Frontier Airlines 2008 Annual Report Download - page 57

• Aircraft Maintenance and Repair. We follow a method of expensing aircraft maintenance and repair costs as incurred. However,
maintenance and repairs for engines and airframe components under power-by-the-hour contracts, such as engines, avionics, APUs,
wheels and brakes, are expensed as the aircraft are operated based upon actual hours or cycles flown.
• Deferred credit - Delta Pre-Petition Claim and Surrendered Warrants . As a result of the Delta amendment, in March 2007, we
recorded a deferred credit of $44.6 million, which represented the net realizable value of the pre-petition claim on the approval date by
the Bankruptcy Court. In addition, we recorded a deferred gain on the surrender of the warrants from Delta of $42.7 million, which
was net of the write-off of the previously reported unamortized deferred warrant charge of $6.4 million. The deferred credits for the
proceeds of the pre-petition claim and the gain on the surrender of the warrants totaling $87.3 million will be amortized as an
adjustment to revenue over term of the agreements with Delta.
• Income Taxes. The Company has generated significant net operating losses (“NOLs”) for federal income tax purposes primarily from
accelerated depreciation on owned aircraft. Certain of our NOLs generated prior to July 2005 are subject to an annual limitation under
Internal Revenue Code Section 382 (“IRC 382”). The annual limitation is based upon the enterprise value of the Company on the IRC
382 ownership change date multiplied by the applicable long-term tax exempt rate. If the utilization of deferred tax assets, and other
carry forwards becomes uncertain in future years, we will be required to record a valuation allowance for the deferred tax assets not
expected to be utilized.
• Intangible Commuter Slots. The Company acquired commuter slots during 2005 at the New York-LaGuardia and Ronald Reagan
Washington National airports from US Airways. The licensing agreement with the Company and US Airways for the LaGuardia
commuter slots expired on December 31, 2006, but we maintain a security interest in the LaGuardia slots if US Airways fails to
perform under the current licensing agreement. The estimated useful lives of these commuter slots were determined based upon the
period of time cash flows are expected to be generated by the commuter slots and by researching the estimated useful lives of
commuter slots or similar intangibles by other airlines. In addition, an estimated residual value was determined using estimates of the
expected fair value of the commuter slots at the end of the expected useful life. The residual value will be assessed annually for
impairment. The estimated useful lives are also reviewed annually.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 16, 2009 Powered by Morningstar® Document Research℠