On September 3, 2008, Republic Airways Holdings Inc. (the "Company") announced that its wholly-owned subsidiary, Republic Airline Inc. ("Republic Airline"), has signed an agreement with Midwest Airlines, Inc. ("Midwest Airlines") to provide twelve 76-seat Embraer E170 jets for Midwest Airlines with initial service beginning October 1, 2008.
Key commercial terms of the agreement include (i) under the Airline Service Agreement (the "Agreement"), Midwest Air Group, Inc. ("Midwest") will purchase all capacity at predetermined rates and will directly pay or reimburse Republic Airline for industry standard pass-through costs; (ii) the first aircraft will be placed into service on October 1, 2008 and the last aircraft on November 15, 2008; (iii) 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 twelve E170s would be leased from Republic Airline for the remaining duration of the Agreement and operated on the Midwest Airlines operating certificate; (iv) all fuel will be purchased directly by Midwest and will not be charged back to Republic Airline; (v) the Company will make a one-year term loan to Midwest in the amount of $15.0 million, with an additional loan commitment of $10.0 million, based on the achievement of certain milestones as determined by the Company; and (iv) the loan(s) will be collateralized by all of Midwest's unencumbered assets and generally be senior to other lender's security position.