Frontier Airlines 2006 Annual Report Download - page 32

We plan to acquire an additional 43 Embraer ERJ-170/175 regional jets by the end of 2008, 38 of which are subject to firm
orders. At December 31, 2006, we had an agreement to place 30 of the 38 firm orders into service. Currently, we have agreements to
place all 38 firm orders into service. We have financing commitments in place for all of these firm orders. In addition, we plan to lease
an additional 20 CRJ-200 aircraft. If we are incorrect in our assessment of the profitability and feasibility of our growth plans, if
circumstances change in a way that was unforeseen by us or if we are unable to consummate financing for these aircraft, we may not
be able to grow as planned.
Under our code-share agreements, we are obligated to place in service an additional 71 regional jets through 2008, including
four ERJ-170 regional jets that are not assigned to any of our code-share partners as of December 31, 2006 and four CRJ-200 regional
jets which have been leased as of December 31, 2006 and which were placed into service with Continental in January 2007, at an
aggregate cost, excluding the cost of acquiring the aircraft and related parts, to us of approximately $14.7 million. These costs, which
are related to the acquisition of these aircraft, include the acquisition of related additional ground and maintenance facilities and
support equipment, the employment of approximately 1,700 additional employees and the integration of those aircraft, facilities and
employees into our existing operations.
In January 2007, our Chautauqua operating subsidiary began operating CRJ-200 aircraft and is no longer operating just one
fleet type. Historically, each of our operating subsidiaries have operated with one fleet type to take advantage of the efficiencies in
employee training, aircraft maintenance, lower spare parts inventory requirements and aircraft scheduling. As we expand
Chautauqua’s operations to include more than one fleet type, some of these efficiencies may no longer be realized.
As of December 31, 2006, we had options to purchase an aggregate of 79 regional jets from Embraer. If we choose to
exercise options to purchase aircraft from Embraer prior to obtaining a commitment from existing or future code-share partners to
place the aircraft in service, we will be obligated to purchase the aircraft from Embraer and to bear the cost of operation even if we
cannot place the aircraft in service with a code-share partner, which could have a material adverse effect on our financial condition,
results of operations and the price of our common stock.
Our ability to manage our growth effectively and efficiently requires us to continue to accurately forecast our equipment and
human resources needs and to continue to expend funds to improve our operating, financial and management controls, reporting
systems, procurement process and procedures. In addition, we must effectively expand, train and manage our employee base, which
could be costly. Our growth will place a significant strain on our management and other corporate resources. If we are unable to
manage our anticipated growth effectively and efficiently, our business could be harmed.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠