Frontier Airlines 2006 Annual Report Download - page 195

5. Annual Adjustment Factors. Effective as of January 1st 2005 and each January 1st thereafter for the term of this
agreement, Contractor and United agree to increase or leave constant all Carrier Controlled Costs, excluding aircraft ownership, within
the Reimbursement Categories for the ensuing contract year by an amount equal to the then applicable Carrier Controlled Costs
multiplied by the applicable “Annual Adjustment Factors” set forth on Appendix E. Rates shall be adjusted in accordance with the
procedures set forth in Appendix E. Except as expressly provided in this Agreement, the parties do not want to perform, and have not
provided for, any additional rate changes, rate negotiations or rate setting process. Annual CPI increases (if any) are to be capped at
[*]. If during any year during the first [*] of the term of this Agreement, CPI is negative, the rates that are subject to CPI adjustment
for such year will remain unchanged. If during any year after the first [*] of the term of this Agreement, (a) CPI is between [*] and [*],
the rates that are subject to CPI adjustment for such year will increase by CPI [*]; (b) CPI is a negative number in excess of [*], the
rates that are subject to CPI adjustment for such year will remain unchanged. Example. For example, if as January 1, 2005, , the rate
for the Completed Block Hours Reimbursement Category is [*] per block hour and the CPI adjustment factor is [*], then the annual
the Carrier Controlled Cost element effective as of such anniversary of this Agreement shall be [*] ([*] multiplied by [*]).
6. “CPI” shall mean the Consumer Price Index, U.S. City Average, Urban Wage Earners and Clerical Workers, All
Items (base index year 1982-1984=100) as published by the United States Department of Labor, Bureau of Labor Statistics. If the
manner in which the Consumer Price Index as determined by the Bureau of Labor Statistics shall be substantially revised, including,
without limitation, a change in the base index year, an adjustment shall be made by the parties in such revised index which would
produce results equivalent, as nearly as possible, to those which would have been obtained if such Consumer Price Index had not been
so revised. If the Consumer Price Index shall become unavailable to the public because publication is not readily available to enable
the parties to make the adjustment referred to in this Section, then the parties shall mutually agree to substitute therefore a comparable
index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental
agency or, if no such index shall be available, then a comparable index published by a major bank or other financial institution or by a
university or a recognized financial publication.
For purposes of calculating Annual Adjustment Factors under this Agreement, the parties agree that CPI shall be calculated
based upon the average of the change for each month during the period at issue for the preceding 12 month period in the Consumer
Price Index, U.S. City Average, Urban Wage Earners and Clerical Workers, All Items (base index year 1982-1984 = 100) as published
by the U.S. Department of Labor, Bureau of Labor Statistics for each month. An example of such calculation is set forth in the
attached Appendix L.
7. Commercially Reasonable Efforts. Contractor agrees to use commercially reasonable efforts to control its Carrier Controlled
Costs and Pass Through Costs. The parties agree to discuss any failure by Contractor to use reasonable efforts to control costs.
8. Aircraft Ownership Costs.
a) Regional Jet Aircraft Rent. United will pay actual aircraft ownership costs for the ERJ-170 fleet provided the fleet average
remains between [*] and [*]. United also reserves the right to finance any aircraft allocated for United Express Services subject to the
requirements of paragraph c below. Contractor agrees to share on a [*] basis the cost savings generated from monthly average fleet
ownership costs, which fall below [*] per month per aircraft. Contractor will also share on a [*] basis the burden of cost increases due
to monthly average fleet ownership costs, which rise above [*] per month per aircraft. In the event Contractor leases an aircraft, the
aircraft ownership costs for such aircraft shall be the amount payable by Contractor under the respective lease. In the event Contractor
owns an aircraft subject to debt financing, the aircraft ownership costs for such aircraft shall be the amount payable by Contractor as
debt service payments in respect of such Aircraft, calculated as if [*] of the aircraft purchase price was financed by such debt. In the
event that the amounts financed under such lease or debt financing do not include Contractor’s third party costs and expenses incurred
in connection with the acquisition and financing of such aircraft, the aircraft ownership costs shall include, in addition to the amount
of such lease or debt service payments, the additional costs that would have been reflected in the lease or debt service payments under
the terms of the respective lease or debt financing for such costs and expenses not to exceed [*] of the aircraft purchase price (the
“Additional Financing Amount”). Notwithstanding the above, at no time will United’s total aircraft ownership cost per aircraft
exceed a fleet average of [*] per aircraft per month excluding Markup.
b) Amended [*]. Republic Airways Holdings Inc. (“Republic”) shall provide United with an amended [*] (the “Amended [*]”)
calculated and applied as provided herein. The Amended [*] shall be (a) [*] per month for each aircraft operated in revenue service
(i.e. excluding spares) by Chautauqua Airlines Inc. or Contractor under a United Express Agreement [*] aircraft and up to a total of
[*] aircraft, and (b) [*] per month for each aircraft operated in revenue service (i.e. excluding spares) by Chautauqua or Contractor
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠