5.
We note your disclosure that on June 21, 2012, Frontier granted to FAPAInvest, units representing the right to receive cash and/or registered shares of Frontier in an aggregate amount of $7.074 million. Please explain to us how you accounted for the issuance of these shares in the second quarter of fiscal 2012 in accordance with ASC 718.

Response
In the second quarter of 2011, the Company initiated a restructuring of its Frontier business. As part of the restructuring, Frontier reached a tentative agreement with the Frontier Airlines Pilot Association (“FAPA”) pursuant to which FAPA agreed in principle, on behalf of the Frontier pilots, to the restructuring of certain wages and benefits in exchange for receipt of an equity stake in Frontier. The terms and conditions of the pilots' equity participation and profit sharing in Frontier were set forth in a commercial agreement dated June 24, 2011 and which was included as Exhibit 99.2 to a Current Report on Form 8-K filed on July 6, 2011. As part of the commercial agreement, Frontier and FAPA agreed to negotiate an equity investment agreement to further evidence the pilots' equity participation in Frontier.

On June 21, 2012, Frontier, the Company and FAPAInvest, a Colorado limited liability company ("FAPAInvest") acting as agent for and on behalf of those persons employed as of June 24, 2011 (the "Agreement Date") as pilots by Frontier (such persons, the "Pilots") entered into a Phantom Equity Investment Agreement (the “Investment Agreement”) providing for the terms and conditions of the Pilots' equity participation in Frontier. The Investment Agreement is the equity investment agreement contemplated by the commercial agreement.

Background:
•
As of the Agreement Date, the Pilots were represented by FAPA as parties to that certain Collective Bargaining Agreement with Frontier dated as of March 2, 2007 (the “CBA”).
•
On the Agreement Date, FAPA and Frontier entered into Letter of Agreement 67 to the CBA (“LOA 67”), pursuant to which FAPA agreed, on behalf of the Pilots, to certain modifications to the CBA which included: (i) the postponement of certain pay increases, (ii) reduced Company contributions to the Pilots 401(k) plan, (iii) reduced vacation and sick day accruals and (iv) an extension of the collective bargaining agreement by two years (collectively, the “Investments”). LOA 67 was included as Exhibit 99.1 to the Company's July 6, 2011 Form 8-K.
•
On the Agreement Date, Frontier, Republic and FAPAInvest entered into a commercial agreement (the “Commercial Agreement”), which specifies, among other things, the terms and conditions of the Pilots equity participation in Frontier, in recognition of the value of the Investments to Frontier as outlined in LOA 67.
•
Republic owns 100% of Frontier Airlines Holdings, Inc. (“Holdings”).
•
Frontier, Republic, and FAPAInvest have agreed that the Pilots equity participation in Frontier in return for the Investments will be accomplished by granting FAPAInvest, for the benefit of the Pilots, phantom equity (“Units”) representing the Pilots right to receive from Frontier an amount of cash and/or registered shares of Frontier's common stock, no par value (the “Shares”), equal to the value of the equity participation contemplated under the Commercial Agreement and LOA 67.
•
Pursuant to the Investment Agreement, Frontier, Republic, and FAPAInvest agree and acknowledge that the aggregate value of the Investments to be made by the Pilots as set forth in LOA 67 is $39.3 million (the “Investment Value”). Frontier grants to FAPAInvest, for the benefit of the Pilots, Units on the terms and conditions set forth below:

5

◦
Units represent a right to receive from Frontier cash and/or registered shares of Frontier in the aggregate amount (the “Net Value”) of up to approximately $7.1 million (subject to adjustment upon the occurrence of certain events that qualify as a change of control of Frontier ("Change of Control Events"), which events are considered not probable at this time).

...The Company believes the Units issued by Frontier to the Pilots are similar to a tandem award referred to in ASC 718-10-25-15. The award stipulates the method of settlement (this is not within the discretion of the employee or Frontier). In most cases, the award will be cash settled and would only be settled in equity in certain circumstances that are not probable at this time (such as an initial public offering of Frontier securities). As a result, the Company concluded that the award should not be accounted for as an equity award. The Company also considered that the Units issued by Frontier to the Pilots were similar to a deferred compensation arrangement referred to in ASC 710-10-25-9 given the expected cash payment amount of $7.1 million.