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 February 28, 2009

Debtors’ Address:

7001 Tower Road

Denver, CO 80249

Monthly Operating Loss:  $3.2 million

Debtors’ Attorney:

Damian Schaible

Davis Polk & Wardwell

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:  March 23, 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 filing to date
Frontier Airlines, Inc.	08-11297	$	112,494,144	$	105,711,455	$	1,338,849,185
Frontier Airlines Holdings, Inc.	08-11298	$	–	$	–	$	–
Lynx Aviation, Inc.	08-11299	$	4,719,470	$	3,123,645	$	42,484,393

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 February 28, 2009 and filing to date		5
Condensed Consolidated Debtors-in-Possession Balance Sheet as of February 28, 2009		6
Condensed Consolidated Debtors-in-Possession Statement of Cash Flows for the month ended February 28, 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
	February 28, 2009			To date
Revenues:
Passenger	$	72,003			1,096,320
Cargo		352			5,439
Other		6,229			49,736
Total revenues		78,584			1,151,495
Operating expenses:
Flight operations		12,816			146,549
Aircraft fuel		19,179			493,020
Aircraft lease		9,241			103,173
Aircraft and traffic servicing		13,586			161,310
Maintenance		7,114			85,865
Promotion and sales		7,567			89,069
General and administrative		4,531			49,385
Operating expenses – regional partner		–			22,288
Loss (gain) on sales of assets, net		(50	)		(8,648	)
Employee separation and other charges		–			462
Depreciation		3,062			36,830
Total operating expenses		77,046			1,179,303
Operating income (loss)		1,538			(27,808	)
Nonoperating income (expense):
Interest income		108			3,655
Interest expense (contractual interest expense was $30,904 from April 10, 2008 to February 28, 2009) (Note 2)		(2,036	)		(26,771	)
Loss from early extinguishment of debt		–			(989	)
Other, net		(9	)		(699	)
Total nonoperating expenses, net		(1,937	)		(24,804	)
Income (loss) before reorganization items and income taxes		(399	)		(52,612	)
Reorganization items (Note 4)		2,575			53,532
Income tax expense		191			1,457
Net loss	$	(3,165	)		(107,601	)

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)	February 28, 2009
ASSETS
Current assets:
Cash and cash equivalents (Note 7)	$	60,159
Restricted investments		126,329
Receivables, net of allowance		41,754
Deposits on fuel hedges		5,506
Prepaid expenses and other assets		22,327
Inventories, net of allowance		12,239
Assets held for sale		770
Total current assets		269,084
Property and equipment, net		607,378
Security and other deposits		25,059
Aircraft pre-delivery payments		6,216
Restricted investments		2,987
Deferred loan expenses and other assets		4,750
Total assets	$	915,474
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities not subject to compromise:
Current liabilities:
Accounts payable (Note 6)		41,298
Air traffic liability		144,121
Other accrued expenses		53,227
Income tax payable		1,307
Deferred revenue and other current liabilities		20,430
Debtor-in-Possession financing		30,000
Total current liabilities not subject to
compromise		290,383
Deferred revenue and other liabilities		19,279
Other long - term debt - post petition		3,000
Total liabilities not subject to compromise		312,662
Liabilities subject to compromise (Note 5)		566,625
Total liabilities		879,287
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		197,106
Unearned ESOP shares		–
Other comprehensive loss		–
Accumulated deficit		(160,956	)
Total stockholders’ equity		36,187
Total liabilities and stockholders’ equity	$	915,474

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			Filing to
	February 28, 2009			Date
Cash flows from operating activities:
Net loss	$	(3,165	)		(107,601	)
Adjustments to reconcile net loss to net cash used in operating activities:
ESOP and stock option compensation expense		111			1,790
Depreciation and amortization		3,405			39,309
Assets beyond economic repair		335			1,604
Mark to market adjustments on derivative contracts		4,129			24,615
Proceeds received (paid) for settled derivative contracts		(4,507	)		1,465
Gain on disposal of equipment and other assets, net		(50	)		(8,648	)
Loss on early extinguishment of debt		–			990
Changes in operating assets and liabilities:
Restricted investments		(7,499	)		(47,228	)
Receivables		(776	)		11,602
Security and other deposits		4,770			(6,093	)
Prepaid expenses and other assets		(1,628	)		9,207
Inventories		985			2,808
Other assets		–			(189	)
Accounts payable		1,196			1,078
Air traffic liability		7,784			(89,338	)
Other accrued expenses and income tax payable		(1,983	)		(21,747	)
Deferred revenue and other liabilities		(2,203	)		1,918
Reorganization items		2,575			53,532
Net cash provided by (used in) operating activities		3,479			(130,926	)
Cash flows from reorganization activities
Net cash used in reorganization activities		(1,361	)		(13,932	)
Total net cash provided by (used in) operating activities		2,118			(144,858	)
Cash flows from investing activities:
Aircraft purchase deposits made		(1,032	)		(4,509	)
Aircraft purchase deposits returned		–			11,485
Sale of short-term investment		–			8,800
Proceeds from the sale of property and equipment  and assets held for sale		65			59,779
Capital expenditures		(829	)		(11,694	)
Proceeds from the sale of aircraft – reorganization activity		–			194,300
Net cash (used in) provided by investing activities		(1,796	)		258,161

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			Filing to
	February 28, 2009			Date
Cash flows from financing activities:
Proceeds from Debtor-in-Possession financing (post-petition)		–			30,000
Extinguishment of long-term borrowings		–			(33,754	)
Principal payments on long-term borrowings		(1,606	)		(31,548	)
Principal payments on short-term borrowings		–			(3,139	)
Payment of financing fees		–			(2,175	)
Extinguishment of long-term borrowings – reorganization activity		–			(119,784	)
Net cash used in financing activities		(1,606	)		(160,400	)
Decrease in cash and cash equivalents		(1,284	)		(47,097	)
Cash and cash equivalents at beginning of period		61,443			107,256
Cash and cash equivalents at end of period	$	60,159			60,159

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.

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, 2008 and subsequent filings on Form 10-Q 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 prepaid balances and pre- and post-petition trade accounts payable 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 period ended March 31, 2008 and subsequent filings on Form 10-Q filed with the United States Securities and Exchange Commission.

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.

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

9

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.  Due to the Company’s history of operating losses over the past few years, combined with the projection of continued operating losses, a full valuation allowance was established against its deferred tax assets during the tax year ended March 31, 2007.  As a result, Frontier Holdings discontinued recognizing income tax benefits for net operating losses and continues to record a full valuation allowance against all deferred tax assets. The Debtor recorded $1,456,000 of alternative minimum tax (“AMT”) expense during the eleven months ended February 28, 2009 because tax gains on the sales of aircraft are currently estimated to result in taxable income for the fiscal year ending March 31, 2009. 

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 February 28, 2009		Filing to Date
Professional fees directly related to reorganization	$	1,968		21,324
Unsecured claims allowed by the court		604		29,901
Loss on sale-leaseback transaction		–		4,654
Write-off of debt issuance cost		–		1,833
Gains on the sale of aircraft		–		(13,888	)
Cost related to the early return and sale of aircraft..		–		2,418
Write-off of equipment note		–		13,541
Gains on contract terminations, net		–		(7,157	)
Other		3		906
Total reorganization items	$	2,575		53,532

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)

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Liabilities subject to compromise consist of the following:

(In $U.S. 000’s)	February 28, 2009
Accounts payable and other accrued expenses	$	85,918
Accrued interest expense		3,677
Secured aircraft debt		385,030
Convertible bonds		92,000
Total liabilities subject to compromise	$	566,625

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 $4.5 million of invoices received, not yet paid, as of February 28, 2009.

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

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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 February 28, 2009 was $4.3 million and are included in cash and cash equivalents in the condensed and consolidated balance sheet.

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

On August 5, 2008, the Bankruptcy Court approved a secured super-priority debtor-in-possession credit agreement (“DIP Credit Agreement”) with Republic Airways Holdings, Inc., Credit Suisse Securities (USA) LLC, AQR Capital LLC, and CNP Partners, LLC (the “Lenders”), each a member of the Unsecured Creditors Committee in the Company’s Chapter 11 Bankruptcy cases.  The DIP Credit Agreement contains various representations, warranties and covenants by the Debtors that are customary for transactions of this nature, including reporting requirements and maintenance of financial covenants.  The DIP Credit Agreement provides for the payment of interest at an annual rate of 16% interest, or annual interest of 14% if the Debtors pay the interest monthly.  The DIP Credit Agreement will mature on April 1, 2009.  On August 8, 2008, the DIP facility was funded in the amount of $30 million, before applicable fees of approximately $2.0 million.

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 will retire the existing $30 million DIP Credit Agreement on April 1, 2009.

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

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