Skywest Inc. (NASDAQ:SKYW) is a regional airline which operates flights for its partners - Delta Airlines, United Airlines, Alaska Airlines and US Airways. Regional carriers operate connecting flights to smaller airports on contracts to 'legacy carriers,' or airlines that have full service offerings and connect through larger hubs.
Regional carriers carry fewer passengers than the large, legacy carriers, but over the last decade they have proven to be much more profitable businesses. Skywest charges its customers for fuel, operating expenses, and an hourly rate besides - making the company immune from the twin hobgoblins of the airline industry - oil prices and flying empty planes as a result of recessions. Skywest's clients then collect passenger revenue and assume the risk that tickets won't sell out.
SkyWest Incorporated wholly owns both SkyWest Airlines and Atlantic Southeast Airlines. Since Skywest owns only regional airlines, all of the company's flights are operated under codeshare agreements with Delta, United, and Midwest Airlines (private). The codeshare agreements are generally long-term and fixed agreements whereby fuel expenses and other general operating expenses are passed through to the codeshare partners and fees are paid to SkyWest or Atlanta Southeast Airlines for the operation of their aircraft.  The larger, legacy carriers use Skywest to reduce the expense of operating smaller airplanes to serve regional markets while Skywest needs the larger companies for their brand names, fixed term agreements, and long-haul service offerings. 
In 2009, SKYW generated a net income of $83.7 million on revenues of $2.61 billion. This represents a 25.9% decrease in net income and a 25.2% decrease in total revenues from 2008, when the company earned $112.9 million on revenues of $3.50 billion.
SkyWest operates through a single reportable segment but has two carriers: Skywest, which offers service to United, Delta, and Midwest carriers, and Atlanta Southeast Airlines, which offers service exclusively to Delta. The company has code sharing agreements with each of its partners that are specific to each of the airlines. 
All of SkyWest Airline's flights are under code share agreements with Delta, United, or Midwest. Each of these agreements was separately reached and has specific terms although all passenger revenues go to the partners in all of the contracts. 
Although Skywest Inc. does not have to directly pay operating costs and is paid for the flights that it operates, it is dependent upon its partner airlines to pay its operating costs and the per-hour payments that it is guaranteed through its contracts. Because 97% of the company's capacity is used for either Delta or United, if its partners are forced to cut costs by eliminating routes, SkyWest Inc. can no longer operate those routes and will lose those revenues as well as the reimbursements for the maintenance expenses and other costs associated with airline ownership.  Although the airline itself is not paid on a per-passenger basis, if its partners do not have enough passengers on their main routes, routes will be cut to Skywest as decided by Midwest. 
Because all of SkyWest Inc. flights are through code-share agreements with its partners, 97.4% of all of the company's fuel purchases are reimbursed as operating expenses to the company under these codeshare agreements.  As such, the company does not directly bear the burden of the higher fuel costs; however, its partners may have increased hardships and may end up cancelling routes as Midwest did. 
One of the reasons why Delta and Northwestern are consolidating, is to be able to cut expenses and reduce overall net losses.  Although it is still unclear what impact the merger between Delta and Northwest will have on SkyWest, a JP Morgan Industry analyst states that JP Morgan continues to believe that consolidation poses a threat to regional airlines.  Before beginning merger negotiations, Delta already dropped another regional carrier, Freedom Airlines, which operates 34 Delta Connection flights per day, although this resulted in a lawsuit because it allegedly violated the terms of the contract between those parties. 
Regional airlines are considered to be their own segment apart from legacy carriers because they do not offer 'long-haul' flights to international or intercontinental destinations. In many cases, regional airlines also sell all or most of their flights to larger legacy carriers such as US Airways, United, and Delta] which offer long-haul and short-haul flights.  These larger carriers pay regional carriers flat rates for operating their flights.
As such, it does not make sense to compare the competition between legacy and regional carriers, but rather the competition between regional carriers. American Eagle and ExpressJet remain SkyWest's biggest competitors for business in terms of passengers carried. Regional airlines are mainly judged by potential partners on the basis of their operating efficiency. When Comair, Delta's subsidiary, proved to be less efficient and had more operating expenses than SkyWest, Delta elected to use SkyWest's services instead.  Despite their operating efficiency however, SkyWest relies upon its partners to make sales with its brand as many customers would otherwise be unfamiliar with the airline.