Frontier Airlines Reaches Investment Agreement With Republic Airways Holdings

Files plan of reorganization


Republic Agrees to Serve as Equity Sponsor for Frontier's Emergence from Bankruptcy

Plan Provides for Frontier and Lynx to Maintain Normal Operations as Subsidiary of Republic

DENVER , June 22 /PRNewswire-FirstCall/ -- Frontier Airlines Holdings, Inc. (Pink Sheets: FRNTQ) today announced it has entered into an investment agreement with Republic Airways Holdings, Inc. (Nasdaq: RJET) by which Republic will serve as equity sponsor for Frontier's plan of reorganization and purchase 100% of the equity in the reorganized company for $108.75 million. The plan sponsorship agreement is subject to bankruptcy court approval and various conditions.

If the plan of reorganization is approved and implemented as proposed, upon its emergence from Chapter 11, Frontier Airlines Holdings would become a wholly owned subsidiary of Republic, an airline holding company that owns Chautauqua Airlines, Republic Airlines and Shuttle America. Frontier Airlines and Lynx Aviation would maintain their current names and continue to operate as usual.

"This agreement represents a major milestone in our ongoing efforts to position Frontier to emerge from bankruptcy as a competitive, sustainable airline," said Sean Menke , Frontier President and Chief Executive Officer. "Through our reorganization process, we have transformed Frontier Airlines and Lynx Aviation into two of the most efficient operating carriers in North America . Additionally, we diversified our revenue generation through the introduction of ancillary charges and our branded 'AirFairs' product. The culmination of all this extraordinary work is that, even in the worst economic environment in the last 50 years, the company has posted an operating profit for each of the past six months and a net profit for the past two quarters."

Menke continued, "I would be absolutely remiss not to thank the thousands of Frontier and Lynx employees, and their families, for their sacrifice and dedication during these extraordinary times. They are truly the heart and soul of the company. We are pleased that this agreement allows our customers and communities to continue to receive the outstanding service for which Frontier is known, while preserving the jobs of most Frontier employees."

"We commend Frontier and its employees for their hard work and accomplishments during this difficult restructuring period," said Bryan Bedford , chairman, president and CEO of Republic Airways. "We believe this agreement represents a new beginning for Frontier, positioning it to build on its recent successes and strengthen the Frontier brand for the benefit of employees and the customers and communities it serves."

Frontier today filed its proposed plan of reorganization and a related disclosure statement with the U.S. Bankruptcy Court for the Southern District of New York . Frontier also filed a motion to approve the investment agreement with Republic, subject to higher and better proposals under a court-supervised auction. Frontier will seek court approval of the investment agreement and proposed auction procedures at a hearing scheduled for July 13, 2009 . Frontier currently expects to conclude the auction process and emerge from Chapter 11 by autumn 2009.

In March 2009 , Frontier received a firm commitment for $40 million in post-petition debtor-in-possession (DIP) financing from Republic Airways Holdings to support Frontier's additional working capital needs and refinance its expiring DIP loan, increasing the available financing and preserving Frontier's financial stability. As a condition to the loan, Frontier agreed to allow Republic's damage claim in the amount of $150 million arising out of Frontier's rejection of its airline services agreement with Republic.

The proposed plan of reorganization provides for general unsecured creditors to receive $28.75 million in cash. An additional $40 million of the sale proceeds would be applied as repayment of the outstanding DIP loan. If the plan is implemented as proposed, the company's current equity would be extinguished and holders of that equity would not receive any recovery.

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