Frontier Airlines 2008 Annual Report Download - page 20

The term of the American code-share agreement continues until February 1, 2013. American may reduce the term by one
year each time that we fail to achieve an agreed performance level. American may only exercise this right three times during the term
of the code-share agreement. The agreement may be subject to termination for cause prior to that date under various circumstances
including:
• a change in the regulations governing air carriers that materially affects the rights and/or obligations of either party,
subject to negotiation of amendments to the code-share agreement or third party mediation;
• if we or American become insolvent or fail to pay our debts as they become due, the other party may terminate the
agreement subject to five business days notice and rights of assurance;
• failure by us or American to perform the material terms, covenants or conditions of the code-share agreement, which
includes the American standards of service, subject to 30 day notice and cure rights;
• if we or American fail to make a payment when due, subject to five business days notice and cure rights;
• if either party suspends or is required to suspend its operations due to any safety reason, the other party may terminate the
agreement on five days notice;
• if American, in its reasonable discretion, determines that we materially breached a representation or warranty to them that
creates a serious and imminent threat to the safe operation of AmericanConnection services, American may immediately
terminate the code-share agreement;
• if we fail to achieve specified levels of operating performance in completion factor, on-time arrivals, customer complaints
and baggage, American may terminate the agreement, subject to a corrective action plan and adherence to such plan; or
• if either party assigns, by operation of law or otherwise, the code-share agreement without the written consent of the other
party, subject to five days notice and cure rights, or if we enter into any merger, sale or acquisition of all or substantially all
of our assets or a majority of our outstanding voting interests with an air carrier other than an entity that is under common
control with us.
The Delta Code-Share Agreements
As of December 31, 2008, we operated 24 E145 aircraft, 3 E170 aircraft, and 13 E175 aircraft for Delta under fixed-fee
code-share agreements. As of December 31, 2008, we provided 225 flights per day as Delta Connection. In connection with a
marketing agreement among Delta, Continental and Northwest Airlines, certain of the routes that we fly using Delta and Continental's
flight designator codes are also flown under Northwest's designator code.
In March 2007, we amended our fixed-fee agreements with Delta. On March 27, 2007, the United States Bankruptcy Court
for the Southern District of New York approved the amended agreements. Key terms of the amended agreements include the removal
of all 15 E135 aircraft beginning in September 2008 at a rate of two aircraft per month, and effective May 1, 2007, an approximate 3%
permanent reduction of block hour fees charged on our remaining 24 E145 and our 16 E170/E175 aircraft. During 2008, we agreed to
accelerate the removal of the 15 E135 aircraft between April and October 2008.
On August 22, 2007, we amended our Jet Services Agreement with Delta to provide for the replacement of 16 E170 aircraft
operating as Delta Connection with 16 E175 aircraft. Thirteen new aircraft were placed into service during the second half of 2008
and the remainder are expected to be placed into service during the first quarter of 2009.
The code-share agreements for the E145 and E170/E175 aircraft terminate in May 2016 and January 2019, respectively.
Delta may terminate the code-share agreements at any time, with or without cause, if it provides us 180 days written notice, provided
that such notice shall not be given prior to November 2009 for the E145 regional jet code-share agreement and July 2015 for the E170
regional jet code-share agreement. With the respect to the E145 agreement, if Delta chooses to terminate any aircraft early, it may not
reduce the number of aircraft in service to less than 12 during the 12-month period following the 180 day initial notice period unless it
completely terminates the code-share agreement. We refer to this as Delta's partial termination right.
If Delta exercises this right under either agreement or if we terminate either agreement for cause, we have the right to require
Delta either to purchase, sublease or assume the lease of aircraft leased by us with respect to any of the aircraft we previously operated
for Delta under that agreement. If we choose not to exercise this right, or if Delta terminates either agreement for cause, Delta may
require us to sell or sublease to it or Delta may assume the lease of aircraft leased by us with respect to any of the aircraft we
previously operated for it under that agreement.
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 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.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 16, 2009 Powered by Morningstar® Document Research℠