Frontier Airlines 2005 Annual Report Download - page 6

PART I
ITEM 1. BUSINESS
General
Overview
Republic Airways Holdings Inc., (“the Company”) is a Delaware holding company organized in 1996 that operates
Chautauqua Airlines, Inc., (“Chautauqua Airlines”), Republic Airline Inc. (“Republic Airline”) and Shuttle America Corporation
(“Shuttle America”). As of December 31, 2005, we offered scheduled passenger service on approximately 800 flights daily to 78 cities
in 33 states, Canada and the Bahamas pursuant to code-share agreements with AMR Corp., the parent of American Airlines, Inc.
(“American”), US Airways, Inc. (“US Airways”), Delta Air Lines, Inc. (“Delta”) and United Air Lines, Inc. (“United”). Currently, we
provide our four partners with regional jet service, operating as US Airways Express, AmericanConnection, Delta Connection or
United Express, including service out of their hubs and focus cities in Boston, Chicago, Columbus, Fort Lauderdale, Indianapolis,
New York, Orlando, Philadelphia, Pittsburgh, Washington, D.C., ( Dulles and National ) and St. Louis.
Chautauqua Airlines is our platform for flying the 37 to 50 seat ERJ-145 family of aircraft and as of December 31, 2005,
operated 95 aircraft. Shuttle America, which we acquired from an affiliate on May 6, 2005, is our platform for flying 70-seat aircraft
and as of December 31, 2005, operated 37 ERJ-170 aircraft. Republic Airline is our platform for aircraft with more than 70 seats, and
as of December 31, 2005, Republic Airline operated ten 72-seat ERJ-170 aircraft for US Airways.
In January 2005, the Company and Delta entered into a code-share agreement whereby the Company will operate 16
ERJ-170 aircraft for Delta. As of December 31, 2005, nine of these aircraft have been placed into service.
On June 22, 2005, the Company amended its code-share agreements with United increasing the ERJ-170 fleet from 23 to 28
aircraft and reducing the ERJ-145 fleet from nine to seven aircraft. The five additional ERJ-170 aircraft were all placed into service by
December 31, 2005. The two ERJ-145 aircraft were removed from service and added to the Company’s charter operations beginning
in November, 2005.
On March 15, 2005, the Company and Wexford Capital LLC, our largest shareholder, entered into an investment agreement
with US Airways Group, Inc. and US Airways. The agreement included provisions for the affirmation of an amended Chautauqua
code-share agreement, a new jet service agreement for the operation of ERJ-170 and ERJ-190 aircraft, a conditional $125 million
equity commitment and up to $110 million in asset related financing. The Bankruptcy Court approved the agreement on March 31,
2005.
On June 23, 2005, the Company received notification from US Airways Group that it would not be requested to make the
$125 million equity investment but US Airways notified the Company that it would exercise its right to receive up to $110 million in
asset related financing in connection with its reorganization plan.
On September 21, 2005, we and US Airways entered into a global aircraft transaction agreement. Under this agreement, we
purchased 10 ERJ-170 aircraft owned by US Airways. We leased the 10 purchased aircraft back to US Airways subject to their
transfer to Republic Airline under a 10-year fixed-fee jet service agreement we entered into with US Airways on September 2, 2005.
As of December 31, 2005, seven of these aircraft had been transferred to Republic Airline. We also agreed to assume the leases of 15
additional ERJ-170 aircraft operated by US Airways and to enter into new leases for an additional three ERJ-170 aircraft. All 28
aircraft are expected to be in operation with Republic Airline by September 2006. In addition, under a commuter slot option agreement
that we and US Airways entered into on September 22, 2005, we purchased 113 commuter slots at Ronald Reagan Washington
National Airport and 24 commuter slots at New York-LaGuardia Airport. Republic assigned the right of use for these commuter slots
to US Airways and these commuter slots are being operated by US Airways and US Airways Express carriers under a licensing
agreement for which US Airways pays us rent. Prior to the expiration of the agreement to license the commuter slots, US Airways has
the right to repurchase all, but not less than all, of the Washington and LaGuardia commuter slots at a predetermined price.
From 2001 to 2005, our available seat miles, or ASMs, grew at a compounded annual growth rate of 41.2%. As of
December 31, 2005, our operational fleet consisted of 142 aircraft, including 47 ERJ-170, 70-seat and larger regional jets and
95 ERJ-145 family, 37-50 seat regional jets. Further, as of December 31, 2005, and in addition to the 18 regional jets which we will
obtain from US Airways, we have agreed to place into service an additional seven ERJ-170 regional jets for Delta through 2006.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠