Frontier Airlines 2004 Annual Report Download - page 52

REPUBLIC AIRWAYS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2004, 2003 and 2002
Dollars in thousands, except share and per share amounts
1. ORGANIZATION & BUSINESS
Republic Airways Holdings Inc. (the "Company" or "Republic") is an airline holding company. The Company was incorporated in the state of Delaware in 1996 and acquired all of the
common stock of Chautauqua Airlines, Inc. ("Chautauqua") in May 1998. The Company incorporated Republic Airline Inc. ("Republic Airline"), previously Republic Airways Inc., in
November 1999. Republic Airline had no substantial activity as of December 31, 2004 and is a wholly - owned subsidiary of the Company.
Chautauqua operates as an air carrier providing scheduled passenger and air freight service as US Airways Express, AmericanConnection, Delta Connection and United Express under
code- share agreements with US Airways, Inc. ("US Airways"), AMR Corporation ("American"), Delta Air Lines, Inc. ("Delta") and United Air Lines, Inc. ( “ United ” ), respectively. Chautauqua
has a code - share agreement with US Airways and offers passenger and air freight service from US Airways' hub airports in Philadelphia and Pittsburgh, Pennsylvania, Indianapolis, Indiana,
Boston, Massachusetts, New York, New York (LaGuardia) and Washington, D.C. Under the code - share agreement with American, Chautauqua offers passenger and air freight service from
American's hub airport in St. Louis, Missouri. The code - share agreement with Delta offers passenger and air freight service from Delta's hub airports in Orlando, Florida and Fort Lauderdale,
Florida. Under the code - share agreement with United, Chautauqua offers passenger and air freight service from United ’ s hub airports in Chicago, Illinois and Washington D.C.
Under the US Airways code - share agreement, which expires in 2012, Chautauqua provides service to designated areas utilizing jet aircraft. The US Airways code - share agreement with
Chautauqua, as amended, allows Chautauqua to operate thirty - five regional jets on a fixed - fee basis with reimbursement of certain pass - through costs. As of December 31, 2004, Chautauqua
has thirty - five regional jets dedicated to US Airways' service.
Chautauqua started service for American in August 2000. The code - share agreement with American, which expires in 2013, is on a fixed - fee basis with reimbursement of certain pass -
through costs and allows Chautauqua to operate fifteen regional jets. The agreement may be terminated by American without cause at any time after September 30, 2008 with 180 days notice.
As of December 31, 2004, Chautauqua has fifteen regional jets dedicated to American service.
Chautauqua started jet service for Delta in November 2002. The code - share agreement with Delta, as amended, which expires in 2016, is on a fixed - fee basis with reimbursement of
certain pass - through costs and provides for fifty - five aircraft to be placed into service. The agreement may be partially or completely terminated by Delta with or without cause at any time after
November 2009 with 180 days notice. As of December 31, 2004, Chautauqua has thirty - nine regional jets dedicated to Delta service. In January 2005, the Company, Delta and Republic
Airline entered into a code - share agreement whereby Republic Airline will operate 16 ERJ -170’ s for Delta, subject to Republic Airline ’ s receipt of its certification.
In February 2004, Chautauqua and Republic Airline entered into separate code - share agreements with United. Chautauqua entered into a fixed - fee code - share agreement with
United to operate 9 regional jets. The agreement terminates in 2014. The agreement may be terminated with or without cause by United upon 18 months prior written notice after December 31,
2007. Republic Airline entered into an agreement with United with the same terms as Chautauqua to operate 23 regional jets. As of December 31, 2004, 11 of the 23 regional jets are in
operation and are being operated by Chautauqua. They will be transferred to Republic Airline when Republic Airline receives its operating certificate.
Chautauqua started jet service for America West in August 2001 and in February 2003 Chautauqua and America West agreed to terminate their code - share agreement. The code - share
agreement with America West was on a fixed - fee basis with reimbursement of certain pass - through costs. Pursuant to the termination of the code - share agreement, Chautauqua and America
West agreed to remove the twelve aircraft from service during April, May and June 2003 and America West paid Chautauqua a contract termination fee of $6,000 as the aircraft were taken out
of service. Chautauqua amended the Delta code - share agreement on February 7, 2003 to utilize these twelve aircraft.
The code - share agreements provide Chautauqua and Republic Airline with a nonexclusive license to the code - share partners' trademarks, as well as general air carrier support services,
and contain provisions relating to the size and use of aircraft, insurance requirements and service requirements. Under certain code - share agreements, the code - share partners are required to
provide reservation systems, ground handling and other services to Chautauqua and Republic Airline. Chautauqua and Republic Airline may receive operating performance incentives from the
code- share partners based on several metrics of customer service. Chautauqua and Republic Airline may also be liable to the code - share partners for operating performance penalties if customer
service metrics are less than specified minimum levels.
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