Frontier Airlines 2005 Annual Report Download - page 96

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, 2005, the Company leases 54 regional jets and 14 spare regional jet engines with varying terms
extending through 2022 and terminal space, operating facilities and office equipment with terms extending through 2016 under
operating leases. The components of rent expense for the years ended December 31 are as follows:
2005 2004 2003
Aircraft and engine rent $ 77,725 $ 74,514 $ 67,350
Other 4,225 3,320 2,518
Total rent expense $ 81,950 $ 77,834 $ 69,868
The Company has long-term maintenance agreements with an avionics equipment manufacturer and maintenance provider
that has a guaranteed minimum annual flight hour requirement. The minimum guaranteed amount based on the Company's current
operations is $4,384 per year through January 2012. The Company did not record a liability for this guarantee, because the Company
does not believe that any aircraft will be utilized below the minimum flight hour requirement during the term of the agreement.
The Company 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 the Company's aircraft are removed from service based on
the annual flight activity prior to the date of removal. The Company did not record a liability for this penalty provision because the
Company does not believe that more than twenty percent of their aircraft will be removed from service during the term of the
agreement.
The Company has long-term maintenance agreements based upon flight activity with engine manufacturers and maintenance
providers through 2014.
The Company has long-term maintenance agreements for wheels and brakes through June 2014. The agreement has an early
termination penalty, if the Company removes seller's equipment from certain aircraft, sells or leases certain aircraft to a third party or
terminates the services prior to expiration of the agreement. The Company did not record a liability for this penalty provision, because
the Company does not believe the contract will be terminated prior to the expiration date.
Total payments under these long-term maintenance agreements were $53,647, $39,982 and $29,357 for the years ended
December 31, 2005, 2004 and 2003, respectively.
As part of the Company's lease agreements, the Company 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. The Company has
not recorded a liability for these indemnifications because they are not estimable. The Company 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.
The Company is unable to estimate the liability for these return conditions as of December 31, 2005, because the leases expire
beginning in 2009. The Company will record a liability for these return conditions once the liability is estimable.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠