Frontier Airlines 2006 Annual Report Download - page 25

The United Code-Share Agreements
We have entered into fixed-fee code-share agreements with United to operate seven ERJ-145 aircraft and 28 ERJ-170 aircraft to
provide United Express Service in markets to be determined by United. As of December 31, 2006, we provided 195 flights per day as
United Express between Chicago, Washington D.C. and designated outlying cities.
The fixed rates that we receive from United under the code-share agreements are annually adjusted in accordance with an agreed
escalation formula. Additionally, certain of our operating costs are considered "pass through" costs whereby United has agreed to
reimburse us the actual amount of costs we incur for these items. Fuel and oil, landing fees, war risk insurance, liability insurance and
aircraft property taxes are pass through costs.
The agreements terminate on June 30, 2014 and June 30, 2015, respectively. United has the option of extending each agreement for
five years or less; however, the ERJ-145 code-share agreement may be terminated by United upon 18 months prior written notice
provided that such notice shall not be delivered prior to December 31, 2008. In addition, the code-share agreements may be terminated
under the following conditions:
• if either party becomes insolvent, is not regularly paying its bills when due without just cause, takes any step leading to its
cessation as a going concern, makes an assignment of substantially all of its assets for the benefit of creditors or a similar disposition
of the assets of the business, or either ceases or suspends operations; or
• if either party fails to fulfill an obligation under the code-share agreements for a period of thirty days after written notice to
cure.
United also may terminate the code-share agreements upon at least thirty days notice and subject to our right to cure under
the following conditions:
• Our operations fall below certain minimum operating thresholds for a period of three consecutive months or any six month
period in a rolling 12 month period regarding controllable flight completion, mishandled bags and on-time performance; or
• We knowingly maintain falsified books or records or submit false reports of a material nature.
United may immediately terminate the respective code-share agreements if Chautauqua Airlines or Shuttle America operates,
except pursuant to preexisting agreements with US Airways and Delta, any additional regional jets or turboprop aircraft pursuant to a
marketing or code-share relationship with any party other than United to provide hub service at United’s hubs in Denver, Los Angeles,
San Francisco, Chicago, Washington, D.C. or Seattle. Chautauqua Airlines and Shuttle America also cannot engage or attempt to
engage, on its behalf or on behalf of a third party, in the business of providing air transportation at any of United’s hubs or for any
carrier that has or attempts to have hub operations at any of United’s hubs, or operate any additional regional jets or turboprops with
any party other than United to provide hub service at United’s hubs.
United has a call option to assume our ownership or leasehold interest in certain aircraft if we wrongfully terminate the
code-share agreements or if United terminates the agreements for our breach for certain reasons.
The Continental Code-Share Agreement
As of July 21, 2006, we entered into a code-share agreement with Continental to provide and operate forty-four 50-seat regional jets as
a Continental Express carrier. We will transition 20 ERJ-145 aircraft from our US Airways operations and we plan to lease 24
CRJ-200 regional jets to fulfill the commitment. As of December 31, 2006, four leases for such CRJ-200 aircraft had been obtained,
and we have commitments to lease the remaining 20 CRJ-200 aircraft. The first six aircraft were placed into service in January 2007
and the last aircraft is expected to be placed into service in August 2007. Continental is responsible for Chautauqua Airlines'
reasonable out-of-pocket costs of preparing each covered aircraft, other than the spare aircraft, up to a maximum amount, prior to its
being placed into service. The aircraft are operated under the agreement on terms that vary from two years to five years. Under certain
conditions, Continental may extend the term on the aircraft up to five additional years.
All fuel will be purchased directly by Continental and will not be charged back to Chautauqua Airlines. Under the agreement,
Continental purchases all capacity at predetermined rates and industry standard pass-through costs.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠