Frontier Airlines 2010 Annual Report Download

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REPUBLIC AIRWAYS HOLDINGS INC (RJET)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/15/2011
Filed Period 12/31/2010

Table of contents

  • Page 1
    REPUBLIC AIRWAYS HOLDINGS INC (RJET) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/15/2011 Filed Period 12/31/2010

  • Page 2
    ... FILE NUMBER: 000-49697 REPUBLIC AIRWAYS HOLDINGS INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 8909 Purdue Road, Suite 300, Indianapolis, Indiana 46268 (Address of principal executive offices) (Zip Code) (317...

  • Page 3
    ... practicable date: As of March 15, 2011, 48,196,303 shares of common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant' s definitive Proxy Statement to be used in connection with its 2011 Annual Meeting of Stockholders are incorporated by reference into Part III...

  • Page 4
    ...Issuer Purchases Of Equity Securities Selected Financial Data Management' s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on...

  • Page 5
    ††A request for confidential treatment was filed for certain portions of the indicated document. Confidential portions have been omitted and filed separately with the Commission as required by Rule 406. 2

  • Page 6
    ... In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements. Republic Airways Holdings Inc. (the "Company") may, from time to time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of...

  • Page 7
    ... operations within our business units as of December 31, 2010: Fixed-Fee Code-Share Agreement Partners Operating Subsidiaries Chautauqua Shuttle Republic Airline Frontier Lynx Total number of operating aircraft Aircraft Size 37 to 50 70 to 76 70 to 99 120 to 162 74 Frontier 13 - 32 50 3 98 American...

  • Page 8
    ... our market share and expand our customer base. Markets and Routes Markets As of December 31, 2010, we offered scheduled passenger service on 1,540 flights daily to 128 cities in 41 states, Canada, Mexico, and Costa Rica. Fixed-fee Routes Our Partners determine the routes that we operate for them...

  • Page 9
    Delta United US Airways Atlanta, GA, Cincinnati, OH, and New York, NY Chicago, IL, Denver, CO, and Washington D.C. (Newark, NJ in 2011 due to UA/CO merger) Charlotte, NC, New York, NY, Philadelphia, PA, and Washington D.C. 5

  • Page 10
    ... illustrates the routes we flew for our branded operations as of December 31, 2010: Maintenance of Aircraft and Training Using a combination of Federal Aviation Administration ("FAA") certified maintenance vendors and our own personnel and facilities we maintain our aircraft on a scheduled and "as...

  • Page 11
    airframes in our service during each month. The rates are subject 6

  • Page 12
    ... in Columbus, Denver, Indianapolis, Louisville, Milwaukee, Pittsburgh and St. Louis, and we perform routine maintenance services from select line maintenance stations. All mechanics and avionics specialists employed by us have appropriate training and experience and hold required licenses issued...

  • Page 13
    ... purchasing and material control. He was previously employed with Mesaba Holdings, Inc. from September 1995 through August 1999 as its vice president, chief financial officer and treasurer. Mr. Cooper is a certified public accountant. He has over 17 years experience in the regional airline industry...

  • Page 14
    consulting divisions of Ernst & Young, where he attained the position of Senior 8

  • Page 15
    ..., American, Delta, United and Continental, we are compensated on a fixed-fee basis on all of our flights. In addition, under our code-share agreements, our passengers participate in frequent flyer programs of the Partners, and the Partners provide additional services such as reservations, ticket...

  • Page 16
    ... at December 31, 2009 were removed from service in early January 2010. Two of the aircraft were returned to our lessor and the remaining five were placed into our branded operations. The fixed rates that we receive from United under the code-share agreements are annually adjusted in accordance with...

  • Page 17
    ... operations. Aircraft lease payments are also considered a pass through cost, but are limited to a specified amount. Landing fees, hull and liability insurance and aircraft property tax costs are pass through costs and included in our fixed-fee services revenue. If American terminates the code-share...

  • Page 18
    regional jets. We believe future growth opportunities in the fixed-fee business will most likely come as contracts come up for renewal though competition for market share may lead to lower margins and higher risks. If our Partners are negatively affected by economic conditions or higher fuel prices,...

  • Page 19
    ... to process Customers efficiently and restore the airport experience; however, the Company is not able to predict the ongoing impact, if any, that various security measures will have on Passenger revenues and the Company' s costs, both in the short-term and the long-term. Additional Information The...

  • Page 20
    13

  • Page 21
    ...our financial condition, results of our operations and the price of our common stock. Each of the code-share agreements contains a number of grounds for termination by our Partners, including our failure to meet specified performance levels. In addition, because all of our fixed-fee service revenues...

  • Page 22
    ...pilots, US Airways will not enter into agreements with its regional affiliates to fly E190 and higher capacity aircraft and it is possible that our other partners will make the same decision. A decision by US Airways, American, Delta, United, or Continental to phase out our contract based code-share...

  • Page 23
    ...similar to United's restriction, this limitation does not apply to aircraft flown by the code-share partner on behalf of carriers other than Continental. We have significant debt and off-balance sheet obligations and any inability to pay would adversely impact our operations. The airline business is...

  • Page 24
    ... respective aircraft and other assets. Even if we are able to timely service our debt, the size of our long-term debt and lease obligations could negatively affect our financial condition, results of operations and the price of our common stock in many ways, including: • increasing the cost, or...

  • Page 25
    ...to provide sufficient parts or related support services on a timely basis or by an interruption of fleet service as a result of unscheduled or unanticipated maintenance requirements for our aircraft. Reduced utilization levels of our aircraft under the fixed-fee agreements would adversely impact our...

  • Page 26
    ... turnover of our employees. Our pilots, flight attendants and maintenance technicians sometimes leave to work for larger airlines, which generally offer higher salaries and more extensive benefit programs than regional airlines or other low cost carriers are financially able to offer. Should the...

  • Page 27
    ... hub of flight operations is DIA where we experience high costs. Financed through revenue bonds, DIA depends on landing fees, gate rentals, income from airlines and the traveling public, and other fees to generate income to service its debt and to support its operations. Our cost of operations...

  • Page 28
    ...and Pilot Training Improvement Act of 2009. Although our regional jets have never had a crash causing death or serious injury in over 36 years of operations, should the public perceive regional aircraft as less safe our Partners may be less inclined to renew our contracts in the future or should new...

  • Page 29
    ... 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 our regional airline business will not be protected against weather or air traffic control cancellations and our operating...

  • Page 30
    ... 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...

  • Page 31
    ...our aircraft or the aircraft types we operate; • new regulatory pronouncements and changes in regulatory guidelines; • general and industry specific economic conditions, including the price of oil; • changes in financial estimates or recommendations by securities analysts; • sales of...

  • Page 32
    ... costs, divert management' s attention and resources and harm our business. Future sales of our common stock by our stockholders or insiders could depress the price of our common stock. Sales of a large number of shares of our common stock or the availability of a large number of shares for sale...

  • Page 33
    ITEM 1B. UNRESOLVED STAFF COMMENTS None 23

  • Page 34
    ITEM 2. PROPERTIES Flight Equipment As of December 31, 2010, we operated 275 aircraft as described in the following table: Total Aircraft Average Age (in years) Seats in Standard Configuration Type Owned Leased E135/140LR 21 12 9 7.0 44 E145LR (1) 57 22 35 8.6 50 E170/175LR 129 106...

  • Page 35
    ..., KY Pittsburgh, PA Denver, CO Denver, CO Kansas City, KS Honolulu, HI Milwaukee, WI Our employees perform substantially all routine airframe and engine maintenance and periodic inspection of equipment. Our Partners or third parties provide ground support services and ticket handling services in...

  • Page 36
    ... effect on our financial position, liquidity or results of operations. ITEM 4. [Reserved] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Price Our common stock began trading on The NASDAQ National Market (now the...

  • Page 37
    ... as of December 31, 2010: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation...

  • Page 38
    None 26

  • Page 39
    ... 31, 2010 Statement of Income (Loss) Data: Operating revenues: Fixed-fee service $ Passenger service Cargo and other Total operating revenues Operating expenses: Wages and benefits Aircraft fuel (2) Landing fees and airport rents Aircraft and engine rent Maintenance and repair Insurance and taxes...

  • Page 40
    Weighted average common shares outstanding: Basic Diluted Other Financial Data: Net cash from: Operating activities Investing activities Financing activities $ $ $ 256,418 2,512 $ $ 168,618 3,385 $ $ 242,287 $ 280,490 $ 229,147 (114,510 ) (81,114 ) 35,976,338 35,...

  • Page 41
    ..., 2010 (1) Airline Operating Data: Passengers carried (000' s) Revenue passenger miles (000' s) (3) Available seat miles (000' s) (4) Passenger load factor (5) Revenue per available seat mile (6) Cost per available seat mile (7) Average passenger trip length (miles) Number of aircraft in operations...

  • Page 42
    ...and the related revenue for the American and Delta operations, respectively. United started directly supplying fuel for certain locations in January 2007. All fuel related to the Continental and US Airways operations is directly supplied as well. Prior to the acquisition of Midwest and Mokulele, all...

  • Page 43
    ... our business units as of December 31, 2010: Fixed-Fee Code-Share Agreement Partners Operating Subsidiaries Aircraft Size Frontier American Continental Delta United US Airways Spares Number of Aircraft Chautauqu 37 to 50 a Airlines Shuttle 70 to 76 America Republic 70 to 99 Airline Frontier 120...

  • Page 44
    29

  • Page 45
    ... second largest market share in Denver. Our branded operation has a significant base of frequent flyer members and strong support in their local communities of Denver and Milwaukee. Business Strategy • Continue to operate a high-quality fleet of aircraft across an efficient network - We intend...

  • Page 46
    ... - Cargo and other revenues is comprised principally of the revenue from the marketing component of the sale of our miles for our co-branded credit cards, sublease revenue, licensing revenue from slots leased to other airlines, charter revenue, cargo revenue, interline and ground handling fees. 30

  • Page 47
    ... on our level of operations, changes in wage rates for contract, and non-contract employees and changes in costs of our benefit plans. Aircraft Fuel As of December 31, 2010, the majority of our aircraft fuel for the fixed-fee operations is supplied directly by our code-share partners, and thus...

  • Page 48
    31

  • Page 49
    ... aircraft return costs, gains and losses on disposal of assets and bad debt expenses. Results of Operations The following tables sets forth information regarding the Company' s statistical performance for the years ended December 31, 2010, 2009, and 2008. Operating Highlights - Fixed-Fee 2010...

  • Page 50
    Average daily utilization of each aircraft (hours) (8) 9.9 480 67 Average length of aircraft flight (miles) Average seat density % ) (2.0 % ) (2.8 % 1.5 % % 10.1 494 66 - % (1.6 ) % 6.5 % 10.1 502 62 32

  • Page 51
    ...fuel expense that is pass-through cost for the fixed-fee business. Revenue passenger miles are the number of scheduled miles flown by revenue passengers. Available seat miles are the number of seats available for passengers multiplied by the number of scheduled miles those seats are flown. Passenger...

  • Page 52
    (9) Branded statistics include the results of Midwest and Frontier beginning in August and October 2009, respectively. In addition, the table includes the results of Mokulele beginning in April 2009 until October 2009 when the Company deconsolidated Mokulele. 33

  • Page 53
    ... 31, 2010, 2009, and 2008. Individual expense components are also expressed in cents per available seat mile ("ASM"). Years ended December 31, 2010 Amount (in thousands) OPERATING EXPENSES: Wages and benefits Aircraft fuel Landing fees and airport rents Aircraft and engine rent Maintenance and...

  • Page 54
    34

  • Page 55
    ...-through cost to our Partners, fixed-fee service revenues decreased 4.1% for 2009. Block hour production for the fixed-fee business was down 8.9% in 2009 because of the reduction of aircraft operated for Continental. Also, the aircraft operations for Midwest are reported as branded flying beginning...

  • Page 56
    35

  • Page 57
    ...to the acquisition of Frontier and Midwest during the year, which accounted for $34.3 million of additional expense in 2009. Our fixed-fee agreements provide for a direct reimbursement of landing fees. The unit cost was 0.57¢ in 2009 compared to 0.45¢ in 2008. Aircraft and engine rent increased by...

  • Page 58
    next 12 months. 36

  • Page 59
    ... deferred frequent flyer revenue are classified as current liabilities. Our liquidity depends to a large extent on the financial strength of our Partners in relation to our fixed-fee business and the number of passengers who fly in our branded passenger service, the fares they pay, our operating and...

  • Page 60
    ... on our current fleet and aircraft fuel consumption. Under our fixed-fee agreements we are not exposed to changes in fuel prices. Our fixed-fee agreements provide for our partners to purchase fuel directly or reimburse us for fuel expense as a pass-through cost. As of December 31, 2010, our Frontier...

  • Page 61
    beginning in February 2013 and continuing through November 2014, 40 CS300 aircraft that have scheduled delivery dates beginning 38

  • Page 62
    ....3 million in 2010. Tax payments in 2010 were not significant and we are not expecting significant tax payments in 2011. Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements, which have been...

  • Page 63
    39

  • Page 64
    ...-board sales of LiveTV, liquor and food and baggage fees recorded in other revenues to passenger revenues in our December 31, 2009 consolidated statement of income (loss). These reclassifications had no effect on previously reported operating income or net income. Frequent Flyer Programs-The Company...

  • Page 65
    ... passenger service revenue. Current and future changes to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred frequent flyer revenue balance as well as recognized revenue from the program. Mileage Credits Sold - The Company...

  • Page 66
    41

  • Page 67
    ... competition in our key markets including Denver and Milwaukee, current economic conditions and forecasts within the United States, volatility of fuel prices, and other related factors. Aircraft Maintenance and Repair. The Company charges expenses as incurred under the direct expense method. Engines...

  • Page 68
    ...estimated useful lives are also reviewed annually. As a result of the acquisitions of Frontier and Midwest during the year ended December 31, 2009, the Company acquired slots at the New York, LaGuardia, Ronald Reagan Washington National and Newark Liberty International airports. Management concluded...

  • Page 69
    ...2009, the FASB issued ASU No. 2009-13 pertaining to multiple-deliverable revenue arrangements. The new guidance will affect accounting and reporting for companies that enter into multiple-deliverable revenue arrangements with their customers when those arrangements are within the scope of Accounting...

  • Page 70
    ... aircraft in service under our code-share agreements our reimbursement rates may not be adjusted higher or lower to reflect any changes in our aircraft rental rates. Aircraft Fuel Price Risk Our results of operations are materially impacted by changes in aircraft fuel prices. In an effort to manage...

  • Page 71
    ...8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2010 and 2009 Consolidated Statements of Income (Loss) for the years ended December 31, 2010, 2009...

  • Page 72
    ... position of the Republic Airways Holdings Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United...

  • Page 73
    REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009 (In thousands, except share and per share amounts) 2010 ASSETS Current Assets: Cash and cash equivalents Restricted cash Receivables-net of allowance for doubtful accounts of $1,230 and $743...

  • Page 74
    ...,433 shares at cost, respectively Accumulated other comprehensive loss Accumulated earnings Total Stockholders' Equity Total $ 405,441 (181,827 ) (2,714 ) 388,725 609,683 4,348,701 $ 299,257 (181,820 ) (2,172 ) 402,571 517,880 4,450,472 See accompanying notes to consolidated financial statements...

  • Page 75
    ..., 2009 AND 2008 (In thousands, except per share amounts) 2010 OPERATING REVENUES: Fixed-fee service Passenger service Cargo and other Total operating revenues OPERATING EXPENSES: Wages and benefits Aircraft fuel Landing fees and airport rents Aircraft and engine rent Maintenance and repair Insurance...

  • Page 76
    ...EXPENSE (BENEFIT) NET INCOME (LOSS) Add: Net loss attributable to noncontrolling interest in Mokulele Flight Service Inc. NET INCOME (LOSS) OF THE COMPANY (7,697 ) (13,846 ) - (13,846 ) $ 99,805 36,385 3,270 39,655 52,835 84,580 - 84,580 $ $ NET INCOME (LOSS) PER COMMON SHARE - BASIC $ (0.38...

  • Page 77
    ...Republic's APIC for purchase of Mokulele Flight Services, Inc. common stock from noncontrolling interest Net income Reclassification adjustment for loss realized on derivatives, net of tax Comprehensive income Balance at December 31, 2009 Stock compensation expense Exercise of employee stock options...

  • Page 78
    REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 (In thousands) 2010 OPERATING ACTIVITIES: 2009 2008 Net income (loss) Adjustments to reconcile net income (loss) to net cash from operating activities: $ (13...

  • Page 79
    ...) - Deferred frequent flyer liability (1,481 ) 7,548 - Other, net (4,859 ) (11,514 ) (11,246 ) Net cash from operating activities INVESTING ACTIVITIES: 256,418 168,618 242,287 Purchase of aircraft and other equipment (58,652 ) (39,997 ) (127,832 ) Proceeds from sale of aircraft and...

  • Page 80
    ... stock offerings, net 101,926 - - Payments on early extinguishment of debt (60,045 ) (70,887 ) (49,969 ) Proceeds from exercise of stock options 129 - 325 Payments for debt issue costs (2,216 ) (2,654 ) (4,564 ) Proceeds on settlement of interest rate swaps - - 5,785 Purchase...

  • Page 81
    ... 31, 2010: Operating Subsidiaries Chautauqua Airlines Shuttle America Republic Airline Frontier Lynx Aircraft Size 37 to 50 70 to 76 70 to 99 120 to 162 74 Frontier 13 - 32 50 3 98 American 15 - - - - 15 Fixed-Fee Code-Share Agreement Partners Continental 15 - - - - 15 Delta 24 16 - - - 40 United...

  • Page 82
    ...-fee service revenues are derived from code-share agreements with US Airways, Delta, American, United, and Continental. 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. During the years...

  • Page 83
    52

  • Page 84
    ... have an adverse effect on our financial position and results of operations. Our Frontier operations expose us to changes in passenger demand, fare competition and fluctuations in fuel prices. In addition, our dependence on a hub system operating out of these airports makes us more susceptible to...

  • Page 85
    Supplemental Statement of Cash Flow Information: Years ended December 31, (amounts in 000's) CASH PAID FOR INTEREST AND INCOME TAXES: 2010 2009 2008 Interest paid-net of amount capitalized $ 138,308 $ 134,700 $ 122,355 Income taxes paid-net of refunds NON-CASH INVESTING AND FINANCING ...

  • Page 86
    ...supported letters of credit and deposits on charter flights Other $ 2010 99,150 31,789 8,165 $ 2009 159,704 31,811 1,185 Total $ 139,104 $ 192,700 Receivables primarily consist of amounts due from credit card companies and customers of our aircraft maintenance and cargo transportation services...

  • Page 87
    ... fair value or projected future cash flows using a discount rate reflecting the Company's average cost of funds. Deferred Credits and Other Non Current Liabilities consist primarily of credits for parts and training from the aircraft and engine manufacturers, deferred gains from the sale and...

  • Page 88
    ... credit cards, charter and cargo revenues, interline and ground handling fees, lease revenue for aircraft subleased under operating leases and revenue from commuter slots leased to US Airways at Ronald Reagan Washington National Airport. Frequent Flyer Programs-The Company has a frequent flyer...

  • Page 89
    versus other redemption choices. Since the equivalent ticket 56

  • Page 90
    ... passenger service revenue. Current and future changes to the expiration policy, or to program rules and program redemption opportunities, may result in material changes to the deferred frequent flyer revenue balance as well as recognized revenue from the program. Mileage Credits Sold - The Company...

  • Page 91
    ... the Company has three reportable operating segments: fixed-fee service, branded passenger service, and other. Additional information about segment reporting is presented in Note 17. New Accounting Standards-In October 2009, the FASB issued ASU No. 2009-13 pertaining to multiple-deliverable revenue...

  • Page 92
    date but before financial statements are issued or available to be issued. The adoption did not have a material impact on the Company' s consolidated results of operations or financial condition, except the Company no longer needs to disclose the date through which subsequent events are evaluated. ...

  • Page 93
    ... year's presentation. We reclassified $31.4 million of on-board sales of LiveTV, liquor and food and baggage fees recorded in other revenues to passenger revenues in our December 31, 2009 consolidated statement of income (loss). These reclassifications had no effect on previously reported operating...

  • Page 94
    ... plan sponsor for Frontier' s plan of reorganization and paid $108.8 million and relinquished its rights to any distribution on account of the Company' s allowed general unsecured claims against Frontier of $150 million arising out of Frontier' s rejection of the fixed-fee code-share agreement. 59

  • Page 95
    ... frequent flyer revenue, and the income tax implications of the transaction, and no adjustments were made to the purchase price allocations. As a result of the purchase price allocation, the Company recognized a bargain purchase gain of $203.7 million for the year ended December 31, 2009. Management...

  • Page 96
    ... The aircraft acquired are used aircraft and therefore will require more maintenance in future periods • The acquired business is expected to generate losses from continued operations for several months after the date of acquisition The Company has included operating revenues from Frontier of...

  • Page 97
    ...Liabilities assumed: $ 180,300 1,070,200 Current liabilites $ 298,800 Long-term liabilities 360,500 Deferred income taxes Total liabilities assumed Gain on bargain purchase _____ * Current assets include $37,000 of cash injected into Frontier from Republic. The following table summarizes the...

  • Page 98
    ... to the terms of the Agreement and Plan of Merger, dated as of June 23, 2009, among the Company, RJET Acquisition, Inc. and Midwest, as amended (the "Merger Agreement"), RJET Acquisition, Inc. merged with and into Midwest (the "Merger") with Midwest continuing as the surviving corporation and...

  • Page 99
    ...,000 shares of the Company' s common stock, subject to adjustment in certain circumstances. The acquisition of Midwest provided the Company additional revenue diversity from its traditional fixed-fee services and allowed it to expand operations into branded passenger service. The Company accounted...

  • Page 100
    Current liabilites $ 122,500 Other liabilities Total liabilities assumed Goodwill 62 $ $ 59,500 182,000 100,400

  • Page 101
    ... forma combined results of operations do not reflect these benefits or costs. December 31, in (000's), except per share amounts Operating revenues Net income (loss) of the Company Basic earnings per share Diluted earnings per share Mokulele Flight Services Inc. In October 2008, the Company entered...

  • Page 102
    and $0.4 million of other long-term assets and assumed $9.3 million of liabilities. The Company did not incur any significant transaction costs associated with its acquisition of Mokulele. The effect of Mokulele' s operations for the last twelve days of March 2009 have not been included in 63

  • Page 103
    ... aircraft would be delivered and Mokulele forfeited a $0.5 million security deposit to the Company. On October 16, 2009, the Company entered into an agreement with Mesa Air Group, Inc. ("Mesa") to form Mo-Go, LLC ("Mo-Go"), a new business venture that will provide commercial airline services...

  • Page 104
    Assets held for sale $ 43,466 $ 25,649 Several of the assets held for sale as of December 31, 2009 were sold for a loss of $0.3 million which was recognized and recorded in other operating expenses in the consolidated statements of income (loss) for the year ended December 31, 64

  • Page 105
    ... INTANGIBLE ASSETS The Company has airport commuter slots and has assigned the right of use for these commuter slots to US Airways which will continue to be operated by US Airways Express carriers until the expiration or termination of the amended and restated Chautauqua Jet Service Agreement ("JSA...

  • Page 106
    ...165 $ 349 6,140 The aggregated amortization expense for the years ended December 31, 2010, 2009 and 2008 was $15.5 million, $4.6 million, and $0.4 million,...year ended December 31, 2009, the Company recorded an impairment loss of $6.8 million for the trade names as a result of the Company' s annual...

  • Page 107
    ... to write-off the full value of goodwill. The Company' s acquisition of Midwest resulted in approximately $100.4 million of goodwill which was assigned to the Company' s Branded operations reporting unit. As of December 31, 2009, the Company performed its annual assessment of the recoverability of...

  • Page 108
    ... 2010 $ 2,046,452 $ 2009 2,194,320 421,619 506,773 - 15,000 30,124 - 31,945 25,000 (7,875 ) (14,763 ) Total debt secured by aircraft and parts Unsecured debt: Convertible note payable, bearing interest at a fixed rate of 8%, due in full in 2014. Debt from affinity credit card program...

  • Page 109
    Other debt 4,000 3,089 Total unsecured debt 55,418 63,089 Total debt Current portion (including debt related to assets held for sale) Long term debt, less current portion 67 2,577,683 2,789,419 $ (269,023 ) 2,308,660 $ (243,259 ) 2,546,160

  • Page 110
    ... manufacturer and maintenance provider that has a guaranteed minimum annual flight hour requirement. The minimum guaranteed amount based on the Company's current operations is $4.2 million per year through December 2016 for the E145 family of aircraft and $9.4 million per year through December...

  • Page 111
    ... in our service during each month. The rates are subject to annual revisions, generally based on certain Bureau of Labor Statistics' labor and material indices. We believe these agreements, coupled with our ongoing maintenance program, reduce the likelihood of unexpected levels of engine, APU...

  • Page 112
    ... million for the years ended December 31, 2010, 2009 and 2008, respectively. While the Company does not have long term maintenance agreements for its Airbus (except wheels and brakes) and Q400 fleets, it has made significant deposits with the aircraft lessors for future maintenance events which will...

  • Page 113
    ...-share agreements or if United terminates the agreements upon our breach for certain reasons. As of December 31, 2010, approximately 54% of the Company's workforce is employed under union contracts. The union contract for our pilots and our flight attendants, except Frontier' s pilots, is currently...

  • Page 114
    net proceeds from this offering of the common stock for general corporate purposes, including to finance a portion of our Embraer 190 aircraft, and to increase our liquidity position. 70

  • Page 115
    ... Options The Company also granted options for non-employee directors on the day prior to commencement of the Company' s initial public offering at a price equal to the fair market value of the common stock on the date of the grant. These options vested over a 3 year period with 1/24 of the shares...

  • Page 116
    the calculations. 71

  • Page 117
    ... were used to value stock option grants during the following periods: December 31, 2010 Dividend yield Expected volatility Risk-free interest rate Expected life (in years) Restricted Stock Grants Restricted stock awards have been granted to certain of our officers, directors, and key employees...

  • Page 118
    ...697 ) $ 2009 - 92,931 92,931 (1,101 ) 7,966 6,865 (807 ) 816 99,805 $ $ 2008 - 46,616 46,616 2,092 1,880 3,972 1,404 843 52,835 $ A reconciliation of income tax (benefit) expense at the applicable federal statutory income tax rate to the tax provision as reported for the years ended December 31...

  • Page 119
    ... tax rate. The following table reconciles the Company' s tax liability for uncertain tax positions for the year ended December 31 (in thousands): 2010 6,268 - - 2,024 2009 5,252 816 200 - 2008 4,409 843 - - Balance at January 1, Additions based on tax positions taken in current year Additions...

  • Page 120
    Reductions for tax positions of prior years Settlements with tax authorities Balance at December 31, 74 $ (200 ) - 8,092 $ - - 6,268 $ - - 5,252

  • Page 121
    ... Additions (deductions) for change in current year analysis Balance at December 31, $ 2010 200,971 - 5,759 (36,356 ) $ 2009 9,523 192,255 - - $ 2008 8,119 - - - 1,404 9,523 $ (3,421 ) 166,953 $ (807 ) 200,971 $ During 2009, Republic acquired Midwest and Frontier. The future use of the net...

  • Page 122
    75

  • Page 123
    ..., no significant employer contributions are expected for the defined benefit plan. Total future benefit payments are expected to be approximately $7.2 million over the next several years. Other Midwest Plans - Midwest provided certain other benefits to its employees. During 2009, curtailment gains...

  • Page 124
    .... INTEGRATION COSTS As a result of the Company's acquisitions of Midwest and Frontier during 2009, the Company has aligned its operations to integrate the business models. These integration costs were all incurred as part of our branded segment and classified as the following: aircraft return costs...

  • Page 125
    ...-fee service revenues are derived from code-share agreements with US Airways, Delta, American, United, and Continental. 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. During the years...

  • Page 126
    78

  • Page 127
    ... Ended December 31, 2008 Total operating revenue Aircraft fuel Depreciation and amortization Income (loss) before income taxes Total assets Total debt $ Fixed-fee 1,461,774 326,343 125,096 147,079 3,076,100 2,137,852 $ Other 17,981 $ 1,448 8,110 (9,664 ) 160,478 139,993 Total 1,479,755 ...

  • Page 128
    ... our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to...

  • Page 129
    Not applicable. 80

  • Page 130
    ... Company." Code of Ethics We have adopted a Code of Ethics within the meaning of Item 406(b) of SEC Regulation S-K. This Code of Ethics applies to our principal executive officer, principal financial officer and principal accounting officer. This Code of Ethics is publicly available on our website...

  • Page 131
    ...TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information set forth under the captions "Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions" in the Company's definitive Proxy Statement to be used in connection with the 2011 Annual Meeting of...

  • Page 132
    ....(i) 2002 Equity Incentive Plan.(xxiv) Restricted Stock Agreement.(xx) 2007 Equity Incentive Plan.(xxiv) Form of Option Agreement for Non-Employee Directors.(i) Form of Option Agreement for Officers.(i) Stock Option Agreement Pursuant to the Republic Airways Holdings Inc. 2002 Equity Incentive Plan...

  • Page 133
    10.4(d)†Inc., dated as of October 28, 2003.(i) Amendment to the Amended and Restated Air Services Agreement, by and between AMR Corporation and Chautauqua Airlines, Inc., dated as of October 23, 2008. (xxxiii) 82

  • Page 134
    ... of June 1, 2007.(xxvi) Agreement between Chautauqua Airlines, Inc. and the Passenger and Fleet Service Employees in the service of Chautauqua Airlines, Inc. as represented by the International Brotherhood of Teamsters, dated as of December 15, 1999.(i) Agreement among Republic Airways Holdings Inc...

  • Page 135
    10.12(m)†10.13†Amendment No. 11 to Amended and Restated Purchase Agreement GCT-025/98, by and between Embraer-Empresa Brasileira de Aeronáutica S.A. and Republic Airways Holdings Inc., dated May 31, 2005.(xiii) Amended and Restated Letter Agreement GCT-026/98, by and between Embraer-Empresa ...

  • Page 136
    ... among Republic Airways Holdings Inc., Imprimis Investors, LLC, Wexford Spectrum Fund I, L.P., Wexford Offshore Spectrum Fund, Wexford Partners Investment Co. LLC, WexAir LLC, and Delta Air Lines, Inc.(i) Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines...

  • Page 137
    ...amending Lease Agreement for office space.(i) Loan Agreement between Chautauqua Airlines, Inc. and Agê...Aircraft Security Agreement between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as Security Trustee, dated as of December 27, 2001. There are fourteen additional Aircraft Security...

  • Page 138
    ... to Delta Air Lines, Inc.(i) Form of warrant to purchase shares of common stock of Republic Airways Holdings Inc. issued to Delta Air Lines, Inc.(i) Delta Connection Agreement, dated as of June 7, 2002, by and among Delta Air Lines, Inc., Chautauqua Airlines, Inc., and Republic Airways Holdings Inc...

  • Page 139
    10.34 Bryan K. Bedford. (xliii) Employment Transition and Separation Agreement, dated as of November 2, 2010, by and between the Company and Robert Hal Cooper (xlii) 85

  • Page 140
    ...-Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of October 18, 2007.(xxix) Amendment No. 21 to Purchase Agreement DCT-014/2004 by and between Embraer-Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of June 5, 2008.(xxxii) Amendment No. 22 to...

  • Page 141
    ...†10.40(a)†Amendment No. 23 to Purchase Agreement DCT-014/2004 by and between Embraer-Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of November 10, 2008. (xxxiv) Letter Agreement DCT-015/2004, by and between Republic Airline Inc. and Embraer-Empresa Brasileira de...

  • Page 142
    ... Indianapolis Airport Authority, dated as of December 17, 2004.(viii) Delta Connection Agreement, dated as of January 13, 2005, by and among Delta Air Lines, Inc., Republic Airline Inc. and Republic Airways Holdings Inc.(vi) Amendment Number One to Delta Connection Agreement, by and among Delta Air...

  • Page 143
    10.46 assignee of Republic Airline, Inc.) and Republic Airways Holdings, Inc., dated as of January 31, 2011. (xlvii) Stock Purchase Agreement, dated May 6, 2005, by and among Republic Airways Holdings, inc., Shuttle America Corporation and Shuttle Acquisition LLC.(ix) 87

  • Page 144
    ... Frontier Airlines, Inc., Republic Airways Holdings Inc., Lynx Aviation, Inc. and Airbus Financial Services, dated as of October 30, 2009. (xxxvi) Evidence of Transfer of Claim by Republic Airways Holdings Inc. in favor of JPMorgan Chase Bank, N.A., dated as of April 11, 2007.(xxiii) Stock Purchase...

  • Page 145
    ... Credit Agreement, dated as of September 3, 2008, among Midwest Airlines, Inc., Midwest Air Group, Inc., each of the subsidiaries of Midwest from time to time party thereto, each lender from time to time party thereto (including Republic Airways Holdings Inc.), Wells Fargo Bank Northwest, National...

  • Page 146
    ... No. 2 to the Airline Services Agreement dated as of September 3, 2008 among Midwest Airlines, Inc., Republic Airline Inc., Midwest Air Group, Inc. and Republic Airways Holdings Inc., dated as of June 3, 2009. (xxxix) Agreement and Plan of Merger, by and among Republic Airways Holdings Inc., RJET...

  • Page 147
    (xiv) Incorporated by reference to the Registrant' s Current Report on Form 8-K filed on September 7, 2005. 89

  • Page 148
    ... by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2008. Incorporated by reference to the Registrant' s Quarterly Report on Form 10-Q filed on May 11, 2009. Incorporated by reference to the Registrant' s Quarterly Report on Form 10-Q filed on November...

  • Page 149
    ... Signature /s/ Bryan K. Bedford Bryan K. Bedford Title Date Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) March 15, 2011 /s/ Joseph P. Allman Joseph P. Allman Vice President and Corporate Controller (Principal Financial and Accounting Officer) March...

  • Page 150
    91

  • Page 151
    ..."), is among Delta Air Lines, Inc., 1030 Delta Boulevard, Atlanta, Georgia 30320 ("Delta"), Shuttle America Corp. (as assignee of Republic Airline, Inc.) ("Shuttle America" or "Operator"), 8909 Purdue Road, Indianapolis, Indiana 46268 and Republic Airways Holdings, Inc. ("Republic"), 8909 Purdue...

  • Page 152
    *Confidential 1

  • Page 153
    ... by Operator from September 1, 2014 through August 31, 2015 with respect to Pilot Wages and Flight Attendant Wages, excluding any one-time or unusual items, [*]; (ii) the respective Base Rate Costs with respect to Maintenance Labor, Airframe Maintenance (both per departure and per flight hour) and...

  • Page 154
    ... Target Year. (vi) 2009 and 2010 Payments. Each of the parties acknowledges and agrees that with respect to calendar years 2009 and 2010 the amounts paid by Delta to Operator as of the Amendment Number 3 Effective Date in exchange for the flying and operation of the Aircraft by Operator during such...

  • Page 155
    ...time arrival rate thresholds currently required to be met by Operator in order for Operator to be entitled to the Mark-Up, Monthly Incentive Compensation and Semi-Annual Incentive Compensation, taking into account the increase of "Northeast Shuttle Flights" and "NYC Spoke Flights" (as such terms are...

  • Page 156
    B. Each ERJ-170 Additional Aircraft shall be made available by Operator to be placed into Delta Connection service no later than the respective dates set forth on Exhibit C (each, a "Delivery 4 *Confidential

  • Page 157
    ... responsible for the costs of the [*] first class seats to be installed on the last two (2) ERJ-170 Additional Aircraft made available for Delta Connection service as contemplated hereby. G. If any ERJ-170 Additional Aircraft are not in compliance with Delta Connection standards currently in place...

  • Page 158
    ... or expenses). H. Operator shall be solely responsible for all start-up costs and transition fees associated with including the ERJ-170 Additional Aircraft as Aircraft under the Agreement including, without limitation all costs and fees related to induction, positioning, maintenance bridging and...

  • Page 159
    ...may require "C-checks" on their respective airframes prior to the end of their respective six-year terms under the Agreement. [*]. (ii) In addition, at the end of each ERJ-170 Additional Aircraft's six-year term, Delta shall pay to Operator in the month following the last flight under the Agreement...

  • Page 160
    ...hereby. B. The Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. C. *Confidential Except as specifically stated herein, all other terms and conditions of the Agreement...

  • Page 161
    ...: Republic Airways Holdings, Inc. By: /s/ Timothy P. Dooley_____ Name: _ Timothy P. Dooley_____ Title: __Vice President, Finance__ Delta Air Lines, Inc. By: __/s/ Don Bornhorst____ Name: __Don Bornhorst_____ Title: _Senior Vice President, Delta Connection_____ Shuttle America Airlines...

  • Page 162
    ... Operations Support (crew travel, OH) Overhead (wages, rent, supplies, prof fees) Depreciation (parts & engines) Per Aircraft Day Pilot Wages FA Wages Operations Expenses (crew and mtc costs) BH Reduction Fee Per Block Hour Maintenance Labor Airframe Maintenance Engine Consumables Per Flight Hour...

  • Page 163
    excluding any Northeast Shuttle Flight. *Confidential 8

  • Page 164
    ... Shuttle Block Hour" means each block hour incurred by Operator on each Northeast Shuttle Flight; and "NYC Spoke Block Hour" means each block hour incurred by Operator on each NYC Spoke Flight. EXHIBIT C ERJ-170 ADDITIONAL AIRCRAFT Aircraft N-Number Serial Number Delivery Date 5/1/2011...

  • Page 165
    ... financial statements of Republic Airways Holdings Inc. and subsidiaries and the effectiveness of Republic Airways Holdings Inc.'s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Republic Airways Holdings Inc. for the year ended December 31, 2010...

  • Page 166
    ... 31.1 CERTIFICATION-Chief Executive Officer I, Bryan K. Bedford, Chief Executive Officer of Republic Airways Holdings Inc., certify that: 1. I have reviewed this report on Form 10-K of Republic Airways Holdings Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of...

  • Page 167
    ...-Chief Financial Officer I, Joseph P. Allman, Vice President and Corporate Controller of Republic Airways Holdings Inc., certify that: 1. I have reviewed this report on Form 10-K of Republic Airways Holdings Inc.; 2. Based on my knowledge, this report does not contain any untrue statement...

  • Page 168
    ... respects, the financial condition and results of operations of the Company at the end of, and for the period covered by, the Report. By: /s/ Bryan K. Bedford President, Chief Executive Officer and Chairman of the Board March 15, 2011 A signed original of this written statement required by...

  • Page 169
    ... all material respects, the financial condition and results of operations of the Company at the end of, and for the period covered by the Report. By: /s/ Joseph P. Allman Vice President and Corporate Controller March 15, 2011 A signed original of this written statement required by Section 906 has...