Frontier Airlines 2007 Annual Report Download - page 20

Certain of our operating costs are considered "pass through" costs, whereby Delta has agreed to reimburse us the actual
amount of costs we incur for these items. Fuel, engine maintenance expenses, landing fees, passenger liability insurance, hull
insurance, war risk insurance, de-icing costs, and aircraft property taxes are some of the pass through costs and included in our
regional airline services revenue. Aircraft rent/ownership expenses are also considered a pass through cost, but the reimbursement is
limited to specified amounts for certain aircraft.
The initial term of the ERJ-145 code-share agreement is until May 31, 2016. At the end of the term, Delta has the right to
extend the agreement for an additional five years on the same terms and conditions. If either we or Chautauqua enter into a merger
where we are not the surviving entity or the ultimate beneficial ownership of the surviving entity following a merger is not
substantially similar (i.e., at least 75% common ownership) to the ultimate beneficial ownership of us or Chautauqua prior to the
merger (which we refer to as a merger), or if a party acquires more than 49% of our voting power or outstanding common stock or that
of Chautauqua (with limited exceptions) (which we refer to as a change in control), Delta shall have the right to extend the term of the
code-share agreement for an additional ten years beyond the applicable termination date of the agreement.
The agreement may be subject to early termination under various circumstances including:
• if either Delta or we file for bankruptcy, reorganization or similar action (or if any such action is imminent) or if either
Delta or we make an assignment for the benefit of creditors;
• if either Delta or we commit a material breach of the code-share agreement, subject to 30 days notice and cure rights; or
• upon the occurrence of an event of force majeure that continues for a period of two or more consecutive months, subject to
30 days prior written notice to the party affected by the force majeure event.
In addition, Delta may immediately terminate the code-share agreement upon the occurrence of one or more of the following events:
• if there is a change in control of us;
• if there is a merger involving us;
• if Delta is unsatisfied with the product quality we are providing 30 days after it has supplied us written notice of its
dissatisfaction and has proposed remedial measures;
• if we fail to maintain a specified completion rate with respect to the flights we operate for Delta during a specified period;
or
• if our level of safety is not reasonably satisfactory to Delta, subject to 30 days notice and cure period.
The United Code-Share Agreements
On August 22, 2007, we amended our Jet Services Agreement with United to provide for the operation of ten additional ERJ-170
aircraft as United Express. The aircraft, which will transition from Delta, are expected to be placed into service during the fourth
quarter of 2008 and the first quarter of 2009.
We have entered into fixed-fee code-share agreements with United to operate seven ERJ-145 aircraft and 38 ERJ-170
aircraft to provide United Express Service in markets to be determined by United. As of December 31, 2007, we operated seven
ERJ-145 aircraft and 28 ERJ-170 aircraft and provided 200 flights per day as United Express between Chicago, Washington D.C. and
designated outlying cities.
The fixed rates that we receive from United under the code-share agreements are annually adjusted in accordance with an
agreed escalation formula. Additionally, certain of our operating costs are considered "pass through" costs whereby United has agreed
to reimburse us the actual amount of costs we incur for these items. Fuel and oil, landing fees, war risk insurance, liability insurance
and aircraft property taxes are pass through costs and included in our regional airline services revenue. Beginning in January 2007,
United elected to provide fuel directly in certain locations, which eliminates a portion of our fuel expense and the related fuel
reimbursement (previously recorded as revenue).
The ERJ-145 and ERJ-170 code-share agreements terminate on June 30, 2014 and June 30, 2019, respectively. United has the
option of extending each agreement for five years or less; however, the ERJ-145 code-share agreement may be terminated by United
or us upon 18 months prior written notice provided that such notice shall not be delivered by United prior to December 31, 2007,
and by us prior to December 31, 2008. In addition, the code-share agreements may be terminated under the following conditions:
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠