UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

Debtors: Frontier Airlines Holdings, Inc., et al. (1)

Case Number: Jointly Administered 08-11298 (RDD)

Monthly Operating Report for the Period:

Month ended August 31, 2009

Debtors’ Address:

7001 Tower Road

Denver, CO 80249

Monthly Operating Loss:  $2.0 million

Debtors’ Attorney:

Damian Schaible

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Telephone:  (212) 450-4000

Fax : (212) 450-6501

Email:  damian.schaible@dpw.com

Report Preparer: Frontier Airlines Holdings, Inc.

The undersigned, having reviewed the attached report and being familiar with the Debtors’ financial affairs, verifies under the penalty of perjury that the information contained therein is complete, accurate and truthful to the best of my knowledge. (2)

Date:  September 25, 2009	/s/ Heather Iden
	Heather Iden
	Vice President Controller

(1)  See next page for a listing of Debtors by case number.

(2)  All amounts herein are unaudited and subject to revision. The Debtors reserve all rights to revise this report.

FRONTIER AIRLINES HOLDINGS, INC., ET AL.

MONTHLY OPERATING REPORT

(1) The Debtors in these jointly administered cases are as follows:

Debtor Name	Case Number
Frontier Airlines, Inc.	08-11297
Frontier Airlines Holdings, Inc.	08-11298
Lynx Aviation, Inc.	08-11299

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

SCHEDULE OF DISBURSEMENTS

Debtor Name	Case Number		Disbursements for April 10, 2008 to April 30, 2008		Disbursements for month ended May 31, 2008		Disbursements for month ended June 30, 2008
Frontier Airlines, Inc.		08-11297	$	83,767,766	$	142,196,923	$	164,914,886
Frontier Airlines Holdings, Inc.		08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.		08-11299	$	961,414	$	1,353,682	$	6,791,728
Debtor Name	Case Number		Disbursements for month ended July 31, 2008		Disbursements for month ended August 31, 2008		Disbursements for month ended September 30, 2008
Frontier Airlines, Inc.		08-11297	$	143,770,237	$	155,230,714	$	136,478,359
Frontier Airlines Holdings, Inc.		08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.		08-11299	$	4,718,790	$	4,944,656	$	3,228,961
Debtor Name	Case Number		Disbursements for the month ended October 31, 2008		Disbursements for the month ended November 30, 2008		Disbursements for the month ended December 31, 2008
Frontier Airlines, Inc.		08-11297	$	101,142,014	$	101,849,443	$	91,293,244
Frontier Airlines Holdings, Inc.		08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.		08-11299	$	2,979,135	$	3,094,850	$	6,568,062

Debtor Name	Case Number		Disbursements for the month ended January 31, 2009		Disbursements for the month ended February 28, 2009		Disbursements for the month ended March 31, 2009
Frontier Airlines, Inc.		08-11297	$	112,494,144	$	105,711,455	$	92,196,807
Frontier Airlines Holdings, Inc.		08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.		08-11299	$	4,719,470	$	3,123,645	$	7,166,953

Debtor Name	Case Number		Disbursements for the month ended April 30, 2009		Disbursements for the month ended May 31, 2009		Disbursements for the month ended June 30, 2009
Frontier Airlines, Inc.		08-11297	$	111,961,288	$	98,832,027	$	94,883,165
Frontier Airlines Holdings, Inc.		08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.		08-11299	$	4,127,258	$	4,321,774	$	5,137,517

Debtor Name	Case Number		Disbursements for the month ended July 31, 2009		Disbursements for the month ended August 31, 2009		Disbursements filing to date
Frontier Airlines, Inc.		08-11297	$	112,115,631	$	98,606,844	$	1,947,444,946
Frontier Airlines Holdings, Inc.		08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.		08-11299	$	4,864,656	$	9,954,643	$	78,057,194

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

MONTHLY OPERATING REPORT

INDEX

Description	Page
Condensed Consolidated Debtors-in-Possession Statement of Operations for the month ended August 31, 2009 and filing to date	5
Condensed Consolidated Debtors-in-Possession Balance Sheet as of  August 31, 2009	6
Condensed Consolidated Debtors-in-Possession Statement of Cash Flows for the month ended August 31, 2009 and filing to date	7
Notes to the Condensed Consolidated Monthly Operating Report	9

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

MONTHLY OPERATING REPORT

CONDENSED CONSOLIDATED DEBTORS-IN-POSSESSION STATEMENT OF OPERATIONS

(In $U.S. 000’s)	Month Ended			Filing
	August 31, 2009			To date
Revenues:
Passenger	$	94,018		$	1,640,265
Cargo		438			8,271
Other		7,555			92,760
Total revenues		102,011			1,741,296
Operating expenses:
Flight operations		13,072			225,216
Aircraft fuel		31,246			640,735
Aircraft lease		9,396			159,172
Aircraft and traffic servicing		14,610			249,733
Maintenance		5,445			115,362
Promotion and sales		10,115			145,564
General and administrative		5,031			79,253
Operating expenses – regional partner		–			22,288
Gain on sales of assets, net		–			(8,536	)
Employee separation and other charges		–			462
Depreciation		2,899			54,980
Total operating expenses		91,814			1,684,229
Operating income		10,197			57,067
Nonoperating income (expense):
Interest income		127			4,423
Interest expense (contractual interest expense was $43,245 from April 10, 2008 to August 31, 2009) (Note 2)		(1,750	)		(36,786	)
Loss from early extinguishment of debt		–			(1,174	)
Other, net		35			(506	)
Total nonoperating expenses, net		(1,588	)		(34,043	)
Income before reorganization items and income taxes		8,609			23,024
Reorganization items (Note 4)		10,495			233,421
Income tax expense		104			2,563
Net loss	$	(1,990	)	$	(212,960	)

The accompanying notes are an integral part of the financial statements.

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

MONTHLY OPERATING REPORT

CONDENSED CONSOLIDATED DEBTORS-IN-POSSESSION BALANCE SHEETS

(In $U.S. 000’s, except  share data)	August 31, 2009
ASSETS
Current assets:
Cash and cash equivalents (Note 7)	$	69,985
Restricted cash and investments		164,962
Receivables, net of allowance		34,215
Prepaid expenses and other assets		20,279
Inventories, net of allowance		12,614
Assets held for sale		605
Total current assets		302,660
Property and equipment, net		582,937
Security and other deposits		27,945
Maintenance reserve deposits		135,432
Aircraft pre-delivery payments		6,869
Restricted investments		2,987
Deferred loan expenses and other assets		8,862
Total assets	$	1,067,692
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities not subject to compromise:
Current liabilities:
Accounts payable (Note 6)		45,040
Air traffic liability		139,566
Other accrued expenses		54,045
Short-term borrowings		14,115
Deferred revenue and other current liabilities		13,134
Debtor-in-Possession financing (Note 8)		40,000
Total current liabilities not subject to compromise		305,900
Deferred revenue and other liabilities		17,127
Other long - term debt (post petition)		3,000
Total liabilities not subject to compromise		326,027
Liabilities subject to compromise (Note 5)		685,947
Total liabilities		1,011,974
Stockholders’ equity:
Preferred stock, no par value, authorized 1,000,000 shares; none issued		–
Common stock, no par value, stated value of $.001 per share, authorized 100,000,000 shares; 36,945,744 issued and outstanding		37
Additional paid-in capital		197,485
Cumulative effect of change in accounting principle		124,511
Accumulated deficit		(266,315	)
Total stockholders’ equity		55,718
Total liabilities and stockholders’ equity	$	1,067,692

The accompanying notes are an integral part of the financial statements

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

MONTHLY OPERATING REPORT

CONDENSED CONSOLIDATED DEBTORS-IN-POSSESSION STATEMENT OF CASH FLOWS

(In $U.S. 000’s)	Month Ended August 31, 2009			Filing to Date
Cash flows from operating activities:
Net loss	$	(1,990	)		(212,960	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
ESOP and stock option compensation expense		74			2,170
Depreciation and amortization		3,112			58,834
Assets beyond economic repair and reserve for inventories		65			1,848
Mark to market adjustments on derivative contracts		1,665			20,780
Amounts paid for settled derivative contracts		–			(2,605	)
Gain on disposal of equipment and other assets, net		–			(8,536	)
Loss on early extinguishment of debt		–			1,175
Reorganization items		10,495			233,421
Changes in operating assets and liabilities:
Restricted investments		5,053			(85,862	)
Receivables		2,777			19,146
Security and other deposits		1,097			(3,481	)
Maintenance reserve payments		(2,042	)		(10,921	)
Prepaid expenses and other assets		4,082			9,786
Inventories		380			2,713
Accounts payable		7,629			12,962
Air traffic liability		(11,293	)		(93,892	)
Other accrued expenses and income tax payable		28			(16,872	)
Deferred revenue and other liabilities		(876	)		(10,532	)
Net cash provided by (used in) operating activities		20,256			(82,826	)
Cash flows from reorganization activities
Net cash used in reorganization activities		(9,821	)		(27,530	)
Total net cash provided by (used in) operating activities		10,435			(110,356	)
Cash flows from investing activities:
Aircraft purchase deposits made		(2,262	)		(10,831	)
Aircraft purchase deposits returned/applied		2,658			14,278
Sale of short-term investment		–			8,800
Proceeds from the sale of property and equipment  and assets held for sale		13			59,790
Capital expenditures		(20,588	)		(40,302	)
Proceeds from the sale of aircraft – reorganization		–			214,296
Net cash provided by (used in) investing activities		(20,179	)		246,031

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

MONTHLY OPERATING REPORT

CONDENSED CONSOLIDATED DEBTORS-IN-POSSESSION STATEMENT OF CASH FLOWS

CONTINUED

(In $U.S. 000’s)	Month Ended August 31, 2009			Filing to Date
Cash flows from financing activities:
Proceeds from Debtor-in-Possession financing (post-petition)		–			40,000
Proceeds from short-term borrowings		14,115			14,115
Extinguishment of long-term borrowings		–			(33,754	)
Principal payments on long-term borrowings		(2,075	)		(44,733	)
Principal payments on short-term borrowings		–			(6,139	)
Payment of financing fees		(90	)		(3,780	)
Extinguishment of long-term borrowings – reorganization		–			(138,655	)
Net cash provided by (used in) financing activities		11,950			(172,946	)
Increase (decrease) in cash and cash equivalents		2,206			(37,271	)
Cash and cash equivalents at beginning of period		67,779			107,256
Cash and cash equivalents at end of period	$	69,985			69,985

The accompanying notes are an integral part of the financial statements.

Case Number: 08-11298 (RDD) (Jointly Administered)

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FRONTIER AIRLINES HOLDINGS, INC., ET AL.

NOTES TO MONTHLY OPERATING REPORT

1. Background and Organization

General – Frontier Airlines Holdings, Inc. (“Frontier Holdings” or the “Company”) is an international airline carrier ranking as the second largest carrier out of Denver International Airport, with an average of 315 daily system-wide departures and arrivals.

Chapter 11 Reorganization Cases – On April 10, 2008 (the “Petition Date”), Frontier Holdings and its two subsidiaries (the “Debtors”) filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Court”).  The Debtors continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. On April 24, 2008, the Office of the United States Trustee for the Southern District of New York appointed a statutory committee of unsecured creditors.

2. Basis of Presentation

Condensed Consolidated Debtor-in-Possession Financial Statements – The unaudited financial statements and supplemental information contained herein represent the condensed consolidated financial information for the Debtors.  The results of operations for the period from April 11 to April 30, 2008 were estimated based upon estimates that included the use of statistical data, processed revenue, fuel purchases, and a pro-ration of calendar days within the month of April.  Amounts presented in the unaudited statement of cash flows for the period from April 11 to April 30, 2008 were estimated based on estimated asset and liability balances as of the filing date and actual balances as of April 30, 2008, as well as the aforementioned estimated results of operations for the period from April 11 to April 30, 2008.

In June 2008, the FASB issued EITF 08-3, "Accounting by Lessees for Maintenance Deposits", on the accounting for maintenance deposits under an arrangement accounted for as a lease.  EITF 08-3 applies to the lessee’s accounting for maintenance deposits paid by a lessee under an arrangement accounted for as a lease that are refunded only if the lessee performs specified maintenance activities.   EITF 08-3 requires that lessees continually evaluate whether it is probable that an amount on deposit with a lessor will be returned to reimburse the costs of the maintenance activities incurred by the lessee. When an amount on deposit is less than probable of being returned, it shall be recognized as additional expense. When the underlying maintenance is performed, the maintenance costs shall be expensed or capitalized in accordance with the lessee's maintenance accounting policy. EITF 08-3 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008, including interim periods within those fiscal years. Earlier application by an entity that has previously adopted an alternative accounting policy is not permitted. Prior to the adoption of EITF 08-3, the Company recorded its maintenance payments, or supplemental monthly payments under aircraft lease agreements, as an expense when paid.

The Company recognized the effect of the change as a change in accounting principle as of April 1, 2009, for all arrangements existing at this effective date, as an adjustment to the opening balance of retained earnings in the amount of $124.5 million.  The cumulative effect adjustment is the difference between the amounts recognized in the statement of financial position before initial application of this Issue and the amounts recognized in the statement of financial position at initial application of this Issue.

American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”), which is applicable to companies in chapter 11, generally does not change the manner in which financial statements are prepared. It does, however, require that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.  The Debtors’ financial statements contained herein have been prepared in accordance with the guidance in SOP 90-7. Further information concerning the Debtors’ accounting policies can be found in the footnotes to our Annual Report on Form 10-K for the period ended March 31, 2009 filed with the United States Securities and Exchange Commission.

The unaudited consolidated financial statements have been derived from the books and records of the Debtors.  Certain financial information, however, has not been subject to procedures that typically would be applied to financial information presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and, upon the application of such procedures, the Debtors believe that the financial information will be subject to changes.  These changes could be material.  The information furnished in this report includes primarily normal recurring adjustments but does not include all of the adjustments that typically would be made for quarterly financial statements in accordance with U.S. GAAP.  Certain pre-petition liability balances are subject to further review and reclassification.  In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, this report should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009 filed with the United States Securities and Exchange Commission.

Case Number: 08-11298 (RDD) (Jointly Administered)

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The results of operations contained herein are not necessarily indicative of results that may be expected from any other period or for the full year, and may not necessarily reflect the consolidated results of operations, financial position and cash flows of the Debtors in the future.

Intercompany Transactions – Intercompany transactions between Debtors have been eliminated in the financial statements contained herein.

Property and Equipment, net – Recorded at cost net of accumulated depreciation.

  Reclassification of Prior Month Amounts­ - Certain prior month items have been reclassified to conform to the current month presentation.

Contractual Interest Expense – Contractual interest expense represents amounts due under the contractual terms of outstanding debt for the reporting periods, including debt subject to compromise for which interest expense is not recognized in the income statement in accordance with the provisions of SOP 90-7.

Taxes – The Debtor accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” and recognizes current and deferred income tax assets and liabilities based upon all events that have been recognized in the consolidated financial statements as measured by the enacted tax laws.

The Debtors have received approval to pay pre-petition employee withholding obligations in addition to employment and wage related taxes, sales and use taxes, and certain other taxes due in the normal course of business through certain first day motions.  As such, the Debtors have paid such taxes when due.

Further, employee withholding obligations are pre-funded by the Debtors and paid directly by the Debtors’ payroll contractor, Automatic Data Processing, Inc. (“ADP”).  Thus, no further information regarding taxes is included in this report.

3. Cash Management System & Use of Cash

The Court has entered an order authorizing the Debtors to continue to use their existing cash management system including: (i) investment guidelines; (ii) maintenance of existing bank accounts and business forms; and (iii) the authorization to open and close bank accounts.  The Debtors are continuing to collect and disburse cash since the Petition Date using the existing cash management system.

Case Number: 08-11298 (RDD) (Jointly Administered)

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4. Reorganization Items

SOP 90-7 requires separate disclosure of reorganization items such as realized gains and losses from the settlement of pre-petition liabilities, provisions for losses resulting from the reorganization and restructuring of the business, as well as professional fees directly related to the process of reorganizing the Debtors under Chapter 11.  The Debtors’ reorganization items consist of the following:

(In $U.S. 000’s)	Month ended August 31, 2009		Filing to Date
Professional fees directly related to reorganization	$	2,193		30,970
Unsecured claims allowed by the court		8,302		185,614
Loss on sale-leaseback transaction		–		4,654
Write-off of debt issuance cost		–		1,833
(Gain)/loss on the sale of aircraft		–		575
Cost related to the early return and sale of aircraft		–		2,418
Write-off of equipment note		–		13,541
Gains on contract terminations and cure payment reductions, net		–		(7,157	)
Other		–		973
Total reorganization items	$	10,495		233,421

Professional fees directly related to the reorganization (“Professional Fees”) include fees associated with advisors to the Debtors, the statutory committee of unsecured creditors and certain secured creditors.   Other expenses are primarily related to gains and losses related to a plan to reduce capacity, gain/(loss) on contract terminations, unsecured claims allowed by the courts and penalty fees incurred during 1110 provisions of Bankruptcy.  Professional Fees are estimated by the Debtors and will be reconciled to actual invoices when received.

5. Liabilities Subject to Compromise

As a result of the Chapter 11 Filings, most pre-petition indebtedness is subject to compromise or other treatment under a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-Chapter 11 liabilities are stayed. At hearings held in April 2008, the Court granted final approval of many of the Debtors’ “first day” motions covering, among other things, human capital obligations, supplier relations (including fuel supply and fuel contracts), insurance, customer relations, business operations, certain tax matters, cash management, utilities, case management and retention of professionals.

The Debtors may reject pre-petition executory contracts and unexpired leases with respect to the Debtors’ operations, with the approval of the Bankruptcy Court.  Damages resulting from rejection of executory contracts and unexpired leases are generally treated as general unsecured claims and will be classified as liabilities subject to compromise. Holders of pre-petition claims were required to file proofs of claims by the bar date. The deadline for the filing of proofs of claims against the Debtors in this case was November 17, 2008.

  A bar date is the date by which claims against the Debtors must be filed if the claimants wish to receive any distribution in the Chapter 11 cases.  Differences between liability amounts estimated by the Debtors and claims filed by creditors will be investigated and, if necessary, the Court will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated cannot be made until the Court approves a Chapter 11 plan of reorganization. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

SOP 90-7 requires pre-petition liabilities that are subject to compromise to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. The amounts currently classified as liabilities subject to compromise may be subject to future adjustments depending on Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events.

Case Number: 08-11298 (RDD) (Jointly Administered)

11

Liabilities subject to compromise consist of the following:

(In $U.S. 000’s)	August 31, 2009
Accounts payable and other accrued expenses	$	241,262
Accrued interest expense		2,710
Secured aircraft debt		349,975
Convertible bonds		92,000
Total liabilities subject to compromise	$	685,947

Liabilities subject to compromise includes trade accounts payable related to pre-petition purchases, all of which were scheduled for payment in the post-petition period.  As a result, the cash flows from operations were favorably affected by the stay of payment related to these accounts payable.

6. Post-petition Accounts Payable

To the best of the Debtors’ knowledge, all undisputed post-petition accounts payable have been and are being paid under agreed-upon payment terms except for approximately $3.7 million of invoices received, not yet paid, as of August 31, 2009.

7. Passenger Facility Charges

Passenger Facility Charges (“PFC”) are assessed on the sale of tickets to end customers and are collected by the Company as an agent and remitted to the respective taxing authority.  These taxes and fees are recorded as a liability until remitted to the respective taxing authority.  As mandated by Federal Regulations for any air carrier that has filed for protection under chapter 11 of the Bankruptcy Code, the Company established a separate reserve account for these funds.  The balances of collected PFC funds as of August 31, 2009 were $4.5 million and are included in cash and cash equivalents in the condensed and consolidated balance sheet.

8. Debtor-in-Possession (“DIP”) Financing

On March 20, 2009, the Bankruptcy Court approved an order authorizing a $40 million Amended and Restated DIP Credit Facility (“Amended DIP Credit Agreement”) with Republic Airways Holdings, Inc.  The Bankruptcy Court also allowed the damage claim of Republic Airways Holdings, Inc. in the amount of $150 million arising from the Debtors’ rejection of the Airline Services Agreement with Republic Airlines, Inc. and Republic Airways Holdings, Inc.   The allowance of this claim was a condition to Republic Airways Holdings, Inc. providing the Amended DIP Credit Agreement.  The Company retired the existing $30 million DIP Credit Agreement on April 1, 2009.

9. Plan of reorganization

On June 22, 2009, the Company filed its proposed plan of reorganization and a related disclosure statement with the U.S. Bankruptcy Court for the Southern District of New York. The Company also filed a motion to approve an investment agreement with Republic Airways Holdings, Inc. (“Republic”), subject to higher and better proposals under a court-supervised auction.   On August 13, 2009, the Debtors concluded the auction and determined that Republic had submitted the highest and otherwise best proposal for the purchase of the Compnay.  As part of the winning proposal, Republic agreed to waive recovery on its allowed $150.0 million unsecured claims increasing the potential recovery for the remaining unsecured claims.  The Company entered into the Second Amended and Restated Investment Agreement with Republic on August 13, 2009.  This revised Investment Agreement retains a purchase price of $108.8 million, with $28.8 million of the purchase price allocated to payment of the unsecured creditors.  Under the revised Investment Agreement and the Debtors’ Plan of Reorganization, the Company’s current outstanding common stock will have no value and will be canceled. The confirmation hearing on the Plan of Reorganization is took place on September 10, 2009.  The Plan of Reorganization was confirmed at that hearing, and the Company expects to consummate the Plan and the Investment Agreement and emerge from Chapter 11 on or about October 1, 2009.

Case Number: 08-11298 (RDD) (Jointly Administered)

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