(b) Exhibits 

Number Exhibit 

Incorporated 

by Reference 

3.1 Restated Articles of Incorporation (1) 

3.2 Amended and Restated Bylaws (11) 

4.1 Specimen of Common Stock Certificate (2) 

4.2 Description of Registered Securities Filed herewith 

10.1 Amended and Restated Delta Connection Agreement, dated as of September 8, 2005, 

between SkyWest Airlines, Inc. and Delta Air Lines, Inc.

(3) 

10.2 United Express Agreement dated July 31, 2003, between United Air Lines, Inc., and 

SkyWest Airlines, Inc.

(4) 

10.3 Lease Agreement dated December 1, 1989 between Salt Lake City Corporation and 

SkyWest Airlines, Inc. 

(5) 

10.4 Master Purchase Agreement dated November 7, 2000 between Bombardier, Inc. and 

SkyWest Airlines, Inc.

(6) 

10.5 Supplement to Master Purchase Agreement dated November 7, 2000 between 

Bombardier, Inc. and SkyWest Airlines, Inc.

(4) 

10.6 SkyWest, Inc. 2002 Deferred Compensation Plan, as amended and restated, effective 

January 1, 2008

(5) 

10.7 First Amendment to the Amended and Restated SkyWest, Inc. 2002 Deferred 

Compensation Plan

(5) 

10.8 SkyWest, Inc. 2009 Employee Stock Purchase Plan (5) 

10.9 SkyWest, Inc. 2010 Long-Term Incentive Plan (6) 

10.10 Form of Restricted Stock Unit Award Agreement (16) 

10.11 Form of Performance Share Award Agreement (16) 

10.12 Capacity Purchase Agreement, dated November 12, 2010, by and among ExpressJet 

Airlines, Inc. and Continental Airlines, Inc.

(9) 

10.13 Aircraft Purchase Agreement, dated December 7, 2012, between Mitsubishi Aircraft 

Corporation and SkyWest, Inc.

(10) 

10.14 Letter Agreement dated December 7, 2012, between Mitsubishi Aircraft Corporation 

and SkyWest, Inc.

(10) 

10.15 Purchase Agreement COM0028-13, between Embraer S.A. and SkyWest Inc. dated 

February 15, 2013

(12) 

10.16 Purchase Agreement COM0344-13, between Embraer S.A. and SkyWest Inc. dated 

June 17, 2013

(12) 

10.17 Form of Indemnification Agreement by and between SkyWest, Inc. and each of Jerry 

C. Atkin, W. Steve Albrecht, Henry J. Eyring, Steven F. Udvar-Hazy, James L. 

Welch, Eric J. Woodward and Russell A. Childs, as of August 6, 2013

(12) 

10.18 Form of Indemnification Agreement by and between SkyWest, Inc. and each of 

Ronald J. Mittelstaedt and Keith E. Smith, as of October 1, 2013

(12) 

10.19 Amended and Restated Capacity Purchase Agreement, dated as of November 7, 

2014, by and between ExpressJet Airlines, Inc. and United Airlines*

(13) 

10.20 Indemnification Agreement by and between SkyWest, Inc. and Robert J. Simmons, 

as of March 16, 2015 

(15) 

10.21 Form of Indemnification Agreement by and between SkyWest, Inc. and each of 

Meredith S. Madden and Andrew C. Roberts, as of May 5, 2015 (15) 

10.22 SkyWest, Inc. 2019 Long-Term Incentive Plan (19) 

10.23 Severance and Release Agreement, dated as of February 12, 2019, by and between 

the Registrant and Terry M. Vais (20) 

21.1 Subsidiaries of the Registrant (11) 
73 

Number Exhibit 

Incorporated 

by Reference 

23.1 Consent of Independent Registered Public Accounting Firm Filed herewith 

31.1 Certification of Chief Executive Officer Filed herewith 

31.2 Certification of Chief Financial Officer Filed herewith 

32.1 Certification of Chief Executive Officer Filed herewith 

32.2 Certification of Chief Financial Officer Filed herewith 

101 The following financial statements from the SkyWest Inc. Annual Report on Form 

10-K for the year ended December 31, 2019, formatted in Inline Extensible Business 

Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated 

Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders’ 

Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated 

Financial Statements, tagged as blocks of text and including detailed tags Filed herewith 

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 

101) Filed herewith 

* Certain portions of this exhibit have been omitted pursuant to Rule 24b-2 and are subject to a confidential 

treatment request. 

(1) Incorporated by reference to the exhibits to a Registration Statement on Form S -3 (File No. 333-129831) filed 

on November 18, 2005 

(2) Incorporated by reference to a Registration Statement on Form S- 3 (File No. 333-42508) filed on July 28, 2000 

(3) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on September 13, 2005, as amended 

by Amendment No. 2 on Form 8-K/A filed on February 21, 2006 

(4) Incorporated by reference to exhibits to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 

2003 

(5) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed for the quarter 

ended December 31, 1986 

(6) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on February 13, 

2001 

(7) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 23, 

2009 

(8) Incorporated by reference to Appendix A to Registrant's Definitive Proxy Statement on Schedule 14A (File No. 

000-14719) filed on March 12, 2010 

(9) Incorporated by reference to the exhibits to Registrant’s Current Report on Form 8-K filed on November 18, 

2010 

(10) Incorporated by reference to the exhibits to Registrant’s Current Report on Form 8-K filed on December 13, 

2012, as amended by Amendment No. 1 to Current Report on Form 8-K/A filed on June 25, 2013 

(11) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 24, 

2012 

(12) Incorporated by reference to the exhibits to Registrant’s Quarterly Report on Form 10-Q filed on August 7, 

2013, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed on November 4, 2013 
74 

(13) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 14, 

2014 

(14) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 18, 

2015 

(15) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 26, 

2016 

(16) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 27, 

2017 

(17) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 26, 

2018 

(18) Incorporated by reference to the exhibits to Registrant’s Annual Report on Form 10-K filed on February 21, 

2019 

(19) Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement on Schedule 14A filed 

on March 22, 2019 

(20) Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on February 15, 

2019 

ITEM 16. FORM 10-K SUMMARY 

None. 

 
75 

SKYWEST, INC. AND SUBSIDIARIES 

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS 

For the Years Ended December 31, 2019, 2018 and 2017 

(Dollars in thousands) 

 

 Additions 

Balance at Charged to 

Beginning Costs and Balance at 

Description of Year Expenses Deductions End of Year 

Year ended December 31, 2019: 

Allowance for inventory obsolescence . . . . . . . . $ 22,141 — (6,251) $ 15,890 

Allowance for doubtful accounts receivable . . . 158 — (140) 18 

 $ 22,299 — (6,391) $ 15,908 

Year ended December 31, 2018: 

Allowance for inventory obsolescence . . . . . . . . $ 17,098 5,043 — $ 22,141 

Allowance for doubtful accounts receivable . . . 157 1 — 158 

 $ 17,255 5,044 — $ 22,299 

Year ended December 31, 2017: 

Allowance for inventory obsolescence(1) . . . . . $ 40,497 — (23,399) $ 17,098 

Allowance for doubtful accounts receivable . . . 173 — (16) 157 

 $ 40,670 — (23,415) $ 17,255 

(1) The deductions in 2017 related to the disposal of excess and obsolete inventory in 2017. 

 
76 

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, 2019, to be signed on its behalf by 

the undersigned, thereunto duly authorized, on February 18, 2020. 

 

 SKYWEST, INC. 

 

By: /s/ ROBERT J. SIMMONS 

Robert J. Simmons 

Chief Financial Officer

 
77 

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 February 18, 2020 

 

/s/ RUSSELL A. CHILDS

Russell A. Childs Chief Executive Officer and President 

(Principal Executive Officer) and Director February 18, 2020 

/s/ ROBERT J. SIMMONS

Robert J. Simmons 

Chief Financial Officer (Principal Financial 

Officer) February 18, 2020 

 

/s/ ERIC J. WOODWARD

Eric J. Woodward 

Chief Accounting Officer (Principal 

Accounting Officer) February 18, 2020 

 

/s/ STEVEN F. UDVAR-HAZY

Steven F. Udvar-Hazy Lead Director February 18, 2020 

 

/s/ W. STEVE ALBRECHT

Steve Albrecht Director February 18, 2020 

 

/s/ HENRY J. EYRING

Henry J. Eyring Director February 18, 2020 

 

/s/ MEREDITH S. MADDEN

Meredith S. Madden Director February 18, 2020 

 

/s/ RONALD J. MITTELSTAEDT

Ronald J. Mittelstaedt Director February 18, 2020 

 

/s/ ANDREW C. ROBERTS

Andrew C. Roberts Director February 18, 2020 

 

/s/ KEITH E. SMITH

Keith E. Smith Director February 18, 2020 

 

/s/ JAMES L. WELCH

James L. Welch Director February 18, 2020 
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SkyWest, Inc. 

444 South River Road ● St. George, UT 84790 

March 13, 2020 

Dear Shareholder: 

You are invited to attend the Annual Meeting of Shareholders of SkyWest, Inc. scheduled to be held at 

10:00 a.m., Mountain Daylight Time on Tuesday, May 5, 2020, at our headquarters located at 444 South River Road, 

St. George, Utah 84790. 

The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement describe the items to be 

considered and acted upon by shareholders. 

Your vote is very important. Whether you plan to attend the Annual Meeting or not, we urge you to vote your 

shares as soon as possible. This will ensure representation of your shares at the Annual Meeting if you are unable to 

attend. 

We are pleased to make these proxy materials available over the Internet, which we believe increases the 

efficiency and reduces the expense of our annual meeting process. As a result, we are mailing to shareholders a Notice of 

Internet Availability of Proxy Materials (the “Notice”) instead of paper copies of these proxy materials and our 2019 

Annual Report. The Notice contains instructions on how to access those documents over the Internet or request that a 

full set of printed materials be sent to you. The Notice also gives instructions on how to vote your shares. 

We look forward to seeing you at the Annual Meeting. 

Sincerely, 

Jerry C. Atkin 

Board Chair

 
(This page has been left blank intentionally.)
SkyWest, Inc.

444 South River Road ● St. George, UT 84790 

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS 

OF SKYWEST, INC. 

Date: Tuesday, May 5, 2020 

Time: 10:00 a.m., Mountain Daylight Time (MDT) 

Place: SkyWest, Inc. Headquarters 

444 South River Road 

St. George, Utah 84790 

Purposes: 1. To elect ten directors of SkyWest, Inc. (the “Company”), to serve until the next Annual 

Meeting of the Company’s shareholders and until their successors are duly elected and 

qualified; 

 2. To conduct a vote, on an advisory basis, on the compensation of the Company’s named 

executive officers; 

3. To ratify the appointment of Ernst & Young LLP as the Company’s independent 

registered public accounting firm for the year ending December 31, 2020; and

4. To transact such other business that may properly come before the Annual Meeting and 

any adjournment thereof. 

Who Can Vote: Shareholders at the close of business on March 4, 2020. 

How You Can Vote: Shareholders may vote at the Annual Meeting, or in advance over the Internet, by telephone, or 

by mail. 

By authorization of the Board of Directors, 

Jerry C. Atkin 

Board Chair

March 13, 2020 

 
(This page has been left blank intentionally.)
Proxy Statement for the 

Annual Meeting of Shareholders of 

SKYWEST, INC. 

To Be Held on Tuesday, May 5, 2020 

TABLE OF CONTENTS 

 Page 

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

Proposal 1—Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 

Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 

Meetings and Committees of the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 

Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 

Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 

Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 

Director Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 

Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 

Security Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 

Proposal 2—Advisory Vote on Named Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 

Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm . . . . . . . . . . 52 

Fees Paid to Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 

Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 

Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 

Shareholder Proposals for the 2021 Annual Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 

Delivery of Documents to Shareholders Sharing an Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 

Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 
(This page has been left blank intentionally.)
1 

PROXY STATEMENT 

FOR THE 

ANNUAL MEETING OF SHAREHOLDERS 

OF 

SKYWEST, INC. 

TUESDAY, MAY 5, 2020 

OVERVIEW 

Solicitation 

This Proxy Statement, the accompanying Notice of Annual Meeting, proxy card and the Annual Report to 

Shareholders of SkyWest, Inc. (the “Company” or “SkyWest”) are being mailed on or about March 26, 2020. The Board 

of Directors of the Company (the “Board”) is soliciting your proxy to vote your shares at the Annual Meeting of the 

Company’s Shareholders to be held on May 5, 2020 (the “Meeting”). The Board is soliciting your proxy in an effort to 

give all shareholders of record the opportunity to vote on matters that will be presented at the Meeting. This Proxy 

Statement provides information to assist you in voting your shares. 

What is a proxy? 

A proxy is your legal designation of another person to vote on your behalf. You are giving the individuals 

appointed by the Board as proxies (Jerry C. Atkin, Russell A. Childs and Robert J. Simmons) the authority to vote your 

shares in the manner you indicate. 

Why did I receive more than one notice? 

You may receive multiple notices if you hold your shares in different ways (e.g., joint tenancy, trusts, or 

custodial accounts) or in multiple accounts. If your shares are held by a broker (i.e., in “street name”), you will receive 

your notice or other voting information from your broker. In any case, you should vote for each notice you receive. 

Voting Information 

Who is qualified to vote? 

You are qualified to receive notice of and to vote at the Meeting if you owned shares of common stock of 

SkyWest (the “Common Stock”) at the close of business on the record date of Wednesday, March 4, 2020. 

How many shares of Common Stock may vote at the Meeting? 

As of March 4, 2020, there were 50,257,387 shares of Common Stock outstanding and entitled to vote. Each 

share of Common Stock is entitled to one vote on each matter presented at the Meeting. 

What is the difference between a “shareholder of record” and a “street name” holder? 

If your shares are registered directly in your name with Zions First National Bank, the Company’s transfer 

agent, you are a “shareholder of record.” If your shares are held in the name of a brokerage, bank, trust or other nominee 

as a custodian, you are a “street name” holder. 
2 

How can I vote at the Meeting? 

You may vote in person by attending the Meeting. You may also vote in advance over the Internet, or by 

telephone, or you may request a complete set of traditional proxy materials and vote your proxy by mail. To vote your 

proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you 

access the Internet website or place your telephone call. To vote your proxy by mail, mark your vote on the enclosed 

proxy card, then follow the instructions on the card. 

What are the Board’s recommendations on how I should vote my shares? 

The Board recommends that you vote your shares as follows: 

Proposal 1—FOR the election of all ten nominees for director. 

Proposal 2—FOR the non-binding resolution to approve the compensation of the Company’s named executive officers. 

Proposal 3—FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered 

public accounting firm for the year ending December 31, 2020. 

What are my choices when voting? 

Proposal 1—You may cast your vote in favor of up to ten individual director-nominees. You may vote for less than ten 

director-nominees if you choose. You may also abstain from voting. 

Proposals 2 and 3—You may cast your vote in favor of, or against, each proposal. You may also abstain from voting. 

How will my shares be voted if I do not specify how they should be voted? 

If you execute the enclosed proxy card without indicating how you want your shares to be voted, the proxies 

appointed by the Board will vote as recommended by the Board and described previously in this section. 

Similarly, shares represented by proxies that reflect a “broker non-vote” will be counted for purposes of 

determining whether a quorum exists. A broker non-vote occurs when a broker, bank or other financial institution 

holding shares in street name for a beneficial owner has not received instructions from the beneficial owner and does not 

have discretionary authority to vote the shares for a particular proposal. Under the rules of various national and regional 

securities exchanges, the organization that holds your shares in street name has discretionary authority to vote only on 

routine matters and cannot vote on non-routine matters. The only proposal at the meeting that is considered a routine 

matter under applicable rules is the proposal to ratify the appointment of Ernst & Young LLP as the Company’s 

independent registered public accounting firm for the year ending December 31, 2020. Therefore, unless you provide 

voting instructions to the broker, bank or other financial institution holding shares on your behalf, they will not have 

discretionary authority to vote your shares on any of the other proposals described in this proxy statement. Please vote 

your proxy or provide voting instructions to the broker, bank or other financial institution holding your shares so your 

vote on the other proposals will be counted. 
3 

What is the quorum requirement for the Annual Meeting? 

Under Utah law and the Company’s Bylaws, the holders of a majority of the votes entitled to be cast on the 

matter constitutes a quorum. Therefore, the holders of a majority of the Common Stock issued and outstanding and 

entitled to vote at the Meeting, present in person or represented by proxy, constitute a quorum for the transaction of 

business at the Meeting. If you submit a properly executed proxy via the Internet or by telephone or mail, regardless of 

whether you abstain from voting on one or more matters, your shares will be counted as present at the Meeting for the 

purpose of determining a quorum. Broker non-votes will also be counted as present for the purpose of determining the 

presence of a quorum at the Meeting. The inspectors of election will determine whether a quorum is present and will 

tabulate the votes cast at the Meeting. 

What vote will be required to approve each proposal? 

Proposal 1 provides that, assuming a quorum is present at the Meeting, the ten director-nominees who receive a 

majority of the votes cast with respect to his or her election will be elected as directors of the Company. This means that 

the number of shares voted “for” the election of a director must exceed the number of shares voted “against” the election 

of that director. 

Proposals 2 and 3 will be approved if, assuming a quorum is present at the Meeting, the number of votes cast, in 

person or by proxy, in favor of a particular proposal exceeds the number of votes cast in opposition to the proposal. 

Proposal 2 is an advisory vote only, and has no binding effect on the Board or the Company. 

How will withheld votes, abstentions and broker non-votes be treated? 

Withheld votes, abstentions and broker non-votes will be deemed as “present” at the Meeting and will be 

counted for quorum purposes only. Withheld votes, abstentions and broker non-votes, if any, will not count as a vote cast 

as to any director-nominee’s election and thus will have no effect in determining whether a director nominee has 

received a majority of the votes cast. For purposes of the votes on Proposals No. 2 and No. 3, abstentions and broker 

non-votes will not be counted as votes cast and will have no effect on the result of the votes on such proposals. 

Can I change my vote? 

You may revoke your proxy before the time of voting at the Meeting in any of the following ways: 

• by mailing a revised proxy card to the Chief Financial Officer of the Company; 

• by changing your vote on the Internet website; 

• by using the telephone voting procedures; or 

• by voting in person at the Meeting. 

Who will count the votes? 

Representatives from Zions First National Bank, the Company’s transfer agent, or other individuals designated 

by the Board, will count the votes and serve as inspectors of election. The inspectors of election will be present at the 

Meeting. 
4 

Who will pay the cost of this proxy solicitation? 

The Company will pay the costs of soliciting proxies. Upon request, the Company will reimburse brokers, 

dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding proxy materials to 

beneficial owners of shares of the Common Stock. 

Is this Proxy Statement the only way proxies are being solicited for use at the Meeting? 

Yes. The Company does not intend to employ any other methods of solicitation. 

How are proxy materials being delivered? 

The Company is pleased to take advantage of Securities and Exchange Commission rules that allow companies 

to furnish their proxy materials over the Internet. As a result, the Company is mailing to most of its shareholders a Notice 

of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this Proxy Statement and the 

Company’s 2019 Annual Report to Shareholders. The Notice contains instructions on how to access those documents 

over the Internet. The Notice also contains instructions on how to request a paper copy of the Company’s proxy 

materials, including this Proxy Statement, the 2019 Annual Report to Shareholders and a form of proxy card or voting 

instruction card. All shareholders who do not receive a Notice will receive a paper copy of the proxy materials by mail. 

The Company believes this process will allow it to provide its shareholders with the information they need in a more 

efficient manner, while reducing the environmental impact and lowering the costs of printing and distributing these 

proxy materials. 

 
5 

PROPOSAL 1 

ELECTION OF DIRECTORS 

The Board currently consists of ten directors. All directors serve a one-year term and are subject to re-election 

each year. The terms of all of the Company’s current directors expire at the Meeting. At the Meeting, the Company 

proposes to elect the ten current directors to hold office until the 2021 Annual Meeting of Shareholders and until their 

successors have been elected and have qualified. The ten nominees for election at the Meeting are listed below. 

• Jerry C. Atkin, Chair 

• W. Steve Albrecht 

• Russell A. Childs 

• Henry J. Eyring 

• Meredith S. Madden 

• Ronald J. Mittelstaedt 

• Andrew C. Roberts 

• Keith E. Smith 

• Steven F. Udvar-Hazy 

• James L. Welch 

The Board Recommends That Shareholders Vote FOR All Ten Director Nominees.

All of the nominees are currently serving as a director of the Company and have consented to be named as a 

nominee. Shareholders voting in person or by proxy at the Meeting may only vote for ten nominees. If, prior to the 

Meeting, any of the nominees becomes unable to serve as a director, the Board may designate a substitute nominee. In 

that event, the persons named as proxies intend to vote for the substitute nominee designated by the Board. 

The Board and the Nominating and Corporate Governance Committee believe that each of the following 

nominees possesses the experience and qualifications that directors of the Company should possess, as described in 

detail below, and that the experience and qualifications of each nominee compliments the experience and qualifications 

of the other nominees. The experience and qualifications of each nominee, including information regarding the specific 

experience, qualifications, attributes and skills that led the Board and its Nominating and Corporate Governance 

Committee to conclude that he or she should serve as a director of the Company at the present time, in light of the 

Company’s business and structure, are set forth on the following pages. 
6 

Jerry C. Atkin 

 

Age: 71 Director Since: 1974 Committees: None 

Principal Occupation: Board Chair

Experience: Mr. Atkin joined the Company in July 1974 as the Company’s Director of Finance. In 1975, he assumed the office of 

President and Chief Executive Officer (“CEO”) and was elected Board Chair in 1991. Mr. Atkin served as President of the 

Company until 2011 and as CEO until December 31, 2015. 

The Board nominated Mr. Atkin to serve as a director, in part, because of his deep knowledge and understanding of the Company, 

the regional airline industry as well as having served as the Company’s CEO for more than 40 years. Mr. Atkin performs an 

extremely valuable role as the Board Chair, providing critical leadership and direction to the Board’s activities and deliberations. 

The Board also believes his values and integrity are tremendous assets to the Company and its shareholders. 

Other Directorships: Mr. Atkin currently serves as a director of Zions Bancorporation, a regional bank holding company based in 

Salt Lake City, Utah (“Zions”). 

W. Steve Albrecht 

Age: 73 Director Since: 2012 (Also served as a director of the 

Company from 2003-2009) 

Committees: Chair of the Audit Committee; 

Member of the Nominating and Corporate 

Governance Committee; Audit Committee Financial 

Expert 

Principal Occupation: Emeritus Professor at Brigham Young University

Experience: Mr. Albrecht, a certified public accountant, certified internal auditor, and certified fraud examiner, joined the faculty 

of Brigham Young University in 1977, after teaching at the University of Illinois and Stanford University. At Brigham Young 

University, he served as director of the School of Accountancy from 1990 to 1999, and as associate dean of the Marriott School 

from 1999 to 2008. He served as the President of the Japan Tokyo Mission of The Church of Jesus Christ of Latter day Saints from 

July 2009 to July 2012. Mr. Albrecht has also served as the President of the American Accounting Association, the Association of 

Certified Fraud Examiners and Beta Alpha Psi, an international honor organization for accounting, finance and information systems 

students. He has also served as a member of the Committee of Sponsoring Organizations of the Treadway Commission (COSO); 

the Financial Accounting Standards Advisory Committee, an advisory committee to the Financial Accounting Standards Board (the 

“FASB”); and the Financial Accounting Foundation that oversees the FASB and the Governmental Accounting Standards Board. 

Mr. Albrecht has consulted with many major corporations and other organizations and has been an expert witness in over 38 major

financial statement fraud cases, including some of the largest cases in U.S. history. 

The Board recognizes Mr. Albrecht’s valuable contribution as a director of the Company from 2003 through 2009 and since his reelection in 2012, including his service as the Chair of the Audit Committee. The Board nominated Mr. Albrecht because of his 

exceptional academic and professional record, his achievements, awards and other forms of recognition in the accounting 

profession, his extensive training in accounting practices and fraud detection, and his outstanding past service on the Board. 

Other Directorships: Mr. Albrecht currently serves as a director of and Board Chair for Cypress Semiconductor Corporation. 

 
7 

Russell A. Childs 

Age: 52 Director Since: 2016 Committees: None 

Principal Occupation: CEO and President of the Company and its operating subsidiary, SkyWest Airlines, Inc. (“SkyWest 

Airlines”) 

Experience: Mr. Childs was named CEO of the Company effective January 1, 2016, and has served as President of the Company 

since 2014. He is responsible for the holding company’s operating entities and all commercial activities. He joined the Company in 

2001 and became Vice President – Controller later that year. He served as the President and Chief Operating Officer of SkyWest 

Airlines from 2007 to 2014. Mr. Childs earned his bachelor's degree in Economics and master's degree in Accounting from 

Brigham Young University. Prior to joining the Company, Mr. Childs was a certified public accountant employed by a public 

accounting firm. 

The Board nominated Mr. Childs, among other reasons, because it recognizes Mr. Childs’ critical role in delivering value to all

Company stakeholders, as well as noting the importance of the Company's CEO serving on the Board, as he is the one closest to the 

Company's day-to-day operations and is able to communicate the Board’s expectations, advice and encouragement to the 

Company’s approximately 14,000 employees. 

Other Directorships: Mr. Childs currently serves as a Chair of the Salt Lake City Branch of the Federal Reserve Bank of San 

Francisco and is the Chair of the NextGen Advisory Committee of the Federal Aviation Administration (FAA). 

Henry J. Eyring 

Age: 56 Director Since: 2006 (Also served as a director 

of the Company from 1995-2003) 

Committees: Member of the Compensation Committee; Member 

of the Audit Committee 

Principal Occupation: President at Brigham Young University Idaho 

Experience: Mr. Eyring was appointed President of Brigham Young University-Idaho in April 2017. Prior to that, he served in 

various positions of administration at Brigham Young University-Idaho from 2006 to April 2017, including Academic Vice 

President. Mr. Eyring was the Director of the Masters of Business Administration Program at Brigham Young University from 

1998 to 2002. From 2002 to 2003, he was a special partner with Peterson Capital, a private equity investment firm before serving as 

president of the Japan Tokyo North Mission of The Church of Jesus Christ of Latter day Saints from 2003 to 2006. 

The Board recognizes the strong business and strategic consulting experience Mr. Eyring contributes to the Board’s direction of the 

Company. In addition to the recent experience summarized above, Mr. Eyring was previously engaged with the Monitor Company, 

an internationally recognized management consulting firm. Mr. Eyring is a sound strategic thinker who possesses the ability to 

apply his academic thought and studies to the practical day-to-day challenges of the Company’s operations. The Board believes that 

his thoughtful application of business and legal principles makes him a valuable contributor to the Board. 

 
8 

Meredith S. Madden 

Age: 46 Director Since: 2015 Committees: Member of the Compensation Committee; Member of the Safety & 

Compliance Committee 

Principal Occupation: CEO of NORDAM Group, Inc. (“NORDAM”). 

Experience: Mrs. Madden was appointed CEO of NORDAM in 2011. Headquartered in Tulsa, Oklahoma, NORDAM is one of the 

world’s premier family-owned aerospace providers of composites and engineered solutions. Prior to becoming the CEO, she was 

vice president of NORDAM’s Repair Group; vice president of Global Sales and Marketing; and vice president of NORDAM 

International. Since joining NORDAM in 1999, Mrs. Madden has been based in Tulsa, and has spent considerable time at 

NORDAM’s facilities in the United Kingdom and Singapore. Mrs. Madden has played a key role in transforming NORDAM into 

the global aerospace entity it is today. 

 

The Board nominated Mrs. Madden, in part, because of her expertise and strategic insights related to aircraft maintenance vendor 

planning. Additionally, Mrs. Madden has extensive expertise working with international maintenance service providers. 

Ronald J. Mittelstaedt 

Age: 56 Director Since: 2013 

Committees: Member of the Compensation Committee; Member of the Nominating 

& Corporate Governance Committee; Member of the Safety & Compliance 

Committee 

Principal Occupation: Board Executive Chair of Waste Connections, Inc. (“Waste Connections”) 

Experience: Mr. Mittelstaedt has served as the Executive Chair of Waste Connections, a company he founded in 1998, since July 

of 2019, and he previously served as its Chair and CEO from 1997 to July of 2019. Under Mr. Mittelstaedt’s leadership, Waste 

Connections has become the second largest company in the North American solid waste and recycling industry, employing more 

than 17,000 people nationwide, and is traded on the New York Stock Exchange. Mr. Mittelstaedt also established the RDM 

Positive Impact Foundation in 2004 to improve the lives of underprivileged and at-risk children. Prior to his career in waste 

management, he spent three years in the air freight industry. Mr. Mittelstaedt holds a bachelor’s degree in Business Economics 

from the University of California – Santa Barbara. 

The Board nominated Mr. Mittelstaedt, in part, because of his expertise in making large capital equipment decisions, extensive 

experience working with diverse employee and other groups in various geographic regions and a history of developing an 

organizational culture of strong work ethics. Mr. Mittelstaedt also contributes to the Board his insight as an experienced CEO of a 

publicly traded company, which the Board has found valuable in its deliberations. 

Other Directorships: Mr. Mittelstaedt currently serves as the Board Chair for Waste Connections. 

 
9 

Andrew C. Roberts 

Age: 59 Director Since: 2015 Committees: Chair of the Safety & Compliance Committee; Member of the Audit 

Committee 

Principal Occupation: Chair, STS Aviation Group, LLC 

Experience: Since January 2019, Mr. Roberts has served as the Chair of STS Aviation Group LLC, a diversified aviation product 

and services provider, and holds a board position at Continental Aerospace Technologies., a subsidiary and the principal operating 

entity of AVIC International Holding (HK) Ltd. (0232.HK) since November 2015, a manufacturer of propulsion units for General 

Aviation. Mr. Roberts also, has held a board position at Dart Aerospace since March 2019, a manufacturer of helicopter accessories 

and other aviation products. 

 

Mr. Roberts was the Executive Chair of Ryan Herco Flow Solutions, a national distributor of high purity fluid conveyance and 

control products, from 2015 to 2018. Additionally, he served as CEO, President and Board Member at Align Aerospace, a global 

distributor of products to the aerospace and aviation industries, from January 2014 to September 2015; and CEO & President of 

Permaswage Holding SA, a designer and manufacturer of fluid fitting products, from 2009 to 2014. He has experience in the 

management and operation of major and regional airlines, including Northwest Airlines from 1997 to 2008, where he served in 

multiple executive positions. From 2000 until 2008 he served as Chair of Aeroxchange Ltd. Mr. Roberts holds a bachelor of 

science degree (with Honors) in Engineering from the University of Birmingham and a post graduate diploma in Engineering from 

Coventry University. 

The Board nominated Mr. Roberts, in part, due to his extensive background in the aviation maintenance and overhaul industry, as

well as his commercial airline executive leadership. Mr. Roberts' education and professional training in the fields of engineering 

and aerospace manufacturing have allowed him to make valuable contributions to the Board in assessing the Company's technical 

operations. 

Keith E. Smith 

Age: 59 Director Since: 2013 Committees: Chair of the Compensation Committee; Member of the Audit 

Committee 

Principal Occupation: President and CEO of Boyd Gaming Corporation (“Boyd Gaming”) 

Experience: Mr. Smith is President, CEO and a director of Boyd Gaming, one of the nation’s leading casino entertainment 

companies, with 29 operations in ten states and more than 25,000 employees. Mr. Smith is an industry veteran with more than 33 

years of gaming experience. He joined Boyd Gaming in 1990 and held various executive positions before being promoted to Chief 

Operating Officer in 2001. In 2005, Mr. Smith was named President and elected as a director of Boyd Gaming and in 2008 he 

assumed the role of CEO. The common stock of Boyd Gaming is traded on the New York Stock Exchange. 

Mr. Smith holds a bachelor’s degree in Accounting from Arizona State University. He served as Chair of the Los Angeles Branch 

of the Federal Reserve Bank of San Francisco from 2012 to 2014. He served as Chair of the American Gaming Association and the 

Nevada Resort Association. He served as Vice Chair of the Las Vegas Convention and Visitors Authority from 2005 to 2011. 

The Board recognizes Mr. Smith’s diverse experience in investing in, financing, and managing capital assets and real properties in 

various geographic regions. Mr. Smith also has extensive experience in leading and directing a large group of diverse employees. 

Mr. Smith’s accounting training and experience and his service as Chair of the Los Angeles Branch of the Federal Reserve Bank of 

San Francisco also enable him to provide valuable service as the Chair of the Compensation Committee and to the Audit 

Committee. 

Other Directorships: Mr. Smith is a director of Boyd Gaming. 

 
10 

Steven F. Udvar-Hazy 

Age: 74 Director Since: 1986 Committees: Lead Independent Director; Chair of the Nominating & Corporate 

Governance Committee; Member of the Compensation Committee 

Principal Occupation: Board Executive Chair of Air Lease Corporation 

Experience: Mr. Udvar-Hazy has been engaged in aircraft leasing and financing for more than 47 years and has served as the 

Board Executive Chair of Air Lease Corporation since July 2016, and as Chair and CEO of Air Lease Corporation from its launch 

in February 2010. Prior to his current engagement with Air Lease Corporation, which leases and finances commercial jet aircraft

worldwide, Mr. Udvar-Hazy founded and served as the Board Chair and CEO of International Lease Finance Corporation, which 

leases and finances commercial jet aircraft. 

Mr. Udvar-Hazy is recognized as one of the leading experts in the aviation industry, and contributes to the Board the wisdom and 

insight he has accumulated through a lengthy, distinguished career in aviation, aircraft leasing and finance. The Company has 

benefitted greatly from his position in the aviation industry, including introductions to his vast industry contacts and networking 

opportunities. In addition to his extensive industry experience, Mr. Udvar-Hazy is extremely knowledgeable of the Company’s 

operations and opportunities, having served as a director of the Company for more than 35 years. 

The Board believes that Mr. Udvar-Hazy’s even temperament and ability to encourage discussion, together with his experience as 

CEO and director of other successful organizations in the airline industry, make him an effective Lead Independent Director. 

Other Directorships: Mr. Udvar-Hazy is Board Executive Chair of Air Lease Corporation. 

James L. Welch 

Age: 65 Director Since: 2007 Committees: Member of the Audit Committee; Member of the Nominating & 

Corporate Governance Committee; Member of the Safety & Compliance Committee 

Principal Occupation: Retired CEO of YRC Worldwide Inc. (“YRC Worldwide”) 

Experience: From July 2011 until his retirement in July 2018, Mr. Welch served as the CEO of YRC Worldwide, a provider of 

global, national and regional ground transportation services. From 2008 to July 2011, Mr. Welch served as the President and CEO

of Dynamex, Inc., a provider of same-day transportation and logistics services in the United States and Canada. During 2007 and

2008, he served as Interim CEO of JHT Holdings, a holding company of multiple enterprises engaged in automotive transport and 

management services. From 2000 to 2007, Mr. Welch served as the President and CEO of Yellow Transportation, an international 

transportation services provider. 

Mr. Welch has over 37 years of senior executive experience in the transportation sector, including extensive experience working

with organized labor groups and labor unions. His insights have been particularly valuable to the Board as the Company has 

addressed labor and related issues arising in the operation of SkyWest Airlines. Mr. Welch also contributes to the Board valuable 

practical experience in the operation of a large enterprise, as well as the perspective of a successful entrepreneur. 

Other Directorships: Mr. Welch serves as a director for Schneider, Inc. 
11 

EXECUTIVE OFFICERS 

In addition to Russell A. Childs, the CEO and President of the Company, whose biographical information is set 

forth above, the following individuals served as executive officers of the Company or its operating subsidiaries during 

2019. 

Robert J. Simmons 

Age: 57 Title: Chief Financial Officer 

Mr. Simmons is the Chief Financial Officer of the Company and its operating subsidiary, SkyWest Airlines. He is 

responsible for the areas of finance, accounting, treasury and investor relations for the Company and its subsidiaries. 

From 2009 until his appointment as SkyWest’s Chief Financial Officer in March 2015, Mr. Simmons served as a Partner 

with Bendigo Partners, LLC. (“Bendigo Partners”), a privately held firm focused on technology-based financial services 

as private equity investors and operational consultants. In his role with Bendigo Partners, he was responsible for 

portfolio management. He previously served as Chief Financial Officer as well as Corporate Treasurer for E*TRADE 

Financial Corporation. He has more than 30 years of finance and treasury experience in various leadership positions at 

companies including Oracle, Iomega, and Bank of America. 

Mr. Simmons holds a master’s degree in business administration, with an emphasis in finance from the Kellogg Graduate 

School of Management at Northwestern University, and graduated magna cum laude with a bachelor’s degree in 

international business from Brigham Young University. 

Wade J. Steel 

Age: 44 Title: Chief Commercial Officer 

Mr. Steel is the Chief Commercial Officer of the Company and its operating subsidiary, SkyWest Airlines. He is 

responsible for the Company’s contractual relationships with American Airlines, Inc. (“American”), Delta Air Lines, Inc. 

(“Delta”), United Airlines, Inc. (“United”) and Alaska Airlines, Inc. (“Alaska”), development of new business 

opportunities with network airlines, fleet management and information technology. He also plays a vital role in the 

strategic planning and development opportunities of the Company. 

Mr. Steel was initially employed with the Company in March 2007 as Director of Financial Planning and Analysis and 

was appointed to serve as Vice President – Controller for SkyWest Airlines in 2011. From May 2014 until his 

appointment as Chief Commercial Officer of the Company in March 2015, he served as the Executive Vice President 

and acting Chief Financial Officer of the Company, with responsibility for the areas of finance, treasury, investor 

relations and information technology for the Company and its subsidiaries. Prior to joining the Company, Mr. Steel was 

employed by a public accounting firm. 

Mr. Steel holds bachelor’s and master’s degrees in accounting from Brigham Young University and is a member of the 

American Institute of Certified Public Accountants. 

Michael B. Thompson 

Age: 44 Title: Chief Operating Officer 

Mr. Thompson is the Chief Operating Officer of SkyWest Airlines. He is responsible for oversight of all aspects of 

SkyWest Airlines’ operations, including safety, quality, flight operations, maintenance and customer service. He also 

oversees SkyWest Airline’s operational relationships with American, Delta, United and Alaska. 
12 

Mr. Thompson was initially employed with the Company in April 2001 as Operations Analyst and was later named 

Director of Market Planning. In 2007 he was named Vice President of Market Development of SkyWest Airlines, in 

which position he served until May 2014, when he was appointed to serve as Chief Operating Officer of SkyWest 

Airlines. 

Mr. Thompson holds a bachelor’s degree in manufacturing engineering and a master’s degree in both mechanical 

engineering and business administration from Brigham Young University. 

Eric J. Woodward 

Age: 48 Title: Chief Accounting Officer 

Mr. Woodward is the Chief Accounting Officer of the Company and its operating subsidiary, SkyWest Airlines. He is 

responsible for the oversight of the Company’s financial accounting practices, internal controls and reporting to the 

Securities and Exchange Commission. 

Mr. Woodward was employed in various other capacities with the Company from April 2004 until April 2007 and served 

as the Company’s Vice President – Controller from April 2007 until May 2011, when he was appointed to serve as Chief 

Accounting Officer of the Company. He is a certified public accountant and was employed by a public accounting firm 

prior to joining the Company. 

Mr. Woodward holds a bachelor’s and master’s degree in accounting from the University of Utah, and is a member of 

the American Institute of Certified Public Accountants and Utah Association of Certified Public Accountants. 

CORPORATE GOVERNANCE 

Corporate Governance Guidelines 

The Board has adopted Corporate Governance Guidelines and periodically reviews and ratifies those guidelines, 

including most recently on February 4, 2020. The Corporate Governance Guidelines can be accessed at the Company’s 

website, inc.skywest.com. The Corporate Governance Guidelines supplement the Company’s Bylaws and the charters of 

the Board’s committees. Excerpts from the principal sections of the Company’s Corporate Governance Guidelines are 

noted below. 

Director Independence 

At a minimum, the Board will have a majority of directors who meet the criteria for independence as required 

by The Nasdaq Global Select Market. 

Director Qualifications 

Criteria for Membership 

The Company’s Nominating and Corporate Governance Committee is responsible for annually 

reviewing with the Board the desired skills and characteristics of directors, as well as the composition 

of the Board as a whole. 

Terms and Limitations 

All directors currently stand for election each year. The Board does not believe it should establish a 

limit on the number of times that a director may stand for election. 
13 

Retirement 

Directors are required to submit their resignation from the Board when their term expires upon 

reaching the age of 75 years old. The Board will accept the resignation unless the Nominating and 

Corporate Governance Committee recommends otherwise. Directors generally will not be nominated 

for election following their 75th birthday. 

Ownership of Company Stock 

Directors are required to own shares of Common Stock having a value equal to at least five times the 

cash component of their annual base compensation. 

Director Responsibilities 

General Responsibilities 

The basic responsibility of directors is to exercise their business judgment to act in what they 

reasonably believe to be in the best interests of the Company and its shareholders. 

Oversight of Management 

The Board is responsible for encouraging the Company’s management to effectively implement 

policies and strategies developed by the Board, and to provide dynamic leadership of the Company. 

Board Meetings and Materials 

Frequency of Meetings 

The Board has four regularly scheduled in person meetings per year. As determined necessary by the 

Board and in order to address the Company’s needs, special meetings of the Board, including 

telephonic meetings, are convened from time to time. 

Meeting Responsibilities 

Absent extraordinary circumstances, directors of the Company should attend all Board meetings, 

meetings of the committee(s) on which they serve and shareholder meetings. The Board Chair is 

responsible for establishing the agenda for each Board meeting. Each director is free to suggest the 

inclusion of items on the agenda and to raise at any Board meeting subjects that are not on the agenda 

for that meeting. 

Executive Sessions of Independent Directors 

The Company’s independent directors meet in executive session regularly, generally quarterly. The 

independent directors may either choose one director annually to serve as the Lead Independent 

Director and to preside at all executive sessions or establish a procedure by which a Lead Independent 

Director will be selected. The independent directors of the Company have chosen Mr. Udvar-Hazy to 

serve as the Lead Independent Director. 

Director Compensation 

The form and amount of director compensation is determined by the Board based on general principles 

established on the Nominating and Corporate Governance Committee’s recommendation. These principles are in 

accordance with the policies and principles set forth in the Nominating and Corporate Governance Committee’s charter 
14 

and are intended to be consistent with rules established by The Nasdaq Global Select Market, including those relating to 

director independence and to compensation of Audit Committee members. 

CEO Evaluation and Management Succession 

The Nominating and Corporate Governance Committee conducts an annual review to assess the performance of 

the Company’s CEO. The Nominating and Corporate Governance Committee communicates the results of its review to 

the other directors in a meeting that is not attended by the CEO. The directors of the Company, excluding the CEO, 

review the Nominating and Corporate Governance Committee’s report to assess the CEO’s leadership in the long and 

short-term, as well as the Company’s long-term succession plans. 

Annual Evaluations 

The Board conducts an annual evaluation to determine if the Board and its committees are functioning 

effectively. The Nominating and Corporate Governance Committee solicits comments from all of the Company’s 

directors and reports annually to the Board with an assessment of the Board’s performance. Each of the Board’s standing 

committees conducts an annual evaluation to assess the performance of the applicable committee. 

Review and Access to Guidelines 

The Nominating and Corporate Governance Committee reviews the Company’s Corporate Governance 

Guidelines at least annually, then, as it deems appropriate, recommends amendments to the Board. 

Board Leadership Structure and Director Independence

Although the Board does not have a formal policy as to whether the roles of Board Chair and CEO should be 

combined or separated, from 1991 until January 2016, Jerry C. Atkin served as both Board Chair and CEO of the 

Company. In January 2016, the Board appointed Russell A. Childs to serve as the CEO of the Company, which resulted 

in the separation of the roles of Board Chair and CEO. Currently, Mr. Atkin serves as Board Chair and Mr. Childs serves 

as the CEO. The Board believes that such separation allows Mr. Childs to focus his time and energy on managing the 

Company’s business on a day-to-day basis, while also leveraging Mr. Atkin’s background with the Company, 

perspective and vast experience in the aviation industry as he devotes his time and attention to matters of Board 

oversight. Accordingly, the Board has determined that the Company’s Board leadership structure is the most appropriate 

at this time, given the specific characteristics and circumstances of the Company, and the unique skills and experience of 

each of Mr. Atkin and Mr. Childs. 

The Company is committed to independent Board oversight. Pursuant to the Company’s Corporate Governance 

Guidelines, all of the Company’s directors (other than Messrs. Atkin and Childs) meet the standards of independence 

applicable to the Company, and the Board has designated Steven F. Udvar-Hazy as Lead Independent Director. As Lead 

Independent Director, Mr. Udvar-Hazy is empowered to prepare agendas for and conduct meetings of the nonmanagement directors, communicate with the Board Chair, disseminate information to the Board, and raise issues with 

management on behalf of the independent directors when appropriate. The Board’s independent oversight function is 

enhanced by the fact that the Audit, Compensation, Nominating and Corporate Governance and Safety and Compliance 

Committees are comprised entirely of independent directors. 

The Board believes no single leadership model is right for all companies at all times. The Board recognizes that, 

depending on the circumstances, other leadership models may be appropriate. The independent directors and the 

Nominating and Corporate Governance Committee regularly review the Company’s leadership structure and, depending 

on the Company’s needs and the available resources, the Board may modify the Company’s existing leadership structure. 
15 

Communications with the Board 

Shareholders and other interested parties may communicate with one or more directors or the non-management 

directors as a group in writing by regular mail. The following address may be used by those who wish to send such 

communications by regular mail: 

Board of Directors or Name of Individual Director(s) 

c/o Chief Financial Officer 

SkyWest, Inc. 

444 South River Road 

St. George, UT 84790 

Code of Ethics 

The Company has adopted a Code of Ethics for Directors and Senior Executive Officers (the “Code of Ethics”), 

which is available on the Company’s website, inc.skywest.com. The Code of Ethics includes the following principles 

related to the Company’s directors and executive officers: 

• Act ethically with honesty and integrity; 

• Promote full, fair, accurate, timely and understandable disclosure in reports and documents filed with the 

Securities and Exchange Commission and other public communications; 

• Comply in all material respects with laws, rules and regulations of governments and their agencies; 

• Comply in all material respects with the listing standards of the stock exchange where the shares of 

Common Stock are traded; 

• Respect the confidentiality of information acquired in the course of performing work for the Company, 

except when authorized or otherwise legally obligated to disclose the information; 

• Do not use confidential information of the Company for personal advantage or for the benefit of 

acquaintances, friends or relatives; and 

• In order to avoid the appearance that any Company employee is trading on inside information, not engage 

in speculative trading such as short sales or trade in puts, calls, or other options on the Company’s or its 

affiliates’ stock, and not purchase or use, directly or indirectly, financial instruments that are designed to 

hedge or offset any decrease in the market value of the Company’s securities. 

A copy of the Code of Ethics is posted to the Company’s website at inc.skywest.com. Copies of the Code of 

Ethics will be provided to any shareholder upon written request to Robert J. Simmons, Chief Financial Officer of the 

Company, 444 South River Road, St. George, Utah 84790, Telephone: (435) 634-3200. The Company will promptly 

disclose any waivers of, or amendments to, certain provisions of the Code of Ethics on its website. 

Corporate Sustainability 

We understand the importance of ensuring the satisfaction and security of our customers, employees, investors 

and other stakeholders through an unwavering commitment to corporate integrity, no matter the environment. We also 

believe good governance is a source of competitive advantage. Our Board of Directors, which is responsible for the 

control and direction of the Company and governed by a Code of Ethics, represents and is accountable to our 
16 

shareholders. Our corporate governance policies are designed both for compliance and to drive effective use of the 

collective skills and experience of our directors, officers and employees for ethical, responsible, and superior 

performance. In addition to our overall dedication to ethical and accountable business practices, our corporate 

sustainability efforts include the areas of environmental and social sustainability. We take social and environmental 

responsibility and sustainability seriously. 

Environmental Sustainability 

As the largest regional airline in the United States, we remain committed to lowering our environmental 

footprint while continuing to offer the best service to our customers and the communities we serve. Through the use of 

software and training, we heavily monitor and manage our fuel trends and fuel consumption which leads to better fuel 

conservation and reductions in emissions. When possible, we try to mitigate the use of fuel, including by taxiing with the 

use of a single engine, taking steps to improve the efficiency of aircraft routing and using ground power when the plane 

is parked at the gate. We participate with our major airline partners in recycling programs, and we have implemented 

recycling initiatives in our facilities to reduce the amount of paper, plastic and other recyclables going to landfills. We 

have worked aggressively to reduce our reliance on paper manuals and have converted, or are in the process of 

converting, our manuals and our maintenance logs into electronic form, further eliminating unnecessary waste while 

increasing efficiencies. 

Social Sustainability 

We are a dedicated people-first organization, providing various avenues to enhance the quality of life for our 

customers, employees and communities. We know that if we take good care of our employees, they will take good care 

of our customers, which will result in value returned to our shareholders. We maintain an employee scholarship program, 

which awards annual scholarships to employees and their family members to help them in their pursuits of higher 

education. We are committed to creating a diverse and inclusive workforce, empowering professional growth and 

development and investing in our employees’ health, emotional and financial wellness. Additionally, we are dedicated to 

protecting our customers by providing employee training programs focused on, among other topics, safety, fuel 

conservation, diversity, and procedures for identifying and reporting human trafficking. We continue to seek to increase 

diversity in the workplace, including by participating in and sponsoring several recruitment and industry events. During 

2019, such events included those organized by such organizations as Women in Aviation, Girls in Aviation, National 

Gay Pilots Association, Organization of Black Aerospace Professionals, Military Organizations, among others. 

Policies Against Hedging and Pledging of Company Stock 

Pursuant to the Company’s Code of Ethics, in order to avoid the appearance that any Company employee is 

trading on inside information, Company officers and directors are prohibited from engaging in speculative trading such 

as short sales or trading in puts, calls, or other options on our stock or the stock of our affiliates, and are likewise 

prohibited from purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any 

decrease in the market value of our securities. 

In addition, the Company’s insider trading policy expressly prohibits all directors, officers and employees from 

purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any decrease in the 

market value of the Company’s securities. Pledging the Company’s securities as collateral to secure loans is also 

prohibited.

Risk Oversight 

The Board and its committees are involved in overseeing risk associated with the Company and its operations. 

The Board and the Audit Committee monitor the Company’s credit risk, liquidity risk, regulatory risk, operational risk 
17 

and enterprise risk by regular reviews with management and internal and external auditors and other advisors. In its 

periodic meetings with the internal auditors and the Company’s independent accountants, the Audit Committee discusses 

the scope and plan for the internal audit and includes management in its review of accounting and financial controls, 

assessment of business risks, legal and ethical compliance programs and related-party transactions. The Board and the 

Nominating and Corporate Governance Committee monitor the Company’s governance and succession risk by regular 

review with management and outside advisors. The Board and the Compensation Committee monitor CEO succession 

and the Company’s compensation policies and related risks by regular reviews with management and the Compensation 

Committee’s outside advisors. The Board and the Safety and Compliance Committee monitor management’s 

administration of airline flight operations safety and compliance with safety regulations. 

Whistleblower Hotline 

The Company has established a whistleblower hotline that enables employees, customers, suppliers and 

shareholders of the Company and its subsidiaries, as well as other interested parties, to submit confidential and 

anonymous reports of suspected or actual violations of the Code of Ethics. 

MEETINGS AND COMMITTEES OF THE BOARD 

The Board 

Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or 

her duties and to attend all Board, committee and shareholders' meetings. The Board met four times during 2019. All 

directors attended at least 75% of the aggregate number of meetings of the Board and of the committees on which he or 

she served during the year ended December 31, 2019, as well as the Company's Annual Meeting of Shareholders held on 

May 7, 2019. 

Committees of the Board 

The Board has four standing committees to facilitate and assist the Board in the execution of its responsibilities: 

(1) Audit, (2) Compensation, (3) Nominating and Corporate Governance and (4) Safety and Compliance. The Board 

may, from time to time, establish or maintain additional committees as the Board deems necessary or appropriate. All the 

standing committees are comprised solely of non-employee, independent directors under the rules of the Securities and 

Exchange Commission and The Nasdaq Global Select Market listing standards. Each committee acts under a written 

charter setting forth its responsibilities and duties. Charters for each committee are available on the Company’s website, 

inc.skywest.com, and are also available in print, free of charge, upon request. Requests for a printed copy of any 

committee charter should be submitted to Eric J. Woodward, Chief Accounting Officer of the Company, at 444 South 

River Road, St. George, Utah 84790. 

The table below shows current membership for each of the standing Board committees: 

 

 Nominating & Corporate 

Audit Compensation Governance Safety and Compliance 

W. Steve Albrecht* Keith E. Smith* Steven F. Udvar-Hazy* Andrew C. Roberts* 

Henry J. Eyring Henry J. Eyring W. Steve Albrecht Meredith S. Madden 

Andrew C. Roberts Meredith S. Madden Ronald J. Mittelstaedt Ronald J. Mittelstaedt 

Keith E. Smith Ronald J. Mittelstaedt James L. Welch James L. Welch 

James L. Welch Steven F. Udvar-Hazy 

* Committee Chair 
18 

Audit Committee 

The Audit Committee has five members and met eight times during the year ended December 31, 2019. The 

Board has determined that Mr. W. Steve Albrecht, Chair of the Audit Committee, is an “audit committee financial 

expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Exchange Act of 1934, as 

amended (the “Exchange Act”). 

The Audit Committee’s responsibilities, which are discussed in further detail in its charter, include the 

responsibility to: 

• Establish and implement policies and procedures for review and approval of the appointment, 

compensation and termination of the independent registered public accounting firm; 

• Review and discuss with management and the independent registered public accounting firm the audited 

financial statements of the Company and the Company’s financial disclosure practices; 

• Pre-approve all audit and permissible non-audit fees; 

• Provide oversight of the Company’s internal auditors; 

• Hold meetings and executive sessions periodically with the Company’s independent registered public 

accounting firm, the Company’s internal auditors and management to review and monitor the adequacy and 

effectiveness of the Company’s financial reporting, internal controls and risk assessment and compliance 

with Company policies; 

• Review the Company’s consolidated financial statements and related disclosures; 

• Review with management and the Company’s independent registered public accounting firm and approve 

disclosure controls and procedures and accounting principles and practices; and 

• Perform other functions or duties deemed appropriate by the Board. 

Additional information regarding the Audit Committee’s processes and procedures is addressed below under the 

heading “Report of the Audit Committee.” 

Compensation Committee 

The Compensation Committee has five members and met three times during the year ended December 31, 2019. 

The Compensation Committee’s responsibilities, which are discussed in detail in its charter, include the responsibility to: 

• In consultation with the Company’s senior management, establish the Company’s general compensation 

philosophy and oversee the development and implementation of the Company’s compensation programs; 

• Recommend to the Board the base salary, incentive compensation and any other compensation for the 

Company’s CEO and review and approve the CEO’s recommendations for the compensation of all other 

officers of the Company; 

• Administer the Company’s incentive and stock-based compensation plans, and discharge the duties 

imposed on the Compensation Committee by the terms of those plans; 
19 

• Review and approve any severance or termination payments proposed to be made to any current or former 

officer of the Company; 

• Prepare and issue the report of the Compensation Committee required by the rules of the Securities and 

Exchange Commission; and 

• Perform other functions or duties deemed appropriate by the Board. 

Additional information regarding the Compensation Committee’s processes and procedures for consideration of 

executive compensation are addressed below under the Heading “Compensation Discussion and Analysis.” The report of 

the Compensation Committee is set forth on page 35 of this Proxy Statement. 

Nominating and Corporate Governance Committee 

The Nominating and Corporate Governance Committee has four members and met twice during the year ended 

December 31, 2019. The Nominating and Corporate Governance Committee’s responsibilities, which are discussed in 

detail in its charter, include the responsibility to: 

• Develop qualifications and criteria for selecting and evaluating directors and nominees; 

• Consider and propose director nominees; 

• Make recommendations to the Board regarding Board compensation; 

• Make recommendations to the Board regarding Board committee memberships; 

• Develop and recommend to the Board corporate governance guidelines; 

• Facilitate an annual assessment of the performance of the Board and each of its standing committees; 

• Consider the independence of each director and nominee for director; and 

• Perform other functions or duties deemed appropriate by the Board. 

Safety and Compliance Committee 

The Safety and Compliance Committee has four members and met once during the year ended December 31, 

2019. The responsibilities of the Safety and Compliance Committee, which are discussed in detail in its charter, include 

the responsibility to: 

• Review and make recommendations to the Board addressing airline flight operations, safety and 

compliance with safety regulations; 

• Periodically review with the Company’s management, and such advisors as the Safety and Compliance 

Committee deems appropriate, aspects of flight operations, safety and compliance with safety regulations; 

and 

• Monitor and provide input with respect to management’s efforts to create and maintain a safety culture 

within the Company’s operations. 
20 

Nomination Process 

The policy of the Nominating and Corporate Governance Committee is to consider properly submitted 

shareholder recommendations for candidates to serve as directors of the Company. In evaluating those recommendations, 

the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and 

capability on the Board and to address the membership criteria described below. Any shareholder wishing to recommend 

a candidate for consideration by the Nominating and Corporate Governance Committee should submit a recommendation 

in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation 

of the candidate’s consent to serve as a director. This information should be addressed to Jerry C. Atkin, Board Chair of 

the Company, 444 South River Road, St. George, Utah 84790. 

As contemplated by the Company’s Corporate Governance Guidelines, the Nominating and Corporate 

Governance Committee reviews the appropriate skills and characteristics required of directors in the context of the 

current composition of the Board at least annually. There is currently no set of specific minimum qualifications that must 

be met by a nominee recommended by the Nominating and Corporate Governance Committee, as different factors may 

assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition 

and the Nominating and Corporate Governance Committee’s perceptions about future issues and needs. Among the 

factors the Nominating and Corporate Governance Committee considers, which are outlined in the Corporate 

Governance Guidelines, are independence, diversity, age, skills, integrity and moral responsibility, policy-making 

experience, ability to work constructively with the Company’s management and directors, capacity to evaluate strategy 

and reach sound conclusions, availability of time and awareness of the social, political and economic environment. 

In addition, board diversity is considered broadly, not merely with regard to race, gender, or national origin, but 

also with regard to general background, geographical location, and other factors. The Board believes that ethnic, gender 

and cultural diversity among its members provides value and is important. In considering a potential new candidate, the 

Board considers whether the candidate would increase the Board’s ethnic, gender or cultural diversity. The consideration 

of diversity permeates all discussions of the Nominating and Corporate Governance Committee. Additionally on an 

annual basis, as part of the Board’s self-evaluation process, the Board assesses whether the mix and diversity of board 

members is appropriate.

The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and 

evaluating director nominees. The Nominating and Corporate Governance Committee assesses the appropriate size of the 

Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies 

are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee considers various potential 

candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee 

through various means, including current directors, professional search firms, shareholder recommendations or other 

referrals. Candidates are evaluated at meetings of the Nominating and Corporate Governance Committee, and may be 

considered at any point during the year. All director-nominee recommendations which are properly submitted to the 

Nominating and Corporate Governance Committee are aggregated and considered by the Nominating and Corporate 

Governance Committee at a meeting prior to the issuance of the proxy statement for the next annual meeting of 

shareholders. Any materials provided by a shareholder in connection with the recommendation of a director candidate 

are forwarded to the Nominating and Corporate Governance Committee, which considers the recommended candidate in 

light of the director qualifications discussed above. The Nominating and Corporate Governance Committee also reviews 

materials provided by professional search firms, if applicable, or other parties in connection with a candidate who is not 

proposed by a shareholder. In evaluating such recommendations, the Nominating and Corporate Governance Committee 

seeks to achieve a balance of knowledge, experience and capability on the Board. The Nominating and Corporate 

Governance Committee has, on occasion, engaged professional search firms to assist in identifying qualified candidates 

for Board service. When such firms have been engaged, the Nominating and Corporate Governance Committee has 

utilized their services principally for the purpose of identifying and screening potential candidates and conducting 

background research; however, the members of the Nominating and Corporate Governance Committee, as well as other 
21 

directors of the Company, have conducted interviews with prospective candidates and have performed other functions in 

completing the nomination process. 

Compensation Committee Interlocks and Insider Participation 

Keith E. Smith, Henry J. Eyring, Meredith S. Madden, Ronald J. Mittelstaedt and Steven F. Udvar-Hazy served 

as members of the Compensation Committee during the year ended December 31, 2019. None of the individuals who 

served on the Compensation Committee during the year ended December 31, 2019 was an officer or employee of the 

Company in 2019 or any time prior thereto. None of the members of the Compensation Committee during the year ended 

December 31, 2019 had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K 

promulgated under the Exchange Act. None of the executive officers of the Company served as a member of the 

Compensation Committee or of any similar committee of any other company whose executive officer(s) served as a 

director of the Company. 

 
22 

COMPENSATION DISCUSSION AND ANALYSIS 

The following compensation discussion and analysis provides information regarding the Company’s executive 

compensation objectives, principles, practices and decisions as they relate to the following named executive officers of 

the Company (the “Named Executives”) for 2019: 

• Russell A. Childs, CEO and President of the Company and its operating subsidiary, SkyWest Airlines (the 

"Chief Executive"); 

• Robert J. Simmons, Chief Financial Officer of the Company and its operating subsidiary, SkyWest 

Airlines; 

• Wade J. Steel, Chief Commercial Officer of the Company and its operating subsidiary, SkyWest Airlines; 

• Michael B. Thompson, Chief Operating Officer of SkyWest Airlines; 

• Eric J. Woodward, Chief Accounting Officer of the Company and its operating subsidiary, SkyWest 

Airlines; and 

• Terry M. Vais, former Chief Operating Officer of ExpressJet Airlines, Inc. (“ExpressJet”) 

Mr. Vais separated from the Company on February 12, 2019. Mr. Vais was not granted any equity grants or 

cash incentives for his 2019 services. As a result, he is only included in the compensation discussion and analysis 

sections below to the extent applicable. 

This compensation discussion and analysis provides narrative perspective to the tables and disclosure in the 

tables following this section. 

Compensation Objectives and Principles 

The overall objective of the Company’s executive compensation programs is to create long-term value for the 

Company’s shareholders by attracting and retaining talented executives that effectively manage the Company in a 

manner that is consistent with the long-term interest of shareholders. 

Accordingly, the executive compensation program incorporates the following principles: 

• The overall compensation package should encourage long-term focus and shareholder value creation; 

• A significant amount of total compensation should be incentive based, and should correlate rewards with 

the Company’s financial performance, as well as the achievement of operational objectives; 

• Compensation should be competitive with other airlines in order to attract and retain talented executives; 

• Compensation should be based upon individual responsibility, leadership ability and experience; and 

• Compensation should not encourage the taking of undue risk that could cause material harm to the 

Company. 
23 

All of the Named Executives’ total annual target compensation for 2019 was set below the median for total 

annual target compensation in our peer group, as further described below. 

Current Year Accomplishments 

SkyWest made great strides operationally and structurally in 2019, positioning itself for changes in the industry 

and future profitability by adding new aircraft with improved economics under Mr. Childs’ leadership. 

The Company’s income before income taxes under generally accepted accounting principles in the United 

States (“GAAP”) improved to $446 million in 2019, from $366 million in 2018. GAAP operating income improved to 

$512 million in 2019, from $474 million in 2018. These improvements reflected above-median performance against our 

compensation peer group. The improvements in 2019 were driven, in part, by the following accomplishments: 

• The continued improvement in aircraft fleet mix can be summarized as follows: 

o Took delivery of ten new Embraer dual-class regional jet ("E175") aircraft and seven new CRJ900 

aircraft under flying contracts that we believe will improve our profitability; and 

o Sold ExpressJet in January 2019, which removed 100 ERJ145 aircraft from service. 

• The Company secured a multi-year flying contract extension on 38 CRJ700 aircraft with American. 

• The Company secured a flying agreement with Delta for six used E175 aircraft that were operated a 

regional airline transitioning out of Delta Connection. 

• The Company secured an agreement to lease 29 CRJ700 aircraft to a third-party for a ten-year term. 

• The Company purchased 56 CRJ aircraft through early lease buyouts reducing the aircraft ownership cost 

and eliminating lease return cost obligations; and 

• The Company’s net income was $340 million, or $6.62 per diluted share for the 2019 year, compared to net 

income of $280 million, or $5.30 per diluted share for the 2018 year. The Company’s adjusted net income 

for the 2019 year was $321 million, or $6.25 per diluted share, excluding the gain on the sale of ExpressJet 

and other special items recorded in 2019 (see Appendix A to the Proxy Statement for a reconciliation of 

Non-GAAP financial measures). 

These accomplishments not only improved the Company’s performance in 2019, but the Board believes the 

fleet and contract improvements position the Company well for the future. 

Role of the Compensation Committee. The Compensation Committee has responsibility for establishing and 

monitoring the executive compensation programs and for making decisions regarding executive compensation. The 

Chief Executive regularly attends the Compensation Committee meetings, and the Compensation Committee also meets 

regularly in executive sessions. The Chief Executive is not present for deliberations by the Compensation Committee 

regarding his compensation. The Compensation Committee recommends the Chief Executive’s compensation to the 

Board, which then reviews and approves the Committee’s recommendation, unless the Committee is required to approve 

such compensation under applicable law. The Compensation Committee also considers the recommendations of the 

Chief Executive with respect to compensation of the other Named Executives, and after reviewing such 

recommendations, determines their compensation. The Compensation Committee also monitors, administers and 

approves awards under the various incentive compensation plans for all levels within the Company, including awards 

under the Company’s annual cash incentive plan and 2019 Long-Term Incentive Plan (the “2019 Plan”). As permitted by 
24 

the 2019 Plan, the Compensation Committee has delegated its authority to the Chief Executive to approve interim awards 

under the 2019 Plan to non-executives on a limited basis between meetings of the Compensation Committee. 

Role of Consultants. During 2018 and 2019, the Company and the Compensation Committee received advice 

from Frederic W. Cook & Co., Inc. (“F.W. Cook”) with respect to executive compensation practices within the airline 

and related transportation and logistics industries using data from the peer group listed below. The Company and the 

Compensation Committee retained F.W. Cook to advise on the amounts and forms of compensation awarded to Named 

Executives in 2018 and 2019. After conducting an evaluation using the factors established by the Securities and 

Exchange Commission and The Nasdaq Global Select Market, the Compensation Committee determined that F.W. Cook 

is independent and that there is no conflict of interest resulting from the engagement of F.W. Cook during 2019. The 

Compensation Committee has sole authority to hire and fire external compensation consultants. 

Industry Compensation Data. The Compensation Committee evaluates data regarding the executive 

compensation programs of other air carriers, as well as other transportation and logistics companies, in order to 

determine the competitiveness of the Company’s executive compensation programs. The Compensation Committee 

performed such a review in November 2018 and again in November 2019, which included a review of the executive 

compensation levels and practices at peer companies where SkyWest approximates the median in enterprise value and 

market capitalization. The peer companies used in the November 2018 review for purposes of setting 2019 executive 

compensation were: Air Canada Inc., Alaska Air Group, Inc., Allegiant Travel Company, Atlas Air Worldwide 

Holdings, Inc., Genesee & Wyoming Inc., Hawaiian Holdings, Inc., Hub Group, Inc., J.B. Hunt Transport Services, Inc., 

JetBlue Airways Corporation, Kansas City Southern, Old Dominion Freight Line, Inc., Spirit Airlines, Inc., Werner 

Enterprises, Inc., WestJet Airlines Ltd., XPO Logistics, Inc. and YRC Worldwide Inc. The peer group was modified in 

November 2019 to remove XPO Logistics, Inc. because it was too large based on the metrics for selection, and it was 

replaced with Mesa Air Group, Inc., which the Compensation Committee determined was a relevant contract air carrier. 

The Compensation Committee had the 2018 peer group data available when 2019 Named Executive 

compensation decisions were made at the start of the year and it had the 2019 compensation peer group data available 

when it approved cash incentive payouts for 2019. 

Compensation Determination. The Compensation Committee relies on its judgment in making compensation 

decisions in addition to reviewing relevant information and results. When setting total compensation for each of the 

Named Executives, the Compensation Committee reviews tally sheets which show the Named Executive’s current 

compensation, including base pay, annual cash incentive objectives, long-term, equity-based compensation objectives, 

and deferred compensation retirement funding. The executive compensation procedures and the Compensation 

Committee assessment process take into account these tally sheets as well as the industry compensation data described 

above, company performance, the results of the most recent say-on-pay vote, performance expected in the current and 

upcoming years, and such other factors as the Compensation Committee determines are appropriate. The Compensation 

Committee has the sole discretion to award compensation and make adjustments to awards based on its review of 

relevant information and other unusual or non-recurring items. 

The Company does not target specific pay levels and uses the peer company market data for context. The 

Company’s directors rely upon their judgment in making compensation decisions, after reviewing the factors described 

above. Competitive compensation paid by other companies is one of the many factors that the Company considers in 

assessing the reasonableness of compensation and the Company does not attempt to maintain a certain target percentile 

within a peer group. Nevertheless, the Committee set target total direct compensation below the median of similar 

positions in the peer group. 

The Company strives to achieve an appropriate mix between long-term equity incentive awards and cash 

payments in order to meet its objectives. The Company’s mix of compensation elements is designed to reward recent 
25 

results, align compensation with shareholder interests and fairly compensate executives through a combination of cash 

and equity incentive awards. 

Compensation Committee Consideration of Shareholder Advisory Vote. At the Company’s Annual Meeting of 

Shareholders held in May 2019, the Company submitted the compensation of its named executive officers to the 

Company’s shareholders in a non-binding vote. The Company’s executive compensation program received the support 

of more than 97% of votes cast. The Compensation Committee considered the results of the 2019 vote and views the 

outcome as evidence of positive shareholder support of its executive compensation decisions and policies. 

The Compensation Committee continued to refine the Company’s executive compensation program for 2019 in 

an effort to better align the compensation packages of the Named Executives with the executive compensation programs 

of other regional carriers and major airlines. The Compensation Committee will continue to review the peer group data 

and future shareholder voting results, including the voting results with respect to “Proposal 2—Advisory Vote on Named 

Executive Compensation” described in this Proxy Statement, and determine whether to make any changes to the 

Company’s executive compensation program in light of such data and voting results. 

Elements of Compensation 

The Company’s executive compensation objectives and principles are implemented through the use of the 

following principal elements of compensation, each discussed more fully below: 

• Salary 

• Annual Cash Incentive 

• Long-Term Incentive Awards 

• Retirement and Other Benefits 

The compensation components for each Named Executive for 2019 are more fully described in the following 

paragraphs. 

Salary. Salary is provided with the objective of paying for the underlying role and responsibility associated 

with the Named Executive’s position, which the Compensation Committee believes allows the Company to attract and 

retain qualified executives. The Named Executives’ salaries are set at levels that the Compensation Committee believes 

are generally competitive with the compensation paid to officers in similar positions at other airlines. Salary adjustments 

are considered annually and influenced by growth of the Company’s operations, individual performance, changes in 

responsibility, changes in cost of living, and other factors. Mr. Childs was provided a $40,000 increase to his base salary 

for 2019 over his 2018 base salary. Mr. Simmons was provided a $10,000 increase to his base salary for 2019 over his 

respective 2018 base salary. Mr. Steel was provided a $20,000 increase to his base salary for 2019 over his respective 

2018 base salary. Mr. Thompson was provided a $5,000 increase to his base salary for 2019 over his respective 2018 

base salary. Mr. Woodward was provided a $6,000 increase to his base salary for 2019 over his respective 2018 base 

salary. The salaries of the Named Executives are set forth in the Summary Compensation Table immediately following 

this section. The salaries of all Named Executives in 2019 were below the median salary level of similar positions in our 

peer group. 

Annual Cash Incentive. In an effort to encourage achievement of the Company’s objectives, an annual 

performance-based cash incentive plan is maintained for the Named Executives. The combination of salary and annual 

cash incentives is intended to result in a cash compensation package for each Named Executive that, when performance 

objectives are met, falls within competitive market standards as determined by the Compensation Committee based on its 
26 

review of the peer group company data, as well as its understanding of other regional and major air carrier executive 

compensation programs. The review of market data in November 2019 showed that the 2019 total cash opportunity of 

the Named Executives, consisting of salary plus target cash incentive, and was below the median for all Named 

Executives when compared to the peer group competitive market data. 

The purpose of the annual cash incentive program is to reward the Named Executives with an annual cash 

incentive in an amount that correlates (i) in part, to one or more financial objectives achieved for the year; and (ii) in 

part, to the achievement of one or more specific operational objectives during the year. The 2019 annual target incentive 

opportunity was 110% of salary for Mr. Childs, 80% of salary for Messrs. Simmons, Steel and Thompson and 60% of 

salary for Mr. Woodward, and their potential annual incentive was allocated by the Compensation Committee for the 

Named Executives between the applicable financial and operational objectives. The differing percentages for the Named 

Executives are due to differing entity level responsibilities. 

2019 Corporate Performance Objectives. For 2019 annual incentive determination purposes, the 

Compensation Committee determined that pre-tax earnings would be the financial objective and that controllable 

completion and controllable on time departures would be the operational objectives. These are viewed as value drivers 

for shareholders that are also in the control of the executive team through their financial and operating decisions and 

leadership. In the case of Messrs. Childs, Simmons, Steel and Woodward, the applicable pre-tax earnings objective and 

controllable completion objective were based on the pre-tax earnings and controllable completion of the entire Company. 

This is because they are corporate level executives with Company-wide responsibility and accountability. 

Mr. Thompson’s pre-tax earnings objective, controllable completion objective and controllable on time departure 

objective were set solely based on the SkyWest Airlines operating segment, since this is his area of responsibility and 

accountability. 

• 2019 Financial Objective. In setting the 2019 pre-tax earnings objective, the Compensation Committee 

considered both the planned 2019 budget, as well as the level of pre-tax earnings that would reflect strong 

performance and generate shareholder value. The pre-tax earnings objective was set to encourage continued 

focus on profitability and to facilitate the exchange of best practices between the Company’s operating 

subsidiaries. The earnings goal was set above the median of trailing four quarter peer group earnings 

available at the time. 

• 2019 Operational Objective. A portion of the Named Executives’ annual cash incentives is based on 

achievement of operating objectives established at the start of the year. The Compensation Committee 

believes the use of operating objectives allows for consideration of operating execution and achievements 

that may not be reflected by corporate financial performance. For 2019, the Compensation Committee 

determined that the operational objectives would be tied to both controllable completion and controllable 

on time departures. Controllable completion is the percentage of completed scheduled flights over which 

SkyWest Airlines had control, excluding cancelled flights due to uncontrollable factors such as weather. 

Controllable on time departures is the percentage of flights departing the gate at or before scheduled 

departure time over which SkyWest Airlines had control, excluding delayed flights due to uncontrollable 

factors such as weather. 

The Compensation Committee established threshold, target and maximum objectives for each of the financial 

and operational objectives. At threshold performance achievement, the Named Executives were able to earn 50% of their 

target annual incentive, while the maximum performance allowed by the Named Executives to earn 200% of their target 

annual incentive. 

At year-end, the Compensation Committee reviewed the actual pre-tax earnings and operating performance for 

the year and determined the extent to which the applicable objectives were met. The actual amount of the cash incentive 
27 

payment for each Named Executive is determined by the Compensation Committee based on the Company’s and/or 

SkyWest Airlines’ achievement of the foregoing objectives and the actual cash incentives paid for 2019 were based on 

the pre-established 2019 cash incentive formula, without application of discretion. 

The table below includes the “threshold,” “target” and “maximum” objectives assigned by the Compensation 

Committee for the corporate performance measures for 2019 and the 2019 performance relative to those objectives for 

the Named Executives (dollars in millions). 

 

2019 Annual Cash Incentive Objectives Interpolated Weighted 

 Threshold Target Maximum Achieved Payout Weight Payout 

SkyWest, Inc. 

Pre-tax Earnings ($ millions) ............... $ 362 $ 402 $ 442 $ 405.6 109.0% 70.0 % 76.3% 

Operating Objective - Controllable completion . . 99.6 % 99.8 % 99.9 % 99.87 % 170.0% 20.0 % 34.0% 

Operating Objective – Controllable departures . . 75.0 % 80.0 % 85.0 % 79.85 % 97.0% 10.0 % 9.7% 

Total Annual Cash Incentive Results 

(% of Target) . . . . . . . . . . . . . . . . . . . . . . . . . 120.0% 

SkyWest Airlines 

Pre-tax Earnings ($ millions) ............... $ 270 $ 300 $ 330 $ 271.0 51.8% 70.0 % 36.3% 

Operating Objective - Controllable completion . . 99.6 % 99.8 % 99.9 % 99.87 % 170.0% 20.0 % 34.0% 

Operating Objective - Controllable departures . . 75.0 % 80.0 % 85.0 % 79.85 % 97.0% 10.0 % 9.7% 

Total Annual Cash Incentive Results 

(% of Target) . . . . . . . . . . . . . . . . . . . . . . . . . 80.0% 

The Company’s achieved pre-tax earnings of $405.6 million for purposes of the 2019 annual incentive plan 

payouts included certain adjustments to GAAP pre-tax earnings, including items relating to the sale of ExpressJet, writeoff of aircraft manufacturer parts credit, and other income items not included in the target setting process. The 

Compensation Committee believes these adjustments to GAAP pre-tax earnings lead to continued focus on long-term 

profitability and incentivize Named Executives to make beneficial long-term business decisions and will enhance the 

Company’s long-term financial performance and ability to respond to its major airline partners’ future needs. 

If the Company’s pre-tax earnings or operating objective achieved results were between two achievement 

levels, “threshold,” “target” and “maximum”, the earned achievement was determined by linear interpolation between 

the applicable achievement levels. 

The corresponding annual cash incentive payments earned for each Named Executive based on performance 

during the year ended December 31, 2019, are set forth below.

 

 Total 

 Target Target Annual Total

 Annual Annual Cash Annual

 Cash Cash Incentive Cash

 Incentive Incentive Results Incentive

 (% of Salary) ($) (% of Target) Results ($)

Russell A. Childs . . . . . . . 110.0 % $ 550,000 120.0 % $ 660,000 

Robert J. Simmons . . . . . 80.0 % $ 276,000 120.0 % $ 331,200 

Wade J. Steel . . . . . . . . . . 80.0 % $ 268,000 120.0 % $ 321,600 

Michael B. Thompson . . . 80.0 % $ 200,000 80.0 % $ 160,000 

Eric J. Woodward . . . . . . 60.0 % $ 126,600 120.0 % $ 151,920 
28 

Amount of 2019 Performance-Based Annual Cash Incentive. The total annual performance-based cash 

incentive amounts earned by the Named Executives for 2019 are included in the amounts shown in the Summary 

Compensation Table below under the caption heading “Non-Equity Incentive Plan Compensation.” 

Long-Term Incentive Awards. The Company grants discretionary long-term incentive awards, in the form 

of restricted stock units and performance shares to the Named Executives annually. 

Long-term incentive awards are made to encourage the Named Executives to continue their engagement with 

the Company throughout the vesting periods of the awards and to align management and shareholder interests. In making 

awards to the Named Executives, the grant size and the appropriate mix of equity-based awards are considered. The 

Compensation Committee generally grants long-term incentive awards at its first meeting of each year. Long-term 

incentive awards generally vest only if the Named Executive remains employed by the Company for three years from the 

date of grant. The three-year cliff-vesting schedule for time-based restricted stock unit awards is to assist with retaining 

Named Executives and to encourage the Named Executives to focus on the Company’s long-term performance. Equity 

incentive awards granted during 2019, accelerate vesting under certain circumstances, as described in the section 

Potential Payments upon Termination or Change in Control. 

Amount and allocation of grant—For 2019, the total annual targeted long-term incentive grant value was 

$2,200,000 for Mr. Childs, $775,000 for Mr. Simmons, $775,000 for Mr. Steel, $650,000 for Mr. Thompson and 

$248,000 for Mr. Woodward. The Compensation Committee established these annual targeted amounts to provide a 

competitive target total compensation when combined with the salary and target bonus that was above the 25th percentile 

but below the median. The equity award is to ensure that a material portion of each Named Executive’s compensation 

was based on continuing long-term service and correlated to the creation of shareholder value. Each Named Executive’s 

2019 long-term incentive award was allocated among the two types of long-term incentive awards as follows: restricted 

stock units and performance shares. The target value of 2019 equity compensation was generally below the median of 

the 2019 peer data reviewed by the Compensation Committee for all Named Executive Officer positions. 

Restricted stock unit and performance share grants in 2019 were made pursuant to the Company’s 2010 Plan, as 

shown in greater detail below and in the table labeled “Grants of Plan Based Awards.” 

The following table summarizes the number and nature of long-term incentive awards granted to the Named 

Executives by the Company in 2019.

 Time Vesting Awards Performance Vesting Awards 

 Number of Restricted Stock Units “Target” Performance Shares (1) 

Russell A. Childs . . . . . . . . . . . 18,163 27,245 

Robert J. Simmons . . . . . . . . . 6,398 9,598 

Wade J. Steel . . . . . . . . . . . . . . 6,398 9,598 

Michael B. Thompson . . . . . . . 5,366 8,050 

Eric J. Woodward . . . . . . . . . . 2,047 3,071 

(1) Number of performance shares if 100% of target is achieved, although the threshold earnout is 50% of target and the 

maximum earnout is 200% of target. 

Restricted Stock Units—The Company granted restricted stock units to the Named Executives in 2019 under the 

2010 Long-Term Incentive Plan (the “2010 Plan”). Restricted stock units comprised 40% of each Named Executive's 

2019 long-term incentive compensation. The restricted stock units awarded to a Named Executive entitle the Named 

Executive to receive a designated number of shares of Common Stock upon completion of a three-year vesting period, 

measured from the date of grant. Until the vesting date, the shares underlying the restricted stock units are not issued and 

outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on the shares underlying his 
29 

restricted stock units unless and until those restricted stock units vest. The purpose of the restricted stock unit component 

is to support continued employment through volatile economic and stock market conditions, to manage dilution 

overhang, and to align officers’ interests with maintaining shareholder value already created as well as future value 

creation. The Compensation Committee believes this approach mitigates the incentive for Named Executives to take 

unnecessary risks and helps retain the Named Executives’ expertise through continued employment. 

Performance Shares. 

2019-2021 Performance Share Awards. The remaining component of each Named Executive’s 2019 annual 

long-term incentive compensation was performance shares payable in Common Stock under the 2010 Plan. Performance 

share value comprised 60% of each Named Executive's 2019 long-term incentive compensation (target performance 

share value is stock price at grant multiplied by the shares earned if the objectives are achieved). The purpose of the 

performance share awards is to reward achievement of the three-year financial plan, which the Company believes will 

also support shareholder value achievement. Under each Named Executive’s performance shares award, a number of 

performance shares will vest upon completion of a three-year performance period from the date of the grant (subject to 

the Named Executive’s continued employment through the last day of the performance period), based on the 

achievement of certain corporate performance objectives. 

For purposes of the performance share awards granted in 2019, which will be eligible to vest based on corporate 

performance during the three-year performance period ending December 31, 2021 (the “2019-2021 PSU Awards”), the 

Compensation Committee set three-year performance share objectives, based on cumulative three-year adjusted earnings 

before interest, taxes, depreciation and amortization (“EBITDA”) per share, three-year average return on capital 

objectives and three-year average controllable completion. Under each Named Executive’s performance share award, the 

performance shares are eligible to vest (and be settled in shares of Common Stock) upon completion of the three-year 

performance period (subject to the Named Executive’s continued employment through the last day of the performance 

period), based on the level of EBITDA per share, adjusted return on invested capital and controllable completion actually 

attained in aggregate over the 2019 to 2021 calendar years. Until the vesting date, the shares underlying the performance 

shares are not issued and outstanding. Accordingly, the Named Executive is not entitled to vote or receive dividends on 

the shares underlying his performance shares unless and until those performance shares vest. For purposes of the 2019-

2021 PSU Awards, return on invested capital for any calendar year is defined as the Company's adjusted operating 

income for such year divided by the Company's average invested capital for such calendar year.

The Compensation Committee’s philosophy for setting performance share targets is to set target awards that 

reflect the three-year budget (the budget expectation is for a growth rate that is above the median), and maximum targets 

that will be difficult for the Named Executives to achieve on a consistent basis. For the 2019-2021 PSU Awards, the 

Compensation Committee established threshold, target and maximum performance levels for each of the three corporate 

performance objectives, with the actual number of performance shares that will vest to be adjusted in proportion to the 

extent to which the combined actual results varied from the target levels of performance. The performance shares are 

allocated 40% to the cumulative three-year EBITDA per share objective, 40% to the three-year average return on 

invested capital objective and 20% to the three-year average controllable completion in determining the actual awarded 

performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each 

objective according to the weightings assigned by the Compensation Committee will be earned ranging from 50% (for 

threshold performance) to 100% (for target performance) to 200% (for maximum performance), with performance in 

between such levels determined by linear interpolation. If performance is below the threshold level for one or more of 

the objectives, no performance shares will be earned with respect to such objective(s).

The corporate objectives for the 2019-2021 PSU Awards for each Named Executive were based on the 

Company-wide performance, with no individual component or subsidiary-level objectives, in order to encourage 

teamwork and a collective focus on the creation of long-term value for the Company’s shareholders. In determining the 

degree to which the corporate objectives have been attained, the Company’s performance will be adjusted for unusual or 

non-recurring items. 
30 

Actual results for 2019-2021 PSU Awards are measured over the three-year performance period. Therefore, the 

degree to which performance shares granted in 2019 ultimately earned will not be determined until the conclusion of the 

2021 calendar year. 

2017-2019 Performance Shares. 

For purposes of the performance share awards granted in 2017, which were eligible to vest based on corporate 

performance during the three-year performance period ending December 31, 2019 (the “2017-2019 PSU Awards”), the 

Compensation Committee set three-year performance share objectives, based on cumulative three-year adjusted pre-tax 

earnings and three-year average return on capital objectives. Under each Named Executive’s performance share award, 

the performance shares are eligible to vest (and be settled in shares of Common Stock) upon completion of a three-year 

performance period (subject to the Named Executive’s continued employment through the last day of the performance 

period), based on the level of adjusted pre-tax earnings and adjusted return on invested capital actually attained in 

aggregate over the 2017 to 2019 calendar years. 

For the 2017-2019 PSU Awards, the Compensation Committee established threshold, target and maximum 

performance levels for each of the two corporate performance objectives, with the actual number of performance shares 

that will vest to be adjusted in proportion to the extent to which the combined actual results varied from the target levels 

of performance. The performance shares are allocated 60% to the cumulative three-year adjusted pre-tax earnings 

objective and 40% to the three-year average return on invested capital objective in determining the actual awarded 

performance shares payable in Common Stock. Specifically, a number of performance shares attributable to each 

objective according to the weightings assigned by the Compensation Committee were earned ranging from 50% (for 

threshold performance) to 100% (for target performance) to 200% (for maximum performance), with performance in 

between such levels determined by linear interpolation. If performance is below the threshold level for one or more of 

the objectives, no performance shares were earned with respect to such objective(s).

In February 2020, the Compensation Committee determined the Company’s achievement relative to the 

objectives previously established for the 2017-2019 PSU Awards as follows (see Appendix A to this proxy statement on 

page 58 for a reconciliation of certain 2019, 2018 and 2017 non-GAAP financial measures used to calculate the 

achievement levels described below for the most directly comparable financial measures prepared in accordance with 

GAAP): 

 

 Achieved 

 Threshold Target Maximum Performance 

Adjusted Pre-tax Income ($ millions) (1) $ 804 $ 892 $ 981 $ 1,076 

Average Return on Invested Capital (2) 13.2 % 13.7 % 14.1 % 15.1 % 

(1) Adjusted pre-tax income for the three-year period ending December 31, 2019 was adjusted in 2019 for special items 

primarily associated with the sale of ExpressJet and the write-off of non-cash aircraft manufacturer part credits to 

settle future aircraft lease return obligations. 

(2) Represents the average return on invested capital for 2017, 2018 and 2019 using adjusted net income in 2019 for 

special items related to the sale of ExpressJet and the write-off of aircraft manufacturer part credits and for the Tax 

Cuts and Jobs Act benefit in 2017. For purposes of the 2017-2019 PSU Awards, return on invested capital for any 

calendar year was defined as the Company's adjusted operating income for such year divided by the Company's 

average invested capital for such calendar year. 

As a result of the foregoing, in February 2020, the Named Executives vested in the maximum number of 

performance shares relative to the 2017-2019 PSU Awards, which was 200% of their target awards: Mr. Childs, 43,564 
31 

shares; Mr. Simmons, 21,782 shares; Mr. Steel, 20,106 shares; Mr. Thompson, 15,080 shares; and Mr. Woodward, 7,708 

shares. 

Long-Term Incentive Awards for 2020. The Compensation Committee did not make any significant changes for 

the 2020 long-term incentive awards from that of the 2019 long-term incentive awards. 

No Employment and Severance Agreements

The Named Executives do not have employment, severance or change-in-control agreements, although the 

vesting of long-term equity incentive awards may accelerate under certain circumstances, as described below under 

“Elements of Compensation – Long-Term Incentive Awards.” The Named Executives serve at the will of the Board, 

which enables the Board to terminate the employment of any Named Executive with discretion as to the terms of any 

severance. This is consistent with the Company’s performance-based employment and compensation philosophy. 

Acceleration of Long-Term Incentive Awards. With respect to long-term incentive awards granted to the 

Named Executives commencing in 2017, such awards will vest on an accelerated basis under certain circumstances. 

Specifically, restricted stock unit awards granted to the Named Executives will vest on an accelerated basis 

(i) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason, or (ii) in 

the event of the Named Executive’s death. 

Performance share awards granted to the Named Executives will vest on an accelerated basis (i) in the event of 

the Named Executive’s death prior to a change in control, as to the “target” number of performance shares subject to the 

award on the date of death and as to any incremental performance shares above “target” based on the Company’s actual 

performance relative to the corporate performance objectives under such award at the end of the three-year performance 

period (or, if earlier, a change in control of the Company), (ii) in the event of the Named Executive’s death following a 

change in control, any “vesting eligible shares” (as described below) will vest upon the date of death, (iii) in the event of 

the Named Executive’s involuntary termination without cause or resignation for good reason, in each case prior to a 

change in control, the Named Executive will remain eligible to vest in such number of performance shares as ultimately 

vest based on the Company’s actual performance relative to the corporate performance objectives under such award at 

the end of the three-year performance period (or, if earlier, a change in control of the Company), which vesting will be 

prorated for the portion of the performance period that has elapsed prior to the date of termination, or (iv) in the event of 

the Named Executive’s involuntary termination without cause or resignation for good reason, in each case following a 

change in control, any vesting eligible shares will vest upon the date of such termination. For purposes of the 

performance shares, in the event of a change in control of the Company, the performance shares will be converted into a 

number of “vesting eligible shares” that will vest at the end of the three-year performance period based on the greater of 

(i) the “target” number of performance shares subject to the award, or (ii) the number of performance shares that would 

vest if performance had been measured against the corporate performance objectives as of the date of the change in 

control. 

Retirement and Other Benefits. 

The Company and SkyWest Airlines sponsor a 401(k) retirement plan for their eligible employees, including 

the Named Executives other than Mr. Vais. Prior to the sale of ExpressJet, ExpressJet also maintained a substantially 

equivalent 401(k) plan for its eligible employees, including Mr. Vais. Both plans are broad based, tax-qualified 

retirement plans under which eligible employees, including the Named Executives, may make annual pre-tax salary 

reduction contributions subject to the various limits imposed under the Internal Revenue Code of 1986, as amended (the 

“Code”). The sponsoring employers make matching contributions under the plans on behalf of eligible participants; 

however, the right of Named Executives and other officers to such matching contributions is limited. The Compensation 
32 

Committee believes that maintaining the 401(k) retirement plans and providing a means to save for retirement is an 

essential part of a competitive compensation package necessary to attract and retain talented executives. 

The Company also maintains the SkyWest, Inc. 2002 Deferred Compensation Plan, a non-qualified deferred 

compensation plan for the benefit of officers and other highly compensated employees. All of the Named Executives 

other than Mr. Vais participate in the SkyWest, Inc. 2002 Deferred Compensation Plan. Prior to the sale of ExpressJet, 

ExpressJet also maintained a separate but similar non-qualified deferred compensation plan, the ExpressJet Executive 

Deferred Compensation Plan, for its highly compensated management employees, including Mr. Vais. Under both such 

deferred compensation plans (the “Deferred Compensation Plans”), the employer credits each Named Executive’s 

account with a discretionary employer contribution equal to 15% of salary and annual cash incentive. These amounts are 

included in the Summary Compensation Table under the column “All Other Compensation”. Additional information on 

the Deferred Compensation Plans is found in the section “Non-Qualified Deferred Compensation for 2018” below. The 

purpose of the Deferred Compensation Plans is to attract and retain executive talent by assisting with building retirement 

assets over the course of their career with the Company. 

The SkyWest Inc. 2002 Deferred Compensation Plan (but not the ExpressJet Executive Deferred Compensation 

Plan) also permits eligible executives, including the Named Executives, to elect in advance of each calendar year to defer 

up to 100% of their cash salary and annual cash incentive compensation for the year. Only Mr. Simmons elected to defer 

any portion of his salary or annual cash incentive for 2019. 

The Company and its subsidiaries do not maintain any defined benefit pension plans for the Named Executives. 

Other Benefits. 

In addition to the benefits described above, the Company provides certain other benefits to the Named 

Executives that the Compensation Committee believes are generally consistent with the benefits provided to senior 

executives of other airlines. The Compensation Committee believes that those benefits, which are detailed in the 

footnotes to the Summary Compensation Table applicable to the heading “All Other Compensation” below, are 

reasonable, competitive and consistent with overall executive compensation objectives. Those benefits consist primarily 

of employer-paid premiums on health, dental and eye insurance, a personal automobile allowance, and use of Company 

owned recreational equipment. 

The Company and its subsidiaries also maintain a non-discriminatory, broad based program under which all 

full-time employees and their dependents, including the Named Executives and their dependents, may fly without charge 

on a space available basis on regularly scheduled flights of aircraft operated by the Company’s operating airline 

subsidiaries. 

The Company has not agreed to provide its Named Executives with any gross-up or reimbursement for taxes. 

Share Ownership Guidelines 

The Company maintains ownership guidelines for the Named Executives to encourage the alignment of their 

interests with the long-term interests of the Company’s shareholders. Each Named Executive is required to maintain a 

minimum ownership interest in the Company. The guideline ownership level is a number of shares of Common Stock 

having a value equal to a multiple of the annual base salary for each Named Executive. The Chief Executive’s guideline 

ownership level is five times salary while the remaining Named Executives’ guideline ownership level is three times 

salary. 

The guidelines also include an expectation that the Named Executives will hold 50% of their net after-tax profit 

shares after vesting or option exercise if the applicable guideline ownership level has not yet been met. The Named 
33 

Executives are limited in their ability to sell shares under long-term incentive awards until their applicable guideline 

ownership level is reached. Each Named Executive met the ownership guidelines at December 31, 2019. The holdings of 

the Named Executives are summarized in the table entitled “Security Ownership of Certain Beneficial Owners” below. 

Policies Against Hedging and Pledging of Company Stock 

Pursuant to the Company's Code of Ethics, in order to avoid the appearance that any Company employee is 

trading on inside information, Company officers and directors are prohibited from engaging in speculative trading such 

as short sales or trading in puts, calls, or other options on our stock or the stock of our affiliates, and are likewise 

prohibited from purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any 

decrease in the market value of our securities. 

In addition, the Company's insider trading policy expressly prohibits all directors, officers and employees from 

purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any decrease in the 

market value of the Company’s securities. Pledging the Company’s securities as collateral to secure loans is also 

prohibited.

Deductibility of Executive Compensation 

Section 162(m) of the Code imposes a $1 million annual limit on the amount that a publicly traded company 

may deduct for compensation paid to the company’s principal executive officer during a tax year or to any of the 

company’s three other most highly compensated executive officers who are still employed at the end of the tax year 

(other than the Company’s principal financial officer). Prior to 2018, the limit did not apply to compensation that met the 

requirements of Section 162(m) of the Code for “qualified performance-based compensation” (i.e., compensation paid 

only if the executive meets pre-established, objective goals based upon performance criteria approved by the Company’s 

shareholders). The Tax Cuts and Jobs Act of 2017 eliminated the “qualified performance-based compensation” exception 

to Section 162(m) of the Code and expanded the limitation on deductibility to generally include all named executive 

officers. The Compensation Committee reviews and considers the deductibility of executive compensation under 

Section 162(m) of the Code, and has reserved, and continues to reserve, the right to approve compensation that may not 

be deductible under Code Section 162(m) in order to ensure competitive levels of total compensation for the Company’s 

executive officers. 

Effect of Compensation on Risk 

The Compensation Committee believes the Company’s compensation policies and practices are designed to 

create appropriate and meaningful incentives for the Company’s employees without encouraging excessive or 

inappropriate risk taking. Among other factors, the Compensation Committee considered the following: 

• The Company’s compensation policies and practices are designed to include a significant level of 

long-term compensation, which discourages short-term risk taking; 

• The base salaries and target cash incentive opportunities the Company provides to its employees are 

generally consistent with salaries paid for comparable positions in the Company’s industry, and provide the 

Company’s employees with steady income while reducing the incentive for employees to take risks in 

pursuit of short-term benefits; 

• The Company’s cash incentive and performance equity incentive compensation is capped at levels 

established by the Compensation Committee, consistent with peer data, and at which the Compensation 

Committee believes reduces the incentive for excessive risk-taking; 
34 

• The Company has established internal controls and adopted codes of ethics and business conduct, which 

are designed to reinforce the balanced compensation objectives established by the Compensation 

Committee; and 

• The Company has adopted equity ownership guidelines for its executive officers, which the Compensation 

Committee believes discourages excessive risk-taking. 

• There is a policy against hedging stock and against pledging stock or using it as collateral. 

Based on the review outlined above, the Company has concluded that the risks arising from its compensation 

policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company. 

 
35 

COMPENSATION COMMITTEE REPORT 

The Compensation Committee has reviewed the foregoing compensation discussion and analysis and discussed 

with the Company’s management the information set forth herein. Based on such review and discussions with 

management, the Compensation Committee recommended to the Board that the foregoing compensation discussion and 

analysis be included in this proxy statement. 

The Compensation Committee 

Keith E. Smith, Chair 

Henry J. Eyring 

Meredith S. Madden 

Ronald J. Mittelstaedt 

Steven F. Udvar-Hazy 

The information contained in this Compensation Committee Report shall not be deemed to be “soliciting 

material,” to be “filed” with the Securities and Exchange Commission or be subject to Regulation 14A or Regulation 

14C or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into 

any filing of SkyWest, Inc., except to the extent that SkyWest, Inc. specifically incorporates it by reference into a 

document filed under the Securities Act of 1933 or the Exchange Act. 

 
36 

EXECUTIVE COMPENSATION 

Summary Compensation Table 

The table below summarizes the total compensation paid to or earned by each of the Named Executives for the 

years indicated. 

 

 Stock Awards Non-Equity 

 Restricted Performance Option Incentive Plan All Other 

 Salary Bonus Stock Units Shares Awards Compensation Compensation Total 

Name and Principal Position Year ($) ($)(1) ($)(2) ($)(2) ($)(2) ($)(3) ($) ($) 

Russell A. Childs .......... 2019 $500,000 $ — $ 880,000 $ 1,320,000 $ — $ 660,000 $ 251,011 (4) $ 3,611,011 

CEO & President 2018 $460,000 $ — $ 680,000 $ 1,020,000 $ — $ 940,728 $ 243,052 $ 3,343,780 

 2017 $420,000 $ — $ 520,000 $ 780,000 $ — $ 924,000 $ 213,395 $ 2,857,395 

Robert J. Simmons ........ 2019 $345,000 $ — $ 310,000 $ 465,000 $ — $ 331,200 $ 158,784 (5) $ 1,609,984 

Chief Financial Officer 2018 $335,000 $ — $ 290,000 $ 435,000 $ — $ 498,251 $ 160,115 $ 1,718,366 

 2017 $325,000 $ — $ 260,000 $ 390,000 $ — $ 520,000 $ 147,148 $ 1,642,148 

Wade J. Steel ............. 2019 $335,000 $ — $ 310,000 $ 465,000 $ — $ 321,600 $ 151,108 (6) $ 1,582,708 

Chief Commercial Officer 2018 $315,000 $ — $ 270,000 $ 405,000 $ — $ 468,505 $ 151,679 $ 1,610,184 

 2017 $300,000 $ — $ 240,000 $ 360,000 $ — $ 480,000 $ 134,287 $ 1,514,287 

Michael B. Thompson ...... 2019 $250,000 $ — $ 260,000 $ 390,000 $ — $ 160,000 $ 127,229 (7) $ 1,187,229 

Chief Operating Officer 2018 $245,000 $ — $ 240,000 $ 360,000 $ — $ 368,480 $ 125,274 $ 1,338,754 

—SkyWest Airlines 2017 $235,000 $ — $ 180,000 $ 270,000 $ — $ 376,000 $ 106,010 $ 1,167,010 

Terry M. Vais ............ 2019 $ 30,237 $ — $ — $ — $ — $ — $ 1,050,728 (8) $ 1,080,965 

Former, Chief Operating 2018 $265,000 $ — $ 232,000 $ 348,000 $ — $ 287,260 $ 90,519 $ 1,222,779 

Officer —ExpressJet 2017 $250,000 $ — $ 180,000 $ 270,000 $ — $ 200,000 $ 110,436 $ 1,010,436 

Eric J. Woodward ......... 2019 $211,000 $ — $ 99,200 $ 148,800 $ — $ 151,920 $ 84,317 (9) $ 695,237 

Chief Accounting Officer 

(1) No discretionary annual performance bonuses were awarded to the Named Executives in 2017, 2018 or 2019. 

(2) These columns show the grant date fair value of stock awards granted during the applicable fiscal year as computed 

under ASC Topic 718 (excluding estimates for forfeitures in case of awards with service-based vesting). With 

respect to the performance share awards, the grant date fair value is reported based on the probable outcome of the 

performance conditions as of the grant date. The maximum potential value of the 2019 performance share awards, 

assuming the highest level of performance achievement, is as follows: Mr. Childs, $1,560,000 (2017), $2,040,000 

(2018), $2,640,000 (2019); Mr. Simmons, $780,000 (2017), $870,000 (2018), $930,000 (2019); Mr. Steel, $720,000 

(2017), $810,000 (2018), $930,000 (2019); Mr. Thompson, $540,000 (2017), $720,000 (2018), $780,000 (2019); 

Mr. Vais, $540,000 (2017); and Mr. Woodward $297,600 (2019). These amounts do not reflect the extent to which 

the Named Executive realized or will realize an actual financial benefit from the awards. Assumptions and 

methodologies used in the calculation of these amounts are included in footnotes to the Company’s audited financial 

statements for the year ended December 31, 2019, which are included in the Company’s Annual Report on 

Form 10-K filed with the Securities and Exchange Commission. 

(3) The amounts in this column reflect the annual performance cash incentive amounts earned in the year indicated 

based on performance in that year and paid in the subsequent year. As described in the section entitled 

“Compensation Discussion and Analysis” above, annual performance cash incentives payable to the Named 

Executives are calculated based upon the financial and operational performance of the Company or its subsidiaries. 

The threshold, target and maximum amount of each Executive’s annual performance cash incentive opportunity for 

2019 is reported in the “Grants of Plan-Based Awards for 2019” table below. 

(4) All other compensation for Mr. Childs for 2019 included $218,047 of employer credits under the SkyWest Deferred 

Compensation Plan attributable to compensation earned for 2019. The remaining other compensation relates to 
37 

employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s recreational 

equipment, and discretionary matching contributions under the SkyWest 401(k) Plan. 

(5) All other compensation for Mr. Simmons for 2019 included $127,107 of employer credits under the SkyWest 

Deferred Compensation Plan attributable to compensation earned for 2019. The remaining other compensation 

relates to employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s 

recreational equipment, and discretionary matching contributions under the SkyWest 401(k) Plan. 

(6) All other compensation for Mr. Steel for 2019 included $122,455 of employer credits under the SkyWest Deferred 

Compensation Plan attributable to compensation earned for 2019. The remaining other compensation relates to 

employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s recreational 

equipment, and discretionary matching contributions under the SkyWest 401(k) Plan. 

(7) All other compensation for Mr. Thompson for 2019 included $95,575 of employer credits under the SkyWest 

Deferred Compensation Plan attributable to compensation earned for 2019. The remaining other compensation 

relates to employer-paid health insurance premiums, a personal vehicle lease, personal use of the Company’s 

recreational equipment, and discretionary matching contributions under the SkyWest 401(k) Plan. 

(8) All other compensation for Mr. Vais includes $1.0 million in severance paid to Mr. Vais during 2019 in connection 

with his separation from the Company pursuant to his severance and release agreement, as further described below, 

$4,751 in employer credits under the ExpressJet Deferred Compensation Plan attributable to compensation earned 

for 2019 and $20,384 relating to the payout of accrued vacation time. The remaining other compensation relates to 

employer-paid health insurance premiums and a personal vehicle lease prior to his separation from the Company. 

(9) All other compensation for Mr. Woodward for 2019 included $67,664 of employer credits under the SkyWest 

Deferred Compensation Plan attributable to compensation earned for 2019. The remaining other compensation 

relates to employer-paid health insurance premiums, personal use of the Company’s recreational equipment, and 

discretionary matching contributions under the SkyWest 401(k) Plan. 

Grants of Plan-Based Awards For 2019 

The following table provides information about non-equity based and equity-based plan awards granted to the 

Named Executives for the year ended December 31, 2019: 

 Estimated Possible Payouts Under Estimated Possible Payouts Under 

All Other Stock 

Awards 

All Other Stock

Awards 

Grant Date 

Fair Value 

 Non-Equity Incentive Plan Awards Equity Incentive Plan Awards Number of Number of Exercise Price of of Stock 

 Threshold Target Maximum Threshold Target Maximum Units Options Option Awards and Option 

Name Grant Date ($)(1) ($)(1) ($)(1) (#) (#) (#) (#) (#) ($/Share) Awards($)(4) 

Russell A. Childs ....... $ 275,000 $ 550,000 $ 1,100,000 $ 550,000 

 5-Feb-2019(2) 13,623 27,245 54,490 $ 1,320,000 

 5-Feb-2019(3) 18,163 $ 880,000 

Robert J. Simmons ...... $ 138,000 $ 276,000 $ 552,000 $ 276,000 

 5-Feb-2019(2) 4,799 9,598 19,196 $ 465,000 

 5-Feb-2019(3) 6,398 $ 310,000 

Wade J. Steel ......... $ 134,000 $ 268,000 $ 536,000 $ 268,000 

 5-Feb-2019(2) 4,799 9,598 19,196 $ 465,000 

 5-Feb-2019(3) 6,398 $ 310,000 

Michael B. Thompson .... $ 100,000 $ 200,000 $ 400,000 $ 200,000 

 5-Feb-2019(2) 4,025 8,050 16,100 $ 390,000 

 5-Feb-2019(3) 5,366 $ 260,000 

Eric J. Woodward ...... $ 63,300 $ 126,600 $ 253,200 $ 126,600 

 5-Feb-2019(2) 1,536 3,071 6,142 $ 148,800 

 5-Feb-2019(3) 2,047 $ 99,200 

(1) The amounts in these columns reflect the threshold, target and maximum amount of each Named Executive’s annual 

cash incentive opportunity for 2019. As described in the section entitled “Compensation Discussion and Analysis” 
38 

above, annual cash incentives payable to the Named Executives are calculated based upon the financial and 

operational performance of the Company or its subsidiaries. 

(2) Represents the 2019-2021 PSU Awards granted in 2019 which will be eligible to vest based on corporate 

performance during the three-year performance period ending December 31, 2021. The Compensation Committee 

determined that the corporate objectives for purposes of such awards would be EBITDA per share, return on 

invested capital and controllable completion actually attained over the three-year performance period. Until the 

vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named 

Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and 

until those performance shares vest. For the 2019-2021 PSU Awards, the Compensation Committee established 

threshold, target and maximum performance levels for each of the three corporate performance objectives, with the 

actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined 

actual results varied from the target levels of performance. The performance shares are allocated 40% to the 

cumulative three-year EBITDA per share, 40% to the three-year adjusted average return on invested capital and 20% 

the three-year average controllable completion in determining the actual awarded performance shares payable in our 

common stock. Specifically, a number of performance shares attributable to each objective according to the 

weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance) 

to 100% (for target performance) to 200% (for maximum performance), with performance in between such levels 

determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no 

performance shares will be earned with respect to such objective(s). 

(3) Represents restricted stock unit awards that entitle the Named Executive to receive a designated number of shares of 

our common stock upon completion of a three-year vesting period, measured from the date of grant, the restricted 

stock units will be eligible to vest on the third anniversary of the grant date, subject to the Named Executive’s 

continued employment through such date. 

(4) This column shows the grant date fair value of the stock awards granted as computed under ASC Topic 718 

(excluding estimates for forfeitures in case of awards with service-based vesting). With respect to the performance 

share awards, the grant date fair value is reported based on the probable outcome of the performance conditions as 

of the grant date. These amounts do not reflect the extent to which the Named Executive realized or will realize an 

actual financial benefit from the awards. Assumptions and methodologies used in the calculation of these amounts 

are included in footnotes to the Company’s audited financial statements for the year ended December 31, 2019 

which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange 

Commission. 
39 

Outstanding Equity Awards at Year-End 

The following table provides information on the holdings of stock options and other stock awards (restricted 

stock units and performance shares) by the Named Executives as of December 31, 2019. 

 Option Awards Stock Awards 

 Equity Incentive 

 Equity Incentive Plan Awards: 

 Number of Number of Number of Market Value Plan Awards: Market or 

 

Securities 

Underlying 

Unexercised 

Securities 

Underlying 

Unexercised Option Option 

Shares 

or Units of 

Stock 

of Shares 

or Units 

 of Stock 

Number of Shares, 

Units or Other 

Rights 

 Payout Value of 

Shares, Units or 

Other Rights 

Options Options Exercise Expiration That Have That Have That Have That Have 

Name Exercisable (#) Unexercisable (#) Price ($) Date(1) Not Vested (#) Not Vested(8)($) Not Vested (#) Not Vested(8)($) 

Russell A. Childs . . . 41,020 $ 14.78 10-Feb-23 

 14,521 (2) $ 938,492 

 43,564 (3) $ 2,815,542 

 12,734 (4) $ 822,998 19,101 (5) $ 1,234,498 

 18,163 (6) $ 1,173,875 27,245 (7) $ 1,760,844 

Robert J. Simmons . . 7,783 $ 14.78 10-Feb-23 

 7,261 (2) $ 469,278 

 21,782 (3) $ 1,407,770 

 5,431 (4) $ 351,006 8,146 (5) $ 526,476 

 6,398 (6) $ 413,503 9,598 (7) $ 620,319 

Wade J. Steel . . . . . 6,702 (2) $ 433,150 

 20,106 (3) $ 1,299,450 

 5,056 (4) $ 326,769 7,584 (5) $ 490,154 

 6,398 (6) $ 413,503 9,598 (7) $ 620,319 

Michael B. 

Thompson . . . . . . 5,027 (2) $ 324,895 

 

 15,080 (3) $ 974,620 

 4,494 (4) $ 290,447 6,742 (5) $ 435,735 

 5,366 (6) $ 346,805 8,050 (7) $ 520,272 

Eric J. Woodward . . 2,968 $ 14.78 10-Feb-23 

 2,569 (2) $ 166,034 

 7,708 (3) $ 498,168 

 1,813 (4) $ 117,174 2,719 (5) $ 175,729 

 2,047 (6) $ 132,298 3,071 (7) $ 198,479 

(1) All stock option awards have a term of seven years from the date of grant. 

(2) Restricted stock unit awards that entitle the Named Executive to receive a designated number of shares of Common 

Stock on February 9, 2020, subject to the achievement of a threshold performance objective included in such 

restricted stock unit awards for Section 162(m) purposes. The threshold performance objective for purposes of the 

2017 restricted stock units was the Company’s achievement of pre-tax earnings of at least $54.9 million during 

2017, 2018 or 2019. If the threshold goal was not achieved, none of the restricted stock units would have been 

eligible to vest. In February 2018, the Compensation Committee determined that the Company’s 2017 pre-tax 

earnings of $288 million satisfied the threshold goal for purposes of the 2017 restricted stock unit awards, and such 

awards will be eligible to vest based on the third anniversary of the grant date. 

(3) Represents the 2017-2019 PSU Awards granted in 2017 which were eligible to vest based on corporate performance 

during the three-year performance period ending December 31, 2019. The Compensation Committee determined 

that the corporate objectives for purposes of such awards would be adjusted pre-tax earnings and average return on 

invested capital actually attained over the three-year performance period. Until the vesting date, the shares 

underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is not entitled 

to vote or receive dividends on the shares underlying his performance shares unless and until those performance 

shares vest. For the 2017-2019 PSU Awards, the Compensation Committee established threshold, target and 

maximum performance levels for each of the two corporate performance objectives, with the actual number of 

performance shares that will vest to be adjusted in proportion to the extent to which the combined actual results 

varied from the target levels of performance. The performance shares are allocated 60% to the cumulative three-year 
40 

adjusted pre-tax earnings objectives and 40% to the three-year average return on invested capital objectives in 

determining the actual awarded performance shares payable in Common Stock. Specifically, a number of 

performance shares attributable to each objective according to the weightings assigned by the Compensation 

Committee were eligible to be earned ranging from 50% (for threshold performance) to 100% (for target 

performance) to 200% (for maximum performance), with performance in between such levels determined by linear 

interpolation. If performance was below the threshold level for one or more of the objectives, no performance shares 

would have been earned with respect to such objective(s). The actual number of shares of Common Stock issued to 

our Named Executives following the conclusion of a performance period is based on our performance relative to the 

corporate performance objectives for that performance period. The Company has reported the number and market 

value of the performance shares subject to the awards based on “maximum” performance. In February 2020, the 

Compensation Committee determined that the Company had satisfied the maximum performance level for these 

awards, and such awards vested at the maximum levels on February 9, 2020. In addition, these awards are reported 

in the "Number of Shares or Units of Stock" column because, as of December 31, 2019, the applicable performance 

objectives had been met and the vesting of the awards was subject only to the Compensation Committee’s 

certification of such results. 

(4) Restricted stock unit awards scheduled to vest on February 7, 2021. 

(5) Represents the 2018-2020 PSU Awards granted in 2018 which will be eligible to vest based on corporate 

performance during the three-year performance period ending December 31, 2020. The Compensation Committee 

determined that the corporate objectives for purposes of such awards would be adjusted pre-tax earnings and 

average return on invested capital actually attained over the three-year performance period. Until the vesting date, 

the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named Executive is 

not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those 

performance shares vest. For the 2018-2020 PSU Awards, the Compensation Committee established threshold, 

target and maximum performance levels for each of the two corporate performance objectives, with the actual 

number of performance shares that will vest to be adjusted in proportion to the extent to which the combined actual 

results varied from the target levels of performance. The performance shares are allocated 60% to the cumulative 

three-year adjusted pre-tax earnings objectives and 40% to the three-year average return on invested capital 

objectives in determining the actual awarded performance shares payable in our common stock. Specifically, a 

number of performance shares attributable to each objective according to the weightings assigned by the 

Compensation Committee will be earned ranging from 50% (for threshold performance) to 100% (for target 

performance) to 200% (for maximum performance), with performance in between such levels determined by linear 

interpolation. If performance is below the threshold level for one or more of the objectives, no performance shares 

will be earned with respect to such objective(s). The actual number of shares of our common stock issued to our 

Named Executives following the conclusion of a performance period will be based on our performance relative to 

the corporate performance objectives for that performance period. The Company has reported the number and 

market value of the performance shares subject to the awards based on “target” performance. 

(6) Restricted stock unit awards scheduled to vest on February 5, 2022. 

(7) Represents the 2019-2021 PSU Awards granted in 2019 which will be eligible to vest based on corporate 

performance during the three-year performance period ending December 31, 2021. The Compensation Committee 

determined that the corporate objectives for purposes of such awards would be EBITDA per share, return on 

invested capital and controllable completion actually attained over the three-year performance period. Until the 

vesting date, the shares underlying the performance shares are not issued and outstanding. Accordingly, the Named 

Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and 

until those performance shares vest. For the 2019-2021 PSU Awards, the Compensation Committee established 

threshold, target and maximum performance levels for each of the two corporate performance objectives, with the 

actual number of performance shares that will vest to be adjusted in proportion to the extent to which the combined 

actual results varied from the target levels of performance. The performance shares are allocated 40% to the 
41 

cumulative three-year EBITDA per share, 40% to the three-year adjusted average return on invested capital and 20% 

the three-year average controllable completion in determining the actual awarded performance shares payable in our 

common stock. Specifically, a number of performance shares attributable to each objective according to the 

weightings assigned by the Compensation Committee will be earned ranging from 50% (for threshold performance) 

to 100% (for target performance) to 200% (for maximum performance), with performance in between such levels 

determined by linear interpolation. If performance is below the threshold level for one or more of the objectives, no 

performance shares will be earned with respect to such objective(s). The Company has reported the number and 

market value of the performance shares subject to the awards based on “target” performance.

(8) Based on market closing price per share of our common stock of $64.63 on December 31, 2019, the last trading day 

of 2019. 

Option Exercises and Stock Vested 

Stock options exercised, restricted stock units and performance shares that vested for the Named Executives 

during the year ended December 31, 2019 are outlined below. 

 

 Option Awards Stock Awards(1) 

 Number of Shares Value Realized Number of Shares Value Realized 

Acquired on Exercise on Exercise Acquired on Vesting on Vesting 

Name (#) ($) (#) ($) 

Russell A. Childs . . . . . . . . . . . . 37,023 $ 1,747,220 67,660 $ 3,638,755

Robert J. Simmons . . . . . . . . . . — $ — 37,753 $ 2,030,329

Wade J. Steel . . . . . . . . . . . . . . . 7,030 $ 318,025 34,100 $ 1,833,898

Michael B. Thompson . . . . . . . . 5,523 $ 250,789 26,793 $ 1,440,901

Terry M. Vais . . . . . . . . . . . . . . . 7,175 $ 270,082 29,228 $ 1,571,855

Eric J. Woodward . . . . . . . . . . . — $ — 14,398 $ 774,298

(1) Includes both restricted stock units and performance shares that vested during the year ended December 31, 2019. 

Non-Qualified Deferred Compensation for 2019 

Pursuant to the SkyWest Deferred Compensation Plan and the ExpressJet Deferred Compensation Plan, covered 

Named Executives may elect prior to the beginning of each calendar year to defer the receipt of base salary and annual 

performance cash incentives earned for the ensuing calendar year. Amounts deferred are credited to an unfunded liability 

account maintained by the Company on behalf of the applicable Named Executive, which account is deemed invested in 

and earns a rate of return based upon certain notational, self-directed investment options offered under the applicable 

plan. 

Each Named Executive’s account under the SkyWest Deferred Compensation Plan and ExpressJet Deferred 

Compensation Plan, as applicable, is also credited with a discretionary employer contribution monthly, whether or not 

the Named Executive contributes. For 2019 that discretionary employer contribution was 15% of the Named Executive’s 

salary and annual cash incentive. Participant account balances under the SkyWest and ExpressJet Deferred 

Compensation Plans are fully vested and will be paid by the Company to each Named Executive upon retirement or 

separation from employment, or on other specified dates, in a lump sum form or in installments according to a schedule 

elected in advance by the Named Executive. 
42 

The following table provides information regarding the SkyWest Deferred Compensation Plan for Messrs. 

Childs, Simmons, Steel, Thompson and Woodward for the year ended December 31, 2019: 

 

 Aggregate 

 Executive Registrant Aggregate Withdrawals/ Aggregate 

 Contributions in Contributions in Earnings in Distributions in Balance at 

 Last Year Last Year Last Year Last Year Last Year 

Name ($)(1) ($)(2) ($)(3) ($) End ($)(4) 

Russell A. Childs . . . . . . . . . . . . . . . . . . . . . . $ — $ 218,047 $ 287,513 $ — $2,174,744 

Robert J. Simmons . . . . . . . . . . . . . . . . . . . . $ 24,929 $ 127,107 $ 117,588 $ — $ 701,370 

Wade J. Steel . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 122,455 $ 163,177 $ — $ 820,340 

Michael B. Thompson . . . . . . . . . . . . . . . . . . $ — $ 95,575 $ 158,202 $ — $ 939,851 

Eric J. Woodward . . . . . . . . . . . . . . . . . . . . . $ — $ 67,664 $ 155,774 $ — $ 844,070 

(1) The amount in this column represents deferral of base salary for 2019 and annual performance cash incentives 

earned for the ensuing calendar year, which deferred amounts are reported in the Summary Compensation Table 

above. 

(2) The amounts in this column reflect the amounts of employer contributions credited under the applicable deferred 

compensation plan for 2019 at the rate of 15% of each Executive’s 2019 base salary and annual cash incentive 

which was paid in 2019. The amounts reported in this column are also included in the amounts reported in the 

“Other Compensation” column of the Summary Compensation Table appearing above. 

(3) The amounts in this column reflect the notational earnings during 2019 credited to each Executive’s account under 

the SkyWest Deferred Compensation Plan. These amounts are not reported in the Summary Compensation Table 

because they are based on market rates determined by reference to mutual funds that are available to participants in 

the SkyWest 401(k) Plan or otherwise broadly available. 

(4) All Named Executive and Company contributions in prior years to the SkyWest Deferred Compensation Plan have 

been reported in the Summary Compensation Tables in the company’s previously filed proxy statements, to the 

extent that an executive was a named executive officer in that fiscal year. These amounts are as follows: Mr. Childs, 

$218,047 (2019), $211,109 (2018) and $183,402 (2017); Mr. Simmons, $152,036 (2019), $146,521 (2018) and 

$142,346 (2017); Mr. Steel, $122,455 (2019), $122,190 (2018) and $110,411 (2017); Mr. Thompson, $95,575 

(2019), $95,785 (2018), and $82,134 (2017); and Mr. Woodward, $67,664 (2019). 

At the election of the executive, deferred amounts are invested in a selection of third party investment funds and 

each executive receives the rates of return under those funds on such deferred amounts.

The following table provides information regarding the ExpressJet Deferred Compensation Plan for Mr. Vais 

for 2019. During 2019, Mr. Vais separated from the Company and received the compensation related to his Deferred 

Compensation account which was valued at $733,463 at the time the balance was distributed to Mr. Vais in accordance 

with the ExpressJet Deferred Compensation Plan. 

 

Aggregate 

Executive Registrant Aggregate Withdrawals/ Aggregate 

Contributions in Contributions in Earnings in Distributions in Balance at 

Last Year Last Year Last Year Last Year Last Year 

Name ($) ($)(1) ($)(2) ($)(3) End ($) 

Terry M. Vais . . . . . . . . . . . . . . . . . . . . . . . . . — $ 4,751 $ 137,120 $ (733,463) $ — 
43 

(1) The amount in this column reflects the employer contributions credited under the applicable deferred compensation 

plan for 2019 at the rate of 15% of Mr. Vais’s 2019 base salary. The amount reported in this column is also included 

in the amount reported in the “Other Compensation” column of the Summary Compensation Table appearing above. 

(2) The amounts in this column reflect the notational earnings during 2019 credited to Mr. Vais’s account under the 

ExpressJet Deferred Compensation Plan. This amount is not reported in the Summary Compensation Table because 

it is based on market rates determined by reference to mutual funds that are available to participants in the 

ExpressJet 401(k) Plan or, in certain cases, otherwise broadly available. 

(3) All Named Executive and Company contributions in prior years to the ExpressJet Deferred Compensation Plan have 

been reported in the Summary Compensation Tables in the company’s previously filed proxy statements, to the 

extent that Mr. Vais was a named executive officer in that fiscal year. These amounts are as follows: $4,751 (2019), 

$70,581 (2018) and $92,248 (2017). 

At the election of the executive, deferred amounts are invested in a selection of third party investment funds and 

each executive receives the rates of return under those funds on such deferred amounts. 

Potential Payments upon Termination or Change in Control 

The information below describes and quantifies certain payments or benefits that would be payable under the 

existing plans and programs of the Company and its subsidiaries if a Named Executive’s employment had terminated on 

December 31, 2019, or the Company had undergone a change in control on December 31, 2019. These benefits are in 

addition to benefits generally available to all salaried employees of the Company in connection with a termination of 

employment, such as distributions from the 401(k) plan and accrued vacation pay. Except as noted below, the Named 

Executives do not have any other severance benefits, severance agreements or change-in-control agreements. 

Accelerated Vesting of Long-Term Incentive Awards. 

With respect to long-term incentive awards granted to the Named Executives, such awards will vest on an 

accelerated basis under certain circumstances, but there is no single trigger accelerated vesting of such awards upon a 

change in control. Specifically, restricted stock unit awards granted to the Named Executives will vest on an accelerated 

basis (i) in the event of the Named Executive’s involuntary termination without cause or resignation for good reason, or 

(ii) in the event of the Named Executive’s death. Performance share awards granted to the Named Executives will vest 

on an accelerated basis (i) in the event of the Named Executive’s death prior to a change in control, as to the “target” 

number of performance shares subject to the award on the date of death and as to any incremental performance shares 

above “target” based on the Company’s actual performance relative to the corporate performance objectives under such 

award at the end of the three-year performance period (or, if earlier, a change in control of the Company), (ii) in the 

event of the Named Executive’s death following a change in control, any “vesting eligible shares” (as described below) 

will vest upon the date of death, (iii) in the event of the Named Executive’s involuntary termination without cause or 

resignation for good reason, in each case prior to a change in control, the Named Executive will remain eligible to vest in 

such number of performance shares as ultimately vest based on the Company’s actual performance relative to the 

corporate performance objectives under such award at the end of the three-year performance period (or, if earlier, a 

change in control of the Company), which vesting will be prorated for the portion of the performance period that has 

elapsed prior to the date of termination, or (iv) in the event of the Named Executive’s involuntary termination without 

cause or resignation for good reason, in each case following a change in control, any vesting eligible shares will vest 

upon the date of such termination. For purposes of the performance shares, in the event of a change in control of the 

Company, the performance shares will be converted into a number of “vesting eligible shares” that will vest at the end of 

the three-year performance period based on the greater of (i) the “target” number of performance shares subject to the 

award, or (ii) the number of performance shares that would vest if performance had been measured against the corporate 

performance objectives as of the date of the change in control. 
44 

The following table shows for each Named Executive the intrinsic value of his unvested restricted stock units 

and performance shares, as of December 31, 2019, the vesting or settlement of which would have been accelerated had a 

change in control of the Company occurred on that date and/or a termination under one of the circumstances identified 

below had occurred on that date, calculated in the case of restricted stock units and performance shares, by multiplying 

the number of underlying shares by the closing price of the Common Stock on December 31, 2019, the last trading day 

of 2019 ($64.63 per share). Mr. Vais is not included in the table, as his employment terminated in February 2019, but his 

actual separation arrangements are discussed below. 

 

Change 

Involuntary Termination 

Following a Change Involuntary Termination 

Name in Control in Control or Death Prior to a Change in Control 

Russell A. Childs 

 RSU Acceleration ........ $ — $ 2,935,365 $ 2,935,365 

 PSU Acceleration (1) ..... $ 2,815,542 $ 5,810,884 $ 4,225,489 

Robert J. Simmons 

 RSU Acceleration ........ $ — $ 1,233,787 $ 1,233,787 

 PSU Acceleration (1) ..... $ 1,407,770 $ 2,554,565 $ 1,965,527 

Wade J. Steel 

 RSU Acceleration ........ $ — $ 1,173,422 $ 1,173,422 

 PSU Acceleration (1) ..... $ 1,299,450 $ 2,409,923 $ 1,832,992 

Michael B. Thompson 

 RSU Acceleration ........ $ — $ 962,147 $ 962,147 

 PSU Acceleration (1) ..... $ 974,620 $ 1,903,627 $ 1,438,534 

Eric J. Woodward 

 RSU Acceleration ........ $ — $ 415,506 $ 415,506 

 PSU Acceleration (1) ..... $ 498,168 $ 872,376 $ 681,480 

1) Reflects the value of the performance shares granted in 2018 and 2019 at “target” performance levels. The value 

under the “Change in Control” column includes only the 2017 performance shares, which are reflected at 

"maximum" performance levels based on the performance relative to the performance objectives for the 

performance period that ended on December 31, 2019 under such awards, since, as of December 31, 2019, the 

applicable performance objectives had been met and the vesting of the awards was subject only to the Compensation 

Committee’s certification of such results (but the settlement of such awards would have been accelerated to the date 

of the change in control occurring on December 31, 2019). While these 2017 performance shares were no longer 

subject to performance or service conditions at December 31, 2019, they are included in this table as the settlement 

of such performance shares would have accelerated (as compared to the regular settlement date in February 2020 

upon Compensation Committee certification of final performance results) upon the occurrence of a change in 

control. The value of the 2017 performance shares are reflected in the other two columns, but no acceleration of the 

settlement of such awards would occur under a termination under those circumstances (and such awards would vest 

in February 2020 upon Compensation Committee certification of final performance results), other than in the case of 

death, in which case the "target" awards would have been subject to immediate settlement. 

Deferred Compensation. If the employment of a Named Executive were terminated on December 31, 2019, 

the Named Executive would have become entitled to receive the balance in his account under the applicable deferred 

compensation plan. Distribution would be made in the form of a lump sum or in installments, and in accordance with the 

distributions schedule elected by the Named Executive under the applicable plan. The 2019 year-end account balances 

under those plans are shown in the applicable Non-Qualified Deferred Compensation Tables included herein. A Named 

Executive’s account balance would continue to be credited with notational investment earnings or losses through the date 

of actual distribution. 
45 

Separation Arrangements with Mr. Vais. In connection with the completion of the sale of ExpressJet, as of 

January 22, 2019, Terry M. Vais ceased serving as the Chief Operating Officer of ExpressJet and transitioned into a nonexecutive operations role with us. Effective February 12, 2019, Mr. Vais separated from the Company. In connection 

with his separation from the Company, Mr. Vais is eligible to receive the following benefits pursuant to a severance and 

release agreement with us, in exchange for his execution of a general release of claims and his compliance with certain 

restrictive covenants for a period of three years following his separation from the Company, including a noncompetition 

covenant: (1) $2.4 million, payable in equal installments over a 24 month period following his date of separation from 

the Company, consisting of two years’ base salary and cash payout of his 2017 and 2018 restricted stock units and 

performance shares; and (2) paid health insurance coverage for 24 months or until his subsequent approved reemployment.

Pay Ratio Disclosure 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 

402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total 

compensation of our employees and the annual total compensation of Russell A. Childs, the Chief Executive. The pay 

ratio included in this information is a reasonable estimate calculated in a manner that is intended to be consistent with 

Item 402(u) of Regulation S-K. 

For 2019, our last completed fiscal year: 

• the median of the annual total compensation of all employees of the Company (other than the CEO) was 

$39,000; and 

• the annual total compensation of the CEO, as reported in the Summary Compensation Table included 

elsewhere in this Proxy Statement, was $3,611,011. 

Based on this information, for 2019, the ratio of the median of the total compensation of all employees of the 

Company to the annual total compensation of Mr. Childs, the CEO, was 1 to 93. 

Determining the Median Employee. Due to the disposition of ExpressJet during 2019, pursuant to SEC rules, 

the Company identified a new median employee for 2019. The Company determined that, as of December 31, 2019, the 

employee population consisted of approximately 14,600 individuals. The employee workforce consists of full and part 

time employees. For purposes of measuring the compensation of the employees, the Company selected total annual cash 

compensation for 2019 as the most appropriate measure of compensation, which was consistently applied to all the 

employees included in the calculation. With respect to the total annual compensation of the “median employee,” the 

Company identified and calculated the elements of such employee’s compensation for 2019 in accordance with the 

requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in the annual total compensation reflected above. 

 
46 

DIRECTOR COMPENSATION 

The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified 

candidates to serve as directors. In setting director compensation, the Company considers the significant amount of time 

that directors expend in fulfilling their duties to the Company, as well as the skill level required by the Company of its 

directors. 

Cash Compensation Paid to Directors 

For the year ended December 31, 2019, all directors who were not employees of the Company received an 

annual cash retainer of $100,000. The Chair of the Audit Committee was paid an annual fee of $20,000, the Chair of the 

Compensation Committee was paid an annual fee of $15,000, the Chair of Nominating and Corporate Governance 

Committee was paid an annual fee of $10,000, the Chair of the Safety and Compliance Committee was paid an annual 

fee of $10,000 and the Lead Independent Director was paid an annual fee of $20,000. The members of the Audit 

Committee were paid an annual fee of $4,000. The Board Chair was paid an annual fee of $200,000. Russell A. Childs, 

who is a director and an employee of the Company, received no compensation for his service on the Board. 

Stock Awards 

Each non-employee director receives a stock award annually, the value of which is determined annually by the 

Board. On February 5, 2019, each of the non-employee directors received an award of 2,064 vested shares of Common 

Stock, representing approximately $100,000 of value based on the trailing 20-day average stock price as of the date of 

award. The Company did not grant stock options to its non-employee directors in 2019. 

Share Ownership Guidelines 

The Company maintains ownership guidelines for the directors to encourage the alignment of their interests 

with the long-term interests of the Company’s shareholders. Each director is required to maintain a minimum ownership 

interest in the Company. The guideline ownership level is a number of shares of Common Stock having a value equal to 

at least five times the cash component of the annual base compensation for each director. Each director met the 

ownership guidelines at December 31, 2019. The holdings of the directors are summarized in the table entitled “Security 

Ownership of Certain Beneficial Owners” below. 

Policies Against Hedging and Pledging of Company Stock 

Pursuant to the Company's Code of Ethics, in order to avoid the appearance that any Company employee is 

trading on inside information, Company officers and directors are prohibited from engaging in speculative trading such 

as short sales or trading in puts, calls, or other options on our stock or the stock of our affiliates, and are likewise 

prohibited from purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any 

decrease in the market value of our securities.

In addition, the Company's insider trading policy expressly prohibits all directors, officers and employees from 

purchasing or using, directly or indirectly, financial instruments that are designed to hedge or offset any decrease in the 

market value of the Company’s securities. Pledging the Company’s securities as collateral to secure loans is also 

prohibited.
47 

DIRECTOR COMPENSATION TABLE 

The table below summarizes the compensation paid by the Company to its non-employee directors for the year 

ended December 31, 2019. 

 

(a) (b) (c) (d) (e) (f) (g) 

 Change in 

 Pension Value 

 and Deferred 

 Fees Earned or Compensation All Other 

 Paid in Cash Stock Awards Option Awards Earnings Compensation Total 

Name(1) ($) ($)(2) ($) ($) ($) ($) 

Jerry C. Atkin . . . . . . . . . . . . . . . . . $ 300,000 $ 100,000 — — — $ 400,000 

Steven F. Udvar-Hazy . . . . . . . . . . $ 130,000 $ 100,000 — — — $ 230,000 

W. Steve Albrecht . . . . . . . . . . . . . $ 120,000 $ 100,000 — — — $ 220,000 

Henry J. Eyring . . . . . . . . . . . . . . . $ 104,000 $ 100,000 — — — $ 204,000 

Meredith S. Madden . . . . . . . . . . . $ 100,000 $ 100,000 — — — $ 200,000 

Ronald J. Mittelstaedt . . . . . . . . . $ 100,000 $ 100,000 — — — $ 200,000 

Andrew C. Roberts . . . . . . . . . . . . $ 114,000 $ 100,000 — — — $ 214,000

Keith E. Smith . . . . . . . . . . . . . . . . $ 119,000 $ 100,000 — — — $ 219,000 

James L. Welch . . . . . . . . . . . . . . . $ 104,000$ 100,000 — — — $ 204,000 

(1) Russell A. Childs, the CEO, President and a director of the Company, is not included in the foregoing table as he 

was an employee of the Company during 2019 and received no financial remuneration for his service as a director. 

(2) Represents the aggregate grant date fair market values of awards as computed under ASC Topic 718. Assumptions 

and methodologies used in the calculation of these amounts are included in footnotes to the Company’s audited 

financial statements for the year ended December 31, 2019, which are included in the Company’s Annual Report on 

Form 10-K filed with the Securities and Exchange Commission. All such shares of our common stock are fully 

vested and none of our non-employee directors holds, or as of December 31, 2019 held any unvested shares or other 

equity awards. 

 
48 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 

Transaction with Related Party 

During the year ended December 31, 2019, the Company purchased $93,540 of spare aircraft parts from 

NORDAM, an entity affiliated with Meredith S. Madden, a director of the Company. 

On June 13, 2019, the Company repurchased 268,025 shares of its common stock from Jerry Atkin, Board 

Chair, at a price of $60.24 per share, representing the volume-weighted average price of the Company’s common stock 

over the five trading days immediately prior to such repurchase. The transaction was part of Mr. Atkin’s personal longterm strategy for asset diversification, tax and estate planning and to fund philanthropic and charitable efforts. The 

transaction was approved by the Company’s Audit Committee and was effected pursuant to the Company’s previously 

announced stock repurchase plan. 

Review and Approval of Transactions with Related Parties 

The Company believes that transactions between the Company and its directors and executive officers, or 

between the Company and persons related to directors and executive officers of the Company, present a heightened risk 

of creating or appearing to create a conflict of interest. Accordingly, the Company has adopted a policy regarding 

related-party transactions that has been approved by the Board and incorporated into the Charter of the Audit Committee. 

The policy provides that the Audit Committee will review all transactions between the Company and related persons (as 

defined in Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission) for potential conflicts 

of interest. Under the Company’s policy, all transactions between the Company and related persons are required to be 

submitted to the Audit Committee for approval prior to the Company’s entry or participation in such transactions. 
49 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 

Security Ownership of Directors and Executive Officers 

The following table sets forth the beneficial ownership of the Common Stock as of March 4, 2020, for each 

director and nominee for director, each Named Executive, and by all directors (including nominees) and executive 

officers of the Company as a group. 

 

 Options Beneficial 

Name Common Stock Exercisable (1) Total Ownership(2) 

Russell A. Childs . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,237 41,020 178,257 (3) 

Robert J. Simmons . . . . . . . . . . . . . . . . . . . . . . . . . . 39,105 7,783 46,888 (3) 

Wade J. Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,270 — 34,270 (3) 

Michael B. Thompson . . . . . . . . . . . . . . . . . . . . . . . . 26,045 — 26,045 (3) 

Terry M. Vais . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,870 — 19,870 (3) 

Eric J. Woodward . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,949 2,968 27,917 (3) 

W. Steve Albrecht . . . . . . . . . . . . . . . . . . . . . . . . . . 40,188 — 40,188 (3) 

Jerry C. Atkin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,805 — 767,805 1.5 % 

Henry J. Eyring . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,738 — 41,738 (3) 

Meredith S. Madden . . . . . . . . . . . . . . . . . . . . . . . . . 15,556 — 15,556 (3) 

Ronald J. Mittelstaedt ....................... 23,007 — 23,007 (3) 

Andrew C. Roberts . . . . . . . . . . . . . . . . . . . . . . . . . . 15,556 — 15,556 (3) 

Keith E. Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,007 — 23,007 (3) 

Steven F. Udvar-Hazy . . . . . . . . . . . . . . . . . . . . . . . 52,408 — 52,408 (3) 

James L. Welch . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,791 — 42,791 (3) 

All officers and directors as a group (15 persons) . . 1,303,532 51,771 1,355,303 2.7 % 

(1) Represents shares that the beneficial owner has the right to acquire within 60 days of March 4, 2020 pursuant to the 

exercise of such stock options. 

(2) Based on 50,257,387 shares outstanding as of March 4, 2020. 

(3) Less than one percent of the total shares outstanding as of March 4, 2020. 
50 

Security Ownership of Other Beneficial Owners 

As of March 4, 2020, the Company’s records and other information available from outside sources indicated 

that the following shareholders were beneficial owners of more than five percent of the outstanding shares of Common 

Stock. The information following is as reported in filings with the Securities and Exchange Commission. The Company 

is not aware of any other beneficial owner of more than five percent of the Common Stock. 

 

Amount of 

Beneficial Ownership 

Common Stock 

Percent 

Name Shares of Class 

Black Rock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,669,333 (1) 15.26% 

55 East 52nd Street 

New York, NY 10055 

The Vanguard Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,780,885 (2) 11.50% 

100 Vanguard Blvd 

Malvern, PA 19355 

Dimensional Fund Advisors LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,272,488 (3) 8.50% 

6300 Bee Cave Road 

Austin, TX 78746 

(1) Based on a Schedule 13G/A filed on February 4, 2020 by BlackRock, Inc., which stated therein that it has sole 

voting power over 7,571,678 shares and sole dispositive power over 7,669,333 shares. 

(2) Based on a Schedule 13G/A filed on February 12, 2020 by The Vanguard Group, Inc., which stated therein that it 

has sole voting power over 42,744 shares, shared voting power over 1,100 shares, sole dispositive power over 

5,738,494 shares and shared dispositive power over 42,391 shares. 

(3) Based on a Schedule 13G/A filed by Dimensional Fund Advisors LP on February 12, 2020, which stated therein that 

it has sole voting power over 4,199,328 shares and sole dispositive power over 4,272,488 shares. 

Securities Authorized for Issuance Under Equity Compensation Plans 

The following table contains information regarding the Company’s equity compensation plans as of 

December 31, 2019. 

 

 Number of Securities 

 Weighted-Average Remaining Available for 

 Exercise Price of Future Issuance under 

 Number of Securities to be Outstanding Equity Compensation 

 Issued upon Exercise of Options, Plans (Excluding 

 Outstanding Options, Warrants and Securities Reflected in 

Plan Category Warrants and Rights Rights the First Column) 

Equity compensation plans approved by security holders(1) 60,231 $ 14.74 5,040,266 (2)

(1) Consists of the Company’s SkyWest Inc. Long Term Incentive Plan and the Employee Stock Purchase Plan. 

(2) Includes 640,640 shares remaining available for future issuance under the Employee Stock Purchase Plan, of which 

24,334 were eligible to be purchased during the purchase period in effect on December 31, 2019. 

 
51 

PROPOSAL 2 

ADVISORY VOTE ON NAMED EXECUTIVE COMPENSATION 

Background 

Section 14A of the Exchange Act, which was enacted pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, requires that the Company provide its shareholders with the opportunity to vote on an 

advisory (non-binding) resolution to approve the compensation of the Named Executives (referred to as a “Say-on-Pay” 

proposal) as disclosed in this Proxy Statement. 

Accordingly, the following resolution will be submitted to the Company’s shareholders for approval at the 

Meeting: 

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named 

Executives, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders 

pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the 

Compensation Discussion and Analysis, the 2019 Executive Compensation table and the other related tables 

and disclosure.” 

As described in detail under the heading “Compensation Discussion and Analysis,” the Board believes the 

Company’s compensation of the Named Executives achieves the primary goals of (i) attracting and retaining 

experienced, well-qualified executives capable of implementing the Company’s strategic and operational objectives, 

(ii) aligning management compensation with the creation of shareholder value on an annual and long-term basis, and 

(iii) linking a substantial portion of the Named Executives’ compensation with long-term Company performance and the 

achievement of pre-determined goals, while at the same time avoiding the encouragement of unnecessary or excessive 

risk-taking. The Board encourages you to review in detail the Compensation Discussion and Analysis beginning on 

page 22 of this Proxy Statement and the executive compensation tables beginning on page 36 of this Proxy Statement. In 

light of the information set forth in such sections of this Proxy Statement, the Board believes the compensation of the 

Named Executives for the fiscal year ended December 31, 2019 was fair and reasonable and that the Company’s 

compensation programs and practices are in the best interests of the Company and its shareholders. 

The vote on this Say-on-Pay resolution is not intended to address any specific element of compensation; rather, 

the vote relates to all aspects of the compensation of the Named Executives, as described in this Proxy Statement. While 

this vote is only advisory in nature, which means that the vote is not binding on the Company, the Board and the 

Compensation Committee (which is composed solely of independent directors), value the opinion of the Company’s 

shareholders and will consider the outcome of the vote when addressing future compensation arrangements. 

Voting 

Approval of the resolution above (on a non-binding, advisory basis) requires that the number of votes cast at the 

Meeting, in person or by proxy, in favor of the resolution exceeds the number of votes cast in opposition to the 

resolution. 

The Board and the Compensation Committee Recommend that Shareholders Vote FOR Approval of the 

Compensation of the Named Executives, as disclosed in this Proxy Statement. 

 
52 

PROPOSAL 3 

RATIFICATION OF APPOINTMENT OF 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

Following an evaluation by the Audit Committee and by the Company’s management of the performance of 

Ernst & Young LLP during the prior fiscal year, the Audit Committee has recommended and approved the appointment 

of Ernst & Young LLP as the Company’s independent registered public accounting firm to examine the consolidated 

financial statements of the Company for the year ending December 31, 2020. The Company is seeking shareholder 

ratification of such action. 

It is expected that representatives of Ernst & Young LLP will attend the Meeting, will have an opportunity to 

make a statement if they desire and will be available to respond to appropriate questions. 

The Board and the Audit Committee Recommend that Shareholders Vote FOR the Ratification of Appointment 

of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the year ending 

December 31, 2020. 

 
53 

FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

The following table represents aggregate fees billed to us for services related to the years ended December 31, 

2019 and 2018, by Ernst & Young LLP (“EY”): 

 

 Year Ended December 31, 

 2019 2018 

Audit Fees (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,049,500 $ 1,371,000 

Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 

Tax Fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 36,000 

All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 

Total .................................................................... $ 1,049,500 $ 1,407,000 

(1) Audit Fees consist of fees and related expenses for the annual audit of the Company’s financial statements, 

including the integrated audit of internal control over financial reporting and the quarterly reviews of the 

Company’s financial statements included in its Quarterly Reports on Form 10-Q.

(2) Tax Fees consist of fees and related expenses for research compiled relating to the Tax Cuts and Jobs Act. 

The Audit Committee has concluded that EY’s delivery of non-audit services is compatible with EY’s 

independence. 

Pre-Approval Policies and Procedures 

The Audit Committee charter provides that the Audit Committee shall pre-approve all external audit services, 

internal control-related services and permissible non-audit services (including the fees and terms thereof), subject to 

certain specified exceptions. The Audit Committee has also adopted a policy regarding the retention of the independent 

registered public accounting firm that requires pre-approval of all of its services by the Audit Committee or the Chair of 

the Audit Committee. When services are pre-approved by the Chair of the Audit Committee, notice of such approval is 

given to the other members of the Audit Committee and presented to the full Audit Committee for ratification at its next 

scheduled meeting. The Audit Committee considers whether the provision of each non-audit service is compatible with 

maintaining the independence of the auditors. All of the services listed above were pre-approved by the Audit Committee 

in accordance with this policy. 

 

 
54 

REPORT OF THE AUDIT COMMITTEE 

Management of the Company has primary responsibility for the Company’s financial statements and internal 

control over the Company’s financial reporting. EY, the Company’s independent registered public accounting firm, has 

responsibility for the integrated audit of the Company’s financial statements and internal control over financial reporting. 

It is the responsibility of the Audit Committee to oversee financial and control matters, among other responsibilities 

fulfilled by the Audit Committee under its charter. The Audit Committee meets regularly with representatives of EY and 

Protiviti, Inc. (“Protiviti”), the Company’s principal internal auditor, without the presence of management, to ensure 

candid and constructive discussions about the Company’s compliance with accounting standards and best practices 

among public companies comparable in size and scope to the Company. 

At its meetings during the year ended December 31, 2019, the Audit Committee reviewed and discussed the 

following topics, among other matters: financial performance; financial reporting practices; quarterly and annual reports, 

including Management’s Discussion and Analysis of Financial Condition and Results of Operations; cybersecurity 

matters and risks and information technology controls; enterprise risk management and risk assessment; legal and 

regulatory issues; accounting and financial management issues; critical accounting policies and critical audit matters; 

accounting standards; airline industry matters; and a summary of calls received on the Company’s anonymous 

whistleblower hotline. The Audit Committee held separate executive sessions regularly with representatives of EY, 

Protiviti and the Company’s legal counsel, during which the following topics, among other matters, were discussed: 

financial management, accounting, internal controls, finance and accounting staffing, legal matters and compliance 

issues. The Audit Committee also regularly reviewed with its outside advisors material developments in the law and 

accounting literature that could be pertinent to the Company’s financial reporting practices. 

In addition, the Audit Committee reviewed management’s report on internal control over financial reporting, 

required under Section 404 of the Sarbanes Oxley Act of 2002 and related rules. As part of this review, the Audit 

Committee reviewed the bases for management’s conclusions in that report, and also reviewed the report of the 

independent registered public accounting firm on internal control over financial reporting. Throughout the year ended 

December 31, 2019, the Audit Committee reviewed management’s plan for documenting and testing controls, the results 

of their documentation and testing, any deficiencies discovered and the resulting remediation of any such deficiencies. 

In connection with the financial statements for the year ended December 31, 2019, the Audit Committee has: 

(1) reviewed and discussed the audited financial statements with management; 

(2) discussed with EY, the Company’s independent registered public accounting firm, the matters required to 

be discussed by applicable standards of the Public Company Accounting Oversight Board (“PCAOB”) and 

the Securities and Exchange Commission; and 

(3) received the written disclosures and letter from EY regarding the auditors’ independence required by 

applicable requirements of the PCAOB regarding EY’s communications with the Audit Committee 

concerning independence, and has discussed with EY its independence. 

Based upon these reviews and discussions, the Audit Committee recommended to the Board at the February 4, 

2020 meeting of the Board that the Company’s audited financial statements be included in the Annual Report on Form 

10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission. The Board approved 

this inclusion. 
55 

The Audit Committee

W. Steve Albrecht, Chair 

Henry J. Eyring 

Andrew C. Roberts 

Keith E. Smith 

James L. Welch 

The information contained in this Audit Committee Report shall not be deemed to be “soliciting material,” to be 

“filed” with the Securities and Exchange Commission or be subject to Regulation 14A or Regulation 14C or to the 

liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing of 

SkyWest, Inc., except to the extent that SkyWest, Inc. specifically incorporates it by reference into a document filed under 

the Securities Act of 1933 or the Exchange Act. 

 
56 

DELINQUENT SECTION 16(a) REPORTS 

The Company’s executive officers, directors and 10% shareholders are required under Section 16 of the 

Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission. 

Copies of these reports must also be furnished to the Company. 

Based solely on a review of copies of reports furnished to the Company, or written representations that no 

reports were required, the Company believes that during 2019 its executive officers, directors and 10% holders complied 

with all filing requirements of Section 16 of the Exchange Act, except that one Form 4 was filed late for Mr. Atkin with 

respect to a single transaction. 

SHAREHOLDER PROPOSALS FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS 

If any shareholder intends to present a proposal to be considered for inclusion in the Company’s proxy materials 

in connection with the Company’s 2021 Annual Meeting of Shareholders, the proposal must be in proper form (per 

Securities and Exchange Commission Regulation 14A, Rule 14a-8—Shareholder Proposals) and received by the Chief 

Financial Officer of the Company on or before November 13, 2020. Shareholder proposals to be presented at the 2021 

Annual Meeting of Shareholders which are not to be included in the Company’s proxy materials must be received by the 

Company no earlier than February 4, 2021, and no later than February 24, 2021, in accordance with the procedures set 

forth in the Company’s Bylaws. 

 
57 

DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS 

In instances in which multiple holders of the Common Stock share a common address and are the beneficial 

owners, but not the record holders, of those shares of Common Stock, the holders’ banks, brokers or other nominees may 

only deliver one copy of this Proxy Statement and the Company’s 2019 Annual Report to Shareholders, unless the 

applicable bank, broker or nominee has received contrary instructions from one or more of the shareholders. The 

Company will deliver promptly, upon written request, a separate copy of this Proxy Statement and the Company’s 2019 

Annual Report to Shareholders to any shareholder at a shared address to which a single copy of the documents was 

delivered. A shareholder who wishes to receive a separate copy of this Proxy Statement and the Company’s 2019 Annual 

Report to Shareholders should submit a request in writing to Robert J. Simmons, Chief Financial Officer of the 

Company, 444 South River Road, St. George, Utah 84790, Telephone: (435) 634-3200. Beneficial owners sharing an 

address who are receiving multiple copies of proxy materials and annual reports and who wish to receive a single copy of 

such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of 

each document be mailed to all shareholders at the shared address in the future. 

OTHER BUSINESS 

The Company’s management does not know of any other matter to be presented for action at the Meeting. 

However, if any other matters should be properly presented at the Meeting, it is the intention of the persons named in the 

accompanying proxy to vote said proxy in accordance with their best judgment. 

Robert J. Simmons 

Chief Financial Officer 

St. George, Utah 

March 13, 2020 

 
58 

APPENDIX A 

TO 

PROXY STATEMENT 

Reconciliation of non-GAAP financial measures 

The non-GAAP information presented in this proxy statement should not be considered in isolation or as a 

substitute for any measure derived in accordance with GAAP. The non-GAAP information may also be inconsistent with 

the manner in which similar measures are derived or used by other companies. Management uses such non-GAAP 

information for financial and operational decision-making purposes and as a means to evaluate period-over-period 

comparisons and in forecasting the Company’s business going forward. Management believes that the presentation of 

such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, 

provides additional useful comparative information for investors in their assessment of the underlying performance of 

the Company’s business without regard to these items. 

Reconciliation to Adjusted Net Income and Diluted Earnings per Share (unaudited)

(Dollars in thousands, except per diluted share) 

 

For the year ended December 31, 2019 

 

Pre-tax 

income 

Income tax 

benefit 

(expense) Net income 

Net income per 

Diluted Share 

GAAP income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 446,305 $ (106,206) $ 340,099 $ 6.62 

2019 adjustments (1) . . . . . . . . . . . . . . . . . . . . . . . . . (24,656) 5,646 (19,010) 

Adjusted income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 421,649 $ (100,560) $ 321,089 $ 6.25 

 

For the year ended December 31, 2017 

 

Pre-tax 

income 

Income tax 

benefit 

(expense) Net income 

Net income per 

Diluted Share 

GAAP income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 288,183 $ 140,724 $ 428,907 $ 8.08 

2017 adjustments (2) . . . . . . . . . . . . . . . . . . . . . . . . . - (246,845) (246,845)

Adjusted income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 288,183 $ (106,121) $ 182,062 $ 3.43 

These adjustments allow investors to better understand and analyze our recurring core performance in the 

periods presented. 

(1) Excludes the gain on the sale of ExpressJet of $46.5 million (pre-tax); also excludes special item operating expenses 

of $21.9 million (pre-tax), primarily consisting of a non-cash write-off of aircraft manufacturer part credits that 

SkyWest forfeited to settle future lease return obligations. These adjustments were recorded in the first quarter of 

2019. 

(2) Adjusts for tax benefit resulting from the Tax Cuts and Jobs Act enacted during the fourth quarter of 2017 that 

resulted in a revaluation of SkyWest’s deferred tax assets and liabilities. 

The Company had no non-GAAP reconciliation items relating to 2018.

inc.skywest.com
SCHEDULE 3.17 

Subsidiaries 

The following is each Subsidiary of the Parent: 

Subsidiary Jurisdiction Owner % 

Ownership

1. SkyWest Airlines, Inc. Utah SkyWest, Inc. 100

2. *SkyWest Leasing, Inc. Utah SkyWest, Inc. 100

3. **SkyWest Insurance

Company, Inc.

Utah SkyWest, Inc. 100 

* Subsidiary is an “Excluded Subsidiary” under the Loan Agreement, pursuant to category (iii) of the

definition. 

** Subsidiary is an “Excluded Subsidiary” under the Loan Agreement, pursuant to category (ii) of the 

definition. 
SCHEDULE 5.14 

Post-Closing Matters

None
SCHEDULE 6.05(i)

Restricted Payments

[REDACTED]
SCHEDULE 6.06 

Investments 

[REDACTED]
SCHEDULE 6.07 

Affiliate Transactions

None