Frontier Airlines 2005 Annual Report Download - page 21

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Should we have aircraft in excess of our operational needs, we have granted American a right of first refusal to use those aircraft
pursuant to the terms of the code-share agreement. In addition, should American require more than 25 regional jets to fly under its
AmericanConnection code out of St. Louis, American has agreed to grant us a right of first refusal to supply up to five additional
ERJ-140 aircraft at our election.
Under the code-share agreement, we are required to have specified terms in the leases of our aircraft. These terms include a limit on
the minimum term of the lease, a clause permitting assignment to American without penalty and under identical terms, certain return
conditions and a purchase option on terms acceptable to American. We also cannot amend any of the ERJ-140 leases without
American's prior consent, such consent not to be unreasonably withheld.
If American terminates the code-share agreement for cause, American has a call option to require that we assign to American all of its
rights under the leases of aircraft, and to lease to American the aircraft to the extent we own them, used at that time under the
code-share agreement. If American exercises their call option, we are required to pay certain maintenance costs in transferring the
aircraft to American's maintenance program.
If American terminates the code-share agreement without cause, we have the right to put the leases of the aircraft, or to lease the
aircraft to them to the extent owned by us, used under the code-share agreement to American. American also has a call option to
require us to assign to American these leases. If we exercise our put or American exercises their call, both parties are obligated to
implement a schedule to terminate the code-share agreement in an orderly fashion and transition the aircraft from us to American.
With the exception of performance incentives, which are deemed inapplicable during such transition, the term of the code-share
agreement is deemed to continue during the transition period. Moreover, we would be entitled to receive payments of fixed costs and
reimbursement of pass-through costs during such period.
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
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠