Frontier Airlines 2006 Annual Report Download - page 21

The American Code-Share Agreement
As of December 31, 2006, we operated 15 ERJ-140 regional jets for American under a fixed-fee code-share agreement and provided
90 flights per day between St. Louis and designated outlying cities.
Under the code-share agreement, American retains all passenger, certain cargo and other revenues associated with each flight, and is
responsible for all revenue-related expenses. We share revenue with American for certain cargo shipments. Additionally, certain
operating costs are considered "pass through" costs and American has agreed to reimburse us the actual amount of costs we incur for
these items. Fuel, landing fees, hull and liability insurance and aircraft property tax costs are pass through costs. Aircraft lease
payments are also considered a pass through cost, but are limited to a specified limit with respect to the first 20 aircraft put into service
for American. American pays us periodically throughout the month on an agreed schedule, subject to American's right to offset
amounts we owe them under the code-share agreement. A reconciliation payment will be made by American to us if uncontrollable
cancellations exceed a specified level of scheduled block hours during any calendar quarter.
If American terminates the code-share agreement for cause, American has a call option to require that we assign to American all of its
rights under the leases of aircraft, and to lease to American the aircraft to the extent we own them, used at that time under the
code-share agreement. If American exercises their call option, we are required to pay certain maintenance costs in transferring the
aircraft to American's maintenance program.
If American terminates the code-share agreement without cause, we have the right to put the leases of the aircraft, or to lease the
aircraft to American to the extent owned by us, used under the code-share agreement to American. American also has a call option to
require us to assign to American these leases. If we exercise our put or American exercises their call, both parties are obligated to
implement a schedule to terminate the code-share agreement in an orderly fashion and transition the aircraft from us to American.
The term of the American code-share agreement continues until February 1, 2013. American may reduce the term by one year each
time that we fail to achieve an agreed performance level. American may only exercise this right three times during the term of the
code-share agreement. The agreement may be subject to termination for cause prior to that date under various circumstances
including:
• a change in the regulations governing air carriers that materially affects the rights and/or obligations of either party, subject
to negotiation of amendments to the code-share agreement or third party mediation;
• if we or American become insolvent or fail to pay our debts as they become due, the other party may terminate the
agreement subject to five business days notice and rights of assurance;
• failure by us or American to perform the material terms, covenants or conditions of the code-share agreement, which
includes the American standards of service, subject to 30 day notice and cure rights;
• if we or American fail to make a payment when due, subject to five business days notice and cure rights;
• if either party suspends or is required to suspend its operations due to any safety reason, the other party may terminate the
agreement on five days notice;
• if American, in its reasonable discretion, determines that we materially breached a representation or warranty to them that
creates a serious and imminent threat to the safe operation of AmericanConnection services, American may immediately terminate the
code-share agreement;
• if we fail to achieve specified levels of operating performance in completion factor, on-time arrivals, customer complaints
and baggage, American may terminate the agreement, subject to corrective action plan and adherence to such plan; or
• if either party assigns, by operation of law or otherwise, the code-share agreement without the written consent of the other
party, subject to five days notice and cure rights, or if we enter into any merger, sale or acquisition of all or substantially all of our
assets or a majority of our outstanding voting interests with an air carrier other than an entity that is under common control with us.
American may terminate the code-share agreement without cause upon 180 days notice, provided that such notice may not be given
prior to September 30, 2008. If American exercises this right, it is required to reimburse us for certain costs and we and American
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠