Frontier Airlines 2010 Annual Report Download - page 28

loss of important data, increase our expenses and generally harm our business. In addition, we have experienced an increase in customers
booking flights on our airline through third-party websites, which has increased our distribution costs. If any of these third-party websites
experiences system failure or discontinues listing our flights on its systems, our bookings and revenue may be adversely impacted.
We implement improvements to our website and reservations system from time to time. Implementation of changes to these systems
may cause operational and financial disruptions if we experience transition or system cutover issues, if the new systems do not perform as we
expect them to, or if vendors do not deliver systems upgrades or other components on a timely basis. Any such disruptions may have the
effect of discouraging some travelers from purchasing tickets from us and increasing our reservations staffing.
We are at risk of losses stemming from an accident involving any of our aircraft.
While we have never had a crash causing death or serious injury over our 36 year history, it is possible that one or more of our
aircraft may crash or be involved in an accident in the future, causing death or serious injury to individual air travelers and our employees and
destroying the aircraft and the property of third parties.
In addition, if one of our aircraft were to crash or be involved in an accident we would be exposed to significant tort liability. Such
liability could include liability arising from the claims of passengers or their estates seeking to recover damages for death or injury. There can
be no assurance that the insurance we carry to cover such damages will be adequate. Accidents could also result in unforeseen mechanical
and maintenance costs. In addition, any accident involving an aircraft that we operate could create a public perception that our aircraft are not
safe, which could result in air travelers being reluctant to fly on our aircraft and a decrease in revenues. Such a decrease could materially
adversely affect our financial condition, results of operations and the price of our common stock.
Customer loyalty may be affected due to diminishing product differentiation.
Frontier's branded business strategy includes a premium travel experience at competitive fares. The Company seeks to differentiate
itself through better customer service throughout the customer's travel experience. Any loss of customers due to diminishing product
differentiation could harm our business.
Risks Associated with the Airline Industry
The airline industry is highly competitive.
Within the airline industry, we not only compete with major and other regional airlines, some of which are owned by or operated as
partners of major airlines, but we also face competition from low-fare airlines and major airlines on many of our routes, including carriers
that fly point to point instead of to or through a hub.
Some of our competitors are larger and have significantly greater financial and other resources than we do. Moreover, federal
deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline industry
is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise
unsold seats.
In addition to traditional competition among airlines, the industry faces competition from video teleconferencing and other methods
of electronic communication. New advances in technology may add a new dimension of competition to the industry as business travelers seek
lower-cost substitutes for air travel.
If passengers perceive the operations of regional aircraft as being unsafe, our business may be harmed.
In February 2009, Colgan Flight 3407, operating as Continental Connection, crashed on its approach into Buffalo, New York. A
total of 50 people were killed. Since the date of this tragedy, there have been numerous press reports questioning some of the operating
policies of regional airlines. In response, there have also been legislative initiatives aimed at heightening safety requirements, such as The
Airline Safety 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 legislation impose additional burdens on us, our financial condition, results of operations and the price
of our common stock could be materially adversely effected.
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