Frontier Airlines 2006 Annual Report Download - page 53

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Overview
Republic Airways Holdings Inc., (“the Company”) is a Delaware holding company organized in 1996 that operates
Chautauqua Airlines, Inc., (“Chautauqua Airlines”), Republic Airline Inc. (“Republic Airline”) and Shuttle America Corporation
(“Shuttle America”). As of December 31, 2006, we offered scheduled passenger service on approximately 1,000 flights daily to 90
cities in 35 states, Canada, Mexico and the U.S. Virgin Islands pursuant to code-share agreements with AMR Corp., the parent of
American Airlines, Inc. (“American”), US Airways, Inc. (“US Airways”), Delta Air Lines, Inc. (“Delta”) and United Air Lines, Inc.
(“United”). In July 2006, we entered into a code-share agreement with Continental Airlines, Inc. (“Continental”) and we began flying
for Continental in January 2007. Also, in January 2007, we entered into a code-share agreement with Frontier Airlines, Inc.
(“Frontier”). We expect to begin flying for Frontier in March 2007. Currently, we provide five of our six partners with regional jet
service, operating as AmericanConnection, US Airways Express, Delta Connection, United Express or Continental Express, including
service out of their hubs and focus cities in Atlanta, Boston, Chicago, Cincinnati, Columbus, Houston, Indianapolis, New York,
Philadelphia, Pittsburgh, St. Louis, and Washington, D.C., ( Dulles and National ).
Chautauqua Airlines is our platform for flying 37 to 50 seat aircraft, and, as of December 31, 2006, operated 95 aircraft.
Shuttle America is our platform for flying 70-seat aircraft and, as of December 31, 2006, operated 48 ERJ-170 aircraft. Republic
Airline is our platform for aircraft with more than 70 seats, and, as of December 31, 2006, Republic Airline operated twenty-eight
72-seat ERJ-170 aircraft.
From 2002 to 2006, our available seat miles, or ASMs, grew at a compounded annual growth rate of 37.9%. As of December
31, 2006, our operational fleet consisted of 171 aircraft, including 76 ERJ-170, 70-seat and larger regional jets and 95 ERJ-145 family,
37-50 seat regional jets. Currently, we have agreed to place into service an additional 30 ERJ-175 regional jets for US Airways
through 2008. These 30 aircraft are covered by firm orders that we have with Embraer. We have also agreed to place forty-four
50-seat regional jets into service for Continental between January and July 2007. 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 began service in January 2007. We have commitments to lease the remaining 20
CRJ-200 aircraft. In addition, we have entered into an agreement with Frontier to operate 17 ERJ-170 regional jets. Four of the 17
aircraft are currently in our fleet but are not allocated to a code-share partner and the remaining 13 aircraft will be funded by delivery
positions available with Embraer in 2007 and 2008. The Company has options for 79 ERJ-170 aircraft, which may be converted to
options for ERJ-175, ERJ-190 or ERJ-195 aircraft, which range in size from 78 seats to 110 seats.
For the years ended December 31, 2006, 2005 and 2004 respectively, US Airways accounted for approximately 24%, 21% and 38% of
our passenger revenues, Delta accounted for approximately 35%, 34% and 36% of our passenger revenues, American accounted for
approximately 11%, 13% and 16% of our passenger revenues and United accounted for approximately 30%, 32% and 10% of our
passenger revenues.
Code-Share Agreements
We have long-term, fixed-fee regional jet code-share agreements with each of our partners that are subject to our maintaining
specified performance levels. Pursuant to these fixed-fee agreements, which provide for minimum aircraft utilization at fixed rates, we
are authorized to use our partners' two-character flight designation codes to identify our flights and fares in our partners' computer
reservation systems, to paint our aircraft in the style of our partners, to use their service marks and to market ourselves as a carrier for
our partners. In addition, in connection with a marketing agreement among Delta, Continental and Northwest Airlines, certain of the
routes that we fly using Delta's and Continental’s flight designator codes are also flown under Northwest's designator code. Our
fixed-fee agreements have eliminated our exposure to fluctuations in fuel prices, fare competition and passenger volumes. Our
development of relationships with multiple major airlines has enabled us to reduce our dependence on any single airline, allocate our
overhead more efficiently among our partners and reduce the cost of our services to our partners.
In October 2005, US Airways which represented 24% of our revenue for the year ended December 31, 2006, emerged from
bankruptcy. United, which represented 30% of our passenger revenues for the year ended December 31, 2006, emerged from
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠