Frontier Airlines 2005 Annual Report Download - page 27

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The United Code-Share Agreements
We have entered into fixed-fee code-share agreements with United to operate seven ERJ-145 aircraft and 28 ERJ-170 aircraft to
provide United Express Service in markets to be determined by United. As of December 31, 2005, we provided 188 flights per day as
United Express between Chicago, Washington D.C. and designated outlying cities.
United provides reservation, check-in, ground-support and other passenger services and also controls seat inventories. Under the
code-share agreements, United retains all air fares, cargo rates, mail charges and other revenues associated with each flight, and is
responsible for revenue-related expenses. In exchange for providing the designated number of flights and performing our obligations
under the code-share agreements, we receive from United compensation of a fixed-fee per completed block hour, fixed-fee per
completed departure, fixed-fee per passenger, fixed-fee for overhead and aircraft costs, and one-time start-up costs. We receive
incentives based upon its performance, including controllable flight completion percentage rates, on-time percentage rates, mishandled
bags percentage rates, and customer responses to surveys about their intent to reuse United Express.
The fixed rates that we receive from United under the code-share agreements are annually adjusted in accordance with an agreed
escalation formula. Additionally, certain of our operating costs are considered "pass through" costs whereby United has agreed to
reimburse us the actual amount of costs it incurs for these items. Fuel and oil, landing fees, war risk insurance, liability insurance and
aircraft property taxes are pass through costs.
The agreements terminate on June 30, 2014 and June 30, 2015. United has the option of extending the agreement for five (5) years or
less; however, the ERJ-145 code-share agreement may be terminated by United upon 18 months prior written notice provided that
such notice shall not be delivered prior to December 31, 2008. In addition, the code-share agreements may be terminated under the
following conditions:
• if either party becomes insolvent, is not regularly paying its bills when due without just cause, takes any step leading to its cessation
as a going concern, makes an assignment of substantially all of its assets for the benefit of creditors or a similar disposition of the
assets of the business, or either ceases or suspends operations; or
• if either party fails to fulfill an obligation under the code-share agreements for a period of thirty days after written notice to cure.
United also may terminate the code-share agreements upon at least thirty days notice and subject to our right to cure under the
following conditions:
• Our operations fall below a certain performance level for a period of three consecutive months or for a period of six months within a
twelve-month period regarding controllable flight completion, mishandled bags and on-time performance; or
• We knowingly maintain falsified books or records or submit false reports of a material nature.
United may immediately terminate the code-share agreements if we operate, except pursuant to preexisting agreements with US
Airways and Delta, any additional regional jets or turboprop aircraft pursuant to a marketing or code-share relationship with any party
other than United to provide hub service at United’s hubs in Denver, Los Angeles, San Francisco, Chicago, Washington, D.C. or
Seattle. We also cannot engage or attempt to engage, on its behalf or on behalf of a third party, in the business of providing air
transportation at any of United’s hubs or for any carrier that has or attempts to have hub operations at any of United’s hubs, or operate
any additional regional jets or turboprops with any party other than United to provide hub service at United’s hubs.
United has a call option to assume our ownership or leasehold interest in certain aircraft if we wrongfully terminate the code-share
agreements or if United terminates the agreements for our breach for any one of the following reasons:
• Our operations fall below a certain performance level for a period of three consecutive months or for a period of six months within a
12-month period regarding controllable flight completion and on-time performance;
• We enter into a new code-share with another airline in breach of the United code-share agreement; or
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠