Frontier Airlines 2006 Annual Report Download - page 37

In addition, if one of our aircraft were to crash or be involved in an accident we would be exposed to significant tort liability.
Such liability could include liability arising from the claims of passengers or their estates seeking to recover damages for death or
injury. There can be no assurance that the insurance we carry to cover such damages will be adequate. Accidents could also result in
unforeseen mechanical and maintenance costs. In addition, any accident involving an aircraft that we operate could create a public
perception that our aircraft are not safe, which could result in air travelers being reluctant to fly on our aircraft and a decrease in
revenues. Such a decrease could materially adversely affect our financial condition, results of operations and the price of our common
stock.
Wexford Capital has significant influence over our affairs by virtue of its significant ownership of our common stock and they
may make decisions with which you disagree.
WexAir LLC, which is owned by several investment funds managed by Wexford Capital, on a fully diluted basis, owns
beneficially approximately 16% of our common stock. As a result of its significant level of ownership, Wexford Capital and its
affiliates have significant influence over matters affecting us, including the election of directors as long as they own or control a
significant percentage of our common stock. They may make decisions which you and other stockholders will not be able to affect by
voting your shares.
We may have conflicts of interest with Wexford Capital, and because of its significant ownership, we may not be able to
resolve these conflicts on an arm's length basis.
Wexford Capital and its affiliates are actively engaged in the airline business. Conflicts of interest may in the future arise
between Wexford Capital and its affiliates, on the one hand, and us, on the other hand, in a number of areas relating to our business
and our past and ongoing relationships. Factors that may create a conflict of interest between Wexford Capital and us include the
following:
• Wexford Capital may in the future make significant investments in other airline companies that directly compete with us;
• sales or distributions by WexAir LLC of all or any portion of its ownership interest in us; and
• two of our directors also are directors, managing members or general partners of Wexford Capital and its affiliates.
Wexford Capital is under no obligation to resolve any conflicts that might develop between it and its affiliates and us in a
manner that is favorable to us and we cannot guarantee that such conflicts will not result in harmful consequences to our business or
future prospects. In addition, Wexford Capital and its affiliates are not obligated to advise us of any investment or business
opportunities of which they are aware, and they are not contractually restricted or prohibited from competing with us. We have
specifically renounced in our certificate of incorporation any interest or expectancy that Wexford Capital and its affiliates, including
its directors and officers, will offer to us any investment or business opportunity of which they are aware.
Risks Associated with the airline industry
The airline industry is highly competitive.
Within the airline industry, we not only compete with other regional airlines, some of which are owned by or operated as
code-share partners of major airlines, but we also face competition from low-fare airlines and major airlines on many of our routes,
including carriers that fly point to point instead of to or through a hub. Other low-fare carriers serve the Indianapolis International
Airport, which results in significant price competition in the Indianapolis market, one of our major markets. Competition in the eastern
United States markets, which we service from US Airways' hubs in New York, Boston, Philadelphia and Washington, D.C. and from
Delta's hub in Cincinnati, and Atlanta, is particularly intense, due to the large number of carriers in those markets.
In addition, some of our competitors are larger and have significantly greater financial and other resources than we do.
Moreover, federal deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and restructure
fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs to provide service
to passengers occupying otherwise unsold seats.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠