Frontier Airlines 2006 Annual Report Download - page 296

Appendix 2 to Exhibit D
Incentive Bonuses/Rebates
1. On Time Bonus/Rebate: The bonus or rebate/offset, as the case may be, for on-time performance shall be determined as follows:
Beginning each month or partial month after the 12th Covered Aircraft is placed in service, the percentage of RAI’s Controllable
arrivals within [* ] minutes will be measured using ACARS data for each completed Scheduled Flight as soon as practicable
following the end of each calendar month of operation. A flight cancellation will not also be counted as a delayed flight. The
Target Threshold is for [*]of all Scheduled Flights to arrive within [*] minutes of scheduled arrival. The Bonus Threshold is [*].
The Penalty Threshold is [*]and the Default Threshold is [*]. Should RAI fall below the Penalty Threshold for Controllable
arrivals within [*] minutes, RAI shall pay Frontier a minimum penalty of [*] plus and an additional [*] per full percentage point
below the Penalty Threshold. Should RAI’s Controllable arrivals within [*] minutes be between the Penalty Threshold and the
Bonus Threshold, there shall be no payment due to or from either party. In the event that RAI meets or exceeds the Bonus
Threshold for Controllable arrivals within [*] minutes, Frontier shall pay to RAI a minimum bonus payment of [*] plus an
additional [*] per full percentage point above the Bonus Threshold.
2. Completion Factor Bonus/Rebate: The bonus or rebate/offset, as the case may be, for completion factor shall be determined as
follows:
Beginning each month or partial month after the 12th Covered Aircraft is place in service, the percentage of RAI’s Controllable
Completion Factor Percentage will be measured for each Scheduled Flight as soon as practicable following the end of each
calendar month of operation. The Target Threshold is for [*] of all Scheduled Flights to be completed. The Bonus Threshold is
[*]. The Penalty Threshold is [*]and the Default Threshold is [*]. Should RAI fall below the Penalty Threshold for Controllable
Completion Factor Percentage in any month, RAI shall pay Frontier, for each percentage point (rounded to the next highest full
percentage in all cases) below the Penalty Threshold, a penalty of [*] for the first month, [*] for the second consecutive month,
[*] for the third consecutive month, and [*] for the fourth consecutive month and each consecutive month thereafter that the
Penalty Threshold is not met. Should RAI’s Controllable Completion Factor Percentage be between the Penalty Threshold and the
Bonus Threshold in any month, there shall be no payments due to or from either party. In the event RAI meets or exceeds the
Bonus Threshold for Controllable Completion Factor Percentage in any month, Frontier will pay RAI a bonus of [*].
3. Bonus/Penalty Payment Terms and Definitions.
a. “Controllable” means factors other than those that are beyond RAI’s direct control, including, without limitation, weather,
natural disasters, air traffic control, ground stops, taxi and parking delays, lightening strikes or bird strikes, delays caused by
or requested by Frontier personnel, including aircraft ground damage.
b. Frontier will be responsible for coding all delays and cancellations. When aircraft are scheduled for heavy maintenance,
Frontier will determine, in its sole discretion, whether to reduce the flight schedule or use the spare aircraft to maintain
schedule integrity. Should Frontier decide to use the spare aircraft to replace aircraft in scheduled heavy maintenance,
incentive bonuses and rebates will be suspended until such time that the spare is removed from scheduled service to act once
again as a spare or the out of service aircraft is returned to service, either as a scheduled aircraft or a spare aircraft.
c. Any final settlement for bonuses or penalties will occur within 30 days after the end of each performance period. If any
matters relating to the measurement or calculation of any penalties remain in dispute at the end of the 30 day period, Frontier
will be entitled to set off the penalty amount it believes due against the next monthly payment due RAI, and will refund any
excess over the final determined penalty within 5 business days’ of the parties reaching agreement on the measurement and
calculation. If any matters relating to the calculation of bonuses remain in dispute at the end of the initial 30 day period, at the
time final agreement is reached between the parties regarding the amount of bonus due, Frontier will pay the bonus to RAI
plus interest on the agreed amount at an annual rate of prime plus [* ] for each day from the initial date of calculation through
the date of payment.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠