<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
OR
Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 For the transition period from ________ to ________
Commission File No: 0-26432
AIRWAYS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-3315474
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6280 HAZELTINE NATIONAL DRIVE
ORLANDO, FLORIDA 32822
(407) 859-1579
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Indicate by check mark 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
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of FEBRUARY 1, 1997
----- -----------------------------------
Common stock
Par value $.01 per share 9,065,937
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1996 1996
------ ------------ ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,406 $16,437
Restricted cash 8,428 11,309
Accounts receivable, net 2,225 3,135
Current tax assets 5,197 -
Inventory, expendable parts and supplies 1,323 1,847
Prepaid expenses 2,698 1,947
------- -------
Total current assets 22,277 34,675
------- -------
Property and equipment, net 33,212 29,458
------- -------
Other assets:
Goodwill, net 1,784 1,891
Security deposits 1,299 1,339
Deferred income taxes 626 -
Other assets, net 651 997
------- -------
Total other assets 4,360 4,227
------- -------
Total assets $59,849 $68,360
======= =======
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
2
<PAGE> 3
AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share information)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996
------------------------------------ ------------ ---------
<S> <C> <C>
Current liabilities:
Accounts payable $12,447 $ 9,362
Air traffic liability 10,430 14,912
Accrued liabilities 1,688 993
Current portion of long-term debt 3,167 3,574
Income taxes payable - 533
------- -------
Total current liabilities 27,732 29,374
------- -------
Long-term liabilities:
Long-term debt, less current portion 11,449 12,484
Maintenance reserves for owned aircraft 3,304 2,089
Deferred income taxes - 50
------- -------
Total long-term liabilities 14,753 14,623
------- -------
Total liabilities 42,485 43,997
------- -------
Stockholders' equity:
Preferred stock, $.01 par value per share,
1,000,000 shares authorized, no shares
issued or outstanding - -
Common stock, $.01 par value per share,
19,000,000 shares authorized, 9,065,937
and 8,966,937 shares issued and
outstanding at December 31, 1996 and
March 31, 1996, respectively 90 90
Additional paid-in capital 26,618 26,350
Accumulated deficit (9,344) (2,077)
------- -------
Total stockholders' equity 17,364 24,363
------- -------
Commitments and contingencies (notes 4 and 5)
Total liabilities and stockholders' equity $59,849 $68,360
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share information)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------------------------ ------------------------------
1996 1995 1996 1995
-------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Operating Revenues
Passenger $ 20,349 $ 17,631 $ 71,196 $ 38,440
Charter 147 179 236 1,529
General aviation and other 352 402 1,414 1,031
-------------- ------------- ------------- ------------
Total operating revenues 20,848 18,212 72,846 41,000
Operating Expenses
Flight operations 10,464 7,230 33,210 16,558
Maintenance 6,029 3,139 19,909 7,190
Aircraft and traffic servicing 3,779 2,871 12,812 6,429
Reservations, sales and marketing 3,310 3,207 12,531 7,246
Depreciation and amortization 1,186 494 3,377 1,247
General and Administrative 1,077 797 3,852 2,246
-------------- ------------- ------------- ------------
Total operating expenses 25,845 17,738 85,691 40,916
-------------- ------------- ------------- ------------
Operating loss (4,997) 474 (12,845) 84
Interest (expense) income and other (174) 151 (335) 564
-------------- ------------- ------------- ------------
(Loss) income before income taxes (5,171) 625 (13,180) 648
(Benefit) provision for income taxes (2,309) 189 (5,913) 198
-------------- ------------- ------------- ------------
Net (loss) income $ (2,862) $ 436 $ (7,267) $ 450
============== ============= ============= ============
Net (loss) income per share $ (0.32) $ .05 $ (0.81) $ .05
============== ============= ============= ============
Weighted average shares outstanding 9,059 9,335 9,012 9,317
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
-----------------------------
1996 1995
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (7,267) $ 450
Adjustments to reconcile net loss to net cash flows (used for) provided
by operating activities:-
Depreciation and amortization 3,377 1,248
Maintenance reserves, net 2,663 1,338
Change in operating items:
Restricted cash 2,881 (3,212)
Accounts payable and Accrued liabilities 2,333 4,283
Accounts receivable, net 910 (1,378)
Inventories 524 236
Deferred income taxes (676) -
Prepaid expenses (751) (708)
Air traffic liability (4,482) 5,450
Current tax assets and liabilities (5,730) -
----------- ---------
Net Cash flows (used for) provided by operating activities (6,218) 7,707
INVESTING ACTIVITIES:
Purchases of property and equipment, net (5,440) (22,971)
Decrease (Increase) in Other assets, excluding deferred loan costs 61 (1,199)
----------- ---------
Net cash flows used for investing activities (5,379) (24,170)
----------- ---------
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
5
<PAGE> 6
AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
--------------------------------
1996 1995
------------ -------------
<S> <C> <C>
FINANCING ACTIVITIES:
Equity contributions - 15,439
Proceeds from notes payable - 14,379
Proceeds from issuance of common stock 268 -
Deferred loan costs (10) -
Repayments of long-term debt (2,692) -
----------- -----------
Net cash flows (used for) provided by financing activities (2,434) 29,818
----------- -----------
Net (decrease) increase in cash and short-term investments (14,031) 13,355
Cash and short-term investments at beginning of period 16,437 961
----------- -----------
Cash and short-term investments at end of period $ 2,406 $ 14,316
=========== ===========
Supplemental disclosures of cash flow activities:
Cash paid for interest $ 1,113 $ -
=========== ===========
Cash paid for income taxes $ 504 $ -
=========== ===========
Supplemental schedule of noncash investing and
financing activities:
Purchased one hush kit financed by the vendor
during the quarter ended December 31, 1996 $ 1,250 $ -
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
AIRWAYS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
The financial statements included herein have been prepared by Airways
Corporation (the Company), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. The information furnished in the
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of such financial statements. The Company's business is seasonal
and, accordingly, interim results are not indicative of results for a full
year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial statements for
the year ended March 31, 1996, and the notes thereto, included in the Company's
Form 10-K Annual Report (File No. 0-26432) filed with the Securities and
Exchange Commission.
(1) SPIN-OFF TRANSACTION
In May 1995, AirTran Corporation ("AirTran"), parent of the Company,
Mesaba Aviation, Inc. and Northwest Airlines, Inc. ("Northwest") entered
into an agreement to spin-off AirTran's Orlando-based jet carrier and
fixed-base operations ("FBO") in Grand Rapids, Minnesota. On April 7,
1995, AirTran established the Company as a wholly owned subsidiary to
consolidate the above operations in order to facilitate the spin-off.
The spin-off, in the form of a one-for-one dividend of all of the
outstanding shares of the Company to the shareholders of AirTran (other
than Northwest), was approved by AirTran's shareholders on August 29,
1995. The distribution was made on September 7, 1995 to shareholders of
record (other than Northwest) on August 31, 1995.
AirTran Airways, Inc., which operates the Orlando-based jet carrier, was
previously a subsidiary of AirTran. The FBO had historically been
operated as a division of an AirTran subsidiary. The following financial
statements present the results of the combined entities whereby
significant intercompany accounts and transactions are eliminated.
Additionally, all results presented for periods prior to the spin-off are
presented on a pro-forma basis.
Net loss per share information for the quarter ended December 31, 1996 is
based on 9,058,665 shares outstanding calculated on the treasury method,
fully-diluted basis as of December 31, 1996. Pursuant to the rules
promulgated by the Financial Accounting Standards Board, no common stock
equivalents were included in the computation of loss per share amounts in
the quarter ended December 31, 1996 in order to ensure that the reported
loss per share would not be inadvertently minimized through their
inclusion.
7
<PAGE> 8
AIRWAYS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(2) AIRCRAFT TRANSACTIONS
The Company's fleet currently consists of six leased and four owned
Boeing 737 with average capacities of 126 passengers. The Company also
owns three Cessna 172 aircraft used in flight training and rental
operation of the FBO. In addition, the FBO had one F-27 aircraft which
was sold in July, 1996.
(3) ROUTE MATTERS
During the quarter ended December 31, 1996, the Company continued a route
realignment to put its resources into more profitable markets; in that
regard, the Company discontinued service to four markets and, during the
fourth quarter, announced new service to Charleston and Columbia, SC, Des
Moines, IA, Harrisburg, PA and Moline, IL.
(4) LETTERS OF CREDIT
The Company maintains a $1,000,000 credit facility with a bank for
purposes of issuing letters of credit. Seven letters totaling $803,000
and nine letters totaling $673,000 had been issued and were outstanding
at December 31, 1996 and March 31, 1996, respectively. Advances under
the facility bear interest at the bank's prime rate plus 1-1/4%. No
amounts were drawn under this facility as of or during the nine months
ended December 31, 1996 or as of or during the year ended March 31, 1996.
(5) LITIGATION
The Company is a party to ongoing legal proceedings arising in the
ordinary course of business. In the opinion of management, the
resolution of these matters will not have a materially adverse effect on
the Company's financial position, results of operations, or its cash
flows.
(6) RECLASSIFICATIONS
Certain amounts in the March 31, 1996 financial statements have been
reclassified to conform to presentation in the December 31, 1996
quarterly consolidated financial statements.
8
<PAGE> 9
AIRWAYS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(7) CHANGE IN ACCOUNTING METHOD FOR RECOGNIZING CRS FEES
Computer Reservation Service ("CRS") fees are incurred for the use of the
reservation software established for travel agents to book passengers on
airlines. These expenses are deferred and recognized when the related
passenger travel is completed. In prior periods, CRS fees were expensed
when incurred. The new method was adopted in the third quarter ended
December 31, 1996 to match the CRS fees expense more appropriately with
the related revenue and to make treatment consistent with the Company's
standard revenue and with similar expense recognition policies (such as
travel agency commission and credit card processing fees). The effect of
the change for both the quarter and the nine months ended December 31,
1996 was to increase net income by approximately $85,000, or $ 0.01 per
share net of the effect of income taxes. The cumulative effect of the
change in accounting principle on prior years is immaterial.
9
<PAGE> 10
AIRWAYS CORPORATION
DECEMBER 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company provides direct scheduled passenger air service between Orlando and
20 cities, principally in the eastern half of the United States. The following
table shows the expansion of the Company's route system and fleet through
December 31, 1996. All flights are to and from Orlando, unless otherwise
noted.
<TABLE>
<CAPTION>
As of Total number Departures
month end of aircraft per month Scheduled cities added
--------- ----------- --------- ----------------------
<S> <C> <C> <C>
FISCAL YEAR 1996:
April 4 354 -
May 4 428 Nashville (1)
June 4 412 -
July 6 426 -
August 7 714 San Antonio (1), Dayton, Birmingham (2), and
Buffalo
September 7 642 -
October 7 880 Dallas (3), Greenville/Spartanburg, Kansas
City, and Norfolk
November 7 874 -
December 8 883 -
January 9 929 -
February 10 1,126 Allentown, Canton/Akron, and Rochester
March 10 1,223 Richmond
FISCAL YEAR 1997:
April 10 1,209 -
May 10 1,135 -
June 10 1,106 Greensboro
July 10 1,315 -
August 10 1,280 -
September 10 963 -
October 10 1,045 Chattanooga (4)
November 10 1,020 Toledo
December 10 1,034 Bloomington
</TABLE>
1) Services to San Antonio and Nashville were canceled as of October 31, 1996.
2) Service to Birmingham was canceled as of August 19, 1996.
3) Service to Dallas was canceled as of September 2, 1996.
4) Services to Providence and Hartford were canceled as of December 2, 1996.
10
<PAGE> 11
AIRWAYS CORPORATION
DECEMBER 31, 1996
The table below sets forth the major components of operating revenues and
expenses per Available Seat Mile ("ASM") and selected operating statistics (see
note below).
<TABLE>
<CAPTION>
Quarters ended December 31,
--------------------------------
Percent
1996 1995 Change
---------- ----------- ----------
<S> <C> <C> <C>
Operating revenue:
Passenger .062 .061 2.5%
Charter .000 .001 (27.1%)
General aviation and other .001 .001 (22.3%)
----------- ---------- ----------
Total .064 .063 1.6%
Operating expenses:
Flight operations .032 .025 28.5%
Maintenance .019 .011 70.5%
Aircraft and traffic servicing .012 .010 16.8%
Reservations, sales and marketing .010 .011 (8.4%)
Depreciation and amortization .004 .002 113.1%
General and administrative .003 .003 20.0%
----------- ---------- ----------
Total .079 .061 29.3%
----------- ---------- ----------
Operating Income (.015) .002 (1,035.8%)
=========== ========== ==========
Available seat miles (1) 323,703,000 287,606,000 12.6%
Revenue passenger miles (2) 200,665,000 168,733,000 18.9%
Passengers 233,159 194,877 19.6%
Departures 3,099 2,638 17.5%
Load Factor (3) 62.0% 58.7% 3.3%
Yield per revenue passenger mile (4) $ 0.101 $ 0.104 (2.9%)
</TABLE>
Note: Revenue and expense per ASM data is calculated using system wide ASMs
which includes charter activity. The percentage changes and subtotals
reported above do not calculate with the reported costs due to rounding.
(1) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(2) The number of scheduled miles flown by revenue passengers.
(3) Revenue passenger miles divided by available seat miles. Year over year
percent change is measured only as a percentage point difference.
(4) Passenger revenue divided by revenue passenger miles.
11
<PAGE> 12
AIRWAYS CORPORATION
DECEMBER 31, 1996
OPERATING REVENUES
Total operating revenues were $20,848,000 and $18,212,000 for the quarters
ended December 31, 1996 and 1995, respectively. The increase of $2,636,000 or
14.5% primarily reflects the 17.5% growth in departures enabled by expansion
of our fleet and the 3.3% increase in load factor. This growth was partially
offset by a 3.6% decrease in average fare, due to softened demand which put
downward pressure on yield this year. The fleet expansion arose from the
purchase and lease, respectively, of two additional aircraft since December 31,
1995.
Total operating revenues were $72,846,000 and $41,000,000 for the nine months
ended December 31, 1996 and 1995, respectively. The increase of $31,846,000
or 77.7% similarly paces with the 80.1% growth in departures and the load
factor increase of 8.3%. Again, softened demand put downward pressure on
yield decreasing the average fare by 3.5%. The fleet was expanded from four to
ten aircraft over fiscal 1996, accounting for the significant growth in
departures and ASMs.
ASMs were 323,703,000 and 287,606,000 in the quarters ended 1996 and 1995,
respectively, an increase of 36,097,000 or 12.6%. Revenue Passenger Miles
("RPMs") were 200,665,000 and 168,733,000 in 1996 and 1995, respectively, an
increase of 31,932,000 or 18.9%. ASMs were 1,076,430,000 and 618,752,000 in
the nine months ended December 31, 1996 and 1995, respectively, an increase of
457,678,000 or 74.0%, and RPMs were 698,240,000 and 370,442,000 in the nine
months ended December 31, 1996 and 1995, respectively, an increase of
327,798,000 or 88.5%. The increase in ASMs during both the quarterly and the
nine month periods resulted from the net addition of 11 new markets since April
of 1995, three of which were established during the third quarter ended
December 31, 1996.
Charter revenues were $147,000 and $179,000 in the quarters ended December
31, 1996 and 1995, respectively, a decrease of $32,000 or 17.9%. For the
nine months ended, charter revenue decreased $1,293,000, or 84.6%. The
decrease in charter revenue over both time periods reflects the deliberate
shift of aircraft use to scheduled service in 1996.
OPERATING EXPENSES
Flight operations expense includes expenses related directly to the operation
of aircraft except for depreciation and amortization of aircraft and aircraft
improvements. Expenses for hull and liability insurance, flight crew salaries,
aircraft fuel and flight operations administration are all included in flight
operations.
Flight operations expenses were $10,464,000 and $7,230,000 in the third
quarters of 1996 and 1995, respectively, an increase of $3,234,000 or 44.7%.
Departures were 3,099 and 2,638 in the third quarters of 1996 and 1995,
respectively, an increase of 461 or 17.5%. Fuel expense was
12
<PAGE> 13
AIRWAYS CORPORATION
DECEMBER 31, 1996
significantly higher in the current quarter due to the rise in jet fuel prices.
The increased cost of fuel, per gallon, was $0.22, driving costs up by over
$1,300,000 in the third quarter of fiscal 1997.
In addition, aircraft leasing expense increased after the introduction of a
sixth leased aircraft in February, 1996. Crew costs also increased due to the
higher level of departures and block hours flown. Lastly, a liability for
future vacation time was recorded this period to recognize the change in the
Company's policy. Previously, the Company employed a "use or lose" vacation
policy with no vesting provisions, whereas the new policy grants vesting to
employees after one year of service and permits carry-over of two years'
vacation earned.
Flight operations expenses were $33,210,000 and $16,558,000 for the nine
months ended December 31, 1996 and 1995, respectively, an increase of
$16,552,000, or 100.6%. The increase results principally from the increase in
activity as the Company flew 74% more ASMs in the current period but was also
significantly driven by the increase in fuel prices, the expiration of the
federal fuel tax exemption ($0.043 per gallon) in October of 1995 and expenses
incurred for substitute aircraft rentals required during the first and second
quarters of the current fiscal year.
Maintenance expense includes all expenses related to the upkeep of aircraft.
Such expenses include labor, parts, supplies and contract maintenance. The
direct cost of airframe and engine overhauls are expensed and, for leased
aircraft, paid monthly to the lessor in the form of reserves. For owned
aircraft, the Company records reserves on the balance sheet for these types of
expenditures by recording expense on a per flight hour basis as the aircraft
are flown. The reserves are then available for major overhauls when they
occur.
Maintenance expenses were $6,029,000 and $3,139,000 for the quarters ended
December 31, 1996 and 1995, respectively, an increase of $2,890,000 or 92.1%.
That increase is not in line with the increase in departures of 17.5%.
Maintenance expense is a semi-variable cost, driven by facilities and salaries
and wages (which are relatively fixed), reserve expense (which is variable
according to the number of hours flown) and other repairs and maintenance
expenses which are driven by expansion of the airline and other events. The
variance between these quarters is explained below.
o Facilities and salaries and wages increased $418,000 or 87% due to the
acquisition of the new maintenance hangar in February of 1996. The hangar
enables the Company to perform more of its own maintenance functions
in-house and enhance its reliability. It also permitted the Company to
establish its own in-house catering and aircraft cleaning functions which
were begun late in the third quarter ended December 31, 1996.
o Reserve expense increased by $269,000 or 18% which is driven principally by
flight hours. Although flight hours only increased 13%, the Company began
reserving for foreign object damage to engines, effective July 1, 1996,
which increased reserve expense at a faster rate than it otherwise would
have grown.
13
<PAGE> 14
AIRWAYS CORPORATION
DECEMBER 31, 1996
o The remainder, or other maintenance and repair expenses, totaled $3,373,000
which was an increase of $2,203,000 over 1995, or 188%. This large variance
was caused by the following contributing factors:
1. To facilitate the continued managed growth of the airline, the Company
continued an inspection program started in the first quarter to ensure
that all aircraft maintenance and records of maintenance had been
properly executed. This program involved engaging outside consultants
to provide an independent report on the Company's maintenance
procedures and records.
2. That report recommended, among other things, that certain repairs and
parts replacement be made.
3. In addition to those costs, the Company experienced scheduled and
unscheduled engine repairs.
4. Aside from the costs of the repairs themselves, these events required
leasing of replacement engines during their repair.
5. Lastly, as previously reported in the Company's Form 10-K, the prior
year's expenses were, in some cases, not tabulated and reported until
the fourth quarter of that fiscal year resulting in an unusually low
base against which this year's quarter is being compared - the
remainder of the difference in this expense category is largely the
result of those expenses.
<TABLE>
<S> <C>
Increased expense from:
Company initiated inspection program
- outside consultants $ 846,000
- replacement of parts and repairs 551,000
Leasing costs of replacement engines 356,000
Increase in expense anticipated as a result of increased ASM volume 379,000
Other 71,000
----------------
Total $ 2,203,000
================
</TABLE>
Maintenance expenses were $19,909,000 and $7,190,000 for the nine months
ended December 31, 1996 and 1995, respectively, an increase of $12,719,000 or
176.9%. The 80.1% growth in departures accounted for part of the increase
but a substantial portion of this increase was driven by the expense of the
outside consultants, replacement parts, repairs and leased engine expenses
associated with the internal inspection program initiated in March 1996.
Aircraft and traffic servicing expense includes all expenses incurred at
airports, including landing fees, facilities rental, station labor, ground
handling services and catering expenses.
Aircraft and traffic servicing expenses were $3,779,000 and $2,871,000 in
third quarters ended December 31, 1996 and 1995, respectively, an increase of
$908,000 or 31.6%. These costs
14
<PAGE> 15
AIRWAYS CORPORATION
DECEMBER 31, 1996
increased partially as a result of the increase in departures (17.5% or
$504,000). Additionally, the inspection program mentioned above necessitated
the diversion/cancellation of flights that caused the Company to incur about
$390,000 of diverted passenger costs. While costs also increased due to higher
management and station operations personnel cost, they were offset by a
reduction in catering service. The Company now offers snacks instead of light
meals, saving nearly $250,000 in the quarter ended December 31, 1996.
Aircraft and traffic servicing expenses were $12,812,000 and $6,429,000 for
the nine months ended December 31, 1996 and 1995, respectively, an increase of
$6,383,000, or 99.3%. This increase is largely in line with the 70.4%
increase in ASMs over the same period but was driven upward further by the
expenditures associated with diverted passenger costs to support the
maintenance inspection initiatives and partially offset by the reduction in
catering services.
Reservations and sales expense includes all sales, marketing and advertising
expenses as well as cost of reservations. Reservation expense includes
salaries of reservations personnel, computer reservation system expenses and
travel agent commissions.
Reservations and sales expenses were $3,310,000 and $3,207,000 in the third
quarters ended December 31, 1996 and 1995, respectively, an increase of
$103,000 or 3.2%. These costs increased at a lower rate than passenger growth
due to the leveraging of costs over expanded operations and a shift in the mix
of travel agency versus Company-direct bookings. The higher utilization of the
Company's WINGS 2000 reservation system causes lower cost in two ways: first,
the Company avoids costly travel agency commission fees and booking fees and
second, the operating cost of the Reservations department is spread over a
higher volume of calls. Expenses were further reduced this period as the
company changed accounting methods for recognizing Computer Reservation Service
("CRS") fees expense as described in note 7 to the financial statements. The
effect of the change was to increase net income by $85,000.
Reservations and sales expenses were $12,531,000 and $7,246,000 for the nine
months ended December 31, 1996 and 1995, respectively, an increase of
$5,285,000 or 72.9%. This increase reflects the higher cost of handling the
92.0% increase in passengers and reflects the increased advertising expenses
associated with the market introductions. Those cost increases were partially
offset by leveraging of costs over expanding operations and, to a lesser
degree, the change in the Company's accounting policy for CRS fees, as
explained above.
General and administrative expense includes the wages and benefits for the
Company's executive officers and various other administrative personnel. Also
included are costs for office supplies, legal expenses, accounting and
miscellaneous expenses.
General and administrative expenses were $1,077,000 and $797,000 for the
quarters ended December 31, 1996 and 1995, respectively, an increase of
$280,000 or 35.1%. General and Administrative expenses were $3,852,000 and
$2,246,000 for the nine months ended December 31, 1996 and 1995, respectively,
an increase of $1,606,000, or 71.5% over the nine month periods
15
<PAGE> 16
AIRWAYS CORPORATION
DECEMBER 31, 1996
ended December 31, 1996 and 1995. The Company became an independent, publicly
traded entity in September of last year and has had to expand its
administrative infrastructure to support its reporting and compliance
requirements. The Company also has had to expand the human resources
department to ensure that it remains in compliance with human resource laws and
regulations.
Depreciation and amortization expense includes depreciation on equipment,
aircraft and aircraft improvements and amortization of leasehold improvements,
goodwill and aircraft and loan acquisition costs.
Depreciation and amortization expenses were $1,186,000 and $494,000 in the
1996 and 1995 third quarters, respectively, an increase of $692,000 or
140.1%. Depreciation and amortization expenses were $ 3,377,000 and
$1,247,000 in the nine months ended December 31, 1996 and 1995, respectively, an
increase of $2,130,000 or 170.8%. Both increases were driven by purchases of
aircraft, completed in the third and fourth quarter of the prior fiscal year,
information systems acquired and the acquisition of the Company's maintenance
facility in the prior fiscal year.
The Company's losses generate provisions for income tax benefit associated with
its ability to apply for refunds of income taxes previously paid and avoidance
of income taxes on future income. The Company believes that future taxable
income will be sufficient to use the benefit associated with the tax loss
carryforwards.
EFFECTS OF DISTRIBUTION ON LIQUIDITY
Prior to the spin-off distribution (see note 1), AirTran contributed cash and
property to the Company having a book value of approximately $20,250,000, in
addition to $8,750,000 invested in the Company in 1995. Pursuant to a
distribution agreement, the Company and AirTran agreed to certain tax-sharing
provisions (including AirTran's assumption of all tax liability related to the
Company's operations prior to spin-off) and to indemnify each other against
certain other liabilities occurring both before and after the distribution.
Costs associated with the distribution were expensed for financial reporting
purposes and charged pursuant to the distribution agreement to the party for
whose benefit the expenses were incurred. The Company had consolidated current
assets of $22,277,000 and $26,258,000 as of December 31, 1996 and 1995,
respectively. Management believes that such assets, along with internally
generated funds as well as financing which management believes is or will be
made available, will satisfy projected operating needs. If the Company expands
its fleet or route system further, acquires another company, sustains further
losses, or otherwise requires additional capital, other sources of funds will
need to be secured and there is no assurance that such funds will be secured.
16
<PAGE> 17
AIRWAYS CORPORATION
DECEMBER 31, 1996
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company's common stock is listed on the NASDAQ National Market under the
symbol "AAIR." Trading in the stock began on September 8, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
Number Name
------ ----
<S> <C>
10.17 Orlando International Airport Lease and Use Agreement
18.1 Letter re Change in Accounting Principles
27 Financial Data Schedule (submitted only in electronic format)
</TABLE>
(B) REPORTS ON FORM 8-K
No reports on form 8-K were filed by Airways Corporation during the quarter
ended December 31, 1996.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements 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.
AIRWAYS CORPORATION
Date: February 14, 1997
/s/ Mark B. Rinder
--------------------------------------
Mark B. Rinder
VICE PRESIDENT - FINANCE,
SECRETARY AND CHIEF FINANCIAL OFFICER
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER NAME
------ ----
<S> <C>
10.17 Orlando International Airport Lease and Use Agreement
18.1 Letter re Change in accounting Principles
27 Financial Data Schedule (submitted only in electronic format)
</TABLE>
19
<PAGE> 1
EXHIBIT 10.17
O R L A N D O
I N T E R N A T I O N A L A I R P O R T
A I R L I N E - A I R P O R T
L E A S E A N D U S E A G R E E M E N T
AIRLINE: AIRTRAN AIRWAYS, INC.
EFFECTIVE DATE:
<PAGE> 2
ORLANDO
AIRLINE - AIRPORT
LEASE AND USE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
I. DEFINITIONS ............................................ 2
II. ASSIGNMENT OF PREMISES,
USE OF AIRPORT AND RIGHTS OF AIRLINES .................. 19
III. CONSTRUCTION OF PROJECT
AND ADDITIONAL PROJECTS ................................ 26
IV. INSTALLATIONS BY AUTHORITY AND AIRLINE ................. 31
V. TERM ................................................... 32
VI. MAINTENANCE AND OPERATION OF AIRPORT ................... 33
VII. FEES AND CHARGES ....................................... 37
VIII. READJUSTMENT OF FEES AND CHARGES ....................... 46
IX. APPLICATION OF REVENUES ................................ 58
X. NO FURTHER CHARGES ..................................... 81
XI. CANCELLATION BY AUTHORITY .............................. 82
XII. CANCELLATION BY AIRLINE ................................ 88
XIII. NON-WAIVER OF RIGHTS ................................... 92
XIV. MEDIATION AND REVIEW OF BUDGET DISPUTES ................ 93
XV. SURRENDER OF AIRLINE'S
EXCLUSIVELY ASSIGNED PREMISES .......................... 96
XVI. ASSIGNMENT AND SUBLETTING .............................. 97
XVII. INDEMNITY AND INSURANCE ................................ 98
XVIII. NOTICES ................................................ 102
XIX. RULES AND REGULATIONS .................................. 102
XX. HEADINGS ............................................... 103
</TABLE>
Page 1
<PAGE> 3
ORLANDO
AIRLINE - AIRPORT
LEASE AND USE AGREEMENT
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
XXI. SUBORDINATION, CONSTRUCTION AND SAVINGS CLAUSES ....... 103
XXII. GOVERNMENT INCLUSION .................................. 105
XXIII. AUTHORITY MEMBER PROTECTION ........................... 110
XXIV. ADDITIONAL PROVISIONS ................................. 111
XXV. USE OF AIRPORT ........................................ 124
XXVI. PUBLIC USE ............................................ 125
XXVII. BINDING ON SUCCESSORS ................................. 125
XXVIII. EFFECT ON PRIOR AGREEMENT ............................. 125
</TABLE>
EXHIBITS A THROUGH L
Page 2
<PAGE> 4
ORLANDO
AIRLINE - AIRPORT
LEASE AND USE AGREEMENT
THIS LEASE AND USE AGREEMENT, hereinafter referred to as
"Agreement", entered into at Orlando, Florida, as of ______________ __, 199_,
and to be effective as of July 1, 1996 (the "Effective Date"), by and between
the GREATER ORLANDO AVIATION AUTHORITY, a public and governmental body,
existing under and by virtue of the laws of the State of Florida, hereinafter
referred to as "Authority," and AIRTRAN AIRWAYS, INC., a corporation organized
and existing under the laws of the State of Delaware and either qualified to do
business in the State of Florida, or legally authorized to do business in the
State of Florida without having so qualified, hereinafter referred to as
"Airline."
W I T N E S S E T H:
WHEREAS, the City of Orlando is the owner of the Orlando
International Airport, located in the County of Orange, State of Florida; and
WHEREAS, pursuant to an agreement dated September 27, 1976, as
amended, with the City of Orlando, City Document No. 13260-1, Authority has
custody, control and management of the Airport and, under its governmental
responsibilities, operates the Airport for the accommodation of air commerce and
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<PAGE> 5
transportation; and
WHEREAS, Authority has the right to lease and license the use
of property on the Airport and has full power and authority to enter into this
Agreement in respect thereof; and
WHEREAS, Airline, as duly authorized by competent governmental
authority, is engaged in the business of certificated air transportation with
respect to persons, property and mail at the Airport and elsewhere; and
WHEREAS, Airline requires the use of certain premises,
facilities, rights and privileges in connection with its use of the Airport and
with respect to the passenger terminal complex and Authority is willing to
assign, license and grant the same to Airline upon the terms and conditions
hereinafter stated; and
NOW, THEREFORE, for and in consideration of the agreements set
forth herein, Authority and Airline agree as follows:
ARTICLE I - DEFINITIONS
The following words, terms and phrases wherever used in this
Agreement shall, for the purpose of this Agreement, have the following
meanings:
1.01 "ACCRUED AGGREGATE DEBT SERVICE" shall mean, as of any date of
calculation, an amount equal to the sum of (i) interest on the
Airport Revenue Bonds and the
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Additional Revenue Bonds of all series, other than Capital
Appreciation Bonds, accrued and unpaid and to accrue to the
end of the then current calendar month, and (ii) Principal
Installments (as defined in the Bond Resolution) due and
unpaid and that portion of the Principal Installments next due
which would have accrued (if deemed to accrue in the manner
described in the definition of Debt Service in the Bond
Resolution) to the end of such calendar month, for all series
of Airport Revenue Bonds and Additional Revenue Bonds
(including Capital Appreciation Bonds).
1.02 "ADDITIONAL PROJECT" shall mean the acquisition and
construction of any additional aviation facilities for the
Airport System or any additions, extensions, improvements and
betterments to and reconstructions of the Airport System, to
be financed, in whole or in part, from the proceeds of any
Additional Revenue Bonds or Subordinated Indebtedness.
1.03 "ADDITIONAL REVENUE BONDS" shall mean the additional revenue
bonds authorized and issued by Authority pursuant to this
Agreement and the Bond Resolution to construct any Additional
Project, including without limitation the additional revenue
bonds issued by Authority in 1985, 1987, 1988 and 1992, and
shall include any completion bonds required to complete any
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<PAGE> 7
such Additional Project and any bonds issued pursuant to the
Bond Resolution to refund any additional revenue bonds.
1.04 "AIRCRAFT PARKING APRON" shall mean that part of the Ramp
Areas contiguous to Airline's Exclusively Assigned Premises
which are used for the parking of aircraft and support
vehicles and the loading and unloading of passengers and
cargo. The exact location, layout and assignment by Airline
is as shown on Exhibit "C" attached hereto.
1.05 "AIRLINE" shall mean AirTran Airways, Inc., a corporation
organized and existing under and by virtue of the laws of the
State of Delaware.
1.06 "AIRPORT" shall mean the Orlando International Airport owned
by the City of Orlando and operated by the Greater Orlando
Aviation Authority, the boundaries of which are more
particularly shown on Exhibit "A" attached hereto and made a
part hereof.
1.07 "AIRPORT CONSULTANT" shall mean the airport consultant or
airport consulting firm or corporation at the time retained by
Authority pursuant to the Trust Agreements and Bond Resolution
to perform the acts and carry out the duties provided for such
Airport Consultant in the Trust Agreements and Bond
Resolution.
1.08 "AIRPORT DEBT SERVICE," for any Fiscal Year, shall mean
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<PAGE> 8
an amount equal to 1.25 times the amounts required by the
Trust Agreements and Bond Resolution (exclusive of any funds
made available as capitalized interest) to be paid in such
Fiscal Year into the Principal Account and the Interest
Account in the Airport System Sinking Fund established under
the Trust Agreements and the Debt Service Account in the
Airport Facilities Bond Fund established under the Bond
Resolution.
1.09 "AIRPORT IMPROVEMENT AND DEVELOPMENT PLAN" shall mean the plan
prepared annually and modified as necessary by Authority,
detailing all its proposed capital additions and improvements
to the Airport System for a five-year period. The plan and
related budgetary information shall include in general, the
details, justification (where appropriate) of each item and
the proposed cost thereof, including the proposed method of
financing. The initial five-year plan form to be used in
subsequent years is shown on Exhibit "I."
1.10 "AIRPORT REVENUE BONDS" shall mean the revenue bonds
authorized and issued by Authority pursuant to the Bond
Resolution in 1978 and in 1981, the revenue bonds issued
pursuant to the Bond Resolution in 1984 to refund the revenue
bonds issued in 1981, and any other bonds issued pursuant to
the Bond Resolution to refund any Airport Revenue Bonds and
any Prior Lien Bonds.
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<PAGE> 9
1.11 "AIRPORT SYSTEM" shall mean (i) the Orlando International
Airport owned by the City and operated by Authority, including
all improvements and facilities now in existence, as said
Orlando International Airport may be hereafter added to,
extended, improved or constructed and equipped, and (ii) any
other aviation facility or airport acquired or constructed by
Authority; provided that, the Airport System shall not include
Orlando Executive Airport (formerly Herndon Airport) or any
additions, extensions or improvements thereto. Upon the
Retirement Date of Prior Lien Bonds, "Airport System" shall
include Special Purpose Facilities the revenue and income from
which are not pledged to the payment of Authority obligations,
but "Airport System" shall not include any airport or aviation
facility thereafter acquired or constructed by Authority with
funds other than the proceeds of bonds issued under the Bond
Resolution or Revenues generated by the Airport System.
1.12 "ANNUAL BUDGET" shall mean the annual budget of Authority, as
amended or supplemented, adopted or in effect for a particular
Fiscal Year as provided in the Bond Resolution.
1.13 "AUTHORITY" shall mean the Greater Orlando Aviation Authority
created pursuant to Chapter 57-1658, Special
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<PAGE> 10
Laws of Florida 1957, as amended.
1.14 "AUTHORITY'S ARCHITECTS AND ENGINEERS" shall refer to
Authority's Architectural and Engineering Consultants, ZHA,
Incorporated (which consultants may be changed subject to MII
Approval).
1.15 "BOND RESOLUTION" shall mean the Airport Facilities Revenue
Bond Resolution Authorizing Airport Facilities Revenue Bonds
of City of Orlando, Florida, adopted by Authority on June 13,
1978, as the same has and may hereafter, from time to time, be
amended and supplemented by a Supplemental Resolution (as
defined in the Bond Resolution).
1.16 "CAPITAL APPRECIATION BONDS" shall mean Airport Revenue Bonds
or Additional Revenue Bonds that bear interest at a compounded
rate which is payable only at maturity or upon prior
redemption thereof or Airport Revenue Bonds or Additional
Revenue Bonds issued at a discount from par value that bear no
stated interest and appreciate in value over time.
1.17 "CITY" shall mean the City of Orlando, Florida.
1.18 "CIVIL AERONAUTICS BOARD" shall mean that agency of the United
States Government created and established under the name
"Civil Aeronautics Authority" under the Civil Aeronautics Act
of 1938 and redesignated as the "Civil Aeronautics Board" by
Reorganization Plan No. IV of
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<PAGE> 11
1940, and continued as an agency of the United States
Government as the "Civil Aeronautics Board" under the Federal
Aviation Act of 1958, or its successor. As of the Effective
Date of this Agreement, the United States Department of
Transportation is the successor to the Civil Aeronautics
Board.
1.19 "COMMON USE" shall mean the non-exclusive use in common by
Airline and other duly authorized users of Airport and
appurtenances together with all facilities, improvements,
equipment and services which have been or may hereafter be
provided for such Common Use.
1.20 "DEBT SERVICE RESERVE REQUIREMENT" shall mean, as of any date
of calculation, an amount equal to the greatest sum of the
amounts of Debt Service (as defined in the Bond Resolution)
with respect to all series of Airport Revenue Bonds and
Additional Revenue Bonds for the current or any future Fiscal
Year.
1.21 "DEPARTMENT OF TRANSPORTATION" shall mean that agency of the
State of Florida created and established under the name
"Department of Transportation" under the Governmental
Reorganization Act of 1969, or its successor.
1.22 "DISCRETIONARY FUND MAXIMUM BALANCE" shall mean the sum of
(a) an amount equal to $1,500,000 for Fiscal Years ending on
or before September 30, 1987, and an amount
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<PAGE> 12
equal to $3,000,000 thereafter, (b) any amount or amounts
required to repay in a timely manner all Subordinated
Indebtedness incurred to finance or refinance any Additional
Project pursuant to the provisions of Section 3.02 or 3.03
hereof and to timely make all deposits required by the terms
of any financing document relating to such Subordinated
Indebtedness, and (c) all amounts required to pay in a timely
manner all payments the Authority is required to make to any
third party under any Swap Agreement entered into by the
Authority with the approval of a Majority In Interest of
Airlines; provided, that said amount set forth in (a) above
shall be increased or decreased in direct proportion to the
changes in Producer Price Index, formerly designated as the
Wholesale Price Index, issued by the United States Department
of Labor, Bureau or Labor Statistics, using 1986 as a base
year; and provided further that, said amounts set forth in (a)
through (c) above may be adjusted by agreement from time to
time of Authority and MII.
1.23 "EXCLUSIVELY ASSIGNED PREMISES" shall mean Terminal space
assigned to, used by or to be assigned to or used by or under
or to be under the control of Airline, and no other, as so
described in Exhibit "C" attached
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<PAGE> 13
hereto. Notwithstanding the foregoing, the Authority shall
have the right to access and assign the use of Airline's
Exclusively Assigned Premises on a second priority basis to
other airlines when such Premises are not reasonably required
by Airline for its own flight operations. Airline shall be
entitled to a reasonable facility fee for the use of its
Exclusively Assigned Premises, Preferential Use Apron and
functionally related equipment by such other airline.
1.24 "FEDERAL AVIATION ADMINISTRATION" hereinafter sometimes
referred to as FAA, shall mean that agency of the United
States Government created and established under the Federal
Aviation Act of 1958, or its successor.
1.25 "FISCAL YEAR" shall mean the then current annual accounting
period of Authority for its general accounting purposes which
period, at the time of entering into this Agreement, is the
period of twelve consecutive calendar months ending with the
last day of September of any year.
1.26 "JOINT USE PREMISES" shall mean Terminal space assigned to,
used by or to be assigned to or used by or under or to be
under the joint control of only those Signatory Airlines whose
Exclusively Assigned Premises adjoin such Joint Use Premises,
described as "Joint Use Premises" on Exhibit "C" attached
hereto.
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1.27 "LANDING AREA" shall mean those portions of the Airport
(exclusive of buildings, hangars and aircraft storage areas),
provided for landing, take-off and taxiing of aircraft,
including without limitation approach and turning zones,
avigation easements, easements, runways, taxiways, runway and
taxiway lights, and other appurtenances in connection
therewith.
1.28 "MAJORITY IN INTEREST OF AIRLINES" hereinafter sometimes
referred to as "MII" shall mean at least fifty percent in
number of the Signatory Airlines which as of the time when
approval of a particular undertaking is requested,
collectively paid more than one-half (1/2) of the following:
(a) Terminal fees and charges payable directly to
Authority by all Signatory Airlines during the most
recent six-month period; and
(b) Landing fees payable directly to Authority by all
Signatory Airlines during the most recent six-month
period during which none of the Signatory Airlines
experienced schedule reductions at the Airport
because of labor disputes.
1.29 "MAXIMUM GROSS LANDING WEIGHTS" shall mean the maximum weight
at which each aircraft operated by Airline is authorized by
the FAA to land at Airport, as recited in the FAA flight
manual governing that type of aircraft.
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<PAGE> 15
1.30 "NON-EXCLUSIVELY ASSIGNED PREMISES" shall mean an area
exclusively used by or assigned to two or more Signatory
Airlines for use in common as so described in Exhibit "C"
attached hereto.
1.31 "NON-REVENUE LANDING" shall mean any aircraft landing at
Airport for which Airline receives no revenue, and includes
irregular and occasional ferry, test, courtesy, inspection,
training or other similar trips.
1.32 "OPERATION AND MAINTENANCE EXPENSES" shall mean all of
Authority's expenses for operation, maintenance, repairs,
ordinary replacement and ordinary reconstruction of the
Airport System and shall include, without limiting the
generality of the foregoing, administrative expenses,
insurance premiums, legal and engineering expenses, payments
to pension, retirement, group life insurance, health and
hospitalization funds, or other employee benefit funds, and
any other expenses required to be paid by Authority under the
provisions of the Bond Resolution, the Trust Agreements or by
law consistent with standard practices for airports similar to
the properties and business of the Airport System and
applicable in the circumstances, the expenses, liabilities and
compensation of the fiduciaries required to be paid under the
Bond Resolution, the fees and expenses of the trustee and
other fiduciaries under
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the Trust Agreements, and all to the extent properly
attributable to the Airport System. Operation and Maintenance
Expenses shall not include any capital costs or any allowance
for depreciation or any operation or maintenance costs for
Special Purpose Facilities; provided, however, that after the
Retirement Date of Prior Lien Bonds, Operation and Maintenance
Expenses shall include operation and maintenance costs
incurred by Authority with respect to any Special Purpose
Facilities, no part of the revenue and income from which is
pledged to the payment of Authority obligations.
1.33 "PREFERENTIAL USE" shall mean that Airline shall have first
right to use of the Aircraft Parking Apron assigned to it as
more particularly delineated on Exhibit "C" attached hereto.
The Authority shall have the right to access and assign the
use of said Aircraft Parking Apron on a second priority use
basis to other airlines when not reasonably required for
Airline's own aircraft operations.
1.34 "PRIOR LIEN BONDS" shall mean the City's outstanding Airport
Revenue Bonds of 1972, dated March 1, 1972, and the City's
outstanding Airport Revenue Bonds of 1974, dated March 1, 1974.
1.35 "PRIOR LIEN TRUSTEE" shall mean the trustee appointed
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pursuant to the Trust Agreements.
1.35 (A) "QUALIFIED SWAP PAYMENTS" means only those gross payments the
Authority is required to make to the third party under a Swap
Agreement (before netting) determined by reference to interest
on a notional amount, and exclude all other payments, if any,
under such agreement such as termination fees, indemnification
obligations or other fees payable to the third party.
1.36 "RAMP AREA" shall mean the aircraft parking and maneuvering
areas adjacent to Terminal.
1.37 "RETIREMENT DATE OF PRIOR LIEN BONDS" means the date on which
all of the Prior Lien Bonds and all other evidences of
indebtedness secured under the Trust Agreements shall be paid
or deemed to be paid in accordance with the Trust Agreements.
1.38 "REVENUES" shall mean
(i) all income and revenues from all sources,
collected or received by Authority in the operation
of the Airport System, including without limitation
except as expressly provided in the Bond Resolution,
all rentals, charges, landing fees, use charges and
concession revenue received by or on behalf of
Authority in its capacity as the operator of the
Airport System in connection
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with the operation, improvement and enlargement of
the Airport System, or any part thereof;
(ii) all gifts, grants, reimbursements or payments
received from governmental units or public agencies
for the Airport System's benefit which are: (a) not
restricted in application to a special purpose, and
(b) otherwise lawfully available for the payment of
charges with respect to Prior Lien Bonds, Airport
Revenue Bonds and Additional Revenue Bonds;
(iii) income received on any investment of moneys
held pursuant to the Bond Resolution and paid into
the Airport Facilities Revenue Fund established under
the Bond Resolution pursuant to the terms of the Bond
Resolution;
(iv) income received on any investment of moneys
held pursuant to the Trust Agreements and paid into
the Airport System Revenue Fund established under the
Trust Agreements; and
(v) amounts deposited in the Airport System
Revenue Fund established under the Trust Agreements
or into the Airport Facilities Revenue Fund
established under the Bond Resolution from the
Prepaid Airlines Fees and Charges Fund established
under the Bond Resolution pursuant to the terms of
the Bond Resolution.
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The term "Revenues" shall not include any moneys held by
Authority in any special fund or account not subject to the
lien and pledge of the Trust Agreements or Bond Resolution or
any revenue or income from any such moneys or from any Special
Purpose Facilities, except ground rentals therefor, or revenue
or income from Orlando Executive Airport (formerly Herndon
Airport) or any additions, extensions or improvements thereto;
provided, however, that after the Retirement Date of Prior
Lien Bonds, "Revenues" shall include revenue or income from
Special Purpose Facilities which are not pledged to the
payment of obligations of Authority issued to finance such
Facilities; and provided further, that prior to the Retirement
Date of Prior Lien Bonds, "Revenues" shall include all
revenues and income included in the definition of "revenues"
under the Trust Agreements, whether or not such revenues and
income have been specifically included or excluded from
"Revenues" herein. The foregoing notwithstanding, the term
"Revenues" shall not include any passenger facility charges
imposed from time to time pursuant to the Aviation Safety and
Capacity Expansion Act of 1990 (Pub. L. 101-508), enacted
November 5, 1990, as amended, and the implementing regulations
promulgated thereunder from time to time, and any interest or
investment earnings thereon.
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1.39 "REVENUE LANDING" shall mean an aircraft landing at Airport in
conjunction with a flight for which Airline makes a charge or
from which revenue is derived for the transportation by air of
persons or property, but "Revenue Landing" shall not include
any landing of an aircraft which, after having taken off from
Airport, and without making a landing at any other airport,
returns to land at Airport because of meteorological
conditions, mechanical or operating causes, or any other
reason of emergency or precaution.
1.40 "SIGNATORY AIRLINE(S)" shall mean an air transportation
company or companies at the relevant point in time performing
scheduled air transportation over specified routes to and from
Orlando, which air transportation company or companies shall
hold any necessary authority to provide such transportation
from the appropriate governmental agencies having jurisdiction
to grant such authority, if required under applicable law, and
which air transportation company or companies has an agreement
or agreements with Authority substantially similar to this
Agreement.
1.41 "SPECIAL PURPOSE FACILITIES" shall, prior to the Retirement
Date of Prior Lien Bonds, have the meaning assigned to such
term in the Trust Agreements; and, after the Retirement Date
of Prior Lien Bonds, shall
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mean any capital improvements or facilities acquired or
constructed by Authority from funds other than Revenues or
obligations payable from Revenues and located or to be located
on any property included under the definition of Airport
System.
1.42 "SPECIAL TRUSTEE" shall mean the Special Trustee appointed
pursuant to the Bond Resolution.
1.43 "SUBORDINATED INDEBTEDNESS" shall mean any evidences of
indebtedness payable out of, and which may be secured by a
pledge of, such amounts in the Discretionary Fund established
under the Bond Resolution as may from time to time be
available for the purpose of payment thereof as provided in
Section 411 of the Bond Resolution; provided, however, that
(i) such indebtedness shall be incurred only for any one or
more of the purposes set forth in Subsection 3 of Section 411
of the Bond Resolution and the proceeds of such indebtedness
shall only be applied for such purpose or purposes, and (ii)
such pledge shall be, and shall be expressed to be,
subordinate in all respects to the pledge created by the Bond
Resolution.
1.43 (A) "SWAP AGREEMENT" means an interest rate swap agreement or
other derivative financial product agreement between the
Authority and a third party.
1.44 "TERMINAL" shall mean the landside building, the three
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(3) airside buildings and the passenger transfer system
connecting the airside and the landside buildings, as
described in Exhibit "B", including any expansion thereof or
any improvement thereto permitted by the Trust Agreements and
Bond Resolution.
1.45 "TRUSTEE" shall mean the Trustee appointed pursuant to the
Bond Resolution.
1.46 "TRUST AGREEMENTS" shall mean (i) the Trust Agreement, dated
March 1, 1972, relating to the City's Airport Revenue Bonds of
1972, and (ii) the Trust Agreement, dated March 1, 1974,
relating to the City's Airport Revenue Bonds of 1974, both by
and between the City and Sun Bank, N.A., as trustee, as such
Trust Agreements have been or shall be amended.
1.47 "UNASSIGNED EXPANSION SPACE" shall mean Terminal space
designated as "Unassigned" space on Exhibit "C" attached
hereto.
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ARTICLE II - ASSIGNMENT OF PREMISES,
USE OF AIRPORT AND RIGHTS OF AIRLINES
2.01 USE OF AIRPORT. Airline, its employees, passengers, guests,
patrons and invitees shall have the right to the use (in
common with other duly authorized users) of Airport and
appurtenances, together with all facilities, improvements,
equipment and services which have been or may hereafter be
provided for common use at or in connection with Airport,
subject to reasonable rules and regulations promulgated in
accordance with the provisions of Article XIX.
2.02 SPECIFIC RIGHTS AT AIRPORT. Airline shall have the right, in
addition to all rights elsewhere granted in this Agreement, to
use Airport for the following purposes:
A. The operation of a transportation system by aircraft
for the carriage of persons, property and mail,
including all activities reasonably necessary to such
operation (hereinafter referred to as "Air
Transportation");
B. The landing, taking off, flying over, taxiing,
pushing, towing, loading, unloading, repairing,
maintaining, conditioning, servicing, parking,
storing and testing of aircraft or other equipment,
of or operated by Airline, or other
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certificated air transportation companies with which
there is an applicable Agreement, including the right
to provide or handle all or part of such companies'
operations or services.
C. The sale of tickets, documentation of shipments,
handling of reservations, and the loading and
unloading of persons, property and mail at Airport by
such motor vehicles or other means of conveyance as
Airline may desire to use in the operation of its air
transportation system; provided, however, that any
ground transportation commercial carrier regularly
transporting persons or their baggage to and from
Airport shall first hold a valid lease, license or
other agreement with Authority for the right to carry
persons or their baggage to and from Airport and
shall pay Authority such rentals, fees and/or
percentages of the fares of such ground
transportation commercial carrier for such right as
Authority and such carrier may agree upon.
Nothing contained herein shall prohibit Airline from
contracting with a duly licensed and appropriately
certificated ground transportation operator of its
choice for the delivery of property or transportation
of passengers and their bags when such transportation
is at the sole
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expense of Airline, or Authority's designated carrier
fails or refuses to render satisfactory service.
D. The training at Airport of persons and testing of
aircraft and other equipment, such training and
testing to be limited to that incidental to Airline's
air transportation business at Airport. Flight
training shall be undertaken by Airline only to the
extent permitted by, and subject to the fees and
conditions of Authority's rules and regulations
applicable from time to time.
E. The purchase of Airline's requirements of personal
property or services, including fuel, lubricants,
food, beverage and other passenger supplies, and any
other materials and supplies used by Airline from any
person or company of Airline's choice, and the making
of agreements with any person or company of Airline's
choice for services to be performed for Airline which
are incidental to operation of Airline's air
transportation system.
F. The sale, disposal and exchange of Airline's
aircraft, engines, accessories, fuel, oil, lubricants
and other equipment, and materials or supplies;
provided that such right shall not be construed as
authorizing the conduct of a separate regular
business by Airline, but as permitting
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Airline to perform such transactions as incidental to
the operation of its air transportation system.
G. The servicing by Airline, its suppliers of materials
or its furnishers of services, of aircraft of, or
operated by Airline or other certificated air
transportation companies with which Airline has an
applicable agreement and other equipment by truck or
otherwise, with fuel, oil, lubricants or other
materials or supplies, at aircraft loading and
unloading aprons and other locations designated by
Authority for such servicing.
The aircraft and hydrant fueling system serving the
Airport is described on Exhibit "D" attached hereto
and made a part hereof.
H. The installation and operation of identifying signs
on Airline's leased premises; the general type,
design and location of all of such signs visible to
the public to be subject to Authority approval.
I. The installation, maintenance and operation of such
radio, communication, meteorological and aerial
navigation equipment and facilities in, on and about
the premises herein leased on Airport as may be
necessary or convenient in the opinion of Airline for
its operations; provided that the
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location of such equipment and facilities as might
interfere with full and proper use of Airport shall
be subject to Authority approval.
J. The rights and privileges granted Airline under this
Article with respect to the performance of ground
services and activities in connection with its air
transportation operations at Airport may be exercised
by Airline for and on behalf of any certificated
carrier which is authorized to use Airport, or for
and on behalf of Airline by any company or person
designated by Airline; provided, however, that no
right is hereby conferred upon any supplier of
services or furnishers of materials (other than
Airline) regularly operating at Airport to perform
services for any other air transportation company
unless it holds a valid lease, license or other
agreement with Authority authorizing it to furnish
the material and/or perform the service in question,
and pays to Authority an appropriate rental, fee
and/or percentage of gross revenue derived as a
result of any materials furnished or services
supplied to other than Airline.
It is understood that if Airline's suppliers,
contractors and furnishers of services lease, for its
or their exclusive use, any portion of Airport
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or facilities of Authority, then Authority may charge
only reasonable rentals therefor (which rentals shall
be based upon the use and occupancy of Authority's
property for the conduct of a business therefrom and
such rentals shall not contain any increment of
charge representing a surcharge upon such person,
company, firm or corporation for the right to
transact business with Airline on Airport). In
addition thereto, Authority may levy a concession fee
against contractors and suppliers of inflight food
and beverage catering services to Airline at a rate
not to exceed five percent (5%) of such contractor's
gross annual sales to Airline for use or delivery at
Airport; and in addition thereto Authority may charge
contractors, and suppliers of inflight food and
beverage service such percentages of contractor's
gross annual sales, as may be mutually agreed upon
between Authority and contractors and furnishers of
service, to anyone other than Airline either on or
off Airport.
2.03 PREMISES. Authority does hereby lease and assign to Airline
and Airline does hereby lease and accept from Authority the
following premises and facilities at the Airport:
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A. The Exclusively Assigned Premises and the Joint Use
Premises in the Terminal, the exact amount and
location of which is set forth on Exhibit "C"
attached hereto.
B. The Non-Exclusively Assigned Premises, the exact
amount and location of which is set forth on Exhibit
"C" attached hereto.
C. The Preferential Use of certain Aircraft Parking
Aprons, the location of which is set forth on Exhibit
"C" attached hereto.
D. Common Use Areas.
2.04 EMPLOYEE PARKING FACILITIES.
Airline shall have the right to the use of reasonably adequate
vehicular parking facilities for its employees employed at the
Airport in common with other employees and located as near as
practicable to the Terminal in an area designated by
Authority. Authority agrees to provide these facilities at
rates based only on Authority's cost of providing them,
subject to reasonable rules and regulations established by
Authority.
2.05 RIGHT OF ACCESS, INGRESS AND EGRESS.
Airline shall have the right of access, ingress and egress to
and from the premises and facilities set forth in Sections
2.01, 2.02, 2.03 and 2.04 for Airline, its employees, agents,
passengers, guests,
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patrons, invitees, suppliers of materials and furnishers of
service, and its or their equipment, vehicles, machinery and
other property, without charge to Airline directly or
indirectly, or to said persons or property except as herein
otherwise provided, subject to reasonable rules and
regulations of Authority.
ARTICLE III - CONSTRUCTION OF PROJECT
AND ADDITIONAL PROJECTS
3.01 CONSTRUCTION OF TERMINAL. The parties agree that the Terminal
and the other improvements shown on Exhibit "B" have been
constructed substantially in accordance with the contract
documents and schematic drawings developed by Authority's
Architects and Engineers.
3.02 ADDITIONAL REVENUE BONDS AND SUBORDINATED INDEBTEDNESS. The
parties recognize that, if certain specified conditions
precedent are met, the Bond Resolution will permit the
issuance of Additional Revenue Bonds on a parity with the
Airport Revenue Bonds or the issuance of Subordinated
Indebtedness, to finance the cost of acquisition and
construction of additional aviation facilities for the Airport
System or any additions, extensions, improvements and
betterments to and reconstruction of the Airport System. It
is hereby agreed that Authority will obtain MII approval of any
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Additional Project prior to financing the same with Additional
Revenue Bonds or Subordinated Indebtedness except for the
following purposes:
(i) for the increased requirements of any
Signatory Airline(s) provided such Signatory
Airline(s) agrees in writing to pay increased
fees and charges sufficient to cover the
payment of debt service on such Additional
Revenue Bonds or Subordinated Indebtedness
issued to finance any such expansion.
(ii) for the requirements of any airline(s)
serving the Airport on a scheduled basis,
pursuant to proper authority, provided such
airline(s) enters into a Lease and Use
Agreement substantially similar to this
Agreement in which it agrees to pay fees and
charges sufficient to cover the payment of
debt service on such Additional Revenue Bonds
or Subordinated Indebtedness issued to
finance such expansion, and an allocated
portion of costs to construct the public
areas of the Project including support
systems designed for all Airlines; and
further provided, however, that if such
airline(s) is assigned any Unassigned
Expansion Space for its exclusive use, then
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Authority shall charge such airline(s) fees
and charges that are at least sufficient to
pay its allocated portion of the costs of any
such Unassigned Expansion Space.
(iii) to finance projects for public safety when
directed by the FAA, National Transportation
Safety Board or similar governmental
authority having jurisdiction over the
Airport, Airline's operation, or the safety
aspect of the Airport's operations.
(iv) to repair casualty damage to Airport System
property, the cost of which exceeds the
proceeds of insurance, which property must be
rebuilt or replaced in order to satisfy an
Authority obligation in respect to the
property or maintain a source of revenue.
(v) after contracts have been awarded, the cost
of change orders initiated by one or more
Signatory Airline(s) or Authority as to
unassigned areas for its or their sole
benefit, which shall have the effect of
increasing the fees and charges payable by
Airline pursuant to Article VII hereunder
shall be borne by the Signatory Airline(s) or
Authority as the case may be initiating such
change orders.
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3.03 REFUNDING BONDS. The parties recognize that, if certain
specified conditions precedent are met, the Bond Resolution
will permit the issuance of refunding bonds on a parity with
the Airport Revenue Bonds and Additional Revenue Bonds, and
the issuance of Subordinated Indebtedness, to refund Prior
Lien Bonds, Airport Revenue Bonds, Additional Revenue Bonds or
Subordinated Indebtedness. It is hereby agreed that Authority
may issue such refunding bonds or Subordinated Indebtedness
with notice to, but without MII approval, provided that the
debt service on the refunding bonds or Subordinated
Indebtedness in any year is not greater than the debt service
which would have been due in such year on the bonds or
Subordinated Indebtedness to be refunded.
3.04 ALLOCATION OF CERTAIN COSTS. In the event that an airline(s)
serving the Airport on a scheduled basis, pursuant to proper
authority, not presently a Signatory Airline, desires to enter
into a Lease and Use Agreement substantially similar to this
Agreement, and can be accommodated in the Terminal without any
expansion thereof, then Authority agrees to charge such
airline(s) fees and charges that are at least sufficient to
pay its allocated portion of costs to construct the public
areas of the Terminal including
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support systems designed for all airlines, and an allocated
portion of the costs of any Unassigned Expansion Space
assigned to such airline(s) for its exclusive use.
3.05 LEASE OF UNASSIGNED SPACE. Authority shall have the right to
lease any unassigned space in the Terminal to any third party
on terms and conditions that are acceptable to Authority and
consistent with the provisions of Section 8.04 (B)(1) below,
provided that Authority shall have the right to cancel any
such lease to an airline that is not a Signatory Airline on
thirty (30) days' notice.
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ARTICLE IV - INSTALLATIONS BY AUTHORITY AND AIRLINE
4.01 SPECIFICATIONS FOR FINISHES TO BE PROVIDED BY AUTHORITY IN
AIRLINE'S PREMISES.
Specifications for finishes to be provided by Authority in
Airline's Premises are set forth on Exhibit "E" attached
hereto and made a part hereof.
4.02 TITLE TO AIRLINE INSTALLED IMPROVEMENTS AND PROPERTY. As to
improvements and property installed and paid for by Airline
under the terms of this Agreement, Airline will retain title
only to its trade fixtures and equipment, except as may be
otherwise provided in this Agreement or other agreements.
4.03 ALTERATIONS, ADDITIONS OR REPLACEMENTS. Airline shall make no
alterations, additions or replacements to its Exclusively
Assigned Premises, Joint Use Premises, and Preferential Use
Aircraft Parking Aprons without Authority's prior written
approval.
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ARTICLE V - TERM
5.01 This Agreement shall become effective on the Effective Date,
except that Airline shall have no obligation to pay fees and
charges under Section 7.01(A) of this Agreement until the
Authority has notified Airline in writing that the space
described in Section 2.03(A) above is available for Airline's
use and occupancy pursuant to this Agreement. Airline shall
have no liability for any fees and charges under this
Agreement prior to the Effective Date.
5.02 This Agreement and all obligations including fees and charges
payable pursuant hereto shall expire on September 30, 2008,
unless earlier terminated in accordance with its terms, but
the termination or expiration of this Agreement shall not
relieve either party from any obligation that accrued
hereunder prior to such termination or expiration.
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ARTICLE VI - MAINTENANCE AND OPERATION OF AIRPORT.
6.01 IN GENERAL. Authority agrees that it will with reasonable
diligence prudently develop, improve, and at all times
maintain and operate Airport with adequate, efficient and
qualified personnel and keep Airport in good repair including,
without limitation, the Terminal, Landing Area, and all
appurtenances, facilities and services now or hereafter
connected therewith as the same relate to Airline's air
transportation system, will keep Airport and its aerial
approaches free from obstruction and interference for the safe
and proper use thereof by Airline; and will develop, maintain
and operate Airport in all respects in a manner at least equal
to the standards or rating established by the FAA and any
other governmental agency having jurisdiction thereof, except
for conditions beyond the control of Authority.
Responsibility for maintenance, cleaning and operation of
facilities shall be as set forth in Exhibit "F."
6.02 TERMINAL.
A. Authority shall operate and maintain and keep in good
condition and repair Terminal and all additions,
improvements, facilities and equipment now or
hereafter provided by Authority at or in
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connection with Terminal (except any passenger
loading bridges and other tenant finish items for
which Airline is obligated to pay a Tenant Finish
Surcharge or a Space Surcharge pursuant to Section
7.05 below and any improvements, facilities and
equipment constructed or installed by Airline, all of
which shall be operated, maintained and kept in good
condition and repair by Airline). Authority shall
keep Terminal, except Airline's Exclusively Assigned
Premises, in a neat, orderly, sanitary and
presentable condition.
B. Authority shall at all times maintain the public area
of Terminal so as to provide for reasonably
unobstructed use thereof by passengers and invitees,
and shall keep such area adequately supplied,
equipped (including directional signs), furnished and
decorated.
C. Authority shall supply or cause to be supplied
appropriate and adequate equipment and maintenance
for air conditioning or ventilation, heat, water and
sewerage facilities for Terminal Common Use Areas,
Airline's Exclusively Assigned Premises and Joint Use
Premises and Airline's Non-Exclusively Assigned
Premises; adequate illumination in Common Use Areas;
and adequate ventilation for removal of exhaust fumes
in the tug passageway; and janitor
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service in Non-Exclusively Assigned Premises
(including baggage claim area), Joint Use Premises,
Terminal Common Use Areas and tug passageway.
D. It is expressly understood that Airline will at all
times keep its Exclusively Assigned Premises neat,
orderly, sanitary and presentable. Airline shall
furnish its own janitor service in its Exclusively
Assigned Premises (excluding the baggage claim area);
and shall cause to be removed, at Airline's own
expense, from such spaces all waste, garbage and
rubbish and agrees not to deposit the same on any
part of Airport, except that Airline may deposit same
temporarily in its Exclusively Assigned Premises or
in space designated by Authority in connection with
collection for removal.
E. Airline may provide such porter and assistance
services as it, in its sole discretion, may deem
necessary for the convenience of its passengers in
and adjacent to the ticketing lobby and baggage claim
areas of Terminal.
6.03 PASSENGER TRANSFER SYSTEM. It is expressly understood that
Authority will be solely responsible for the safe operation,
day and night, of the passenger transfer
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system; with adequate service to Airline, its passengers,
employees and invitees; will maintain, and repair the
passenger transfer system and will keep the passenger transfer
system in a clean, neat and orderly condition at all times and
shall impose no charge against Airline's passengers, employees
or invitees for providing such service without MII approval.
6.04 CONCESSION POLICY.
Authority has adopted a Concession Policy which requires
Authority ordinarily to take competitive bids or proposals for
non-aeronautical concessions and consumer service privileges
in the Terminal exceeding one year and to award each such
contract to the qualified, responsible bidder or proposer
whose bid or proposal shall be in the best interests of the
Authority. Authority may amend the Concession Policy from
time to time, provided, however, that amendments that change
the manner of awarding concessions shall require MII approval.
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ARTICLE VII - FEES AND CHARGES
Airline agrees to pay Authority for use of the premises,
facilities, rights, licenses and privileges granted hereunder
and for the undertakings of Authority, the applicable fees
during the term of this Agreement in the following manner:
Terminal and apron fees and charges shall be paid on the first
day of each month in advance; with respect to landing fees
Airline shall, within fifteen (15) days following the end of
each calendar month, provide to Authority a true report giving
all data necessary to calculate the amount of landing fees
prescribed herein. On the basis of the information contained
in such report, Authority shall invoice Airline for the
landing fees payable by Airline to Authority for such prior
calendar month, and Airline shall, within ten (10) days after
its receipt of such invoice, pay the invoiced amount to
Authority. The acceptance by Authority of any such payment
made by Airline shall not preclude Authority from verifying
the accuracy of Airline's report on which the landing fees are
based as provided in this Article, and Airline shall be
obligated to pay to Authority any underpayment within ten (10)
days after Authority's written demand.
7.01 TERMINAL FEES AND CHARGES.
A. Airline shall pay fees for Airline's Exclusively
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Assigned Premises and Joint Use Premises in the
Terminal at the rates and in the amounts calculated
in accordance with Exhibit "G" attached hereto, as
amended from time to time.
B. In addition to the fees as called for in Section
7.01(A), above, Airline shall pay its proportionate
share of charges for the use of Non-Exclusively
Assigned Premises as set forth under Section 2.03(B)
hereof at rates set forth in Exhibit "G," as amended
from time to time pursuant to the following formula:
The total square feet of the Non-Exclusively Assigned
Premises, shown on Exhibit "C," shall be multiplied
by the appropriate annual square foot rate set forth
in Exhibit "G." Twenty percent (20%) of this total
amount is to be divided equally among all Signatory
Airlines. The eighty percent (80%) balance is to be
prorated among the Signatory Airlines based on the
ratio of each such Airline's enplaned passengers
semiannually at Airport to the total of all
passengers enplaned semiannually at Airport by all
Signatory Airlines. On October 1 and April 1 of each
year, or as soon thereafter as possible, a
reallocation shall be made based upon the total
number of enplaned passengers for the preceding
six-month period.
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C. The fees and charges with regard to Article VII,
Sections 7.01(A) and (B) above, will be subject to at
least annual readjustment in accordance with Article
VIII and Exhibit "G" and will be an automatic
function of such readjustment without the necessity
of formal amendment of this Agreement, and such
readjustments shall be prepared by Authority and
distributed to Airline by mail and thereby shall
become a part hereof.
7.02 AIRSIDE AIRCRAFT PARKING APRON FEE. The annual charge to
Airline throughout the term hereof for use of the Aircraft
Parking Apron is set out in Exhibit "H" attached hereto.
7.03 ELECTRICAL CHARGES. It is understood that all electrical
power used or consumed by Airline in its Exclusively Assigned
Premises and in its Joint Use Premises will be paid by
Authority and included in Operation and Maintenance Expenses.
It is further understood that Airline shall have an obligation
to advise Authority when there is a significant decrease or
increase in the use of electrical equipment.
7.04 LANDING FEES.
A. (1) From and after the Effective Date of this
Agreement, fees and charges for use of the Premises,
facilities, rights, licenses and
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privileges granted to Airline under this Agreement,
except those for which fees and charges are
specifically provided in Sections 7.01 and 7.02 of
this Article VII, shall be combined in and
represented by a landing fee or fees, which shall be
at least annually calculated and determined as a
function of the readjustment in accordance with
Article VIII hereof and will appear annually on
Exhibit "G." Said fee or fees will be expressed in
cents per thousand pounds of the approved maximum
gross landing weight of each type of Airline's
aircraft and shall be multiplied by the number of
Revenue Landings by each type of said aircraft at the
Airport.
(2) If Airline shall fail, within fifteen (15) days
following the end of a calendar month, to provide
Authority with the report containing all the data
required by the first paragraph of this Article VII,
then Authority shall invoice Airline for estimated
landing fees for the prior calendar month in an
amount equal to the monthly landing fee that would be
payable under this Agreement if Airline's landings at
the Airport were those shown in Airline's published
schedule of aircraft service to the Airport for the
prior calendar month. Airline shall, within ten (10)
days after
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its receipt of such invoice, pay the invoiced amount
to Authority. The acceptance of such estimated
landing fee payments by Authority shall be without
prejudice to any of Authority's or Airline's rights
under Section 11.01(B) below. Any underpayment of
landing fees shall be paid with the landing fee
report provided by Airline to Authority covering the
period for which estimated landing fee payments have
been made, together with interest thereon from the
date the estimated landing fees became payable at the
rate provided for in Section 7.08 below, and any
overpayment of landing fees shown in such report
shall be credited against the landing fees next
coming due from Airline after issuance of a credit
memorandum by Authority.
B. As a consideration for Airline's commitments
hereunder, Authority agrees to directly or indirectly
levy appropriate and equitable user fees and charges
on all users of the Airport landing area.
7.05 TENANT FINISH/SPACE SURCHARGE. Airline shall pay an annual
Tenant Finish Surcharge calculated in accordance with Exhibits
"E-2" and "E-3", based on Airline's Net Tenant Finish Project
Cost. Airline shall also pay an
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annual Space Surcharge calculated in accordance with Exhibits
"E-2" and "E-3" to reflect the Authority's tenant finish cost
in finishing and furnishing Airline's Exclusively Assigned
Premises. Airline's Tenant Finish Surcharge and Space
Surcharge as of the Effective Date is shown on Exhibit "E-3",
and shall be re-calculated at least annually, adjusted if
necessary, and will appear annually on Exhibit "G."
7.06 INFORMATION TO BE SUPPLIED BY AIRLINE. Airline covenants and
agrees to furnish Authority each month, as far as the records
of Airline will permit, a report of Airline's operations at
the Airport during the preceding month, setting forth the
total number of enplaning and deplaning passengers, the total
pounds of enplaned and deplaned mail, express and freight, on
a daily basis, carried by Airline during the preceding month
and the number of Revenue Landings by Airline by type of
aircraft.
7.07 NOTICES OF UNPAID RENT, FEES OR CHARGES. Notwithstanding any
provision of this Agreement to the contrary, invoices or other
written notices for unpaid rent, fees or charges payable by
Airline under this Agreement which are hand delivered to
Airline's station manager or assistant or acting station
manager at the Airport shall constitute receipt by Airline of
written notice of non-payment from Authority, provided that
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duplicate written notice is sent by overnight delivery service
to the address set forth for Notices to Airline pursuant to
Paragraph 18.02.
7.08 INTEREST ON DELINQUENT AMOUNTS. Without waiving any other
right available to Authority in the Event of Default in
Airline's payment of rents, fees or charges under this
Agreement, in the event that Airline is delinquent in paying
Authority any such rents, fees or charges, and if Airline
fails to pay such amounts within ten (10) business days after
Authority's written demand, Airline shall pay Authority
interest thereon, from the date such rents, fees or charges
became payable to the date of payment, at the maximum interest
rate then provided by applicable law; provided, however, that
if no maximum interest rate is then provided by applicable
law, the interest rate shall be eighteen percent (18%) per
annum. Such interest shall not accrue with respect to disputed
items being contested in good faith by Airline.
7.09 CONTRACT SECURITY.
(A) Unless Airline has provided regularly scheduled
passenger flights to and from the Airport for the
eighteen (18) months prior to Airline's execution of
this Agreement (or prior to the assignment of this
Agreement to Airline) without committing an
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act or omission that would have been an Event of
Default under Section 11.01(A) of this Agreement if
this Agreement had been in effect during this period,
Airline shall provide Authority on the execution of
this Agreement (or on the assignment of this
Agreement to Airline) with a contract bond,
irrevocable letter of credit or other security
acceptable to Authority ("Contract Security") in an
amount equal to three (3) months' fees and charges
payable by Airline under Sections 7.01(A) and (B),
7.02 and 7.04 of this Agreement and any Tenant
Finish Surcharge or Space Surcharge payable under
this Agreement during such three-month period, to
guarantee the faithful performance by Airline of its
obligations under this Agreement and the payment of
all fees and charges due hereunder. Airline shall be
obligated to maintain such Contract Security in
effect until the expiration of eighteen (18)
consecutive months (including any period prior to
Airline's execution of this Agreement or prior to the
assignment of this Agreement to Airline during which
Airline provided regularly scheduled passenger
flights to and from the Airport) during which Airline
commits no Event of Default under Section 11.01(A) of
this Agreement (and for any
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such prior period, no act or omission that would have
been such an Event of Default hereunder). Such
Contract Security shall be in such form and with such
company licensed to do business in the State of
Florida as shall be acceptable to Authority in its
reasonable discretion. In the event that any such
Contract Security shall be for a period of less than
the full period required by this Agreement, or if
such Contract Security may be canceled, Airline shall
provide a renewal or replacement Contract Security
for the period following the expiration or
cancellation of such Contract Security previously
provided at least sixty (60) days prior to the date
on which such previous Contract Security expires or
at least sixty (60) days prior to the effective date
of such cancellation.
(B) If Airline shall commit an Event of Default under
Section 11.01(A) of this Agreement, Authority shall
have the right, by written notice to Airline given at
any time within ninety (90) days of such Event of
Default, to impose or reimpose the requirements of
Section 7.09(A) above on Airline. In such event,
Airline shall within ten (10) days from its receipt
of such written notice, provide Authority with the
required Contract Security and
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shall thereafter maintain such Contract Security in
effect until the expiration of a period of eighteen
(18) consecutive months during which Airline commits
no Event of Default under Section 11.01(A) of this
Agreement. Authority shall have the right to reimpose
the requirements of Section 7.09(A) above on Airline
each time Airline commits such an Event of Default
during the term of this Agreement. Authority's
rights under this paragraph shall be in addition to
all other rights and remedies provided to Authority
under this Agreement.
ARTICLE VIII - READJUSTMENT OF FEES AND CHARGES
8.01 It is agreed that Authority will compute the fees and charges
payable by Airline under this Agreement using the cash basis
of revenue accounting. Fees and charges will be reviewed at
least annually and adjusted as necessary through negotiation,
effective September 1, for fees and charges provided for in
Sections 7.01 and 7.05 of this Agreement, and effective August
1, for the fees and charges provided for in Section 7.04 of
this Agreement. Fees and charges will be calculated so that
for each Fiscal Year, Revenues less:
(i) Operation and Maintenance Expenses; and
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(ii) all amounts required to be paid or deposited
for such Fiscal Year by the terms of any financing
documents relating to any Subordinated Indebtedness
incurred pursuant to Section 3.02 or 3.03; and
(iii) all payments the Authority is required to
make in such Fiscal Year to any third party under any
Swap Agreement entered into by the Authority with the
approval of a Majority In Interest of Airlines; and
(iv) required deposits from Revenues into:
(a) the Airport System Renewal and
Replacement Fund established under
the Trust Agreements,
(b) Operating Reserve Account in the
Airport System Revenue Fund
established under the Trust
Agreements,
(c) the Operation and Maintenance
Reserve Account in the Airport
Facilities Operation and Maintenance
Fund established under the Bond
Resolution,
(d) the Airport Facilities Capital
Expenditures Fund established under
the Bond Resolution, and
(e) the Airport Facilities Renewal and
Replacement Fund established under
the
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Bond Resolution,
shall at least equal Airport Debt Service; provided, however,
that if Authority with the approval of a Majority In Interest
of Airlines, enters into a Swap Agreement with respect to
Airport Revenue Bonds or Additional Revenue Bonds, and if .25
times the Qualified Swap Payments for such Fiscal Year exceeds
.25 times Debt Service (as defined in the Bond Resolution) on
the Airport Revenue Bonds or Additional Revenue Bonds to which
the Swap Agreement relates for such Fiscal Year, then Airport
Debt Service under this Section 8.01 shall be increased by
such excess amount; and further provided, however, that if
Authority with the approval of a Majority In Interest of
Airlines, enters into a Swap Agreement with respect to
Subordinated Indebtedness, then Airport Debt Service under
this Section 8.01 shall be increased by .25 times the
Qualified Swap Payments the Authority is required to make to
the third party under the Swap Agreement for such Fiscal Year.
8.02 A. For purposes of accomplishing the aforesaid annual
adjustment, Authority shall by June 1st prior to the
end of each Fiscal Year, submit to Airline the
quarterly financial data (unaudited) called for in
Section 8.05(A), for the first two quarters of the
said current Fiscal Year, together with the
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following:
1. Authority's estimates of Revenues and
Operation and Maintenance Expenses for the
last two quarters of said current Fiscal
Year;
2. Estimates of any surplus or deficit in its
Annual Budget for the current Fiscal Year;
3. Actual audited financial statements with this
Agreement for the preceding Fiscal Year;
4. Authority's estimates of Revenues and
Operation and Maintenance Expenses for the
next ensuing Fiscal Year, in substantial
accordance with the format as shown on
attached Exhibit "G" setting forth the basis
for changes from the current year, if any.
Authority shall also furnish Airline a
breakdown of its personnel staffing proposal
for the next ensuing Fiscal Year in the
format of Exhibit "J," and the justification
for any proposed changes.
5. Proposed Annual Budget
B. The estimates of Revenues and Operation and
Maintenance Expenses for the next ensuing Fiscal Year
shall be based upon the historical experience and the
then current Annual Budget of Authority and shall be
supported by Authority's proposed
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Annual Budget for the ensuing Fiscal Year. Authority
and Airline shall meet between June 1st and July 1st
of each Fiscal Year for the purpose of reviewing the
information submitted to Airline. In such review,
Authority will give fair and prudent consideration to
suggestions, comments or requests by Airline with
respect to additions, deletions or modifications and
with respect to the amount, character and
desirability of any line items contained therein, and
negotiate the new fees and charges for the ensuing
Fiscal Year for the purpose of reaching agreement.
C. Before the beginning of each Fiscal Year, Authority
shall adopt its Annual Budget substantially in
accordance with the information submitted to Airline
for purposes of recalculation of fees and charges
referred to above, as the latter may have been
revised as a result of negotiations with Airlines and
any subsequent mediation or hearings.
D. Once the Annual Budget is adopted by Authority, the
total budgeted amount will not be exceeded without
the written approval of MII unless said increase is
due to (i) circumstances beyond the control of
Authority or (ii) is the result of maintenance or
repair of an emergency nature that
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would have the effect of closing the Airport to
scheduled flight operations or to the public for a
period of forty-eight (48) hours, or (iii) is the
result of increases in the interest rate payable by
the Authority on Airport Revenue Bonds, Additional
Revenue Bonds or Subordinated Indebtedness that bear
a variable interest rate, causing the interest
thereon to exceed the amount budgeted therefor, or
(iv) is the result of increases in the payments the
Authority is required to make to a third party under
a Swap Agreement entered into by the Authority with
the approval of a Majority In Interest of Airlines,
causing such payments to exceed the amount budgeted
therefor, in any of which cases such approval shall
not be required.
E. If adjustment of fees and charges is not completed on
or prior to the end of the Fiscal Year, the fees and
charges then in existence shall continue to be paid
by Airline until adjustment is concluded; provided,
however, that during any such period when Authority
is required to expend twenty-five percent (25%) or
more of the funds which should properly be on deposit
in the Operating Reserve Account held in the Airport
System Revenue Fund established under the Trust
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Agreements or the Operation and Maintenance Reserve
Account held in the Airport Facilities Operation and
Maintenance Fund established under the Bond
Resolution, if Authority elects, the amount so
expended shall become a surcharge applied to the
landing fees for the month in which such expenditures
are made from said Account and to be paid therewith
provided that Airline shall be credited with the
amount of any such surcharge paid by it and said
credit shall be applied to Airline's adjusted landing
fees in the first month after the adjustment is
implemented but only to the extent that such credit
will not create a deficiency in the amount of
Revenues to be received by Authority under the Bond
Resolution.
8.03 The following factors shall be used in determining the
adjustments of fees and charges pursuant hereto:
A. Airport Debt Service for the next ensuing Fiscal Year
and any deficiencies in the Reserve Account held in
the Airport System Sinking Fund established under the
Trust Agreements or the Debt Service Reserve Account
held in the Airport Facilities Bond Fund established
under the Bond Resolution.
B. Operation and Maintenance Expenses estimated by
Authority for the next ensuing Fiscal Year.
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C. Required payments into the Airport System Renewal and
Replacement Fund and Operating Reserve Account in the
Airport System Revenue Fund established under the
Trust Agreements and the Operation and Maintenance
Reserve Account held in the Airport Facilities
Operation and Maintenance Fund, the Airport
Facilities Capital Expenditures Fund and the Airport
Facilities Renewal and Replacement Fund established
under the Bond Resolution for the next ensuing Fiscal
Year.
D. All amounts required to be paid or deposited for the
next ensuing Fiscal Year by the terms of any
financing documents relating to any Subordinated
Indebtedness incurred pursuant to Sections 3.02 or
3.03 above.
E. Revenues estimated by Authority for the next ensuing
Fiscal Year.
F. All amounts required to be paid to any third party
for the next ensuing Fiscal Year under any Swap
Agreement entered into by the Authority with the
approval of a Majority In Interest of Airlines, plus
.25 times such amount to the extent provided for in
Section 8.01 above.
After adjustments to fees and charges have been made for a
particular Fiscal Year with consideration to the above
factors, fees and charges payable by Signatory
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Airlines in such Fiscal Year shall be reduced by the amount
deposited into the Airport System Revenue Fund established
under the Trust Agreements or the Airport Facilities Revenue
Fund established under the Bond Resolution in such Fiscal Year
from amounts accumulated in the Prepaid Airline Fees and
Charges Fund established under the Bond Resolution in the
previous Fiscal Year.
8.04 A. Authority covenants that in keeping its books of
account and allocating revenues and expenses it will
observe sound, generally accepted accounting
principles, with variations approved by both parties,
consistently applied and including only those costs
in the system of accounts directly attributable to
the Airport System, on the basis of sound business
principles for effective and prudent control of
expenses for Airport System operation, maintenance
and administration. Wages and salaries for all
Airport System personnel shall be reasonable and not
in excess of those prevailing at comparable airports
in the Southeastern United States for the performance
of similar work. Authority shall contract prudently
for cleaning services in lieu of performing this work
with its own employees unless it can show that such
can be done efficiently at less cost.
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B. Authority further covenants that it:
1. shall operate the Airport System in a manner
so as to produce revenues from
concessionaires, tenants and other users of
Airport System of a nature and amount which
would be produced by a reasonably prudent
operator of an Airport System of
substantially similar size, use and activity,
consistent with sound management principles
which will protect Authority's financial
integrity;
2. shall, to the extent economically feasible,
establish non-discriminatory rates, fees and
charges at each airport operated by Authority
as part of its Airport System in order to
recover all costs properly allocable to each
of said airports;
3. shall use all Revenues, exclusively for the
construction, maintenance, operation,
development and management of the Airport
System pursuant to its enabling legislation;
4. shall not, in computing cost, charge interest
on advances or loans made from Authority
resources other than borrowing, to the
Airport System for purposes of improving the
Airport System at rates greater than those
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paid by Authority on bond issues or other
loans for Airport System purposes;
5. shall not include amortization, depreciation
or interest charges for those portions of
costs of facilities or improvements paid for
by federal or state grants-in-aid or other
grants from public agencies or ad valorem
taxes, unless such grants require repayment
to Federal or State Government;
6. shall not include the cost of any service
provided by any governmental agency unless
the service and cost are justified and a
direct charge is paid by Authority;
7. shall not include a return on its investment
in land as an expense in the airline rate
base;
8. shall not include amortization, depreciation
or interest charges for those portions of
costs of facilities or improvements
constructed and/or used for public or common
use by the Signatory Airlines and which were
funded from the Airport Facilities
Improvement and Development Fund established
under the Bond Resolution unless it shall be
determined otherwise by a MII; and
9. (i) prior to the Retirement Date of Prior
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Lien Bonds, shall not acquire or
construct any additional airport or
aviation facility without MII
approval unless such Airport or
aviation facility is an addition,
extension or improvement to Orlando
Executive Airport (formerly Herndon
Airport), and
(ii) after the Retirement Date of Prior
Lien Bonds, shall not acquire or
construct any additional airport or
aviation facility with the proceeds
of bonds issued under the Bond
Resolution or from revenues
generated by the Airport System
without MII approval.
8.05 A. For the purpose of keeping Airline informed as to the
revenues and expenses of Authority's Airport System,
Authority shall furnish quarterly statements to
Airline; and, for use in adjustment of charges as
herein provided, Authority shall provide Airline
annually with a statement of actual revenues and
expenses showing reasonable detail as to basis for
allocation and the distribution of revenues and
expenses therefor. The basic format of said
statements is to be substantially as shown on
attached Exhibit "G."
B. Promptly following the beginning of each Fiscal
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Year, Authority shall furnish to each Signatory
Airline a copy of Airport System's Annual Budget for
such Fiscal Year.
C. In order to make informed suggestions, if any, for
additions, deletions or modifications to line items
in any Annual Budget, Airline shall have the right,
at its expense, to review and inspect Authority's
accounts.
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ARTICLE IX - APPLICATION OF REVENUES
Pursuant to the terms of the Trust Agreements and the Bond
Resolution, Revenues shall be applied as follows:
9.01 PRIOR TO RETIREMENT DATE OF PRIOR LIEN BONDS - Prior to the
Retirement Date of Prior Lien Bonds, all Revenues shall be
deposited by Authority into the Airport System Revenue Fund
created under the Trust Agreements. Moneys held in said
Revenue Fund shall be disbursed and applied by the Prior Lien
Trustee as follows:
A. The Prior Lien Trustee shall, on the first day of
each month, withdraw from said Revenue Fund and
deposit into the following funds and accounts
established under the Trust Agreements in the
following order of priority the amounts set forth
below:
1. to the Airport System Sinking Fund for credit
to the Interest Account therein, an amount
equal to one-sixth (1/6) of the amount of
interest which will mature on the Prior Lien
Bonds on the next succeeding semi-annual
interest payment date; provided, however,
that such deposit shall not be required to
the extent that sufficient moneys are then on
deposit in said Interest Account;
2. to the Airport System Sinking Fund for credit
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to the Principal Account therein, an amount
equal to one-twelfth (1/12) of the amount of
principal which will become due on the Prior
Lien Bonds on the next succeeding principal
maturity date;
3. to the Airport System Sinking Fund for credit
to the Reserve Account therein, an amount
equal to one-sixtieth (1/60) of the largest
amount of principal and interest which will
mature or become due on the Prior Lien Bonds
in any succeeding year; provided, however,
that no further deposits into said Reserve
Account shall be required whenever and as
long as the amount then on deposit therein is
equal to the largest amount of principal and
interest which will mature or become due on
the Prior Lien Bonds in any succeeding year;
4. to the Operation and Maintenance Fund an
amount equal to one-twelfth (1/12) of the
amount provided in the then current Annual
Budget for Operating Expenses (as defined in
the Trust Agreements);
5. to the Operating Reserve Account held in the
Airport System Revenue Fund in an amount
which, together with the monies on deposit in
said Account, will equal one-sixth (1/6) of
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the Operation and Maintenance Expenses set
forth in the then current Annual Budget;
6. to the Airport System Renewal and Replacement
Fund, an amount equal to one-twelfth (1/12)
(or such greater fraction if the period is
less than 12 months as may be appropriate) of
the monies appropriated for said Renewal and
Replacement Fund as set forth in the then
current Annual Budget; provided, however,
that no further deposits into said Renewal
and Replacement Fund shall be required
whenever and as long as the uncommitted
monies in said Renewal and Replacement Fund
are equal to or greater than Three Million
Dollars ($3,000,000) or such larger amount as
the Airport Consultant shall certify is
necessary for the purposes of said Renewal
and Replacement Fund. Each Annual Budget
shall provide for depositing in said Renewal
and Replacement Fund the amount necessary to
maintain the level of said Fund at Three
Million Dollars ($3,000,000) or such larger
amount as the Airport Consultant shall
certify is necessary for the purposes of said
Fund;
7. to the Discretionary Fund, an amount equal to
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(i) one-twelfth (1/12) of an amount which is
equal to seven and one-half per cent (7-1/2%)
of the budgeted Revenues, or (ii) $10,000,
whichever is greater;
8. after making all the deposits or payments
provided in subsections 9.01(A)(1) to (7),
inclusive, above, including all deficiencies
for prior required payments, all monies then
remaining in the Airport System Revenue Fund
shall be deposited in the Airport System
Surplus Fund.
B. Authority shall, on the second day of each month,
transfer, or cause to be transferred, into the
Airport Facilities Revenue Fund established under the
Bond Resolution and to be held by the Special
Trustee, (i) all monies on deposit in said
Discretionary Fund except for such monies which are
required to be deposited in the Reserve Account or
Redemption Account in the Airport System Sinking
Fund, or in the Airport System Operation and
Maintenance Fund, or are required to pay principal or
interest on Prior Lien
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Bonds, and (ii) all monies on deposit in the Airport
System Surplus Fund which are not required to be
deposited in the Redemption Account in the Airport
System Sinking Fund or to pay principal or interest
on Prior Lien Bonds. As soon as practicable in each
month after the aforesaid transfer is made, but in
any case no later than five (5) business days before
the end of such month, the Special Trustee shall
withdraw from the Airport Facilities Revenue Fund
established under the Bond Resolution and deposit in
the following Funds and Accounts established under
the Bond Resolution, in the following order of
priority, the amounts set forth below:
1. To the Airport Facilities Bond Fund, to be
held by the Trustee for credit to the Debt
Service Account therein, if and to the extent
required so that the balance in said Debt
Service Account shall equal the Accrued
Aggregate Debt Service; provided that, for
the purposes of computing the amount in said
Debt Service Account, there shall be excluded
the amount, if any, set aside in said Debt
Service Account which was deposited therein
from the proceeds of each series of Airport
Revenue Bonds and Additional Revenue Bonds
less the amount of interest accrued and
unpaid and to accrue on said Bonds of such
series (or any Bonds issued to refund such
Bonds), excluding Capital Appreciation Bonds,
to the last day of the then current calendar
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month. Authority, from the proceeds of each
series of Airport Revenue Bonds, shall
deposit in said Debt Service Account an
amount equal to the interest accrued and to
accrue on such series of Airport Revenue
Bonds from their date to the date specified
in the Bond Resolution.
2. To the Airport Facilities Bond Fund for
credit to the Debt Service Reserve Account
therein, an amount, if and to the extent
necessary, so that the balance in said Debt
Service Reserve Account shall equal the Debt
Service Reserve Requirement. Authority, from
the proceeds of each series of Airport
Revenue Bonds, shall deposit in said Debt
Service Reserve Account the amount, if any,
necessary so that such Account shall equal
the Debt Service Reserve Requirement
calculated immediately after authentication
and delivery of such series of Airport
Revenue Bonds.
3. To the Airport Facilities Capital
Expenditures Fund, to be held by Authority,
an amount equal to one-twelfth (1/12) (or
such greater fraction if the period is less
than 12 months as may be appropriate) of the
money
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appropriated for said Capital Expenditures
Fund as set forth in the then current Annual
Budget, provided that, if any such monthly
allocation to said Capital Expenditures Fund
shall be less than the required amount, the
amount of the next succeeding monthly payment
shall be increased by the amount of such
deficiency. Amounts on deposit in said
Capital Expenditures Fund may be used to
purchase items of equipment or other capital
items for use in connection with the Airport
System. Prior written approval of a MII
shall be obtained for an expenditure
exceeding $20,000 for any single item or
expenditures for all items exceeding an
aggregate of $200,000 in any Fiscal Year.
Each succeeding Annual Budget commencing with
the Annual Budget for the Fiscal Year that
commences on October 1, 1979, shall specify
the amount, if any, of the increase or
decrease in the $20,000 and $200,000
requirements of such Fund, which changes
shall be in direct proportion to changes in
the Producer Price index, formerly known as
the Wholesale Price Index, issued by the
United States Department of Labor, Bureau of
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Labor Statistics using 1978 as a base year.
4. To the Airport Facilities Discretionary Fund,
to be held by Authority, in each month of the
Fiscal Year, the amount of $83,333.33, plus
all amounts required to be deposited into the
Discretionary Fund in such month by the terms
of any financing documents relating to any
obligation incurred by Authority pursuant to
the provisions of Section 3.02 or 3.03
hereof, plus all amounts required to pay in a
timely manner all payments the Authority is
required to make to any third party under any
Swap Agreement entered into by the Authority
with the approval of a Majority In Interest
of Airlines, or such lesser amount which will
not cause the amount on deposit in such
Discretionary Fund to exceed the
Discretionary Fund Maximum Balance, provided
that, if any such monthly allocation to said
Discretionary Fund shall be less than the
required amount, the amount of the next
succeeding monthly payment shall be increased
by the amount of such deficiency to the
extent that the amount on deposit in such
Discretionary Fund shall not exceed the
Discretionary Fund Maximum Balance. The
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amount of the monthly deposit to the
Discretionary Fund may be adjusted from time
to time by agreement between Authority and
MII. Expenditures from said Fund may be made
by Authority at its sole discretion for any
legal purpose of Authority in connection with
the Airport System; provided, however, that
Authority shall provide Airline with an
annual detailed report of such expenditures.
5. At the end of each Fiscal Year, after all
deposits required to be made into each of the
aforesaid Funds have been made, the Special
Trustee shall transfer from the remaining
monies on deposit in such Revenue Fund a sum
equal to the estimated amount of monies which
are not required to make up deficiencies in
any of the aforesaid Funds, as follows:
(i) an amount equal to 50% of such
remaining monies shall be deposited
in the Airport Facilities
Improvement and Development Fund,
and
(ii) an amount equal to 50% of such
remaining monies shall be deposited
in the Airport Facilities Prepaid
Airlines Fees and Charges Fund.
When it has been determined by audit what
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actual amounts were on deposit in the Airport
Facilities Revenue Fund at the end of a
Fiscal Year which were not required to make
up deficiencies as aforesaid, an adjustment
shall be made, as follows:
(1) If such amounts were overestimated,
there shall be deposited into such
Revenue Fund from each of the
Airport Facilities Improvement and
Development Fund and the Airport
Facilities Prepaid Airlines Fees and
Charges Fund, respectively, fifty
percent (50%) of the overestimated
amount. To the extent there shall
not be sufficient monies on deposit
in the Airport Facilities Prepaid
Airlines Fees and Charges Fund to
make the required deposit into such
Revenue Fund, each Signatory Airline
shall, as soon as possible, pay to
Authority for deposit in such
Airlines Fees and Charges Fund the
amount of such deficiency which is
in proportion to the amount that the
landing fees paid by such Signatory
Airline in the Fiscal Year just
concluded bears to the total amount
of landing fees paid by all
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Signatory Airlines in such concluded
Fiscal Year.
(2) If such amounts were underestimated,
there shall be deposited from the
Airport Facilities Revenue Fund into
each of the Airport Facilities
Improvement and Development Fund and
the Airport Facilities Prepaid
Airlines Fees and Charges Fund,
respectively, fifty percent (50%) of
the underestimated amount.
(a) Amounts on deposit in the Airport Facilities
Improvement and Development Fund in each Fiscal Year
shall be used to pay costs of such Fiscal Year's
Airport Improvement and Development Plan to the
extent approved by MII:
(i) Prior to June 1 of each year, Authority shall
submit to Airline in detail its recommended
Airport Improvement and Development Plan for
the succeeding Fiscal Year for Airline review
and consideration. Airline shall notify
Authority in writing within forty-five (45)
days after receipt of a written request from
Authority whether such improvements or
additions are approved in whole or in part.
Failure of Airline to reply within forty-five
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(45) days shall constitute approval by
Airline. Authority's proposal, to the extent
approved or modified by MII, shall be the
Airport Improvement and Development Plan for
the succeeding Fiscal Year funded as provided
hereunder, and Authority shall proceed to
purchase, construct or otherwise complete
such plan. To the extent that the balance in
the fund, in the opinion of Authority and
MII, exceeds the amounts reasonably necessary
to fund the requirements of (i) above, the
amounts on deposit in said Improvement and
Development Fund may be used to purchase or
redeem any Airport Revenue Bonds, Additional
Revenue Bonds or Subordinated Indebtedness,
including the expenses in connection with
such purchase or redemption; provided,
however, if at any time the unencumbered
balance in the fund exceeds the amounts
reasonably necessary to fund Authority's
share of the projects in the Airport
Improvement and Development Plan, to be
funded from the Airport Improvement and
Development Fund, such amount to be net of
costs to be funded by the issuance of notes
or other debt obligations, grants-in-aid, or
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from Authority's Discretionary Fund or the
Airport Facilities Capital Expenditure Fund,
the excess amounts on deposit in said
Improvement and Development Fund shall be
used to purchase or redeem any Airport
Revenue Bonds, Additional Revenue Bonds or
Subordinated Indebtedness, including the
expenses in connection with such purchase or
redemption; and further provided, however,
that beginning with the end of the Fiscal
Year that commenced as of October 1, 1990,
the Authority will use the unencumbered
balance remaining in said Improvement and
Development Fund to purchase or redeem
Airport Revenue Bonds or Additional Revenue
Bonds and to pay the expenses associated
therewith unless the Authority and an MII
agree, pursuant to this Agreement, to use
these funds for another permitted purpose.
(ii) If a proposed improvement or addition is not
approved by MII, Authority may abandon it or
fund the improvement or addition from any
other source legally available to Authority,
including the Airport Facilities
Discretionary Fund, but may not include the
costs thereof or associated therewith as an
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Operation and Maintenance Expense when
calculating landing fees pursuant to Article
VIII.
Any amounts remaining on deposit in the Prepaid
Airlines Fees and Charges Fund at the end of each
Fiscal Year shall be transferred by Authority to the
Prior Lien Trustee for deposit in the Airport System
Revenue Fund established under the Trust Agreements,
in equal amounts in each of the first three (3)
months of the next succeeding Fiscal Year, to be
disbursed and applied as Revenues. Airline's fees and
charges for the first three (3) months of such next
succeeding Fiscal Year shall be credited with that
portion of the amount so deposited in the Airport
System Revenue Fund in such month which is in
proportion to the amount that the landing fees paid
by Airline in the Fiscal Year just concluded bears to
the total amount of landing fees paid by all
Signatory Airlines in such concluded Fiscal Year.
Notwithstanding the foregoing, if required by the terms of the
Bond Resolution, the monies in the Airport Facilities Capital
Expenditures Fund, the Airport Facilities Discretionary Fund
and the Airport Facilities Improvement and Development Fund
may be used, to the extent necessary, to pay principal of and
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interest on Airport Revenue Bonds and Additional Revenue Bonds
and to pay Operation and Maintenance Expenses.
9.02 AFTER RETIREMENT DATE OF PRIOR LIEN BONDS - On and after the
Retirement Date of Prior Lien Bonds, all Revenues shall be
promptly deposited by Authority into the Airport Facilities
Revenue Fund created under the Bond Resolution. As soon as
practicable in each month after the deposit of Revenues in
said Airport Facilities Revenue Fund, but in any case no later
than five (5) business days before the end of such month, the
Special Trustee shall withdraw from the Airport Facilities
Revenue Fund and deposit into the following Funds and Accounts
established under the Bond Resolution, in the following order
of priority, the amounts set forth below:
1. To the Airport Facilities Operation and Maintenance
Fund, an amount equal to one-twelfth (1/12) (or such
greater fraction if the period is less than 12 months
as may be appropriate) of the money appropriated for
Operation and Maintenance Expenses for the then
current Fiscal Year as set forth in the then current
Annual Budget.
2. To the Airport Facilities Bond Fund for credit to the
Debt Service Account therein, if and to the
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extent required so that the balance in said Debt
Service Account shall equal the Accrued Aggregate
Debt Service; provided that, for the purposes of
computing the amount in said Debt Service Account,
there shall be excluded the amount, if any, set aside
in said Debt Service Account which was deposited
therein from the proceeds of each series of Airport
Revenue Bonds and Additional Revenue Bonds less the
amount of interest accrued and unpaid and to accrue
on the said Bonds of such series (or any Bonds issued
to refund such Bonds), excluding Capital Appreciation
Bonds, to the last day of the then current calendar
month.
3. To the Airport Facilities Bond Fund for credit to the
Debt Service Reserve Account therein, an amount, if
and to the extent necessary, so that the balance in
said Debt Service Reserve Account shall equal the
Debt Service Reserve Requirement.
4. To the Airport Facilities Operation and Maintenance
Fund, for credit to the Operation and Maintenance
Reserve Account therein one-twelfth (1/12) (or such
greater fraction if the period is less than 12 months
as may be appropriate) of the amount which is equal
to the difference between the sum on deposit in said
Account at the beginning of the then Fiscal Year and
1/6 of the
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Operation and Maintenance Expenses as set forth in
the then current Annual Budget.
5. To the Airport Facilities Capital Expenditures Fund,
an amount equal to one-twelfth (1/12) (or such
greater fraction if the period is less than 12 months
as may be appropriate) of the money appropriated for
said Capital Expenditures Fund as set forth in the
then current Annual Budget, provided that, if any
such monthly allocation to said Capital Expenditures
Fund shall be less than the required amount, the
amount of the next succeeding monthly payments shall
be increased by the amount of such deficiency. The
amounts held in such Fund and the replacing of
withdrawals therefrom shall be governed by the
provisions of Section 9.01(B)(3).
6. To the Airport Facilities Renewal and Replacement
Fund, to be held by Authority, an amount equal to
one-twelfth (1/12) (or such greater fraction if the
period is less than 12 months as may be appropriate)
of the money appropriated for said Renewal and
Replacement Fund as set forth in the then current
Annual Budget, provided that, if any such monthly
allocation to said Renewal and Replacement Fund shall
be less than the required amount, the amount of the
next succeeding monthly
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payments shall be increased by the amount of such
deficiency. No further deposits into the Airport
Facilities Renewal and Replacement Fund shall be
required whenever and as long as uncommitted monies
in said Renewal and Replacement Fund are equal to or
greater than $3,000,000 or such larger amount as the
Airport Consultant shall certify is necessary for
purposes of such Renewal and Replacement Fund. Each
Annual Budget shall provide for depositing into the
said Renewal and Replacement Fund the amount
necessary to maintain the level of said Fund at
$3,000,000 or such larger amount as the Airport
Consultant shall certify is necessary for purposes of
such Renewal and Replacement Fund. The purpose of
the Airport Facilities Renewal and Replacement Fund
is for the payment of unanticipated or emergency
replacements and repairs to Airport System.
7. To the Airport Facilities Discretionary Fund, in each
month of the Fiscal Year, the amount of $83,333.33,
plus all amounts required to be deposited into the
Discretionary Fund in such month by the terms of any
financing documents relating to any obligation
incurred by Authority pursuant to the provisions of
Section 3.02 or 3.03 hereof, plus all amounts
required to pay in a
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timely manner all payments the Authority is required
to make to any third party under any Swap Agreement
entered into by the Authority with the approval of a
Majority In Interest of Airlines, or such lesser
amount which will not cause the amount on deposit in
said Discretionary Fund to exceed the Discretionary
Fund Maximum Balance, provided that, if any such
monthly allocation to said Discretionary Fund shall
be less than the required amount, the amount of the
next succeeding monthly payment shall be increased by
the amount of such deficiency to the extent that the
amount on deposit in said Discretionary Fund shall
not exceed the Discretionary Fund Maximum Balance.
The amount of the monthly deposit to the
Discretionary Fund may be adjusted from time to time
by agreement between Authority and MII. Expenditures
from said Fund may be made by Authority at its sole
discretion for any legal purpose of Authority in
connection with the Airport System; provided,
however, that Authority shall provide Airline with an
annual detailed report of such expenditures.
8. At the end of each Fiscal Year, after all deposits
required to be made into each of the aforesaid Funds
have been made, the Special Trustee shall
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transfer from the remaining monies on deposit in the
Airport Facilities Revenue Fund a sum equal to the
estimated amount of monies which are not required to
make up deficiencies in any of the aforesaid Funds,
as follows: (i) an amount equal to 50% of such
remaining monies shall be deposited in the Airport
Facilities Improvement and Development Fund, and (ii)
an amount equal to 50% of such remaining monies shall
be deposited in the Airport Facilities Prepaid
Airlines Fees and Charges Fund.
When it has been determined by audit what actual
amounts were on deposit in the Airport Facilities
Revenue Fund at the end of a Fiscal Year which were
not required to make up deficiencies as aforesaid, an
adjustment shall be made, as follows:
(1) If such amounts were overestimated, there
shall be deposited into such Revenue Fund
from each of the Airport Facilities
Improvement and Development Fund and the
Airport Facilities Prepaid Airlines Fees and
Charges Fund, respectively, fifty percent
(50%) of the overestimated amount. To the
extent there shall not be sufficient monies
on deposit in the Airport Facilities Prepaid
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Airlines Fees and Charges Fund to make the
required deposit into such Revenue Fund, each
Signatory Airline shall, as soon as possible,
pay to Authority for deposit in such Prepaid
Airlines Fees and Charges Fund the amount of
such deficiency which is in proportion to the
amount that the landing fees paid by such
Signatory Airline in the Fiscal Year just
concluded bears to the total amount of
landing fees paid by all Signatory Airlines
in such concluded Fiscal Year.
(2) If such amounts were underestimated, there
shall be deposited from the Airport
Facilities Revenue Fund into each of the
Airport Facilities Improvement and
Development Fund and the Airport Facilities
Prepaid Airlines Fees and Charges Fund,
respectively, fifty percent (50%) of the
underestimated amount.
(a) All of the provisions contained in Section
9.01(B)(5)(a) shall apply equally to such Improvement
and Development Fund after the Retirement Date of
Prior Lien Bonds.
(b) Any amounts remaining on deposit in the Prepaid
Airlines Fees and Charges Fund at the end of each
Fiscal Year shall be transferred by Authority to
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the Trustee for deposit in the Airport Facilities
Revenue Fund established under the Bond Resolution,
in equal amounts in each of the first three (3)
months of the next succeeding Fiscal Year, to be
disbursed and applied as Revenues. Airline's fees
and charges for the first three (3) months of such
next succeeding Fiscal Year shall be credited with
that portion of the amount so deposited in such
Revenue Fund in such month which is in proportion to
the amount that the landing fees paid by Airline in
the Fiscal Year just concluded bears to the total
amount of landing fees paid by all Signatory Airlines
in such concluded Fiscal Year.
Notwithstanding the foregoing, if required by the terms of the
Bond Resolution, the monies in the Airport Facilities Capital
Expenditures Fund, the Airport Facilities Renewal and
Replacement Fund, the Airport Facilities Discretionary Fund
and the Airport Facilities Improvement and Development Fund
may be used, to the extent necessary, to pay principal of and
interest on Airport Revenue Bonds and Additional Revenue Bonds
and to pay Operation and Maintenance Expenses.
9.03 If and to the extent permitted by the terms of the Trust
Agreements and the Bond Resolution, Authority
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may, without MII approval, expend unencumbered capital funds
from any source, including the proceeds from bonds, notes or
other obligations, for the following purposes:
1. Projects required to increase public safety when
directed by the FAA, National Transportation Safety
Board or similar governmental authority having
jurisdiction over the Airport, Airlines' operation,
or the safety aspect of Airport operations.
2. Casualty damages to Airport System property which
exceeds the proceeds of insurance, which property
must be rebuilt or replaced in order to satisfy
Authority obligation or maintain a source of revenue.
3. Special Purpose Facilities as defined herein;
provided, however, that the interest rate charged by
Authority for use of its funds shall be not less than
1% above the prime interest rate prevailing at
Trustee bank at the time the loan is made. In cases
where such a project occupies a building site, an
appropriate ground rental shall be charged. In all
cases, the tenants or users of such project shall be
required to pay directly or reimburse Authority for
all costs (direct or indirect) associated with such
project.
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ARTICLE X - NO FURTHER CHARGES
10.01 Except as herein provided, no further rentals, fees, licenses,
excise or operating taxes, tolls or charges, shall be charged
against or collected from Airline, its passengers, shippers
and receivers of freight and express, its suppliers of
materials, or its contractors or furnishers of services to
Airline, by Authority for the premises, facilities, rights,
licenses and privileges granted to Airline in this Agreement.
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ARTICLE XI - CANCELLATION BY AUTHORITY
11.01 EVENTS OF DEFAULT BY AIRLINE. Each of the following shall
constitute an "Event of Default by Airline":
A. Airline shall fail to make due and punctual payment
of any rents, fees or charges payable hereunder, and
such default shall continue for a period of ten (10)
days after receipt of written notice from Authority
of such non-payment.
B. Airline shall fail, within twenty (20) days after
receipt of written notice from Authority, to keep,
perform or observe any term, covenant or condition of
this Agreement to be kept, performed or observed by
Airline, other than those covered by A. or G. of this
Section; provided, however, that if by its nature
such default cannot be cured within such twenty-day
period, then such default shall not constitute an
Event of Default if Airline commences to cure or
remove such default within said twenty-day period and
thereafter pursues the curing or removal of such
default with due diligence.
C. Airline shall file a voluntary petition in
bankruptcy, or make assignment of all or
substantially all of Airline's assets for the benefit
of Airline's creditors.
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D. Airline is adjudicated a bankrupt in any involuntary
proceeding in bankruptcy against Airline.
E. A receiver of the assets of Airline is appointed;
provided, however, that in the latter event, if any
such appointment is involuntary, then it shall not be
considered an Event of Default by Airline unless
Airline fails to procure a dismissal thereof within
sixty (60) days after appointment of such receiver.
F. A court shall take jurisdiction of Airline and its
assets pursuant to proceedings brought under the
provisions of any reorganization.
G. Airline shall fail to provide the Contract Security
or to renew or replace such Contract Security on or
before the date on which the same is required
hereunder.
11.02 REMEDIES FOR AIRLINE'S DEFAULT.
A. Upon the occurrence of an Event of Default by
Airline, Authority, besides any other rights or
remedies it may have, shall have the immediate right
of reentry and may remove all Airline persons and
property from the Airline's Exclusively Assigned
Premises and Joint Use Premises as defined in Article
II; such property
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may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of
Airline. Should Authority elect to reenter, as
herein provided, or should it take possession
pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate
this Agreement or relet the Airline's Exclusively
Assigned Premises and Joint Use Premises and any
improvements thereon or any part thereof for such
term or terms (which may be for a term extending
beyond the term of this Agreement) and at such fees
and charges and upon such other terms and conditions
as Authority in its sole discretion may deem
advisable, with the right to make alterations and
repairs to improvements on said Exclusively Assigned
Premises and [with the consent of the other Joint
User(s)] Joint Use Premises; provided, however, that
Authority shall be obligated to make a good faith
effort to obtain terms and conditions no less
favorable to itself than those contained herein and
otherwise seek to mitigate any damages it may suffer
as a result of Airline's default.
B. Upon such occurrence as set forth in subsection
11.02(A) above,
1. Airline shall be immediately liable to pay to
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Authority, in addition to any indebtedness
other than fees and charges due hereunder,
the cost and expenses of such use by someone
else, and the amount, if any, by which the
fees and charges provided for in this
Agreement for the period of such reuse by
someone else (up to but not beyond the
Agreement term) exceeds the amount agreed to
be paid in fees and charges for Airline's
Exclusively Assigned Premises and Joint Use
Premises for the period of such reuse by
someone else, or
2. At the option of Authority, fees and charges
received by Authority from such reuse by
someone else shall be credited, first to the
payment of any indebtedness, other than fees
and charges due hereunder from Airline to
Authority; second, to the payment of fees and
charges due and unpaid hereunder; and the
residue, if any, shall be held by Authority
and applied in payment of future fees and
charges as the same may become due and
payable hereunder.
C. If Airline has been credited with any fees and
charges to be received under such reuse by someone
else pursuant to the foregoing option, and such
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fees and charges shall not be promptly paid to
Authority by new tenant, or if such fees and charges
received from such reuse by someone else under the
foregoing option, during any month be less than the
fees and charges to be paid during that month by
Airline for its Exclusively Assigned Premises and
Joint Use Premises hereunder, Airline shall pay any
such deficiency to Authority. Such deficiency shall
be calculated and paid monthly.
D. No such reentry or taking possession of the
Exclusively Assigned Premises and Joint Use Premises,
and any improvements thereon by Authority shall be
construed as an election on its part to terminate
this Agreement unless a written notice of such
intention be given to Airline.
E. Notwithstanding any such reuse by someone else
without termination, Authority may, at any time
thereafter, elect to terminate this Agreement for any
additional Event of Default by Airline, in addition
to any other remedy it may have, and in such event,
Authority may recover from Airline all damages to
which it may be legally entitled by reason of such
Event of Default by Airline, including the cost of
recovering the Exclusively Assigned Premises and the
Joint Use Premises, and Authority may recover at the
time of such termina-
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tion any deficit in the amount of fees and charges
due under this Agreement up to the date of
termination.
11.03 CURATIVE PROVISIONS.
Notwithstanding anything to the contrary in this Agreement
contained, if a dispute shall arise between Authority and
Airline with respect to any obligation or alleged obligation
of Airline to pay money, the payment under protest by Airline
of the amount claimed by Authority to be due shall not waive
any of Airline's rights, and if any court or other body having
jurisdiction shall determine that all or any part of the
protested payment was not due, then Authority shall as
promptly as reasonably practicable reimburse Airline any
amount determined as not due.
11.04 HOLDING OVER. Should Airline hold over in the Exclusively
Assigned Premises or the Joint Use Premises after this
Agreement has terminated in any manner, during such holding
over Airline shall be deemed merely a tenant at sufferance.
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ARTICLE XII - CANCELLATION BY AIRLINE
12.01 EVENTS OF DEFAULT BY AUTHORITY. Each of the following events
shall constitute an "Event of Default by Authority":
A. Authority shall fail after receipt of thirty (30)
days' written notice from Airline to keep, perform or
observe any material term, covenant or condition of
this Agreement to be kept, performed or observed by
Authority.
B. Authority shall close Airport to flying in general or
to the flights of Airline, for reasons other than
weather, acts of God or other reasons beyond its
control, and fail to reopen Airport to such flying or
flights for a period in excess of ninety (90) days.
C. Authority shall deprive Airline of its right to
occupy and use Airline's Exclusively Assigned
Premises, its Joint Use Premises or its
Non-Exclusively Assigned Premises in accordance with
the terms of this Agreement for a period in excess of
thirty (30) days or deprive Airline of its right to
use the Airport in accordance with the terms of this
Agreement, as it may be amended from time to time,
for a period in excess of thirty (30) days, except in
Event of Default by Airline.
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12.02 REMEDIES FOR AUTHORITY'S DEFAULTS. After the occurrence of an
Event of Default by Authority, Airline shall have the right to
suspend or terminate this Agreement upon thirty (30) days'
written notice to Authority, in which event all fees and
charges payable by Airline under this Agreement shall abate
and Airline shall have the rights specified in Section 12.05
of this Agreement.
12.03 AIRLINE'S RIGHT OF TERMINATION. Airline, in addition to any
other right of termination provided for elsewhere herein or by
operation of law, may, if no Event of Default by Airline
exists, suspend or terminate this Agreement upon thirty (30)
days' written notice to Authority after the happening of any
of the following events:
A. Airline shall be permanently deprived, for any reason
beyond its control, of the rights, certificates, or
authorizations necessary under applicable law to
operate its air transportation business at the
Airport as Airline may reasonably desire to operate.
B. Airport shall be closed, on a permanent basis, to
flying in general or to the flights of Airline, for
any reason beyond Airline's control.
In the event of such suspension or termination, fees
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and charges payable by Airline under this Agreement shall
abate and Airline shall have the rights specified in Section
12.05 of this Agreement.
12.04 CURATIVE PROVISIONS; PAYMENT UNDER PROTEST.
A. Notwithstanding anything to the contrary in this
Agreement, no termination declared by Airline shall
be effective unless and until thirty (30) days shall
have elapsed after the date of written notice to
Authority specifying the date upon which such
termination shall take effect and the cause for which
it is being terminated (and if such termination is by
reason of an Event of Default by Authority under this
Agreement, specifying such default with reasonable
certitude); and no such termination shall be
effective if such cause shall have been cured or
removed during such thirty-day period, or in the
event such cause is an Event of Default by Authority
under this Agreement and if, by its nature such
default cannot be cured within such thirty-day
period, such termination shall not be effective if
Authority commences to cure or remove such Event of
Default within said thirty (30) days and cures or
removes the same as promptly as reasonably
practicable.
B. Notwithstanding anything to the contrary in this
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Agreement, if a dispute shall arise between
Authority and Airline with respect to any obligation
or alleged obligation of Airline to make payment, the
payment under protest by Airline of the amount
claimed by Authority to be due shall not waive any of
Airline's rights, and if any court or other body
having jurisdiction shall determine that all or any
part of the protested payment was not due, then
Authority shall immediately reimburse Airline any
amount determined as not due.
12.05 RIGHTS UPON TERMINATION. If no Event of Default by Airline
exists hereunder, Airline shall have the right to remove
within a reasonable time after termination any equipment,
systems, fixtures or other installations or improvements
referred to in Article XV under the terms provided therein.
In the event that Airline shall suspend this Agreement as
herein provided, Airline shall have the further right during
such suspension to cancel this Agreement or any of its
obligations by giving Authority ninety (90) days' written
notice of such cancellation at any time prior to termination
of the condition or event which gave rise to the suspension;
and, if Airline does not so cancel, such suspension shall
terminate sixty (60) days
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after termination of such condition or event and written
notice thereof from Authority to Airline. The period of any
suspension of this Agreement in its entirety shall be added to
the term of this Agreement or any renewal or extension
thereof.
12.06 HOLDING OVER. Should Airline hold over in the Exclusively
Assigned Premises or the Joint Use Premises after this
Agreement has been suspended or terminated in any manner,
during such holding over Airline shall be deemed merely a
tenant at sufferance.
ARTICLE XIII - NON-WAIVER OF RIGHTS
13.01 No waiver by either party at any time of any of the terms,
conditions, covenants, or agreements of this Agreement, or
noncompliance therewith, shall be deemed or taken as a waiver
at any time thereafter of the same or any other term,
condition, covenant or agreement herein contained, nor of the
strict and prompt performance thereof by the other. No
option, right, power, remedy or privilege of either party
shall be construed as being exhausted or discharged by the
exercise thereof in one or more instances. It is agreed that
each and all of the rights, powers, options or remedies given
to each party by this Agreement are cumulative
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and no one of them shall be exclusive of the other or
exclusive of any remedies provided by law except as
specifically provided herein, and that the exercise of one
right, power, option or remedy by either party shall not
impair its right to any other right, power, option or remedy,
except as specifically provided herein.
ARTICLE XIV - MEDIATION
AND REVIEW OF BUDGET DISPUTES
If Airline and Authority are unable to negotiate and mutually
agree on the rentals, fees and charges or any budgetary items during the month
of June of any year, the following procedure shall be followed:
14.01 Either party may, prior to the end of June, request mediation
and if written request for mediation is made by Airline,
Airline shall, in said request, notify Authority of the names
of any other airline(s) to be joined with Airline as a party
to mediation; if Authority requests mediation, Authority shall
include as a part of its request, the names of any other
airline(s) to be joined with Airline as a party to the
mediation. Within ten (10) calendar days after mailing by
Authority or Airline of written request for mediation, the
parties shall attempt to name a mediator agreeable to both.
In the event the parties cannot
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agree upon a mediator within ten (10) calendar days from the
request for mediation by either party, all airlines joined as
a party to the mediation shall select by a majority vote a
mediator and notify Authority of their designee and Authority
shall within ten (10) days thereafter select a mediator and
notify Airline(s) of its designee. The two so selected shall
within ten (10) calendar days appoint a third mediator; in the
event the two mediators first appointed shall be unable to
agree upon the third mediator within ten (10) calendar days
after the appointment of the last of the two mediators, then
the third mediator shall be appointed by the Circuit Court in
and for Orange County, Florida.
14.02 The mediator or mediators (hereinafter called mediator) shall
immediately hear and investigate the issues of fact or matters
of dispute concerning the budget or any item in the budget and
shall attempt to mediate the dispute and seek agreement
between the parties. The mediator shall consider this
Agreement to determine whether proper procedures have been
followed by both parties. The parties agree that Authority, in
setting its budget in accordance with the terms of this
Agreement, shall include items for expenditure only if they
are reasonable, necessary and prudent, taking into account the
obligations of Authority under this
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Agreement and the applicable laws including Authority's
enabling legislation, practices of other airports in the
United States of similar size and traffic, the financial
burden imposed on Signatory Airlines in relation to the
benefits to be derived, the question of whether the
expenditure proposed is the most efficient and economic means
of accomplishing a particular purpose and any other relevant
circumstances such as matters peculiar or relative to the
Orlando International Airport. The question for mediation
shall be whether Authority has set its budgets according to
the above standards as to the particular matters specified by
the party requesting mediation. The mediator shall attempt
mediation for a period not to exceed thirty (30) days from the
date of his appointment and at the end of such time, Authority
shall adopt its budget taking into consideration in good faith
the recommendations and suggestions of Airline(s) and the
mediator. Authority, however, shall have final and sole
discretion in the adoption of its budget. Neither Authority
nor Airline shall be bound by the recommendations or
suggestions.
14.03 Authority and Airline(s) shall each pay fifty percent (50%) of
the cost of mediation and the mediator's fee in the event
there is one mediator and in the event there is a panel of
three mediators, Authority shall
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pay the fee of its mediator, and all the airlines joined as
parties to the mediation shall share equally the fee of their
mediator. Fifty percent (50%) of the sum of the fee of the
third mediator plus all mediation costs shall be paid by
Authority and the remaining fifty percent (50%) shall be
shared equally by all the airlines joined as parties to the
mediation.
14.04 By following the mediation process, neither party waives any
other rights it might have under this Agreement or at law or
equity.
ARTICLE XV - SURRENDER OF AIRLINE'S
EXCLUSIVELY ASSIGNED PREMISES
15.01 Airline agrees to yield and deliver to Authority possession of
the Airline's Exclusively Assigned Premises and Joint Use
Premises herein at the termination of this Agreement, by
expiration or otherwise, or of any renewal or extension
hereof, in good condition in accordance with its express
obligations hereunder, except for damage or loss due to
reasonable wear and tear, fire and other casualty, and Airline
shall have the right at any time during said term, or any
renewal or extension hereof, and for ninety (90) days after
the termination hereof, to remove any furniture, furnishings,
trade fixtures or equipment it may erect, place or install in,
on or
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about the Airline's Exclusively Assigned Premises and Joint
Use Premises (excluding tenant finish items), subject,
however, to any valid lien which Authority may have thereon
for unpaid fees, charges, or other amounts payable under this
Agreement.
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ARTICLE XVI - ASSIGNMENT AND SUBLEASE
16.01 Airline shall not at any time assign this Agreement or any
part thereof or assign or sublet any portion of Airline's
Exclusively Assigned Premises or Joint Use Premises without
the prior consent in writing of Authority; provided, however,
that without such consent Airline may assign this Agreement to
any corporation with which Airline may merge or consolidate or
which may succeed to the business of Airline.
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ARTICLE XVII - INDEMNITY AND INSURANCE
17.01 A. Airline agrees to fully indemnify, defend, and hold harmless
Authority and City and the members (including without
limitation members of the Authority's Board and the City's
Council, and members of the citizens advisory committees of
each), directors, officers, employees and agents of each from
and against all liabilities (including without limitation,
liability under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et
seq., or any other federal, state or local environmental
statute, ordinance, regulation or rule), losses, suits,
claims, demands, judgments, fines, damages, costs and expenses
(including all costs for investigation and defense thereof,
including but not limited to court costs, expert fees and
reasonable attorney's fees) which may be incurred by, charged
to or recovered from any one of the foregoing, (i) by reason
or on account of damages to or destruction of property of the
Authority or City, or any property of, injury to or death of
any person, resulting from or arising out of or incident to
the negligence of Airline in the conduct of business in, on or
about said Airport,
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including the work, acts or omissions of its officers, agents,
employees, contractors, subcontractors, sublessees, licensees
and invitees, regardless of where the damage, destruction,
injury or death occurred, unless such liability, loss, suit,
claim, demand, judgment, fine, damage, cost or expense was
proximately caused solely by Authority's negligence or the
joint negligence of Authority and any person other than
Airline or Airline's officers, agents, employees, contractors,
subcontractors, sublessees, licensees or invitees, or (ii)
arising out of the failure of Airline to keep, observe or
perform any of the agreements or conditions of this Agreement
to be kept, observed or performed by Airline. Authority and
City shall give Airline prompt and reasonable notice of any
such claim, suit or action, and Airline or its insurer shall
have the right to investigate, compromise, before or after
suit, and defend same. Any final judgment rendered against
Authority and/or City for any cause for which Airline is
liable hereunder shall be conclusive against Airline as to
liability and amount. The provisions of this Section shall
survive the expiration or early termination of the term of
this Agreement.
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B. Without limiting its liability as aforesaid, Airline
further agrees to carry, and keep in force for the
term of this Agreement (i) Commercial General
Liability Insurance with combined single limits of
not less than $200,000,000, or its equivalent, per
occurrence, which provides coverage for public
liability, property damage and bodily injury,
(including, but not limited to, aircraft liability,
passenger legal liability, personal injury, property
damage liability, premises liability, baggage and
cargo liability and such other coverage as may from
time to time be generally issued by insurance
companies to airlines in connection with their
airport operations) and (ii) Comprehensive
Automobile Liability Insurance (any Auto, including
Owned Autos, Non-Owned Autos and Hired Autos)
covering on-airport automotive vehicles, both
licensed and unlicensed, with combined single limits
of not less than $2,000,000, or equivalent, per
occurrence. Authority reserves the right during the
term of this Agreement reasonably to amend the
monetary limits or coverages herein specified, in
accordance with insurance requirements in effect at
other large hub airports, and in so doing will
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give Airline at least (30) days prior written notice
of any change. All such policies shall name
Authority and the City and their members (including,
without limitation, members of the Authority's Board
and the City's Council and members of the citizens
advisory committees of each), directors, officers,
agents and employees as additional insureds and cover
the contractual liability assumed by Airline
hereunder and contain a waiver of the right of
subrogation that the insurer or insurers may have
against Authority or City. Airline shall furnish to
Authority a certificate(s) of insurance which
satisfactorily evidences that such insurance is in
effect and will not be canceled or reduced during the
term of this Agreement without 30 days prior written
notice to the Authority. In addition, during the
terms of this Agreement, Airline shall carry and keep
in force Workers' Compensation and Employees
Liability Insurance covering its employees employed
at the Airport.
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ARTICLE XVIII - NOTICES
18.01 All notices provided for in this Agreement shall be in writing.
18.02 Notices to Authority provided for herein shall be sufficient
if sent by certified or registered mail, postage prepaid,
addressed to:
GREATER ORLANDO AVIATION AUTHORITY
Attention: Executive Director
One Airport Boulevard
Orlando, Florida 32827-4399
Attention: Executive Director
and notices to Airline, if sent by certified or registered
mail, postage prepaid, addressed to:
AIRTRAN AIRWAYS, INC.
Attention: President
6280 Hazeltine Drive
Orlando, Florida 32822
or to such other respective addresses as the parties may
designate in writing from time to time.
ARTICLE XIX - RULES AND REGULATIONS
19.01 Airline covenants and agrees to observe and obey all
reasonable rules and regulations not conflicting with the
provisions of this Agreement as may now exist or may be
promulgated from time to time by Authority governing the safe
conduct on and operations at Airport and the safe use of its
facilities provided that such rules and regulations shall be
furnished in writing to
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Airline; except that Authority agrees that any rules and
regulations so promulgated and as applied to Airline shall not
be inconsistent with any constitution, law, rule or regulation
of the State of Florida or the United States of America or any
agency thereof having jurisdiction in the Airport System.
ARTICLE XX - HEADINGS
20.01 The article and paragraph headings are inserted only as a
matter of convenience and for reference and in no way define,
limit or describe the scope or intent of any provision of this
Agreement.
ARTICLE XXI - SUBORDINATION,
CONSTRUCTION AND SAVINGS CLAUSES
21.01 This Agreement shall be construed in accordance with the laws
of the State of Florida. It is understood and agreed by and
between Airline and Authority that if any covenant, condition
or provision contained in this Agreement is held to be invalid
by any court of competent jurisdiction, or otherwise appears
to Airline and Authority to be invalid, such invalidity shall
not affect the validity of any other covenant, condition or
provision herein contained; provided, however, that the
invalidity of any such covenant, condition, or provision does
not materially prejudice either
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Authority or Airline in its respective rights and obligations
contained in the remaining valid covenants, conditions or
provisions of this Agreement.
21.02 Wherever approval or consent of Authority or Airline is
required under this Agreement, such shall not be unreasonably
withheld or delayed nor shall Authority or Airline impose
unreasonable conditions to its approval or consent.
21.03 This Agreement and all rights of Airline hereunder are
expressly subordinated and subject to the lien and provisions
of any pledge, transfer, hypothecation or assignment made at
any time by Authority to secure Prior Lien Bonds, Airport
Revenue Bonds and Additional Revenue Bonds, and to the terms
and conditions of the authorizing legislation, and Authority
and Airline agree that to the extent permitted by the
authorizing legislation, the holders of the Prior Lien Bonds,
Airport Revenue Bonds and Additional Revenue Bonds, shall
possess, enjoy and may exercise all rights of Authority
hereunder to the extent such possession, enjoyment and
exercise are necessary to insure compliance by Airline and
Authority with the terms and provisions of this Agreement and
the authorizing legislation.
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ARTICLE XXII - GOVERNMENT INCLUSION
22.01 Airline covenants and agrees that this Agreement shall be
subordinate to the provisions of any existing or future
agreements between Authority and the United States Government,
relative to the operation or maintenance of Airport, the
execution of which has been or will be required as a condition
precedent to the granting of Federal Funds for the development
of Airport to the extent that the provisions of any such
existing or future agreements are generally required by the
United States at other civil airports receiving Federal Funds
and provided that Authority agrees to give Airline written
notice in advance of the execution of such agreements of any
provisions which will modify the terms of this Agreement.
A. Airline, for itself, its successors in interest and
assigns, as a part of the consideration hereof, does
hereby covenant and agree as a covenant running with
the land that (1) no person on the grounds of race,
color, or national origin shall be excluded from
participation in, denied the benefits of, or be
otherwise subject to discrimination in the use of the
Premises including any improvements assigned to
Airline hereunder (collectively referred to
hereinafter as
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the "Assigned Premises"), or the Airport under the
provisions of this Agreement; (2) that in the
construction of any improvements on, over, or under
the Assigned Premises and the furnishing of services
thereon, no person on the grounds of race, color or
national origin shall be excluded from participation
in, denied the benefits of, or otherwise be subjected
to discrimination; (3) that Airline shall use the
Assigned Premises in compliance with all other
requirements imposed by or pursuant to Title 49, Code
of Federal Regulations, Department of Transportation,
Subtitle A, Office of the Secretary, Part 21,
Nondiscrimination in Federally-assisted Programs of
the Department of Transportation-Effectuation of
Title VI of the Civil Rights Act of 1964, and as said
Regulations may be amended. Likewise, Airline shall
comply with laws of the State of Florida prohibiting
discrimination because of sex, religion, age, race,
color, national origin, marital status or physical
handicap. Should Airline authorize another person,
with Authority's prior written consent, to provide
services or benefits upon the Assigned Premises,
Airline shall obtain from such person a written
agreement pursuant to which such person shall, with
respect
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to the services or benefits which it is authorized to
provide, undertake for itself the obligations
contained in this paragraph. Airline shall furnish
the original of such agreement to Authority.
B. Authority may from time to time be required by the
United States Government, or one or more of its
agencies, to adopt additional or amended provisions
including nondiscrimination provisions, concerning
the use and operation of Airport, and Airline agrees
that it will adopt any such requirement as a part of
this Agreement.
C. In the event of breach of any of the above
nondiscrimination covenants, Authority shall have the
right to terminate this Agreement and to re-enter and
repossess said Assigned Premises, and hold the same
as if this Agreement had never been made or issued.
The right granted to Authority by the foregoing
sentence shall not be effective until applicable
procedures of Title 49, Code of Federal Regulations,
Part 21 are followed and completed, including
exercise or expiration of appeal rights.
D. Further, Airline assures Authority that no person
shall be excluded on the grounds of race, creed,
color, national origin or sex from participating in
or receiving the services or benefits of any
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program or activity covered by Title 14, Code of
Federal Regulations, Part 152, Subpart E, Federal
Aviation Administration, Non-discrimination in
Airport Aid Program, and that it will be bound by and
comply with all other applicable provisions of such
Subpart E, as it may be amended. Airline also
assures Authority that it will require its covered
suborganizations to provide written assurances to the
same effect and provide copies thereof to Authority.
E. In addition, Airline assures the Authority that it
will comply with pertinent statutes, executive orders
and such rules as are promulgated to assure that no
person shall, on the grounds of race, creed, national
origin, sex, age or handicap be excluded from
participating in any activity conducted at or in
connection with its operations at the Assigned
Premises. Airline also assures Authority that it
will require its contractors and sublessees to
provide assurances to the same effect and ensure that
such assurances are included in contracts and
subleases at all tiers which are entered into in
connection with Airline's operations at the Assigned
Premises.
F. If Airline shall furnish any services to the public
at the Airport, it shall furnish said
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services on a fair, equal and not unjustly
discriminatory basis to all users thereof and shall
charge fair, reasonable and not unjustly
discriminatory prices for each unit of service,
provided that Airline shall be allowed to make
reasonable and nondiscriminatory discounts, rebates
or other similar types of price reductions to volume
purchasers, if any.
G. Notwithstanding anything herein contained that may be
or appear to the contrary, it is expressly understood
and agreed that the rights granted under this
Agreement (except in the Exclusively Assigned
Premises and Joint Use Premises) are "non-exclusive"
and Authority reserves the right to grant similar
privileges to other air transport operators on other
parts of Airport.
H. Airline shall comply with all applicable regulations
of the FAA relating to Airport security and shall
control the Assigned Premises so as to prevent or
deter unauthorized persons from obtaining access to
the air operations area of Airport.
I. Authority reserves unto itself, its successors, and
assigns, for the use and benefit of the public, a
right of flight for the passage of aircraft in the
airspace above the surface of the
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Assigned Premises, for navigation or flight in the
said airspace for landing on, taking off from or
operating on Airport.
J. Airline expressly agrees for itself, its successors
and assigns, to restrict the height of structures,
objects of natural growth and other obstructions on
the Assigned Premises to such a height so as to
comply with Federal Aviation Regulations, Part 77.
K. Airline agrees to require any lights on Assigned
Premises to be constructed, focused or arranged in a
manner that will prevent them from casting their
beams in an upward direction so as to interfere with
the vision of pilots in aircraft landing or taking
off from Airport.
L. Airline expressly agrees for itself, its successors
and assigns, to prevent any use of the Assigned
Premises which would interfere with or adversely
affect the operation or maintenance of Airport, or
otherwise constitute an Airport hazard.
ARTICLE XXIII - AUTHORITY MEMBER PROTECTION
23.01 No recourse under or upon any obligation, covenant, or
agreement contained in this document, or any other
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agreements or documents pertaining to the operations of
Airline hereunder, as such may from time to time be altered or
amended in accordance with the provisions hereof, or under any
judgment obtained against Authority, or by the enforcement of
any assessment or by any legal or equitable proceeding by
virtue of any statute or otherwise, under or independent of
this document, shall be had against any Authority member or
officer, as such, past, present or future, either directly or
through Authority or otherwise, for any sum that may be due
and unpaid by Authority for, or by reason of the operations of
Airline hereunder, as such may from time to time be amended.
Any and all personal liability of every nature, whether at
common law or in equity, or by statute or by constitution or
otherwise, of any Authority member or officer, as such, past,
present or future, to respond by reason of any act or omission
on his or her part or otherwise for the payment for, or to
Authority or any receiver therefor or otherwise of any sum
that may remain due and unpaid by Authority, is hereby
expressly waived and released as a condition of and
consideration for the execution of this Agreement.
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ARTICLE XXIV - ADDITIONAL PROVISIONS
24.01 ONLINE AND INTERLINE PASSENGERS.
Airline acknowledges that it is obligated under this Agreement
to include all of its online and interline passengers as
enplaned passengers in all reports it submits to Authority
under this Agreement, and to include all of its online and
interline passengers in all calculations of payments to be
made by Airline under this Agreement on the basis of the
number of Airline's enplaned passengers.
24.02 AMENDMENTS TO RATE MAKING PRINCIPLES.
The principles used by Authority in preparing the Annual
Budget for its Fiscal Year which commenced October 1, 1987
received the unanimous approval of all Signatory Airlines. In
addition the fees and charges for Airline's right to use and
occupy its Exclusively Assigned Premises have been determined
in accordance with the principles referred to in the MII
Resolution dated May 18, 1988, which is incorporated herein be
reference as a part of Exhibit G. To the extent that any of
such principles are different from the principles contained in
the Rates and Changes Analysis of the Expanded Terminal
Development Program, prepared by Peat Marwick Main & Co. dated
April 30, 1980 referred to in Exhibit G, Airline hereby
approves such changes.
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24.03 SECURITY FEES.
Airline agrees to pay its share of that portion of Authority's
security costs that is not included in either the rental rates
being charged the Signatory Airlines for space of the same
class being leased to Airline hereunder, or in the landing
fees being paid by the Signatory Airlines. Airline's share of
such portion of these security costs will be calculated and
paid by Airline on the same basis as such costs are calculated
and paid by the other Signatory Airlines.
24.04 PASSENGER BAGGAGE.
Airline agrees that Authority will have the right, exercisable
from time to time on written notice to Airline, to determine
what size baggage Airline's passengers will be permitted to
carry onto the automated guideway transit system at the
Airport, and Airline will require its passengers to check all
baggage larger than the size approved by Authority at the
curbside adjacent to the skycap office being leased to Airline
hereunder or at the ticket counters in the landside space
being leased to Airline hereunder.
24.05 TAX COVENANTS.
A. Airline agrees to comply with any then applicable
provisions of any then applicable federal tax
statute, and all regulations promulgated
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thereunder, to permit any facilities leased to
Airline hereunder and any Additional Project, to be
planned and constructed by Authority with
Subordinated Indebtedness and/or with Additional
Revenue Bonds (the interest on which is exempt from
federal income taxation, other than any applicable
individual or corporate minimum income taxes),
including without limitation the execution by Airline
and delivery to Authority of an election not to claim
depreciation or any investment credit with respect to
any facilities leased to Airline hereunder, or any
other portion of the Airport System required of
Airline by any then applicable federal tax statute or
regulation to establish or maintain the tax-exempt
status (as described above) of interest on such
Subordinated Indebtedness and/or Additional Revenue
Bonds. Airline hereby executes and delivers to
Authority the election attached hereto as Exhibit "K".
B. Airline agrees that its use of facilities financed
with proceeds of Subordinated Indebtedness and/or
with Additional Revenue Bonds shall be limited to
activities directly related and essential to
servicing aircraft, enabling aircraft to take off and
land, and transferring passengers or cargo to and
from aircraft, and activities functionally
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related and subordinate to such operations. Airline
also agrees that it will not, at some future time,
convert the use of facilities financed with proceeds
of Subordinated Indebtedness and/or with Additional
Revenue Bonds, to use as part of a lodging facility,
part of a retail facility in excess of a size
necessary to serve passengers and employees at the
Airport, or part of a manufacturing facility.
C. Airline further agrees that the proceeds of
Subordinated Indebtedness and/or Additional Revenue
Bonds that are exempt from federal income taxation
will not be used to acquire any property or any
interest therein the first use of which is not
pursuant to such acquisition. Airline also agrees
that it shall limit its use of such portion of its
Exclusively Assigned Premises or Joint Use Premises
used for office space so that no more than a de
minimis amount (not more than five percent (5%)), if
any, of the functions to be performed in such space
will not be directly related to its day-to-day
operations either at such premises or more generally
within the Terminal. The provisions of this
paragraph shall not be interpreted to confer any
rights on Airline that are not expressly granted
elsewhere in this
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Agreement.
24.06 PUBLIC ENTITY CRIMES. A person or affiliate who has been
placed on the convicted vendor list following a conviction for
a public entity crime may not submit a bid on a contract to
provide any goods or services to a public entity, may not
submit a bid on a contract with a public entity for the
construction or repair of a public building or public work,
may not submit bids on leases of real property to a public
entity, may not be awarded or perform work as a contractor,
supplier, subcontractor, or consultant under a contract with
any public entity, and may not transact business with any
public entity in excess of $10,000 for a period of 36 months
from the date of being placed on the convicted vendor list.
24.07 SPECIAL PROVISIONS
A) Simultaneously with its execution of this Agreement,
Airline has paid Authority the sum of three thousand
seven hundred Dollars ($3,700.00) as a deposit to
cover the cost of modifying Authority's
identification, directional and locational signs
affecting Airline and on which Airline's name is
entitled to appear in accordance with the applicable
requirements of Authority's existing signage policy.
Authority agrees with
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reasonable promptness to make such signage
modification with signs that are compatible with
existing similar signs at the Airport. Upon
completion of such signage modification, Authority
will submit an invoice to Airline showing the cost of
same. Should the cost be less than the deposit,
Authority will submit its payment for the difference
with such invoice. Should the cost exceed the
deposit, Airline will pay the excess sum within
fifteen (15) days of its receipt of such invoice.
B) Authority shall turn over to Airline the Assigned
Premises shown on Exhibit "C" at which time Airline
shall become obligated to pay fees and charges
hereunder subject to measurement and adjustment for
final costs and "as built" conditions retroactive to
the Effective Date. At such time the Exhibits "C",
"E-3" and "H" shall be replaced with final exhibits
showing such as built measurement and adjustments.
C) (1) (a) On the expiration of the Notice Period
(as hereinafter defined) after Authority's
written notice to Airline, Airline agrees to
lease five (5) aircraft gates, configured to
accommodate aircraft as large as a Boeing
757/200 (or equivalent), together with the
related Aircraft Parking Apron and airside
support space. Such gates shall be located in
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a contiguous area of an airside in the
Terminal, as the same may hereafter be
expanded or become available for any reason.
The Notice Period shall equal the shorter of
(i) the remaining number of days notice
Airline must give its sublessor to terminate
or cancel its sublease of aircraft gates in
the Terminal, or sixty (60) days, whichever
is longer, or (ii) 180 days. The total
airside space per gate required to be leased
by Airline shall not exceed the areas set
forth below by class:
Class 2 Space: 2,407 Square Feet
Class 3 Space: 1,614 Square Feet
Class 4 Space: 85 Square Feet
Class 5 Space: As Available
Authority's written notice to Airline shall
be accompanied by a new Exhibit "C-1"
identifying the location of such aircraft
gates, Aircraft Parking Apron and airside
support space, a new Exhibit "E-3A" showing
the per gate Tenant Finish Surcharge and
Space Surcharge, and a new Exhibit "H"
showing the apron fees for the Aircraft
Parking Apron. On the expiration of the
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Notice Period: (i) the space shown on such
proposed Exhibit "C-1" shall be added to the
premises and facilities leased by Airline on
a preferential use basis pursuant to Section
2.03 above; (ii) Airline shall pay fees and
charges hereunder calculated for the space
shown on Exhibits "C" and "C-1", a Tenant
Finish Surcharge and/or Space Surcharge based
upon Exhibits "E-3" and "E-3A", and apron
fees for the use of the Aircraft Parking
Apron based upon the new Exhibit "H"; and
(iii) references in this Agreement to Exhibit
"C" shall include Exhibits "C" and "C-1", and
references in this Agreement to Exhibit "E-3"
shall include Exhibits "E-3" and "E-3A".
Airline agrees that prior to the expiration
of the Notice Period, it shall execute and
deliver to the Authority the following
documents, in the form in which such
documents have previously been executed by
the Authority and American Trans Air, Inc.,
pursuant to which Airline will, effective on
the expiration of the Notice Period, become a
lessee of the Fuel System serving the
Terminal at the Airport, and will lease on a
preferential use basis the fuel pits serving
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Airline's aircraft gates: Fuel System Lease
Agreement; Joinder to Fuel System Interline
Agreement; Joinder to Fuel System Access
Agreement; and Joinder to Fuel System
Operation and Maintenance Agreement. The
Authority may not exercise its rights under
this Section 24.07(C)(1)(a) after Airline has
been required to relocate into a Future
Expansion pursuant to Section 24.07(C)(2)
below.
(b) If the Authority determines that the
location of the airside space to be leased to
Airline pursuant to Section 24.07(C)(1)(a)
above makes the landside space currently
leased to Airline hereunder operationally
inefficient or undesirable, then on at least
sixty (60) days prior written notice from
Authority (the "Notice Period"), which notice
may but shall not be required to accompany
the notice described in Section
24.07(C)(1)(a) above, Airline shall be
required to relocate from the landside space
currently leased to Airline to reasonably
equivalent space located elsewhere in the
landside of the Terminal, as the same may
hereafter be expanded or become available for
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any reason. The total landside space per
gate required to be leased by Airline shall
not exceed the landside space per gate, by
class, currently leased to Airline hereunder.
If the Authority exercises this right, then
such written notice shall be accompanied by a
substitute Exhibit "C" showing the landside
space into which Airline will be relocated,
as well as airside space then leased to
Airline, with a Tenant Finish Surcharge
and/or Space Surcharge to be identified on a
substitute Exhibit "E-3". On the expiration
of the Notice Period: (i) the space shown on
the substitute Exhibit "C" shall be
substituted for the space shown on the
original Exhibit "C" to this Agreement; (ii)
Airline shall pay fees and charges hereunder
calculated for the space shown on such
substitute Exhibit "C", and a Tenant Finish
Surcharge and/or Space Surcharge based on the
substitute Exhibit "E-3", and (iii) Airline
shall have no right to use or occupy any of
the landside space shown on the original
Exhibit "C" attached hereto. Airline's
obligation to pay the Space Surcharge
applicable to the landside space shown on
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such original Exhibit "C" and previously
occupied by Airline shall terminate as of the
expiration of the Notice Period and Airline's
vacating of such space. However, Airline's
obligation to pay the Tenant Finish Surcharge
applicable to the landside space shown on
such original Exhibit "C" and previously
occupied by Airline shall not terminate but
shall be subject to the principles contained
in the MII Resolution dated May 18, 1988,
referred to in Section 24.02 above. The
Authority may not exercise its rights under
this Section 24.07(C)(1)(b) after Airline has
been required to relocate into a Future
Expansion pursuant to Section 24.07(C)(2)
below.
(2) Authority shall have the option to relocate
Airline's Assigned Premises and Aircraft
Parking Aprons after substantial completion
of a future expansion of the Terminal, which
expansion (the "Future Expansion") may
consist of the construction of Airside 2, or
the construction of a terminal facility in
the area to the south or east of the
Terminal. If the Authority exercises this
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option, then not less than 180 days prior to
the estimated substantial completion of the
Future Expansion, the Authority shall provide
a written notice to Airline identifying on a
proposed substitute Exhibit "C" the
facilities in the Terminal, as the same may
hereafter be expanded or become available for
any reason, into which Airline will be
relocated, which facilities shall include ten
(10) aircraft gates, configured to
accommodate aircraft as large as a Boeing
757/200 (or equivalent), located in a
contiguous area of an airside in the
Terminal, not more than 125% of each class of
landside space per gate currently assigned to
Airline, and not more than 125% of each class
of airside space per gate identified in
Section 24.07(C)(1)(a) above, with a per gate
Tenant Finish Surcharge and/or Space
Surcharge to be identified on a proposed
substitute Exhibit "E-3" which shall
accompany such written notice, and specifying
the estimated relocation date on which
Airline shall be obligated to relocate its
facilities. Such estimated relocation date
as it may be postponed from time to time by
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the Authority on at least 30 days prior
written notice to Airline, is hereafter the
"Relocation Date". Airline shall be
obligated to relocate its operations into the
space shown on the proposed substitute
Exhibit "C" on the Relocation Date, and on
and after the Relocation Date Airline shall
pay fees and charges hereunder calculated for
the space shown on such substitute Exhibit
"C", a Tenant Finish Surcharge and/or Space
Surcharge based upon a new Exhibit "E-3"
showing Airline's recalculated Tenant Finish
Surcharge and/or Space Surcharge for such
relocated space, and apron fees for the use
of Airline's relocated Preferential Use
Aircraft Parking Apron based upon a new
Exhibit "H". Airline shall have no right to
use or occupy any of the space shown on the
original Exhibit "C" attached hereto (or any
of the fuel pits serving the aircraft gates
included in such space) on or after the
Relocation Date. Airline's obligation to pay
the Space Surcharge applicable to the space
shown on such original Exhibit "C" and
previously occupied by Airline shall
terminate as of the Relocation Date.
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However, Airline's obligation to pay the
Tenant Finish Surcharge applicable to the
space shown on such original Exhibit "C" and
previously occupied by Airline shall not
terminate but shall be subject to the
principles contained in the MII Resolution
dated May 18, 1988, referred to in Section
24.02 above. The amount of space by class
assigned to Airline shall be subject to
measurement and adjustment for "as built"
conditions retroactive to the Relocation
Date, and thereupon the original Exhibits
"C", "E-3" and "H" shall be replaced with
final exhibits showing such as built
measurement and adjustments. Airline agrees
that prior to the Relocation Date, it shall
execute and deliver to the Authority the
following documents, in the form in which
such documents have previously been executed
by the Authority and American Trans Air, Inc.
(or if such documents have previously been
executed and delivered by Airline pursuant to
Section 24.07(C)(1)(a) above, amendments to
such documents), pursuant to which Airline
will, effective on the Relocation date,
become (or continue as) a lessee of the Fuel
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System serving the Terminal at the Airport,
and will lease on a preferential use basis
(or substitute for the fuel pits previously
leased on a preferential use basis by
Airline) the fuel pits serving Airline's
aircraft gates in the Future Expansion: Fuel
System Lease Agreement; Joinder to Fuel
System Interline Agreement; Joinder to Fuel
System Access Agreement; and Joinder to Fuel
System Operation and Maintenance Agreement.
If the Authority requires Airline to relocate to new
facilities under this Section 24.07(C)(2), and if
Airline chooses not to relocate capital equipment
purchased with its own funds and not previously
reimbursed with tenant finish funds, the Authority
shall have the option to reimburse Airline for the
unamortized cost of such equipment (not to exceed the
then fair market value thereof) as a project cost or
require a subsequent user to pay such unamortized
cost to Airline.
Authority shall have no liability to Airline in the
event that it is unable for any reason to commence or
complete the construction of the Future Expansion or
of the facilities, if any, to be constructed for
Airline therein.
The Authority agrees to exercise its option to
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relocate Airline pursuant to this Section 24.07(C)(2)
promptly after all of the following conditions have
been satisfied:
(a) Substantial completion of the Future
Expansion.
(b) Unless the Lease and Use Agreement with
Southwest Airlines Co. ("Southwest") has been
earlier terminated, the Authority has leased
one additional narrow bodied aircraft gate to
Southwest (for a total of four narrow bodied
aircraft gates) pursuant to its Lease and Use
Agreement, or such gate has been offered to
Southwest and it has failed to lease it
pursuant to its Lease and Use Agreement;
(c) Unless the Lease and Use Agreement with
American Trans Air, Inc. has been earlier
terminated, the Authority has leased two
additional narrow bodied aircraft gates to
American Trans Air, Inc. (for a total of two
wide bodied aircraft gates and two narrow
bodied aircraft gates) pursuant to its Lease
and Use Agreement, or such gates have been
offered to American Trans Air, Inc. and it
has failed to lease them pursuant to its
Lease and Use Agreement;
(d) The Authority controls a total of 9 unleased
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aircraft gates in the Terminal, excluding the
gates to be leased to Airline pursuant to
this Section 24.07(C)(2). The Authority
agrees that if it leases any of the 9
unleased aircraft gates that it controls on
the date of this Agreement, then the number
of such gates leased by the Authority shall
be deducted from the number "9" in this
subparagraph in determining whether the
condition in this subparagraph has been
satisfied; and
(e) There are 10 unleased gates configured to
accommodate aircraft as large as a Boeing
757/200 (or equivalent) available in a
contiguous area of an airside in the
Terminal.
The Authority's intention is to build a Future
Expansion that is large enough to satisfy each of the
foregoing conditions, and agrees to make a reasonable
good faith effort, in its negotiations with the
Signatory Airlines, to obtain the necessary MII
approvals of such a Future Expansion.
D) As long as Airline has the right to occupy ticket
counter and/or baggage claim space which requires the
use of baggage make-up and/or baggage claim
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devices owned and operated by the Authority, then
notwithstanding the provisions of Section 7.01(A)
above, or of Exhibit "F" attached hereto, (i)
Airlines' right to use such bag make-up and/or bag
claim devices shall be in common with such third
parties as Authority shall permit to use such
devices, and (ii) the Authority shall maintain such
devices in good operating condition, and Airline
shall be obligated to pay to the Authority 50% of the
monthly cost of maintaining such devices, which
payment shall be made by Airline promptly after
receipt of Authority's invoice. Notwithstanding the
foregoing, Airline shall be solely responsible to
repair any damage to the devices caused by the
negligence or intentional misconduct of Airline, its
employees, agents or contractors.
E) Airline shall be required to provide a minimum number
of seats on flights departing from the Airport per
gate assigned to Airline hereunder per day (such
obligation is hereinafter referred to as the "Service
Commitment") equal to the greater of (i) the average,
as calculated conclusively by the Authority from time
to time, of the number of seats per gate per day
provided by the Signatory Airlines on flights
departing from gates assigned
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to such Signatory Airlines, or (ii) an average of
five hundred (500) seats per gate per day.
Airline shall become a Signatory Airline on the
Effective Date and shall continue to be responsible
for all its obligations under this Agreement
notwithstanding its failure to satisfy the Service
Commitment, provided however:
i) If Airline shall fail to satisfy the Service
Commitment during the consecutive six (6)
month period (excluding any period prior to
the Effective Date of this Agreement)
immediately preceding the taking of a vote on
an issue submitted for MII approval under
this Agreement, then Airline shall be
conclusively deemed to have cast an
affirmative vote on such MII issue provided
that the result of the MII ballot constitutes
an affirmative MII vote in both the number of
Signatory Airlines and amount of fees
pursuant to Section 1.28 hereof, in each case
calculated by excluding Airline from the
calculation.
ii) If Airline shall fail to satisfy the Service
Commitment during any consecutive twelve (12)
month period ending July 31 (excluding in the
first year of this Agreement any period prior
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<PAGE> 137
to the Effective Date), then notwithstanding
anything in this Agreement to the contrary,
Airline shall not be entitled to a credit
against its fees and charges resulting from
the application of the amounts deposited in
the Airport Facilities Prepaid Airlines Fees
and Charges Fund at the end of the Fiscal
Year which concluded on the September 30th
following such twelve month period.
F) Airline shall be bound by all MII approvals granted
by the Signatory Airlines prior to the Effective Date.
G) Airline approves the Gate Utilization Program (the
"Program") attached hereto as Exhibit "L" and agrees
that all of its Exclusively Assigned Premises and
Preferential Use Aircraft Parking Aprons shall
participate in the Program, with such modifications
to the Program as the Authority and an MII of the
Signatory Airlines participating in the Program may
approve.
24.08 RADON GAS NOTICE. Florida Statutes, Section 404.056(8)
requires the following language on at least one document
executed prior to or simultaneously with this Lease:
"Radon is a naturally occurring radioactive gas that,
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<PAGE> 138
when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may
be obtained from your county public health unit."
ARTICLE XXV - USE OF AIRPORTS
25.01 To the extent permitted by law, Authority covenants and agrees
that it will not permit the use of Orlando Executive Airport
(formerly known as Herndon Airport) or any other airport
operated by Authority within thirty (30) statute miles of the
Airport for any scheduled service or for charter service by
any airline providing scheduled service to the Airport. A
"scheduled service" is one that is operated or proposed to be
operated pursuant to a schedule contained in the then current
issue of the Official Airline Guide, or as otherwise defined
by Authority and an MII.
25.02 The Signatory Airlines, in consideration of the above
covenant, also agree not to serve any airport with scheduled
service or charter service within thirty (30) statute miles of
Orlando International Airport.
25.03 Authority covenants and agrees that it will not permit
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<PAGE> 139
the former terminal building nor any other facilities on the
Airport outside the Terminal to be used as a terminal for
scheduled interstate or intrastate passenger service by any
airline, air carrier or other provider of air transportation
except for interim operations while additional facilities are
under construction in the Terminal. This exemption shall not
apply if a Signatory Airline(s) makes the necessary space and
facilities available on reasonable terms during any such
period of construction.
ARTICLE XXVI - PUBLIC USE
26.01 Authority acknowledges that the premises leased to Airline
hereunder are to be used for the purpose of providing public
air transportation facilities.
ARTICLE XXVII - BINDING ON SUCCESSORS
27.01 This Agreement shall bind and inure to the benefit of the
parties hereto and their authorized successors and assigns.
ARTICLE XIX - EFFECT ON PRIOR AGREEMENT
28.01 On the Effective Date, this Agreement shall supersede and
terminate any prior agreements between the parties with
respect to the subject matter hereof, but any
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<PAGE> 140
amounts owed by either party to the other under any such prior
agreement shall continue to be owed hereunder.
IN WITNESS WHEREOF, the parties hereto by their duly authorized
officers have caused this Agreement and as many counterparts as may be required
to be executed in their names and
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<PAGE> 141
their corporate seals to be affixed hereto and to each of said counterparts,
all as of the day and year first above written.
GREATER ORLANDO AVIATION AUTHORITY
By:
------------------------------------
Chairman
Attest: (SEAL)
-------------------------
Assistant Secretary
AIRTRAN AIRWAYS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Attest: (SEAL)
-------------------------
Page 138
<PAGE> 1
EXHIBIT 18.1
February 10, 1997
Airways Corporation
6280 Hazeltine National Drive
Orlando, Florida 32822
Ladies and Gentlemen:
We have been furnished with a copy of Form 10-Q of Airways Corporation for the
three months ended December 31, 1996, and have read the Company's statements
contained in Note 7 to the condensed financial statements included therein. As
stated in Note 7, the Company changed its method of accounting for CRS (Computer
Reservation Service) fees related to passenger travel and states that the newly
adopted accounting principle is preferable in the circumstances because it is
consistent with the Company's policy on similar expenses and more appropriately
matches expenses to the revenues. In accordance with your request, we have
reviewed and discussed with Company officials the circumstances and business
judgment and planning upon which the decision to make this change in the method
of accounting was based.
We have not audited any financial statements of Airways Corporation as of any
date or for any period subsequent to March 31, 1996, nor have we audited the
information set for the aforementioned Note 7 to the condensed financial
statements; accordingly, we do not express an opinion concerning the factual
information contained therein.
With regard to the aforementioned accounting change, authoritative criteria have
not been established for evaluating the preferability of one acceptable method
of accounting over another acceptable method. However, for purposes of Airways
Corporation's compliance with the requirements of the Securities and Exchange
Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting is
preferable in the Company's circumstances.
Very truly yours,
KPMG Peat Marwick LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OR AIRWAYS CORPORATION FOR THE NINE MONTHS ENDED DECEMBER
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,834
<SECURITIES> 0
<RECEIVABLES> 2,225
<ALLOWANCES> 0
<INVENTORY> 1,323
<CURRENT-ASSETS> 22,277
<PP&E> 38,204
<DEPRECIATION> 4,992
<TOTAL-ASSETS> 58,849
<CURRENT-LIABILITIES> 27,732
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 17,274
<TOTAL-LIABILITY-AND-EQUITY> 59,849
<SALES> 0
<TOTAL-REVENUES> 72,846
<CGS> 0
<TOTAL-COSTS> 85,691
<OTHER-EXPENSES> (801)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,136
<INCOME-PRETAX> (13,180)
<INCOME-TAX> (5,913)
<INCOME-CONTINUING> (7,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,267)
<EPS-PRIMARY> (.81)
<EPS-DILUTED> (.81)
</TABLE>
