Frontier Airlines 2006 Annual Report Download - page 29

The DOT allows local airport authorities to implement procedures designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or foreign commerce or the national transportation system. Certain airports,
including the major airports at Boston, Washington, D.C., Chicago, Los Angeles, San Diego, Orange County (California) and San
Francisco, have established airport restrictions to limit noise, including restrictions on aircraft types to be used and limits on the
number of hourly or daily operations or the time of such operations. In some instances, these restrictions have caused curtailments in
services or increases in operating costs, and such restrictions could limit our ability to commence or expand our operations at affected
airports. Local authorities at other airports are considering adopting similar noise regulations.
Pursuant to law and the regulations of the DOT, we must be effectively controlled by United States citizens. In this regard,
our President and at least two-thirds of our Board of Directors must be United States citizens and not more than 25% of our voting
stock may be owned or controlled by foreign nationals, although subject to DOT approval the percent of foreign economic ownership
may be as high as 49%.
ITEM 1A. RISK FACTORS
The following risk factors, in addition to the information discussed elsewhere herein, should be carefully considered in
evaluating us and our business:
Risks Related To Our Operations
We are dependent on our code-share relationships with our major partners.
We depend on relationships created by our regional jet code-share agreements with US Airways, American, Delta, United,
Continental and Frontier for all of our passenger revenue. Any material modification to, or termination of, our code-share agreements
with any of these partners could have a material adverse effect on our financial condition, results of our operations and the price of our
common stock. Each of the code-share agreements contains a number of grounds for termination by our partners, including our failure
to meet specified performance levels. In addition, American may terminate its code-share agreement without cause upon 180 days
notice, provided such notice may not be given prior to September 30, 2008. If American terminates its code-share agreement for
cause, it has the right to require us to assign to them our leases of all ERJ-140 regional jets then operating under the code-share
agreement or to lease such jets to them to the extent we own them. If American terminates our code-share agreement other than for
cause, we have the right to require American to assume our leases of all ERJ-140 regional jets then operating under the code-share
agreement, or to lease such jets from us to the extent we own them. Delta may partially or completely terminate its code-share
agreement with respect to the ERJ-135/145 aircraft, with or without cause, on 180 days written notice at any time after
November 2009, and may partially or completely terminate its code-share agreement with respect to the ERJ-170 aircraft, with or
without cause, on 180 days written notice at any time after 2013. If Delta exercises this right under either agreement or if we terminate
either agreement for cause, we have the right to require Delta either to purchase, sublease or assume the lease of aircraft leased by us
with respect to any of the aircraft we previously operated for Delta under that agreement. If we choose not to exercise this right, or if
Delta terminates either agreement for cause, Delta may require us to sell or sublease to it or Delta may assume the lease of aircraft
leased by us with respect to any of the aircraft we previously operated for it under that agreement. On March 13, 2007, we and Delta
reached an agreement to amend our code-share agreements. Delta has submitted the amendments to the bankruptcy court for approval,
and the amendments are currently docketed for action on March 27, 2007. United may terminate its code-share agreement with respect
to the ERJ-145 aircraft without cause on 18 months prior written notice, provided that such notice may not be delivered prior to
December 31, 2008. If we wrongfully terminate our code-share agreement, breach certain provisions thereof or fall below certain
minimum operating thresholds for three consecutive months or any six month period in a rolling 12 month period, United can assume
our ownership or leasehold interests in the jets we operate for them. Each of Continental and Frontier may terminate these code share
agreements with cause or if we breach certain provisions thereof including a breach of our guaranty granted to each of them.
In addition, because substantially all of our passenger revenues are currently generated under the code-share agreements, if
any one of them is terminated, our operating revenues and net income will be materially adversely affected unless we are able to enter
into satisfactory substitute arrangements or, alternatively, fly under our own flight designator code, including obtaining the airport
facilities and gates necessary to do so. We cannot assure you that we would be able to enter into substitute code-share arrangements,
that any such substitute arrangements would be as favorable to us as the current code-share agreements or that we could successfully
fly under our own flight designator code.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠