Frontier Airlines 2005 Annual Report Download - page 16

Code-Share Agreements
Through our subsidiaries, we have entered into code-share agreements with US Airways, American, Delta and United that authorize
us to use their two-letter flight designator codes ("US," "AA," "DL" and "UA") to identify our flights and fares in their computer
reservation systems, to paint our aircraft with their colors and/or logos, to use their service marks and to market and advertise our
status as US Airways Express, AmericanConnection, Delta Connection and United Express, respectively. In connection with a
marketing agreement among Delta, Continental Airlines and Northwest Airlines, certain of the routes that we fly using Delta's flight
designator code are also flown under Continental's or Northwest's designator codes. Under the code-share agreements between our
subsidiaries and each of US Airways, American, Delta and United, we are compensated on a fixed-fee basis on all of our US Airways
Express, AmericanConnection, Delta Connection and United Express flights. In addition, under our code-share agreements, our
passengers participate in frequent flyer programs of the major airline, and the major airline provides additional services such as
reservations, ticket issuance, ground support services, commuter slot rights and airport facilities.
US Airways Code-Share Agreements
We have entered into an Amended and Restated Chautauqua Jet Services Agreement with US Airways, dated April 26, 2005. As of
December 31, 2005, we operated 30 ERJ-145 regional jets including two spares, under this agreement. The code-share agreement
provides that we will operate these aircraft to provide US Airways Express service between US Airways hubs and cities designated by
US Airways. As of December 31, 2005, we were providing 250 flights per day as US Airways Express between New York, Boston,
Philadelphia, Pittsburgh, Indianapolis, Washington, D.C. and designated outlying cities.
We have also entered into a fixed-fee code-share agreement with US Airways to operate 28 ERJ-170 aircraft on terms
substantially similar to those of the ERJ-145 code-share agreement between us and US Airways. Thirteen of the 28 aircraft have been
acquired by us, and we will assume the leases of 15 ERJ-170 aircraft from US Airways. We will be subject to monetary penalties if we
are unable to transition the subject aircraft by certain specified dates, generally by the end of 2006, subject to certain exclusions.
US Airways provides reservation, check-in, baggage-handling, ground-support and other passenger services, landing slots, gates,
tickets, baggage tags, ticket wallets and similar items with respect to such flights and also controls scheduling, ticket prices and seat
inventories with respect to such flights. Under the code-share agreement, US Airways retains all passenger, cargo and other revenues
associated with each flight, and is responsible for all revenue-related expenses. In exchange for providing the designated number of
flights and performing our other obligations under the code-share agreement, we receive compensation from US Airways three times
each month in consideration for the services provided under the code-share agreement. We receive an additional amount per available
seat mile flown. We also may receive incentives or pay penalties based upon our performance, including fleet launch performance,
on-time departure performance and completion percentage rates. These incentive and penalty payments are a relatively small
component of the total compensation that we are entitled to receive for each of our flights. Additionally, certain of our operating costs
are considered "pass through" costs whereby US Airways has agreed to reimburse us the actual amount of costs we incur for these
items. Fuel, landing fees, passenger catering, passenger liability insurance and aircraft property tax costs are pass through costs.
Beginning in May 2005, US Airways elected to provide fuel directly for all of the Company’s US Airways Express aircraft
operations. This change eliminated fuel expense and the related fuel reimbursement (previously recorded as revenue) for the US
Airways operations. Operating profits are not affected by this change.
The code-share agreements for the ERJ-145 and ERJ-170 regional jets terminate in March 2013 and September 2015, respectively;
however, US Airways may terminate the code-share agreements at any time for cause upon not less than 90 days notice and subject to
our right to cure under the following conditions:
• if we fail to perform or observe any material covenant or condition or agreement to be performed or observed by us, provided that
if we breach any payment obligation, US Airways has the right to terminate the agreement on 10 days’ prior written notice unless
we cure such breach prior to the expiration of 10 days;
• if our flight completion factor falls below specified percentages during specified periods due to operational deficiencies that are
within our control;
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠