Frontier Airlines 2004 Annual Report Download - page 59

7. REDEEMABLE PREFERRED STOCK
Chautauqua had 1,000,000 authorized shares of Series A redeemable preferred stock at a par value of $.01 per share. In May 2000, 10.295828 shares of Series A redeemable
preferred stock were issued with a stated value of $250 per share in full satisfaction of a related party note payable and accrued interest thereon, and Chautauqua issued six shares of Series A
redeemable preferred stock for cash of $1,500. At December 31, 2002, 16.295828 shares were issued and outstanding and held by a related party. The preferred stockholder was entitled to
receive cumulative dividends equal to 10% per annum of the stated value of the preferred stock. The redeemable preferred stock, including accrued and unpaid dividends, was purchased and
retired by Chautauqua during 2003.
8. COMMITMENTS
As of December 31, 2004 Chautauqua leases forty - nine regional jet aircraft and fourteen spare regional jet engines with varying terms extending through 2020 and terminal space,
operating facilities and office equipment with terms extending through 2012. The components of rent expense for the years ended December 31 are as follows:
Chautauqua has a long - term maintenance agreement with an avionics equipment manufacturer and maintenance provider that has a guaranteed minimum annual flight hour requirement.
The minimum guaranteed amount based on Chautauqua's current operations is $4,710 per year through January 2012. Chautauqua did not record a liability for this guarantee because
Chautauqua does not believe that any aircraft will be utilized below the minimum flight hour requirement during the term of the agreement.
Chautauqua has a long - term maintenance agreement with an aviation equipment manufacturer through October 2013. The agreement has a penalty payment provision if more than twenty
percent of Chautauqua's aircraft are removed from service based on the annual flight activity prior to the date of removal. Chautauqua did not record a liability for this penalty provision because
Chautauqua does not believe that more than twenty percent of their aircraft will be removed from service during the term of the agreement.
Chautauqua has a long - term maintenance agreement based upon flight activity with an engine manufacturer and maintenance provider through June 2012.
Chautauqua has a long - term maintenance agreement for wheels and brakes through June 2014. The agreement has an early termination penalty if Chautauqua removes seller's equipment
from aircraft, sells or leases aircraft to a third party or terminates the services prior to expiration of the agreement. The maximum penalty during the first two years is $675 and is reduced every
two years thereafter. Chautauqua did not record a liability for this penalty provision because Chautauqua does not believe the contract will be terminated prior to the expiration date.
Total payments under these long - term maintenance agreements were $35,079, $26,994, and $18,072 for the years ended December 31, 2004, 2003 and 2002, respectively.
As part of Chautauqua's lease agreements, Chautauqua typically indemnifies the lessor of the respective aircraft against liabilities that may arise due to changes in benefits from tax
ownership or tax laws of the respective leased aircraft. Chautauqua has not recorded a liability for these indemnifications because they are not estimable. Chautauqua is responsible for all other
maintenance costs of its aircraft and must meet specified return conditions upon lease expiration for both the airframes and engines. Chautauqua is unable to estimate the liability for these return
conditions as of December 31, 2004, because the leases expire beginning in 2009. Chautauqua will record a liability for these return conditions once the liability is estimable.
Future minimum payments under noncancellable operating leases are as follows for the years ending December 31:
2004
2003
2002
Aircraft and engine rent
$
66,464
$
59,319
$
56,165
Other
2,666
1,979
2,083
Total rent expense
$
69,130
$
61,298
$
58,248
Regional Jet
Aircraft
Other
Total
2005
$
69,659
$
5,013
$
74,672
2006
69,659
4,544
74,203
2007
69,443
4,577
74,020
2008
69,207
4,601
73,808
2009
67,646
4,604
72,250
Thereafter
447,404
28,050
475,454
Total
$
793,018
$
51,389
$
844,407
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