Frontier Airlines 2008 Annual Report Download - page 68

The Continental Code-Share Agreement
As of December 31, 2008, the Company operated 20 E145 aircraft and 17 CRJ-200 aircraft for Continental. The CRJ-200
aircraft are operated under the fixed-fee code-share agreement on terms generally equivalent to the CRJ-200 leases, which vary from
two to five years. The E145 aircraft have a term of three to five years. Under certain circumstances, Continental may extend the term
on the aircraft up to five additional years. The term of the agreement is effective as of January 8, 2007 and, unless earlier terminated
or extended, will continue until July 2012.
The Midwest Code-Share Agreement
In September 2008, the Company entered into a fixed-fee code-share agreement with Midwest. Under the agreement, the
Company provides and operates 12 E170 aircraft for Midwest. The first aircraft was placed into service in October 2008 and the final
aircraft was placed into service in November 2008. The agreement has a term of ten years. However, at Midwest’s option, and at any
time prior to June 1, 2010, Midwest can elect to convert the agreement into a long-term aircraft lease. The 12 E170 aircraft would be
leased from the Company for the remaining duration of the agreement and operated on the Midwest operating certificate.
The Mokulele Code-Share Agreement
In October 2008, the Company entered into a fixed-fee code-share agreement with Mokulele. Under the agreement, the Company will
provide and operate four E170 aircraft for Mokulele. The first two aircraft were placed into service in November 2008 with the
additional two planned for delivery during the second quarter of 2009. The agreement has a term of ten years. Mokulele is currently
in default of its loan and code-share agreement. We are negotiating with Mokulele the terms of a possible recapitalization of
Mokulele, but there can be no assurance that Mokulele will be recapitalized. As a part of these negotiations, we are contemplating
converting $3,000 of our loan and injecting $3,000 of cash in exchange for 50% of Mokulele's common stock. Even if this
recapitalization is completed, Mokulele could require additional funding, part or all of which may come from us. If the business
environment does not improve for Mokulele, our financial condition, results of operations and liquidity could be adversely affected.
Concentrations
The following sets forth our Partners’ regional airline services revenue and accounts receivable as a percentage of total
regional airline services revenue and net receivables:
Regional airline
services
revenues for the
years ended: Delta United
US
Airways American Continental Frontier Midwest Mokulele
December 31,
2008 29% 21% 25% 10% 12% 2% 1% <1%
December 31,
2007 33 24 22 9 10 2 — —
December 31,
2006 35 30 24 11 — — — —
Receivables as of:
December 31,
2008 3% 4% 16% 2% 16% 3% 1% 1%
December 31,
2007 3 18 18 18 4 2 — —
For the years ended December 31, 2008, 2007 and 2006, substantially all of the Company's revenue is derived from
agreements with its Partners. Termination of any of these code-share agreements could have a material adverse effect on the
Company's financial position, results of operations and cash flows.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation—The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Chautauqua, Shuttle America and Republic Airline. All significant intercompany accounts and transactions are
eliminated in consolidation.
Reclassification—The Company reclassified amounts previously recorded as impairment loss and accrued aircraft return
costs to other operating expense of ($2,050) in the December 31, 2006 consolidated financial statements to conform to current year
presentation.
Risk Management—The Company accounts for derivatives in accordance with Statement of Financial Accounting Standard
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 16, 2009 Powered by Morningstar® Document Research℠