FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 000-23447
MIDWAY AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3915637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 Slater Road, Suite 200
Morrisville, NC 27560
(Address of principal executive offices)
(Zip Code)
919-595-6000
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes ____X___ No ________
As of August 10, 1999 there were 8,602,395 shares of Common Stock, $.01 par
value, of the registrant outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Midway Airlines Corporation
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited) (Audited)
------------------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $36,810 $48,736
Restricted cash 12,513 9,512
Short-term investments 7,275 0
Accounts receivable
Credit cards and travel agencies 7,804 4,702
Other (net) 1,332 1,946
Inventories 2,963 2,916
Deferred tax asset 457 457
Prepaids and other 6,783 10,886
----- ------
Total current assets 75,937 79,155
Equipment and property:
Flight 111,444 107,143
Other 9,497 6,657
Less accumulated depreciation and amortization (12,744) (10,793)
-------- --------
Total equipment and property, net 108,197 103,007
Other noncurrent assets:
Equipment and aircraft purchase deposits 29,895 18,103
Aircraft lease deposits and other 4,504 3,316
----- -----
Total other noncurrent assets 34,399 21,419
Total assets $218,533 $203,581
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $6,936 $7,327
Accrued expenses 6,172 5,732
Accrued income and excise taxes 4,685 581
Advance ticket sales 26,747 21,483
Other current liabilities 5,752 5,803
Current maturities of long-term debt and capital lease obligations 5,458 5,349
----- -----
Total current liabilities 55,750 46,275
Noncurrent liabilities:
Long-term debt and capital lease obligations 77,280 78,764
Deferred tax liability 7,022 7,022
Other 0 1,057
------ ------
Total noncurrent liabilities 84,302 86,843
------ ------
Total liabilities 140,052 133,118
------- -------
Stockholders' equity:
Preferred stock 0 0
Common stock 86 86
Additional paid-in-capital 51,032 51,032
Retained earnings ($51.1 million of accumulated deficit eliminated
in the quasi-reorganization as of June 30, 1997) 27,363 19,345
------ ------
Total stockholders' equity 78,481 70,463
Total liabilities and stockholders' equity $218,533 $203,581
======== ========
</TABLE>
<PAGE>
Midway Airlines Corporation
Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Three months ended
June 30,
1999 1998
--------- ---------
Operating revenues:
Passenger $54,387 $54,204
Cargo 417 555
Contract and other 747 949
--------- ---------
Total revenues 55,551 55,708
Operating expenses:
Wages, salaries and related costs 9,686 8,143
Aircraft fuel 4,685 4,927
Aircraft and engine rentals 7,397 7,360
Commissions 3,654 4,179
Maintenance, materials and repairs 2,938 4,020
Other rentals and landing fees 2,538 2,335
Depreciation and amortization 1,844 1,493
Other 14,697 13,811
Equipment retirement charges 1,080 -
--------- ---------
Total operating expenses 48,519 46,268
--------- ---------
Operating income 7,032 9,440
Other income (expense):
Interest income 1,016 945
Interest expense (1,580) (1,555)
--------- ---------
Total other income (expense) (564) (610)
--------- ---------
Income before income taxes 6,468 8,830
Income tax expense 2,458 3,532
--------- ---------
Net income $4,010 $5,298
========= =========
BASIC EARNINGS PER SHARE: $0.47 $0.62
Weighted average shares used in computing ========= =========
basic earnings per share 8,602,395 8,562,757
========= =========
DILUTED EARNINGS PER SHARE: $0.42 $0.54
Weighted average shares used in computing ========= =========
diluted earnings per share 9,563,384 9,791,826
========= =========
<PAGE>
Midway Airlines Corporation
Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
Six months ended
June 30,
1999 1998
--------- ---------
Operating revenues:
Passenger $108,047 $103,278
Cargo 923 965
Contract and other 1,568 1,986
--------- ---------
Total revenues 110,538 106,229
Operating expenses:
Wages, salaries and related costs 18,687 15,631
Aircraft fuel 8,804 10,011
Aircraft and engine rentals 14,714 14,733
Commissions 7,296 8,163
Maintenance, materials and repairs 6,789 8,128
Other rentals and landing fees 4,930 4,780
Depreciation and amortization 3,572 2,534
Other 29,383 26,243
Equipment retirement charges 2,008 -
--------- ---------
Total operating expenses 96,183 90,223
--------- ---------
Operating income 14,355 16,006
Other income (expense):
Interest income 1,907 1,922
Interest expense (3,330) (2,673)
--------- ---------
Total other income (expense) (1,423) (751)
--------- ---------
Income before income taxes 12,932 15,255
Income tax expense 4,914 6,102
--------- ---------
Net income $8,018 $9,153
========= =========
BASIC EARNINGS PER SHARE: $0.93 $1.07
Weighted average shares used in computing ========= =========
basic earnings per share 8,602,395 8,560,737
========= =========
DILUTED EARNINGS PER SHARE: $0.83 $0.93
Weighted average shares used in computing ========= =========
diluted earnings per share 9,607,750 9,797,367
========= =========
<PAGE>
Midway Airlines Corporation
Statements of Cash Flows
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
(Unaudited)
-----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $8,018 $9,153
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,572 2,534
Capitalized interest on purchase deposits (560) (409)
Provision for deferred income taxes - -
(Gain) on disposal of assets (28) -
Changes in operating assets and liabilities:
Restricted cash (2,999) (7,009)
Accounts receivable (2,489) (7,114)
Inventories (46) (1,103)
Prepaids and other 3,885 1,283
Aircraft lease deposits and other (1,210) (838)
Accounts payable and accrued expenses 48 1,821
Accrued excise and income taxes 4,103 412
Advance ticket sales 5,265 5,807
Other current liabilities 77 (1,273)
Other noncurrent liabilities (1,060) (62)
--------- ----------
Net cash provided by operating activities 16,576 3,202
======= ======
INVESTING ACTIVITIES
Purchase of short-term investments (7,275) -
Sale of short-term investments 751
Purchase of equipment and property (6,629) (1,693)
Aircraft and equipment purchase deposits (15,354) (6,036)
Refund of aircraft and equipment purchase deposits 3,563 8,348
------ ----
Net cash (used in) provided by investing activities (25,695) 1,370
======== =====
FINANCING ACTIVITIES
Issuance of common and preferred stock - 23
Proceeds from issuance of long-term debt - -
Repayment of long-term debt and capital lease obligations (3,029) (14,530)
Accreted interest on long-term debt 222 328
---- ----
Net cash (used in) financing activities (2,807) (14,179)
------- --------
Decrease in cash and cash equivalents (11,926) (9,607)
Cash and cash equivalents at beginning of period 48,736 54,509
------- -------
Cash and cash equivalents at end of period $36,810 $44,902
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $3,069 $957
====== =======
Income taxes paid $1,957 $5,882
====== ======
Equipment purchases under debt and capital lease obligations $1,529 $0
======= =======
</TABLE>
<PAGE>
MIDWAY AIRLINES CORPORATION
Notes to Financial Statements
(Information as of June 30, 1999 and for the three month and six month periods
ended June 30, 1999 and 1998 are unaudited)
1. BASIS OF PRESENTATION
The unaudited interim financial statements included herein have been prepared by
Midway Airlines Corporation (the "Company"), in accordance with generally
accepted accounting principles ("GAAP") for interim financial reporting pursuant
to the rules and regulations of the Securities and Exchange Commission. The
information furnished in the interim financial statements includes normal
recurring adjustments and reflects all adjustments which, in the opinion of
management, are necessary for a fair presentation of such financial statements.
The results of operations for any interim period presented are not necessarily
indicative of the results to be expected for any other period. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with GAAP have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. These condensed financial statements
should be read in conjunction with the financial statements, and the notes
thereto, included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
Use of Estimates and Assumptions
Preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during those reporting periods. Actual results could
differ from those estimates.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include investments with an original maturity of three
months or less or which may be redeemed without penalty at any time. These
investments are stated at cost, which approximates market value. As of June 30,
1999 and December 31, 1998, approximately $12.5 million and $9.5 million,
respectively, of cash and cash equivalents were restricted as to withdrawal;
these funds serve as collateral to support letters of credit and a credit card
holdback and are classified as restricted cash in the balance sheets.
Short-term Investments
Short-term investments consist of corporate bonds which mature between three
months and one year of the original investment date. These investments are
carried at cost, which approximates market value.
<PAGE>
3. EARNINGS PER SHARE OF COMMON STOCK
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
--------------------------------------------------------------
FOR THE THREE FOR THE SIX
MONTHS ENDED JUNE 30, MONTHS ENDED JUNE 30,
1999(1) 1998 1999(1) 1998
--------------------------------------------------------------
Numerator:
<S> <C> <C> <C> <C>
Net Income (2) $4,010,000 $5,298,000 $8,018,000 $9,153,000
Denominator:
Denominator for basic earnings per share - weighted average 8,602,395 8,562,757 8,602,395 8,560,737
shares
Effect of dilutive securities:
Employee stock options 570,420 838,475 614,779 846,035
Warrants 390,569 390,594 390,576 390,595
--------------------------------------------------------------
Dilutive potential common shares (3) 960,989 1,229,069 1,005,355 1,236,630
Denominator for diluted earnings per share - adjusted weighted
average shares and assumed conversions. 9,563,384 9,791,826 9,607,750 9,797,367
==============================================================
Basic earnings per share $ 0.47 $ 0.62 $0.93 $1.07
Diluted earnings per share $ 0.42 $ 0.54 $0.83 $0.93
</TABLE>
(1) Options to purchase 245,930 shares of common stock at $15.50 per share
were outstanding as of June 30, 1999 but were not included in the
computation of diluted earnings per share for the three months and the
six months ended June 30, 1999 because the exercise price of the
options was greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.
(2) Numerator for basic and diluted earnings per share.
(3) Shares calculated using the "Treasury Stock" method under SFAS 128.
4. COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS:
The Company has placed firm orders to purchase 11 additional newly manufactured
CRJ-200ER Canadair Regional Jet aircraft, all of which are scheduled to be
delivered by December 2001. Midway also has options to acquire up to 14
additional CRJs. The Company has ordered two General Electric CF34-3B1 spare
engines for approximately $4.0 million to support the operation of its CRJ
aircraft.
The Company has placed firm orders to purchase 15 Boeing 737-700 aircraft, and
intends to lease two additional Boeing 737-700s. Deliveries of the two leased
Boeing 737-700 aircraft are scheduled for December 1999 and January 2000, and
deliveries of the other 15 Boeing 737-700 aircraft are scheduled to begin in
September 2000 and end in October 2002. The Company has options to acquire 10
additional Boeing 737-700s. The Company intends to purchase CFM 56-7B spare
engines to support the operation of its Boeing 737-700 aircraft.
In March 1995, Midway entered into an agreement for the acquisition of four
Airbus A320 aircraft with deliveries beginning in 1998. The Company also agreed
to purchase one IAE V2527-A5 spare engine to support the operation of the four
A320 aircraft. The delivery dates of these aircraft and the spare engine have
been extended to 2005 and later. The Company is required to make deposits on the
four A320 aircraft and the spare engine in amounts to be determined beginning in
2003. The Company is considering several alternatives with respect to the A320s,
including restructuring its purchase agreement or selling its position.
OTHER CONTINGENCIES:
<PAGE>
In the fourth quarter of 1998, the Company retired two Fokker F-100 aircraft at
the expiration of the related lease terms. In each of March and May 1999, the
Company retired one F-100 aircraft at the expiration of the related lease.
With respect to the retirement of these aircraft, the Company and the lessor
disagree as to the amount of certain life cycle costs required to maintain the
aircraft and as to the level of the Company's responsibility to pay for such
costs. The Company believes that it has met or exceeded its obligations. The
lessor believes that the Company has not met its obligations and has brought an
action against the Company alleging breach of contract and unjust enrichment,
seeking damages in excess of $5 million under each claim. The Company intends to
discuss a potential settlement of this matter with the lessor but it also
believes it has meritorious legal defenses to the lessor's claims and will
vigorously defend the action, if necessary. At this time, it is not possible to
predict the outcome of this matter.
In August 1998, the Compliance and Enforcement Branch of the Drug Abatement
Division of the Federal Aviation Administration ("FAA") conducted an inspection
of the Company's compliance with certain regulations related to its alcohol and
drug testing programs. In September 1998, the FAA notified the Company that it
was investigating alleged violations discovered during the August 1998
inspection. The Company responded to these alleged violations in October 1998.
In May 1999, the FAA requested that the Company provide the FAA with an update
of certain matters raised during the investigation. The Company promptly
provided this information to the FAA and has received no further communications
from the FAA in this respect. The Company is unable to determine whether the
FAA's investigation will result in the finding of violations of these
regulations and, if so, whether the FAA will pursue an assessment as a result of
any such findings or what the amount of any such assessment might be.
In September 1997, the Civil Aviation Security Division of the Federal Aviation
Administration ("FAA") conducted an investigation of the Company's compliance
with certain regulations requiring the Company to verify the accuracy of the
background information provided by its employees who have access to secure
airport areas. The Company revised its background check procedures during the
course of the FAA's investigation and then obtained and verified the necessary
background information of those employees who had been identified by the FAA as
having insufficient background check documentation. This investigation will
likely result in the finding of violations of these regulations. While the
Company is unable to determine whether the FAA will pursue an assessment as a
result of the findings of this investigation, or what the amount of any such
assessment might be, an assessment could have a material adverse effect on the
Company's results of operations.
The Company has been named as a defendant in certain pending litigation. The
outcome of these matters cannot be predicted, but it is management's belief that
whatever the outcome, the results will not, either individually or in the
aggregate have a material adverse effect on the Company's financial position,
results of operations or cash flows.
The Company's pilots, fleet service (ramp) agents, and flight attendants are
represented by labor unions. The pilots' representative, the Air Line Pilots
Association ("ALPA"), was elected in December 1997, the ramp employees'
representative, International Association of Machinists and Aerospace Workers,
AFL-CIO ("IAM"), was elected in June 1998, and the flight attendants'
representative, the Association of Flight Attendants, AFL-CIO ("AFA") was
elected in December 1998. Prior to those times, none of the Company's employees
were represented by a union. Although the Company believes mutually acceptable
agreements can be reached with the unions representing such employees,
negotiations have not yet commenced with the AFA and have not yet concluded with
ALPA or the IAM, and the ultimate outcome of such negotiations cannot be
predicted.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
- -----------------------------------------
SELECTED OPERATING DATA
- -----------------------
For the three months
ended June 30,
1999 1998
---- ----
Available seat miles (000s) 375,476 387,752
Revenue passenger miles (000s) 251,675 261,474
Load factor 67.0% 67.4%
Break-even load factor (1) 57.7% 56.4%
Departures 10,786 8,808
Block hours 16,721 13,952
Passenger revenue per ASM (cents) 14.5 14.0
Passenger yield (cents) 21.6 20.7
Average fare $108 $105
Operating cost per available seat mile (1) 12.6 11.9
Onboard passengers 503,353 515,761
Average seats per departure 71 89
Average stage length (miles) 473 481
Aircraft (average during period) 20.9 17.2
Aircraft utilization (hours per day) 8.8 8.9
Fuel price per gallon (cents) (2) 43.2 45.7
(1) Excludes equipment retirement charges
(2) Excludes taxes and into-plane fees
RESULTS OF OPERATIONS
For the three months ended June 30, 1999 the Company's net income was $4.0
million. Excluding the unusual items discussed below, net income was $4.7
million (net of taxes), down 11.7% from the net income of $5.3 million for the
three months ended June 30, 1998. Revenue for the three months ended June 30,
1999 was down 0.3% from 1998 to $55.6 million. Excluding the equipment
retirement charges, the Company's operating margin decreased to 14.6% in 1999
from 16.9% in 1998.
Diluted earnings per share for the three months ended June 30, 1999 amounted
to $0.42 ($0.49 excluding unusual items) compared to $0.54 for the three months
ended June 30, 1998.
Unusual Items
During the three months ended June 30, 1999 the Company incurred $1.1 million
in equipment retirement charges related to the retirement of two aircraft, one
of which left the fleet in May and one in June.
Additionally, the Company incurred added cost and reduced revenue due to a
shortage of pilots driven by a tripling of the normal pilot attrition rate.
Attrition, which was up due to increased hiring by the major carriers, had the
effect of forcing the cancellation of one aircraft's worth of capacity
throughout the three months ended June 30, 1999. Increased hiring and a
reduction in pilot attrition have since reduced the pilot shortage.
Capacity. In the three months ended June 30, 1999, the company produced 375
million ASMs, a decrease of 12.2 million or 3.2% over the three months ended
June 30, 1998. The decrease in ASM production is attributable to a 1.7% shorter
average stage length (to 473 miles) and 20.2% fewer seats per departure (to 71
seats) offset by 22.5% more departures (to 10,786).
<PAGE>
These changes resulted from the change in the Company's fleet (decreasing the
number of 98-seat F100s to eight during the three months ended June 30, 1999,
the 148-seat A320 being removed from service in May and returned at the
expiration of its lease in June 1999, and an increase in the number of 50-seat
CRJs to 13), the pilot shortage noted above, and a schedule realignment
initiated in February 1999.
Operating Revenues. The Company's operating revenues decreased 0.3% to $55.6
million for the three months ended June 30, 1999 from $55.7 million for the
three months ended June 30, 1998. Passenger revenue increased 0.3% due to a 4.3%
increase in passenger yield to 21.6 cents partially offset by a 3.7% decrease in
revenue passenger miles to 252 million. Passenger revenue per ASM increased 3.6%
to 14.5 cents per ASM due to the 4.3% increase in yield partially offset by a
0.4 percentage point decrease in load factor to 67.0%. Cargo revenue decreased
due to less mail being carried partially offset by the increase in departures
and more cargo being carried, while contract and other revenue decreased due to
a reduction in charter operations in the three months ended June 30, 1999
partially offset by ground handling services provided to other airlines in the
three months ended June 30, 1999.
Operating Expenses. The Company's operating expenses increased 4.9% to $48.5
million for the three months ended June 30, 1999 from $46.3 million for the
three months ended June 30, 1998. Operating expenses increased primarily due to
increases in wages, salaries and related costs, depreciation and amortization,
other miscellaneous operating expenses, and equipment retirement charges,
partially offset by a reduction in fuel cost per gallon, lower commission
expense, and lower maintenance expense. Total operating expense per ASM
increased 8.3% to 12.92 cents from 11.93 cents. This increase is attributable to
an increase in depreciation and amortization expense related to the ownership of
five CRJs and the parts for the fleet, increases in wages, salaries, and related
costs, equipment retirement charges, and an increase in other expenses spread
over a stable ASM base, partially offset by a decrease in commissions and
maintenance cost per ASM.
<TABLE>
<CAPTION>
Three months ended June 30,
1999 1998
Percent of Cost per Percent of Cost per
Total ASM Total ASM
Expenses (cents) Expenses (cents
<S> <C> <C> <C> <C>
Wages, salaries and related costs 19.7% 2.58 17.4% 2.10
Aircraft fuel 9.6 1.25 10.5 1.27
Aircraft and engine rentals 15.1 1.97 15.7 1.90
Commissions 7.4 0.97 8.9 1.08
Maintenance, materials and repairs 6.0 0.78 8.6 1.04
Other rentals and landing fees 5.2 0.68 5.0 0.60
Depreciation and amortization 3.8 0.49 3.2 0.38
Other 29.9 3.91 29.4 3.56
---- ---- ---- ----
Sub-total operating expenses before
equipment retirement charges 96.7 12.63 98.7 11.93
Equipment retirement charges 2.2 0.29 0.0 .0
--- ---- --- --
Total operating expenses 98.9 12.92 98.7 11.93
Other (income) expenses 1.1 0.15 1.3 0.16
Total expenses 100.0% 13.07 100.0% 12.09
====== ===== ====== =====
</TABLE>
Wages, salaries and related costs increased $1.5 million or 18.9% to $9.7
million for the three months ended June 30, 1999 from $8.1 million for the three
months ended June 30, 1998. The increase is attributable to increased staffing
associated with the addition of the CRJs, increased staffing in reservations,
increased wages per employee, partially offset by a decrease in the profit
sharing expense in the three months ended June 30, 1999 related to the Company's
Bonus Plan implemented in 1998. Wages, salaries and related cost per ASM
increased 0.48 cents or 22.9% to 2.58 cents. The increase in unit costs is
attributable to the items noted above as well as the changes noted in
"Capacity".
Aircraft fuel expense decreased 4.9% to $4.7 million for the three months
ended June 30, 1999 from $4.9 million for the three months ended June 30, 1998.
The decrease was due to a 5.5% decrease in the average fuel price per gallon to
43.2 cents
<PAGE>
from 45.7 cents (net of into plane fees and taxes), and the flying of the lower
fuel burn CRJ aircraft, partially offset by the 19.8% increase in block hours.
Aircraft fuel expense per ASM decreased 1.6% to 1.25 cents from 1.27 cents.
Aircraft and engine rental expense increased 0.5% to $7.4 million for the
three months ended June 30, 1999. The increase in expense is attributable to
$2.5 million in lease expense in the three months ended June 30, 1999 for leased
CRJs which were placed in service beginning in September 1998, partially offset
by lower lease costs due to the return at the end of the leases of four Fokkers
and one Airbus during late 1998 and the first six months of 1999. Aircraft and
engine rentals expense per ASM increased 3.7% to 1.97 cents from 1.90 cents. The
increase in cost per ASM resulted from a combination of the 3.2% decrease in
ASMs discussed above in "Capacity" and the increase in the number of aircraft
under lease.
Commission expense decreased 12.6% to $3.7 million for the three months ended
June 30, 1999 from $4.2 million for the three months ended June 30, 1998. This
was due to a reduction in the commission rate paid and a decrease of travel
agency revenues as a percent of passenger revenue to 65.6% from 67.2%, partially
offset by the 0.3% increase in passenger revenues. Commissions expense per ASM
decreased 10.2% to 0.97 cents from 1.08 cents, primarily driven by the reduction
in the commission rate paid and the decrease in agency revenues offset by the
3.6% increase in passenger revenue per ASM to 14.5 cents from 14.0 cents.
Maintenance, materials and repairs expense decreased 26.9% to $2.9 million
for the three months ended June 30, 1999 from $4.0 million for the three months
ended June 30, 1998. The expense decrease is largely attributable to the new
maintenance contracts on most of the Company's F100 aircraft, and the retirement
of 4 Fokker F100 aircraft and the A320, the lower maintenance cost of the new
CRJ fleet, offset somewhat by the 19.8% increase in block hours. Maintenance,
materials and repairs expense per ASM decreased 25.0% to 0.78 cents from 1.04
cents due to the changes noted above.
Other rentals and landing fees expense increased 8.7% to $2.5 million for the
three months ended June 30, 1999 from $2.3 million for the three months ended
June 30, 1998. The expense increase is attributable primarily to 22.5% more
departures and by facility rentals in newly opened stations and the new
corporate headquarters facility in Morrisville, North Carolina, partially offset
by lower landing fee rates at the Company's hub, and the shift in the fleet mix,
resulting in 189% more CRJ landings and 33% fewer landings by the larger Fokker
and Airbus aircraft. Other rentals and landing fees expense per ASM increased
13.3% to 0.68 cents from 0.60 cents.
Depreciation and amortization expense increased 23.5% to $1.8 million for the
three months ended June 30, 1999 from $1.5 million for the three months ended
June 30, 1998. Depreciation and amortization expense per ASM increased 28.9% to
0.49 cents from 0.38 cents in the three months ended June 30, 1998. The increase
is attributable to the acquisition of five owned CRJs and related spare parts
spread over the 3.2% smaller ASM base.
Other operating expense increased 6.4% to $14.7 million for the three months
ended June 30, 1999 from $13.8 million for the three months ended June 30, 1998.
Other operating expenses consist primarily of reservations, ground handling,
advertising, general and administrative expense and insurance. The expense
increase is attributable to the 22.5% increase in departures partially offset by
savings in insurance, marketing and administrative expenses and the 2.4%
decrease in passengers. Other operating expense per ASM increased 9.8% to 3.91
cents from 3.56 cents.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
SELECTED OPERATING DATA
- -----------------------
For the six months
ended June 30,
1999 1998
---- ----
Available seat miles (000s) 751,125 760,918
Revenue passenger miles (000s) 490,299 493,541
Load factor 65.3% 64.9%
Break-even load factor (1) 56.2% 55.3%
Departures 21,268 16,559
Block hours 32,792 26,309
<PAGE>
Passenger revenue per ASM (cents) 14.4 13.6
Passenger yield (cents) 22.0 20.9
Average fare $111 $108
Operating cost per available seat mile (1) 12.5 12.0
Onboard passengers 974,946 957,721
Average seats per departure 72 92
Average stage length (miles) 470 488
Aircraft (average during period) 21.2 16.1
Aircraft utilization (hours per day) 8.5 9.0
Fuel price per gallon (cents) (2) 39.7 48.6
(1) Excludes equipment retirement charges
(2) Excludes taxes and into-plane fees
RESULTS OF OPERATIONS
For the six months ended June 30, 1999 the Company's net income was $8.0
million. Excluding the unusual items discussed below, net income was $9.3
million (net of taxes), up 1.2% from the net income of $9.2 million for the six
months ended June 30, 1998. Revenue for the six months ended June 30, 1999 was
up 4.1% over 1998 to $110.5 million. Excluding the equipment retirement charges
the Company's operating margin decreased to 14.8% in 1999 from 15.1% in 1998.
Diluted earnings per share for the six months ended June 30, 1999 amounted to
$0.83 ($0.96 excluding unusual items) compared to $0.93 for the six months ended
June 30, 1998.
Unusual Items
During the six months ended June 30, 1999 the Company incurred $2.0 million
in equipment retirement charges related to the retirement of three aircraft, one
of which left the fleet in March, one in May and one in June.
Additionally, the Company incurred added cost and reduced revenue due to a
shortage of pilots driven by a tripling of the normal pilot attrition rate.
Attrition, which was up due to increased hiring by the major carriers, had the
effect of forcing the cancellation of one aircraft's worth of capacity
throughout the six months ended June 30, 1999. Increased hiring and a reduction
in pilot attrition have since reduced the pilot shortage.
Capacity. In the six months ended June 30, 1999, the company produced 751
million ASMs, a decrease of 9.8 million or 1.3% over the six months ended June
30, 1998. The decrease in ASM production is attributable to a 3.7% shorter
average stage length (to 470 miles) and 21.7% fewer seats per departure (to 72
seats) partially offset by 28.4% more departures (to 21,268). These changes
resulted from the change in the Company's fleet, (decreasing the number of
98-seat F100s to eight during the six months ended June 30, 1999, the 148-seat
A320 being out of service for two months in the first quarter and being removed
from service in May and returned at the expiration of its lease in June, 1999,
and an increase in the number of 50-seat CRJs to 15), the pilot shortage noted
above, and a schedule realignment initiated in February 1999.
Operating Revenues. The Company's operating revenues increased 4.1% to $110.5
million for the six months ended June 30, 1999 from $106.2 million for the six
months ended June 30, 1998. Passenger revenue increased 4.6% due to a 5.3%
increase in passenger yield (revenue per RPM) to 22.0 cents partially offset by
a 0.7% decrease in revenue passenger miles to 490.3 million. Passenger revenue
per ASM increased 5.9% to 14.4 cents per ASM due to the 5.3% increase in yield
combined with a 0.4 percentage point increase in load factor to 65.3%. Cargo
revenue decreased due to less mail being carried partially offset by the
increase in departures and more other cargo being carried, while contract and
other revenue decreased due to a reduction in charter operations, partially
offset by ground handling services provided to other airlines in the six months
ended June 30, 1999.
Operating Expenses. The Company's operating expenses increased 6.6% to $96.2
million for the six months ended June 30, 1999 from $90.2 million for the six
months ended June 30, 1998. Total expenses increased primarily due to increases
in wages, salaries and related costs, depreciation and amortization, other
miscellaneous operating expenses, and equipment
<PAGE>
retirement charges, partially offset by a reduction in fuel cost per gallon,
lower commission expense, and lower maintenance expense. Total operating expense
per ASM increased 7.9% to 12.80 cents from 11.86 cents. This increase is
attributable to an increase in depreciation and amortization expense related to
the ownership of five CRJs and the parts for the fleet, equipment retirement
charges, and an increase in other expenses spread over a stable ASM base.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
---- ----
Cost per Percent of Cost per
Percent of ASM Total ASM
Total Expenses (cents) Expenses (cents)
-------------- ------- -------- -------
<S> <C> <C> <C> <C>
Wages, salaries and related costs 19.1% 2.49 17.2% 2.05
Aircraft fuel 9.0 1.17 11.0 1.32
Aircraft and engine rentals 15.1 1.96 16.2 1.94
Commissions 7.5 0.97 9.0 1.07
Maintenance, materials and repairs 7.0 0.90 8.9 1.07
Other rentals and landing fees 5.1 0.66 5.3 0.63
Depreciation and amortization 3.7 0.47 2.8 0.33
Other 30.1 3.91 28.8 3.45
---- ---- ---- ----
Sub-total operating expenses before
equipment retirement charges 96.5 12.53 99.2 11.86
Equipment retirement charges 2.1 0.27 0.0 0
--- ---- --- -
Total operating expenses 98.5 12.80 99.2 11.86
Other (income) expenses 1.5 0.19 0.8 0.10
--- ---- --- ----
Total expenses 100.0% 12.99 100.0% 11.96
====== ===== ====== =====
</TABLE>
Wages, salaries and related costs increased $3.1 million or 19.6% to $18.7
million for the six months ended June 30, 1999 from $15.6 million for the six
months ended June 30, 1998. The increase is attributable to increased staffing
associated with the addition of the CRJs and the increased number of stations
and flights, increased wages per employee, partially offset by decreased profit
sharing expense in the six months ended June 30, 1999 related to the Company's
Bonus Plan implemented in 1998. Wages, salaries and related cost per ASM
increased 0.44 cents or 21.5% to 2.49 cents. The increase in unit costs is
attributable to the items noted above as well as the changes noted in
"Capacity".
Aircraft fuel expense decreased 12.1% to $8.8 million for the six months
ended June 30, 1999 from $10.0 million for the six months ended June 30, 1998.
The decrease was due to a 18.3% decrease in the average fuel price per gallon to
39.7 cents from 48.6 cents (net of taxes and into plane fees), and the flying of
the lower fuel burn CRJ aircraft, partially offset by the 24.6% increase in
block hours. Aircraft fuel expense per ASM decreased 11.4% to 1.17 cents from
1.32 cents.
Aircraft and engine rental expense remained stable at $14.7 million for the
six months ended June 30, 1999. The stability in expense is attributable to the
retirement of four Fokker F100s and the A320 in the last quarter of 1998 and the
first quarter of 1999 combined with the rental of spare engines in early 1998,
offset by the rental expense of the leased CRJs. Aircraft and engine rentals
expense per ASM increased 1.0% to 1.96 cents from 1.94 cents.
Commission expense decreased 10.6% to $7.3 million for the six months ended
June 30, 1999 from $8.2 million for the six months ended June 30, 1998. This was
due to a reduction in the commission rate paid and a decrease of travel agency
revenues as a percent of passenger revenue to 64.5% from 67.9%, partially offset
by the 4.6% increase in passenger revenues. Commissions expense per ASM
decreased 9.4% to 0.97 cents from 1.07 cents, primarily driven by the reduction
in the commission rate paid and the decrease in agency revenues offset by the
5.9% increase in passenger revenue per ASM to 14.4 cents from 13.6 cents.
Maintenance, materials and repairs expense decreased 16.5% to $6.8 million
for the six months ended June 30, 1999 from $8.1 million for the six months
ended June 30, 1998. The expense decrease is largely attributable to the new
maintenance contracts on most of the Company's F100 aircraft, and the retirement
of 4 Fokker F100 and one A320 aircraft and lower
<PAGE>
maintenance costs for the new CRJ fleet, offset somewhat by the 24.6% increase
in block hours. Maintenance, materials and repairs expense per ASM decreased
15.9% to 0.90 cents from 1.07.
Other rentals and landing fees expense increased 3.1% to $4.9 million for the
six months ended June 30, 1999 from $4.8 million for the six months ended June
30, 1998. The expense increase is attributable primarily to 28.4% more
departures and facility rentals in newly opened stations and the new
headquarters facility in Morrisville, North Carolina, partially offset by lower
landing fee rates at the Company's hub, the shift in the fleet mix, resulting in
267% more CRJ landings and 29% fewer landings by the larger Fokker and Airbus
aircraft. Other rentals and landing fees expense per ASM increased 4.8% to 0.66
cents from 0.63 cents
Depreciation and amortization expense increased 41.0% to $3.6 million for the
six months ended June 30, 1999 from $2.5 million for the six months ended June
30, 1998. Depreciation and amortization expense per ASM increased 42.4% to 0.47
cents from 0.33 cents in the six months ended June 30, 1998. The increase is
attributable to the acquisition of five owned CRJs and related spare parts.
Other operating expense increased 12.0% to $29.4 million for the six months
ended June 30, 1999 from $26.2 million for the six months ended June 30, 1998.
Other operating expenses consist primarily of reservations, ground handling,
advertising, general and administrative expense and insurance. The expense
increase is attributable to the 28.4% increase in departures and the 1.8%
increase in passengers, partially offset by savings in insurance, marketing and
administrative expenses. Other operating expense per ASM increased 13.3% to 3.91
from 3.45 cents.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's working capital decreased during the six months ended June 30,
1999 compared to the year ended December 31, 1998. As of June 30, 1999, the
Company had cash, restricted cash, and short-term investments of $56.6 million
and working capital of $20.2 million compared to $58.2 million and $32.9 million
respectively as of December 31, 1998. The decrease in working capital is due
primarily to the net increase in aircraft purchase deposits of $11.8 million.
During the six months ended June 30, 1999, cash, restricted cash and short-term
investments decreased $1.6 million, reflecting net cash provided by operating
activities of $19.6 million (net of changes in restricted cash), net cash used
in investing activities of $18.5 million (net of purchases of short term
investments), and net cash used in financing activities of $2.8 million. During
the six months ended June 30, 1999, net cash provided by operating activities
was primarily due to net income and depreciation and amortization, combined with
a net increase in operating liabilities; net cash used in investing activities
was due to net payments of equipment purchase deposits and purchases of
equipment and property; and net cash used in financing activities reflects
repayment of long-term debt.
Capital Resources
Since the February 1997 Recapitalization, the Company has been able to
generate sufficient funds from operations to meet its working capital
requirements and does not currently have any lines of credit. The Company
believes that the working capital available to the Company from ongoing
operations combined with financing commitments which have been and are expected
to be arranged with aircraft manufacturers, lessors and others will be
sufficient to meet its anticipated requirements for capital expenditures and
other cash requirements for the foreseeable future.
Capital Expenditures
The Company's cash outflows for capital expenditures in the six months ended
June 30, 1999 and 1998 were $6.6 million and $1.7 million, respectively,
excluding financed purchases.
The Company has placed firm orders to purchase 11 additional newly
manufactured CRJ-200ER Canadair Regional Jet aircraft, all of which are
scheduled to be delivered by December 2001. Midway also has options to acquire
up to 14 additional CRJs. The Company has ordered two General Electric CF34-3B1
spare engines to support the operation of its CRJ aircraft.
The Company has placed firm orders to purchase 15 Boeing 737-700 aircraft,
and intends to lease two additional Boeing 737-700s. Deliveries of the two
leased Boeing 737-700 aircraft are scheduled for December 1999 and January 2000,
and
<PAGE>
delivery for the other 15 Boeing 737-700 aircraft are scheduled to begin in
September 2000 and end in October 2002. The Company has options to acquire 10
additional Boeing 737-700s. The Company intends to purchase four CFM 56-7B spare
engines to support the operation of its Boeing 737-700 aircraft.
The Company's fixed costs will increase significantly with the induction of
the CRJs and the 737-700s. Based on the current interest rate environment, the
Company estimates that its fixed charges will increase by approximately $9.2
million over the next twelve months as a result of the financing of the aircraft
to be delivered during that time. However, depending upon the financing method
ultimately chosen, the Company's balance sheet liabilities may or may not
increase.
YEAR 2000
STATE OF READINESS
The Company's Year 2000 Project has been designed to ensure that the
Company's computer systems and embedded operating systems will function properly
beyond 1999. The Project involves five phases: Inventory, Assessment,
Remediation, Testing and Contingency Planning.
During the Inventory Phase, the Company identified six business-critical
functions which rely heavily on computer or embedded systems for safe or
reliable operations. These six functions include the operation of aircraft, the
operation of the Company's computer reservation system and related telephone
systems, the transmission and reconciliation of credit card and travel agency
sales and collection of money, the operation of the Company's yield management
systems, the operation of the Company's aircraft dispatch and air traffic
control systems as they communicate with the FAA's air traffic controllers and
other agencies and the utilization of certain time-sensitive crew qualification
and tracking systems, and aircraft maintenance control and planning systems.
The Company has completed the Assessment Phase which first began with a
detailed review of these six critical functions and the applicable systems used
by the Company or its vendors in performing these functions. This review has
concluded and the results are as follows:
o With respect to its aircraft, the Company has received assurances
and warranties that the embedded technology in such aircraft and
parts will process date data correctly in the Year 2000. The
manufacturers and suppliers of these aircraft and parts have
provided the Company with regular updates of their investigation
and testing of the component systems for Year 2000 compliance. To
date, the information provided by these sources has not identified
any aircraft or parts in the Company's projected Year 2000 fleet
which are not now Year 2000 compliant.
o With respect to its yield management systems and its computer
reservation system, each of these systems is operated and
maintained by American Airlines, Inc. and/or its affiliate,
SABRE Group Holdings, Inc. The SABRE Group Holdings, Inc. has
stated that the computer reservation system is now Year 2000
compliant, with only testing of minor sub-systems remaining to be
completed. The Company's computer reservation system has, in fact,
begun taking reservations for travel in the Year 2000. The SABRE
Group has also stated that substantially all of its core systems
are either completed or in the final testing phases of its Year
2000 Project.
o With respect to its telephone systems, the Company has
installed and is using a new phone switch and related
systems/equipment in its headquarters and reservations center. The
phone switch and related systems/equipment have been warranted as
Year 2000 compliant by the seller, a leading communications
technology company.
o With respect to the systems used in the transmission and
reconciliation of credit card sales, the Company is reliant upon
the systems of the credit card companies, the systems used by
these companies to transact business with their customers' banks
and the systems used by the Company's revenue accounting vendor.
The Company has received written assurances from its revenue
accounting vendor that its systems are Year 2000 compliant and
that it successfully completed Year 2000 testing in September
1998. The Company has reviewed information made available by the
credit card companies (such as MasterCard and American Express)
and these companies have stated that card members should not
experience any problems using cards with expiration dates of the
Year 2000 or beyond.
<PAGE>
o With respect to its primary maintenance control and planning
system, the Company had previously determined that this system was
not Year 2000 compliant. The Company and its third party
consultants have completed remediation of this system and it is
currently being tested in use, including the proper tracking of
maintenance tasks in the Year 2000. The Company has developed a
contingency plan to utilize in the event that the current system
fails to be Year 2000 compliant. With respect to its crew
qualification and tracking systems, the vendor has warranted the
systems are Year 2000 compliant when operated on an appropriate
platform. The Company has been using these systems on its current
platform and the systems are properly recording Year 2000 events.
o With respect to the Company's aircraft dispatch and related air
traffic control systems, the Company is largely dependent upon the
systems operated by certain governmental entities such as the FAA
that provide the aviation industry with critical information and
reports. The Company is reviewing and will continue to review the
Year 2000 information and readiness reports issued by these
entities. The FAA asserts that its systems are Y2K compliant,
although the Company has no independent method to verify this
assertion.
In summary, the Company identified the computer systems which support its
business-critical functions and has taken necessary remedial actions to address
Year 2000 problems identified during the review of these systems and which could
be addressed within the Company's own systems and facilities. As part of its
Remediation and Testing Phases, the Company continues to review Year 2000
information and reports issued by its vendors and other third parties as they
relate to business critical (and other) functions in order to respond to systems
information or changes that could affect the Company's Year 2000 readiness.
During the Inventory Phase, the Company also identified a number of other
Company functions which require the use of computer systems for operation, but
which are not business-critical. These functions include the preparation of
financial books and records, the scheduling of crew and aircraft, the processing
of payroll and similar functions. The Company has largely completed its Year
2000 remediation efforts with respect to these systems.
As discussed above, the Company's System-Testing Phase has commenced and the
Company has already verified successful testing of third party systems, or has
otherwise commenced or completed testing with respect to its business-critical
functions. With respect to third party computer systems which support other
functions, the Company has limited or no ability to independently test the
systems of third parties which support these operations and must rely on testing
completed and reported by these third parties. To the extent possible, testing
of the systems which support these operations will be completed in a timely
manner.
Although the Contingency Planning Phase of the Company's Year 2000 Project
has commenced in a number of select areas, it has not yet been completed. The
Company believes that most of its business-critical and other functions can be
performed manually or without aid of computer systems (such as scheduling of
crew and aircraft and revenue collection processes), but that the performance of
these functions will obviously be materially impacted should certain systems
fail to operate past 1999. To the extent reasonably possible, the Company
intends to develop contingency plans to ensure continued operations in the event
certain systems fail to operate after 1999.
The Company intends to complete the Remediation, Testing, and Contingency
Planning phases in a manner which will allow it to timely prepare for the Year
2000 cut-over.
Costs of Compliance:
The total costs of the Company's Year 2000 Project are expected to be
immaterial and will be funded from available cash balances. To date, the Company
has incurred less than $100,000 in connection with the Project, all of which has
been expensed as incurred. The cost of the Company's Year 2000 Project is
limited by the substantial outsourcing of its systems, the relative youth of the
Company and its operating systems and the purchase of new technology. The costs
of the Company's Year 2000 Project and the date on which the Company believes it
will be completed are based on management's best estimates and include
assumptions regarding third-party modification plans. Accordingly, there can be
no assurance that these estimates will be achieved and actual results could
differ materially from those anticipated.
Risks of Non-Compliance:
<PAGE>
The Company believes that its Year 2000 Project will be completed prior to
there being any material impact on the operations of the Company, and that, with
modifications to its existing software and systems and/or conversions to new
software, the Year 2000 issue will not pose significant operational problems for
its computer systems. However, there can be no assurance that the systems of
third parties on which the Company's business relies (including those of its
customers, its vendors or the FAA) will be modified on a timely basis. The
Company's business, financial condition or results of operations could be
materially adversely affected by the failure of its systems or those operated by
other parties to operate properly beyond 1999. To the extent reasonably
possible, the Company will be developing and executing contingency plans
designed to allow continued operation in the event of the failure of the systems
of the Company or certain third parties. These contingency plans have not yet
been fully established.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the Act) provides a
safe harbor for forward-looking statements made by or on behalf of the Company.
The Company and its representatives may from time to time make written or verbal
forward-looking statements, including statements contained in the Company's
filings with the Securities and Exchange Commission and in reports to share
owners. All statements which address operational performance, events or
developments which are anticipated to occur in the future, including statements
relating to revenue growth, cost reductions and earnings growth or statements
expressing general optimism about future operating results, are forward-looking
statements within the meaning of the Act. The forward-looking statements are and
will be based on management's then current views and assumptions regarding
future events and operating performance.
Some of the factors that could cause actual results to differ materially from
estimates contained in the Company's forward-looking statements include the
following:
o The ability to generate sufficient cash flows to support capital expansion
plans and general operating activities.
o Change in laws and regulations, including changes in accounting standards,
taxation requirements (including tax rate changes, new tax laws and revised
tax law interpretations) and environmental laws.
o Fluctuations in the cost and availability of materials, fuel, equipment and
labor, including the continued availability of landing slots at New
York/LaGuardia and Washington Reagan airports.
o The ability to achieve earnings forecasts, which are based on projected
traffic and fares in the different markets the Company serves, some of
which are more profitable than others.
o Interest rate fluctuations and other capital market conditions.
o The reliance on a limited number of markets and the ability to enter and
develop new markets.
o The effectiveness and availability of resources to support advertising,
marketing, and promotional programs.
o The impact of increased competition in the Raleigh-Durham market on fares,
traffic, new market opportunities and related matters.
o The uncertainties of litigation and/or administrative proceedings.
o Adverse weather conditions, which could affect the Company's ability to
operate.
o The Company's significant dependence on the Raleigh Durham market.
o Control by existing stockholders.
o The Company's indebtedness (including capital and operating lease
obligations).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In the fourth quarter of 1998, the Company retired two Fokker F-100 aircraft
at the expiration of the related lease terms. In each of March and May 1999, the
Company retired one F-100 aircraft at the expiration of the related lease terms.
With respect to the retirement of these aircraft, the Company and the lessor
disagree as to the amount of certain life cycle costs required to maintain the
aircraft and as to the level of the Company's responsibility to pay for such
costs. The Company believes that it has met or exceeded its obligations. The
lessor believes that the Company has not met its obligations and has brought an
action against the Company alleging breach of contract and unjust enrichment,
seeking damages in excess of $5 million under each claim. The Company believes
it has meritorious legal defenses to the lessor's claims and will vigorously
defend the action, if necessary. At this time, it is not possible to predict the
outcome of this matter.
<PAGE>
The Company is otherwise a party to routine litigation incidental to its
business. Management believes that none of this litigation is likely to have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Through June 30, 1999, net proceeds of $37.7 million from the initial
public offering of common stock in December 1997 were used as follows:
1. $1.2 million paid in settlement of the Treasury Lock,
2. $7.0 million to secure the Company's performance of its
obligations under a credit card processing agreement,
3. $11.6 million for aircraft purchase deposits and $17.9
million for down payments on debt-financed aircraft and
other costs on debt-financed aircraft
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of shareholders on May 19,
1999. Matters voted upon at the meeting included the election
of two Class II Directors to hold office until the annual
meeting of shareholders to be held in 2002; and the adoption
of an amendment to the Company's Amended and Restated
Certificate of Incorporation which would suspend voting rights
with respect to, and allow the Company to redeem, common stock
of the Company which is owned or controlled by persons or
entities that are not United States citizens as may be
necessary to comply with federal regulations. Voting results
with respect to these two matters were as follows:
<TABLE>
<CAPTION>
Matter/Description Votes For Votes Against Broker Non- Votes Abstentions
votes Withheld
<S> <C> <C> <C> <C> <C>
1. Election of Directors:
Howard Wolf 7,320,474 -0- 1,065,187 510 -0-
Gregory Robitaille 7,320,474 -0- 1,065,187 510 -0-
2. Amendment to Certificate of
Incorporation 6,249,303 3,358 1,065,187 -0- 3,136
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K:
Date Subject
---- -------
June 28,1999 Item 5: Announcement of agreement to
purchase fifteen (15) Boeing 737-700
aircraft and of lawsuit filed against the
Company described in Part II, Item 1.
(b) Exhibits
10.1* Purchase Agreement Number 2235 between The Boeing
Company and Midway Airlines Corporation dated June
11, 1999 with Letter Agreements 6-1162-CPJ-304
through 6-1162-CPJ-316 and 1-9541-JSW-1116
attached thereto.
10.2+@ Participation Agreement dated as of September 10,
1998 among Midway Airlines Corporation as Leasee,
NCC Charlie Company as Owner Participant, First
Union Trust Company, National Association not in
its individual capacity (except as otherwise
expressly set forth herein) but solely as Owner
Trustee, The First National Bank of Maryland as
Indenture Trustee, The First National Bank of
Maryland as Pass-Through Trustee and The First
National Bank of Maryland as Subordination Agent.
Midway Airlines Corporation is a party to seven
additional Participation Agreements which are
substantially identical in all material respects
except as indicated on the exhibit.
10.3+@ Trust Agreement dated as of September 10, 1998
between NCC Charlie Company as Owner Participant
and First Union Trust Company, National
Association as Owner Trustee. There are seven
additional Trust Agreements which are
substantially identical in all material respects
except as indicated on the exhibit.
10.4+@ Trust Indenture and Security Agreement dated as of
September 10, 1998 between First Union Trust
Company, National Association not in its
individual capacity except as expressly provided
herein but solely as Owner Trustee and The First
National Bank of Maryland as Indenture Trustee.
There are seven additional Trust Indenture and
Security Agreements which are substantially
identical in all material respects except as
indicated on the exhibit.
10.5+@ Indenture Supplement No. 1 dated as of September
30, 1998 of First Union Trust Company, National
Association, a national banking association, not
in its individual capacity but solely as Owner
Trustee. There are seven additional Indenture
Supplements No. 1 which are substantially
identical in all material respects except as
indicated on the exhibit.
10.6+@ Lease Agreement dated as of September 10, 1998
between First Union Trust Company, National
Association as Owner Trustee and Lessor and Midway
Airlines Corporation as Lessee. Midway Airlines
Corporation is a party to seven additioanl Leases
which are substantially identical in all material
respects except as indicated on the exhibit.
10.7+@ Lease Supplement No. 1 dated as of September 10,
1998 between First Union Trust Company, National
Association not in its individual capacity but
solely as Owner Trustee except as otherwise
provided therein, the Lessor and Midway Airlines
Corporation, as Lessee. Midway Airlines
Corporation is a party to seven additional Lease
Supplements No. 1 which are substantially
identical in all material respects except as
indicated on the exhibit.
10.8+@ Purchase Agreement Assignment and Aircraft
Manufacturer's Consent dated as of September 10,
1998 between Midway Airlines Corporation as
Assignor and First Union Trust Company, National
Association of Assignee. Midway Airlines
Corporation is a party to seven additional
Purchase Agreement Assignment and Aircraft
Manufacturer's Consents which are substantially
identical in all material respects except as
indicated on the exhibit.
10.9+@ Engine Warranty Assignment and Engine
Manufacturer's Consent dated as of September 10,
1998 between Midway Airlines Corporation, First
Union Trust Company, National Association not in
its individual capacity but solely as Owner
Trustee and General Electric Company. Midway
Airlines Corporation is a party to seven
additional Engine Warranty Assignment and Engine
Manufacturer's Consents which are substantially
identical in all material respects except as
indicated on the exhibit.
27 Financial Data Schedule.
* Portions have been omitted pursuant
to a request for confidential
treatment. The confidential
portions have been separately filed
with the Securities and Exchange
Commission.
+ Filed as Exhibit to the Company's
Quarterly Report on Form 10-Q for
the quarter ended September 30,
1998.
@ Exhibit containing differences
filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this Report to be
signed on
its behalf by the undersigned, thereunto duly authorized.
Midway Airlines Corporation
Registrant
August 13, 1999 By /s/ STEVEN WESTBERG
Steven Westberg
Sr. Vice President and CFO
PURCHASE AGREEMENT NUMBER 2235
between
THE BOEING COMPANY
and
Midway Airlines Corporation
Relating to Boeing Model 737-7BX Aircraft
<PAGE>
TABLE OF CONTENTS
SA
ARTICLES NUMBER
- --------- -------
1. Quantity, Model and Description
2. Delivery Schedule
3. Price
4. Payment
5. Miscellaneous
TABLE
- -----
1. Aircraft Information Table
EXHIBIT
- -------
A. Aircraft Configuration
B. Aircraft Delivery Requirements and Responsibilities
SUPPLEMENTAL EXHIBITS
- ---------------------
BFE1. BFE Variables
CS1. Customer Support Variables
EE1. Engine Escalation/Engine Warranty and Patent Indemnity
SLP1. Service Life Policy Components
2
<PAGE>
LETTER AGREEMENTS
6-1162-CPJ-304 Operating Weight
6-1162-CPJ-305 [Redacted]
6-1162-CPJ-306 Purchase Rights
6-1162-CPJ-307 Escalation Sharing
6-1162-CPJ-308 [Redacted]
6-1162-CPJ-309 Open Configuration Matters
6-1162-CPJ-310 [Redacted]
6-1162-CPJ-311 [Redacted]
6-1162-CPJ-312 Performance Guarantees
6-1162-CPJ-313 [Redacted]
6-1162-CPJ-314 Assignment Rights
6-1162-CPJ-315 Miscellaneous Matters
6-1162-CPJ-316 Special Matters
3
<PAGE>
Purchase Agreement No. 2235
between
The Boeing Company
and
Midway Airlines Corporation
------------------------------
This Purchase Agreement No. 2235 dated as of ________ between The
Boeing Company (Boeing) and Midway Airlines Corporation (Customer) relating to
the purchase and sale of Model 737-7BX aircraft incorporates the terms and
conditions of the Aircraft General Terms Agreement dated as of ________ between
the parties, identified as AGTA-MID (AGTA).
Article 1. Quantity, Model and Description.
--------------------------------
The aircraft to be delivered to Customer will be designated as Model
737-7BX aircraft (the Aircraft). 737-7BX is the unique Customer designator for
the Model 737-700 aircraft, and all references herein and in the AGTA to 737-700
aircraft include the Aircraft. Boeing will manufacture and sell to Customer
Aircraft, assembled, complete, and ready for flight, conforming to the
configuration described in Exhibit A, which is part of this Purchase Agreement,
in the quantities listed in Table 1 to the Purchase Agreement.
Article 2. Delivery Schedule.
------------------
The scheduled months of delivery of the Aircraft are listed in the
attached Table 1, which is part of this Purchase Agreement. Exhibit B, which is
part of this Purchase Agreement, describes certain responsibilities for both
Customer and Boeing in order to accomplish the delivery of the Aircraft.
Article 3. Price.
------
3.1 Aircraft Basic Price. The Aircraft Basic Price is listed in Table 1
in 1998 year dollars subject to escalation. The Aircraft Basic Price includes
optional features and two (2) CFM56-7B20 engines installed, but does not include
Buyer Furnished Equipment.
3.2 Advance Payment Base Prices. The Advance Payment Base Prices listed
in Table 1 were calculated utilizing the latest escalation factors available to
Boeing on the date of this Purchase Agreement projected to the month of
scheduled delivery.
4
<PAGE>
3.3 Boeing has not yet established the Aircraft Basic Price for
Aircraft scheduled to be delivered after December 31, 2004. Accordingly, the
Aircraft Basic Price for such Aircraft, if any, will be the sum of the Airframe
Price, Optional Features Prices and the Engine Price first published by Boeing
for the same model of aircraft and engines to be delivered after December 31,
2004 in Boeing's price catalog.
Article 4. Payment.
--------
4.1 Boeing acknowledges receipt of a deposit in the amount shown in
Table 1 for each of the fifteen (15) Aircraft (Deposit) totaling $1,125,000.
4.2 Customer is required to make certain advance payments according to
the standard advance payment schedule for the Model 737-7BX aircraft, as shown
in Table 1, expressed in a percentage of the Advance Payment Base Price of each
Aircraft beginning with a payment of 1%, less the Deposit, on the effective date
of the Purchase Agreement for the Aircraft. Additional advance payments for each
aircraft are due on the first business day of the months listed in the attached
Table 1.
4.3 For any Aircraft whose scheduled month of delivery is less than 24
months from the date of this Purchase Agreement, the total amount of advance
payments due for payment upon signing of this Purchase Agreement will include
all advance payments which are past due in accordance with the standard advance
payment schedule set forth in paragraph 4.2 above.
4.4 Customer will pay the balance of the Aircraft Price of each
Aircraft at delivery.
Article 5. Miscellaneous.
--------------
5.1 Aircraft Information Table. Table 1 consolidates information
contained in Articles 1, 2, 3 and 4 with respect to (i) quantity of Aircraft,
(ii) applicable Detail Specification, (iii) month and year of scheduled
deliveries, (iv) Aircraft Basic Price, (v) applicable estimated escalation
factors and (vi) Advance Payment Base Prices and advance payments and their
schedules.
5.2 Buyer Furnished Equipment Variables. Supplemental Exhibit BFE1
contains vendor selection dates, on dock dates and other variables applicable to
the Aircraft.
5.3 Customer Support Variables. Supplemental Exhibit CS1 contains the
variable information applicable to information, training services and other
things furnished by Boeing in support of the Aircraft.
5.4 Engine Escalation Variables. Supplemental Exhibit EE1 contains the
applicable engine escalation formula, the engine warranty and the engine patent
indemnity for the Aircraft.
5
<PAGE>
5.5 Service Life Policy Component Variables. Supplemental Exhibit SLP1
lists the airframe and landing gear components covered by the Service Life
Policy for the Aircraft.
5.6 Negotiated Agreement; Entire Agreement. This Purchase Agreement,
including the provisions of Article 8.2 of the AGTA relating to insurance, and
Article 11 of Part 2 of Exhibit C of the AGTA relating to DISCLAIMER AND RELEASE
and EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES, has been the subject of
discussion and negotiation and is understood by the parties; the Aircraft Price
and other agreements of the parties stated in this Purchase Agreement were
arrived at in consideration of such provisions. This Purchase Agreement,
including the AGTA, contains the entire agreement between the parties and
supersedes all previous proposals, understandings, commitments or
representations whatsoever, oral or written, and may be changed only in writing
signed by authorized representatives of the parties.
DATED AS OF _______________________________
Midway Airlines Corporation THE BOEING COMPANY
By By
Its Its
6
<PAGE>
TABLE 1
PURCHASE AGREEMENT NO. 2235
AIRCRAFT DELIVERY, DESCRIPTION, PRICE AND ADVANCE PAYMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Airframe Model/MTGW: 737-700 133,000 Detail Specification: D6-38808-34 (UNK)
Engine Model: CFM56-7B20 Price Base Year: Jul-98
Airframe Base Price: REDACTED
Optional Features: REDACTED Airframe and Engine Escalation Data:
------------ --------------------------------------
Sub-Total of Airframe and Features: REDACTED Base Year Index (ECI): 134.7
Engine Price (Per Aircraft): REDACTED Base Year Index (ICI): 126.1
Aircraft Basic Price (Excluding BFE/SPE): REDACTED
============
Buyer Furnished Equipment (BFE) Estimate: REDACTED
Seller Purchased Equipment (SPE) Estimate: REDACTED
Refundable Deposit per Aircraft at Proposal Acceptance: REDACTED
- ------------------------------------------------------------------------------------------------------------------------------------
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Applicable Estimated Escalation Estimate ----------------------------------------------------------------
Delivery Number of Escalation Factor Adv Payment Base At Signing 24 Mos. 21/18/12/9/6 Mos. Total
Date Aircraft (Airframe) Price Per A/P 1% 4% 5% 30%
- ------------------------------------------------------------------------------------------------------------------------------------
Sep-2000 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Oct-2000 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Nov-2000 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Jan-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Feb-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Apr-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Jun-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Aug-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Oct-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Dec-2001 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Feb-2002 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Apr-2002 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Page 1
<PAGE>
TABLE 1
PURCHASE AGREEMENT NO. 2235
AIRCRAFT DELIVERY, DESCRIPTION, PRICE AND ADVANCE PAYMENTS
Advance Payment Per Aircraft (Amts. Due/Mos. Prior to Delivery):
Applicable Estimated Escalation Estimate ----------------------------------------------------------------
Delivery Number of Escalation Factor Adv Payment Base At Signing 24 Mos. 21/18/12/9/6 Mos. Total
Date Aircraft (Airframe) Price Per A/P 1% 4% 5% 30%
- ------------------------------------------------------------------------------------------------------------------------------------
Jun-2002 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Aug-2002 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
Oct-2002 1 Redacted Redacted Redacted Redacted Redacted Redacted
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
AIRCRAFT CONFIGURATION
between
THE BOEING COMPANY
and
Midway Airlines Corporation
Exhibit A to Purchase Agreement Number 2235
<PAGE>
AIRCRAFT CONFIGURATION
Dated_________________
relating to
BOEING MODEL 737-7BX AIRCRAFT
The Detail Specification is Boeing Detail Specification D6-38808-34, Rev.
B, dated October 21, 1998. Such Detail Specification will be comprised of Boeing
Detail Specification D6-38808-34, as amended to incorporate the Options listed
below, including the effects on Manufacturer's Empty Weight (MEW) and Operating
Empty Weight (OEW). As soon as practicable, Boeing will furnish to Buyer copies
of the Detail Specification, which copies will reflect such Options. The
Aircraft Basic Price reflects and includes all effects of such Options, except
such Aircraft Basic Price does not include the price effects of any Buyer
Furnished Equipment.
A-2
<PAGE>
Exhibit A to
Purchase Agreement No. 2235
Page 3
<PAGE>
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
between
THE BOEING COMPANY
and
Midway Airlines Corporation
Exhibit B to Purchase Agreement Number 2235
B-1
<PAGE>
Exhibit B to
Purchase Agreement No. 2235
Page 2
AIRCRAFT DELIVERY REQUIREMENTS AND RESPONSIBILITIES
relating to
BOEING MODEL 737-7BX AIRCRAFT
Both Boeing and Customer have certain documentation and approval
responsibilities at various times during the construction cycle of Customer's
Aircraft that are critical to making the delivery of each Aircraft a positive
experience for both parties. This Exhibit B documents those responsibilities and
indicates recommended completion deadlines for the actions to be accomplished.
B-2
<PAGE>
Exhibit B to
Purchase Agreement No. 2235
Page 3
1. GOVERNMENT DOCUMENTATION REQUIREMENTS.
Certain actions are required to be taken by Customer in advance of the scheduled
delivery month of each Aircraft with respect to obtaining certain government
issued documentation.
1.1 Airworthiness and Registration Documents.
Not later than 6 months prior to delivery of each Aircraft,
Customer will notify Boeing of the registration number to be painted on the side
of the Aircraft. In addition, and not later than 3 months prior to delivery of
each Aircraft, Customer will, by letter to the regulatory authority having
jurisdiction, authorize the temporary use of such registration numbers by Boeing
during the pre-delivery testing of the Aircraft.
Customer is responsible for furnishing any Temporary or Permanent Registration
Certificates required by any governmental authority having jurisdiction to be
displayed aboard the Aircraft after delivery.
1.2 Certificate of Sanitary Construction.
1.2.1 U.S. Registered Aircraft. Boeing will obtain from the
United States Public Health Service, a United States Certificate of Sanitary
Construction to be displayed aboard each Aircraft upon delivery to Customer.
1.2.2 Non-U.S. Registered Aircraft. If Customer requires a
United States Certificate of Sanitary Construction at the time of delivery of
the Aircraft, Customer will give written notice thereof to Boeing at least 3
months prior to delivery. Boeing will then use its reasonable best efforts to
obtain the Certificate from the United States Public Health Service and present
it to Customer at the time of Aircraft delivery.
1.3 Customs Documentation.
1.3.1 Import Documentation. If the Aircraft is intended to
be exported from the United States, Customer must notify Boeing not later than 3
months prior to delivery of each Aircraft of any documentation required by the
customs authorities or by any other agency of the country of import.
1.3.2 General Declaration - U.S. If the Aircraft is
intended to be exported from the United States, Boeing will prepare Customs Form
7507, General Declaration, for execution by U.S. Customs immediately prior to
the ferry flight of the Aircraft. For this purpose, Customer will furnish to
Boeing not later than 20 days prior to delivery a complete crew and passenger
list and a complete ferry flight itinerary, including point of exit from the
United States for the Aircraft.
B-3
<PAGE>
Exhibit B to
Purchase Agreement No. 2235
Page 4
If Customer intends, during the ferry flight of an Aircraft, to land at a U.S.
airport after clearing Customs at delivery, Customer must notify Boeing not
later than 20 days prior to delivery of such intention. If Boeing receives such
notification, Boeing will provide to Customer the documents constituting a
Customs permit to proceed, allowing such Aircraft to depart after any such
landing. Sufficient copies of completed Form 7507, along with passenger
manifest, will be furnished Customer to cover U.S. stops scheduled for the ferry
flight.
1.3.3 Export Declaration - U.S. If the Aircraft is intended
to be exported from the United States, Boeing will prepare Form 7525V and,
immediately prior to the ferry flight, will submit such Form to U.S. Customs in
Seattle in order to obtain clearance for the departure of the Aircraft,
including any cargo, from the United States. U.S. Customs will deliver the
Export Declaration to the U.S. Department of Commerce after export.
2. Insurance CertificateS.
Unless provided earlier, Customer will provide to Boeing
not later than 30 days prior to delivery of the first Aircraft, a copy of the
requisite annual insurance certificate in accordance with the requirements of
Article 8 of the AGTA.
3. NOTICE OF FLYAWAY CONFIGURATION.
Not later than 20 days prior to delivery of the Aircraft,
Customer will provide to Boeing a configuration letter stating the requested
"flyaway configuration" of the Aircraft for its ferry flight. This configuration
letter should include:
(i) the name of the company which is to furnish fuel for
the ferry flight and any scheduled post-delivery flight training,
the method of payment for such fuel, and fuel load for the ferry
flight;
(ii) the cargo to be loaded and where it is to be stowed on
board the Aircraft, the address where cargo is to be shipped after
flyaway and notification of any hazardous materials requiring
special handling;
(iii) any BFE equipment to be removed prior to flyaway and
returned to Boeing BFE stores for installation on Customer's
subsequent Aircraft;
(iv) a complete list of names and citizenship of each crew
member and non-revenue passenger who will be aboard the ferry
flight; and
(v) a complete ferry flight itinerary.
B-4
<PAGE>
Exhibit B to
Purchase Agreement No. 2235
Page 5
4. DELIVERY ACTIONS BY BOEING.
4.1 Schedule of Inspections. All FAA, Boeing, Customer and,
if required, U.S. Customs Bureau inspections will be scheduled by Boeing for
completion prior to delivery or departure of the Aircraft. Customer will be
informed of such schedules.
4.2 Schedule of Demonstration Flights. All FAA and Customer
demonstration flights will be scheduled by Boeing for completion prior to
delivery of the Aircraft.
4.3 Schedule for Customer's Flight Crew. Boeing will inform
Customer of the estimated date that a flight crew is required for acceptance
routines associated with delivery of the Aircraft 30 days prior to the estimated
delivery date, and the actual date 14 days prior to the actual delivery date.
4.4 Fuel Provided by Boeing. Boeing will provide to
Customer, without charge, the amount of fuel shown in U.S. gallons in the table
below for the model of Aircraft being delivered and full capacity of engine oil
at the time of delivery or prior to the ferry flight of the Aircraft.
Aircraft Model Fuel Provided
--------------- --------------
737 1,000
747 4,000
757 1,600
767 2,000
777 3,000
4.5 Flight Crew and Passenger Consumables. Boeing will
provide reasonable quantities of food, coat hangers, towels, toilet tissue,
drinking cups and soap for the first segment of the ferry flight for the
Aircraft.
4.6 Delivery Papers, Documents and Data. Boeing will have
available at the time of delivery of the Aircraft certain delivery papers,
documents and data for execution and delivery. If title for the Aircraft will be
transferred to Customer through a Boeing sales subsidiary and if the Aircraft
will be registered with the FAA, Boeing will pre-position in Oklahoma City,
Oklahoma, for filing with the FAA at the time of delivery of the Aircraft an
executed original Form 8050-2, Aircraft Bill of Sale, indicating transfer of
title to the Aircraft from Boeing's sales subsidiary to Customer.
4.7 Delegation of Authority. If specifically requested in
advance by Customer, Boeing will present a certified copy of a Resolution of
Boeing's Board of Directors, designating and authorizing certain persons to act
on its behalf in connection with delivery of the Aircraft.
B-5
<PAGE>
Exhibit B to
Purchase Agreement No. 2235
Page 6
5. DELIVERY ACTIONS BY CUSTOMER.
5.1 Aircraft Radio Station License. At delivery Customer
will provide its Aircraft Radio Station License to be placed on board the
Aircraft following delivery.
5.2. Aircraft Flight Log. At delivery Customer will provide
the Aircraft Flight Log for the Aircraft.
5.3 Delegation of Authority. Customer will present to
Boeing at delivery of the Aircraft an original or certified copy of Customer's
Delegation of Authority designating and authorizing certain persons to act on
its behalf in connection with delivery of the specified Aircraft.
B-6
<PAGE>
BUYER FURNISHED EQUIPMENT VARIABLES
between
THE BOEING COMPANY
and
Supplemental Exhibit BFE1 to Purchase Agreement Number 2235
BFE1
<PAGE>
BUYER FURNISHED EQUIPMENT VARIABLES
relating to
BOEING MODEL AIRCRAFT
This Supplemental Exhibit BFE1 contains vendor selection dates, on-dock dates
and other variables applicable to the Aircraft.
1. Supplier Selection.
Customer will:
1.1 Select and notify Boeing of the suppliers and part numbers of the
following BFE items by the following dates:
Galley System August 27, 1999
Galley Inserts August 27, 1999
Seats (passenger)* July 21, 1999
Overhead Audio System July 21, 1999
Miscellaneous Emergency Equipment August 27, 1999
Cargo Handling Systems June 28, 1999
(Single Aisle Programs only)
For a new certification, supplier requires notification 10 months prior to Cargo
Handling System on-dock date.
* Seats must be previously 16G certified on a Boeing 737NG aircraft and such
seats must not require any further 16G static or dynamic testing. Customer must
select from Boeing's list of offerable seat suppliers. Customer may make color
and fabric choices.
BFE2
<PAGE>
2. On-dock Dates
On or before December 1999, Boeing will provide to Customer a BFE Requirements
On-Dock/Inventory Document (BFE Document) or an electronically transmitted BFE
Report which may be periodically revised, setting forth the items, quantities,
on-dock dates and shipping instructions relating to the in-sequence installation
of BFE. For planning purposes, a preliminary BFE on-dock schedule is set forth
below:
Item Preliminary On-Dock Dates
- ---- --------------------------
September 2000 October 2000
-------------- ------------
Aircraft Aircraft
-------- --------
Seats 7/6/00 8/11/00
Galleys/Furnishings 6/29/00 8/11/00
Miscellaneous Emergency Equipment 5/6/00 6/11/00
Electronics 6/29/00 8/11/00
Textiles/Raw Material 4/7/00 5/10/00
Cargo Systems (Single Aisle
Programs)) 5/29/00 7/11/00
Provision Kits (Single Aisle
Programs) 2/1/00 3/1/00
Radomes (Single Aisle Programs) 5/26/00 7/11/00
November 2000 January 2001
-------------- ------------
Aircraft Aircraft
-------- ---------
Seats 9/6/00 11/3/00
Galleys/Furnishings 8/30/00 10/30/00
Miscellaneous Emergency Equipment 7/6/00 9/3/00
Electronics 8/30/00 10/30/00
Textiles/Raw Material 6/8/00 8/8/00
Cargo Systems (Single Aisle
Programs)) 7/30/00 9/30/00
Provision Kits (Single Aisle
Programs) 4/3/00 6/1/00
Radomes (Single Aisle Programs) 7/30/00 9/30/00
BFE3
<PAGE>
February 2001 April 2001
-------------- ----------
Aircraft Aircraft
-------- ---------
Seats 11/29/00 2/5/01
Galleys/Furnishings 11/21/00 1/30/01
Miscellaneous Emergency Equipment 9/29/00 12/5/00
Electronics 11/21/00 1/30/01
Textiles/Raw Material 8/29/00 10/27/00
Cargo Systems (Single Aisle
Programs)) 10/21/00 12/23/00
Provision Kits (Single Aisle
Programs) 4/3/00 9/1/00
Radomes (Single Aisle Programs) 10/21/00 12/23/00
June 2001 August 2001
--------- -----------
Aircraft Aircraft
-------- --------
Seats 4/5/01 6/6/01
Galleys/Furnishings 3/30/01 5/31/01
Miscellaneous Emergency Equipment 2/5/01 4/6/01
Electronics 3/30/01 6/6/01
Textiles/Raw Material 1/9/01 4/9/01
Cargo Systems (Single Aisle
Programs)) 2/28/01 4/30/01
Provision Kits (Single Aisle
Programs) 11/1/00 1/2/01
Radomes (Single Aisle Programs) 2/28/01 4/30/01
October 2001 December 2001
------------ --------------
Aircraft Aircraft
-------- --------
Seats 8/8/01 10/6/01
Galleys/Furnishings 8/2/01 10/2/01
Miscellaneous Emergency Equipment 6/8/01 8/6/01
Electronics 8/2/01 10/2/01
Textiles/Raw Material 5/10/01 7/11/01
Cargo Systems (Single Aisle
Programs)) 7/2/01 9/2/01
Provision Kits (Single Aisle
Programs) 3/1/01 5/2/01
Radomes (Single Aisle Programs) 7/2/01 9/2/01
BFE4
<PAGE>
February 2002 April 2002
------------- ----------
Aircraft Aircraft
-------- --------
Seats 11/29/01 2/5/02
Galleys/Furnishings 11/21/01 1/30/02
Miscellaneous Emergency Equipment 9/29/01 12/5/01
Electronics 11/21/01 1/30/02
Textiles/Raw Material 8/29/01 10/27/01
Cargo Systems (Single Aisle
Programs)) 10/21/01 12/23/01
Provision Kits (Single Aisle
Programs) 4/3/01 9/1/01
Radomes (Single Aisle Programs) 10/21/01 12/23/01
June 2002 August 2002
--------- -----------
Aircraft Aircraft
-------- --------
Seats 4/5/02 6/6/02
Galleys/Furnishings 3/30/02 5/31/02
Miscellaneous Emergency Equipment 2/5/02 4/6/02
Electronics 3/30/02 6/6/02
Textiles/Raw Material 1/9/02 4/9/02
Cargo Systems (Single Aisle
Programs)) 2/28/02 4/30/02
Provision Kits (Single Aisle
Programs) 11/1/01 1/2/02
Radomes (Single Aisle Programs) 2/28/02 4/30/02
October 2002
------------
Aircraft
--------
Seats 8/8/02
Galleys/Furnishings 8/2/02
Miscellaneous Emergency Equipment 6/8/02
Electronics 8/2/02
Textiles/Raw Material 5/10/02
Cargo Systems (Single Aisle
Programs)) 7/2/02
Provision Kits (Single Aisle
Programs) 3/1/02
Radomes (Single Aisle Programs) 7/2/02
BFE5
<PAGE>
CUSTOMER SUPPORT VARIABLES
between
THE BOEING COMPANY
and
Midway Airlines Corporation
Supplemental Exhibit CS1 to Purchase Agreement Number 2235
CS1
<PAGE>
CUSTOMER SUPPORT VARIABLES
relating to
BOEING MODEL 737-7BX AIRCRAFT
Customer and Boeing will conduct planning conferences no later than July 31,
1999, or as otherwise agreed, to develop and schedule a customized Customer
Support Program to be furnished by Boeing in support of the Aircraft.
The customized Customer Services Program will be based upon and equivalent to
the entitlements summarized below.
1. Maintenance Training.
--------------------
1.1 Airplane General Familiarization Course; 4 classes of 10 students;
1.2 Combined & Condensed Mechanical/Power Plant, Electrical Systems, and
Avionics Course, 3 classes of 15 students each.
2. Flight Training.
---------------
2.1 Transition training for 8 flight crews (16 pilots) in 2 classes; The
training will consist of ground school (utilizing computer based
training), fixed base simulator, full flight simulator and actual
aircraft training on Customer's Aircraft.
2.2 Flight Dispatcher training; 2 classes of 6 students;
2.3 Flight Attendant training; 2 classes of 12 students;
2.4 Performance Engineer training in Boeing's regularly scheduled
courses; schedules are published twice yearly.
2.5 Training materials will be provided to each student. In addition,
one set of training materials as used in Boeing's training program,
including visual aids, Computer Based Training Courseware,
instrument panel wall charts, text/graphics, video programs, etc.
will be provided for use in Customer's own training program.
2.6 Additional Flight Operations Services:
a. Boeing flight crew personnel to assist in ferrying the
first aircraft to Customer's main base;
CS1-2
<PAGE>
b. Instructor pilots for 90 calendar days for revenue service
training assistance;
c. An instructor pilot to visit Customer 6 months after revenue
service training to review Customer's flight crew operations
for a 2 week period.
3. Planning Assistance.
--------------------
3.1 Maintenance and Ground Operations.
----------------------------------
Upon request, Boeing will visit Customer's main base to assist in
the planning and evaluation of aircraft maintenance facilities,
develop recommendations and assist in maintenance planning.
3.2 Spares.
-------
a) Recommended Spares Parts List (RSPL)
------------------------------------
customized RSPL, data and documents will be provided to
identify spare parts required for Customer's support program.
b) Illustrated Parts Catalog (IPC)
-------------------------------
A customized IPC in accordance with ATA 100 will be provided.
c) Provisioning Training
---------------------
Provisioning training will be provided for Customer's
personnel at Boeing's facilities, where documentation and
technical expertise are available. Training is focused on the
initial provisioning process and calculations reflected in the
Boeing RSPL.
d) Spares Provisioning Conference
-------------------------------
A provisioning conference will be conducted, normally at
Boeing's facilities where technical data and personnel are
available.
4. Technical Data and Documents
----------------------------
4.1. Flight Operations.
------------------
Airplane Flight Manual
Operations Manual
Quick Reference Handbook
Weight and Balance Manual
Dispatch Deviation Procedures Guide
Flight Crew Training Manual
Performance Engineer's Manual
Jet Transport Performance Methods
FMC Supplemental Data Document
CS1-3
<PAGE>
Operational Performance Software
Fault Reporting Manual
ETOPS Guide Vol. III
Flight Planning and Performance Manual
4.2. Maintenance.
-----------
Aircraft Maintenance Manual
Wiring Diagram Manual
Systems Schematics Manual
Connector Part Number Options Document
Structural Repair Manual
Overhaul/Component Maintenance Manual
Standard Overhaul Practices Manual
Standard Wiring Practices Manual
Non-Destructive Test Manual
Service Bulletins and Index
Corrosion Prevention Manual
Fault Isolation Manual
Fuel Measuring Stick Calibration Document
Power Plant Buildup Manual
Built-In Test Equipment (BITE) Manual
Central Maintenance Computer System Reporting Table
In Service Activity Report
All Operator Letters
Service Letters
Structural Item Interim Advisory
Maintenance Tips
Combined Index
Ramp Maintenance Manual (747,757,767)
Baggage/Cargo Loading Manual(747 and 767 Aircraft)
4.3. Maintenance Planning.
---------------------
Maintenance Planning Data Document
Maintenance Planning Data Tasks Masterfile
Maintenance Task Cards and Index
Maintenance Inspection Intervals Report
ETOPS Guide Vol. II
Configuration Maintenance and Procedures for Extended Range
Operations
4.4. Spares.
-------
Illustrated Parts Catalog
Standards Books
4.5. Facilities and Equipment Planning.
----------------------------------
Facilities and Equipment Planning Document
CS1-4
<PAGE>
Special Tool and Ground Handling Equipment Drawings and Index
Supplementary Tooling Documentation
Illustrated Tool and Equipment List/Manual
Aircraft Recovery Document
Airplane Characteristics for Airport Planning Document
Airplane Rescue and Fire Fighting Document
Engine Handling Document
ETOPS Guide Vol. I
4.6. Computer Software Index.
------------------------
4.7. Supplier Technical Data.
------------------------
Service Bulletins
Ground Support Equipment Data
Provisioning Information
Component Maintenance/Overhaul Manuals and Index
Publications Index
Product Support Supplier Directory
CS1-5
<PAGE>
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
between
THE BOEING COMPANY
and
Midway Airlines Corporation
Supplemental Exhibit EE1 to Purchase Agreement Number 2235
EE1
<PAGE>
ENGINE ESCALATION,
ENGINE WARRANTY AND PATENT INDEMNITY
relating to
BOEING MODEL 737-7BX AIRCRAFT
1. ENGINE ESCALATION. No separate engine escalation methodology is defined for
the 737-600, -700, -800 or -900 Aircraft. Pursuant to the AGTA, the engine
prices for these Aircraft are included in and will be escalated in the same
manner as the Airframe.
2. ENGINE WARRANTY AND PRODUCT SUPPORT PLAN. Boeing has obtained from CFM
International, Inc. (or CFM International, S.A., as the case may be) (CFM) the
right to extend to Customer the provisions of CFM's warranty as set forth below
(herein referred to as the "Warranty"); subject, however, to Customer's
acceptance of the conditions set forth herein. Accordingly, Boeing hereby
extends to Customer and Customer hereby accepts the provisions of CFM's Warranty
as hereinafter set forth, and such Warranty shall apply to all CFM56-7 type
Engines (including all Modules and Parts thereof) installed in the Aircraft at
the time of delivery or purchased from Boeing by Customer for support of the
Aircraft except that, if Customer and CFM have executed, or hereafter execute, a
General Terms Agreement, then the terms of that Agreement shall be substituted
for and supersede the provisions of Paragraphs 2.1 through 2.8 below and
Paragraphs 1 through 10 below shall be of no force or effect and neither Boeing
nor CFM shall have any obligation arising therefrom. In consideration for
Boeing's extension of the CFM Warranty to Customer, Customer hereby releases and
discharges Boeing from any and all claims, obligations and liabilities
whatsoever arising out of the purchase or use of such CFM56-7 type Engines and
Customer hereby waives, releases and renounces all its rights in all such
claims, obligations and liabilities. In addition, Customer hereby releases and
discharges CFM from any and all claims, obligations and liabilities whatsoever
arising out of the purchase or use of such CFM56-7 type Engines except as
otherwise expressly assumed by CFM in such CFM Warranty or General Terms
Agreement between Customer and CFM and Customer hereby waives, releases and
renounces all its rights in all such claims, obligations and liabilities.
2.1. Title. CFM warrants that at the date of delivery, CFM has legal
title to and good and lawful right to sell its CFM56-7 type Engine and
Products and furthermore warrants that such title is free and clear of
all claims, liens and encumbrances of any nature whatsoever.
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<PAGE>
2.2. Patents.
2.2.1 CFM shall handle all claims and defend any suit or
proceeding brought against Customer insofar as based on a claim
that any product or part furnished under this Agreement
constitutes an infringement of any patent of the United States,
and shall pay all damages and costs awarded therein against
Customer. This paragraph shall not apply to any product or any
part manufactured to Customer's design or to the aircraft
manufacturer's design. As to such product or part, CFM assumes
no liability for patent infringement.
2.2.2 CFM's liability hereunder is conditioned upon Customer
promptly notifying CFM in writing and giving CFM authority,
information and assistance (at CFM's expense) for the defense
of any suit. In case said equipment or part is held in such
suit to constitute infringement and the use of said equipment
or part is enjoined, CFM shall expeditiously, at its own
expense and at its option, either (i) procure for Customer the
rights to continue using said product or part; (ii) replace the
same with a satisfactory and noninfringing product or part; or
(iii) modify the same so it becomes satisfactory and
noninfringing. The foregoing shall constitute the sole remedy
of Customer and the sole liability of CFM for patent
infringement.
2.2.3 The above provisions also apply to products which are the
same as those covered by this Agreement and are delivered to
Customer as part of the installed equipment on CFM56-7 powered
Aircraft.
2.3. Initial Warranty. CFM warrants that CFM56-7 Engine products will
conform to CFM's applicable specifications and will be free from
defects in material and workmanship prior to Customer's initial use of
such products.
2.4. New Engine Warranty.
2.4.1. CFM warrants each new Engine and Module against Failure
for the initial 3000 Flight Hours as follows:
(i) Parts Credit Allowance will be granted for any
Failed Parts.
(ii)Labor Allowance for disassembly, reassembly, test
and Parts repair of any new Engine Part will be granted for
replacement of Failed Parts.
EE1
<PAGE>
(iii) Such Parts Credit Allowance, test and Labor
Allowance will be: 100% from new to 2500 Flight Hours and
decreasing pro rata from 100% at 2500 Flight Hours to zero
percent at 3000 Flight Hours.
2.4.2 As an alternative to the above allowances, CFM shall,
upon request of Customer:
(i) Arrange to have the failed Engines and Modules
repaired, as appropriate, at a facility designated by CFM at
no charge to Customer for the first 2500 Flight Hours and at a
charge to Customer increasing pro rata from zero percent of
CFM's repair cost at 2500 Flight Hours to 100% of such CFM
repair costs at 3000 Flight Hours.
(ii)Transportation to and from the designated
facility shall be at Customer's expense.
2.5. New Parts Warranty. In addition to the warranty granted
for new Engines and new Modules, CFM warrants Engine and Module
Parts as follows:
2.5.1. During the first 1000 Flight Hours for such Parts and
Expendable Parts, CFM will grant 100% Parts Credit Allowance or
Labor Allowance for repair labor for failed Parts.
2.5.2. CFM will grant a pro rata Parts Credit Allowance for
Scrapped Parts decreasing from 100% at 1000 Flight Hours Part
Time to zero percent at the applicable hours designated in
Table 1.
2.6. Ultimate Life Warranty.
2.6.1. CFM warrants Ultimate Life limits on the following
Parts:
(i) Fan and Compressor Disks/Drums
(ii)Fan and Compressor Shafts
(iii) Compressor Discharge Pressure Seal (CDP)
(iv)Turbine Disks
(v) HPT Forward and Stub Shaft
(vi)LPT Driving Cone
(vii) LPT Shaft and Stub Shaft
2.6.2. CFM will grant a pro rata Parts Credit Allowance
decreasing from 100% when new to zero percent at 25,000 Flight
Hours or 15,000 Flight Cycles, whichever comes earlier. Credit
will
EE1
<PAGE>
be granted only when such Parts are permanently removed from
service by a CFM or a U.S. and/or French Government imposed
Ultimate Life limitation of less than 25,000 Flight Hours or
15,000 Flight Cycles. 2.7. Campaign Change Warranty.
2.7.1. A campaign change will be declared by CFM when a new
Part design introduction, Part modification, Part Inspection,
or premature replacement of an Engine or Module is required by
a mandatory time compliance CFM Service Bulletin or FAA
Airworthiness Directive. Campaign change may also be declared
for CFM Service Bulletins requesting new Part introduction no
later than the next Engine or Module shop visit. CFM will grant
following Parts Credit Allowances:
Engines and Modules
(i) 100% for Parts in inventory or removed from
service when new or with 2500 Flight Hours or less
total Part Time.
(ii)50% for Parts in inventory or removed from
service with over 2500 Flight Hours since new,
regardless of warranty status.
2.7.2. Labor Allowance - CFM will grant 100% Labor Allowance
for disassembly, reassembly, modification, testing, or
Inspection of CFM supplied Engines, Modules, or Parts therefor
when such action is required to comply with a mandatory time
compliance CFM Service Bulletin or FAA Airworthiness Directive.
A Labor Allowance will be granted by CFM for other CFM issued
Service Bulletins if so specified in such Service Bulletins.
2.7.3. Life Controlled Rotating Parts retired by Ultimate Life
limits including FAA and/or DGAC Airworthiness Directive, are
excluded from Campaign Change Warranty.
2.8. Limitations. The provisions set forth HEREIN are exclusive and are
in lieu of all other warranties whether written, oral or implied. There
are no implied warranties of fitness or merchantability. Said
provisions set forth the maximum LIABILITY of CFM with respect to
claims of any kind, including negligence, arising out of MANUFACTURE,
sale, possession, use or handling of the products or parts thereof or
therefor, and in no event shall CFM's liability to Customer exceed the
purchase price of the product giving rise to Customer's claim or
include incidental or consequential damages.
EE1
<PAGE>
TABLE 1
-------
737X
----
CFM56 WARRANTY PARTS LIST
-------------------------
FLIGHT HOURS
------------
Flight Hours
---------------------------------------------
2000 3000 4000 6000 8000 12000
---- ---- ---- ---- ---- -----
Fan Rotor/Booster
- -----------------
Blades X
Disk, Drum X
Spinner X
Fan Frame
- ---------
Casing X
Hub & Struts X
Fairings X
Splitter (Mid Ring) X
Vanes X
Engine Mount X
No. 1 & No. 2 Bearing Support
- -----------------------------
Bearings X
Shaft X
Support (Case) X
Inlet Gearbox & No. 3 Bearing
- -----------------------------
Bearings X
Gear X
Case X
Compressor Rotor
- -----------------
Blades X
Disk & Drums X
Shaft X
Compressor Stator
- -----------------
Casing X
Shrouds X
Vanes X
Variable Stator Actuating
Rings X
Combustor Diffuser Nozzle (CDN)
- -------------------------------
Casings X
Combustor Liners X
Fuel Atomizer X
HPT Nozzle X
HPT Nozzle Support X
HPT Shroud X
TABLE 1
-------
737X
----
CFM56 WARRANTY PARTS LIST
-------------------------
(continued)
Flight Hours
---------------------------------------------
2000 3000 4000 6000 8000 12000
---- ---- ---- ---- ---- -----
EE1
<PAGE>
HPT Rotor
- ---------
Blades X
Disks X
Shafts X
Retaining Ring X
LP Turbine
- ----------
Casing X
Vane Assemblies X
Interstage Seals X
Shrouds X
Disks X
Shaft X
Bearings X
Blades X
Turbine Frame
- -------------
Casing & Struts X
Hub X
Sump X
Accessory & Transfer Gearboxes
- ------------------------------
Case X
Shafts X
Gears X
Bearings X
Air-Oil Seals X
- -------------
Controls & Accessories
- ----------------------
Engine X
Condition Monitoring Equipment X
- ------------------------------
EE1
<PAGE>
SERVICE LIFE POLICY COMPONENTS
between
THE BOEING COMPANY
and
Midway Airlines Corporation
Supplemental Exhibit SLP1 to Purchase Agreement Number 2235
SLP1
<PAGE>
SERVICE LIFE POLICY COMPONENTS
relating to
BOEING MODEL 737 AIRCRAFT
This is the listing of SLP Components for the Aircraft which relate to Part 3,
Boeing Service Life Policy of Exhibit C, Product Assurance Document to the AGTA
and is a part of Purchase Agreement No. 2235.
1. Wing.
(a) Upper and lower skins and stiffeners between the forward and
rear wing spars.
(b) Wing spar webs, chords and stiffeners.
(c) Inspar wing ribs.
(d) Inspar splice plates and fittings.
(e) Main landing gear support structure.
(f) Wing center section floor beams, lower beams and spanwise
beams, but not the seat tracks attached to floor beams.
(g) Engine strut support fittings attached directly to wing primary
structure.
(h) Wing-to-body structural attachments.
(i) Support structure in the wing for spoilers and spoiler
actuators; for aileron hinges and reaction links; and for
leading edge devices and trailing edge flaps.
(j) Trailing edge flap tracks and carriages.
(k) Aileron leading edge device and trailing edge flap internal,
fixed attachment and actuator support structure.
SLP1-2
<PAGE>
2. Body.
(a) External surface skins and doublers, longitudinal
stiffeners, longerons and circumferential rings and frames
between the forward pressure bulkhead and the vertical
stabilizer rear spar bulkhead and structural support and
enclosure for the APU but excluding all system components
and related installation and connecting devices, insulation,
lining, and decorative panels and related installation and
connecting devices.
(b) Window and windshield structure but excluding the windows and
windshields.
(c) Fixed attachment structure of the passenger doors, cargo doors
and emergency exits, excluding door mechanisms and movable
hinge components. Sills and frames around the body openings for
the passenger doors, cargo doors and emergency exits, excluding
scuff plates and pressure seals.
(d) Nose wheel well structure, including the wheel well walls,
pressure deck, bulkheads, and gear support structure.
(e) Main gear wheel well structure including pressure deck and
landing gear beam support structure.
(f) Floor beams and support posts in the control cab and passenger
cabin area, but excluding seat tracks.
(g) Forward and aft pressure bulkheads.
(h) Keel structure between the wing front spar bulkhead and the
main gear wheel well aft bulkhead including splices.
(i) Wing front and rear spar support bulkheads, and vertical and
horizontal stabilizer front and rear spar support bulkheads
including terminal fittings but excluding all system components
and related installation and connecting devices, insulation,
lining, decorative panels and related installation and
connecting devices.
(j) Support structure in the body for the stabilizer pivot and
stabilizer screw.
SLP1-3
<PAGE>
3. Vertical Stabilizer.
(a) External skins between front and rear spars.
(b) Front, rear and auxiliary spar chords, webs and stiffeners and
attachment fittings.
(c) Inspar ribs.
(d) Rudder hinges and supporting ribs, excluding bearings.
(e) Support structure in the vertical stabilizer for rudder hinges,
reaction links and actuators.
(f) Rudder internal, fixed attachment and actuator support
structure.
4. Horizontal Stabilizer.
(a) External skins between front and rear spars.
(b) Front and rear spar chords, webs and stiffeners.
(c) Inspar ribs.
(d) Stabilizer center section including hinge and screw support
structure.
(e) Support structure in the horizontal stabilizer for the elevator
hinges, reaction links and actuators.
(f) Elevator internal, fixed attachment and actuator support
structure.
5. Engine Strut.
(a) Strut external surface skin and doublers and stiffeners.
(b) Internal strut chords, frames and bulkheads.
(c) Strut to wing fittings and diagonal brace.
(d) Engine mount support fittings attached directly to strut
structure and including the engine-mounted support fittings.
SLP1-4
<PAGE>
6. Main Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder, including axles.
(c) Upper and lower side struts, including spindles, universals and
reaction links.
(d) Drag strut.
(e) Bell crank.
(f) Orifice support tube.
(g) Trunnion link.
(h) Downlock links including spindles and universals.
(i) Torsion links.
(j) Actuator beam, support link and beam arm.
7. Nose Landing Gear.
(a) Outer cylinder.
(b) Inner cylinder, including axles.
(c) Orifice support tube.
(d) Upper and lower drag strut, including lock links.
(e) Steering plates and steering collars.
(f) Torsion links.
NOTE: The Service Life Policy does not cover any bearings, bolts, bushings,
clamps, brackets, actuating mechanisms or latching mechanisms used in
or on the Covered Components.
SLP1-5
<PAGE>
6-1162-CPJ-304
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Operating Weight
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
1. [REDACTED]
2. Annual Leased Aircraft Operating Weight (LOW Program)
Boeing has an Annual Leased Aircraft Operating Weight Program (LOW
Program) which is substantially in the form included as Attachment A herein.
Boeing agrees to make such LOW Program available to Customer, in a form
substantially similar to Attachment A, upon request at any time until December
31, 2002.
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-304 Page 2
Very truly yours,
THE BOEING COMPANY
By
---------------------------
Its Attorney-In-Fact
---------------------------
ACCEPTED AND AGREED TO this
Date:_____________________ , 1999
Midway Airlines Corporation
By __________________________
Its__________________________
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-305 Page 3
Attachment A
[REDACTED]
<PAGE>
6-1162-CPJ-305
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: [REDACTED]
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
[REDACTED]
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-305 Page 2
Very truly yours,
THE BOEING COMPANY
By
-----------------------------
Its Attorney-In-Fact
-----------------------------
ACCEPTED AND AGREED TO this
Date:_______________________________ , 1999
Midway Airlines Corporation
By__________________________________
Its_________________________________
<PAGE>
6-1162-CPJ-306
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Purchase Rights
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
1. [REDACTED]
2. [REDACTED]
3. [REDACTED]
4. [REDACTED]
5. [REDACTED]
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-306 Page 2
6. [REDACTED]
Very truly yours,
THE BOEING COMPANY
By
----------------------------
Its Attorney-In-Fact
----------------------------
ACCEPTED AND AGREED TO this
Date:_______________________________ , 1999
Midway Airlines Corporation
By__________________________________
Its_________________________________
<PAGE>
6-1162-CPJ-307
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Escalation Sharing
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
1. Commitment.
----------
Boeing agrees to share one-half of the escalation, up to a maximum
Boeing share of 1.5 percent, in the last half of the year 1998 according to
the terms in paragraph 2 below. [REDACTED]. For the purpose of this Letter
Agreement such aircraft are referred to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement will be made in
accordance with Exhibit D to the AGTA between Boeing and Customer, using actual
escalation indices published for the applicable period.
2. Escalation Credit Memo.
-----------------------
2.1 Calculation - Eligible Aircraft Delivering in July 1998 or
-----------------------------------------------------------
later.
-----
At the time of delivery of each Eligible Aircraft delivering in July
1998 or later, Boeing will issue to Customer a credit memorandum (the 1998
Credit Memorandum) which shall be applied to the Aircraft Price of such Eligible
Aircraft. The 1998 Credit Memorandum shall be calculated as follows:
One-half of the difference between the Escalation Adjustment calculated
for a July 1998 aircraft delivery position, and the Escalation
Adjustment calculated for the month of delivery of the Eligible
Aircraft (or December 1998, if the Eligible Aircraft
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-307 Page 2
delivers later), provided however, such amount shall not exceed 1.5
percent pursuant to the following calculation:
For an Eligible Aircraft, the Aircraft Basic Price will be escalated
(if necessary) to a July 1998 delivery month. The July 1998 escalated
price will be referred to in the following formula as the "July 1998
Index Amount." The 1998 Credit Memorandum for the Eligible Aircraft
will not exceed an amount equal to the July 1998 Index Amount times
0.015.
2.2 Eligible Aircraft Delivering 1999 or later.
For Eligible Aircraft the amount of the credit memorandum will be the
amounts calculated pursuant to paragraph 2.1 above. This credit memorandum
amount will be escalated from December 1998 to the month of delivery for
Eligible Aircraft delivering after 1998.
3. Advance Payment Base Price.
It is agreed that the Advance Payment Base Prices for the Eligible
Aircraft set forth in the Purchase Agreement include an estimate for the
escalation sharing credit memorandum pursuant to this Letter Agreement.
4. Escalating Credits (STE).
[REDACTED]
Very truly yours,
THE BOEING COMPANY
By
------------------------------
Its Attorney-In-Fact
------------------------------
ACCEPTED AND AGREED TO this
Date:_______________________ , 1999
Midway Airlines Corporation
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-307 Page 3
By_______________________
Its______________________
<PAGE>
6-1162-CPJ-308
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: [REDACTED]
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. [REDACTED] All terms used but not defined in this Letter Agreement
have the same meaning as in the Purchase Agreement.
[REDACTED]
- ----------
6. Confidential Treatment.
-----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity except as required by law.
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-308 Page 2
If the foregoing correctly sets forth your understanding of our agreement with
respect to the matters treated above, please indicate your acceptance and
approval below.
Very truly yours,
THE BOEING COMPANY
By
-----------------------------
Its Attorney-In-Fact
-----------------------------
ACCEPTED AND AGREED TO this
Date:_______________________, 1999
Midway airlines corporation
By ____________________________
Its____________________________
<PAGE>
Attachment A to
6-1162-CPJ-308
Page 3
ATTACHMENT A (SAMPLE)
FLIGHT FREQUENCY ADJUSTMENT FORMULAS
Number of Airplane Days calculation.
[REDACTED]
- ----------
<PAGE>
6-1162-CPJ-309
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Open Configuration Matters
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
1. Aircraft Configuration.
1.1 Initial Configuration. The initial configuration of Customer's
Model 737-7BX Aircraft has been defined by Boeing Model 737-700 Detail
Specification D6-38808-34, Rev. B, dated October 21, 1998 as described in
Article 1 and Exhibit A of the Purchase Agreement (the Aircraft Configuration).
Given the short period of time between Customer's acceptance of the proposal and
the execution of the Purchase Agreement, Customer and Boeing did not have time
to incorporate certain configuration changes (Options) into the Aircraft
Configuration.
1.2 Final Configuration Schedule. Boeing and Customer discussed
potential Options on May 26th and 27th, 1999. Within 90 days after that meeting,
Boeing will provide Customer with Option proposals, which will include any
effect to the Performance Guarantees, for those configuration changes that can
be incorporated in Aircraft production. Once Customer receives the list of
priced and offerable Options from Boeing, Customer will then have 15 days to
accept or reject any or all of these Options.
2. Effect on Purchase Agreement.
2.1 Basic Specification. Changes applicable to the basic Model 737-700
aircraft which are developed by Boeing between the date of signing of the
Purchase Agreement and completion of the final configuration review described in
paragraph 1.2 above will be incorporated into the Aircraft Configuration by
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-309 Page 2
written amendment and will not affect the Aircraft Basic Price and Performance
Guarantees.
2.2 Exhibit A. The effects of all Options which are mutually agreed
upon between Boeing and Customer for incorporation into the Aircraft
Configuration will be incorporated into Exhibit A of the Purchase Agreement by
written amendment.
2.3 Performance Guarantees. Within 90 days after Customer's acceptance
of any Options, Boeing will provide to Customer revisions to the Performance
Guarantees to reflect the effects, if any, of the incorporation of such Options
on Aircraft performance. Such revisions will be incorporated by written
amendment.
2.4 Price Adjustments. The Aircraft Basic Price and Advance Payment
Base Price of each Aircraft included the amount of Five Hundred Ninety Three
Thousand One Hundred Dollars ($593,100) as an estimate of the value of the
Options which may be accepted and included in the final Aircraft Configuration.
The Aircraft Basic Price and the Advance Payment Base Price of each Aircraft
will be increased or decreased as required to reflect the difference between
such estimate and the actual prices of the Options accepted by Customer.
3.0 Optional Feature Restriction. Due to the short length of time between the
effective date of the Purchase Agreement and the scheduled delivery of the first
aircraft, Boeing will not offer Customer any Options relating to in-cabin or
in-seat audio, video, or telephones.
4.0 Seat Supplier, Seat Supplier Selection and 16G Test Restriction. Due to the
short length of time between the effective date of the Purchase Agreement and
the scheduled delivery of the first aircraft, Customer must select one of the
seat suppliers listed in 4.1 herein for any passenger seats on the Aircraft by
July 21, 1999 and notify Boeing in writing of such selected supplier. The seats
selected must already meet any 16G requirement and must not require any
additional static of dynamic testing of any kind.
4.1 Offerable Seat Suppliers:
i. Avio Interiors
ii. Koito Industries, Ltd.
iii. Recaro Aircraft Seating
iv. Weber Aircraft Inc.
5. Purchase Agreement Amendment.
----------------------------
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-309 Page 3
Within 30 days after reaching agreement as to the final Aircraft
Configuration, Boeing will provide Customer an amendment to the Purchase
Agreement reflecting the effects of the configuration changes agreed to by the
parties.
Very truly yours,
THE BOEING COMPANY
By
-------------------------------
Its Attorney-In-Fact
------------------------------
ACCEPTED AND AGREED TO this
Date:_______________________ , 1999
Midway Airlines Corporation
By __________________________
Its__________________________
<PAGE>
6-1162-CPJ-310
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: [REDACTED]
----------
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. [REDACTED]. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement.
1. [REDACTED]
----------
2. [REDACTED]
----------
3. [REDACTED]
----------
4. [REDACTED]
----------
5. Confidential Treatment.
----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity.
If the foregoing correctly sets forth your understanding of our agreement with
respect to the matters treated above, please indicate your acceptance and
approval below.
Very truly yours,
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-310 Page 2
THE BOEING COMPANY
By
-------------------------------
Its Attorney-In-Fact
------------------------------
ACCEPTED AND AGREED TO this
Date:__________________________ , 1999
Midway Airlines Corporation
By ____________________________
Its____________________________
<PAGE>
6-1162-CPJ-311
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: [REDACTED]
----------
Reference: Purchase Agreement 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase Agreement
and Exhibit C of the AGTA. All terms used but not defined in this Letter
Agreement have the same meaning as in the Purchase Agreement and AGTA.
1. [REDACTED]
----------
2. [REDACTED]
----------
3. [REDACTED]
----------
4. [REDACTED]
----------
5. [REDACTED]
----------
6. Confidential Treatment.
----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity.
If the foregoing correctly sets forth your understanding of our agreement with
respect to the matters treated above, please indicate your acceptance and
approval below.
<PAGE>
Midway Airlines
6-1162-CPJ-311 Page 2
Very truly yours,
THE BOEING COMPANY
By
------------------------------
Its Attorney-In-Fact
------------------------------
ACCEPTED AND AGREED TO this
Date:___________________________, 1999
Midway airlines corporation
By _____________________________
Its ____________________________
<PAGE>
Attachment A to
6-1162-CPJ-311
Page 3
Attachment A - Adjustments
--------------------------
For each reporting period, Boeing will calculate Target Maintenance Costs by
revising the Projected Target Maintenance Cost to reflect actual data for the
following parameters:
Material Price Inflation
- ------------------------
Material prices will be adjusted using Producer Price Indexes as defined below.
The Target Material Cost for a Reporting Period will be calculated by
multiplying the projected target material cost by the ratio of the average index
for the Reporting Period to the index related to the projected target material
cost.
The measure of material price inflation will be the Producer Price Index for
"Aircraft Parts and Auxiliary Equipment, n.e.c." (Standard Industrial
Classification Code 3728). This index will be obtained from the publication
"Producer Prices and Price Indexes" published by the U.S. Department of Labor,
Bureau of Labor Statistics or any comparable successor publication published by
the U.S. Department of Labor, Bureau of Labor Statistics or any comparable
successor agency.
Labor Cost
- ----------
The projected target labor cost will be adjusted to reflect Customer's actual
Labor Cost. The Target Labor Cost will be calculated by multiplying the
Projected Target Labor Cost by the ratio of Customer's then-current Labor Rate
to the Labor Rate used to calculate the projected target labor cost for that
Reporting Period.
Airframe Maintenance Performed by Others (Subcontracted Maintenance)
- -----------------------------------------
The Projected Target Material Cost and Projected Target Labor Cost assume that
Subcontracted Maintenance, will be no more than 10% of the Cumulative Average
Reported Cost as of any reporting period. If Subcontracted Maintenance amounts
to more than 10% of the Cumulative Average Actual Maintenance Cost as of any
reporting period, Boeing reserves the right to revise the Target Material Cost
and Target Labor Cost for that Reporting Period accordingly.
To adjust Subcontracted Maintenance to Customer's equivalent direct labor and
direct material costs, Subcontracted Maintenance will be reduced by 18% percent
before it is distributed to Direct Labor and Direct Material.
Covered Aircraft
- ----------------
The Projected Target Maintenance Costs are based on the number of Covered
Aircraft. If the number of Covered Aircraft changes during any Reporting Period,
Boeing reserves the right to incorporate such change when calculating the Target
Maintenance Costs for that Reporting Period.
<PAGE>
Attachment A to
6-1162-CPJ-311
Page 4
Delivery Schedule
- -----------------
The Projected Target Maintenance Costs are based on the delivery schedule of
Covered Aircraft as described in Article 2 of the Purchase Agreement. If the
delivery schedule for the Covered Aircraft changes during any Reporting Period,
Boeing reserves the right to incorporate such change when calculating the Target
Maintenance Costs for that Reporting Period.
Average Flight Time
- -------------------
If the Actual Average Flight Time (AAFT) for any Reporting Period differs from
the Projected Average Flight Time (PAFT) of 1.25 hours, the Target Material Cost
(TMC) and Target Labor Cost (TLC) for that reporting period will be adjusted as
follows:
.65 +
TMC for AAFT = TMC for PAFT X AAFT .35
----------
.65 +
PAFT .35
.54 +
TLC for AAFT = TLC for PAFT X AAFT .46
----------
.54 +
PAFT .46
Note: The adjustment formula set forth above is obtained from the publication
"Airframe Maintenance Analysis of IATA PPM (Production Performance Measurements)
Maintenance Cost Data".
Utilization
- ------------
The Projected Target Maintenance Costs assume a Projected Average Yearly
Utilization for the Covered Aircraft during any reporting period of 2700 flight
hours per aircraft. If the Average Yearly Utilization for the Covered Aircraft
for any Reporting Period exceeds 3000 flight hours or is less than 2200 flight
hours , Boeing reserves the right to incorporate such change when calculating
the Target Maintenance Costs for that Reporting Period.
<PAGE>
Attachment A to
6-1162-CPJ-311
Page 5
Currency Exchange Rate
- ----------------------
The Actual Maintenance Costs and average Labor Rates reported by Customer for
any Reporting Period will be converted by Boeing from __________ to U.S. Dollars
using the average of the four quarterly "rf" (period average) factors applicable
to such Reporting Period ("Exchange Rate") as set forth in the publication
"International Financial Statistics" published by the International Monetary
Fund.
Target Maintenance Costs for any Reporting Period will be adjusted to reflect
any differences between the Exchange Rate for such Reporting Period and the
________ to U.S. Dollar rate of __________, which was used to calculate the
Projected Target Maintenance Costs (Projected Exchange Rate).
(Additional information regarding the publication "International Financial
Statistics" may be obtained from: Publications Unit, International Monetary
Fund, Washington, D.C. 20431, U.S.A. or by calling U.S.A. Area Code (202)
623-7430.)
Covered Aircraft Configuration
- ------------------------------
The Target Maintenance Cost set forth in this Program is based on the
configuration for the Covered Aircraft as set forth in Exhibit A to the Purchase
Agreement. Such Target Maintenance Cost may be adjusted by Boeing to
appropriately reflect any changes to the actual configuration of the Covered
Aircraft at the time of delivery thereof to Customer. Adjustments to such Target
Maintenance Cost may also be made at any time during the Program Term to reflect
any additional changes in the configuration of the Covered Aircraft.
<PAGE>
Exhibit A to
6-1162-CPJ-311
Page 6
To: Director - Product Assurance Contracts
Boeing Commercial Airplane Group
P.O. Box 3707 Mail Stop 76-02
Fax: 206-237-1706
Seattle, Washington 98124-2207
Subject: Letter Agreement No. 6-1162-CPJ-311 to Purchase Agreement No. 2235
Airframe Maintenance Cost Protection Program
Reported herein are certain data required under paragraph 4.1.1 of the reference
Letter Agreement.
Reporting Period No. _____
Beginning date _________ ending date _________
Currency of the costs shown below: _________
- --------------------------------------------------------------------------------
Direct Direct Subcontracted
Actual Labor Material Maintenance
Maintenance Costs (total cost) (total cost) (total cost)
- --------------------------------------------------------------------------------
Scheduled
Maintenance
- --------------------------------------------------------------------------------
Non-Scheduled Maintenance
- --------------------------------------------------------------------------------
Repair &
Overhaul
- --------------------------------------------------------------------------------
Modifications
(ref. para.
4.3 & 5.1)
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
The above labor costs are exclusive of time consumed by employees while waiting
for work, traveling to or from work, training, vacation, sick leave, or in any
other similar absences from the actual maintenance work. The above material
costs exclude all costs described in paragraph 5 of the reference letter
agreement.
- -------------------------------------------------------------------------------
Average per Average per Average Total per
manhour flight number of aircraft
Labor Rate Flight Time Covered Aircraft Flight Hours
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Exhibit A to
6-1162-CPJ-311
Page 7
The above labor rate excludes all fringe benefits, premium time allowances,
social charges, business taxes and the like.
Midway Airlines Corporation
By _________________________ Date _________________________
Its _________________________
<PAGE>
Exhibit B to
6-1162-CPJ-311
Page 8
To: Midway Airlines Corporation
Subject: Letter Agreement No. 6-1162-CPJ-311 to Purchase Agreement No. 2235
Airframe Maintenance Cost Protection Program
Reported herein are certain data required under paragraph 4.2.1 of the reference
Letter Agreement.
Reporting Period No. _____
Beginning date _________ ending date _________
Costs as reported by Customer /in foreign currency/:
- --------------------------------------------------------------------------------
Actual Direct Direct Subcontracted
Maintenance Costs Labor Material Maintenance
- --------------------------------------------------------------------------------
Scheduled
Maintenance
- --------------------------------------------------------------------------------
Non-Scheduled
Maintenance
- --------------------------------------------------------------------------------
Repair &
Overhaul
- --------------------------------------------------------------------------------
Modifications
- --------------------------------------------------------------------------------
Customer's costs with adjusted Subcontracted Maintenance (per Attachment A of
the reference Letter Agreement) /in U.S. dollars/.
- --------------------------------------------------------------------------------
Actual Direct Direct Subcontracted Subcontracted
Maintenance Costs Labor Material Labor Material
- --------------------------------------------------------------------------------
Scheduled
Maintenance
- --------------------------------------------------------------------------------
Non-Scheduled Maintenance
- --------------------------------------------------------------------------------
Repair &
Overhaul
- --------------------------------------------------------------------------------
Modifications
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
<PAGE>
Exhibit B to
6-1162-CPJ-311
Page 9
Actual Costs and Target Costs (per Attachment A of the reference Letter
Agreement) /in U.S. dollars/.
- --------------------------------------------------------------------------------
Reporting Reporting Reporting Reporting Reporting
Period 1 Period 2 Period 3 Period 4 Period 5
- --------------------------------------------------------------------------------
Year dollars
- --------------------------------------------------------------------------------
Actual Labor
- --------------------------------------------------------------------------------
Actual Material
- --------------------------------------------------------------------------------
Actual Maintenance
Cost
- --------------------------------------------------------------------------------
Fleet Hours
- --------------------------------------------------------------------------------
Cumulative Actual
Maintenance Cost
- --------------------------------------------------------------------------------
Number of Covered
Aircraft
- --------------------------------------------------------------------------------
Currency Exchange
factor
- --------------------------------------------------------------------------------
Per man-hour Labor
Rate
- --------------------------------------------------------------------------------
Material Inflation
factor
- --------------------------------------------------------------------------------
Average Flight Time
- --------------------------------------------------------------------------------
Target Labor Cost
- --------------------------------------------------------------------------------
Target Material Cost
- --------------------------------------------------------------------------------
Target Maintenance
Cost
- --------------------------------------------------------------------------------
Cumulative Target
Maintenance Cost
- --------------------------------------------------------------------------------
As of this Reporting Period, the Program is in compliance:
Yes |_| No |_|
Very truly yours,
THE BOEING COMPANY
Reported by _________________________
Its _________________________
Date _________________________
<PAGE>
6-1162-CPJ-312
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Aircraft Performance Guarantees
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (the Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
Boeing agrees to provide Customer with the performance guarantees in the
Attachment. These guarantees are exclusive and expire upon delivery of the
Aircraft to Customer.
Customer agrees not to disclose this Letter Agreement, attachments, or any other
information related to this Letter Agreement without prior written consent by
Boeing, unless required by law.
Very truly yours,
THE BOEING COMPANY
By
--------------------------------
Its Attorney-In-Fact
-------------------------------
ACCEPTED AND AGREED TO this
Date: , 1999
Midway Airlines Corporation
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-312 Page 2
By__________________________
Its__________________________
<PAGE>
6-1162-CPJ-313
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: [REDACTED]
----------
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
[REDACTED]
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-313 Page 2
3. Confidential Treatment.
-----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity unless required by law.
Very truly yours,
THE BOEING COMPANY
By
-------------------------------
Its Attorney-In-Fact
-----------------------------
ACCEPTED AND AGREED TO this
Date:____________________________, 1999
Midway Airlines Corporation
By_________________________________
Its________________________________
<PAGE>
6-1162-CPJ-314
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Assignment Rights
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
1. [REDACTED]
----------
2. Confidential Treatment.
-----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity except to potential Assignees that would qualify
under paragraph 1.1 or unless required by law.
Very truly yours,
THE BOEING COMPANY
By
-----------------------------------
Its Attorney-In-Fact
-----------------------------------
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-314 Page 2
ACCEPTED AND AGREED TO this
Date:_______________________________ , 1999
Midway Airlines Corporation
By___________________________________
Its__________________________________
<PAGE>
ATTACHMENT A TO 6-1162-CPJ-314
[REDACTED]
- ----------
<PAGE>
6-1162-CPJ-315
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Miscellaneous Matters
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the same
meaning as in the Purchase Agreement.
1. [REDACTED]
----------
2. [REDACTED]
----------
3. [REDACTED]
----------
4. Confidential Treatment.
-----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity, except as required by law or by Customer's advisors
who will also be bound by the confidentiality agreement.
Very truly yours,
THE BOEING COMPANY
By
-------------------------------------
Its Attorney-In-Fact
-----------------------------------
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-315 Page 2
ACCEPTED AND AGREED TO this
Date:_______________________________ , 1999
Midway Airlines Corporation
By__________________________________
Its ________________________________
<PAGE>
6-1162-CPJ-316
Midway Airlines Corporation
2801 Slater Road, Suite 200
Morrisville, NC 27560
Subject: Special Matters
Reference: Purchase Agreement No. 2235 (the Purchase Agreement) between The
Boeing Company (Boeing) and Midway Airlines Corporation
(Customer) relating to Model 737-7BX aircraft (Aircraft)
This Letter Agreement amends, supplements, and is part of the Purchase
Agreement. All terms used but not defined in this Letter Agreement have the
same meaning as in the Purchase Agreement. [REDACTED]
1. [REDACTED]
----------
2. [REDACTED]
----------
3. [REDACTED]
----------
4. [REDACTED]
----------
5. [REDACTED]
----------
6. [REDACTED]
----------
7. [REDACTED]
----------
8. [REDACTED]
----------
<PAGE>
Midway Airlines Corporation
6-1162-CPJ-316 Page 2
9. [REDACTED]
----------
10. [REDACTED]
----------
11. [REDACTED]
----------
12. [REDACTED]
----------
13. Confidential Treatment.
-----------------------
Customer understands that certain commercial and financial information
contained in this Letter Agreement are considered by Boeing as confidential.
Customer agrees that it will treat this Letter Agreement and the information
contained herein as confidential and will not, without the prior written consent
of Boeing, disclose this Letter Agreement or any information contained herein to
any other person or entity unless required by law.
Very truly yours,
THE BOEING COMPANY
By
------------------------------
Its Attorney-In-Fact
------------------------------
ACCEPTED AND AGREED TO this
Date:_______________________________ , 1999
Midway Airlines Corporation
By _____________________________________
Its ____________________________________
Exhibit 10.2
Note to Exhibit 10.2
The following Participation Agreement is substantially identical in all
material respects to seven additional Participation Agreements except as
follows:
<TABLE>
<CAPTION>
Owner Participant Date Aircraft (Tail No.)
- ----------------- ----
<S> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML*
NCC Charlie Company September 10, 1998 N576ML
General Electric Capital Corporation November 10, 1998 N577ML
General Electric Capital Corporation November 10, 1998 N578ML
Castle Harbour Leasing Inc. December 10, 1998 N579ML
NCC Charlie Company January 25, 1999 N580ML
General Electric Capital Corporation April 14, 1999 N581ML
NCC Charlie Company June 28, 1999 N582ML
</TABLE>
- ------------------
* Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
EXHIBIT 10.3
Note to Exhibit 10.3
The following Trust Agreement is substantially identical in all
material respects to seven additional Trust Agreements except as follows:
<TABLE>
<CAPTION>
Owner Participant Date Aircraft (Tail No.)
- ----------------- ----
<S> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML*
NCC Charlie Company September 10, 1998 N576ML
General Electric Capital Corporation November 10, 1998 N577ML
General Electric Capital Corporation November 10, 1998 N578ML
Castle Harbour Leasing Inc. December 10, 1998 N579ML
NCC Charlie Company January 25, 1999 N580ML
General Electric Capital Corporation April 14, 1999 N581ML
NCC Charlie Company June 28, 1999 N582ML
</TABLE>
- ------------------
* Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
EXHIBIT 10.4
Note to Exhibit 10.4
The following Trust Indenture and Security Agreement is substantially
identical in all material respects to seven additional Trust Indenture and
Security Agreements except as follows:
<TABLE>
<CAPTION>
Aircraft
Owner Participant Date (Tail No.) Amortization
- ----------------- ----
<S> <C> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML* *
NCC Charlie Company September 10, 1998 N576ML *
General Electric Capital Corporation November 10, 1998 N577ML *
General Electric Capital Corporation November 10, 1998 N578ML *
Castle Harbour Leasing Inc. December 10, 1998 N579ML **
NCC Charlie Company January 25, 1999 N580ML **
General Electric Capital Corporation April 14, 1999 N581ML ***
NCC Charlie Company June 28, 1999 N582ML ****
</TABLE>
- ------------------------------
* Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998.
** Filed as Exhibit 10.52 to the Company's Annual Report on Form 10-K/A for
the year ended December 31, 1998.
*** Filed as Exhibit 10.52 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999.
**** As attached hereto.
<PAGE>
Annex B
Amortization Schedule
-------------------------
Series A Series B Series C Series D
Equipment Equipment Equipment Equipment
Payment Date Notes Notes Notes Notes
- ----------- --------- --------- ---------- ---------
Jul 2 1999 0.00 0.00 568,742.38 0.00
Jan 2 2000 222,645.40 96,355.00 232,167.39 0.00
Jul 2 2000 0.00 0.00 0.00 0.00
Jan 2 2001 222,644.40 96,354.00 225,392.67 54,890.04
Jul 2 2001 0.00 0.00 0.00 0.00
Jan 2 2002 222,644.40 96,354.00 0.00 331,165.36
Jul 2 2002 0.00 0.00 0.00 0.00
Jan 2 2003 222,644.40 96,354.00 211,894.36 174,864.60
Jul 2 2003 0.00 0.00 0.00 0.00
Jan 2 2004 222,644.40 96,354.00 447,645.59 0.00
Jul 2 2004 0.00 0.00 0.00 0.00
Jan 2 2005 222,644.40 96,354.00 514,270.57 0.00
Jul 2 2005 0.00 0.00 0.00 0.00
Jan 2 2006 222,644.40 277,047.96 405,687.04 0.00
Jul 2 2006 0.00 0.00 0.00 0.00
Jan 2 2007 222,644.40 683,658.95 0.00 0.00
Jul 2 2007 0.00 0.00 0.00 0.00
Jan 2 2008 222,644.40 332,475.54 0.00 0.00
Jul 2 2008 0.00 0.00 0.00 0.00
Jan 2 2009 222,644.41 353,979.35 0.00 0.00
Jul 2 2009 0.00 0.00 0.00 0.00
Jan 2 2010 342,713.01 509,781.77 0.00 0.00
Jul 2 2010 0.00 0.00 0.00 0.00
Jan 2 2011 918,260.78 0.00 0.00 0.00
Jul 2 2011 0.00 0.00 0.00 0.00
Jan 2 2012 986,237.90 0.00 0.00 0.00
Jul 2 2012 0.00 0.00 0.00 0.00
Jan 2 2013 584,973.47 476,731.43 0.00 0.00
Jul 2 2013 0.00 0.00 0.00 0.00
Jan 2 2014 1,142,786.05 0.00 0.00 0.00
Jul 2 2014 0.00 0.00 0.00 0.00
Jan 2 2015 1,220,063.78 0.00 0.00 0.00
EXHIBIT 10.5
Note to Exhibit 10.5
The following Indenture Supplement is substantially identical in all
material respects to seven additional Indenture Supplements except as follows:
<TABLE>
<CAPTION>
Owner Participant Date Aircraft (Tail No.)
- ----------------- ----
<S> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML*
NCC Charlie Company September 10, 1998 N576ML
General Electric Capital Corporation November 10, 1998 N577ML
General Electric Capital Corporation November 10, 1998 N578ML
Castle Harbour Leasing Inc. December 10, 1998 N579ML
NCC Charlie Company January 25, 1999 N580ML
General Electric Capital Corporation April 14, 1999 N581ML
NCC Charlie Company June 28, 1999 N582ML
</TABLE>
- ------------------
* Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
EXHIBIT 10.6
Note to Exhibit 10.6
The following Lease Agreement is substantially identical in all
material respects to seven additional Lease Agreements except as follows:
<TABLE>
<CAPTION>
Rental and
Lease Related
Aircraft Termination Terms
Owner Participant Date (Tail No.) Date
<S> <C> <C> <C> <C>
NCC Charlie September 10, 1998* N575ML* March 30, 2015* **
Company*
NCC Charlie Company September 10, 1998 N576ML March 30, 2015 **
General Electric Capital November 10, 1998 N577ML May 12, 2015 **
Corporation
General Electric Capital November 10, 1998 N578ML May 13, 2015 **
Corporation
Castle Harbour Leasing Inc. December 10, 1998 N579ML June 15, 2015 **
NCC Charlie Company January 25, 1999 N580ML July 28, 2015 **
General Electric Capital
Corporation April 14, 1999 N581ML October 14, 2015 **
NCC Charlie Company June 28, 1999 N582ML December 29, 2015 **
</TABLE>
- ------------------
* Filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
** Confidential treatment requested.
EXHIBIT 10.7
Note to Exhibit 10.7
The following Lease Supplement is substantially identical in all
material respects to seven additional Lease Supplements except as follows:
<TABLE>
<CAPTION>
Lease
Aircraft Termination
Owner Participant Date (Tail No.) Date
- ----------------- ---- ----
<S> <C> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML* March 30, 2015*
NCC Charlie Company September 10, 1998 N576ML March 30, 2015
General Electric Capital Corporation November 10, 1998 N577ML May 12, 2015
General Electric Capital Corporation November 10, 1998 N578ML May 13, 2015
Castle Harbour Leasing Inc. December 10, 1998 N579ML June 15, 2015
NCC Charlie Company January 25, 1999 N580ML July 28, 2015
General Electric Capital Corporation April 14, 1999 N581ML October 14, 2015
NCC Charlie Company June 28, 1999 N582ML December 29, 2015
</TABLE>
- ------------------
* Filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
EXHIBIT 10.8
Note to Exhibit 10.8
The following Purchase Agreement Assignment is substantially identical
in all material respects to seven additional Purchase Agreement Assignments
except as follows:
<TABLE>
<CAPTION>
Owner Participant Date Aircraft (Tail No.)
- ----------------- ----
<S> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML*
NCC Charlie Company September 10, 1998 N576ML
General Electric Capital Corporation November 10, 1998 N577ML
General Electric Capital Corporation November 10, 1998 N578ML
Castle Harbour Leasing Inc. December 10, 1998 N579ML
NCC Charlie Company January 25, 1999 N580ML
General Electric Capital Corporation April 14, 1999 N581ML
NCC Charlie Company June 28, 1999 N582ML
</TABLE>
- ------------------
* Filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
EXHIBIT 10.9
Note to Exhibit 10.9
The following Engine Warranty Assignment is substantially identical in
all material respects to seven additional Engine Warranty Assignments except as
follows:
<TABLE>
<CAPTION>
Owner Participant Date Aircraft (Tail No.)
- ----------------- ----
<S> <C> <C>
NCC Charlie Company* September 10, 1998* N575ML*
NCC Charlie Company September 10, 1998 N576ML
General Electric Capital Corporation November 10, 1998 N577ML
General Electric Capital Corporation November 10, 1998 N578ML
Castle Harbour Leasing Inc. December 10, 1998 N579ML
NCC Charlie Company January 25, 1999 N580ML
General Electric Capital Corporation April 14, 1999 N581ML
NCC Charlie Company June 28, 1999 N582ML
</TABLE>
- ------------------
* Filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
**Values represent the interim year-to-date figures. All Division of
Corporation Finance Schedules will consist of a SINGL containing information for
a complete fiscal year as well as for an interim period is the first filing
submitted with new finan use two columns--one for the year period and a second
for the interim period. Financial Data Schedules for Investment Man numbers.
Each schedule may contain up to five columns of numbers; however, most will
contain ONLY ONE.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 49,323
<SECURITIES> 7,275
<RECEIVABLES> 10,748
<ALLOWANCES> (1,612)
<INVENTORY> 2,963
<CURRENT-ASSETS> 75,937
<PP&E> 120,941
<DEPRECIATION> (12,744)
<TOTAL-ASSETS> 218,533
<CURRENT-LIABILITIES> 55,750
<BONDS> 77,280
0
0
<COMMON> 86
<OTHER-SE> 78,395
<TOTAL-LIABILITY-AND-EQUITY> 218,533
<SALES> 110,538
<TOTAL-REVENUES> 110,538
<CGS> 0
<TOTAL-COSTS> 96,183
<OTHER-EXPENSES> 1,423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,932
<INCOME-TAX> 4,914
<INCOME-CONTINUING> 8,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,018
<EPS-BASIC> .93
<EPS-DILUTED> .83
</TABLE>
