Frontier Airlines 2004 Annual Report Download - page 14

The term of the American code - share agreement continues until February 1, 2013. American may reduce the term by one year each time that we fail to achieve an agreed performance
level. American may only exercise this right three times during the term of the code - share agreement. The agreement may be subject to termination for cause prior to that date under various
circumstances including:
•
a change in the regulations governing air carriers that materially affects the rights and/or obligations of either party, subject to negotiation of amendments to the code - share agreement or
third party mediation;
•
if we or American become insolvent or fail to pay our debts as they become due, the other party may terminate the agreement subject to five business days notice and rights of
assurance;
•
failure by us or American to perform the material terms, covenants or conditions of the code - share agreement (which includes the American standards of service), subject to 30 day
notice and cure rights;
•
if we or American fail to make a payment when due, subject to five business days notice and cure rights;
•
if either party suspends or is required to suspend its operations due to any safety reason, the other party may terminate the agreement on five days notice;
•
if American, in its reasonable discretion, determines that we materially breached a representation or warranty to them that creates a serious and imminent threat to the safe operation of
AmericanConnection services, American may immediately terminate the code - share agreement;
•
if our President and CEO is replaced, American has the right to terminate the agreement if it does not approve of the replacement CEO; however, American cannot unreasonably
withhold its approval;
•
if we fail to achieve specified levels of operating performance in completion factor, on - time arrivals, customer complaints and baggage, American may terminate the agreement, subject
to corrective action plan and adherence to such plan;
•
if we fail to represent the American brand favorably (subject to certain standards and conditions), American may terminate the agreement; or
•
if either party assigns, by operation of law or otherwise, the code - share agreement without the written consent of the other party, subject to five days notice and cure rights, or if we
enter into any merger, sale or acquisition of all or substantially all of our assets or a majority of our outstanding voting interests with an air carrier other than an entity that is under common
control with us.
American may terminate the code - share agreement without cause upon 180 days notice, provided that such notice may not be given prior to September 30, 2008. If American exercises
this right, it is required to reimburse us for certain deferred costs and we and American have certain "put" and "call" rights with respect to the aircraft we operate for them.
If American terminates the code - share agreement for any reason prior to September 30, 2008, or we terminate the code - share agreement prior to September 30, 2008, due to a breach
of the agreement by American, American has agreed to reimburse us for certain price concessions that we granted American.
In general, we have agreed to indemnify American and American has agreed to indemnify us for any damages caused by any breaches of our respective obligations under the code - share
agreement or caused by our respective actions or inactions under the code - share agreement.
In October, 2004, in order to accommodate American with respect to its scope restrictions, we agreed to modify our Agreement with American to preclude the continued use of larger
regional jets on our Chautauqua Airlines Air Carrier Operating Certificate. We have also agreed to pay American an aggregate of approximately $500,000 through February 19, 2005, in
connection with our operation of ERJ - 170s for United through Chautauqua instead of Republic Airline. Approximately $291,000 of this amount was paid in 2004. Additionally, we will pay
approximately $36,000 per day to American for each day Chautauqua is operating any ERJ - 170s after April 21, 2005. This payment will continue until Chautauqua no longer operates ERJ -170
aircraft. Consequently, we will most likely pay this daily penalty through November 2005. Also, as agreed with American, Chautauqua can fly no more than 18 ERJ - 170 aircraft.
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