Frontier Airlines 2007 Annual Report Download - page 68

REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
(Dollars in thousands, except share and per share amounts)
1. ORGANIZATION & BUSINESS
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America and include the accounts of Republic Airways Holdings Inc., a Delaware Corporation, and
its wholly-owned operating subsidiaries (collectively “Republic” or the “Company”), Chautauqua Airlines, Inc. (“Chautauqua”), an
Indiana Corporation and certified air carrier; Shuttle America Corporation (“Shuttle America”), an Indiana Corporation and certified
air carrier; and Republic Airline Inc. (“Republic Airline”) an Indiana Corporation and certified air carrier.
Effective May 6, 2005, the Company entered into a stock purchase agreement (the “Agreement”) with Shuttle America and
Shuttle Acquisition LLC (“Shuttle LLC”), pursuant to which the Company acquired all of the issued and outstanding common stock of
Shuttle America from Shuttle LLC. Consideration paid was a promissory note in the aggregate principal amount of $1,000 payable by
Republic to Shuttle LLC and the assumption of certain debt of Shuttle America totaling approximately $679. Because Republic and
Shuttle America were commonly controlled by Wexford Capital LLC (“Wexford”), the acquisition was accounted for in a manner
similar to a pooling of interests.
The Company operates as an air carrier providing scheduled passenger and air freight service as US Airways Express,
AmericanConnection, Delta Connection,United Express, Continental Express and Frontier Airlines under code-share agreements with
US Airways, Inc. ("US Airways"), AMR Corporation ("American"), Delta Air Lines, Inc. ("Delta"), United Air Lines, Inc. (“United”),
Continental Airlines, Inc. (“Continental”) and Frontier Airlines, Inc. (“Frontier”), respectively. The Company has code-share
agreements with US Airways offering passenger and air freight service from US Airways' hub and focus airports in Philadelphia and
Pittsburgh, Pennsylvania, Indianapolis, Indiana, Boston, Massachusetts, New York, New York (LaGuardia) and Washington, D.C.
Under the code-share agreement with American, the Company offers passenger and air freight service from American's hub airport in
St. Louis, Missouri. The code-share agreements with Delta offer passenger and air freight service from Delta's hub and focus airports
in Atlanta, Georgia, Columbus, Ohio and Cincinnati, Ohio. Under the code-share agreements with United, the Company offers
passenger and air freight service from United’s hub airports in Chicago, Illinois and Washington D.C., (Dulles and National), the
Company offers passenger and air freight service from Continental’s hub in Houston, Texas and Cleveland, Ohio and the
Company offers passenger and air freight service from Frontier’s hub in Denver, Colorado.
The US Airways Code-Share Agreements
The Company has code-share agreements with US Airways to operate ERJ-145 and ERJ-170/175 aircraft. The code-share
agreement for the ERJ-145 aircraft terminates in March 2013. The code-share agreement for the ERJ-170 aircraft and the ERJ-175
aircraft terminates in September 2015 with respect to the ERJ-170 aircraft and twelve years from the in-service date for each ERJ-175
aircraft. US Airways may terminate the code-share agreements at any time for cause upon not less than 90 days notice and subject to
the Company’s right to cure.
The American Code-Share Agreement
The Company has a code-share agreement with American to operate ERJ-140 aircraft. If American terminates the code-share
agreement for cause, American has a call option to require that the Company assign to American all of its rights under the leases of
aircraft, and to lease to American the aircraft to the extent the Company owns them, used at that time under the code-share agreement.
If American exercises its call option, the Company is required to pay certain maintenance costs in transferring the aircraft to
American's maintenance program.
If American terminates the code-share agreement without cause, the Company has the right to put the leases of the aircraft, or
to sell the aircraft to American to the extent owned by the Company, used under the code-share agreement to American. American
also has a call option to require the Company to assign to American these leases. If the Company exercises its put or American
exercises its call right, both parties are obligated to implement a schedule to terminate the code-share agreement in an orderly fashion
and transition the aircraft from the Company to American.
The term of the American code-share agreement continues until February 1, 2013. American may reduce the term by one
year each time that the Company fails to achieve an agreed performance level. American may only exercise this right three times
during the term of the code-share agreement. Under certain circumstances, the agreement may be subject to termination for cause prior
to that date.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠