Frontier Airlines 2007 Annual Report Download - page 29

The airline industry has been subject to a number of strikes which could affect our business.
The airline industry has been negatively impacted by a number of labor strikes. Any new collective bargaining agreement
entered into by other regional carriers may result in higher industry wages and increase pressure on us to increase the wages and
benefits of our employees. Furthermore, since each of our Partners is a significant source of our operating revenues, any labor
disruption or labor strike by the employees of any one of our Partners could have a material adverse effect on our financial condition,
results of operations and the price of our common stock.
Airlines are often affected by certain factors beyond their control, including weather conditions which can affect their
operations.
Generally, revenues for airlines depend on the number of passengers carried, the fare paid by each passenger and service
factors, such as the timeliness of departure and arrival. During periods of fog, ice, low temperatures, storms or other adverse weather
conditions, flights may be cancelled or significantly delayed. For example, in 2005, Hurricane Wilma forced us to suspend some of
our operations in Florida for a number of days. Under our fixed-fee code-share agreements, we are partially protected against
cancellations due to weather or air traffic control, although these factors may affect our ability to receive incentive payments for flying
more than the minimum number of flights specified in our code-share agreements. Should we enter into pro-rate revenue sharing
agreements in the future we will not be protected against weather or air traffic control cancellations and our operating revenues could
suffer as a result.
The airline industry has recently gone through a period of consolidation and transition; consequently, we have fewer potential
partners.
Since 1978 and continuing to the present, the airline industry has undergone substantial consolidation, and it may in the
future undergo additional consolidation. For example, in April 2001, American acquired the majority of Trans World Airlines, Inc.'s
assets. Our relationship with American resulted from this transaction. Other recent developments include the domestic code-share
alliance between United and US Airways, a similar new relationship among Delta, Continental and Northwest and the merger of
America West and US Airways. We, as well as our Partners, routinely monitor changes in the competitive landscape and engage in
analysis and discussions regarding our strategic position, including potential alliances and business combination transactions. Further
consolidation could limit the number of potential partners with whom we could enter into code-share relationships. Although none of
our contracts with our Partners allow termination or are amendable in the event of consolidation, any additional consolidation or
significant alliance activity within the airline industry could materially adversely affect our relationship with our Partners.
The airline industry is heavily regulated.
Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that
involve significant costs. In the last several years, the FAA has issued a number of directives and other regulations relating to the
maintenance and operation of aircraft that have required us to make significant expenditures. FAA requirements cover, among other
things, retirement of older aircraft, security measures, collision avoidance systems, airborne wind shear avoidance systems, noise
abatement, commuter aircraft safety and increased inspection and maintenance procedures to be conducted on older aircraft.
We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and
regulations to which we are subject. We cannot predict whether we will be able to comply with all present and future laws, rules,
regulations and certification requirements or that the cost of continued compliance will not significantly increase our costs of doing
business.
The FAA has the authority to issue mandatory orders relating to, among other things, the grounding of aircraft, inspection of
aircraft, installation of new safety related items and removal, replacement or modification of aircraft parts that have failed or may fail
in the future. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, all or any of our Embraer
or Bombardier aircraft, for any reason, could negatively impact our results of operations.
In addition to state and federal regulation, airports and municipalities enact rules and regulations that affect our operations.
From time to time, various airports throughout the country have considered limiting the use of smaller aircraft, such as Embraer or
Bombardier aircraft, at such airports. The imposition of any limits on the use of Embraer or Bombardier aircraft at any airport at which
we operate could interfere with our obligations under our code-share agreements and severely interrupt our business operations.
Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could
significantly increase the cost of airline operations or reduce revenues. For instance, "passenger bill of rights" legislation was
introduced in Congress that, if enacted, would have, among other things, required the payment of compensation to passengers as a
result of certain delays and limited the ability of carriers to prohibit or restrict usage of certain tickets. This legislation is not currently
active but if it is reintroduced, these measures could have the effect of raising ticket prices, reducing revenue and increasing costs.
Several state legislatures have also considered such legislation. Restrictions on the ownership and transfer of airline routes and takeoff
and landing slots have also been proposed. In addition, as a result of the terrorist attacks in New York and Washington, D.C. in
September 2001, the FAA and the Transportation Security Administration (TSA) have imposed stringent security requirements on
airlines. We cannot predict what other new regulations may be imposed on airlines and we cannot assure you that laws or regulations
enacted in the future will not materially adversely affect our financial condition, results of operations and the price of our common
stock.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠