Frontier Airlines 2006 Annual Report Download - page 19

Code-Share Agreements
Through our subsidiaries, we have entered into code-share agreements with US Airways, American, Delta, United, Continental and
Frontier that authorize us to use their two-character flight designator codes (“US,” “AA,” “DL,” “UA,” “CO” and “F9”) 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, United Express, Continental
Express and Frontier Airlines, respectively. In connection with a marketing agreement among Delta, Continental and Northwest
Airlines, certain of the routes that we fly using Delta's and Continental’s flight designator codes are also flown under Northwest's
designator code. Under the code-share agreements between our subsidiaries and each of US Airways, American, Delta, United,
Continental and Frontier, we are compensated on a fixed-fee basis on all of our US Airways Express, AmericanConnection, Delta
Connection, United Express, Continental Express and Frontier Airlines 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 Jet Services Agreement with US Airways, dated April 26, 2005. As of December 31,
2006, 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. On
July 21, 2006, we amended this agreement and agreed to remove 20 ERJ-145 aircraft from US Airways operations and transition into
operation under the Continental code-share agreement during 2007. 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.
In exchange for providing the designated number of flights and performing our other obligations under the code-share agreements, 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.
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. Landing fees, passenger catering, passenger liability insurance and aircraft property
tax costs are pass through costs.
As of December 31, 2006, with our ERJ 145 regional jets and our ERJ 170 regional jets, we were providing 370 flights per
day as US Airways Express between New York, Boston, Philadelphia, Pittsburgh, Indianapolis, Washington, D.C. and designated
outlying cities.
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 margins are not affected by this change.
On July 24, 2006, we amended the Jet Service Agreement (JSA”) with US Airways to operate 30 ERJ-175 aircraft on terms
substantially similar to those of the ERJ-145 and ERJ-170 agreements between us and US Airways. The amended agreement has a
term of twelve years for each aircraft. We expect to place these 30 ERJ-175 aircraft into service for US Airways beginning in 2007
and through 2008.
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, March 15, 2007 Powered by Morningstar® Document Research℠