**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-K**







[X]
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


For
      the fiscal year ended March 31, 2007





[  
                ]
            TRANSITION
                REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
                OF
                1934





Commission
      file number: **000-51890**





**FRONTIER
      AIRLINES HOLDINGS, INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **20-4191157**(State
                or other jurisdiction of incorporated or organization)
            (I.R.S.
                Employer Identification No.)**7001
                Tower Road, Denver, CO**
            **80249**(Address
                of principal executive offices)
            (Zip
                Code)





Registrant’s
      telephone number including area code: **(720)
      374-4200**





Securities
      registered pursuant to Section 12(b) of the Act:





**Title
                of Class**
            **Name
                of exchange on which registered**Common
                Stock, Par Value of $0.001 per share
            The
                NASDAQ Stock Market LLC





Securities
      registered pursuant to Section 12(g) of the Act: None





Indicate
      by check mark whether the Registrant is a well−known seasoned issuer, as defined
      in Rule 405 of the Securities Act.


Yes  No X





Indicate
      by check mark whether the Registrant is not required to file reports pursuant
      to
      Section 13 or Section 15(d) of the Act. Yes  No X





Indicate
      by check mark whether the Registrant (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act 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
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of the Registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. ___





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer or large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
      accelerated filer  Accelerated filer X Non-accelerated
      filer





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  No X





The
      aggregate market value of common stock held by non-affiliates of the Company
      computed by reference to the last quoted price at which such stock sold on
      such
      date as reported by the Nasdaq National Market as of September 30, 2006 was
      $298,817,926.





The
      number of shares of the Company’s common stock outstanding as of May 23, 2007 is
      36,641,181.





**Documents
      incorporated by reference**


Certain
      information required by Part III is incorporated by reference to the Company’s
      2007 Proxy Statement.









**TABLE
      OF CONTENTS**





Page


**PART
      I**





Item
                1:
            Business
            3Item
                1A:
            Risk
                Factors
            16Item
                1B:
            Unresolved
                Staff Comments
            28Item
                2:
            Properties
            29Item
                3:
            Legal
                Proceedings
            30Item
                4:
            Submission
                of Matters to a Vote of Security Holders
            30


**PART
      II**


Item
                5:
            Market
                for Registrant's Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            31Item
                6:
            Selected
                Financial Data
            33Item
                7:
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            38Item
                7A:
            Quantitative
                and Qualitative Disclosures About Market Risk
            59Item
                8:
            Financial
                Statements and Supplementary Data
            60Item
                9:
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            60Item
                9A:
            Controls
                and Procedures
            60Item
                9B:
            Other
                Information
            60


**PART
      III**





Item
                10:
            Directors,
                Executive Officers and Corporate Governance
            61Item
                11:
            Executive
                Compensation
            61Item
                12:
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            61Item
                13:
            Certain
                Relationships and Related Transactions and Director
                Independence
            61Item
                14:
            Principal
                Accountant Fees and Services
            61


**PART
      IV**


Item
                15:
            Exhibits
                and Financial Statement Schedules
            62





Table
          of Contents


**PART
      I**





***Special
      Note About Forward-Looking Statements*** *.
      This report contains forward-looking statements within the meaning of Section
      21E of the Securities Exchange Act of 1934 (the “Exchange Act”) that describe
      the business and prospects of Frontier Airlines Holdings, Inc. and the
      expectations of our company and management. All statements included in this
      report that address activities, events or developments that we expect, believe,
      intend or anticipate will or may occur in the future, are forward-looking
      statements. When used in this document, the words “estimate,” “anticipate,”
“intend,” “project,” “believe” and similar expressions are intended to identify
      forward-looking statements. Forward-looking statements are inherently subject
      to
      risks and uncertainties, many of which cannot be predicted with accuracy and
      some of which might not even be anticipated. These risks and uncertainties
      include, but are not limited to: the timing of, and expense associated with,
      expansion and modification of our operations in accordance with our business
      strategy or in response to competitive pressures or other factors; failure
      of
      our new markets to perform as anticipated; the inability to achieve a level
      of
      revenue through fares sufficient to obtain profitability due to competition
      from
      other air carriers and excess capacity in the markets we serve; the inability
      to
      obtain sufficient gates at Denver International Airport (“DIA”) to accommodate
      the expansion of our operations; the inability to successfully lease or build
      a
      new maintenance hanger prior to a potential lease termination of our primary
      maintenance hanger located at DIA that is on a month-to-month sublease with
      Continental Airlines; general economic factors and behavior of the fare-paying
      public and its potential impact on our liquidity; terrorist attacks or other
      incidents that could cause the public to question the safety and/or efficiency
      of air travel; hurricanes and their impact on oil production; operational
      disruptions, including weather; industry consolidation; the impact of labor
      disputes; enhanced security requirements; changes in the government’s policy
      regarding relief or assistance to the airline industry; the economic environment
      of the airline industry generally; increased federal scrutiny of low-fare
      carriers generally that may increase our operating costs or otherwise adversely
      affect us; actions of airlines competing in our primary markets, such as
      increasing capacity and pricing actions of United Airlines, Southwest Airlines,
      and other competitors, particularly in some of our Mexico destinations due
      to
      the increase in the number of domestic airlines authorized to serve Mexican
      markets from the U.S.; the availability of suitable aircraft, which may inhibit
      our ability to achieve operating economies and implement our business strategy;
      the unavailability of, or inability to secure upon acceptable terms, debt or
      operating lease financing necessary to acquire aircraft which we have ordered;
      uncertainties regarding aviation fuel price; inherent risks of entering into,
      new business strategies, such as the start-up of a new subsidiary using a
      different type of aircraft and in different markets and a new regional jet
      partner, and various risk factors to our business discussed elsewhere in this
      report. Forward-looking statements include the statements in Item 7, “Outlook”.
      Because our business, like that of the airline industry generally, is
      characterized by high fixed costs relative to revenues, small fluctuations
      in
      our revenue per available seat mile (“RASM”) or cost per available seat mile
      (“CASM”) can significantly affect operating results. These risks and factors are
      not exclusive, and we undertake no obligation to publicly update or revise
      any
      forward-looking statements to reflect events or circumstances that may arise
      after the date of this filing.*





**Item
      1:****Business**





**General**





On
      April 3, 2006, Frontier Airlines, Inc. (“Frontier”) completed its corporate
      reorganization (the “Reorganization”). As a result of the Reorganization,
      Frontier became a wholly-owned subsidiary of Frontier Airlines Holdings, Inc.
      (“Frontier Holdings”), a Delaware corporation, and Frontier Holdings became the
      successor issuer to Frontier pursuant to Rule 12g-3 under the Exchange Act.
      In
      connection with the Reorganization, each outstanding share of common stock,
      no
      par value, of Frontier was exchanged for one share of common stock, $0.001
      par
      value, of Frontier Holdings, resulting in each shareholder of Frontier as of
      the
      close of business on March 31, 2006 becoming a stockholder of Frontier Holdings
      as of the opening of business on April 3, 2006. The common stock of Frontier
      Holdings is now the publicly traded stock of the company. In this report,
      references to “us,” “we,” or the “company” refer to the consolidated results of
      Frontier Holdings unless the context requires otherwise.





In
      September 2006, we formed a new subsidiary, Lynx Aviation, Inc. (“Lynx
      Aviation”). Lynx Aviation intends to assume a purchase agreement between
      Frontier Holdings and Bombardier, Inc. for ten Q400 turboprop aircraft, each
      with a seating capacity of 74, with the option to purchase ten additional
      aircraft. The aircraft will be purchased and operated by Lynx Aviation under
      a
      separate operating certificate. Lynx Aviation is currently in the process of
      obtaining Federal authorization to provide scheduled air transportation. Lynx
      Aviation submitted its




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application
      to the Department of Transportation in January 2007, and the DOT entered its
      show cause order on May 4, 2007. Lynx Aviation expects it will receive its
      authorizations in August and commence revenue service operations in September
      2007 with ten aircraft in service by the end of January 2008. At this time,
      Frontier and Lynx Aviation are the only subsidiaries of Frontier Holdings.
      The
      financial performance of Frontier Holdings is represented by the financial
      performance of Frontier and includes only start-up costs for Lynx Aviation
      because it has not yet commenced operations.





Now
      in our 13th year of operations, we are a low cost, affordable fare airline
      operating primarily in a hub and spoke fashion connecting cities coast to coast
      through our hub at Denver International Airport (“DIA”). We are the second
      largest jet service carrier at DIA based on departures and in January 2007,
      we
      became a major carrier as designated by the DOT. As of May 18, 2007, we, in
      conjunction with our Frontier JetExpress brand operated by Horizon Air
      Industries, Inc. (“Horizon”) and Republic Airlines, Inc. (“Republic”) or
      (“Frontier JetExpress”), operate routes linking our Denver hub to 49 U.S. cities
      spanning the nation from coast to coast, eight cities in Mexico and two cities
      in Canada. We also provide service to Mexico from 10 non-hub cities. We began
      service between San Francisco, California and Los Angeles, California with
      five
      daily frequencies on June 29, 2006 and service between San Francisco, California
      and Las Vegas, Nevada on December 14, 2006 with one daily frequency. On May 3,
      2007, we announced that we plan to terminate point-to-point service between
      San
      Francisco and Los Angeles and between San Francisco and Las Vegas effective
      July
      10, 2007.





We
      were organized in February 1994, and we began flight operations in July 1994
      with two leased Boeing 737-200 jets. We have since expanded our fleet in service
      to 59 jets as of May 18, 2007 (38 of which we lease and 21 of which we own),
      consisting of 49 Airbus A319s and ten Airbus A318s. In April 2005, we completed
      our plan to replace our Boeing aircraft with new purchased and leased Airbus
      jet
      aircraft. During the years ended March 31, 2007 and 2006, we increased
      year-over-year capacity by 14.4% and 8.4%, respectively. During the years ended
      March 31, 2007 and 2006, we increased mainline passenger traffic by 14.7% and
      12.9%, respectively, outpacing our increase in capacity during both periods.
      We
      intend to continue our growth strategy and to expand to new markets and add
      frequency to existing markets that we believe are underserved.





On
      January 11, 2007, we signed an agreement with Republic under which Republic
      will
      operate up to 17 Embraer 170 aircraft with capacity of 76-seats under our
      Frontier JetExpress brand. The contract is for an 11-year period from the
      in-service date of the last aircraft, which is scheduled for December 2008.
      The
      service began on March 4, 2007 and replaced our agreement with Horizon, which
      will expire on return of the last aircraft in December 2007. We control the
      routing, scheduling and ticketing of this service. We compensate Republic for
      its services based on its operating expenses plus a margin on certain of its
      expenses. The agreement provides for financial incentives and penalties based
      on
      the performance of Republic.





In
      September 2003, we signed an agreement with Horizon, under which Horizon
      operates up to nine 70-seat CRJ 700 aircraft under our Frontier JetExpress
      brand. In September 2006, we amended the Horizon Agreement to provide that
      all
      nine CRJ-700 aircraft will be returned to Horizon during a one-year ramp down
      period that began in January 2007 and will be completed in December 2007.





As
      of May 18, 2007, Frontier JetExpress provided service to Billings, Montana;
      Boise, Idaho; El Paso, Texas; Little Rock, Arkansas; Louisville, Kentucky;
      Oklahoma City, Oklahoma; Tulsa, Oklahoma, and Calgary, Alberta, Canada and
      supplements our mainline service to Albuquerque, New Mexico; Los Angeles,
      California; Omaha, Nebraska; San Francisco, California; and Spokane, Washington.





We
      currently lease 22 gates on Concourse A at DIA on a preferential basis. We
      use
      these 22 gates and share use of up to seven common use regional jet parking
      positions to operate approximately 300 daily mainline flight departures and
      arrivals and 65 Frontier JetExpress daily system flight departures and arrivals.





Our
      filings with the Securities and Exchange Commission (the “SEC”) are available at
      no cost on our website, www.frontierairlines.com ,
      in the Investor Relations folder contained in the section titled “About
      Frontier”. These reports include our annual report on Form 10-K, our quarterly
      reports on Form 10-Q, our current reports on Form 8-K, Section 16 reports on
      Forms 3, 4 and 5, and any related amendments or other documents that we file
      or
      furnish with the SEC, and are made available as soon as reasonably practicable
      after we file or furnish the materials with the SEC.




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          of Contents


Our
      corporate headquarters are located at 7001 Tower Road, Denver, Colorado 80249.
      Our administrative office telephone number is 720-374-4200 and our reservations
      telephone number is 800-432-1FLY.





**Overview
      of Operations and the Industry**





We
      intend to continue our focused growth strategy while keeping our operating
      costs
      low. One of the key elements to keeping our costs low was the completion of
      the
      transition from a Boeing fleet to an all Airbus fleet in April 2005. This
      strategy produces cost savings because crew training is standardized for
      aircraft of a common type, maintenance issues are simplified, spare parts
      inventory is reduced, and scheduling is more efficient. We also keep our
      operating costs low by operating only two types of Airbus aircraft with similar
      engines and cockpit configurations and a single class of service. Operating
      a
      single class of service simplifies our operations, enhances productivity,
      increases our capacity and offers an operating cost advantage. The anticipated
      addition of the Bombardier Q400 turboprop aircraft through our Lynx Aviation
      subsidiary and the expansion of our JetExpress operation will allow us to add
      routes to markets that we believe are under-served in Colorado and elsewhere
      in
      the Rocky Mountain region using the aircraft that we believe will offer
      favorable economics and operating performance for the selected routes. The
      operations of both Lynx Aviation and Jet Express services are separate and
      apart
      from our mainline Airbus operations. We anticipate that Lynx Aviation will
      begin
      revenue service in September 2007.





As
      of May 18, 2007, we had remaining firm purchase commitments for 21 aircraft
      (one
      Airbus 318 aircraft, ten Airbus 320 aircraft and ten Bombardier Q400 aircraft).
      We intend to use these additional aircraft to provide service to new markets
      and
      to add frequencies to existing markets that we believe are
      underserved.





We
      believe we have a proven management team and a strong company culture and will
      continue to focus on differentiating the product and service we provide to
      our
      passengers. We believe our friendly and dedicated employees, affordable pricing,
      accommodating service, in-flight entertainment systems and comfortable airplanes
      distinguish our product and service from our competitors. Safety is a primary
      concern, and we are proud that our maintenance staff has been awarded the
      Federal Aviation Administration (“FAA”) Diamond Award for Excellence for eight
      straight years - an award that recognizes our commitment to the ongoing training
      and education of our maintenance staff. Our product begins with the Airbus
      aircraft, which offers a comfortable passenger cabin that we configure with
      one
      class of seating, ample leg room, and in-seat 24 channel live television
      entertainment. We also provide four additional channels that offer current-run
      pay-per-view movies.





The
      airline industry is intensely competitive with record high aviation fuel costs.
      We expect competition will remain intense. Business and leisure travelers
      continue to reevaluate their travel budgets and remain highly price sensitive.
      Increased competition has prompted aggressive strategies from competitors
      through discounted fares and sales promotions. Additionally, the intense
      competition coupled with the record high fuel costs has created financial
      hardship for some of our competitors that have been forced to reduce capacity
      and, in some cases, seek bankruptcy protection.





**Business
      Strategy and Markets**





Our
      business strategy is to provide air service at affordable fares to high volume
      markets from our DIA hub and limited point-to-point routes outside of our DIA
      hub while seeking ways to leverage our strong market position in Denver and
      excellent product and service. Our strategy is based on the following
      factors:





•
            Stimulate
                demand by offering a combination of low fares, quality service and
                frequent flyer credits in our frequent flyer program,*EarlyReturns**®*.•
            Expand
                our Denver hub operation and increase connecting traffic by adding
                additional high volume markets to our current route system through
                use of
                our own aircraft, the introduction and expansion of Lynx Aviation
                and by
                entering into code sharing agreements and other relationships with
                other
                airlines.•
            Continue
                filling gaps in flight frequencies to current markets from our DIA
                hub.•
            Evaluate
                other opportunities for additional non-hub point-to-point
                routes.


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**Route
      System Strategy**





Our
      route system strategy encompasses connecting our Denver hub to top business
      and
      leisure destinations. We currently serve 44 of the top 50 destinations from
      Denver, as defined by the U.S. Department of Transportation’s, (“DOT”) Origin
      and Destination Market Survey.




As
      of May 18, 2007, we, in conjunction with Frontier JetExpress, operate routes
      linking our Denver hub to 49 U.S. cities spanning the nation from coast to
      coast, eight cities in Mexico and two cities in Canada. We also provide service
      to Mexico from 10 non-hub cities and we began service between San Francisco,
      California and Los Angeles, California with five daily frequencies on June
      29,
      2006 and service between San Francisco, California and Las Vegas, Nevada on
      December 14, 2006 with one daily frequency. On May 3, 2007, we announced that
      we
      plan to terminate point-to-point service between San Francisco and Los Angeles
      and between San Francisco and Las Vegas effective July 10, 2007.





During
      the year ended March 31, 2007 and as of May 18, 2007, we added new service
      out
      of DIA to the following cities with commencement dates as follows:




**Destination**
            **Commencement
                Date**DIA
                to Calgary, Alberta, Canada (1)
            May
                25, 2006DIA
                to Guadalajara, Mexico
            December
                24, 2006DIA
                to Hartford, Connecticut
            March
                2, 2007DIA
                to Louisville, Kentucky (1)
            April
                1, 2007DIA
                to Vancouver, British Colombia, Canada
            May
                5, 2007DIA
                to Memphis, Tennessee
            May
                12, 2007




(1)   
                Operated exclusively by Frontier JetExpress.





We
      also discontinued service to Baltimore, Maryland effective January 8,
      2007





We
      have continued our Mexico expansion, and as of May 18, 2007 we serve the
      following routes:





**Current
                non-stop****Destination**
            **round-trip
                frequencies**California:Los
                Angeles to Cabo San Lucas
            One
                DailySan
                Diego to Cancun*
            Once
                per weekSan
                Francisco to Cabo San Lucas
            Daily
                except SaturdaysSan
                Jose to Cabo San Lucas*
            Three
                per weekSacramento
                to Cabo San Lucas*
            Four
                per weekColorado:Denver
                to Acapulco*
            Twice
                per weekDenver
                to Cabo San Lucas
            DailyDenver
                to Cancun
            DailyDenver
                to Cozumel
            Three
                per weekDenver
                to Guadalajara
            Four
                weeklyDenver
                to Ixtapa/Zihuatanejo
            Three
                per weekDenver
                to Mazatlan
            Four
                weeklyDenver
                to Puerto Vallarta
            Daily





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Missouri:Kansas
                City to Cabo San Lucas*
            Once
                per weekKansas
                City to Puerto Vallarta*
            Once
                per weekSt.
                Louis to Cancun*
            Three
                per weekIndiana:Indianapolis
                to Cancun*
            Three
                per weekTennessee:Nashville
                to Cancun*
            Three
                per weekUtah:Salt
                Lake City to Cancun
            Once
                per week*
                Seasonal service








On
      March 19, 2007, we announced that we plan to offer daily mainline non-stop
      and
      one-stop service between DIA and Jacksonville International Airport beginning
      June 15, 2007. On February 7, 2007, we also announced that we plan to offer
      non-stop flights between Dallas/Ft. Worth and Mazatlan, Mexico three times
      a
      week beginning on June 7, 2007. On April 25, 2007, we announced that we plan
      to
      offer daily non-stop service between DIA and Baton Rouge, Louisiana to become
      the only low-cost carrier serving Baton Rouge Metropolitan Airport. The new
      service will be operated by Republic Airlines using EMB170 equipment beginning
      on August 15, 2007.





On
      April 3, 2007, the U.S. Department of Transportation issued an “Open-Skies
      Notice” inviting all U.S. air carriers now certificated to conduct foreign
      scheduled air transportation and interested in applying for blanket open-skies
      certificate authority to file applications with the Department.  We filed
      for this blanket authority in April 2007. In advance of receiving this blanket
      authority, on May 14, 2007, we filed an application to provide scheduled air
      service from DIA and Los Angeles, California to two destinations in Costa Rica.
      We received approval to fly to Costa Rica from the DOT on May 17, 2007 and
      plan
      to start service to the Santamaria International Airport in San Jose, Costa
      Rica
      on November 30, 2007.





**Fleet
      and Operational Upgrades**





As
      of November 2004, Frontier’s Airbus fleet was certified to FAA Category III
      instrument approach minimums. Category III certification reduces the number
      of
      diversions because of low visibility, a condition that occurs with some
      regularity at a number of the cities we serve.





As
      of July 2004, ten of our owned A319 aircraft have increased maximum rated thrust
      from a base of 22,000 to 23,500 pounds per engine and as of April 2005, these
      ten aircraft have increased maximum take-off weight from a base of 70 tons
      to
      75.5 tons. The improved operational performance of these aircraft allows us
      to
      serve longer haul markets such as Denver to Anchorage, Alaska, and to depart
      from airports with shorter runways while carrying a full passenger load. 
In addition, two of the A319 aircraft delivered to us during fiscal year 2007
      included over-water configurations and we plan to change three more A319
      aircraft that we own to over-water configurations during the year.





**Marketing
      and Sales**





Our
      sales efforts target value conscious leisure and business travelers. Value
      conscious customers are price-sensitive; however, we believe their travel
      decisions are also balanced with other aspects of our product offering such
      as
      our frequent flyer program, non-stop service, advanced seat assignments, service
      level and live television entertainment. In the leisure market, we offer
      discounted fares marketed through the Internet, newspaper, radio and




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television
      advertising along with special promotions and travel packages. In May 2003,
      we
      launched a new brand strategy and advertising campaign designed to identify
      Frontier as “A Whole Different Animal” and to set us apart from our competition.
      The campaign includes television, print and radio components that began running
      in the Denver market and have since expanded to additional markets along our
      routes. We have gathered extensive customer and employee feedback that has
      allowed us to identify elements of service that are important to our customers
      who have the potential to fly with us more often.





On
      May 23, 2006, we launched a new version of our website as part of our strategic
      initiative to reduce commissions paid to external travel websites and to provide
      better customer service by increasing our website bookings. We have increased
      our rate of bookings on our internal website from 36.0% to 37.4% of total
      bookings. We began a phased improvement of our website shortly after we
      converted our reservation and ticketing automation to Sabre by March 2005.
      In
      January 2007, we added redemption capabilities for Early Return members. Also,
      on May 1, 2007, we implemented a new low fare shopping capability that now
      displays fares three days before and after departure and return dates. Results
      are listed in a seven-by-seven grid format that allows users to see when the
      cheapest fares are being offered. The Web site's default setting will pull
      up
      flexible fares, but customers can still search by schedule.





In
      conjunction with the branding campaign, we have sponsorship agreements as the
      exclusive airline of The Pepsi Center in Denver, Denver’s National Hockey League
      team, the Colorado Avalanche, and Denver’s National Basketball Association team,
      the Denver Nuggets. We also have sponsorship agreements with Colorado’s Major
      League Baseball team the Colorado Rockies, Colorado’s National Lacrosse League
      team, the Colorado Mammoth, and Colorado’s Arena Football League team, the
      Colorado Crush. In addition, we are the exclusive airline partner for the
      college athletic programs of the Air Force Academy, University of Colorado,
      Colorado State University, the University of Denver, the University of Northern
      Colorado, and the University of Wyoming. The agreements allow for prominent
      signage in applicable stadiums and arenas, participation in-game promotions,
      receipt of prominent logo and advertising placement in publications and access
      to joint promotion opportunities. These agreements vary in terms of length
      and
      the amount and method of compensation to the sponsored entities.





In
      order to increase connecting traffic, we have a code share agreement with Great
      Lakes Aviation Ltd. and in January 2007, we signed an agreement with Republic
      operating as Frontier JetExpress that is replacing our current agreement with
      Horizon. This will increase our regional jet fleet from nine aircraft to 17
      aircraft. We also expect Lynx Aviation to provide additional connecting traffic
      to markets where regional jet service would not be as economically feasible
      to
      operate or operationally restricted. We also have interline agreements with
      105
      domestic and international airlines serving cities on our route system.
      Generally, these agreements include joint ticketing and baggage services and
      other conveniences designed to expedite the connecting process.





In
      November 2006, we partnered with AirTran Airways to create the first Low Cost
      Carrier referral and frequent flyer partnership in the industry that offers
      travelers the ability to reach more than 80 destinations across four countries.
      This partnership enables both airlines to increase destination options by
      linking phone and online reservations systems as well as enabling Frontier’s *EarlyReturns* *®* and AirTran’s A+ Rewards members to earn and redeem mileage/travel credits on
      both airlines.





To
      balance the seasonal demand changes that occur in the leisure market, we have
      introduced programs over the past several years that are designed to capture
      a
      larger share of the corporate market, which tends to be less seasonal than
      the
      leisure market. These programs include negotiated fares for large companies
      that
      sign contracts committing to a specified volume of travel, future travel credits
      for small and medium size businesses contracting with us, and special discounts
      for members of various trade and nonprofit associations.





We
      also pursue sales opportunities with meeting and convention arrangers and
      government travel offices. The primary tools we use to attract this business
      include personal sales calls, direct mail and telemarketing. In addition, we
      offer air/ground vacation packages to many destinations on our route system
      under contracts with various tour operators.





We
      participate in the four major computer reservation systems used by travel agents
      to make airline reservations: Amadeus, Galileo, Worldspan and Sabre. We maintain
      reservation centers in Denver, Colorado and Las Cruces, New Mexico, operated
      by
      our own employees.


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**LiveTV**





In
      October 2002, we signed a 12 year purchase and long-term services agreement
      with
      LiveTV, LLC to bring DIRECTV AIRBORNE TM satellite programming to every seatback
      in our Airbus fleet. DIRECTV® programming features 24
      channels of live television delivered to each seat. We charge $5 per segment for access
      to the system to offset the costs for the system equipment, programming, and
      services. In 2005, we continued to improve our customers’ flying experience by
      adding four additional channels that offer current-run pay-per-view movies
      for
      $8 per segment.





**Customer
      Loyalty Program**




We
      have operated *EarlyReturns* *®* ,
      our frequent flyer program, since February 2001. Our frequent flyer program
      won
      the following awards at the 2007 Freddie Awards for frequent flyer programs:
      first place for program of the year and best award (for redemption deals);
      second place for best member communication and best customer service; third
      place for best website and best award redemption; fourth place for the best
      elite level, fifth place for the best bonus promotion (fly 3 get 1 free) and
      sixth place for best affinity card. We believe that our frequent flyer program
      offers some of the most generous benefits in the industry, including a free
      round-trip award ticket within the contiguous U.S. or between the contiguous
      U.S. and Canada after accumulating only 15,000 miles (25,000 miles to Alaska
      or
      any of our destinations in Mexico). There are no blackout dates for award
      travel. Additionally, members who earn 25,000 or more Frontier flight miles
      or
      fly 40 or more Frontier flight segments in a calendar year attain Summit Level
      status, which includes a 50% mileage bonus on each paid Frontier flight,
      priority check-in and boarding, complimentary on-board cocktails and DIRECTV,
      extra allowance on checked baggage and priority baggage handling, standby at
      no
      charge on return flights the day before, the day of, and the day after the
      originally scheduled flight, $100 change fees waived, and access to an exclusive
      customer service toll-free phone number. Members who earn 15,000 - 24,999
      Frontier flight miles annually, fly 25 or more Frontier flight segments, or
      spend $60,000 or more on their Frontier MasterCard in a calendar year attain
      Ascent Level status, which includes a 25% mileage bonus on each Frontier flight,
      priority check-in and boarding, complimentary DIRECTV service, and access to
      an
      exclusive customer service toll-free phone number. Members earn one mile for
      every mile flown on Frontier. Members can also earn additional miles through
      our
      program partners, which presently include Hertz Rental Car, 1-800-FLOWERS.com,
      Qwest Communications, SuperShuttle, Marriott International and Frontier Airline
      Cruises, and can transfer points to miles from Citibank Diners Club. To apply
      for the *EarlyReturns* *®* program, customers may visit our Web site at www.frontierairlines.com; obtain an *EarlyReturns* *®* enrollment form at any of our airport counters or call our *EarlyReturns* *®* Service Center toll-free hotline at 866-26-EARLY, or our reservations at
      800-432-1FLY.





In
      November 2006, we partnered with AirTran Airways to create the first Low Cost
      Carrier referral and frequent flyer partnership in the industry that offers
      travelers the ability to reach more than 80 destinations across four countries.
      This partnership enables both airlines to increase destination options by
      linking phone and online reservation systems as well as enabling Frontier’s *EarlyReturns®* and AirTran’s A+ Rewards members to earn and redeem mileage/travel credits on
      both airlines.





In
      March 2003, we entered into a co-branded credit card arrangement with a
      MasterCard issuing bank. In May 2007, we amended this agreement to extend the
      term through December 2014 with enhanced financial terms. Credit card users
      earn
      miles on their credit card purchases. We receive fees for new accounts, the
      purchase of frequent flier miles awarded to credit card customers and a
      percentage of the annual renewal fees.





In
      June 2004, we entered into an agreement with Points.com that allows for the
      sale, purchase and exchange of *EarlyReturn* *®* points. Beginning in July 2005, we entered into an agreement with American
      Express that allows its cardholders to convert their Membership Reward points
      into *EarlyReturns* *®* points.





In
      June 2005, we launched the More Store ( www.frontiermorestore.com ),
      which is an online miles shopping experience designed to provide Ascent and
      Summit level *EarlyReturns®* members with the ability to purchase merchandise online with frequent flyer
      miles in an auction-style bidding process or with a stated amount of miles. Approximately
      26 million points have been redeemed for merchandise since the
      launch.


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**Competition
      and Market Barriers**





The
      Airline Deregulation Act of 1978 produced a highly competitive airline industry,
      freed of government regulations that for 40 years prior to the Deregulation
      Act
      had dictated where domestic airlines could fly and how much they could charge
      for their services. Since then, we and other smaller carriers have entered
      markets long dominated by larger airlines with substantially greater resources,
      such as United Airlines, American Airlines, Northwest Airlines and Delta Air
      Lines.





We
      compete principally with United, the dominant carrier at DIA. United has a
      competitive advantage due to its larger number of flights from DIA, its
      significantly broader domestic and international route system, its mature and
      robust loyalty program, and its offering a multiple class cabin for most of
      its
      flights. In February 2003, United launched a new low-fare airline, Ted, which
      we
      believe was developed in an attempt to operate with lower costs than United’s
      mainline operations to compete with us and other low-cost carriers.





In
      January 2006, Southwest Airlines, the largest low−fare major U.S. airline,
      introduced service at DIA. Southwest Airlines currently has 36 flights out
      of
      DIA to 10 destinations, and has announced plans to add another six flights
      out
      of DIA by adding service to Oakland, California and additional frequencies
      to
      Houston, Texas in June 2007. Southwest pioneered the low−cost model by operating
      a single aircraft fleet with high utilization, being highly productive in the
      use of its people and assets, providing a simplified fare structure and offering
      only a single class of seating with no seat assignments. These methods, coupled
      with significant favorable fuel hedging positions, enable Southwest to offer
      fares that are significantly lower than those charged by other U.S. airlines.
      We
      believe we need to match these low fares in the routes in which we compete
      with
      Southwest in order to retain market share, which has impacted our yields.
      Further expansion by Southwest into other markets we serve would cause the
      same
      result.





During
      the month of March 2007, United, Ted, and its commuter affiliates had a total
      market share at DIA of approximately 55.4%, down from 55.9% during the month
      of
      March 2006. During the month of March 2007, Southwest had a total market share
      at DIA of approximately 4.6%, up from 3.1% during the month of March 2006.
      Our
      market share at DIA, including our codeshare affiliates, during the month of
      March 2007 was 21.0%, up from 20.5% during the month of March 2006. As of May
      1,
      2007, we directly compete with United and United regional jet affiliates on
      87.7% of the cities we serve out of DIA and with Southwest on 14.0% of the
      cities we serve. We compete with United and Southwest primarily on the basis
      of
      fares, fare flexibility, the number of markets we operate in and the number
      of
      frequencies within a market, our frequent flyer programs, brand recognition
      (particularly in Denver market), the level of passenger entertainment available
      on our aircraft and the quality of our customer service.





Where
      we do not compete directly with United and/or Southwest, we compete with many
      other air carriers for the limited number of passengers desiring to travel
      between the cities we serve. With excess capacity in these and almost all
      markets, it is extremely difficult to demand fare levels sufficient to offset
      the high costs of operating an airline, particularly with the current high
      prices for aviation fuel.




At
      the present time, New York’s LaGuardia and John F. Kennedy International
      Airports and Washington Ronald Reagan National Airport are regulated by means
      of
“slot” allocations, which represent government authorization to take off or land
      at a particular airport within a specified time period. FAA regulations require
      the use of each slot at least 80% of the time and provide for forfeiture of
      slots in certain circumstances. At New York LaGuardia airport, we currently
      hold
      four high-density exemption slots, with two seasonal slots, and at the present
      time, we utilize four of these slots to operate three daily round-trip flights
      between DIA and LaGuardia. In addition to slot restrictions, Reagan National
      is
      limited by a perimeter rule, which initially limited flights to and from Reagan
      National to 1,250 miles. In April 2000, the Wendell H. Ford Aviation Investment
      and Reform Act for the 21 st Century, or AIR 21, was enacted. AIR 21 authorized the DOT to grant up to 12
      slot exemptions beyond the 1,250-mile Reagan National perimeter, provided
      certain specifications are met. Under AIR 21, we were awarded two slots for
      one
      daily round-trip flight. In 2004 the Vision
      100 - Century of Flight Aviation Authorization Act was
      enacted, which authorized the DOT to grant an additional 12 slot exemptions
      into
      Reagan National. In April 2004, we were granted four additional slots at Reagan
      National for two additional round-trip flights.





Another
      airport we serve, John Wayne International Airport in Santa Ana, California
      (SNA), is also slot controlled at the local level as mandated by a federal
      court
      order. We were originally awarded six arrival and departure slots at SNA, or
      three daily round-trips. We began service with two daily round-trips to SNA
      in
      August 2003 and added a third daily round- trip in March 2004.





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**Maintenance
      and Repairs**





All
      of our aircraft maintenance and repairs are accomplished in accordance with
      our
      maintenance program approved by the FAA. Since mid-1996, we have trained,
      staffed and supervised our own maintenance work force at Denver, Colorado.
      We
      sublease a portion of Continental Airlines' hangar at DIA where we currently
      perform most of our own line maintenance and longer interval maintenance through
      the “D” check level. Continued access to the Continental hangar at DIA is
      currently in question, as discussed more fully in Item 1A, “Risk Factors” of
      this report. We also maintain line maintenance facilities at Phoenix, Arizona
      and Kansas City, Missouri. Outside FAA approved contractors perform other major
      maintenance, such as line maintenance at our spoke cities, longer interval
      maintenance when we do not have adequate facilities or staff to meet maintenance
      needs and for major engine repairs.





We
      have attempted to level our engine maintenance expenses by entering into a
      maintenance cost per hour agreement with GE Engine Services, Inc. (“GE”). For
      owned aircraft, this
      agreement is for a 12-year period from the effective date for our owned aircraft
      or May 1, 2019, whichever comes first. For each covered leased aircraft, the
      agreement term coincides with the initial lease term of 12 years. This agreement
      precludes us from using another third party for such services during the term
      on
      the covered engines. This agreement requires non-refundable monthly payments,
      which are increased periodically, at a specified rate multiplied by the number
      of flight hours the engine operated during that month. Currently,
      engines on all of our owned and most of our leased aircraft are subject to
      the
      GE agreement. For
      the covered leased aircraft, the lessors pay GE directly for the repair of
      aircraft engines in conjunction with this agreement from reserve accounts
      established under the applicable lease documents. For our owned aircraft, we
      pay
      GE directly and are required to pay any amounts above funded reserves in the
      event of a shortfall if maintenance expenses incurred are outside scheduled
      maintenance and not otherwise covered by a reserve.





Under
      our aircraft lease agreements, we pay all expenses relating to the maintenance
      and operation of our aircraft, and we are required to pay supplemental monthly
      rent payments to the lessors based on usage. Supplemental rents, which increase
      annually, are applied against the cost of scheduled major maintenance. To the
      extent these reserves are not used for major maintenance during the lease terms,
      excess supplemental rents are forfeited to the aircraft lessors after
      termination of the lease. Additionally, to the extent actual maintenance
      expenses incurred exceed these reserves, we are required to pay these
      amounts.





Our
      monthly completion factors for the years ended March 31, 2007, 2006, and 2005,
      excluding cancellations that were not related to maintenance, averaged 99.9%,
      99.9% and 99.8%, respectively. The completion factor is the percentage of our
      scheduled flights that were operated by us, whether or not delayed (i.e., not
      canceled). We believe that our high monthly completion factors are attributable
      to the reliability of our new Airbus fleet and our record of excellence in
      our
      maintenance department.





For
      eight consecutive years starting in 1999, our maintenance and engineering
      department received the FAA’s highest award, the Diamond Certificate of
      Excellence, in recognition of 100 percent of our maintenance and engineering
      employees completing advanced aircraft maintenance training
      programs.  The
      Diamond Award recognizes advanced training for aircraft maintenance
      professionals throughout the airline industry. We were the first Part 121
      domestic air carrier to achieve 100 percent participation in this training
      program by our maintenance employees.





**Fuel**





Fuel
      prices have increased significantly over the past three years. During the years
      ended March 31, 2007, 2006, and 2005, jet fuel, including hedging activities
      and
      our regional partner operations, accounted for 31.8%, 31.1% and 24.0%,
      respectively, of our operating expenses. We have arrangements with major fuel
      suppliers for substantial portions of our fuel requirements, and we believe
      that
      these arrangements assure an adequate supply of fuel for current and anticipated
      future operations. Jet fuel costs are subject to wide fluctuations as a result
      of sudden disruptions in supply beyond our control. Therefore, we cannot predict
      the future availability and cost of jet fuel with any degree of certainty.
      Our
      mainline average fuel prices per gallon including realized and non-cash mark
      to
      market hedging activities, taxes and into-plane fees for the last three fiscal
      years were as follows:





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**Fiscal
                Year Ended**
            **Average
                Fuel Price per Gallon**
            **Monthly
                Low Price per Gallon**
            **Monthly
                High Price per Gallon**March
                31, 2007
            $
                2.12
            $
                1.57
            $
                2.47March
                31, 2006
            $
                1.99
            $
                1.66
            $
                2.65March
                31, 2005
            $
                1.41
            $
                1.19
            $
                1.64





As
      of May 18, 2007, the average price per gallon was approximately $2.30 excluding
      the impact of our fuel hedges. We implemented a fuel-hedging program in November
      2002, under which we entered into crude oil or Gulf Coast jet fuel derivative
      contracts to partially protect us against significant increases in fuel prices.
      As of March 31, 2007, we had hedged approximately 46% of our projected fuel
      requirements for the quarter ending June 30, 2007, 30% of our projected fuel
      requirements for the quarter ending September 30, 2007, 40% of our projected
      fuel requirements as of December 31, 2007 and 18.8% of our projected fuel
      requirements as of March 31, 2008.





Increases
      in fuel prices or a shortage of supply could have a material adverse effect
      on
      our operations and financial results. Based on our current fleet and operations,
      we estimate that a 1¢ increase in the price of fuel per gallon increases our
      operating expenses by $2,039,000 on an annualized basis. This number will
      increase as our capacity increases. Our ability to pass on increased fuel costs
      to passengers through price increases or fuel surcharges may be limited,
      particularly because of our affordable fare strategy and intense competition.





**Insurance**





We
      carry $1.0 billion per aircraft per occurrence in property damage insurance
      and
      passenger and third-party liability insurance, and insurance for aircraft loss
      or damage with deductible amounts as required by our aircraft lease agreements,
      and customary coverage for other business insurance. While we believe such
      insurance is adequate, there can be no assurance that such coverage will
      adequately protect us against all losses that we might sustain. Our aircraft
      hull and liability coverage renewed on December 31, 2006 for one year at reduced
      year-over-year rates.





In
      December 2002, through authority granted under the Homeland Security Act of
      2002, the U.S. government expanded its insurance program to enable airlines
      to
      elect either the government’s excess third-party war risk coverage or for the
      government to become the primary insurer for all war risks coverage. We elected
      to take primary government coverage in February 2003 and dropped the
      commercially available war risk coverage. The current government war risk policy
      is in effect until August 31, 2007. We do not know whether the government will
      extend the coverage beyond August 31, 2007 and if it does how long the extension
      will last. We expect that if the government stops providing excess war risk
      coverage to the airline industry, the premiums charged by aviation insurers
      for
      this coverage will be substantially higher than the premiums currently charged
      by the government or the coverage will not be available from reputable
      underwriters.





**Employees**





As
      of May 1, 2007, we had 5,265 employees, including 4,334 full-time and 931
      part-time personnel. Our employees included 666 pilots, 978 flight attendants,
      1,256 customer service agents, 517 ramp service agents, 334 reservations agents,
      132 aircraft appearance agents, 45 catering agents, 341 mechanics and related
      personnel, and 996 general management and administrative personnel. We consider
      our relations with our employees to be good.





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Approximately
      22% of our employees are represented by unions. The following table reflects
      the
      principal collective bargaining agreements, and their respective amendable
      dates:








**Approximate
                Number**
            
            **Contract****Employee
                Group**
            **of
                Employees**
            **Representing
                Union**
            **Amendable
                Date**Pilots
            666
            Frontier
                Airline Pilots Association
            March
                2011Mechanics
            281
            Teamsters
                Airline Division
            July
                2008Dispatchers
            16
            Transport
                Workers Union
            Under
                NegotiationAircraft
                appearance agents and maintenance cleaners
            132
            Teamsters
                Airline Division
            October
                2013Material
                Specialist
            22
            International
                Brotherhood of Teamsters
            Under
                Negotiation








In
      September 2006, the National Mediation Board notified us that two unions
      petitioned for representation of our flight attendants: the International
      Brotherhood of Teamsters (“IBT”) and the Frontier Flight Attendants Association
      (“FFAA”). Only the IBT had a sufficient number of authorization cards to be
      included in the election ballot. The results were counted on November 30, 2006,
      and the flight attendants voted against union representation by the IBT. This
      is
      the fifth time our flight attendants voted against union
      representation.





In
      February 2007, Frontier and the Frontier Airline Pilots Association (“FAPA”)
      announced that FAPA membership ratified a new collective bargaining agreement.
      The new four-year agreement amends the previous five-year contract signed in
      May
      2000. Implementation of the approved agreement began in March 2007.





In
      March 2006, our material specialists voted for union representation by the
      IBT
      affecting 22 employees. We are currently in the process of negotiating this
      agreement.





In
      September 2006, the contract with our dispatchers, who are represented by the
      Transport Workers Union (“TWU”), expired. We are currently in the process of
      re-negotiating this agreement, which affects 16 employees.





We
      have established a compensation philosophy that we will pay competitive wages
      compared to other airlines of similar size and other employers with which we
      compete for our labor supply. Employees have the opportunity to earn bonuses
      under our profit sharing program and may be granted shares of our common stock
      under our Employee Stock Ownership Program (“ESOP”). The bonuses and ESOP grants
      are discretionary and reviewed by our Board of Directors each year.





Effective
      in May 2000, we enhanced our 401(k) Retirement Savings Plan by announcing an
      increased matching contribution by the company. Participants may receive a
      50%
      company match for contributions up to 10% of salary. This match is discretionary
      and is approved on an annual basis by our Board of Directors. The Board of
      Directors has approved the continuation of the match through the plan year
      ending December 31, 2007.





For
      the plan years ended December 31, 2007, 2006 and 2005, the Company contributed
      300,000, 400,000, and 346,400 shares of stock to the ESOP, respectively. The
      2007 contribution was funded from shares we purchased in the open market and
      the
      2006 and 2005 contributions were funded from shares issued. These shares are
      allocated to eligible employees at the end of the plan year. Employees become
      vested in shares allocated to their




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account
      20% per year and may obtain a distribution of vested shares upon leaving the
      company. We believe that the 401(k) match, the ESOP and the related vesting
      schedules of 20% per year may reduce our employee turnover rates.





In
      September 2004, our stockholders approved an equity incentive plan for officers
      and directors that provided a framework for our Board of Directors to grant
      certain incentive awards to members of management. In March 2005, our Board
      of
      Directors adopted a new annual bonus and long-term incentive plan for our
      officers and directors. The long-term incentive plan included the issuance
      of
      stock-only stock appreciation rights, restricted stock units and a three-year
      cash incentive pool. Annual bonuses and three-year cash incentive pools are
      paid
      out based upon the company reaching targeted pre-tax profits and may also be
      adjusted based on our annual pre-tax profit performance relative to peer group
      companies.





Both
      initial and recurring training is required for many employees. We train our
      pilots, flight attendants, ground service personnel, reservations personnel
      and
      mechanics. FAA regulations require pilots to be licensed as commercial pilots,
      with specific ratings for aircraft to be flown, to be medically certified or
      physically fit, and have to recent flying experience. Mechanics, quality control
      inspectors and flight dispatchers must be licensed and qualified for specific
      aircraft. Flight attendants must have initial and periodic competency, fitness
      training and certification. The FAA approves and monitors our training programs.
      Management personnel directly involved in the supervision of flight operations,
      training, maintenance and aircraft inspection must meet experience standards
      prescribed by FAA regulations.





All
      new employees are subject to pre-employment drug testing. Those employees who
      perform safety sensitive functions are also subject to random drug and alcohol
      testing, and mandatory testing in the event of an accident.





**Government
      Regulation**





*General.* All
      interstate air carriers are subject to regulation by the DOT, the FAA and other
      state and federal government agencies. In general, the amount of regulation
      over
      domestic air carriers in terms of market entry and exit, pricing and
      inter-carrier agreements has been greatly reduced since the enactment of the
      Deregulation Act.





*U.S.
      Department of Transportation* .
      The DOT’s jurisdiction extends primarily to the economic aspects of air
      transportation, such as certification and fitness, insurance, advertising,
      computer reservation systems, deceptive and unfair competitive practices, and
      consumer protection matters such as compliance with the Air Carrier Access
      Act,
      on-time performance, denied boarding, discrimination and baggage liability.
      The
      DOT also is authorized to require reports from air carriers and to investigate
      and institute proceedings to enforce its economic regulations and may, in
      certain circumstances, assess civil penalties, revoke operating authority and
      seek criminal sanctions. We hold a Certificate of Public Convenience and
      Necessity issued by the DOT that allows us to engage in air transportation.
      In
      January 2007, the DOT designated us as a major carrier, which is U.S. -based airlines that post more than $1 billion in revenue during a fiscal
      year .





*U.S.
      Federal Aviation Administration* .
      The FAA’s regulatory authority relates primarily to flight operations and air
      safety, including aircraft certification and operations, crew licensing and
      training, maintenance standards, and aircraft standards. The FAA also oversees
      aircraft noise regulation, ground facilities, dispatch, communications, weather
      observation, and flight and duty time. It also controls access to certain
      airports through slot allocations, which represent government authorization
      for
      airlines to take off and land at controlled airports during specified time
      periods. The FAA has the authority to suspend temporarily or revoke permanently
      the authority of an airline or its licensed personnel for failure to comply
      with
      FAA regulations and to assess civil and criminal penalties for such failures.
      We
      hold an operating certificate issued by the FAA pursuant to Part 121 of the
      Federal Aviation Regulations. We must have and we maintain FAA certificates
      of
      airworthiness for all of our aircraft. Our flight personnel, flight and
      emergency procedures, aircraft and maintenance facilities and station operations
      are subject to periodic inspections and tests by the FAA.





*Transportation
      Security Administration.* On
      November 19, 2001, in response to the terrorist acts of September 11, 2001,
      the
      President of the United States signed into law the Aviation and Transportation
      Security Act (“ATSA”). The ATSA created the Transportation Security
      Administration (“TSA”), an agency within the DOT, to oversee, among other
      things, aviation and airport security. The ATSA provided for the federalization
      of airport passenger, baggage, cargo, mail, employee and vendor screening
      processes. The ATSA also enhanced background checks, provided federal air
      marshals aboard flights, improved flight deck security, and enhanced security
      for airport




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perimeter
      access. In addition, the ATSA required that all checked baggage be screened
      by
      explosive detection systems by December 31, 2002. Funding for airline and
      airport security under the ATSA is primarily provided by a $2.50 per enplanement
      ticket tax, with authority granted to the TSA to impose additional fees on
      the
      air carriers if necessary to cover additional federal aviation security costs.
      Since 2002, the TSA has imposed an Aviation Security Infrastructure Fee on
      all
      airlines to assist in the cost of providing aviation security. The fees assessed
      are based on airlines' actual 2000 security costs. Pursuant
      to authority granted to the TSA to impose additional fees on air carriers if
      necessary to cover additional federal aviation security costs, the TSA has
      imposed an additional annual Security Infrastructure Fee on certain airlines,
      including us. The industry has opposed and disagrees with the higher assessment
      and is working with the TSA on a resolution.





*Environmental
      Matters.* The
      Aviation Safety and Noise Abatement Act of 1979, the Airport Noise and Capacity
      Act of 1990 and Clean Air Act of 1963 oversee and regulate airlines with respect
      to aircraft engine noise and exhaust emissions. We are required to comply with
      all applicable FAA noise control regulations and with current exhaust emissions
      standards. Our fleet is in compliance with the FAA’s Stage 3 noise level
      requirements. In addition, various elements of our operation and maintenance
      of
      our aircraft are subject to monitoring and control by federal and state agencies
      overseeing the use and disposal of hazardous materials and storm water
      discharge. We believe we are currently in substantial compliance with all
      material requirements of these agencies.





*Railway
      Labor Act/National Mediation Board.* Our
      labor relations with respect to our unionized employees are covered under Title
      II of the Railway Labor Act and are subject to the jurisdiction of the National
      Mediation Board.





*Foreign
      Operations.* The
      availability of international routes to U.S. carriers is regulated by treaties
      and related agreements between the United States and foreign governments. The
      United States typically follows the practice of encouraging foreign governments
      to enter into “open skies” agreements that allow multiple carrier designation on
      foreign routes. In some cases, countries have sought to limit the number of
      carriers allowed to fly these routes. Certain foreign governments impose
      limitations on the ability of air carriers to serve a particular city and/or
      airport within their country from the U.S. For a U.S. carrier to fly to any
      such
      international destination, it must first obtain approval from both the U.S.
      and
      the “foreign country authority”. For those international routes where there is a
      limit to the number of carriers or frequency of flights, studies have shown
      these routes have more value than those without restrictions. In the past,
      U.S.
      government route authorities have been sold between carriers.





On
      April 3, 2007, the U.S. Department of Transportation issued an “Open-Skies
      Notice” inviting all U.S. air carriers now certificated to conduct foreign
      scheduled air transportation and interested in applying for blanket open-skies
      certificate authority to file applications with the Department.  We filed
      for this blanket authority in April 2007.





*Foreign
      Ownership.* Pursuant
      to U.S. law and DOT regulation, each United States air carrier must qualify
      as a
      United States citizen, which requires the carrier’s President and at least
      two-thirds of its board of directors and other managing officers be comprised
      of
      United States citizens, that not more than 25% of the carrier’s voting stock may
      be owned by foreign nationals, and that the carrier not be otherwise subject
      to
      foreign control.





*Miscellaneous.* We are also subject to regulation or oversight by other federal and state
      agencies. Antitrust laws are enforced by the U.S. Department of Justice and
      the
      Federal Trade Commission. All air carriers are subject to certain provisions
      of
      the Communications Act of 1934 because of their extensive use of radio and
      other
      communication facilities, and are required to obtain an aeronautical radio
      license from the Federal Communications Commission. The U.S. Citizenship and
      Immigration Services, the U.S. Customs Service and the Animal and Plant Health
      Inspection Service of the U.S. Department of Agriculture each have jurisdiction
      over certain aspects of our aircraft, passengers, cargo and operations.


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**Item
      1A. Risk Factors**





In
      addition to the other information contained in this Form 10-K, the following
      risk factors should be considered carefully in evaluating our business and
      us.
      Our business, financial condition or results of operations could be materially
      adversely affected by any of these risks. In addition, please read "Special
      Note
      About Forward-Looking Statements" in this Form 10-K, where we describe
      additional uncertainties associated with our business and the forward-looking
      statements included or incorporated by reference in this Form 10-K. Our actual
      results could differ materially from those anticipated in these forward-looking
      statements as a result of certain factors, including the risks faced by us
      described below and elsewhere included or incorporated by reference in this
      Form
      10-K. Please note that additional risks not presently known to us or that we
      currently deem immaterial may also impair our business and operations.





**Risks
      Related to Frontier**





***We
      may not be able to obtain or secure financing for our new
      aircraft.***





As
      of March 31, 2007, we have remaining firm purchase commitments for 13 aircraft
      from Airbus (three Airbus 318 aircraft and ten Airbus 320 aircraft) and ten
      Q400
      aircraft from Bombardier. We have secured financing commitments for all ten
      of
      the Bombardier aircraft and three Airbus A318 aircraft deliveries through
      February 2008 totaling approximately $225.3 million. To complete the purchase
      of
      the remaining ten A320 Airbus aircraft, we must secure aircraft financing
      totaling approximately $320.0 million, which we may not be able to obtain on
      terms acceptable to us, if at all. The terms of the purchase agreement do not
      allow for cancellations of any of the purchase commitments. The amount of
      financing required will depend on the required down payment on mortgage-financed
      aircraft and the extent to which we lease as opposed to purchase the aircraft.
      We are exploring various financing alternatives, including, but not limited
      to,
      domestic and foreign bank financing, leveraged lease arrangements or
      sale/leaseback transactions. There can be no guarantee that additional financing
      will be available when required or will be on acceptable terms. Our inability
      to
      secure the financing could have a material adverse effect on our cash balances
      or result in delays in or our inability to take delivery of Airbus aircraft
      that
      we have agreed to purchase. The failure to take these future deliveries would
      impair our strategy for long-term growth and could result in the loss of
      pre-delivery payments and deposits previously paid to the manufacturer, and
      the
      imposition of other penalties or the payment of damages in accordance with
      the
      terms of the purchase agreement with the manufacturer. Additionally, the terms
      of the purchase agreement with the manufacturer would require us to pay
      penalties or damages in the event of any breach of contract with our supplier,
      including possible termination of the agreement. As of March 31, 2007, we had
      made pre-delivery payments on future aircraft deliveries totaling $52,453,000,
      of which $14,833,000 relates to aircraft for which we have not yet secured
      financing and $37,620,000 relates to aircraft for which we have secured
      financing.





***We
      have a significant amount of fixed obligations and we will incur significantly
      more fixed obligations, which could increase the risk of failing to meet payment
      obligations.***





As
      of March 31, 2007, our total debt was $478.8 million, including $92.0 million
      of
      convertible debt due in December 2025 that was issued in December 2005.
      Maturities of our long-term debt are $26.8 million in fiscal year 2008, $28.4
      million in fiscal year 2009, $30.1 million in fiscal year 2010, $31.9 million
      in
      2011, $51.0 million in 2012, and an aggregate of $310.6 million for the years
      thereafter. In addition, total interest due for our fixed obligations is $246.1
      million in the aggregate. Maturities of long-term debt and interest due are
      based on the stated maturity; however, the convertible notes are callable by
      holders of the notes in December 2010. Our total existing long-term debt has
      73.6% that bears floating interest rates and the remaining 26.4% bears fixed
      rates. In addition to long-term debt, we have a significant amount of other
      fixed obligations under operating leases related to our aircraft, airport
      terminal space, other airport facilities and office space. As of March 31,
      2007,
      future minimum lease payments under non-cancelable operating leases were
      approximately $164.0 million in fiscal year 2008, $172.0 million in fiscal
      year
      2009, $181.6 million in fiscal year 2010, $168.4 million in fiscal year 2011,
      $166.5 million in fiscal year 2012 and an aggregate of $837.9 million for the
      years thereafter. Approximately 85.8% of our minimum lease payments related
      to
      aircraft and leased engines are fixed in nature, and the remaining 14.2% are
      adjusted periodically based on floating interest rates. As of March 31, 2007,
      we
      had commitments of




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approximately
      $721.8 million to purchase 23 additional aircraft over approximately the next
      four years, including estimated amounts for contractual price escalations,
      spare
      parts to support these aircraft and to equip the aircraft with LiveTV, and
      obligations relating to a service agreement with Sabre Travel Network. We expect
      to incur additional debt or long-term lease obligations as we take delivery
      of
      new aircraft and other equipment and continue to expand into new
      markets.





***Many
      of our financial obligations contain cross-default
      provisions.***





Many
      of our financial arrangements contain cross-default provisions. As a result,
      if
      we default in our payment or performance obligations under one of our financial
      arrangements and, in some cases, if the amount due thereunder is accelerated,
      other financial arrangements may be declared in default and accelerated even
      though we are meeting payment and performance obligations on those other
      arrangements. If this occurs, we may not have sufficient available cash to
      pay
      all amounts that are then due and payable under our lease and loan agreements,
      and we may have to seek additional debt or equity financing, which may not
      be
      available on acceptable terms, or at all. If alternative financing were not
      available, we would have to sell assets in order to obtain the funds required
      to
      make the accelerated payments or seek ways to restructure the lease and loan
      obligations.





***Our
      failure to successfully implement our growth strategy could harm our
      business.***





As
      of March 31, 2007, our growth strategy involves adding 13 additional Airbus
      aircraft and ten Bombardier Q400 aircraft, which we could choose to increase
      to
      30 total Airbus aircraft (including the exercise of 17 additional purchase
      rights) and 20 Bombardier aircraft (including the exercise of ten additional
      options), increasing the frequency of flights to markets we currently serve,
      expanding the number of markets served and increasing flight connection
      opportunities. The purchase rights on our Airbus aircraft expire on July 1,
      2007
      and our last option expires on December 1, 2007 for our Bombardier aircraft,
      subject to additional extension rights. It is critical that we achieve our
      growth strategy in order for our business to attain economies of scale and
      to
      sustain or improve our results of operations. Increasing the number of markets
      we serve depends on our ability to access suitable airports located in our
      targeted geographic markets in a manner that is consistent with our cost
      strategy. While we currently have sufficient gates and facilities at DIA to
      accommodate our current level of operations, our continued mainline expansion,
      the increase of our regional jet fleet from nine to 17 aircraft, and the
      initiation of turboprop service by Lynx Aviation expected in September 2007,
      may
      require us to obtain additional gates and other operational facilities at our
      Denver hub. Any condition that would deny, limit or delay our access to airports
      we seek to serve in the future will constrain our ability to grow or cause
      us to
      move some of our capacity to other airports. This would limit our ability to
      leverage our hub and spoke network. Additionally, traffic may not materialize
      in
      new markets. Opening new markets requires us to commit a substantial amount
      of
      resources, even before the new services commence. Expansion will also require
      additional skilled personnel, equipment and facilities. An inability to hire
      and
      retain skilled personnel or to secure the required equipment and facilities
      efficiently and cost-effectively may negatively affect our ability to achieve
      our growth strategy. We cannot assure you that we will be able to successfully
      expand our existing markets or establish new markets, and our failure to do
      so
      could harm our business.





Growth
      of our fleet and expansion of our markets and services may also strain our
      existing management resources and systems to the point that they may no longer
      be adequate to support our operations, requiring us to make significant
      expenditures in these areas. We may need to further develop our information
      technology systems and other corporate infrastructure to accommodate future
      growth, particularly with respect to efficient Internet ticket sales and
      passenger check-in capabilities. We cannot assure you that we will be able
      to
      sufficiently develop our systems and infrastructure on a timely basis, and
      the
      failure to do so could harm our business.





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***We
      depend heavily on the Denver market to be successful.***





Our
      business strategy has historically focused on adding flights to and from our
      Denver base of operations. Currently, 96% of our flights originate or depart
      from DIA. A reduction in our share of the Denver market, increased competition,
      or reduced passenger traffic to or from Denver could have a material adverse
      effect on our financial condition and results of operations. In addition, our
      dependence on a hub system operating out of DIA makes us more susceptible to
      adverse weather conditions and other traffic delays in the Rocky Mountain region
      than some of our competitors that may be better able to spread these traffic
      risks over larger route networks.





***We
      face intense competition and market dominance by United Airlines and other
      airlines at DIA, and Southwest Airlines service to and from Denver, has
      increased competition on certain of our routes.***





The
      airline industry is highly competitive, primarily due to the effects of the
      Airline Deregulation Act of 1978, which substantially eliminated government
      authority to regulate domestic routes and fares and increased the ability of
      airlines to compete with respect to flight frequencies and fares. We compete
      with United in our hub in Denver, and we anticipate that we will compete with
      United in any additional markets we elect to serve in the future. United, Ted,
      and United’s regional airline affiliates are the dominant carriers out of DIA,
      accounting for approximately 55.4% of all revenue passengers out of DIA for
      the
      month of March 2007. In addition, Southwest Airlines started service to and
      from
      Denver in January 2006 and currently has 36 daily departures. Southwest’s
      introductory fares were significantly below the fares we were able to obtain
      prior to its arrival. Fare pressure exerted by Southwest on its announced routes
      and on any future expansion in Denver by Southwest will require us to be fare
      competitive, and may place additional downward pressure on our yields. In
      addition, in the last four years Alaska Airlines, JetBlue Airways and AirTran
      Airways have commenced service at DIA. These airlines have offered low
      introductory fares and compete on several of our routes. Fare wars, predatory
      pricing, ‘‘capacity dumping,’’ in which a competitor places additional aircraft
      on selected routes, and other competitive activities could adversely affect
      us.
      The future activities of United, Southwest and other carriers may have a
      material adverse effect on our revenues and results of operations.





United
      currently operates ten flights a week to Mexico that compete with our current
      routes to Mexico. Most of our current and potential competitors have
      significantly greater financial resources, larger route networks, and superior
      market identity. Denver is also a hub for United’s low-cost operation Ted, which
      began in February 2004. United’s scale and ability to lower the costs of its
      mainline operations through its bankruptcy may continue to place downward
      pressure on airfares charged in the Denver market and adversely affect our
      market share at DIA and our ability to maintain yields required for profitable
      operations. The potential for United and Southwest to place downward pressure
      on
      airfares charged in the Denver market may impair our ability to maintain yields
      required for profitable operations.





***Competition
      on our Mexican routes may increase due to recent regulatory changes, which
      may
      adversely impact some of our most important markets.***





The
      U.S. and Mexico amended their bilateral agreement relating to commercial air
      service. Previously, only two U.S. based airlines were permitted to provide
      air
      service between city pairs in the U.S. and Mexico. In many cases, we were one
      of
      the two U.S. based airlines providing service to the cities we serve in Mexico.
      The amendments to the bilateral agreement expanded the authorized service levels
      to three U.S. based airlines per city pair. It is therefore highly likely that
      we will see other airlines seeking to add service to some of the Mexico
      destinations we serve, which would increase competition and perhaps place
      downward pressure on airfares in these markets. Flights to resort destinations
      in Mexico have represented a significant portion of our vacation-oriented
      operations, and if competition results in lower load factors or airfares on
      our
      Mexico flights, our operating results may be adversely impacted. United
      currently operates ten flights a week to Mexico that compete with our current
      routes to Mexico.





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***We
      may not have access to adequate gates or airport slots, which could decrease
      our
      competitiveness.***





The
      number of gates, ticket counter or office space available to us at DIA, or
      any
      other airport where we operate or seek to commence operations in the future,
      may
      be limited due to the lack of available space or disruptions caused by airport
      renovation projects. Available facilities may not provide for the best overall
      service to our customers and may prevent us from scheduling our flights during
      peak or opportune times. The lack of available facilities may limit our ability
      to expand service to certain cities or restrict our ability to plan departures
      and arrivals in a manner that provides efficient service or connecting times
      to
      and through our Denver hub. Inefficient operations may result in a reduction
      in
      passenger bookings or lost revenue.





In
      the U.S., the FAA currently regulates slot allocations at O’Hare International
      Airport in Chicago, at JFK and LaGuardia Airports in New York City, and at
      Ronald Reagan National Airport in Washington D.C. John Wayne Airport in Orange
      County also limits arrivals and departures at its airport for noise control
      purposes. We currently operate at LaGuardia Airport, Ronald Reagan National
      Airport and John Wayne Airport through arrival and departure slots at these
      airports. In each case, the agencies controlling slot allocations reserve the
      right to recall slot allocations for, among other reasons, lack of meeting
      frequency or capacity requirements. If we lose existing slot allocations, are
      denied requests for additional slot allocations at these airports, or are denied
      slot allocations at other slot-controlled airports where we wish to operate
      in
      the future, our ability to provide service would be restricted, eliminated,
      or
      reduced. Because these cities represent key markets, the resulting restriction
      on our service could negatively effect our results of operations.





***We
      experience high costs at DIA, which may impact our results of
      operations.***





We
      operate our hub of flight operations from DIA where we experience high costs.
      Financed through revenue bonds, DIA depends on landing fees, gate rentals,
      income from airlines, the traveling public, and other fees to generate income
      to
      service its debt and to support its operations. Our cost of operations at DIA
      will vary as traffic increases or diminishes at the airport or as significant
      improvement projects are undertaken by the airport. We believe that our
      operating costs at DIA substantially exceed those that other airlines incur
      at
      most hub airports in other cities, which decreases our ability to compete with
      other airlines with lower costs at their hub airports. In addition, United
      represents a significant tenant at DIA. In connection with United’s bankruptcy,
      United and DIA restructured United’s lease agreement in a fashion that reduces
      the amounts United is required to pay under its lease. Normally, the decrease
      in
      payments by United would result in the increase in amounts paid by all other
      airlines. At this time, however, the City and County of Denver has agreed to
      offset the decrease in payments negotiated by United. The city’s obligation to
      make these offset payments is subject to rescission in certain circumstances.
      If
      these payments are rescinded or if United otherwise significantly reduces
      operations at DIA, the overall costs at DIA may significantly increase for
      all
      other carriers operating at DIA, including ourselves. Also, we have recently
      added six additional gates in Concourse A, related holdroom space and more
      space
      to accommodate our DIA regional operations.





***Our
      all-Airbus mainline fleet creates certain concentration
      risks.***





As
      of March 31, 2007, we operated 57 Airbus aircraft. We completed our transition
      from Boeing aircraft to operating only Airbus aircraft on our mainline routes
      in
      April 2005. One of the key elements of this strategy is to produce cost savings
      because crew training is standardized for aircraft of a common type, maintenance
      issues are simplified, spare parts inventory is reduced, and scheduling is
      more
      efficient. We cannot assure you that we will achieve all of the cost savings
      we
      anticipated from the fleet transition.





Since
      we operate only Airbus aircraft on our mainline routes and GE engines, we are
      dependent on single manufacturers for future aircraft acquisitions or
      deliveries, spare parts or warranty service. If Airbus is unable to perform
      its
      obligations under existing purchase agreements,




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or
      is unable to provide future aircraft or services, whether by fire, strike or
      other events that affect its ability to fulfill contractual obligations or
      manufacture aircraft or spare parts, we would have to find another supplier
      for
      our aircraft. If acceptable Airbus aircraft were otherwise not available in
      the
      marketplace, Boeing is the only other manufacturer from which we could purchase
      or lease alternate aircraft. If we were forced to acquire Boeing aircraft,
      we
      would need to address fleet transition issues, including substantial costs
      associated with retraining our employees, acquiring new spare parts, and
      replacing our manuals. In addition, the fleet efficiency benefits described
      above may no longer be available.





Our
      business would be significantly disrupted if an FAA airworthiness directive
      or
      service bulletin were issued that resulted in the grounding of Airbus aircraft
      or GE engines of the type we operate while the defect was being corrected.
      Our
      business could also be harmed if the public avoids flying Airbus aircraft due
      to
      an adverse perception about the aircraft’s safety or dependability, whether real
      or perceived, in the event of an accident or other incident involving an Airbus
      aircraft of the type we fly.





***If
      we, through our new subsidiary Lynx Aviation, fail to successfully take delivery
      of and operate reliably the new Bombardier Q400 aircraft we agreed to purchase,
      our business could be harmed.***





Acquisition
      of a new type of aircraft, such as the Bombardier Q400, which we plan to place
      into revenue service in September 2007, involves a variety of risks relating
      to
      its ability to be successfully placed into service, including delays in meeting
      the agreed upon delivery schedule and the inability of the aircraft and all
      of
      its components to comply with agreed upon specifications and performance
      standards. In addition, Lynx Aviation needs to obtain a certificate of public
      convenience and necessity and an operating certificate in order to operate
      these
      aircraft. Application for these government authorizations was submitted in
      January 2007 and we anticipate receiving these authorizations in time for Lynx
      Aviation to commence operations in September 2007. However, approval of our
      application could be delayed. In the meantime, we are incurring significant
      start-up costs for Lynx, including the hiring and training of employees and
      making pre-delivery payments on the Bombardier Q400 aircraft. We are also
      required to purchase these aircraft in accordance with the timing and terms
      of
      our purchase agreement with Bombardier. Any delay in the ability for Lynx
      Aviation to commence operations and generate revenues while we continue to
      incur
      these significant start-up costs will likely have a significant impact on our
      results of operations.


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***We
      rely on one vendor to provide our LiveTV service.***





One
      of the unique features of our Airbus fleet is that every seat in each of our
      Airbus aircraft is equipped with LiveTV. LiveTV is provided by a subsidiary
      of
      JetBlue Airways, a competitor of ours. We do not know of any other company
      that
      could provide us economically with LiveTV equipment and related satellite
      signals for programming. Our LiveTV installations have exceeded the number
      of
      installations provided for in our contract with the supplier of LiveTV, and
      although we have had discussions with the supplier about expanding the number
      of
      aircraft covered by the contract, we have not finalized the terms of an expanded
      agreement. If the supplier of LiveTV were to stop supplying us with the
      equipment or service for any reason, or refused to supply equipment for our
      future aircraft deliveries, we could lose one of the unique services that we
      believe differentiates us from our competitors.





***Our
      maintenance expenses may be higher than we anticipate and will increase as
      our
      fleet ages.***





We
      bear the cost of all routine and major maintenance on our owned and leased
      aircraft. Maintenance expenses comprise a significant portion of our operating
      expenses. In addition, we are required periodically to take aircraft out of
      service for heavy maintenance checks, which can increase costs and reduce
      revenue. We also may be required to comply with regulations and airworthiness
      directives the FAA issues, the cost of which our aircraft lessors may only
      partially assume depending upon the magnitude of the expense. Although we
      believe that our owned and leased aircraft are currently in compliance with
      all
      FAA issued airworthiness directives, additional airworthiness directives likely
      will be required in the future, necessitating additional expense.





Because
      the average age of our aircraft is approximately 3.3 years, our aircraft require
      less maintenance now than they will in the future. We have incurred lower
      maintenance expenses because most of the parts on our aircraft are under
      multi-year warranties. Our maintenance costs will increase significantly, both
      on an absolute basis and as a percentage of our operating expenses, as our
      fleet
      ages and these warranties expire.





***We
      may need to make other arrangements for our maintenance facility.***





We
      currently sublease a substantial part of a maintenance hangar located at DIA
      from Continental Airlines. We use this facility to perform our heavy maintenance
      and some of our line maintenance. The sublease has expired and attempts to
      negotiate a fixed term extension have been unsuccessful to date. Therefore,
      we
      are currently renting this facility on a month-to-month basis. Continental
      has
      also indicated that it may reduce the amount of space we could sublease. The
      space reduction would prevent us from accommodating both our heavy and line
      maintenance functions at the Continental hangar. If Continental reduces the
      space covered by a sublease extension, or if we receive a notice to vacate
      from
      Continental, our maintenance operations would be significantly disrupted and
      we
      would likely need to rely on outside maintenance providers to cover our
      maintenance requirements until we located a new facility or facilities. This
      disruption would significantly increase our costs. We are currently is the
      design stages of a new line maintenance facility at DIA and are moving
      aggressively to complete this project, but it may not be completed prior to
      a
      reduction in our subleased space or our need to vacate the Continental facility.
      We have also issued a request for proposals for the lease or construction of
      new
      or existing hangar and shop space to accommodate our heavy maintenance
      functions. This facility may be located at DIA or elsewhere, depending on the
      responses we receive. If we are required to relocate our heavy maintenance
      operations, we will incur relocation expenses and our heavy maintenance
      operations will likely be disrupted during the relocation process. The inability
      to procure new maintenance facilities in a timely fashion may cause us to
      increase our overall maintenance costs. Further, the lease or financing costs
      of
      a new facility or facilities may be higher than those of our current sublease
      with Continental.





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***Our
      landing fees may increase because of local noise abatement
      procedures.***





As
      a result of litigation and pressure from residents in the areas surrounding
      airports, airport operators have taken actions over the years to reduce aircraft
      noise. These actions have included regulations requiring aircraft to meet
      prescribed decibel limits by designated dates, curfews during nighttime hours,
      restrictions on frequency of aircraft operations, and various operational
      procedures for noise abatement. The Airport Noise and Capacity Act of 1990
      recognized the right of airport operators with special noise problems to
      implement local noise abatement procedures as long as the procedures do not
      interfere unreasonably with the interstate and foreign commerce of the national
      air transportation system. Compliance with local noise abatement procedures
      may
      lead to increased landing fees.





An
      agreement between the City and County of Denver and another county adjacent
      to
      Denver specifies maximum aircraft noise levels at designated monitoring points
      in the vicinity of DIA with significant payments payable by the city to the
      other county for each substantiated noise violation under the agreement. DIA
      has
      incurred these payment obligations and likely will incur such obligations in
      the
      future, which it will pass on to us and other air carriers serving DIA by
      increasing landing fees. Additionally, noise regulations could be enacted in
      the
      future that would increase our expenses and could have a material adverse effect
      on our operations.





***Unionization
      affects our costs and may affect our operations.***





Five
      of our employee groups are represented by unions: our pilots, dispatchers,
      mechanics, material specialist and aircraft appearance agents. In addition,
      since 1997 we have had union organizing attempts that were defeated by our
      flight attendants and ramp service agents. The collective bargaining agreement
      with our pilots union, FAPA, expired in May 2005. In February 2007, FAPA
      membership ratified a four year agreement that amends the previous five-year
      contract signed in May 2005. In March 2006, our material specialists voted
      for
      union representation by the IBT, which affects approximately 22 employees.
      We
      are currently in the process of negotiating their first agreement. In September
      2006, the contract with our dispatchers, who are represented by the TWU,
      expired. We are currently in the process of re-negotiating this agreement,
      which
      affects approximately 16 employees.





If
      we are unable to reach agreement with any of the represented work groups whose
      contracts are currently being negotiated, or if currently non-unionized
      employees were to unionize and we were unable to reach agreement on the terms
      of
      their employment, we may need to go to mediation and may experience widespread
      employee dissatisfaction. We could be subject to work slowdowns or stoppages.
      In
      addition, we may be subject to disruptions by organized labor groups protesting
      certain groups for their non-union status or conducting sympathy action for
      fellow members striking at other airlines. Any of these events would be
      disruptive to our operations and could harm our business.





***The
      lack of marketing alliances could harm our business.***





Many
      airlines have marketing alliances with other airlines, under which they market
      and advertise their status as marketing alliance partners. Among other things,
      they share the use of two-letter flight designator codes to identify their
      flights and fares in the computerized reservation systems and permit reciprocity
      in their frequent flyer programs. We do not have an extensive network of
      marketing partners. The lack of marketing alliances puts us at a competitive
      disadvantage to global network carriers, whose ability to attract passengers
      through more widespread alliances, particularly on international routes, may
      adversely affect our passenger traffic and our results of operations.





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***Our
      lack of higher borrowing capacity under our current lines of credit and our
      lack
      of other borrowing facilities makes us highly dependent upon our existing cash
      and operating cash flows.***





Airlines
      require substantial liquidity to operate. We have a line of credit with a
      maximum borrowing amount of $20.0 million based on 60% of the value of certain
      spare parts inventory. As of May 18, 2007, based on our eligible spare parts
      inventory, we could borrow up to $16.5 million, which was reduced by letters
      of
      credit issued of $11.3 million as of March 31, 2007. We also have an additional
      revolving line of credit for $5.8 million, and we can issue letters of credit
      for up to $5.0 million of which $4.8 million had been issued as of March 31,
      2007. Our limited borrowing capacity means we rely primarily on operating cash
      flows to provide working capital. Unless we secure additional borrowing capacity
      under lines of credit, borrowing facilities or other financing, we will be
      dependent upon our existing cash and operating cash flows to fund our operations
      and to make scheduled payments on our debt and other fixed obligations. If
      we
      deplete our existing cash, fail to generate sufficient funds from operations
      to
      meet these cash requirements and are unable to secure additional lines of
      credit, borrowing facility or other financing, we could default on our debt
      and
      other fixed obligations. Our inability to meet our obligations as they become
      due would seriously harm our business and financial results, particularly in
      light of the cross-default clauses contained in many of our financing
      arrangements.


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***If
      we are unable to attract and retain qualified personnel at reasonable costs,
      our
      business will be harmed.***





Our
      business is labor intensive, with labor costs totaling $246.6 million, $219.4
      million and $202.3 million for the years ended March 31, 2007, 2006 and 2005,
      respectively. We expect salaries, wages and benefits to increase on a gross
      basis. These costs could increase as a percentage of our overall costs, which
      could harm our business. Our growth plans will require us to hire, train and
      retain a significant number of new employees in the future. From time to time,
      the airline industry has experienced a shortage of personnel licensed by the
      FAA, especially pilots and mechanics. We compete against the major U.S. airlines
      for labor in these highly skilled positions. Many of the major U.S. airlines
      offer wage and benefit packages that exceed our wage and benefit packages.
      As a
      result, in the future, we may have to increase significantly wages and benefits
      in order to attract and retain qualified personnel or risk considerable employee
      turnover. If we are unable to hire, train and retain qualified employees at
      a
      reasonable cost, we may be unable to complete our growth plans and our business
      could be harmed.





***We
      rely heavily on automated systems and technology to operate our business and
      any
      failure of these systems could harm our business.***





We
      are increasingly dependent on automated systems and technology to operate our
      business, enhance customer service and achieve low operating costs, including
      our computerized airline reservation system, telecommunication systems, website,
      check-in kiosks and in-flight entertainment systems. Substantial or repeated
      system failures to any of the above systems could reduce the attractiveness
      of
      our services and could result in our customers purchasing tickets from another
      airline. Any disruptions in these systems could result in the loss of important
      data, increase our expenses and generally harm our business. In addition, a
      seemingly high percentage of customers have been booking flights on our airline
      through third-party websites, which has increased our distribution costs. If
      any
      of these third-party websites experiences system failures or discontinues
      listing our flights on its systems, our bookings and revenues may be adversely
      impacted.





We
      implement improvements to our website and reservations system from time to
      time.
      Implementation of changes to these systems may cause operational and financial
      disruptions if we experience transition or system cutover issues, if the new
      systems do not perform as we expect them to, or if vendors do not deliver
      systems upgrades or other components on a timely basis. Any such disruptions
      may
      have the effect of discouraging some travelers from purchasing tickets from
      us
      and increasing our reservations staffing.


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**Risks
      Associated with the Airline Industry**





***The
      airline industry has incurred significant losses resulting in airline
      restructuring and bankruptcies, which could result in changes in our
      industry.***





Financial
      losses throughout the airline industry in recent years have resulted in airlines
      renegotiating or attempting to renegotiate labor contracts, reconfiguring flight
      schedules, furloughing or terminating employees, and taking other efficiency
      and
      cost-cutting measures. Despite these actions, several airlines have sought
      reorganization under Chapter 11 of the U.S. Bankruptcy Code, which permits
      them
      to reduce labor rates, restructure debt, terminate pension plans and generally
      reduce their cost structure. Such factors may have a greater impact during
      time
      periods when the industry encounters continued financial losses, as airlines
      under financial pressures may institute pricing structures to achieve near-term
      survival rather than long-term viability. It is foreseeable that further airline
      reorganizations, bankruptcies, or consolidations may occur, the effects of
      which
      we are unable to predict. We cannot assure you that the occurrence of these
      events, or potential changes resulting from these events, will not harm our
      business or the industry.





***We
      may be subject to terrorist attacks or other acts of war and increased costs
      or
      reductions in demand for air travel due to hostilities in the Middle East or
      other parts of the world.***





Although
      the entire industry is substantially enhancing security equipment and
      procedures, it is impossible to guarantee that additional terrorist attacks,
      such as the terrorist attacks that occurred on September 11, 2001 and more
      recent threats in August 2006, or other acts of war will not occur. Given the
      weakened state of the airline industry, if additional terrorist attacks or
      acts
      of war occur, particularly in the near future, it can be expected that the
      impact of those attacks on the industry may be similar in nature to but
      substantially greater than those resulting from the September 11 terrorist
      attacks.





***Increases
      in fuel costs affect our operating costs and
      competitiveness.***





Fuel
      is a major component of our operating expenses, accounting for 31.8% of our
      total operating expenses for the year ended March 31, 2007, up from 31.1% for
      the year ended March 31, 2006. On an actual basis, mainline fuel costs including
      the impact of hedging increased to $343.1 million, representing an average
      cost
      of $2.12 per gallon, from $281.9 million, or $1.99 per gallon, over the same
      periods. Both the cost and availability of fuel are influenced by many economic
      and political factors and events occurring in oil-producing countries throughout
      the world, which causes fuel costs to fluctuate widely. High oil prices have
      had
      a significant adverse impact on our results of operations over the past two
      fiscal years. We cannot predict our future cost and availability of fuel, or
      the
      impact or further disruptions in oil supplies or refinery productivity based
      on
      natural disasters, which affect our ability to compete. The unavailability
      of
      adequate fuel supplies could have a material adverse effect on our operations
      and profitability. In addition, larger airlines may have a competitive advantage
      because they pay lower prices for fuel and other airlines, such as Southwest
      Airlines, may have substantial fuel hedges that give them a competitive
      advantage. We generally follow industry trends by imposing a fuel surcharge
      in
      response to significant fuel price increases. However, our ability to pass
      on
      increased fuel costs have been and may continue to be limited by economic and
      competitive conditions. Although we implemented a fuel hedging program in 2003,
      under which we entered into Gulf Coast jet fuel and West Texas Intermediate
      crude derivative contracts that are intended to partially protect us against
      significant increases in fuel prices, this program is limited in fuel volume
      and
      duration. As of March 31, 2007, we had hedged following percentages for our
      projected fuel requirements as follows:





●
            Approximately
                46% for the quarter ending June 30, 2007●
            Approximately
                30% for the quarter ending September 30, 2007●
            Approximately
                40% for the quarter ending December 31, 2007●
            Approximately
                19% for the quarter ending March 31,
                2008





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***The
      airline industry is seasonal and cyclical, resulting in unpredictable liquidity
      and earnings.***





Because
      the airline industry is seasonal and cyclical, our liquidity and earnings will
      fluctuate and be unpredictable. Our operations primarily depend on passenger
      travel demand and seasonal variations. Our weakest travel periods are generally
      during the quarters ending in March and December. The airline industry is also
      a
      highly cyclical business with substantial volatility. Airlines frequently
      experience short-term cash requirements. These requirements are caused by
      seasonal fluctuations in traffic, which often reduce cash during off-peak
      periods, and various other factors, including price competition from other
      airlines, national and international events, fuel prices, and general economic
      conditions including inflation. Our operating and financial results are likely
      to be negatively impacted by national or regional economic conditions in the
      U.S., and particularly in Colorado.





***Our
      current insurance costs could increase if the U.S. government does not provide
      war risk coverage to airlines.***





Following
      the September 11 terrorist attacks, aviation insurers dramatically increased
      airline insurance premiums and significantly reduced the maximum amount of
      insurance coverage available to airlines for liability to persons other than
      passengers for claims resulting from acts of terrorism, war or similar events
      to
      $50 million per event and in the aggregate. In light of this development, under
      the Air Transportation Safety and System Stabilization Act, the U.S. government
      has provided domestic airlines with excess war risk coverage above $50 million
      up to an estimated $1.6 billion per event for us.





In
      December 2002, through authority granted under the Homeland Security Act of
      2002, the U.S. government expanded its insurance program to enable airlines
      to
      elect either the government’s excess third-party war risk coverage or for the
      government to become the primary insurer for all war risks coverage. We elected
      to take primary government coverage in February 2003 and dropped the
      commercially available war risk coverage. The current government war risk policy
      is in effect until August 31, 2007. We do not know whether the government will
      extend the coverage beyond August 31, 2007 and if it does how long the extension
      will last. We expect that if the government stops providing excess war risk
      coverage to the airline industry, the premiums charged by aviation insurers
      for
      this coverage will be substantially higher than the premiums currently charged
      by the government or the coverage will not be available from reputable
      underwriters. Significant increases in insurance premiums would harm our
      financial condition and results of operations.





***Our
      financial results and reputation could be harmed in the event of an accident
      or
      incident involving our aircraft.***





An
      accident or incident involving one of our aircraft could involve repair or
      replacement of a damaged aircraft and its consequential temporary or permanent
      loss from service, and significant potential claims of injured passengers and
      others. We are required by the DOT and our lenders and lessors to carry hull,
      liability and war risk insurance. Although we believe we currently maintain
      liability insurance in amounts and of the type generally consistent with
      industry practice, the amount of such coverage may not be adequate and we may
      be
      forced to bear substantial losses from an accident. Substantial claims resulting
      from an accident in excess of our related insurance coverage would harm our
      business and financial results. Moreover, any aircraft accident or incident,
      even if fully insured, could cause a public perception that we are less safe
      or
      reliable than other airlines, which would harm our business.





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***We
      are in a high fixed cost business, and any unexpected decrease in revenues
      would
      harm us.***





The
      airline industry is characterized by low profit margins and high fixed costs
      primarily for personnel, fuel, aircraft ownership and lease costs and other
      rents. The expenses of an aircraft flight do not vary significantly with the
      number of passengers carried and, as a result, a relatively small change in
      the
      number of passengers or in pricing would have a disproportionate effect on
      our
      operating and financial results. Accordingly, a shortfall from expected revenue
      levels can have a material adverse effect on our profitability and liquidity.
      We
      are often affected by factors beyond our control, including weather conditions,
      traffic congestion at airports and increased security measures, and irrational
      pricing from competitors, any of which could harm our operating results and
      financial condition.





***Delays
      or cancellations due to adverse weather conditions or other factors beyond
      our
      control could adversely affect us.***





Like
      other airlines, we are subject to delays caused by factors beyond our control,
      including adverse weather conditions, air traffic congestion at airports and
      increased security measures. Delays frustrate passengers, reduce aircraft
      utilization and increase costs, all of which negatively affect profitability.
      During periods of snow, rain, fog, hurricanes or other storms, or other adverse
      weather conditions, flights may be cancelled or significantly delayed.
      Cancellations or delays due to weather conditions, traffic control problems
      and
      breaches in security could harm our operating results and financial condition.





In
      December 2006 and January 2007, major snow storms in Denver, Colorado had a
      significant negative impact on our operating results. In the December 2006
      snow
      storms, we cancelled 875 flights, 104,567 passengers were impacted and one
      storm
      completely shut down DIA for almost 48 hours. We estimate that this storm
      reduced our revenue for the quarter ended December 31, 2006 by approximately
      $13,200,000 ($12,200,000 in mainline passenger revenue and $1,000,000 in
      regional partner revenue) and $3,500,000 in January 2007. In addition, the
      snow
      storms increased many variable costs including $3,300,000 in additional glycol
      expenses over the prior year and $889,000 in additional wages related to our
      flight crews and station personnel, offset by a reduction of fuel, landing
      fees,
      maintenance expenses and catering expenses of $3,306,000.





***We
      are subject to strict federal regulations, and compliance with federal
      regulations increases our costs and decreases our
      revenues.***





Airlines
      are subject to extensive regulatory and legal requirements that involve
      significant compliance costs. Any future changes in regulatory oversight of
      airlines generally, or low-fare carriers in particular, could result in a
      material increase in our operating expenses or otherwise hinder our business.
      In
      the last several years, Congress has passed laws and the DOT and FAA have issued
      regulations relating to the operation of airlines that have required significant
      expenditures. For example, the President signed into law the Stabilization
      Act
      in November 2001. This law federalized substantially all aspects of civil
      aviation security and requires, among other things, the implementation of
      certain security measures by airlines and airports, including a requirement
      that
      all passenger baggage be screened. Funding for airline and airport security
      under the law is primarily provided by a $2.50 per enplanement ticket tax
      effective February 1, 2002, with authority granted to the TSA to impose
      additional fees on air carriers if necessary. Under the Appropriations Act
      enacted on April 16, 2003, the $2.50 enplanement tax was temporarily suspended
      on ticket sales from June 1, 2003 through September 30, 2003. This enplanement
      tax resumed on October 1, 2003, and recently proposed legislation, although
      unsuccessful to date, would increase the ticket tax to $5.00 per enplanement.
      To
      the extent this increase could not be passed on to the passenger, it would
      result in a significant increase in our cost of operations. In addition, the
      acquisition, installation and operation of the required baggage screening
      systems by airports will result in capital expenses and costs by those airports
      that will likely be passed on to the airlines through increased use and landing
      fees. On February 17, 2002, the Stabilization Act imposed a base security
      infrastructure fee on commercial air carriers in an amount equal to the calendar
      year ended 2000 airport security expenses. The infrastructure fee for us is
      $1,625,000 annually subject to final audit. Pursuant
      to authority granted to the TSA to impose additional fees on air carriers if
      necessary to cover additional federal




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aviation
      security costs, the TSA has imposed an additional annual Security Infrastructure
      Fee on certain airlines, including Frontier. A
      revision in the fee structure assessed by the TSA could result in increased
      cost
      for us. The airline industry has opposed and disagrees with the higher assessment and
      is
      working with the TSA on a resolution.





Although
      we have obtained the necessary authority from the DOT and the FAA to conduct
      flight operations and are currently seeking such authority from the FAA with
      respect to our Bombardier aircraft, we must maintain this authority by our
      continued compliance with applicable statutes, rules, and regulations pertaining
      to the airline industry, including any new rules and regulations that may be
      adopted in the future. We believe that the FAA strictly scrutinizes smaller
      airlines like ours, which makes us susceptible to regulatory demands that can
      negatively impact our operations. We may not be able to continue to comply
      with
      all present and future rules and regulations. In addition, we cannot predict
      the
      costs of compliance with these regulations and the effect of compliance on
      our
      profitability, although these costs may be material.




**Item
      1B. Unresolved Staff Comments**





None.





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**Item
      2: Properties**





**Aircraft**





As
      of May 18, 2007, excluding JetExpress, we operate 49 Airbus A319 aircraft and
      ten Airbus A318 aircraft in all-coach seating configurations. The age of these
      aircraft, their passenger capacities and expiration years for the leased
      aircraft are shown in the following table:





**Aircraft**
            **No.
                of**
            **Year
                of**
            **Approximate**
            **Lease****Model**
            **Aircraft**
            **Manufacture**
            **Seating
                Capacity**
            **Expiration**A319
            36
            2001
                - 2007
            132
            2013
                - 2019A319
            13
            2001
                - 2006
            132
            OwnedA318
            2
            2004
            114
            2016A318
            8
            2003
                - 2007
            114
            Owned







We
      have
      completed our fleet replacement plan to phase out our Boeing aircraft and have
      replaced them with a combination of Airbus A319 and A318 aircraft. In March
      2000, we entered into a purchase agreement with Airbus, as subsequently amended
      in April 2006, to purchase 38 Airbus aircraft. As of May 18, 2007, we had taken
      delivery of 27 of these aircraft, four of which we sold and leased back. In
      addition, prior to the delivery of two aircraft in fiscal year 2004, we assigned
      delivery to a lessor and agreed to lease these aircraft over 12-year terms.
      Our
      purchase agreement with Airbus also includes purchase rights for up to 17
      additional aircraft, and allows us to purchase Airbus A318 or A320 aircraft
      in
      lieu of the A319 aircraft at our option. We have remaining firm purchase
      commitments for 11 Airbus aircraft and 10 Bombardier Q400 aircraft. We
      anticipate the following fleet composition as of the end of each fiscal year
      through 2011:





**Fiscal
                Year Ending**
            **A319**
            **A318**
            **A320**
            **Q400**
            **End
                of Year Cumulative Total Fleet**March
                31, 2007
            49
            8
            -
            -
            57March
                31, 2008
            49
            11
            2
            10
            72March
                31, 2009
            49
            11
            3
            10
            73March
                31, 2010
            49
            11
            8
            10
            78March
                31, 2011
            49
            11
            10
            10
            80




This
      table does not include any of the 17 Airbus and ten Bombardier Q400 aircraft
      for
      which we have purchase rights and options respectively, which would allow us
      to
      take delivery of additional A318, A319 or A320 aircraft beginning in fiscal
      year
      2009. The purchase rights on our Airbus aircraft expire on July 1, 2007 and
      our
      last option expires on December 1, 2007 for our Bombardier aircraft, subject
      to
      additional extension rights. In addition, we can defer delivery of two A320
      aircraft to be delivered in November 2009 and February 2010 into the year 2011.


29
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**Facilities**





We
      lease approximately 70,000 square feet of space at our headquarters facility
      near DIA. The lease expires in January 2015. We also lease an additional 20,000
      square feet of space in a building adjacent to our main headquarters. This
      lease
      expires in July 2008. We are currently examining options to acquire additional
      office space to accommodate our growth.





Our
      Denver, Colorado reservations facility is 16,000 square foot facility, also
      in
      Denver, Colorado, which we have leased for a 10-year lease term ending in June
      2011. In August 2000, we established a second reservations center facility
      in
      Las Cruces, New Mexico. This facility is approximately 12,000 square feet and
      is
      leased for a term of 122 months ending August 2010.





Lynx
      Aviation currently leases approximately 12,000 square feet of space in
      Westminster, Colorado. The lease expires in December 2012.





We
      have entered into an airport lease and facilities agreement expiring in 2010
      with the City and County of Denver, Colorado, at DIA for ticket counter space,
      22 gates in Concourse A and associated operations space. Our future growth
      may
      require us to work with DIA and the City and County of Denver, Colorado to
      develop access to additional gates and other airport facilities. If the
      construction of additional facilities is required to meet our growth needs,
      it
      is likely that we would be obligated to lease the additional facilities, thereby
      increasing our overall rates and charges paid to the airport. Because our
      overall rates and charges will be based on the final project costs as well
      as
      the number of passengers and gross weight landed at the airport, it is not
      possible at this time to determine the amount of future rates and charges at
      DIA.





We
      sublease a portion of Continental Airlines’ hangar at DIA. The primary term of
      this sublease expired in February 2007 and we now occupy that facility on a
      month-to-month basis. Additionally, we lease maintenance facilities in Kansas
      City, Missouri and Phoenix, Arizona.





Each
      of our airport locations requires leased space associated with gate operations,
      ticketing and baggage operations. We either lease the ticket counters, gates,
      and airport office facilities at each of the airports we serve from the
      appropriate airport authority or sublease them from other airlines.





**Item
      3: Legal Proceedings**





From
      time to time, we are engaged in routine litigation incidental to our business.
      We believe there are no legal proceedings pending in which we are a party or
      of
      which any of our property is the subject that are not adequately covered by
      insurance maintained by us or which have sufficient merit to result in a
      material adverse affect upon our business, financial condition, results of
      operations, or liquidity.





**Item
      4: Submission of Matters to a Vote of Security
      Holders**





None





30
 Table
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**PART
      II**





**Item
      5: Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities**





**Price
      Range of Common Stock**





Our
      common stock is listed on the NASDAQ Global Market and is traded under the
      symbol FRNT. As of May 18, 2007, there were 1,639 holders of record of our
      common stock. The following table shows the range of high and low sales prices
      per share for our common stock for the periods indicated as reported by
      NASDAQ.





**High**
            
            **Low****Fiscal
                Year 2007 Quarter Ended**June
                30, 2006
            
            $
            7.83
            
            $
            5.66September
                30, 2006
            
            $
            8.63
            
            $
            5.79December
                31, 2006
            
            $
            9.08
            
            $
            6.87March
                31, 2007
            
            $
            8.07
            
            $
            5.90**Fiscal
                Year 2006 Quarter Ended**June
                30, 2005
            
            $
            12.96
            
            $
            9.26September
                30, 2005
            
            $
            13.01
            
            $
            8.90December
                31, 2005
            
            $
            10.92
            
            $
            7.57March
                31, 2006
            
            $
            9.40
            
            $
            6.43








**Dividend
      Policy**





We
      have not declared or paid cash dividends on our common stock. We currently
      intend to retain any future earnings to fund operations and the continued
      development of our business, and, thus, do not expect to pay any cash dividends
      on our common stock in the foreseeable future. Future cash dividends, if any,
      will be determined by our Board of Directors and will be based upon our
      earnings, capital requirements, financial condition and other factors deemed
      relevant by the Board of Directors.


31
 Table
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**Performance
      Graph**




The
      following graph shows the cumulative total shareholder return on Frontier’s
      common stock compared to the cumulative total return of two other indices:
      (i)
      The Nasdaq National Market Composite Index of U.S. Companies (IXICN), and (ii)
      the Peer Group Index of similar line-of business companies consisting of Midwest
      Express Airlines (MEH), AirTran Holdings, Inc. (AAI), and JetBlue Airways
      Corporation (JBLU) (the “Peer Group”). JetBlue did not begin trading until April
      2002, and is not included in the Peer Group Index until fiscal year 2003. The
      graph shows the value at the end of each of the last five fiscal years of $100
      invested in Frontier Holdings common stock or the indices on March 31, 2002,
      assumes reinvestment of dividends, and takes into account stock splits.
      Historical stock price performance is not necessarily indicative of future
      stock
      price performance.












**Mar-02**
            **Mar-03**
            **Mar-04**
            **Mar-05**
            **Mar-06**
            **Mar-07**Frontier
                Airlines Holdings, Inc.
            100.00
            27.13
            56.88
            57.21
            42.03
            32.81NASDAQ
                Market Index
            100.00
            72.68
            108.07
            108.34
            126.79
            131.23Peer
                Group Index
            100.00
            70.15
            115.46
            85.90
            138.55
            109.92


**Issuer
      Purchases of Equity Securities**


The
        following chart provides information regarding Common Stock purchases by
        the
        Company during the period January 1, 2007 through March 31, 2007.
 
 **Period**
              **Total
                  Number**
                **of
                  Shares**
                **Purchased**
              **Average
                  Price**
                **Paid
                  Per**
                **Share**
              **Total
                  number of shares**
                **purchased
                  as part of**
                **publicly
                  announced**
                **plans
                  or programs**
              **Maximum
                  number**
                **of
                  shares that may**
                **yet
                  to be purchased**
                **under
                  the plans**
                **or
                  program**January
                  1, 2007 through
                January
                  31, 2007
              -
              -
              -
              -February
                  1, 2007 through
                February
                  28, 2007
              -
              -
              -
              -March
                  1, 2007 through
                March
                  31, 2007
              212,701
              $      
                  6.14
              212,701
              87,299




32
 Table
          of Contents


**Item
      6:****Selected
      Financial Data**





The
      following selected financial and operating data as of and for each of the years
      ended March 31, 2007, 2006, 2005, 2004, and 2003 are derived from our audited
      financial statements. This data should be read in conjunction with “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” and
      the consolidated financial statements and the related notes thereto included
      elsewhere in this report.





**Year
                    Ended March 31,****2007**
                
                
                **2006**
                
                
                **2005**
                
                
                **2004**
                
                
                **2003**(Amounts
                    in thousands except per share
                    amounts)
 **Statement
                    of Operations Data:**Total
                    operating revenues
                
                $
                1,170,949
                
                $
                1,001,522
                
                $
                837,585
                
                $
                644,739
                
                $
                469,992Total
                    operating expenses
                
                
                1,181,651
                
                
                1,009,419
                
                
                864,032
                
                
                617,257
                
                
                500,783Operating
                    income (loss)
                
                
                (9,834
                )
                
                (7,897
                )
                
                (26,447
                )
                
                27,482
                
                
                (30,791
                )Income
                    (loss) before income tax expense (benefit)and
                    cumulative effect of change in accounting principle
                
                
                (24,996
                )
                
                (20,468
                )
                
                (35,838
                )
                
                20,457
                
                
                (39,509
                )Income
                    tax expense (benefit)
                
                
                (4,626
                )
                
                (6,497
                )
                
                (12,408
                )
                
                7,822
                
                
                (14,655
                )Income
                    (loss) before cumulative effect of change in accounting
                    principle
                
                
                (20,370
                )
                
                (13,971
                )
                
                (23,430
                )
                
                12,635
                
                
                (24,854
                )Cumulative
                    effect of change in accounting principle
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                2,011Net
                    income (loss)
                
                $
                (20,370
                )
                $
                (13,971
                )
                $
                (23,430
                )
                $
                12,635
                
                $
                (22,843
                )Income
                    (loss) per share before cumulative effectof
                    a change in accounting principle:Basic
                
                $
                (0.56
                )
                $
                (0.39
                )
                $
                (0.66
                )
                $
                0.39
                
                $
                (0.84
                )Diluted
                
                $
                (0.56
                )
                $
                (0.39
                )
                $
                (0.66
                )
                $
                0.36
                
                $
                (0.84
                )Net
                    income (loss) per share:Basic
                
                $
                (0.56
                )
                $
                (0.39
                )
                $
                (0.66
                )
                $
                0.39
                
                $
                (0.77
                )Diluted
                
                $
                (0.56
                )
                $
                (0.39
                )
                $
                (0.66
                )
                $
                0.36
                
                $
                (0.77
                )**Balance
                    Sheet Data:**Cash,
                    cash equivalents and short-term investments
                
                $
                202,981
                
                $
                272,840
                
                $
                174,795
                
                $
                190,609
                
                $
                104,880Current
                    assets
                
                
                340,405
                
                
                390,957
                
                
                275,550
                
                
                269,733
                
                
                191,291Total
                    assets
                
                
                1,042,868
                
                
                970,432
                
                
                792,011
                
                
                769,706
                
                
                588,315Current
                    liabilities
                
                
                359,326
                
                
                301,011
                
                
                233,850
                
                
                181,659
                
                
                130,519Long-term
                    debt
                
                
                451,908
                
                
                405,482
                
                
                282,792
                
                
                280,001
                
                
                261,739Total
                    liabilities
                
                
                833,372
                
                
                741,656
                
                
                554,090
                
                
                511,764
                
                
                429,348Stockholders'
                    equity
                
                
                209,496
                
                
                228,776
                
                
                237,920
                
                
                257,942
                
                
                158,967Working
                    capital (deficit)
                
                
                (18,921
                )
                
                89,946
                
                
                41,700
                
                
                88,074
                
                
                60,772
















33
 Table
          of Contents





**Year
                  Ended March 31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2003****Selected
                  Operating Data - Mainline:**Passenger
                  revenue (000s) (1)
              
              $
              1,037,302
              
              $
              878,681
              
              $
              731,822
              
              $
              615,390
              
              $
              460,188Revenue
                  passengers carried (000s)
              
              
              9,140
              
              
              7,764
              
              
              6,653
              
              
              5,569
              
              
              3,926Revenue
                  passenger miles (RPMs) (000s) (3)
              
              
              8,532,577
              
              
              7,436,830
              
              
              6,587,589
              
              
              5,120,587
              
              
              3,599,553Available
                  seat miles (ASMs) (000s) (4)
              
              
              11,310,070
              
              
              9,885,599
              
              
              9,115,868
              
              
              7,153,740
              
              
              6,013,261Passenger
                  load factor (5)
              
              
              75.4
              %
              
              75.2
              %
              
              72.3
              %
              
              71.6
              %
              
              59.9
              %Break-even
                  load factor (6)
              
              
              76.3
              %
              
              75.8
              %
              
              75.0
              %
              
              68.8
              %
              
              65.0
              %Block
                  hours (7)
              
              
              234,965
              
              
              202,300
              
              
              182,581
              
              
              142,466
              
              
              120,297Departures
              
              
              97,554
              
              
              82,878
              
              
              72,888
              
              
              61,812
              
              
              53,081Average
                  seats per departure
              
              
              129.6
              
              
              129.4
              
              
              130.1
              
              
              132.2
              
              
              132.1Average
                  stage length
              
              
              895
              
              
              922
              
              
              961
              
              
              875
              
              
              858Average
                  length of haul
              
              
              934
              
              
              958
              
              
              990
              
              
              919
              
              
              917Average
                  daily block hour utilization (8)
              
              
              11.9
              
              
              11.5
              
              
              11.1
              
              
              10.4
              
              
              9.8Passenger
                  yield per RPM (cents) (9), (10)
              
              
              12.05
              
              
              11.68
              
              
              11.03
              
              
              11.96
              
              
              12.74Total
                  yield per RPM (cents) (11)
              
              
              12.62
              
              
              12.22
              
              
              11.44
              
              
              12.37
              
              
              13.06Passenger
                  yield per ASM (cents) (12)
              
              
              9.09
              
              
              8.79
              
              
              7.97
              
              
              8.56
              
              
              7.63Total
                  yield per ASM (cents) (13)
              
              
              9.52
              
              
              9.19
              
              
              8.26
              
              
              8.86
              
              
              7.82Cost
                  per ASM (cents)
              
              
              9.49
              
              
              9.13
              
              
              8.46
              
              
              8.42
              
              
              8.33Fuel
                  expense per ASM (cents)
              
              
              3.03
              
              
              2.85
              
              
              2.04
              
              
              1.52
              
              
              1.43Cost
                  per ASM excluding fuel (cents) (14)
              
              
              6.46
              
              
              6.28
              
              
              6.42
              
              
              6.90
              
              
              6.90Average
                  fare (15)
              
              $
              102.59
              
              $
              103.05
              
              $
              102.31
              
              $
              103.54
              
              $
              108.81Average
                  aircraft in service
              
              
              54.1
              
              
              48.2
              
              
              44.9
              
              
              37.3
              
              
              33.8Aircraft
                  in service at end of period
              
              
              57
              
              
              50
              
              
              47
              
              
              38
              
              
              36Average
                  age of aircraft at end of period
              
              
              3.2
              
              
              2.6
              
              
              2.5
              
              
              3.9
              
              
              7.4Average
                  fuel cost per gallon (16)
              
              $
              2.12
              
              $
              1.99
              
              $
              1.41
              
              $
              1.04
              
              $
              0.96Fuel
                  gallons consumed (000's)
              
              
              161,616
              
              
              141,474
              
              
              131,906
              
              
              104,799
              
              
              89,236





**Selected
                  Operating Data - Regional Partner (2):**Passenger
                  revenue (000s) (1)
              
              $
              94,164
              
              $
              92,826
              
              $
              84,269
              
              $
              11,191
              
              $
              -Revenue
                  passengers carried (000s)
              
              
              899
              
              
              912
              
              
              872
              
              
              115
              
              
              -Revenue
                  passenger miles (RPMs) (000s) (3)
              
              
              576,431
              
              
              591,787
              
              
              527,205
              
              
              75,974
              
              
              -Available
                  seat miles (ASMs) (000s) (4)
              
              
              799,914
              
              
              821,244
              
              
              736,287
              
              
              111,144
              
              
              -Passenger
                  load factor (5)
              
              
              72.1
              %
              
              72.1
              %
              
              71.6
              %
              
              68.4
              %
              
              -Passenger
                  yield per RPM (cents) (9)
              
              
              16.34
              
              
              15.69
              
              
              15.98
              
              
              14.73
              
              
              -Passenger
                  yield per ASM (cents) (12)
              
              
              11.77
              
              
              11.30
              
              
              11.45
              
              
              10.07
              
              
              -Cost
                  per ASM (cents)
              
              
              13.55
              
              
              13.01
              
              
              12.56
              
              
              13.17
              
              
              -Average
                  fare (15)
              
              $
              104.72
              
              $
              101.78
              
              $
              96.66
              
              $
              97.03
              
              $
              -Aircraft
                  in service at end of period
              
              
              9
              
              
              9
              
              
              9
              
              
              7
              
              
              -





34
 Table
          of Contents


**Year
                  Ended March 31,****2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2003****Selected
                  Operating Data - Combined:**Passenger
                  revenue (000s) (1)
              
              $
              1,131,466
              
              $
              971,507
              
              $
              816,091
              
              $
              626,581
              
              $
              460,188Revenue
                  passengers carried (000s)
              
              
              10,039
              
              
              8,676
              
              
              7,525
              
              
              5,684
              
              
              3,926Revenue
                  passenger miles (RPMs) (000s) (3)
              
              
              9,109,008
              
              
              8,028,617
              
              
              7,114,794
              
              
              5,196,561
              
              
              3,599,553Available
                  seat miles (ASMs) (000s) (4)
              
              
              12,109,984
              
              
              10,706,843
              
              
              9,852,155
              
              
              7,264,884
              
              
              6,013,261Passenger
                  load factor (5)
              
              
              75.2
              %
              
              75.0
              %
              
              72.2
              %
              
              71.5
              %
              
              59.9
              %Passenger
                  yield per RPM (cents) (9), (10)
              
              
              12.32
              
              
              11.98
              
              
              11.39
              
              
              12.01
              
              
              12.74Total
                  yield per RPM (cents) (11)
              
              
              12.85
              
              
              12.47
              
              
              11.77
              
              
              12.41
              
              
              13.06Passenger
                  yield per ASM (cents) (12)
              
              
              9.27
              
              
              8.98
              
              
              8.23
              
              
              8.59
              
              
              7.63Total
                  yield per ASM (cents) (13)
              
              
              9.67
              
              
              9.35
              
              
              8.50
              
              
              8.87
              
              
              7.82Cost
                  per ASM (cents)
              
              
              9.76
              
              
              9.43
              
              
              8.77
              
              
              8.50
              
              
              8.33








(1)
            “Passenger
                revenue” includes revenues for reduced rate stand-by passengers, charter
                revenues, administrative fees, and revenue recognized for unused
                tickets
                that are greater than one year from issuance date. The incremental
                revenue
                from passengers connecting from regional flights to mainline flights
                is
                included in our mainline passenger
                revenue.


(2)
            Regional
                Partner operating data includes the operations of Republic, Horizon
                and
                Mesa Airlines. On January 11, 2007, we signed an agreement with Republic
                under which Republic will operate up to 17 Embraer 170 aircraft with
                capacity of 76-seats under our Frontier JetExpress brand. The contract
                is
                for an 11-year period from the in-service date of the last aircraft,
                which
                is scheduled for December 2008. The service began on March 4, 2007
                and is
                replacing our agreement with Horizon, which will expire on return
                of the
                last aircraft in December 2007. In September 2003, we signed an agreement
                with Horizon, under which Horizon operates up to nine 70-seat CRJ
                700
                aircraft under our Frontier JetExpress brand. The service began on
                January
                1, 2004 and replaced our codeshare with Mesa Airlines, which terminated
                on
                December 31, 2003. In accordance with Emerging Issues Task Force
                No.
                01-08, “Determining Whether an Arrangement Contains a Lease” (“EITF
                01-08”), we have concluded that the Horizon and Republic agreements
                contain leases as the agreements convey the right to use a specific
                number
                and specific type of aircraft over a stated period of time. Therefore,
                we
                are recording revenues and expenses related to these agreements on
                a gross
                basis. Under the Mesa agreement, we recorded JetExpress revenues
                reduced
                by related expenses net in other revenues. JetExpress operations
                under the
                Mesa agreement from April 1, 2003 to December 31, 2003 and from February
                1, 2003 to March 31, 2003 are not included in regional partner statistics
                in 2004 and 2003 because the Mesa arrangement was effective prior
                to May
                28, 2003, the effective date of EITF
                01-08.





Amounts
      included in other revenues for Mesa for the years ended March 31, 2007, 2006,
      2005, 2004 and 2003 were as follows:





**Year
                Ended March 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Mesa
                revenues (000s)
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            25,155
            
            $
            1,608Mesa
                expenses (000s)
            
            
            -
            
            
            -
            
            
            -
            
            
            (23,438
            )
            
            (2,314
            )Net
                amount in other revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1,717
            
            $
            (706
            )





Mesa’s
      revenue passenger miles (RPMs) and available seat miles (ASMs) for the years
      ended March 31, 2007, 2006, 2005, 2004 and 2003


were
      as follows:





**Year
                Ended March 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Mesa
                RPMs (000s)
            
            
            -
            
            
            -
            
            
            -
            
            
            148,163
            
            
            11,004Mesa
                ASMs (000s)
            
            
            -
            
            
            -
            
            
            -
            
            
            174,435
            
            
            17,759





35
 Table
          of Contents





(3)
            “Revenue
                passenger miles,” or RPMs, are determined by multiplying the number of
                fare-paying passengers carried by the distance flown. This represents
                the
                number of miles flown by revenue paying
                passengers.


(4)
            “Available
                seat miles,” or ASMs, are determined by multiplying the number of seats
                available for passengers by the number of miles
                flown.


(5)
            “Passenger
                load factor” is determined by dividing revenue passenger miles by
                available seat miles. This represents the percentage of aircraft
                seating
                capacity that is actually utilized.


(6)
            “Break-even
                load factor” is the passenger load factor that will result in operating
                revenues being equal to operating expenses, assuming constant revenue
                per
                passenger mile and expenses.





A
      reconciliation of the components of the calculation of break-even load factor
      is
      as follows:





**Year
                Ended March 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**(in
                thousands)(Income)
                loss before cumulative effect of accounting change
            
            $
            20,370
            
            $
            13,971
            
            $
            23,430
            
            $
            (12,635
            )
            $
            24,854Income
                tax (expense) benefit
            
            
            4,626
            
            
            6,497
            
            
            12,408
            
            
            (7,822
            )
            
            14,655Passenger
                revenue
            
            
            1,037,302
            
            
            878,681
            
            
            731,822
            
            
            615,390
            
            
            460,188Regional
                partner expense
            
            
            (108,355
            )
            
            (106,866
            )
            
            (92,481
            )
            
            (14,634
            )
            
            -Regional
                partner revenue
            
            
            94,164
            
            
            92,826
            
            
            84,269
            
            
            11,191
            
            
            -Charter
                revenue
            
            
            (8,861
            )
            
            (10,011
            )
            
            (5,381
            )
            
            (2,724
            )
            
            (1,515
            )Passenger
                revenue mainline (excluding charter and regional partner revenue
                required
                to break even)
            
            $
            1,039,246
            
            $
            875,098
            
            $
            754,067
            
            $
            588,766
            
            $
            498,182





The
                calculation of the break-even load factor is as follows:**Year
                Ended March 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Passenger
                revenue mainline (excluding charter and regional partner revenue
                required
                to break even) ($000s)
            
            $
            1,039,246
            
            $
            875,098
            
            $
            754,067
            
            $
            588,766
            
            $
            498,182Mainline
                yield per RPM (cents)
            
            
            12.05
            
            
            11.68
            
            
            11.03
            
            
            11.96
            
            
            12.74Mainline
                revenue passenger miles (000s) to break even assumingconstant
                yield per RPM
            
            
            8,624,448
            
            
            7,492,277
            
            
            6,838,110
            
            
            4,920,834
            
            
            3,909,610Mainline
                available seat miles (000's)
            
            
            11,310,070
            
            
            9,885,599
            
            
            9,115,868
            
            
            7,153,740
            
            
            6,013,261**Mainline
                break-even load factor**
            
            
            76.3
            %
            
            75.8
            %
            
            75.0
            %
            
            68.8
            %
            
            65.0
            %




(7)
              “Block
                  hours” represent the time between aircraft gate departure and aircraft
                  gate arrival.
 (8)
                “Average
                    daily block hour utilization” represents the total block hours divided by
                    the number of aircraft days in service, divided by the weighted
                    average of
                    aircraft in our fleet during that period. The number of aircraft
                    includes
                    all aircraft on our operating certificate, which includes scheduled
                    aircraft, as well as aircraft out of service for maintenance
                    and
                    operational spare aircraft, and excludes aircraft removed permanently
                    from
                    revenue service or new aircraft not yet placed in revenue service.
                    This
                    represents the amount of time that our aircraft spend in the
                    air carrying
                    passengers.
 (9)
                  “Passenger
                      yield per RPM” is determined by dividing passenger revenues (excluding
                      charter revenue) by revenue passenger
                      miles.
 (10)
                    For
                        purposes of these yield calculations, charter revenue is
                        excluded from
                        passenger revenue. These figures may be deemed non-GAAP financial
measures
                        under regulations issued by the SEC. We believe that presentation
                        of yield
                        excluding charter revenue is useful to investors because
                        charter flights
                        are not included in RPMs or ASMs. Furthermore, in preparing
                        operating
                        plans and forecasts, we rely on an analysis of yield exclusive
                        of charter
                        revenue. Our presentation of non-GAAP financial measures
                        should not be
                        viewed as a substitute for our financial or statistical results
                        based on
                        GAAP. The calculation of passenger revenue excluding charter
                        revenue is as
                        follows:




**Year
                Ended March 31,****2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Passenger
                revenues - mainline, as reported
            
            $
            1,037,302
            
            $
            878,681
            
            $
            731,822
            
            $
            615,390
            
            $
            460,188Less:
                charter revenue
            
            
            8,861
            
            
            10,011
            
            
            5,381
            
            
            2,724
            
            
            1,515Passenger
                revenues - mainline excluding charter
            
            
            1,028,441
            
            
            868,670
            
            
            726,441
            
            
            612,666
            
            
            458,673Add:
                Passenger revenues - regional partner
            
            
            94,164
            
            
            92,826
            
            
            84,269
            
            
            11,191
            
            
            -Passenger
                revenues, system combined
            
            $
            1,122,605
            
            $
            961,496
            
            $
            810,710
            
            $
            623,857
            
            $
            458,673





36
 Table
          of Contents


(11)
            “Total
                yield per RPM” is determined by dividing total revenues by revenue
                passenger miles. This represents the average amount one passenger
                pays to
                fly one mile.


(12)
            “Passenger
                yield per ASM” or “RASM” is determined by dividing passenger revenues
                (excluding charter revenue) by available seat
                miles.


(13)
            “Total
                yield per ASM” is determined by dividing total revenues by available seat
                miles.


(14)
            This
                may be deemed a non-GAAP financial measure under regulations issued
                by the
                Securities and Exchange Commission. We believe the presentation of
                financial information excluding fuel expense is useful to investors
                because we believe that fuel expense tends to fluctuate more than
                other
                operating expenses. Excluding fuel from the cost of mainline operations
                facilitates the comparison of results of operations between current
                and
                past periods and enables investors to better forecast future trends
                in our
                operations. Furthermore, in preparing operating plans and forecasts,
                we
                rely, in part, on trends in our historical results of operations
                excluding
                fuel expense. However, our presentation of non-GAAP financial measures
                should not be viewed as a substitute for our financial results determined
                in accordance with GAAP.


(15)
            “Average
                fare” excludes revenue included in passenger revenue for charter and
                reduced rate stand-by passengers, administrative fees, and revenue
                recognized for unused tickets that are greater than one year from
                issuance
                date.


(16)
            “Average
                fuel cost per gallon” includes non-cash mark to market gains/(losses) from
                fuel hedging of $12,753,000, $(2,163,000), $2,837,000, and $469,000
                for
                the years ended March 31, 2007, 2006, 2005, and 2004,
                respectively.


37
 Table
          of Contents


**Item
      7:****Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**





**Overview**




We are
        a low cost, affordable fare airline operating primarily in a hub and spoke
        fashion connecting cities coast to coast through our hub at DIA. We are the
        second largest jet service carrier at DIA based on departures. We offer our
        customers a differentiated product, with a new aircraft, affordable pricing,
        and
        in-seat DirectTV with 24 channels of live television entertainment with four
        additional channels of current-run pay-per-view movies in a one class cabin
        on
        our mainline routes. As of March 31, 2007, we, in conjunction with Frontier
        JetExpress, operate routes linking our Denver hub to 46 U.S. cities from
        coast
        to coast, to eight cities in Mexico and to one city in Canada. As of March
        31,
        2007, we provided jet service to Mexico from ten non-hub cities and we began
        service between San Francisco, California and Los Angeles, California with
        five
        daily frequencies on June 29, 2006 and service between San Francisco, California
        and Las Vegas, Nevada on December 14, 2006 with one daily
        frequency.





During
      the year ended March 31, 2007, we had a net loss of $20,370,000 or 56¢ per
      diluted share, as compared to a net loss of $13,971,000 or 39¢ per diluted share
      for the year ended March 31, 2006. Included in our net loss for the year ended
      March 31, 2007 was a non-cash mark to market derivative gain which decreased
      fuel expense by $12,753,000 and $656,000 in gains on Boeing parts held for
      sale
      which were offset by a tax valuation allowance of $3,980,000. These items,
      net
      of income taxes, decreased our net loss by 12¢ per share for the year ended
      March 31, 2007. Included in our net loss for the year ended March 31, 2006
      was a
      non-cash mark to market derivative loss, which increased fuel expense by
      $2,163,000 and $3,414,000 of aircraft and facility exit charges which related
      primarily to three leased Boeing 737-300 aircraft we ceased using during the
      first quarter of fiscal year 2006, offset by gains on the sale of Boeing parts
      held for sale of $1,144,000 These items, net of income taxes, increased our
      net
      loss by 8¢ per share for the year ended March 31, 2006.





Our
      losses over the past three years have been primarily driven by rising fuel
      costs
      and our inability to pass these increases on to our customers due to a highly
      competitive market. We have seen a sharp rise in fuel costs since January 2004,
      and fuel costs may continue to increase or remain at these historically high
      levels. Our average fuel cost per gallon, including hedging activities, was
      $2.12 for the year ended March 31, 2007 compared to $1.99 for the year ended
      March 31, 2006, an increase of 6.5%. We have implemented several strategic
      initiatives to decrease our fuel burn rate during the year, which resulted
      in a
      decrease of our fuel burn rate to an average of 688 gallons per block hour
      from
      an average of 699 gallons per block hour for fiscal year 2006, a decrease of
      1.6%.





We
      have increased passenger revenues by 18.1% over the prior year which is a result
      of increasing our capacity (as measured by ASM’s) by 14.4% while increasing our
      passenger yields by 3.2%. The increase in our passenger yields can be primarily
      attributed to a 2.5% reduction in our average length of haul as we had a
      decrease of our average fare from $103.05 to $102.59, or 0.4%, due to
      competitive pricing pressure.





We
      have relatively low operating expenses excluding fuel because we currently
      operate a single fleet of aircraft on our mainline routes in a single class
      of
      service with high aircraft utilization rates. Our mainline CASM, or cost per
      available seat mile, for the year ended March 31, 2007 and 2006 was 9.49¢ and
      9.13¢, respectively, an increase of 3.9%. The increase in mainline CASM was
      largely due to an increase in fuel expense to 3.03¢ per ASM from 2.85¢ per ASM
      for the years ended March 31, 2007 and 2006, respectively, an increase of 6.3%.
      Mainline CASM excluding fuel was 6.46¢ per ASM as compared to 6.28¢ per ASM for
      the years ended March 31, 2007 and 2006, respectively, an increase of 2.9%.
      This
      increase in mainline CASM is partially due to $3,582,000 of start-up costs
      in
      Lynx Aviation, $3,800,000 of expenses (primarily deicing expense) associated
      with unusually inclement weather at DIA, a decrease in the average stage length
      of 2.9%, an increase in promotion and sales expense related to increased rates
      in reservation and travel agency expenses and increases in advertising spending.





We
      intend to continue our focused growth strategy, which included the completion
      of
      our fleet transition from a Boeing fleet to an all Airbus fleet in April 2005.
      One of the key elements of this strategy is to produce cost savings because
      crew
      training is standardized for aircraft of a common type, maintenance issues
      are
      simplified, spare parts inventory is reduced and scheduling is more efficient.
      As of March 31, 2007, we have remaining firm purchase commitments for 13 Airbus
      aircraft from Airbus and ten Q400 aircraft from Bombardier . We
      intend to use these additional aircraft to provide service to new markets and
      to
      add frequencies to existing markets that we believe are underserved.





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The
      airline industry continues to operate in an intensely competitive market. We
      expect competition will remain intense, as over-capacity in the industry
      continues to exists. Business and leisure travelers continue to reevaluate
      their
      travel budgets and remain highly price sensitive. Increased competition has
      prompted aggressive strategies from competitors through discounted fares and
      sales promotions. Additionally, the intense competition has created financial
      hardship for some of our competitors that have been forced to reduce capacity
      or
      have been forced into bankruptcy protection.




**Highlights
      from the 2007 Fiscal Year**




·
            We
                took delivery of six new Airbus A319 aircraft and one new Airbus
                A318
                aircraft (3 owned and 4 leased), for an increase of seven aircraft
                and a
                fleet total of 57 available for revenue service at year end.·
            In
                January 2007, the DOT designated us as a major carrier, which isU.S.-basedairlinesthat post more than $1 billion in revenue during afiscal
                year.·
            We
                formed a new subsidiary, Lynx Aviation, Inc., which intends to assume
                a
                purchase agreement between Frontier Holdings and Bombardier, Inc.
                for ten
                Q400 turboprop aircraft (with an option to purchase ten additional
                aircraft) and will be operated with its own operating
                certificate.·
            On
                January 11, 2007, we signed an agreement with Republic Airlines,
                Inc.,
                which Republic will operate up to 17 Embraer 170 aircraft with capacity
                of
                76-seats under our Frontier JetExpress brand. The service began on
                March
                4, 2007 and is replacing our agreement with Horizon.·
            The
                City and County of Denver announced that it reached an agreement
                with
                United Airlines under which United Airlines gave up the six gates
                it
                leased on Concourse A. We lease these gates on a preferential basis.·
            We
                unveiled “A Whole Different Website” with new features and
                functionality.·
            We
                renewed our title as the official and now exclusive airline sponsor
                of the
                Colorado Rockies, Denver's major league baseball team, for an additional
                five years.·
            We
                entered into an exclusive three year agreement with Marriott
                International’s guest loyalty program, Marriott Rewards®, in conjunction
                with our*EarlyReturns®*frequent flyer program.·
            In
                December 2006, the readers of Business Traveler magazine selected
                us as
                the best low cost carrier in the U.S. in the magazine’s 18th annual
                Readers’ Choice Business Travel Survey.·
            In
                November 2006, we partnered with AirTran Airways to create the first
                Low
                Cost Carrier referral and frequent flyer partnership in the industry
                that
                offers travelers the ability to reach more than 80 destinations across
                four countries. This partnership enables both airlines to increase
                destination options by linking phone and online reservations systems
                as
                well as enabling our*EarlyReturns®*and AirTran’s A+ Rewards members to earn and redeem mileage/travel credits
                on both airlines.·
            On
                November 30, 2006, our flight attendants voted against union
                representation by the IBT. This is the fifth time our flight attendants
                voted against union representation.·
            In
                February 2007, FAPA ratified a new collective bargaining agreement.
                The
                new four-year agreement amended the previous five-year contract signed
                in
                May 2000.







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**Outlook**




Although
      we have been able to raise capital and continue to grow, the highly competitive
      nature of the airline industry could prevent us from attaining the passenger
      traffic or yields required to reach profitable operations in new and existing
      markets. We expect our mainline full-year operating capacity for fiscal year
      2008 to increase by approximately 12% to 14% over fiscal year 2007 with the
      addition of three A318’s, two A320’s and ten Q400’s.  While the industry
      revenue environment remains extremely competitive, our passenger revenue per
      available seat mile is expected to increase slightly in fiscal year 2008. Our
      mainline cost per available seat mile, excluding fuel, is expected to also
      rise
      slightly over fiscal 2007 as we will be investing in the start-up operations
      of
      Lynx Aviation for the first two quarters of fiscal year 2008 until revenue
      service begins, which is estimated to be in September 2007. Fuel
      costs have risen sharply in 2007 and may remain at these historically high
      levels or increase even further. Due
      to the unpredictability of the price of fuel and these historically high fuel
      costs, we cannot predict if we will be profitable in fiscal 2008.




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**Selected
      Mainline Operating Statistics**





To
      a large extent, changes in operating expenses for airlines are driven by changes
      in capacity, or ASMs. The following table provides our operating revenues and
      expenses for our mainline operations expressed as cents per total mainline
      ASMs
      and as a percentage of total mainline operating revenues, as rounded, for years
      ended March 31, 2007, 2006, and 2005. Regional partner revenues, expenses and
      ASMs were excluded from this table. This data should be read in conjunction
      with
“Selected Financial Data” contained in Item 6 to this report.




**2007**
            
            **2006**
            
            **2005****Revenue/Cost
                Per**
              **ASM**
            
            
            **%
                Of Total**
              **Revenue**
            
            
            **Revenue/Cost
                Per**
              **ASM**
            
            
            **%
                Of Total**
              **Revenue**
            
            
            **Revenue/Cost
                Per**
              **ASM**
            
            
            **%
                Of Total**
              **Revenue**(in
                cents)
            (in
                cents)
            (in
                cents)Revenues:Passenger
                - mainline
            
            
            9.17
            
            
            96.3
            %
            
            8.89
            
            
            96.7
            %
            
            8.03
            
            
            97.1
            %Cargo
            
            
            0.06
            
            
            0.7
            %
            
            0.06
            
            
            0.6
            %
            
            0.05
            
            
            0.7
            %Other
            
            
            0.29
            
            
            3.0
            %
            
            0.24
            
            
            2.7
            %
            
            0.18
            
            
            2.2
            %Total
                revenues
            
            
            9.52
            
            
            100.0
            %
            
            9.19
            
            
            100.0
            %
            
            8.26
            
            
            100.0
            %Operating
                expenses:Flight
                operations
            
            
            1.43
            
            
            15.0
            %
            
            1.43
            
            
            15.5
            %
            
            1.45
            
            
            17.5
            %Aircraft
                fuel expense
            
            
            3.03
            
            
            31.9
            %
            
            2.85
            
            
            31.0
            %
            
            2.04
            
            
            24.7
            %Aircraft
                lease expense
            
            
            0.96
            
            
            10.1
            %
            
            0.95
            
            
            10.4
            %
            
            0.95
            
            
            11.5
            %Aircraft
                and traffic servicing
            
            
            1.47
            
            
            15.5
            %
            
            1.40
            
            
            15.2
            %
            
            1.42
            
            
            17.2
            %Maintenance
            
            
            0.78
            
            
            8.2
            %
            
            0.78
            
            
            8.5
            %
            
            0.84
            
            
            10.2
            %Promotion
                and sales
            
            
            1.02
            
            
            10.7
            %
            
            0.91
            
            
            9.9
            %
            
            0.88
            
            
            10.7
            %General
                and administrative
            
            
            0.50
            
            
            5.2
            %
            
            0.50
            
            
            5.4
            %
            
            0.53
            
            
            6.4
            %Aircraft
                lease and facility exit costs
            
            
            -
            
            
            -
            
            
            0.03
            
            
            0.4
            %
            
            -
            
            
            -Impairments
                and (gains)/ losses on sales of assets, net
            
            
            (0.01
            )
            
            (0.1
            )%
            
            (0.01
            )
            
            (0.1
            )%
            
            0.06
            
            
            0.7
            %Depreciation
            
            
            0.31
            
            
            3.2
            %
            
            0.29
            
            
            3.1
            %
            
            0.29
            
            
            3.5
            %Total
                operating expenses
            
            
            9.49
            
            
            99.7
            %
            
            9.13
            
            
            99.3
            %
            
            8.46
            
            
            102.4
            %








**Results
      of Operations - Year Ended March 31, 2007 Compared to Year Ended March 31,
      2006**





We
      had a net loss of $20,370,000 or 56¢ per diluted share for the year ended March
      31, 2007, as compared to a net loss of $13,971,000 or 39¢ per diluted share for
      the year ended March 31, 2006. Included in our net loss for the year ended
      March
      31, 2007 was a tax valuation allowance of $3,980,000 offset by a non-cash mark
      to market derivative gain which decreased fuel expense by $12,753,000 and
      $656,000 in gains on Boeing parts held for sale. These items, net of income
      taxes, decreased our net loss by 12¢ per share for the year ended March 31,
      2007.





Included
      in our net loss for the year ended March 31, 2006 were the following items
      before the effect of income taxes: aircraft lease and facility exit charges
      of
      $3,414,000 primarily relating to three leased Boeing 737-300 aircraft that
      we
      ceased using during the first quarter, gains of $1,144,000 related to the sale
      of Boeing parts held for sale and other assets and a non-cash mark to market
      loss on fuel hedges of $2,163,000. These items, net of income taxes, increased
      our net loss by 8¢ per share.





**Mainline
      Revenues**





Industry
      fare pricing behavior has a significant impact on our revenues. Because of
      the
      elasticity of passenger demand, we believe that increases in fares may at
      certain levels result in a decrease in passenger demand in many markets. We
      cannot predict future fare levels, which depend to a substantial degree on
      actions of




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competitors
      and the economy. When sale prices or other price changes are initiated by
      competitors in our markets, we believe that we must, in most cases, match those
      competitive fares in order to maintain our market share. In addition, certain
      markets we serve are destinations that cater to vacation or leisure travelers,
      resulting in seasonal fluctuations in passenger demand and revenues in these
      markets.





***Passenger
      Revenues - Mainline*** **.** Mainline passenger revenues totaled $1,037,302,000 for the year ended March
      31,
      2007 compared to $878,681,000 for the year ended March 31, 2006, an increase
      of
      18.1%. Mainline passenger revenues include revenues for reduced rate stand-by
      passengers, charter revenue, administrative fees, revenue recognized for tickets
      that are not used within one year from their issue dates and revenue recognized
      from our co-branded credit card agreement.





Revenues
      from ticketed passenger sales generated 90.4% of our mainline passenger revenues
      and increased $137,676,000 or 17.2% over the year ended March 31, 2006. The
      increase in mainline revenue earned from ticketed passenger sales resulted
      from
      a 14.4% increase in ASMs, or $115,282,000, an increase of 0.2 points in load
      factor, or $2,596,000, and an increase in our yields from ticket sales of 2.2%
      or $19,798,000. The percentage of revenues generated from other sources compared
      to total mainline passenger revenue are as follows: Administrative fees were
      2.7%; revenue recognized for tickets that were not used within one year from
      issuance were 3.0%, charter revenues were 0.9% and revenue from our co-branded
      credit card were 1.9%. These sources of revenue increased total mainline
      passenger revenues by $20,317,000 as compared to the year ended March 31, 2006.





***Other
      Revenues*** .
      Other revenues, comprised principally of the revenue from the marketing
      component of our co-branded credit card, interline and ground handling fees,
      liquor sales, LiveTV sales, pay-per-view movies and excess baggage fees totaled
      $32,603,000 and $24,338,000 for the year ended March 31, 2007 and March 31,
      2006, respectively, an increase of 34.0% and were 3.0% and 2.7% of total
      mainline operating revenues for the years ended March 31, 2007 and 2006. The
      increase in other revenues was primarily due to the increase of $6,646,000
      in
      the revenues earned for the marketing component of our co-branded credit card
      agreement and other partnership agreements.




**Mainline
      Operating Expenses**





Total
      mainline operating expenses were $1,073,296,000 and $902,553,000 for the years
      ended March 31, 2007 and 2006, respectively, an increase of 18.9%, and
      represented 99.7% and 99.3% of total mainline revenues, respectively. Mainline
      operating expenses increased slightly as a percentage of mainline revenue during
      the year ended March 31, 2006 largely a result of a 6.5% increase in our
      aircraft fuel cost per gallon for the year ended March 31, 2006 as compared
      to
      the prior comparable period.





***Salaries,
      Wages and Benefits*** *.* We record salaries, wages and benefits within the specific expense category
      identified in our statements of operations to which they pertain. Salaries,
      wages and benefits increased 12.4% to $246,568,000 compared to $219,380,000,
      and
      were 22.9% and 24.1% of total mainline revenues for the years ended March 31,
      2007 and 2006, respectively. Salaries, wages and benefits increased over the
      prior comparable period largely as a result of an increase in the number of
      full-time equivalent employees to support our continued capacity growth. Our
      full-time equivalent employee count increased from approximately 4,200 at March
      31, 2006 to 4,800 at March 31, 2007, or 14.3%.





***Flight
      Operations.*** Flight operations expenses increased 14.3% to $161,544,000 as compared to
      $141,316,000, and were 15.0% and 15.5% of total mainline revenues, for the
      year
      ended March 31, 2007 and 2006, respectively. Flight operations expenses
      increased due to an increase in mainline block hours from 202,300 for the year
      ended March 31, 2006 to 234,965 for the year ended March 31, 2007, an increase
      of 16.1%. Flight operations expenses include all expenses related directly
      to
      the operation of the aircraft excluding depreciation of owned aircraft and
      aircraft lease expenses and including insurance expenses, pilot and flight
      attendant compensation, in-flight catering, crew overnight expenses, flight
      dispatch and flight operations administrative expenses.





Pilot
      and flight attendant salaries before payroll taxes and benefits increased 15.1%
      to $95,020,000 compared to $82,566,000, and were 8.8% and 9.1% of total mainline
      revenue for the year ended March 31, 2007 and 2006, respectively. We employed
      approximately 1,865 full time equivalent pilots and flight attendants at March
      31, 2007 as compared to 1,614 at March 31, 2006, an increase of 15.6%. We
      increased the number of pilots and flight attendants over the prior year to
      support the 16.1% increase in block hours and the 12.2% increase in the average
      aircraft in service.





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Aircraft
      insurance expenses totaled $9,819,000 (0.9% of total mainline revenue) and
      $9,896,000 (1.1% of total mainline revenue) for the years ended March 31, 2007
      and 2006, respectively. Aircraft insurance expenses were $1.07 per passenger
      and
      $1.27 per passenger for the years ended March 31, 2007 and 2006, respectively,
      a
      decrease on a per passenger basis of 15.7%. Our aircraft hull and liability
      coverage renewed on January 1, 2006 to December 31, 2006 at rates that were
      reduced by 9.9%. Our rates were further reduced by 33.4% for the policy that
      covers January 1, 2007 to December 31, 2007. In December 2002, through authority
      granted under the Homeland Security Act of 2002, the U.S. government expanded
      its insurance program to enable airlines to elect either the government’s excess
      third-party war risk coverage or for the government to become the primary
      insurer for all war risks coverage. We elected to take primary government
      coverage in February 2003 and dropped the commercially available war risk
      coverage. The current government war risk policy is in effect until August
      31,
      2007. We do not know whether the government will extend the coverage beyond
      August 31, 2007 and if it does how long the extension will last. We expect
      that
      if the government stops providing excess war risk coverage to the airline
      industry, the premiums charged by aviation insurers for this coverage will
      be
      substantially higher than the premiums currently charged by the government
      or
      the coverage will not be available from reputable underwriters.


***Aircraft Fuel.*** ** Aircraft
        fuel costs of $343,082,000 for 161,616,000 gallons used and $281,906,000
        for
        141,474,000 gallons used and resulted in an average fuel cost of $2.12 and
        $1.99
        per gallon for the year ended March 31, 2007 and 2006, respectively, an increase
        of 6.5% per gallon. Aircraft fuel costs, excluding hedging losses and gains,
        were $2.18 and $2.02 per gallon for the year ended March 31, 2007 and 2006,
        respectively, an increase of 7.9%. Aircraft fuel expenses represented 31.9%
        and
        31.0% of total mainline revenue for the years ended March 31, 2007 and 2006,
        respectively. Fuel prices are subject to change weekly as we purchase a very
        small portion in advance for inventory. Fuel consumption for the years ended
        March 31, 2007 and 2006 averaged 688 and 699 gallons per block hour,
        respectively, a decrease of 1.6%. Fuel consumption per block hour decreased
        during the year ended March 31, 2007 from the prior year due to the
        implementation of several fuel conservation initiatives.





Our
      aircraft fuel expenses for the year ended March 31, 2007 include a non-cash
      mark
      to market derivative gain of $12,753,000 recorded as a decrease to fuel expense
      offset by cash settlements of $3,925,000 paid to a counter-party recorded as
      an
      increase in fuel expense. Our aircraft fuel expenses for the year ended March
      31, 2006 include a non-cash mark to market derivative loss of $2,163,000
      recorded an increase to fuel expense offset by cash settlements of $5,338,000
      received from a counter-party recorded as a decrease in fuel expense.





***Aircraft
      and Engine Lease.***Aircraft lease expenses totaled $108,623,000 (10.1% of total
      mainline revenue) and $94,229,000 (10.4% of total mainline revenue) for the
      years ended March 31, 2007 and 2006, respectively, an increase of 15.3%. The
      increase in lease expense is due to an increase in the average number of leased
      aircraft from 32.7 to 36.7, or 12.2%, and increases in lease rates for four
      of
      our aircraft that have variable rents based on LIBOR.





***Aircraft
      and Traffic Servicing.*** Aircraft and traffic servicing expenses were $166,525,000 and $138,492,000,
      an
      increase of 20.2%, for the years ended March 31, 2007 and 2006, respectively,
      and represented 15.5% and 15.2% of total mainline revenues. Aircraft and traffic
      servicing expenses will increase with the addition of new cities to our route
      system. Aircraft and traffic servicing expenses include all expenses incurred
      at
      airports including landing fees, facilities rental, station labor, ground
      handling expenses, and interrupted trip expenses associated with delayed or
      cancelled flights. Interrupted trip expenses are amounts paid to other airlines
      to protect passengers on cancelled flights as well as hotel, meal and other
      incidental expenses. During the year ended March 31, 2007, our departures
      increased to 97,554 from 82,878 for the year ended March 31, 2006, an increase
      of 17.7%. Aircraft and traffic servicing expenses were $1,707 per departure
      for
      the year ended March 31, 2007 as compared to $1,671 per departure for the year
      ended March 31, 2006, an increase of 2.2%. Aircraft and traffic servicing during
      the year ended March 31, 2007 included an increase in glycol expenses of
      $3,300,000, or 83.6%, over the prior year primarily related to the significant
      snow storms in Denver in December 2006 and January 2007. In addition, we had
      additional operating costs of $5,106,000 during the year ended March 31, 2007
      as
      compared to the fiscal year ended March 31, 2006 primarily related to our Los
      Angeles to San Francisco shuttle, which operated five times a day, and an
      increase in the rates charged by the Los Angeles airport.





***Maintenance.*** Maintenance expenses of $87,978,000 and $77,238,000 were 8.2% and 8.5% of total
      revenue for the years ended March 31, 2007 and 2006, respectively, an increase
      of 13.9% as compared to the year ended March 31, 2006. Maintenance expenses
      include all labor, parts and supplies expenses related to the maintenance of
      the
      aircraft. Maintenance cost per block hour was $374 and $382 for the years ended
      March 31,




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2007
      and 2006, respectively, a decrease of 2.1%, primarily related to several leased
      aircraft in which supplemental rent amounts reached the maximum reserve amount
      required during the year and increases in maintenance labor performed in which
      we receive reimbursement against these reserves.





***Promotion
      and Sales*** *.* Promotion
      and sales expenses totaled $115,536,000 and $89,751,000 and were 10.7% and
      9.9%
      of total mainline revenues for the years ended March 31, 2007 and 2006,
      respectively, an increase of 28.7%. These expenses include advertising expenses,
      telecommunications expenses, wages and benefits for reservation agents and
      related supervision as well as marketing management and sales personnel, credit
      card fees, travel agency commissions and computer reservations costs. During
      the
      year ended March 31, 2006, promotion and sales expense was reduced by $4,444,000
      due to the favorable resolution of a sales and use tax credit on the taxation
      of
      ticketing services that related to the period September 2001 to March 2005.
      During the year ended March 31, 2007, promotion and sales expenses, per mainline
      passenger increased to $12.64 from $12.13 (excluding the sales and use tax
      credit) for the year ended March 31, 2006. Promotion and sales expenses per
      mainline passenger increased primarily as a result of an increase in the
      commission rates paid to external travel websites, an increase in advertising
      expenses and the inclusion of the favorable tax ruling in the fiscal year 2006
      promotion and sales expense.




***General
      and Administrative.*** General and administrative expenses for the years ended March 31, 2007 and
      2006
      totaled $56,019,000 and $48,979,000, respectively, an increase of 14.4%, and
      were 5.2% and 5.4% of total mainline revenues, respectively. General and
      administrative expenses include the wages and benefits for our executive
      officers and various other administrative personnel including legal, accounting,
      information technology, corporate communications, training and human resources
      and other expenses associated with these departments. General and administrative
      expenses also include employee health benefits, accrued vacation, and general
      insurance expenses including worker’s compensation for all of our employees.
      General and administrative expenses increased due to increases in our worker’s
      compensation expense, consulting and legal expenses (primarily related to the
      start-up of Lynx Aviation) offset by a reduction in our health insurance expense
      as compared to the year ended March 31, 2006.




***Depreciation.*** Depreciation expenses were $34,702,000 and $28,372,000 and were approximately
      3.2% and 3.1% of total mainline revenue for the years ended March 31, 2007
      and
      2006, respectively, an increase of 22.3%. These expenses include depreciation
      of
      aircraft and aircraft components, office equipment, ground station equipment,
      and other fixed assets. The increase in depreciation is primarily due to an
      increase in the average number of purchased aircraft in service to 17.7 during
      the year ended March 31, 2007 as compared to 15.5 purchased aircraft in service
      for the year ended March 31, 2006, an increase of 14.2%. The increase in
      depreciation expense is also due to accelerated depreciation on our aircraft
      seats which we are replacing over the next two fiscal years and investments
      in
      rotable aircraft components, aircraft improvements and ground equipment to
      support the 14.4% increase in our capacity during the year ended March 31,
      2007.





***Business
      interruption insurance proceeds.*** We recorded insurance proceeds of $868,000 as a result of final settlements
      of
      business interruption claims that covered lost profits when our service to
      Cancun, Mexico and New Orleans, Louisiana were disrupted by hurricanes during
      the fiscal year ended March 31, 2006.





***Nonoperating
      (Income) Expense.*** Net
      nonoperating expense totaled $15,162,000 for the year ended March 31, 2007
      as
      compared to net nonoperating expense of $12,571,000 for the year ended March
      31,
      2006, an increase of 20.6%.





Interest
      income increased to $14,982,000 from $9,366,000 during the year ended March
      31,
      2007 from the year ended March 31, 2006 as a result of an increase in short-term
      interest rates earned on investments and an increase in our average cash
      position during the year ended March 31, 2007 largely as a result of the net
      proceeds of $88,759,000 from our convertible notes offering in December 2005.





Interest
      expense, net of capitalized interest, increased to $29,899,000 for the year
      ended March 31, 2007 from $21,758,000 for the year ended March 31, 2006, an
      increase of 37.4%. The increase in interest expense was a result of additional
      debt for the acquisition of three additional purchased aircraft, an increase
      in
      the weighted average borrowing rate and additional debt of $92,000,000 from
      our
      convertible notes offering in December 2005. Debt related to aircraft increased
      from $335,756,000 as of March 31, 2006 to $386,755,000 as of March 31, 2007
      with
      an increase in the average weighted interest rate from 6.55% to 7.15% as of
      March 31, 2006 and 2007, respectively.





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***Income
      Tax Benefit.*** ** We
      recorded an income tax benefit of $4,626,000 during the year ended March 31,
      2007, which includes a valuation allowance of $3,980,000 which resulted in
      an
      effective tax rate of 18.5%, compared to an income tax benefit of $6,497,000
      during the year ended March 31, 2006 at a 31.7% rate. During the year ended
      March 31, 2007, our tax benefit was at a federal rate of 35.0% plus the blended
      state rate of 2.7% (net of federal benefit) and was decreased by the tax effect
      of permanent differences of 3.6%. During the years ended March 31, 2007 and
      2006, we recorded valuation allowances of $3,980,000 and $273,000 against
      federal and certain state net operating loss carryforwards since it was more
      likely than not that these tax benefits were not going to be realized due to
      lack of taxable income in these jurisdictions before those net operating loss
      carryforwards expire.





**Regional
      Partner**





Regional
      partner revenues are derived from Frontier JetExpress operated by Horizon and
      Republic. Our mainline passenger revenue increases as a result of incremental
      revenue from passengers connecting to/from regional flights. Operating expenses
      include all direct costs associated with Frontier JetExpress operated by Horizon
      and Republic plus payments of performance bonuses if earned under the
      contract.  Certain expenses such as aircraft lease, maintenance and crew
      costs are included in the operating agreements with Horizon and Republic in
      which we reimburse these expenses plus a margin. Operating expenses also
      include other direct costs incurred for which we do not pay a margin. 
 These expenses are primarily composed of fuel, airport facility expenses
      and passenger related expenses.





***Passenger
      Revenues -
      Regional Partner.***Regional partner revenues, consisting of
      revenues from Frontier JetExpress operated by Horizon and Republic, totaled
      $94,164,000 for the year ended March 31, 2007 and $92,826,000 for the year
      ended
      March 31, 2006, a 1.4% increase. The increase in revenue is due to an increase
      in the average fare to $104.72 during the year ended March 31, 2007 from $101.78
      during the year ended March 31, 2006, an increase of 2.9%.




***Operating
      Expenses -
      Regional Partner.***Regional partner expense for the year
      ended March 31, 2007 and 2006 totaled $108,355,000 and $106,866,000,
      respectively, a 1.4% increase, and was 115.1% of total regional partner revenues
      for each of the years ended March 31, 2007 and 2006. Regional partner operating
      expenses include all direct costs associated with Frontier JetExpress operated
      by Horizon and Republic. The increase in expenses is primarily due to a
      $1,450,000 increase in fuel expense for the regional partner operations as
      compared to the prior year.





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**Results
      of Operations - Year Ended March 31, 2006 Compared to Year Ended March 31,
      2005**





We
      had a net loss of $13,971,000 or 39¢ per diluted share for the year ended March
      31, 2006, as compared to a net loss of $23,430,000 or $0.66 per diluted share
      for the year ended March 31, 2005. Included in our net loss for the year ended
      March 31, 2006 were the following items before the effect of income taxes:
      aircraft lease and facility exit charges of $3,414,000 primarily relating to
      three leased Boeing 737-300 aircraft that we ceased using during the first
      quarter and a non-cash mark to market loss on fuel hedges of $2,163,000, offset
      by gains of $1,144,000 related to the sale of Boeing parts held for sale and
      other assets. These items, net of income taxes, increased our net loss by 8¢ per
      share. Also, included in our results is $421,000 in additional federal airport
      security expenses due to a retroactive assessment by the TSA. We believe this
      assessment is improper and are vigorously contesting it.





Included
      in our net loss for the year ended March 31, 2005 were the following items
      before the effect of income taxes: a write down of $5,123,000 of the carrying
      value of expendable Boeing 737 inventory and losses on sales of assets of
      $85,000 which was partially offset by and non-cash mark to market gain on fuel
      hedges of $2,837,000. These items, net of income taxes, increased our net loss
      by 4¢ per diluted share.





**Mainline
      Revenues**





***Passenger
      Revenue*** **s** ***-
      Mainline.*** Mainline passenger revenues totaled $878,681,000 for the year ended March 31,
      2006 compared to $731,822,000 for the year ended March 31, 2005, an increase
      of
      $146,859,000 or 20.0%.





Revenues
      from ticket sales generated 91.0% of our mainline passenger revenues and
      increased $119,360,000 or 17.5% over prior year. The increase in ticket sales
      resulted from an 8.4% increase in ASMs, or $57,476,000, a 4.0% increase in
      load
      factor, or $30,274,000, and a 4.1% increase in our yields from ticket sales,
      or
      $31,610,000. Revenues generated from other sources and the percentage of
      mainline passenger revenues are as follows: Administrative fees were 2.4%;
      revenue recognized for tickets that are not used within one year from issuance
      were 2.9%, charter revenues were 1.1% and earnings from our co-branded credit
      card were 1.3%. These sources of revenue increased mainline passenger revenue
      by
      $18,737,000 as compared to prior year, or 38.1%, due to our 16.7% increase
      in
      passengers and the increased usage of our co-branded credit card.





***Other
      Revenues*** **.** Other revenues totaled $24,338,000 for the year ended March 31, 2006 compared
      to
      $16,536,000 for the year ended March 31, 2005, an increase of $7,802,000 or
      47.2%. The increase in other revenues was primarily due to an increase the
      revenue received from our co-branded credit card, increased revenue generated
      from ground handling contracts, increased revenues in excess baggage fees and
      pay-per-view movies.





**Mainline
      Operating Expenses**





Total
      mainline operating expenses were $902,553,000 and $771,551,000 for the years
      ended March 31, 2006 and 2005, respectively, and represented 99.3% and 102.4%
      of
      total mainline revenues, respectively. Mainline operating expenses decreased
      as
      a percentage of mainline revenue during the year ended March 31, 2006 largely
      a
      result of a 10.3% increase in our RASM coupled with an increase in our load
      factors of 2.9 points. This decrease was significantly offset by an increase
      of
      41.1% in our aircraft fuel cost per gallon for the year ended March 31, 2006
      as
      compared to the prior comparable period.





***Salaries,
      Wages and Benefits*** *.* We record salaries, wages and benefits within the specific expense category
      identified in our statements of operations to which they pertain. Salaries,
      wages and benefits increased 8.4% to $219,380,000 compared to $202,341,000,
      and
      were 24.1% and 26.9% of total mainline revenues for the years ended March 31,
      2006 and 2005, respectively. Salaries, wages and benefits increased over the
      prior comparable periods largely as a result of general wage increases,
      increases in heath insurance costs and increases in workers compensation
      insurance. Our full time equivalent employee count increased 13.5% from 3,700
      at
      March 31, 2005 to 4,200 at March 31, 2006.





***Flight
      Operations.*** Flight operations expenses increased 7.0% to $141,316,000 as compared to
      $132,022,000, and were 15.5% and 17.5% of total mainline revenues, for the
      year
      ended March 31, 2006 and 2005, respectively. Flight operations expenses
      increased due to an increase in mainline block hours from 182,581 for the year
      ended March 31, 2005 to 202,300 for the year ended March 31, 2006, an increase
      of 10.8%.





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Pilot
      and flight attendant salaries before payroll taxes and benefits increased 13.9%
      to $82,566,000 compared to $72,487,000, and were 9.1% and 9.6% of total mainline
      revenue for the year ended March 31, 2006 and 2005, respectively. We increased
      the number of pilots and flight attendants over the prior year by 16.1% to
      support the 10.8% increase in block hours and the 7.3% increase in the average
      aircraft in service.





Aircraft
      insurance expenses totaled $9,896,000 (1.1% of total mainline revenues) and
      $10,219,000 (1.4% of total mainline revenue) for the year ended March 31, 2006
      and 2005, respectively, a decrease of 3.2%. Aircraft insurance expenses were
      13¢
and 16¢ per RPM for the year ended March 31, 2006 and 2005, respectively, a
      decrease of 18.8%. Our aircraft hull and liability coverage was renewed at
      reduced premium rates twice during the year.





***Aircraft
      Fuel.*** ** Aircraft
      fuel costs of $281,906,000 for 141,474,000 gallons used and $185,821,000 for
      131,906,000 gallons used and resulted in an average fuel cost of $1.99 and
      $1.41
      per gallon for the year ended March 31, 2006 and 2005, respectively, an increase
      of 41.1% per gallon. Aircraft fuel costs, excluding hedging losses and gains,
      were $2.02 and $1.47 per gallon for the year ended March 31, 2006 and 2005,
      respectively, an increase of 37.4%. Aircraft fuel expenses represented 31.0%
      and
      24.7% of total mainline revenue for the years ended March 31, 2006 and 2005,
      respectively. Our results of operations for the year ended March 31, 2006
      include a non-cash mark to market derivative loss of $2,163,000 and realized
      gains of $5,338,000 in cash settlements received from a counter-party recorded
      as a decrease in fuel expense. Our results of operations for the year ended
      March 31, 2005 include a non-cash mark to market derivative gain of $2,837,000
      and a realized gain of approximately $4,768,000 in cash settlements received
      from a counter-party recorded as a decreases in fuel expense.





***Aircraft
      Lease.***Aircraft lease expenses totaled $94,229,000 (10.4% of
      total mainline revenues) and $87,096,000 (11.5% of total mainline revenue)
      for
      the years ended March 31, 2006 and 2005, respectively, an increase of 8.2%.
      The
      increase in lease expense is due to an increase in the average number of leased
      aircraft from 30.9 to 32.7, or 5.8%, costs associated with the late return
      of
      certain Boeing aircraft, increases in lease rates for four of our aircraft
      that
      have variable rents based on LIBOR and additional rent related to two spare
      engine leases.





***Aircraft
      and Traffic Servicing.*** Aircraft and traffic servicing expenses were $138,492,000 and $129,470,000,
      an
      increase of 7.0%, for the years ended March 31, 2006 and 2005, respectively,
      and
      represented 15.2% and 17.2% of total mainline revenues. During the year ended
      March 31, 2006, we added a net of six cities with mainline only service. During
      the year ended March 31, 2006, our departures increased to 82,878 from 72,888
      for the year ended March 31, 2005, an increase of 13.7%. Aircraft and traffic
      servicing expenses were $1,671 per departure for the year ended March 31, 2006
      as compared to $1,776 per departure for the year ended March 31, 2005, a
      decrease of 5.9%. This decrease in the amount of expenses per departure is
      related to the realization of economies of scale.





***Maintenance.*** Maintenance expenses of $77,238,000 and $76,679,000 were 8.5% and 10.2% of
      total
      mainline revenues for the years ended March 31, 2006 and 2005, respectively,
      an
      increase of 0.7%. Maintenance cost per block hour was $382 and $420 for the
      years ended March 31, 2006 and 2005, respectively, a decrease of 9.0%.
      Maintenance cost per block hour decreased as a result of our transition to
      an
      all Airbus fleet that is less costly to maintain than our older Boeing aircraft,
      offset slightly by maintenance costs associated with meeting the return
      condition requirements of five Boeing aircraft during the year. Our mainline
      average age of aircraft was 2.6 years as of March 31, 2006.





***Promotion
      and Sales*** *.* Promotion
      and sales expenses totaled $89,751,000 and $80,407,000 and were 9.9% and 10.7%
      of total mainlines revenues for the years ended March 31, 2006 and 2005,
      respectively, an increase of 11.6%. During the year ended March 31, 2006,
      promotion and sales expense was reduced by $4,444,000 due to the favorable
      resolution in the current fiscal year of a sales and use tax credit on the
      taxation of ticketing services which related to the period September 2001 to
      March 2005. During the year ended March 31, 2006, promotion and sales expenses,
      excluding this item, per mainline passenger increased to $12.13 from $12.09
      for
      the year ended March 31, 2005. Promotion and sales expenses per mainline
      passenger increased primarily as a result of an increase in the commission
      rates
      paid to external travel websites.




***General
      and Administrative.*** General and administrative expenses for the years ended March 31, 2006 and
      2005
      totaled $48,979,000 and $48,350,000, respectively, an increase of 1.3%, and
      were
      5.4% and 6.4% of total




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mainline
      revenues respectively. General and administrative expenses remained relatively
      flat, despite increased rates for health insurance and worker’s compensation,
      due to $2,958,000 of expenses incurred during the fiscal year ended March 31,
      2005 for the Sabre implementation .




***Aircraft
      Lease and Facility Exit Costs.*** ** In
      April
      2005, we finalized our transition to an all Airbus fleet and ceased using three
      of our Boeing 737-300 leased aircraft, which had original lease termination
      dates in September 2005, August 2005 and May 2006. We negotiated an early
      termination fee for the aircraft with an original termination date of May 2006.
      As such, we recorded a charge of $3,312,000 to reflect the estimated fair value
      of the remaining lease payments and a one-time early return payment. We also
      recorded $102,000 of facility exit costs for a revised estimate of time to
      obtain a sublease on leased space we ceased using in fiscal year 2005. There
      were no similar costs incurred during the year ended March 31,
      2005.





***Gains
      and Losses on Sales of Assets, Net*** .
      During
      the year ended March 31, 2006, we had net gains totaling $1,144,000, which
      related primarily to the sale of Boeing spare parts. During the year ended
      March
      31, 2005, we incurred a net loss totaling $85,000 on the sale of Boeing spare
      parts and other assets.





***Depreciation.*** Depreciation expenses were $28,372,000 and $26,498,000, or approximately 3.1%
      and 3.5% of total mainline revenues for the years ended March 31, 2006 and
      2005,
      respectively, an increase of 7.1%. The increase in depreciation expense is
      primarily due to an increase in the average number of owned aircraft from 14.0
      to 15.5, or 10.7%.





***Nonoperating
      (Income) Expense.*** Net
      nonoperating expense totaled $12,571,000 for the year ended March 31, 2006
      as
      compared to net nonoperating expense of $9,391,000 for the year ended March
      31,
      2005, an increase of 33.9%.





Interest
      income increased to $9,366,000 from $3,758,000 during the year ended March
      31,
      2006 from the prior year as a result of an increase in short-term interest
      rates
      earned on investments and an increase in our cash position largely as a result
      of the net proceeds of $88,759,000 from our convertible notes offering in
      December 2005.





Interest
      expense increased to $21,758,000 for the year ended March 31, 2006 from
      $13,184,000 for the year ended March 31, 2005, an increase of 65.0%. The
      increase in interest expense was a result of additional debt for the acquisition
      of two additional purchased aircraft, an increase in the weighted average
      borrowing rate and additional debt of $92,000,000 from our convertible notes
      offering in December 2005. Interest on our convertible notes is at a fixed
      rate
      of 5.0% and resulted in an increase of $1,651,000 in interest
      expense.  Debt
      related to aircraft increased from $301,015,000 as of March 31, 2005 to
      $335,756,000 as of March 31, 2006 with an increase in the average weighted
      interest rate from 4.82% to 6.55% as of March 31, 2005 and 2006, respectively.





***Income
      Tax Benefit.*** ** We
      recorded an income tax benefit of $6,497,000 during the year ended March 31,
      2006 at a 31.7% rate, compared to an income tax benefit of $12,408,000 during
      the year ended March 31, 2005 at a 34.6% rate. During the year ended March
      31,
      2006, our tax benefit was at a federal rate of 35.0% plus the blended state
      rate
      of 3.0% (net of federal benefit) and was decreased by the tax effect of
      permanent differences of 3.6%. During the year ended March 31, 2006, we
      increased our valuation allowance by $273,000 against certain state net
      operating loss carryforwards since it was more likely than not that the tax
      benefit was not going to be realized due to lack of taxable income in these
      jurisdictions before those net operating loss carryforwards expire.





**Regional
      Partner**





***Passenger
      Revenues -
      Regional Partner.***Regional partner revenues totaled
      $92,826,000 for the year ended March 31, 2006 and $84,269,000 for the year
      ended
      March 31, 2005, a 10.2% increase. The increase in revenue is due to an increase
      in our utilization of the aircraft resulting in an increase of 4.6% in
      passengers coupled with an increase in the average fare to $101.78 from $96.66,
      an increase of 5.3%.




***Operating
      Expenses -
      Regional Partner.***Regional partner operating expenses for
      the year ended March 31, 2006 and 2005 totaled $106,866,000 and $92,481,000,
      respectively, and was 115.1% and 109.7% of total regional partner revenues,
      respectively. The increase in operating expenses is primarily due to a 47.2%
      increase in fuel expense for the regional partner operations and an increase
      in
      performance bonuses paid.


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**Liquidity
      and Capital Resources**





Our
      liquidity depends to a large extent on the number of passengers who fly with
      us,
      advanced ticket sales, the fares they pay, our operating and capital
      expenditures, our financing activities, and the cost of fuel. We depend on
      lease
      or mortgage-style financing to acquire all of our aircraft, including 13
      additional Airbus aircraft that as of March 31, 2007 are scheduled for delivery
      through August 2010 and ten Bombardier aircraft scheduled for delivery through
      December 2007.





We
      had cash and cash equivalents of $202,981,000 and $272,840,000 at March 31,
      2007
      and March 31, 2006, respectively. At March 31, 2007, total current assets were
      $340,405,000 as compared to $359,326,000 of total current liabilities, resulting
      in negative working capital of $18,921,000. At March 31, 2006, total current
      assets were $390,957,000 as compared to $301,011,000 of total current
      liabilities, resulting in working capital of $89,946,000. The decrease in our
      working capital from March 31, 2006 to March 31, 2007 is largely a result of
      an
      increase in our air traffic liability of $30,091,000 and cash used for aircraft
      pre-delivery payments for our Airbus and Bombardier aircraft and other capital
      expenditures.





*Operating
      Activities* .
      Cash provided by operating activities for the year ended March 31, 2007 was
      $23,227,000 as compared to $79,642,000 for the year ended March 31, 2006. The
      decrease in operating cash flows was primarily due to an increase in our
      bankcard and letter of credit collateral requirements of $9,161,000, which
      increased our restricted cash. We also increased our fuel and expendable
      inventories by $9,012,000 to support the increase in the number of aircraft
      in
      our fleet.





*Investing
      Activities.* ****** Cash
      used in investing activities for the year ended March 31, 2007 was $141,310,000.
      Capital expenditures of $172,270,000 for the year ended March 31, 2007 included
      the purchase of three Airbus A319 aircraft, one Airbus A318 aircraft and one
      spare engine, the purchase of LiveTV equipment, rotable aircraft components,
      aircraft improvements, information technology enhancements and ground equipment.
      We received $43,947,000 primarily from the sale of one of the three newly
      acquired Airbus A319 aircraft and a spare engine in two sale-leaseback
      transactions and proceeds from the sale of Boeing assets held for sale. Aircraft
      lease and purchase deposits made during the period were $47,933,000, including
      $15,276,000 for pre-delivery payments on Bombardier Q400 aircraft, and
      pre-delivery payments and deposits totaling $34,946,000 were applied against
      the
      purchase of four Airbus A319 aircraft, one spare engine and LiveTV
      equipment.





Cash
      used in investing activities for the year ended March 31, 2006 was $95,502,000.
      Capital expenditures were $93,775,000 for the year ended March 31, 2006 and
      included the purchase of two Airbus A319 aircraft, the purchase of LiveTV
      equipment, the purchase of one spare engine that was delivered to us and that
      we
      sold in a sale-leaseback transaction, rotable aircraft components, aircraft
      improvements and ground equipment. We received $9,843,000 from the sale of
      the
      spare engine that we sold in a sale-leaseback transaction, the sale of Boeing
      spare parts held for sale and other assets. Aircraft lease and purchase deposits
      made during the period were $36,117,000, which was offset by pre-delivery
      payments totaling $19,513,000 applied against the purchase of two Airbus A319
      aircraft and LiveTV equipment.





*Financing
      Activities.* Cash provided by financing activities for the year ended March 31, 2007 was
      $48,224,000. During the year ended March 31, 2007, we paid $23,439,000 of debt
      principal payments on our 19 owned aircraft and we borrowed $74,438,000 to
      purchase two additional Airbus A319 aircraft and one Airbus A318 aircraft.
      We
      were also required to increase our compensation balance at a bank by $750,000
      to
      secure letters of credit.





Cash
      provided by financing activities for the year ended March 31, 2006 was
      $116,905,000. On December 7, 2005, we completed the issuance of $92,000,000
      principal amount of 5% convertible notes due 2025, raising net proceeds of
      approximately $88,759,000. The net proceeds from our convertible debt offering
      are being used for general working capital purposes and capital expenditures
      related to the purchase of financing of aircraft and expansion of our
      operations. During the year ended March 31, 2006, we borrowed $54,700,000 for
      the purchase of two Airbus A319 aircraft, paid $19,959,000 of debt principal
      payments on 16 owned aircraft and repaid short-term borrowings of $5,000,000
      under a revolving line of credit. During the year ended March 31, 2006, we
      also
      received $1,551,000 from the exercise of common stock options and paid
      $1,146,000 of fees for aircraft debt financing.


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***Other
      Items That Impact Our Liquidity***





We
      continue to assess our liquidity position in light of our aircraft purchase
      commitments and other capital requirements, the economy, our competition, and
      other uncertainties surrounding the airline industry. In September 2005, we
      filed a shelf registration statement with the SEC, which will enable us to
      periodically sell up to $250,000,000 in preferred and common stock and debt
      and
      other securities. In December 2005, in the first offering under this shelf
      registration statement, we issued $92,000,000 of 5% convertible notes due 2025.
      We intend to continue to examine domestic or foreign bank aircraft financing,
      bank lines of credit, aircraft sale-leasebacks, and other transactions as
      necessary to support our capital and operating needs. For further information
      on
      our financing plans, activities and commitments, see “Contractual Obligations”
and “Commercial Commitments” below.





We
      have obtained financing for all of our planned Airbus aircraft deliveries until
      February 2008 and all ten Bombardier aircraft for which we have firm purchase
      commitments and expect to have adequate liquidity to cover our contractual
      obligations. However, we cannot predict future trends or predict whether current
      trends and conditions will continue. Our future liquidity and capital resources
      may be impacted by many factors, including those described as “Risk Factors” in
      Item 1A of this report.





We
      currently sublease a substantial part of a maintenance hangar located at DIA
      from Continental Airlines. We use this facility to perform our heavy maintenance
      and some of our line maintenance. The sublease expired in February 2007 and
      we
      are currently on a month-to-month lease. The inability to locate an existing
      facility at similar lease rates may cause us to increase our overall maintenance
      costs or we may be required to build or lease a new maintenance facility. To
      the
      extent these facilities are located at airports other than DIA, we may incur
      relocation expenses and higher than normal staff attrition.


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**Contractual
      Obligations**





The
      following table summarizes our contractual obligations as of March 31,
      2007:





**Total**
            
            ****Less
                than****
              **1
                year**
            
            **1-3**
              **years**
            
            **4-5**
              **years**
            
            **After**
              **5
                years**Long-term
                debt - principal payments (1)
            
            $
            478,755
            
            $
            26,847
            
            $
            58,581
            
            $
            82,937
            
            $
            310,390Long-term
                debt - interest payments (1)
            
            
            246,146
            
            
            31,476
            
            
            56,923
            
            
            47,173
            
            
            110,574Operating
                leases (2)
            
            
            1,690,342
            
            
            163,982
            
            
            353,573
            
            
            334,848
            
            
            837,939Unconditional
                purchase obligations (3) (4) (5)
            
            
            721,788
            
            
            353,463
            
            
            297,896
            
            
            70,429
            
            
            -Total
                contractual cash obligations
            
            $
            3,137,031
            
            $
            575,768
            
            $
            766,973
            
            $
            535,387
            
            $
            1,258,903


(1)
              At
                  March 31, 2007, we had 19 loan agreements for 13 Airbus A319 aircraft
                  and
                  six Airbus A318 aircraft. Two of the loans have a term of 10 years
                  and are
                  payable in equal monthly installments, including interest, payable
                  in
                  arrears. These loans require monthly principal and interest payments
                  of
                  $218,000 and $215,000, bear interest with rates of 6.71% and 6.54%,
                  and
                  mature in May and August 2011, at which time a balloon payment
                  totaling
                  $10,200,000 is due with respect to each loan. The remaining 17
                  loans have
                  interest rates based on LIBOR plus margins that adjust quarterly
                  or
                  semi-annually. At March 31, 2007, interest rates for these loans
                  ranged
                  from 6.63% to 7.99%. Each of these loans has a term of 12 years,
                  and each
                  loan has balloon payments ranging from $2,640,000 to $9,215,000
                  at the end
                  of the term. All of the loans are secured by the aircraft. Actual
                  interest
                  payments will change based on changes in LIBOR. In July 2005, we
                  also
                  entered into a junior loan in the amount of $4,900,000 on an Airbus
                  A319
                  aircraft. This loan has a seven-year term with quarterly installments
                  of
                  approximately $250,000. The loan bears interest at a floating rate
                  adjusted quarterly based on LIBOR, which was 9.13% at March 31,
                  2007.In
                  December 2005, we issued $92,000,000 of 5% convertible notes due
                  2025. At
                  any time on or after December 20, 2010, we may redeem any of the
                  convertible notes for the principal amount plus accrued interest.
                  Note
                  holders may require us to repurchase the notes for cash for the
                  principal
                  amount plus accrued interest only on December 15, 2010, 2015 and
                  2020 or
                  at any time prior to their maturity following a designated event
                  as
                  defined in the indenture for the convertible notes. In the contractual
                  obligations table above, the convertible notes are reflected based
                  on
                  their stated maturity of December 2025 with the corresponding interest
                  payments. However, these notes may be called five years from the
                  date of
                  issuance which would impact the timing of the principal payments
                  and the
                  amount of interest paid.(2)
              As
                  of March 31, 2007, we have leased 36 Airbus A319 type aircraft
                  and two
                  Airbus A318 aircraft under operating leases with expiration dates
                  ranging
                  from 2013 to 2019. Under all of our leases, we have made cash security
                  deposits, which totaled $18,205,000 at March 31, 2007. Additionally,
                  we
                  are required to make additional rent payments to cover the cost
                  of major
                  scheduled maintenance overhauls of these aircraft. These additional
                  rent
                  payments are based on the number of flight hours flown and/or flight
                  departures and are not included as an obligation in the table
                  above.During the years ended March 31, 2007, 2006, and 2005, additional
                  rent
                  expense to cover the cost of major scheduled maintenance overhauls
                  of
                  these aircraft totaled $26,187,000, $24,933,000 and $25,974,000,
                  respectively, and are included in maintenance expense in the statement
                  of
                  operations.On
                  January 11, 2007, we signed an agreement with Republic, under which
                  Republic will operate up to 17 Embraer 170 aircraft each with capacity
                  of
                  up to 76-seats under our Frontier JetExpress brand. The contract
                  period is
                  for an 11-year period starting on the date the last aircraft is
                  placed in
                  service, which is scheduled for December 2008. The service began
                  on March
                  4, 2007 and replaces our agreement with Horizon. In the contractual
                  obligations table above, fixed costs associated with the Republic
                  and
                  Horizon agreements are reflected through their respective stated
                  contract
                  periods.We
                  also lease office space, spare engines and office equipment for
                  our
                  headquarters and airport facilities, and certain other equipment
                  with
                  expiration dates ranging from 2007 to 2015. In addition, we lease
                  certain
                  airport gate facilities and maintenance facilities on a month-to-month
                  basis. Amounts for leases that are on a month-to-month basis are
                  not
                  included as an obligation in the table
                  above.
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 (3)
              As
                  of March 31, 2007, we have remaining firm
                  purchase commitments for 13 additional aircraft from Airbus that
                  have
                  scheduled delivery dates beginning in April 2007 and continuing
                  through
                  August 2010 and one remaining firm purchase commitment for one
                  spare
                  Airbus engine scheduled for delivery in December 2009. We also
                  have ten
                  remaining firm purchase commitments from Bombardier that have scheduled
                  delivery dates all in fiscal year 2008. Included in the purchase
                  commitments are the remaining amounts due Airbus and Bombardier
                  and
                  amounts for spare aircraft components to support the additional
                  aircraft.
                  We are not under any contractual obligations with respect to spare
                  parts.We
                  have secured financing commitments totaling approximately $225,300,000
                  for
                  13 of these additional aircraft, including commitments for all
                  of our
                  scheduled Airbus deliveries until February 2008 and all ten Bombardier
                  aircraft. To complete the purchase of the remaining aircraft, we
                  must
                  secure additional aircraft financing totaling approximately $320,000,000
                  assuming bank financing was used for the remaining ten aircraft.
                  The terms
                  of the purchase agreement do not allow for cancellations of any
                  of the
                  purchase commitments. If we are unable to secure all the necessary
                  financing it could result in the loss of pre-delivery payments
                  and
                  deposits previously paid to the manufacturer totaling $14,833,000
                  for
                  these aircraft for which we have not yet secured financing. We
                  expect to
                  finance these remaining firm commitments through various financing
                  alternatives, including, but not limited to, domestic and foreign
                  bank
                  financing, leveraged lease arrangements or sale/leaseback transactions.
                  There can be no assurances that additional financing will be available
                  when required or will be on acceptable terms. Additionally, the
                  terms of
                  the purchase agreement with the manufacturer would require us to
                  pay
                  penalties or damages in the event of any breach of contract with
                  our
                  supplier, including possible termination of the agreement. As of
                  March 31,
                  2007, we had made pre-delivery payments on future aircraft deliveries
                  totaling $52,453,000 of which $14,833,000 relates to aircraft for
                  which we
                  have not yet secured financing and $37,620,000 relates to aircraft
                  for
                  which we have secured financing.(4)
              In
                  October 2002, we entered into a purchase and 12-year services agreement
                  with LiveTV to bring DIRECTV AIRBORNETM satellite programming to every
                  seatback in our Airbus fleet. We intend to install LiveTV in every
                  new
                  Airbus aircraft we place in service. The table above includes amounts
                  for
                  the installation of DirecTV for the remaining 13 Airbus aircraft
                  we
                  currently expect to purchase, less deposits made of
                  $896,000.(5)
              In
                  March 2004, we entered into a services
                  agreement with Sabre, Inc. for its SabreSonicTM
                  passenger
                  solution to power our reservations and check-in capabilities along
                  with a
                  broad scope of technology for streamlining our operations and improving
                  revenues. The table above includes minimum annual system usage
                  fees. Usage
                  fees are based on passengers booked, and actual amounts paid may
                  be in
                  excess of the minimum per the contract
                  terms.****


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  **Commercial
          Commitments** ****** **and
          Off-Balance Sheet Arrangements**





***Letters
      of Credit and Cash Deposits***





As
      we enter new markets, increase the amount of space we lease, or add leased
      aircraft, we are often required to provide the airport authorities and lessors
      with a letter of credit, bond or cash security deposits. These generally
      approximate up to three months of rent and fees. We also provide letters of
      credit for our workers’ compensation insurance. As of March 31, 2007, we had
      outstanding letters of credit, bonds, and cash security deposits totaling
      $18,996,000, $1,914,000 and $20,850,000 respectively.





We
      also have an agreement with a financial institution where we can issue letters
      of credit of up to 60% of certain spare parts inventories less amounts borrowed
      under the credit facility. As of May 1, 2007, we had $16,500,000 available
      under
      this facility, which is reduced by letters of credit issued of $11,300,000.





In
      July 2005, we entered into an additional agreement with another financial
      institution for a $5,000,000 revolving line of credit that permits us to issue
      letters of credit up to $3,500,000. In June 2006, the revolving line of credit
      was increased to $5,750,000 and it now permits us to issue letters of credit
      up
      to $5,000,000. As of March 31, 2007, we have utilized $4,821,000 under this
      agreement for standby letters of credit that provide credit support for certain
      facility leases.





We
      have a contract with a bankcard processor that requires us to pledge a
      certificate of deposit equal to a certain percentage of our air traffic
      liability associated with the estimated amount of bankcard transactions. As
      of
      March 31, 2007, that amount totaled $39,186,000. The amount is adjusted
      quarterly in arrears based on our air traffic liability associated with these
      estimated bankcard transactions. As of June 1, 2007, our requirements results
      in
      an increase of approximately $16,016,000.





We
      use the Airline Reporting Corporation (“ARC”) to provide reporting and
      settlement services for travel agency sales and other related transactions.
      In
      order to maintain the minimum bond (or irrevocable letter of credit) coverage
      of
      $100,000, ARC requires participating carriers to meet, on a quarterly basis,
      certain financial tests such as, working capital ratio, and percentage of debt
      to debt plus equity. As of March 31, 2007, we met these financial tests and
      presently are only obligated to provide the minimum amount of $100,000 in
      coverage to ARC. If we failed the minimum testing requirements, we would be
      required to increase our bonding coverage to four times the weekly agency net
      cash sales (sales net of refunds and agency commissions). Based on net cash
      sales remitted to us for the week ended May 18, 2007, the bond coverage would
      be
      increased to $5,038,000 if we failed the tests. If we were unable to increase
      the bond amount as a result of our then financial condition, we could be
      required to issue a letter of credit that would restrict cash in an amount
      equal
      to the letter of credit.





***Hedging
      Transactions***





In
      November 2002, we initiated a fuel hedging program comprised of swap and collar
      agreements. Under a swap agreement, the cash settlements are calculated based
      on
      the difference between a fixed swap price and a price based on an agreed upon
      published spot price for the underlying commodity. If the index price is higher
      than the fixed price, we receive the difference between the fixed price and
      the
      spot price. If the index price is lower, we pay the difference. A collar
      agreement has a cap price and a floor price. When the hedged product’s index
      price is above the cap, we receive the difference between the index and the
      cap.
      When the hedged product’s index price is below the floor we pay the difference
      between the index and the floor. When the price is between the cap price and
      the
      floor, no payments are required. These fuel hedges have been designated as
      trading instruments, as such realized and mark to market adjustments are
      included in aircraft fuel expense. The results of operations for the year ended
      March 31, 2007, 2006 and 2005 include non-cash mark to market derivative
      gains/(losses) of $12,753,000, $(2,163,000) and $2,837,000, respectively. Cash
      settlements for fuel derivatives contracts for the year ended March 31, 2007,
      2006, and 2005 were payments of $3,925,000, and receipts of $5,338,000 and
      $4,768,000, respectively. We have entered into the following swap and collar
      agreements that cover periods during our fiscal years 2007 and
      2008:





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**Date**
            **Product
                ***
            **Notional
                volume ****
              **(barrels
                per month)**
            **Period
                covered**
            **Price
                (per gallon or barrel)**
            **Percentage
                of estimated fuel purchases**November
                2005
            Jet
                A
            50,000
            April
                1, 2006 -
              June
                30, 2006
            $1.83
                per gallon, with a floor of $1.6925 per gallon
            15%June
                2006
            Crude
                Oil
            85,000
            July
                1, 2006 -
              September
                30, 2006
            $76.00
                per barrel cap,
              with
                a floor of $67.15
            24%June
                2006
            Crude
                Oil
            50,000
            October
                31, 2006 - December 31, 2006
            $77.00
                per barrel cap,
              with
                a floor of $69.40
            14%September
                2006
            Jet
                A
            90,000
            October
                1, 2006 - December 31, 2006
            Swap
                priced at
              $1.9545
                per gallon
            26%September
                2006
            Jet
                A
            55,000
            January
                1, 2007 -
              March
                31, 2007
            $2.27
                per gallon,
              with
                a floor of $1.9485 per gallon
            15%September
                2006
            Jet
                A
            70,000
            October
                1, 2006 - December 31, 2006
            $1.94
                per gallon,
              with
                a floor of $1.7775 per gallon
            20%January
                2007
            Jet
                A
            100,000
            April
                1, 2007 -
              June
                30, 2007
            Swap
                priced at
              $1.817
                per gallon
            26%January
                2007
            Crude
                Oil
            40,000
            July
                1, 2007-
              September
                30, 2007
            $64.70
                per barrel cap,
              with
                a floor of $59.15
            10%January
                2007
            Crude
                Oil
            80,000
            October
                1, 2007 - December 31, 2007
            $65.90
                per barrel cap,
              with
                a floor of $59.90
            20%January
                2007
            Crude
                Oil
            80,000
            April
                1, 2007 -
              June
                30, 2007
            $59.30
                per barrel cap,
              with
                a floor of $49.30
            20%January
                2007
            Crude
                Oil
            80,000
            July
                1, 2007-
              September
                30, 2007
            $60.75
                per barrel cap,
              with
                a floor of $50.45
            20%January
                2007
            Crude
                Oil
            80,000
            October
                1, 2007 - December 31, 2007
            $62.00
                per barrel cap,
              with
                a floor of $51.10
            20%January
                2007
            Crude
                Oil
            80,000
            January
                1, 2008 -
              March
                31, 2008
            $62.60
                per barrel cap,
              with
                a floor of $52.10
            19%








*Jet
      A is Gulf Coast Jet A fuel. Crude oil is West Texas Intermediate crude
      oil.


**One
      barrel is equal to 42 gallons.





In
      March 2003, we entered into an interest rate swap agreement with a notional
      amount of $27,000,000 to hedge a portion of our LIBOR based borrowings through
      March 31, 2007. Under the interest rate swap agreement, we are paying a fixed
      rate of 2.45% and receive a variable rate based on the three month LIBOR. During
      the years ended March 31, 2007 and 2006, interest expense was decreased by
      $187,000 and $216,000, respectively, as a result of this agreement. At March
      31,
      2007 and 2006, the interest rate swap agreement had estimated values of $0
      and
      $105,000, respectively, which were included in deferred loan fees and other
      assets.





Changes
      in the fair value of interest rate swaps designated as hedging instruments
      are
      reported in accumulated other comprehensive income included in stockholders’
equity. Approximately $105,000 of mark to market gains are included in
      accumulated other comprehensive income included in stockholders’ equity, net of





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income
      taxes of $40,000, for the year ended March 31, 2007. Approximately $238,000
      of
      mark to market gains are included in accumulated other comprehensive income
      included in stockholders’ equity, net of income taxes of $87,000, for the year
      ended March 31, 2006.




***Maintenance
      Contracts***





Effective
      January 1, 2003, we entered into an engine maintenance agreement with GE Engine
      Services, Inc. (“GE”) covering the scheduled and unscheduled repair of our
      aircraft engines used on most of our Airbus aircraft. The agreement was
      subsequently modified and extended in September 2004. The agreement is for
      a
      12-year period from the effective date for our owned aircraft or May 1, 2019,
      whichever comes first. For each leased aircraft, the term coincides with the
      initial lease term of 12 years. This agreement precludes us from using another
      third party for such services during the term. For owned aircraft, this
      agreement requires monthly payments at a specified rate multiplied by the number
      of flight hours the engines were operated during that month. The costs under
      this agreement for our purchased aircraft for the years ended March 31, 2007,
      2006, and 2005 were approximately $6,374,000, $3,545,000 and $2,603,000,
      respectively. Any unplanned maintenance expenses not otherwise covered by
      reserves are paid by us. For our leased aircraft that are covered by the
      agreement, we do not make the flight hour payments to GE under the agreement;
      instead we make engine maintenance reserve payments which are expensed as paid
      as required under the applicable lease agreements. At the time a leased engine
      makes a scheduled shop visit, the lessors pay GE directly for the repair of
      aircraft engines from reserve accounts established under the applicable lease
      documents. To the extent actual maintenance expenses incurred exceed these
      reserves, we are required to pay these amounts.





***Fuel
      Consortia***





We
      participate in numerous fuel consortia with other carriers at major airports
      to
      reduce the costs of fuel distribution and storage. Interline agreements govern
      the rights and responsibilities of the consortia members and provide for the
      allocation of the overall costs to operate the consortia based on usage. The
      consortia (and in limited cases, the participating carriers) have entered into
      long-term agreements to lease certain airport fuel storage and distribution
      facilities that are typically financed through tax-exempt bonds (either special
      facilities lease revenue bonds or general airport revenue bonds), issued by
      various local municipalities. In general, each consortium lease agreement
      requires the consortium to make lease payments in amounts sufficient to pay
      the
      maturing principal and interest payments on the bonds. As of March 31,
      2007, approximately $562,757,000 principal amount of such bonds were secured
      by
      fuel facility leases at major hubs in which we participate, as to which each
      of
      the signatory airlines has provided indirect guarantees of the debt. Our
      exposure is approximately $24,412,000 principal amount of such bonds based
      on
      our most recent consortia participation. Our exposure could increase if the
      participation of other carriers decreases or if other carriers default. The
      guarantees will expire when the tax-exempt bonds are paid in full, which ranges
      from 2011 to 2033. We can exit any of our fuel consortia agreements with limited
      penalties and certain advance notice requirements. We have not recorded a
      liability on our consolidated balance sheets related to these indirect
      guarantees.








**Critical
      Accounting Policies**





The
      preparation of financial statements in conformity with U.S generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





Critical
      accounting policies are defined as those that are both important to the
      portrayal of our financial condition and results, and require management to
      exercise significant judgments. Our most critical accounting policies are
      described briefly below.





***Revenue
      Recognition***





Passenger,
      cargo, and other revenues are recognized when the transportation is provided
      or
      after the tickets expire, one year after date of issuance, and are net of excise
      taxes, passenger facility charges and security fees. Revenues that have been
      deferred are included in the accompanying consolidated balance sheets as air
      traffic liability. Included in passenger revenue are change fees which may
      be
      imposed on passengers for making schedule





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changes
      to non-refundable tickets.  Change fees are recognized as revenue at the
      time the change fees are collected from the passenger as they are a separate
      transaction that occurs subsequent to the date of the original ticket sale.




***Aircraft
      Maintenance***





We
      operate under an FAA-approved continuous inspection and maintenance program.
      We
      account for maintenance activities on the direct expense method. Under this
      method, major overhaul maintenance costs are recognized as expense as
      maintenance services are performed, as flight hours are flown for nonrefundable
      maintenance payments required by lease agreements, and as the obligation is
      incurred for payments made under service agreements. Routine maintenance and
      repairs are charged to operations as incurred.





Effective
      January 1, 2003, we executed a 12-year engine services agreement with GE
      covering the scheduled and unscheduled repair of Airbus engines. This agreement
      was extended to May 1, 2019 in September 2004. Under the terms of the services
      agreement, we agreed to pay GE an annual rate per-engine-hour, payable monthly,
      and GE assumed the responsibility to overhaul our engines on Airbus aircraft
      as
      required during the term of the services agreement, subject to certain
      exclusions. We believe the rate per-engine hour approximates the periodic cost
      we would have incurred to service those engines. Accordingly, these payments
      are
      expensed as the obligation is incurred.





***Derivative
      Instruments***





We
      account for derivative financial instruments in accordance with the provisions
      of Statement of Financial Accounting Standards No. 133, “Accounting for
      Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133 requires
      us to measure all derivatives at fair value and to recognize them in the balance
      sheet as an asset or liability. For derivatives designated as cash flow hedges,
      changes in fair value of the derivative are generally reported in other
      comprehensive income and are subsequently reclassified into earnings when the
      hedged item affects earnings. Changes in fair value of derivative instruments
      not designated as hedging instruments and ineffective portions of hedges are
      recognized in earnings in the current period.





We
      enter into derivative instruments to hedge the interest payments associated
      with
      a portion of our LIBOR-based borrowings and fuel purchases. We designate certain
      interest rate swaps as qualifying cash flow hedges. We also enter into
      derivative instruments to reduce exposure to the effect of fluctuations in
      fuel
      prices. These transactions are accounted for as trading instruments under SFAS
      133. As a result, we record these instruments at fair market value and recognize
      realized and mark to market gains and losses in aircraft fuel
      expense.





***Customer
      Loyalty Program***





In
      2001, we established *EarlyReturns®* ,
      a frequent flyer program to encourage travel on our airline and foster customer
      loyalty. We account for the *EarlyReturns®* program under the incremental cost method whereby travel awards are valued
      at
      the incremental cost of carrying one passenger based on expected redemptions.
      Those incremental costs are based on expectations of expenses to be incurred
      on
      a per passenger basis and include food and beverages, fuel, liability insurance,
      and ticketing costs. The incremental costs do not include allocations of
      overhead expenses, salaries, aircraft cost or flight profit or losses. We do
      not
      record a liability for mileage earned by participants who have not reached
      the
      level to become eligible for a free travel award. We do not record a liability
      for the expected redemption of miles for non-travel awards since the cost to
      us
      of these awards is negligible.





As
      of March 31, 2007 and 2006, we estimated that approximately 324,000 and 193,000
      round-trip flight awards, respectively, were eligible for redemption by *EarlyReturns®* members who have mileage credits exceeding the 15,000-mile free round-trip
      domestic ticket award threshold. As of March 31, 2007 and 2006, we had recorded
      a liability of approximately $4,249,000 and $2,776,000, respectively, for these
      rewards.





We
      sell points in *EarlyReturns®* to third parties. The portion of the sale that is for travel is deferred and
      recognized as passenger revenue when we estimate transportation is provided.
      The
      remaining portion, referred to as the marketing component, is recognized in
      the
      month received and included in other revenue.


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***Co-Branded
      Credit Card Arrangement***





We
      entered into a co-branded credit card arrangement with a MasterCard issuing
      bank
      in March 2003. In May 2007, this agreement was amended to extend the contract
      to
      December 2014 with enhanced financial terms. The terms of this affinity
      agreement provide that we will receive a fixed fee for each new account, which
      varies based on the type of account, and a percentage of the annual renewal
      fees
      that the bank receives. We receive an increased fee for new accounts solicited
      by us. We also receive fees for the purchase of frequent flier miles awarded
      to
      the credit card customers.





We
      account for all fees received under the co-branded credit card program by
      allocating the fees between the portion that represents the estimated value
      of
      the subsequent travel award to be provided, and the portion which represents
      a
      marketing fee to cover marketing and other related costs to administer the
      program. This latter portion (referred to as the marketing component) represents
      the residual after determining the value of the travel component. The component
      representing travel is determined by reference to an equivalent restricted
      fare,
      which is used as a proxy for the value of travel of a frequent flyer mileage
      award. The travel component is deferred and recognized as revenue over the
      estimated usage period of the frequent flyer mileage awards of 20 months. We
      have estimated the period over which the frequent flier mileage awards will
      be
      used based on the history of usage of the frequent flier mileage awards. We
      record the marketing component of the revenue earned under this agreement in
      other revenue in the month received.





For
      the year ended March 31, 2007, we earned total fees of $36,917,000. Of that
      amount, $25,219,000 was deferred as the travel award component, with the
      remaining marketing component of $11,698,000 recognized as other revenue. For
      the year ended March 31, 2006, we earned total fees of $24,986,000. Of that
      amount, $19,686,000 was deferred as the travel award component, with the
      remaining marketing component of $5,300,000 recognized as other revenue. For
      the
      year ended March 31, 2005, we earned total fees of $12,227,000. Of that amount,
      $8,455,000 was deferred as the travel award component, and the remaining
      marketing component of $3,772,000 was recognized as other revenue. Amortization
      of deferred revenue recognized in earnings during the years ended March 31,
      2007, 2006 and 2005 was $20,158,000, $11,059,000 and $4,396,000,
      respectively.





***Income
      Taxes***





We
      account for income taxes using the asset and liability method. Under that
      method, deferred income taxes are recognized for the tax consequences of
“temporary differences” by applying enacted statutory tax rates applicable to
      future years to differences between the financial statement carrying amounts
      and
      tax bases of existing assets and liabilities and net operating losses (“NOL’s”)
      and tax credit carryforwards. A valuation allowance is provided to the extent
      that it is more likely than not that deferred tax assets will not be realized.





During
      the year ended March 31, 2007, we recorded additional valuation allowances
      of
      $3,980,000 against our net deferred tax asset related to state and federal
      net
      operating loss carryforwards.  The ultimate realization of deferred tax
      assets is dependent upon the generation of future taxable income during the
      periods in which those temporary differences become deductible.  We
      considered the scheduled reversal of deferred tax liabilities, projected future
      taxable income, and tax planning strategies in making this assessment.  The
      NOL’s that have been generated are due in large part to the accelerated
      depreciation over a shorter useful life for tax purposes.  While we
      continue to take delivery of new aircraft, we expect our fleet acquisitions
      to
      be substantially complete by fiscal 2009.  Since our NOL’s do not begin to
      expire until 2023, we expect these NOL’s to be available in future periods when
      tax depreciation is at a minimal level, and taxable income is high. However,
      based upon the level of historical book losses, we provided a valuation
      allowance in fiscal 2007 for the net deferred tax asset.   Based upon
      the projections for future taxable income over the periods in which the deferred
      tax assets become deductible, and available tax planning strategies, we believe
      it is more likely than not that we will realize the benefits of the deductible
      differences, net of our existing valuation allowances at March 31, 2007. 
The amount of the deferred tax asset considered realizable, however, could
      be
      reduced in the near term if estimates of future taxable income during the
      carryforward period are reduced.





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***Self-Insurance***





We
      are self insured for the majority of our group health insurance costs, subject
      to specific retention levels. We rely on claims experience and the advice of
      consulting actuaries and administrators in determining an adequate liability
      for
      self-insurance claims. Our self-insurance healthcare liability represents our
      estimate of claims that have been incurred but not reported as of March 31,
      2007. This liability, which totaled $1,639,000 at March 31, 2007, was estimated
      based on our claims experience. We determine the actual average claims cost
      per
      employee and the number of days between the incurrence of a claim and the date
      it is paid. The estimate of our liability for employee healthcare represents
      our
      estimate of unreported claims with an increase in claims based on trend
      factors.





We
      are also self-insured for the majority of our workers’ compensation cost. Our
      liability for workers’ compensation claims is the estimated total cost of the
      claims on a fully-developed basis, up to a maximum amount, based on reserves
      for
      these claims that are established by a third-party administrator. The liability
      at March 31, 2007 totaled $7,178,000.





While
      we believe that the estimate of our self-insurance liabilities are reasonable,
      significant differences in our experience or a significant change in any of
      our
      assumptions could materially affect the amount of healthcare and workers
      compensation expenses we have recorded.





***Stock-Based
      Compensation*** *.*





We
      estimate the fair value of stock options and stock appreciation rights granted
      using the Black-Scholes-Merton option pricing model and the assumptions shown
      in
      Note 12 to our consolidated financial statements. We estimate the expected
      term
      of options granted using our historical exercise patterns, which we believe
      are
      representative of future exercise behavior. We estimate volatility of our common
      stock using the historical closing prices of our common stock using the period
      equal to the expected term of the options, which we believe is representative
      of
      the future behavior of our common stock. Our risk-free interest rate assumption
      is determined using the Federal Reserve nominal rates for U.S. Treasury
      zero-coupon bonds with maturities similar to those of the expected term of
      the
      award being valued. We have never paid any cash dividends on our common stock
      and we do not anticipate paying any cash dividends in the foreseeable future.
      Therefore, we assumed an expected dividend yield of zero. Stock-based
      compensation expense for restricted stock units (“RSU”) are based on the fair
      value of our common stock on the date of grant and is amortized over the vesting
      period, generally five years. Each RSU is settled in shares of our common stock
      after the vesting period. We record stock-based compensation expense only for
      those options and awards expected to vest using an estimated forfeiture rate
      based on our historical pre-vesting forfeiture data and periodically will revise
      those estimates in subsequent periods if actual forfeitures differ from those
      estimates.





**New
      Accounting Standards Not Yet Adopted**




In
      July 2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* .
      This Interpretation prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return. This Interpretation also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. The Interpretation is effective
      for
      fiscal years beginning after December 15, 2006. We have not yet reached a
      final determination of the potential financial statement impact of the adoption
      of FIN 48 but we do not expected it to have a material impact on the Company’s
      financial position, results of operations or cash flows.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, *Fair
      Value Measurements* ,
      (“FAS 157”). This Standard defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. FAS 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007 and
      interim periods within those fiscal years. We
      have not yet determined the impact of the adopting FAS 157.







In
      February 2007, the FASB issued Statement
      of Financial Accounting Standards No. 159*,
      The Fair Value Option for Financial Assets and Financial Liabilities*("FAS
      159"). This standard permits companies to choose to measure many financial
      instruments and certain other items at fair value, following the provisions
      of
      SFAS No. 157.


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FAS
      159 is effective for fiscal years beginning after November 15, 2007. We have
      not
      yet determined the impact of adopting FAS 159.




**Item
      7A: Quantitative and Qualitative Disclosures About Market
      Risk**





***Fuel***





Our
      earnings are affected by changes in the price and availability of aircraft
      fuel.
      Market risk is estimated as a hypothetical 10 percent change in the average
      cost
      per gallon of fuel for the year ended March 31, 2007. Based on actual fuel
      usage
      for the year ended March 31, 2007, such a change would have had the effect
      of
      increasing or decreasing our mainline and regional partner aircraft fuel expense
      by approximately $38,507,000, excluding the impact of our fuel hedging.
      Comparatively, based on projected fiscal year 2008 fuel usage for our mainline
      operations and regional partner operators, this would have the effect of
      increasing or decreasing our aircraft fuel expense in fiscal year 2008 by
      approximately $44,453,000, measured as of March 31, 2007, excluding the effects
      of our fuel hedging arrangements.





Our
      results of operations for the year ended March 31, 2007 include cash settlements
      on fuel derivative contracts of $3,925,000 recorded as a increase to fuel
      expense and non-cash mark to market gains of $12,753,000 recorded as a decrease
      in fuel expense with respect to fuel hedging agreements. As of March 31, 2007,
      the fair value of the hedge agreements recorded on the balance sheet as an
      asset
      was $13,729,000.





***Interest***





We
      are susceptible to market risk associated with changes in variable interest
      rates on long-term debt obligations we incurred and will incur to finance the
      purchases of our Airbus aircraft. Interest expense on 73.6% of our outstanding
      debt at March 31,2007 is subject to interest rate adjustments every three to
      nine months based upon changes in the applicable LIBOR rate. A change in the
      base LIBOR rate of 100 basis points (1.0%) would have the effect of increasing
      or decreasing our annual interest expense by $3,524,000 assuming the loans
      outstanding that are subject to interest rate adjustments at March 31, 2007
      totaling $352,441,000 are outstanding for the entire period.





Our
      interest rate swap agreement with a notional amount of $27,000,000 to hedge
      a
      portion of our LIBOR based borrowings expired in March 2007.


59
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**Item
      8: Financial Statements and Supplementary
      Data**





Our
      consolidated financial statements are filed as a part of this report immediately
      following the signature page.





**Item
      9: Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure**





Not
      applicable.





**Item
      9A: Controls and Procedures**





**Disclosure
      Controls and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
      of
      1934, as amended) as of March 31, 2007. Based on that evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures were effective to ensure that the information required
      to be disclosed by us in this Annual Report on Form 10-K was recorded,
      processed, summarized and reported within the time periods specified in the
      SEC's rules and instructions for Form 10-K.





**Management’s
      Report on Internal Control over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting (as defined in Rule 13a-15(f) under the
      Exchange Act). Under the supervision and with the participation of our
      management, including our Chief Executive Officer and Chief Financial Officer,
      we conducted an evaluation of the effectiveness of our internal control over
      financial reporting based on the framework in Internal Control - Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission. Based on that evaluation, our management concluded that our internal
      control over financial reporting was effective as of March 31,
      2007.





Our
      management's assessment of the effectiveness of our internal control over
      financial reporting as of March 31, 2007 has been audited by KPMG LLP, an
      independent registered public accounting firm, as stated in their report which
      is included elsewhere herein.





**Changes
      in Internal Control**





There
      were no changes in our internal control over financial reporting identified
      in
      connection with the evaluation of our controls performed during the quarter
      ended March 31, 2007 that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.





**Item
      9B. Other Information**





None.


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**PART
      III**





**Item
      10: Directors, Executive Officers and Corporate
      Governance.**





**Code
      of Ethics**





The
      information required by this Item is incorporated herein by reference to the
      data under the heading “Election of Directors” in the Proxy Statement to be used
      in connection with the solicitation of proxies for our annual meeting of
      stockholders to be held on September 6, 2007. We plan to file the definitive
      Proxy Statement with the SEC on or before July 28, 2007.





**Audit
      Committee Financial Expert**





The
      information required by this Item is incorporated herein by reference to the
      data under the heading “Election of Directors” in the Proxy Statement to be used
      in connection with the solicitation of proxies for our annual meeting of
      stockholders to be held on September 6, 2007. We plan to file the definitive
      Proxy Statement with the SEC on or before July 28, 2007.





**Item
      11. Executive Compensation.**





The
      information required by this Item is incorporated herein by reference to the
      data under the heading “Executive Compensation” in the Proxy Statement to be
      used in connection with the solicitation of proxies for our annual meeting
      of
      stockholders to be held on September 6, 2007. We plan to file the definitive
      Proxy Statement with the SEC on or before July 28, 2007.








**Item
      12. Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters.**





The
      information required by this Item is incorporated herein by reference to the
      data under the heading “Voting Securities and Principal Holders Thereof” in the
      Proxy Statement to be used in connection with the solicitation of proxies for
      our annual meeting of stockholders to be held on September 6, 2007. We plan
      to
      file the definitive Proxy Statement with the SEC on or before July 28,
      2007.





**Item
      13. Certain Relationships and Related Transactions, and
      Director Independence.**





The
      information required by this Item is incorporated herein by reference to the
      data under the heading “Related Transactions” in the Proxy Statement to be used
      in connection with the solicitation of proxies for our annual meeting of
      stockholders to be held on September 6, 2007. We plan to file the definitive
      Proxy Statement with the SEC on or before July 28, 2007.





I**tem
      14. Principal Accounting Fees and Services.**





The
      information required by this Item is incorporated herein by reference to the
      data under the heading “Principal Accounting Fees and Services” in the Proxy
      Statement to be used in connection with the solicitation of proxies for our
      annual meeting of stockholders to be held on September 6, 2007. We plan to
      file
      the definitive Proxy Statement with the SEC on or before July 28,
      2007.





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**PART
      IV**





**Item
      15(a): Exhibits and Financial Statement
      Schedules**




ExhibitNumbers
              Description
                  of Exhibits
 
 Exhibit
        2 - Plan of acquisition, reorganization, arrangement, liquidation or
        succession:
 
 2.1
              Agreement
                  and Plan of Merger, dated as of January 31, 2006, by and among
                  Frontier Airlines, Inc., Frontier Airlines Holdings, Inc., and
                  FA Sub, Inc. (Annex I to Amendment No. 1 to the Registration
                  Statement on Form S-4 filed by Frontier Airlines Holdings, Inc.
                  on February 14, 2006, File
                  No. 333-131407).
 
 Exhibit
        3 - Articles of Incorporation and Bylaws:
 
 3.1
              Amended
                  and Restated Certificate of Incorporation of Frontier Airlines
                  Holdings,
                  Inc.(Annex
                  II to Amendment No. 1 to the Registration Statement on Form S-4
                  filed by
                  Frontier Airlines Holdings, Inc. on February 14, 2006, File No.
                  333-131407).3.2
              Bylaws
                  of Frontier Airlines Holdings, Inc.(Annex
                  III to Amendment No. 1 to the Registration Statement on Form S-4
                  filed by
                  Frontier Airlines Holdings, Inc. on February 14, 2006, File No.
                  333-131407).
 
 Exhibit
        4 - Instruments defining the rights of security holders:
 4.1
                Specimen
                    common stock certificate of Frontier Airlines Holdings, Inc.
                    (Exhibit 4.1
                    to the Company’s
                    Annual
                    Report on Form 10-K for the year ended March 31, 2006).4.2
                Frontier
                    Airlines, Inc. Warrant to Purchase Common Stock, No. 1 - Air
                    Transportation Stabilization Board. Two Warrants, dated as of
                    February 14,
                    2003, substantially identical in all material respects to this
                    Exhibit,
                    have been entered into with each of the Supplemental Guarantors
                    granting
                    each Supplemental Guarantor a warrant to purchase 191,697 shares
                    under the
                    same terms and conditions described in this Exhibit. Portions
                    of this
                    Exhibit have been excluded from the publicly available document
                    and an
                    order granting confidential treatment of the excluded material
                    has been
                    received. (Exhibit 4.6 to the Company’s Current Report on Form 8-K dated
                    March 25, 2003).4.2(a)
                Warrant
                    Supplement to Frontier Airlines, Inc. Warrant to Purchase Common
                    Stock,
                    No. 1 - Air Transportation Stabilization Board. Two Warrant Supplements
                    dated March 17, 2006, substantially identical in all material
                    respects to
                    this Exhibit have been entered into with each of the Supplemental
                    Guarantors. (Exhibit 4.2(a) to the Company’s
                    Annual
                    Report on Form 10-K for the year ended March 31, 2006).4.3
                Registration
                    Rights Agreement dated as of February 14, 2003 by and between
                    and Frontier
                    Airlines, Inc. as the Issuer, and the Holders of Warrants to
                    Purchase
                    Common Stock. Portions of this Exhibit have been omitted excluded
                    from the
                    publicly available document and an order granting confidential
                    treatment
                    of the excluded material has been received.(Exhibit
                    4.5 to the Company’s Current Report on Form 8-K dated March 25,
                    2003).
  Exhibit
        10 - Material Contracts:
 
 10.1
              Airport
                  Use and Facilities Agreement, Denver International Airport (Exhibit
                  10.7to
                  the Company’s Annual Report on Form 10-KSB for the year ended March 31,
                  1995;Commission
                  File No. 0-4877).
 62
 10.2
                  Space
                      and Use Agreement between Continental Airlines, Inc. and the
                      Company.(Exhibit
                      10.43 to the Company’s Annual Report on Form 10-K for the year ended March
                      31, 1999).
 10.2(a)
                      Second
                          Amendment to Space and Use Agreementbetween
                          Continental Airlines, Inc. and the Company.Portions
                          of this Exhibit have been omitted and filed separately
                          with the Securities
                          and Exchange Commission in a confidential treatment request
                          under Rule
                          24b-2 of the Securities Exchange Act of 1934, as amended. 
                          (Exhibit 10.3(a) to the Company’s
                          Annual
                          Report on Form 10-K for the year ended March 31, 2003).10.3
                      Airbus
                          A318/A319 Purchase Agreement dated as of March 10, 2000
                          between AVSA,
                          S.A.R.L., Seller, and Frontier Airlines, Inc., Buyer. Portions
                          of this
                          exhibit have been excluded from the publicly available
                          document and an
                          order granting confidential treatment of the excluded material
                          has been
                          received.(Exhibit
                          10.51 to the Company’s Annual Report on Form 10-K for the year ended March
                          31, 2000).10.3(a)
                      Amendment
                          No. 9 to the A318/A319 Purchase Agreement dated as of March
                          10, 2000
                          between AVSA, S.A.R.L. and Frontier Airlines, Inc. Portions
                          of this
                          exhibit have been excluded from the publicly available
                          document and filed
                          separately with the SEC in a confidential treatment request
                          under Rule
                          24b-2 of the Securities Exchange Act of 1934, as amended.
                          (Exhibit 10.3(a) to the Company’s
                          Annual
                          Report on Form 10-K for the year ended March 31, 2006).10.4
                      Aircraft
                          Lease Common Terms Agreement dated as of April 20, 2000
                          between General
                          Electric Capital Corporation and Frontier Airlines, Inc.
                          Portions of this
                          exhibit have been excluded from the publicly available
                          document and an
                          order granting confidential treatment of the excluded material
                          has been
                          received. (Exhibit 10.52 to the Company’s
                          Annual
                          Report on Form 10-K for the year ended March 31, 2000).10.5
                      Aircraft
                          Lease Agreement dated as of April 20, 2000 between Aviation
                          Financial
                          Services, Inc., Lessor, and Frontier Airlines, Inc., Lessee,
                          in respect of
                          15 Airbus A319 Aircraft.After
                          3 aircraft were leased under this Exhibit with Aviation
                          Financial
                          Services, Inc. as Lessor, related entities of Aviation
                          Financial Services,
                          Inc. replaced it as the Lessor, but each lease with these
                          related entities
                          is substantially identical in all material respects to
                          this Exhibit.Portions
                          of this exhibit have been excluded from the publicly available
                          document
                          and an order granting confidential treatment of the excluded
                          material has
                          been received.(Exhibit
                          10.53 to the Company’s Annual Report on Form 10-K for the year ended March
                          31, 2000).10.6
                      Lease
                          dated as of May 5, 2000 for Frontier Center One, LLC, as
                          landlord, and
                          Frontier Airlines, Inc., as tenant. Portions of this exhibit
                          have been
                          excluded from the publicly available document and an order
                          granting
                          confidential treatment of the excluded material has been
                          received.(Exhibit
                          10.55 to the Company’s Annual Report on Form 10-K for the year ended March
                          31, 2000).10.6(a)
                      Amendment
                          Number Two to Lease Agreement. Portions of this exhibit
                          have been omitted
                          and filed separately with the Securities and Exchange Commission
                          in a
                          confidential treatment request under Rule 24b-2 of the
                          Securities Exchange
                          Act of 1934, as amended. (Exhibit 10.7(a) to the Company’s
                          Annual
                          Report on Form 10-K for the year ended March 31, 2005).10.7
                      Operating
                          Agreement of Frontier Center One, LLC, dated as of May
                          10, 2000 between
                          Shea Frontier Center, LLC, and 7001 Tower, LLC, and Frontier
                          Airlines,
                          Inc. Portions of this exhibit have been excluded from the
                          publicly
                          available document and an order granting confidential treatment
                          of the
                          excluded material has been received.(Exhibit
                          10.56 to the Company’s Annual Report on Form 10-K for the year ended March
                          31, 2000).10.8
                      Standard
                          Industrial Lease dated April 27, 2000, between Mesilla
                          Valley Business
                          Park, LLC, landlord, and Frontier Airlines, Inc., tenant.
                          Portions of this
                          exhibit have been excluded from the publicly available
                          document and an
                          order granting confidential treatment of the excluded material
                          has been
                          received.(Exhibit
                          10.57 to the Company’s Annual Report on Form 10-K for the year ended March
                          31, 2000).10.9
                      General
                          Terms Agreement No. 6-13616 between CFM International and
                          Frontier
                          Airlines, Inc. Portions of this exhibit have been excluded
                          from the
                          publicly available document and an order


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granting
                  confidential treatment of the excluded material has been received.
(Exhibit
                  10.60 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 2000).10.10
                Lease
                    Agreement dated as of December 15, 2000 between Gateway Office
                    Four, LLC,
                    Lessor, and Frontier Airlines, Inc., Lessee.(Exhibit
                    10.61 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
                    December 31, 2000).10.11
                Code
                    Share Agreement dated as of May 3, 2001 between Frontier Airlines,
                    Inc.
                    and Great Lakes Aviation, Ltd. Portions of this exhibit have
                    been excluded
                    from the publicly available document and an order granting confidential
                    treatment of the excluded material has been received.(Exhibit
                    10.62 to the Company’s Annual Report on Form 10-K for the year ended March
                    31, 2001).10.11(a)
                Amendment
                    No. 1 to the Codeshare Agreement dated as of May 3, 2001 between
                    Frontier
                    Airlines, Inc. and Great Lakes Aviation, Ltd. Portions of the
                    exhibit have
                    been excluded from the publicly available document and an order
                    granting
                    confidential treatment of the excluded material has been received.(Exhibit
                    10.62(a) to the Company’s Quarterly Report on Form 10-Q for the quarter
                    ended December 31, 2001).+10.12
                Employee
                    Stock Ownership Plan of Frontier Airlines, Inc. as amended and
                    restated,
                    effective January 1, 1997 and executed February 5, 2002.(Exhibit
                    10.66 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
                    December 31, 2001).+10.12(a)
                Amendment
                    of the Employee Stock Ownership Plan of Frontier Airlines, Inc.
                    as amended
                    and restated, effective January 1, 1997 and executed February
                    5, 2002 for
                    EGTRRA.(Exhibit
                    10.66(a) to the Company’s Quarterly Report on Form 10-Q for the quarter
                    ended December 31, 2001).10.12(b)
                Second
                    Amendment to the Employee Stock Ownership Plan of Frontier Airlines,
                    Inc.
                    executed March 30, 2006 and effective April 3, 2006. (Exhibit
                    10.12(b) to
                    the Company’s Annual Report on Form 10-K for the year ended March 31,
                    2006).+10.13
                Director
                    Compensation Agreement between Frontier Airlines, Inc. and Samuel
                    D.
                    Addoms dated effective April 1, 2002.This
                    agreement was modified on April 1, 2003, to expressly describe
                    the second
                    installment exercise period as on or after December 31, 2003,
                    and the
                    third installment exercise period as on or after April 1, 2004.
                    (Exhibit
                    10.67 to the Company’s Annual Report on Form 10-K for the year ended March
                    31, 2002).+10.13(a)
                Amendment
                    No. 2 to the Director Compensation Agreement between Frontier
                    Airlines,
                    Inc. and Samuel D. Addoms dated effective April 1, 2003. (Exhibit
                    10.13(a)
                    to the Company’s Quarterly Report on Form 10-Q for the quarter ended
                    September 30, 2006).10.14
                Secured
                    Credit Agreement dated as of October 10, 2002 between Frontier
                    Airlines,
                    Inc. and Credit Agricole Indosuez in respect to three Airbus
                    319 aircraft.
                    Portions of this exhibit have been excluded form the publicly
                    available
                    document and an order granting confidential treatment of the
                    excluded
                    material has been received.(Exhibit
                    10.75 to the Company’s Quarterly Report on Form 10-Q/A for the quarter
                    ended September 30, 2002).10.15
                Aircraft
                    Mortgage and Security Agreement dated as of October 10, 2002
                    between
                    Frontier Airlines, Inc. and Credit Agricole Indosuez in respect
                    to 3
                    Airbus 319 aircraft. Portions of this exhibit have been excluded
                    form the
                    publicly available document and an order granting confidential
                    treatment
                    of the excluded material has been received.(Exhibit
                    10.76 to the Company’s Quarterly Report on Form 10-Q/A for the quarter
                    ended September 30, 2002).10.16
                Codeshare
                    Agreement dated as of September 18, 2003 between Horizon Air
                    Industries,
                    Inc. and Frontier Airlines, Inc. Portions of this exhibit have
                    been
                    omitted and filed separately with the Securities and Exchange
                    Commission
                    in a confidential treatment request under Rule 24b-2 of the Securities
                    Exchange Act of 1934, as amended.(Exhibit
                    10.23 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
                    September 30, 2003).
  64
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 10.17
                    Aircraft
                        Lease Agreement dated as of December 5, 2003 between International
                        Lease
                        Finance Corporation, Inc., and Frontier Airlines, Inc., Lessee,
                        in respect
                        of 1 Airbus A319 Aircraft. Frontier has signed leases for
                        4 additional
                        Airbus 319 aircraft with this Lessor under Aircraft Lease
                        Agreements that
                        are substantially identical in all material respects to this
                        Exhibit.
                        Portions of this Exhibit have been omitted and filed separately
                        with the
                        Securities and Exchange Commission in a confidential treatment
                        request
                        under Rule 24b-2 of the Securities Exchange Act of 1934,
                        as amended.(Exhibit
                        10.24 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
                        December 31, 2003).+10.18
                    Frontier
                        Airlines 2004 Equity Incentive Plan. (Exhibit B to the Company’s 2004
                        Annual Meeting of Shareholders; filed July 26, 2004).10.18
                        (a)
                    Amendment
                        to Frontier Airlines 2004 Equity Incentive Plan executed
                        March 30, 2006
                        and effective April 3, 2006.+10.19
                    Executive
                        Bonus Plan for the Company’s fiscal year ending March 31, 2006 (Exhibit
                        10.21 to the Company’s Annual Report on Form 10-K for the year ended March
                        31, 2005).+10.20
                    Long
                        Term Incentive Plan for the Company’s fiscal year ending March 31, 2006
                        (Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year
                        ended March 31, 2005).+10.21
                    Form
                        of Stock Appreciation Rights Agreement for issuance of stock
                        appreciation
                        rights pursuant to the Frontier Airlines 2004 Equity Incentive
                        Plan to
                        plan participants, including named executive officers (Exhibit
                        10.23 to
                        the Company’s Annual Report on Form 10-K for the year ended March 31,
                        2005).+10.22
                    Form
                        of Incentive Stock Option Agreement for issuance on incentive
                        stock
                        options pursuant to the Frontier Airlines 2004 Equity Incentive
                        Plan to
                        plan participants, including named executive officers (Exhibit
                        10.24 to
                        the Company’s Annual Report on Form 10-K for the year ended March 31,
                        2005).+10.23
                    Form
                        of Stock Unit Agreement for issuance of restricted stock
                        units pursuant to
                        the Frontier Airlines 2004 Equity Incentive Plan to plan
                        participants,
                        including named executive officers (Exhibit 10.25 to the
                        Company’s Annual
                        Report on Form 10-K for the year ended March 31, 2005).+10.24
                    Form
                        of Non-Qualified Stock Option Agreement for issuance of non-qualified
                        stock options pursuant to the Frontier Airlines 2004 Equity
                        Incentive Plan
                        to qualifying members of the Company’s Board of Directors (Exhibit 10.26
                        to the Company’s Annual Report on Form 10-K for the year ended March 31,
                        2005).+10.25
                    Summary
                        of Base Salary Compensation Arrangements with Named Executive
                        Officers
                        (Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year
                        ended March 31, 2005).10.26
                    Underwriting
                        Agreement dated December 1, 2005, by and among Frontier
                        Airlines, Inc., Morgan Stanley & Co. Incorporated, and
                        Citigroup Global Markets, Inc. (Exhibit 1.1 to a Form 8-K filed on
                        December 7, 2005).10.27
                    Indenture
                        dated December 7, 2005, by and between Frontier Airlines, Inc.
                        and U.S. Bank National Association, as Trustee (Exhibit 4.1 to
                        Amendment No. 1 to Frontier's Registration Statement on
                        Form S-3, File No. 333-128407, filed on November 23,
                        2005).10.28
                    First
                        Supplemental Indenture dated December 7, 2005, by and between
                        Frontier Airlines, Inc. and U.S. Bank National Association, as
                        Trustee (Exhibit 4.2 to a Form 8-K filed on December 7,
                        2005).
  65
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 10.29
                    Second
                        Supplemental Indenture dated April 3, 2006, by and among
                        Frontier
                        Airlines, Inc., Frontier Airlines Holdings, Inc., and U.S.
                        Bank National
                        Association, as Trustee. (Exhibit 10.29 to the Company’s Annual Report on
                        Form 10-K for the year ended March 31, 2006).10.30
                    Purchase
                        Agreement dated September 1, 2006 between Bombardier, Inc.
                        and Frontier
                        Airlines Holdings, Inc., relating to the purchase of Bombardier
                        Q400
                        aircraft. Portions of this exhibit have been excluded from
                        the publicly
                        available document and an order granting confidential treatment
                        of the
                        excluded material has been received. (Exhibit 10.30 to the
                        Company’s
                        Quarterly Report on Form 10-Q for the quarter ended September
                        30,
                        2006).10.31*
                    Airline
                        Service Agreement between Frontier Airlines Holdings, Inc.
                        and Republic
                        Airlines, Inc. dated January 11, 2007.21.1*
                    List
                        of Subsidiaries


Exhibit
      23 - Consents of Experts:





23.1*
            Consent
                of KPMG LLP.


Exhibit
      31 - Certifications




31.1*
              Section
                  302 certification of President and Chief Executive Officer, Jeffery
                  S.
                  Potter.31.2*
              Section
                  302 certification of Chief Financial Officer, Paul H.
                  Tate.


Exhibit
      32 - Certifications




32.1**
              Section
                  906 certifications of President and Chief Executive Officer, Jeffery
                  S.
                  Potter32.2**
              Section
                  906 certifications of Chief Financial Officer, Paul H. Tate
  *
                Filed
                    herewith.**
                Furnished
                    herewith.+
                Management
                    contract or compensatory plan or
                    arrangement.
  66
 Table
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**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.








FRONTIER
                AIRLINES HOLDINGS, INC.Date:
                May 24, 2007
            By:/s/
                Jeffery S. PotterJeffery
                S. Potter, Chief Executive Officer and
                Director








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.





FRONTIER
                AIRLINES HOLDINGS, INC.Date:
                  May 24, 2007
              By:/s/
                  Paul H. TatePaul
                  H. Tate, Vice President andChief
                  Financial OfficerDate:
                  May 24, 2007
              By:/s/
                  Elissa A. PotucekElissa
                  A. Potucek, Vice President, Controller,Treasurer
                  and Principal Accounting OfficerDate:
                  May 24, 2007
              By:/s/
                  Samuel D. AddomsSamuel
                  D. Addoms, DirectorDate:
                  May 24, 2007
              By:/s/
                  D. Dale BrowningD.
                  Dale Browning, DirectorDate:
                  May 24, 2007
              By:/s/
                  Rita M. CuddihyRita
                  M. Cuddihy, DirectorDate:
                  May 24, 2007
              By:/s/
                  Paul Stephen DempseyB.
                  Paul Stephen Dempsey, DirectorDate:
                  May 24, 2007
              By:/s/
                  Patricia A. EngelsD.Patricia A. Engels, DirectorDate:
                  May 24, 2007
              By:/s/
                  LaRae OrullianLaRae
                  Orullian, DirectorDate:
                  May 24, 2007
              By:/s/
                  James B. UpchurchJames
                  B. Upchurch, DirectorDate:
                  May 24, 2007
              By:/s/
                  Robert D. TaylorRobert
                  D. Taylor, Director








67




**Report
      of Independent Registered Public Accounting Firm**




The
      Board
      of Directors and Stockholders


Frontier
      Airlines Holdings, Inc.:




We
      have
      audited the accompanying consolidated balance sheets of Frontier Airlines
      Holdings, Inc. and subsidiaries as of March 31, 2007 and 2006, and the
      related consolidated statements of operations, stockholders’ equity and other
      comprehensive income (loss), and cash flows for each of the years in the
      three-year period ended March 31, 2007. These consolidated financial statements
      are the responsibility of the Company’s management. Our responsibility is to
      express an opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Frontier Airlines Holdings,
      Inc. and subsidiaries as of March 31, 2007 and 2006, and the results of their
      operations and its cash flows for each of the years in the three-year period
      ended March 31, 2007, in conformity with U.S. generally accepted accounting
      principles.




As
      discussed in note 1 to the accompanying consolidated financial statements
      effective, April 1, 2006, the Company adopted SFAS No. 123(R), *Share-Based
      Payment* .





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Frontier Airlines
      Holdings, Inc.’s internal control over financial reporting as of March 31, 2007,
      based on criteria established in Internal Control - Integrated Framework issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO),
      and our report dated May 24, 2007, expressed an unqualified opinion on
      management’s assessment of, and the effective operation of, internal control
      over financial reporting.








**KPMG
      LLP**




Denver,
      Colorado


May
      24,
      2007


F-1




**Report
      of Independent Registered Public Accounting Firm**




The
      Board
      of Directors and Stockholders


Frontier
      Airlines Holdings, Inc.:




We
      have
      audited management’s assessment, included in the accompanying Management’s
      Report on Internal Control over Financial Reporting, that Frontier Airlines
      Holdings, Inc. maintained effective internal control over financial reporting
      as
      of March 31, 2007, based on criteria established in Internal Control -
      Integrated Framework issued by the Committee of Sponsoring Organizations of
      the
      Treadway Commission (COSO). Frontier Airlines Holdings, Inc.’s management is
      responsible for maintaining effective internal control over financial reporting
      and for its assessment of the effectiveness of internal control over financial
      reporting. Our responsibility is to express an opinion on management’s
      assessment and an opinion on the effectiveness of the Company’s internal control
      over financial reporting based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.




A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our
      opinion, management’s assessment that Frontier Airlines Holdings, Inc.
      maintained effective internal control over financial reporting as of March
      31,
      2007, is fairly stated, in all material respects, based on criteria established
      in Internal Control - Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO). Also, in our opinion, Frontier
      Airlines Holdings, Inc. maintained, in all material respects, effective internal
      control over financial reporting as of March 31, 2007, based on criteria
      established in Internal Control - Integrated Framework issued by the Committee
      of Sponsoring Organizations of the Treadway Commission (COSO).




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Frontier
      Airlines Holdings, Inc., and subsidiaries as of March 31, 2007 and 2006, and
      the
      related consolidated statements of operations, stockholders’ equity and other
      comprehensive income (loss), and cash flows for each of the years in the
      three-year period ended March 31, 2007, and our report dated May 24, 2007
      expressed an unqualified opinion on those financial statements.







**KPMG
      LLP**




Denver,
      Colorado


May
      24,
      2007








F-2





**FRONTIER
      AIRLINES HOLDINGS, INC.**


**Consolidated
      Balance Sheets**


**March
      31, 2007 and 2006**


**(In
      thousands, except share data)**





**2007**
            
            
            
            
            
            2006**Assets**Current
                assets:Cash
                and cash equivalents
            
            
            
            
            
            
            
            
            $
            202,981
            
            
            
            
            $
            272,840Restricted
                investments
            
            
            
            
            
            
            
            
            
            42,844
            
            
            
            
            
            35,297Receivables,
                net of allowance for doubtful accounts of $632and
                $1,261 at March 31, 2007 and 2006, respectively
            
            
            
            
            
            
            
            
            
            50,691
            
            
            
            
            
            41,691Prepaid
                expenses and other assets
            
            
            
            
            
            
            
            
            
            26,163
            
            
            
            
            
            23,182Inventories,
                net of allowance of $329 and $378at
                March 31, 2007 and 2006, respectively
            
            
            
            
            
            
            
            
            
            15,685
            
            
            
            
            
            6,624Assets
                held for sale (note 3)
            
            
            
            
            
            
            
            
            
            2,041
            
            
            
            
            
            3,543Deferred
                tax asset (note 10)
            
            
            
            
            
            
            
            
            
            -
            
            
            
            
            
            7,780Total
                current assets
            
            
            
            
            
            
            
            
            
            340,405
            
            
            
            
            
            390,957Property
                and equipment, net (note 4)
            
            
            
            
            
            
            
            
            
            605,131
            
            
            
            
            
            510,428Security
                and other deposits (note 7)
            
            
            
            
            
            
            
            
            
            20,850
            
            
            
            
            
            19,597Aircraft
                pre-delivery payments
            
            
            
            
            
            
            
            
            
            52,453
            
            
            
            
            
            40,449Restricted
                investments
            
            
            
            
            
            
            
            
            
            2,845
            
            
            
            
            
            481Deferred
                loan fees and other assets
            
            
            
            
            
            
            
            
            
            21,184
            
            
            
            
            
            8,520**Total
                Assets**
            
            
            
            
            
            
            
            
            $
            1,042,868
            
            
            
            
            $
            970,432**Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable
            
            
            
            
            
            
            
            
            $
            52,001
            
            
            
            
            $
            44,955Air
                traffic liability
            
            
            
            
            
            
            
            
            
            183,754
            
            
            
            
            
            153,662Other
                accrued expenses (note 6)
            
            
            
            
            
            
            
            
            
            80,324
            
            
            
            
            
            67,683Current
                portion of long-term debt (note 9)
            
            
            
            
            
            
            
            
            
            26,847
            
            
            
            
            
            22,274Deferred
                revenue and other liabilities (note 5)
            
            
            
            
            
            
            
            
            
            16,400
            
            
            
            
            
            12,437Total
                current liabilities
            
            
            
            
            
            
            
            
            
            359,326
            
            
            
            
            
            301,011Long-term
                debt related to aircraft notes (note 9)
            
            
            
            
            
            
            
            
            
            359,908
            
            
            
            
            
            313,482Convertible
                notes (note 9)
            
            
            
            
            
            
            
            
            
            92,000
            
            
            
            
            
            92,000Deferred
                tax liability (note 10)
            
            
            
            
            
            
            
            
            
            -
            
            
            
            
            
            12,733Deferred
                revenue and other liabilities (note 5)
            
            
            
            
            
            
            
            
            
            22,138
            
            
            
            
            
            22,430Total
                liabilities
            
            
            
            
            
            
            
            
            $
            833,372
            
            
            
            
            $
            741,656Commitments
                and contingencies (notes 2, 7, 9, 12, 13 and 16)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,
                authorized100,000,000
                shares; 36,627,455 and 36,589,705 shares issued andoutstanding
                at March 31, 2007 and March 31, 2006, respectively
            
            
            
            
            
            
            
            37
            
            
            
            
            
            37Treasury
                stock, stated at cost (note 13)
            
            
            
            
            
            
            
            
            
            (1,838
            )
            
            
            
            
            -Additional
                paid-in capital
            
            
            
            
            
            
            
            
            
            193,943
            
            
            
            
            
            192,936Unearned
                ESOP shares (note 13)
            
            
            
            
            
            
            
            
            
            -
            
            
            
            
            
            (2,094
            )Accumulated
                other comprehensive income (loss), net of tax
            
            
            
            
            
            
            
            (22
            )
            
            
            
            
            151Retained
                earnings
            
            
            
            
            
            
            
            
            
            17,376
            
            
            
            
            
            37,746Total
                stockholders' equity
            
            
            
            
            
            
            
            
            
            209,496
            
            
            
            
            
            228,776**Total
                Liabilities and Stockholders’ Equity**
            
            
            
            
            
            
            
            
            $
            1,042,868
            
            
            
            
            $
            970,432


See
      accompanying notes to the consolidated financial statements.


F-3





**FRONTIER
      AIRLINES HOLDINGS, INC.**





**Consolidated
      Statements of Operations**


**Years
      Ended March 31, 2007, 2006 and 2005**


**(In
      thousands, except per share amounts)**





**2007**
            
            
            
            **2006**
            
            
            
            **2005**Revenues:Passenger
                - mainline
            
            
            
            
            $
            1,037,302
            
            
            
            
            $
            878,681
            
            
            
            
            $
            731,822Passenger
                - regional partner
            
            
            
            
            
            94,164
            
            
            
            
            
            92,826
            
            
            
            
            
            84,269Cargo
            
            
            
            
            
            6,880
            
            
            
            
            
            5,677
            
            
            
            
            
            4,958Other
            
            
            
            
            
            32,603
            
            
            
            
            
            24,338
            
            
            
            
            
            16,536Total
                revenues
            
            
            
            
            
            1,170,949
            
            
            
            
            
            1,001,522
            
            
            
            
            
            837,585Operating
                expenses:Flight
                operations
            
            
            
            
            
            161,544
            
            
            
            
            
            141,316
            
            
            
            
            
            132,022Aircraft
                fuel
            
            
            
            
            
            343,082
            
            
            
            
            
            281,906
            
            
            
            
            
            185,821Aircraft
                lease
            
            
            
            
            
            108,623
            
            
            
            
            
            94,229
            
            
            
            
            
            87,096Aircraft
                and traffic servicing
            
            
            
            
            
            166,525
            
            
            
            
            
            138,492
            
            
            
            
            
            129,470Maintenance
            
            
            
            
            
            87,978
            
            
            
            
            
            77,238
            
            
            
            
            
            76,679Promotion
                and sales
            
            
            
            
            
            115,536
            
            
            
            
            
            89,751
            
            
            
            
            
            80,407General
                and administrative
            
            
            
            
            
            56,019
            
            
            
            
            
            48,979
            
            
            
            
            
            48,350Operating
                expenses - regional partner
            
            
            
            
            
            108,355
            
            
            
            
            
            106,866
            
            
            
            
            
            92,481Aircraft
                lease and facility exit costs (note 8)
            
            
            
            
            
            (57
            )
            
            
            
            
            3,414
            
            
            
            
            
            -(Gains)
                losses on sales of assets, net
            
            
            
            
            
            (656
            )
            
            
            
            
            (1,144
            )
            
            
            
            
            85Impairments
            
            
            
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            5,123Depreciation
            
            
            
            
            
            34,702
            
            
            
            
            
            28,372
            
            
            
            
            
            26,498Total
                operating expenses
            
            
            
            
            
            1,181,651
            
            
            
            
            
            1,009,419
            
            
            
            
            
            864,032Business
                interruption insurance proceeds (note 16)
            
            
            
            868
            
            
            
            
            
            -
            
            
            
            
            
            -Operating
                loss
            
            
            
            
            
            (9,834
            )
            
            
            
            
            (7,897
            )
            
            
            
            
            (26,447
            )Nonoperating
                income (expense):Interest
                income
            
            
            
            
            
            14,982
            
            
            
            
            
            9,366
            
            
            
            
            
            3,757Interest
                expense
            
            
            
            
            
            (29,899
            )
            
            
            
            
            (21,758
            )
            
            
            
            
            (13,184
            )Other,
                net
            
            
            
            
            
            (245
            )
            
            
            
            
            (179
            )
            
            
            
            
            36Total
                nonoperating income (expense), net
            
            
            
            
            
            (15,162
            )
            
            
            
            
            (12,571
            )
            
            
            
            
            (9,391
            )Loss
                before income tax benefit
            
            
            
            
            
            (24,996
            )
            
            
            
            
            (20,468
            )
            
            
            
            
            (35,838
            )Income
                tax benefit (note 10)
            
            
            
            
            
            (4,626
            )
            
            
            
            
            (6,497
            )
            
            
            
            
            (12,408
            )Net
                loss
            
            
            
            
            $
            (20,370
            )
            
            
            
            $
            (13,971
            )
            
            
            
            $
            (23,430
            )Loss
                per share:Basic
                and diluted (note 14)
            
            
            
            
            $
            (0.56
            )
            
            
            
            $
            (0.39
            )
            
            
            
            $
            (0.66
            )Weighted
                average shares of common stock outstanding:Basic
                and diluted
            
            
            
            
            
            36,608
            
            
            
            
            
            36,167
            
            
            
            
            
            35,641


See
      accompanying notes to the consolidated financial statements.


F-4





**FRONTIER
      AIRLINES HOLDINGS, INC.**





**Consolidated
      Statements of Stockholders’ Equity and Other Comprehensive Income
      (Loss)**


**Years
      Ended March 31, 2007, 2006 and 2005**


**(In
      thousands)**





**Accumulated****Additional**
            
            **Unearned**
            
            **other**
            
            
            
            **Total****Common**
            
            **Treasury**
            
            **paid-in**
            
            **ESOP**
            
            **comprehensive**
            
            **Retained**
            
            **stockholders’****Stock**
            
            **Stock**
            
            **capital**
            
            **shares**
            
            **income
                (loss)**
            
            **earnings**
            
            **equity****Balances,
                March 31, 2004**
            
            $
            36
            
            $
            -
            
            $
            185,078
            
            $
            (2,183
            )
            $
            (137
            )
            $
            75,147
            
            $
            257,941Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (23,430
            )
            
            (23,430
            )Other
                comprehensive loss -unrealized
                gain on derivativeinstruments,
                net of tax of $246,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            409
            
            
            -
            
            
            409Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (23,021
            )Exercise
                of common stock options
            
            
            -
            
            
            -
            
            
            337
            
            
            -
            
            
            -
            
            
            -
            
            
            337Tax
                benefit from exercises of stock options
            
            
            -
            
            
            -
            
            
            (289
            )
            
            -
            
            
            -
            
            
            -
            
            
            (289
            )Contribution
                of common stockto
                employee stock ownership plan
            
            
            -
            
            
            -
            
            
            3,028
            
            
            (3,028
            )
            
            -
            
            
            -
            
            
            -Amortization
                of employee stock compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            2,940
            
            
            -
            
            
            -
            
            
            2,940Capital
                contribution
            
            
            -
            
            
            -
            
            
            12
            
            
            -
            
            
            -
            
            
            -
            
            
            12**Balances,
                March 31, 2005**
            
            
            36
            
            
            -
            
            
            188,166
            
            
            (2,271
            )
            
            272
            
            
            51,717
            
            
            237,920Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (13,971
            )
            
            (13,971
            )Other
                comprehensive income -unrealized
                loss on derivativeinstruments,
                net of tax of $74,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (121
            )
            
            -
            
            
            (121
            )Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (14,092
            )Exercise
                of common stock options
            
            
            -
            
            
            -
            
            
            1,551
            
            
            -
            
            
            -
            
            
            -
            
            
            1,551Tax
                benefit from exercises of stock options
            
            
            -
            
            
            -
            
            
            281
            
            
            -
            
            
            -
            
            
            -
            
            
            281Contribution
                of common stockto
                employee stock ownership plan
            
            
            1
            
            
            -
            
            
            2,791
            
            
            (2,792
            )
            
            -
            
            
            -
            
            
            -Amortization
                of employee stock compensation
            
            
            -
            
            
            -
            
            
            147
            
            
            2,969
            
            
            -
            
            
            -
            
            
            3,116**Balances,
                March 31, 2006**
            
            
            37
            
            
            -
            
            
            192,936
            
            
            (2,094
            )
            
            151
            
            
            37,746
            
            
            228,776Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (20,370
            )
            
            (20,370
            )Other
                comprehensive loss -unrealized
                loss on derivativeinstruments,
                net of tax of $40,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (151
            )
            
            -
            
            
            (151
            )Impact
                of adoption of SFAS 158,
              net
                of tax of $14,000 (note 13)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (22
            )
            
            -
            
            
            (22
            )Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (20,543
            )Exercise
                of common stock options
            
            
            -
            
            
            -
            
            
            162
            
            
            -
            
            
            -
            
            
            -
            
            
            162Purchase
                of treasury shares - 300,000 shares
            
            
            -
            
            
            (1,838
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,838
            )Amortization
                of employee stock compensation
            
            
            -
            
            
            -
            
            
            845
            
            
            2,094
            
            
            -
            
            
            -
            
            
            2,939**Balances,
                March 31, 2007**
            
            $
            37
            
            $
            (1,838
            )
            $
            193,943
            
            $
            -
            
            $
            (22
            )
            $
            17,376
            
            $
            209,496


See
      accompanying notes to the consolidated financial statements.











F-5





**FRONTIER
      AIRLINES HOLDINGS, INC.**


**Consolidated
        Statements of Cash Flows**
 **Years
        ended March 31, 2007, 2006, and 2005**
 **(In
        thousands)**
 
 **2007**
              
              
              
              
              
              **2006**
              
              
              
              
              
              **2005*****Cash
                  flows from operating activities:***Net
                  loss
              
              
              
              
              $
              (20,370
              )
              
              
              
              $
              (13,971
              )
              
              
              
              $
              (23,430
              )Adjustments
                  to reconcile net loss to net cash andcash
                  equivalents provided by operating activities:Compensation
                  expense under long-term incentive plans
                and
                  employee stock ownership plans
              
              
              3,409
              
              
              
              
              
              3,115
              
              
              
              
              
              2,940Depreciation
                  and amortization
              
              
              
              
              
              36,219
              
              
              
              
              
              29,439
              
              
              
              
              
              27,124Impairment
                  recorded on property and equipment
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              3,860Provisions
                  recorded on inventories and assets beyond
                economic
                  repair
              
              
              1,409
              
              
              
              
              
              86
              
              
              
              
              
              1,661(Gains)
                  losses on disposal of equipment and other,net
              
              
              (656
              )
              
              
              
              
              (1,144
              )
              
              
              
              
              85Mark
                  to market derivative (gains) losses, net
              
              
              
              
              
              (12,753
              )
              
              
              
              
              2,163
              
              
              
              
              
              (2,837
              )Deferred
                  tax expense
              
              
              
              
              
              (4,883
              )
              
              
              
              
              (6,551
              )
              
              
              
              
              (12,515
              )Changes
                  in operating assets and liabilities:Restricted
                  investments
              
              
              
              
              
              (9,161
              )
              
              
              
              
              3,326
              
              
              
              
              
              (7,916
              )Receivables
              
              
              
              
              
              (9,000
              )
              
              
              
              
              (3,943
              )
              
              
              
              
              (11,178
              )Security
                  and other deposits
              
              
              
              
              
              (269
              )
              
              
              
              
              96
              
              
              
              
              
              (305
              )Prepaid
                  expenses and other assets
              
              
              
              
              
              (2,981
              )
              
              
              
              
              (4,442
              )
              
              
              
              
              (5,647
              )Inventories
              
              
              
              
              
              (9,012
              )
              
              
              
              
              405
              
              
              
              
              
              (2,701
              )Other
                  assets
              
              
              
              
              
              (936
              )
              
              
              
              
              640
              
              
              
              
              
              1,151Accounts
                  payable
              
              
              
              
              
              7,046
              
              
              
              
              
              7,714
              
              
              
              
              
              6,073Air
                  traffic liability
              
              
              
              
              
              30,091
              
              
              
              
              
              40,974
              
              
              
              
              
              29,349Other
                  accrued expenses
              
              
              
              
              
              12,135
              
              
              
              
              
              12,346
              
              
              
              
              
              11,032Deferred
                  revenue and other liabilities
              
              
              
              
              
              2,939
              
              
              
              
              
              9,389
              
              
              
              
              
              2,494Net
                  cash provided by operating activities
              
              
              23,227
              
              
              
              
              
              79,642
              
              
              
              
              
              19,240***Cash
                  flows from investing activities:***Aircraft
                  lease and purchase deposits
              
              
              
              
              
              (47,933
              )
              
              
              
              
              (36,117
              )
              
              
              
              
              (21,436
              )Aircraft
                  lease and purchase deposits applied to aircraft
              
              
              34,946
              
              
              
              
              
              19,513
              
              
              
              
              
              23,008Decrease
                  in restricted investments
              
              
              
              
              
              -
              
              
              
              
              
              2,034
              
              
              
              
              
              3,482Decrease
                  in short-term investments
              
              
              
              
              
              -
              
              
              
              
              
              3,000
              
              
              
              
              
              57,600Proceeds
                  from the sale of property and equipment and
                assets
                  held for sale
              
              
              43,947
              
              
              
              
              
              9,843
              
              
              
              
              
              80,963Capital
                  expenditures
              
              
              
              
              
              (172,270
              )
              
              
              
              
              (93,775
              )
              
              
              
              
              (128,776
              )Net
                  cash provided by (used in) investingactivities
              
              
              (141,310
              )
              
              
              
              
              (95,502
              )
              
              
              
              
              14,841***Cash
                  flows from financing activities:***Net
                  proceeds from issuance of common stock andwarrants
              
              
              162
              
              
              
              
              
              1,551
              
              
              
              
              
              349Purchase
                  of treasury shares
              
              
              
              
              
              (1,838
              )
              
              
              
              
              -
              
              
              
              
              
              -Payment
                  to bank for compensating balance
              
              
              
              
              
              (750
              )
              
              
              
              
              (2,000
              )
              
              
              
              
              -(Payments)
                  proceeds from short-term borrowings
              
              
              
              -
              
              
              
              
              
              (5,000
              )
              
              
              
              
              5,000Proceeds
                  from long-term borrowings
              
              
              
              
              
              74,438
              
              
              
              
              
              146,700
              
              
              
              
              
              22,000Principal
                  payments on long-term borrowings
              
              
              
              
              
              (23,439
              )
              
              
              
              
              (19,959
              )
              
              
              
              
              (18,373
              )Payment
                  of financing fees
              
              
              
              
              
              (349
              )
              
              
              
              
              (4,387
              )
              
              
              
              
              (1,271
              )Net
                  cash provided by financing activities
              
              
              
              48,224
              
              
              
              
              
              116,905
              
              
              
              
              
              7,705Net
                  increase (decrease) in cash and cashequivalents
              
              
              (69,859
              )
              
              
              
              
              101,045
              
              
              
              
              
              41,786Cash
                  and cash equivalents, beginning of year
              
              
              
              
              
              272,840
              
              
              
              
              
              171,795
              
              
              
              
              
              130,009Cash
                  and cash equivalents, end of year
              
              
              
              
              $
              202,981
              
              
              
              
              $
              272,840
              
              
              
              
              $
              171,795
  See
        accompanying notes to the consolidated financial statements.
 F-6


**FRONTIER
      AIRLINES HOLDINGS, INC.**





**Notes
      to the Consolidated Financial Statements**


**March
      31, 2007**





**1.
      Nature of Business and Summary of Significant Accounting
      Policies**





***Nature
      of Business***





Frontier
      Airlines Holdings, Inc. (“Frontier Holdings” or the “Company”) provides air
      transportation for passengers and freight through its wholly-owned subsidiaries.
      On April 3, 2006, Frontier Airlines, Inc. (“Airlines”) completed its corporate
      reorganization (the “Reorganization”) and as a result, Airlines became a
      wholly-owned subsidiary of Frontier Airlines Holdings, Inc., a Delaware
      corporation. Airlines was incorporated in the State of Colorado on February
      8,
      1994 and commenced operations on July 5, 1994. In September 2006, the Company
      formed a new subsidiary, Lynx Aviation, Inc. (“Lynx Aviation”). Airlines, in
      conjunction with its regional
      jet partners, operating under the Frontier JetExpress brand (“Frontier
      JetExpress”), operates
      routes linking from its Denver, Colorado hub to 46 cities coast to coast, eight
      cities in Mexico and one city in Canada as of March 31, 2007. Airlines also
      provides service from other non-hub cities including service from ten non-hub
      cities to Mexico. As of March 31, 2007, Airlines operates a fleet of 49 Airbus
      A319 aircraft, eight Airbus A318 aircraft and seven CRJ 700 aircraft (operated
      by Horizon Air Industries, Inc.) and two Embraer 170 aircraft (operated by
      Republic Airlines, Inc.) from its base in Denver, and had approximately 5,200
      employees.





The
      Company operates in one business segment that provides transportation to
      passengers and cargo and includes mainline operations and a regional
      partner.





***Lynx
      Aviation***





Lynx
      Aviation intends to assume a purchase agreement between Frontier Holdings and
      Bombardier, Inc. for ten Q400 turboprop aircraft, each with a seating capacity
      of 74, with the option to purchase ten additional aircraft. The aircraft will
      be
      purchased and operated by Lynx Aviation under a separate operating certificate.
      Lynx Aviation is currently in the start-up phase of operations. Lynx Aviation
      plans to commence revenue service in September 2007 with ten aircraft in service
      by the end of January 2008. At this time, Frontier and Lynx Aviation are the
      only subsidiaries of Frontier Holdings. The financial performance of Frontier
      Holdings is represented by the financial performance of Frontier and includes
      only start-up costs for Lynx Aviation because it has not yet commenced
      operations.





***Frontier
      Jet Express***





In
      January 2007, the Company entered into an agreement with Republic Airlines,
      Inc.
      (“Republic”), under which Republic will operate up to 17 76-seat Embraer 170
      aircraft under the Frontier JetExpress brand. The contract is for an 11-year
      period from the in-service date of the last aircraft, which is scheduled for
      December 2008. The service will begin on March 4, 2007 and replaces the CRJ
      700
      aircraft operated by Horizon. The Company will control the routing, scheduling
      and ticketing of this service. The Company compensates Republic for its services
      based on Republic’s operating expenses plus a margin on certain of its expenses.
      The agreement provides for financial incentives and penalties based on the
      performance of Republic which are accrued for in the period earned. In
      accordance with Emerging Issues Task Force No. 01-08, “ *Determining
      Whether an Arrangement Contains a Lease* ”
(“EITF
      01-08”), the Company has concluded that the Republic agreement contains a lease
      as the agreement conveys the right to use a specific number and specific type
      of
      aircraft over a stated period of time, and as such, has reported revenues and
      expenses related to Republic on a gross basis. Frontier establishes the
      scheduling, routes and pricing of the flights operated as “Frontier JetExpress”
under the agreement. Revenues are pro-rated to the segment




F-7


**FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


operated
      by the regional partner based on miles flown and are included in passenger
      revenues - regional partner. Expenses directly related to the flights flown
      by
      the regional partner are included in operating expenses - regional partner.
      The
      Company allocates indirect expenses between mainline and JetExpress operations
      by using regional partner departures, available seat miles, or passengers as
      a
      percentage of system combined departures, available seat miles or
      passengers.





In
      September 2003, the Company signed an agreement with Horizon Air Industries,
      Inc. (“Horizon”), under which Horizon operated up to nine 70-seat CRJ 700
      aircraft under the Frontier JetExpress brand. In September 2006, the Company
      amended the agreement with Horizon to provide that all nine CRJ-700 aircraft
      would be returned to Horizon during a one-year ramp down period which began
      in
      January 2007 and will be completed in December 2007. The Company has recorded
      revenues and expenses related to Horizon gross, as opposed to net, upon
      inception of service in accordance with EITF 01-08.





***Preparation
      of Financial Statements and Use of Estimates***





The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





***Reclassification
      of Prior Year Amounts***





Certain
      prior year items have been reclassified to conform to the current year
      presentation.





***Cash
      and Cash Equivalents***





For
      financial statement purposes, the Company considers cash and short-term
      investments with an original maturity of three months or less to be cash
      equivalents.





Short-term
      investments consist of the following: (a) bond money market funds and commercial
      paper with maturities of less than three months, classified as held-to-maturity
      and are carried at amortized cost which approximates fair value and (b) money
      market funds with maturities of less than three months, classified as available
      for sale securities and stated at fair value. Held-to-maturity securities are
      those securities in which the Company has the ability and intent to hold the
      security until maturity. Interest income is recognized when earned. There were
      no unrealized gains or losses on these investments for the years ended March
      31,
      2007, 2006 and 2005.





***Restricted
      Investments***





Restricted
      investments include certificates of deposit that secure certain letters of
      credit issued primarily to companies which process credit card sale
      transactions, workers compensation claim reserves and certain airport
      authorities. Restricted investments are carried at cost, which management
      believes approximates fair value. Maturities are for one year or less and the
      Company intends to hold restricted investments until maturity.


F-8
 **FRONTIER
          AIRLINES HOLDINGS, INC.**
 
 **Notes
          to the Consolidated Financial Statements, continued**


***Valuation
      and Qualifying Accounts***





The
      following table summarizes the Company’s valuation and qualifying accounts as of
      March 31, 2007, 2006, and 2005, and the associated activity for the years then
      ended.





**Allowance
                for**
              Doubtful
              Accounts
            
            
            
            **Allowance
                for**
              **Inventory****(In
                thousands)**
            
            
            
            **(In
                thousands)**Balance
                at March 31, 2004
            
            $
            225
            
            
            
            
            $
            2,991Additional
                provisions
            
            
            1,012
            
            
            
            
            
            1,263Deductions
                (1)
            
            
            (310
            )
            
            
            
            
            (281
            )Balance
                at March 31, 2005
            
            $
            927
            
            
            
            
            $
            3,973Additional
                provisions
            
            
            579
            
            
            
            
            
            169Deductions
                (1)
            
            
            (245
            )
            
            
            
            
            (165
            )Transfer
                to assets held for sale
            
            
            -
            
            
            
            
            
            (3,599
            )Balance
                at March 31, 2006
            
            $
            1,261
            
            
            
            
            $
            378Additional
                provisions
            
            
            400
            
            
            
            
            
            159Deductions
                (1)
            
            
            (1,029
            )
            
            
            
            
            -Transfer
                to assets held for sale
            
            
            -
            
            
            
            
            
            (208
            )Balance
                at March 31, 2007
            
            $
            632
            
            
            
            
            $
            329




(1)  
      Uncollectible accounts written off, net of recoveries, for the allowance of
      doubtful accounts





The
      allowance for doubtful accounts is primarily based on the specific
      identification method.





***Inventories***





Inventories
      consist of expendable aircraft spare parts, supplies and aircraft fuel and
      are
      stated at the lower of cost or market. Inventories are accounted for on a
      first-in, first-out basis and are charged to expense as they are used. An
      allowance for obsolescence on aircraft spare parts is provided over the
      remaining useful life of the related aircraft to reduce the carrying costs
      to
      lower of cost or market.





***Assets
      held for sale***





Assets
      held for sale are valued at the lower of the carrying amount or the estimated
      market value less selling costs. The Company monitors resale values for its
      assets held for sale quarterly using an analysis of current sales and estimates
      obtained from outside vendors.





***Property
      and Equipment***





Property
      and equipment are carried at cost. Major additions, betterments and renewals
      are
      capitalized. Depreciation is provided for on a straight-line basis to estimated
      residual values over estimated depreciable lives as follows:


F-9
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


**Description**
            
            **Lives**Aircraft,
                spare aircraft parts and flight equipment
            
            7
                -
                25 yearsImprovements
                to leased aircraft
            
            Life
                of improvements or term of lease, whichever is less.Capitalized
                software
            
            3
                yearsGround
                property; equipment and leasehold improvements
            
            3
                -
                5 years or term of lease, which ever is
                less




Residual
      values for aircraft are at 25% of the aircraft cost and 10% for aircraft spare
      parts.




***Manufacturers’
      and Lessor Credits***





The
      Company receives credits in connection with its purchase and lease of aircraft
      for engines, auxiliary power units and other rotable parts. These credits are
      deferred until the aircraft, engines, auxiliary power units and other rotable
      parts are delivered and then applied as a reduction of the cost of the related
      equipment. The Company also receives credits in connection with certain aircraft
      lease agreements. These credits are recognized as a credit to lease expense
      over
      the lease term.





***Deferred
      Loan Fees***





Deferred
      loan fees are deferred and amortized over the term of the related debt
      obligation.





***Fair
      Value of Financial Instruments***





The
      Company estimates the fair value of its monetary assets and liabilities based
      upon existing interest rates related to such assets and liabilities compared
      to
      current rates of interest for instruments with a similar nature and degree
      of
      risk. The Company estimates that the carrying value of all of its monetary
      assets and liabilities approximates fair value as of March 31, 2007 and 2006
      with the exception of its fixed rate loans. The estimated fair value of the
      Company’s fixed rate loans based on current rates available to the Company for
      debt of the same remaining maturity was approximately $119,923,000 as compared
      to the carrying amount of $126,314,000 at March 31, 2007. The estimated fair
      value of the Company’s fixed rate loans based on current rates available to the
      Company for debt of the same remaining maturity was approximately $125,981,000
      as compared to the carrying amount of $129,100,000 at March 31, 2006.





***Revenue
      Recognition***





Passenger,
      cargo, and other revenues are recognized when the transportation is provided
      or
      after the tickets expire, one year after date of issuance, and are net of excise
      taxes, passenger facility charges and security fees.  Revenues that have
      been deferred are included in the accompanying consolidated balance sheets
      as
      air traffic liability.    Included in passenger revenue are
      change fees which may be imposed on passengers for making schedule changes
      to
      non-refundable tickets.  Change fees are recognized as revenue at the time
      the change fees are collected from the passenger as they are a separate
      transaction that occurs subsequent to the date of the original ticket
      sale.





The
      marketing component of the sale of the Company’s *EarlyReturns* miles,
      previously reported as a reduction of promotion and sales expense, have been
      reclassified as other revenue in all periods presented. The marketing component
      was $13,895,000, $7,249,000 and $3,945,000 for the years ended March 31, 2007,
      2006 and 2005, respectively.


F-10
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


***Passenger
      Traffic Commissions and Related Expenses***





Passenger
      traffic commissions and related expenses are expensed when the transportation
      is
      provided and the related revenue is recognized. Passenger traffic commissions
      and related expenses not yet recognized are included as a prepaid
      expense.





***Aircraft
      Maintenance***





The
      Company operates under an FAA-approved continuous inspection and maintenance
      program. The Company accounts for maintenance activities on the direct expense
      method. Under this method, major overhaul maintenance costs are recognized
      as
      expense as maintenance services are performed, as flight hours are flown for
      nonrefundable maintenance payments required by lease agreements, and as the
      obligation is incurred for payments made under service agreements. Routine
      maintenance and repairs are charged to operations as incurred.





Effective
      January 1, 2003, the Company and GE Engine Services, Inc. (“GE”) executed
      an engine services agreement (the "Services Agreement") covering the scheduled
      and unscheduled repair of Airbus engines, which was subsequently modified in
      September 2004. The agreement is for a 12-year period from the effective date
      for our owned aircraft or May 1, 2019, whichever comes first. For each leased
      aircraft, the agreement term coincides with the initial lease term of 12 years.
      Under the terms of the Services Agreement, the Company agreed to pay GE a rate
      per-engine-hour, and GE assumed the responsibility to overhaul the Company's
      engines on Airbus aircraft as required during the term of the Services
      Agreement, subject to certain exclusions. The Company believes the rate
      per-engine hour approximates the periodic cost the Company would have incurred
      to service those engines. Accordingly, these payments are expensed as the
      obligation is incurred.





***Advertising
      Costs***





The
      Company expenses the costs of advertising as promotion and sales expense in
      the
      year incurred. Advertising expense was $12,904,000, $9,588,000 and $10,803,000
      for the years ended March 31, 2007, 2006 and 2005, and the amount of expense
      recognized related to advertising barter transactions were $3,814,000,
      $2,104,000, and $2,051,000, respectively. During the years ended March 31,
      2007,
      2006 and 2005, the amount of revenue recognized related to advertising barter
      transactions were $2,463,000, $1,511,000, and $2,324,000, respectively. Prepaid
      barter expenses as of March 31, 2007 and 2006 were $1,038,000 and $799,000,
      respectively.





**Impairment
      of Long-Lived Assets**





The
      Company records impairment losses on long-lived assets used in operations when
      indicators of impairment are present and the undiscounted future cash flows
      estimated to be generated by those assets are less than the carrying amount
      of
      the assets. If an impairment occurs, the loss is measured by comparing the
      fair
      value of the asset to its carrying amount.





***Income
      Taxes***





The
      Company accounts for income taxes using the asset and liability method. Under
      that method, deferred income taxes are recognized for the tax consequences
      of
“temporary differences” by applying enacted statutory tax rates applicable to
      future years to differences between the financial statement carrying amounts
      and
      tax bases of existing assets and liabilities and net operating losses and tax
      credit carryforwards. A valuation allowance is provided to the extent that
      it is
      more likely than not that deferred




F-11
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


tax
      assets will not be realized. The effect on deferred taxes from a change in
      tax
      rates is recognized in income in the period that includes the enactment date.





***Loss
      Per Common Share***





Basic
      loss per common share excludes the effect of potentially dilutive securities
      and
      is computed by dividing income by the weighted-average number of common shares
      outstanding for the period. Diluted earnings per common share reflects the
      potential dilution of all securities that could share in earnings. Shares
      outstanding include shares contributed to the Employee Stock Ownership
      Plan.





**Customer
      Loyalty Program**





The
      Company offers EarlyReturns, a frequent flyer program to encourage travel on
      its
      airline and customer loyalty. The Company accounts for the EarlyReturns program
      under the incremental cost method whereby travel awards are valued at the
      incremental cost of carrying one passenger based on expected redemptions. Those
      incremental costs are based on expectations of expenses to be incurred on a
      per
      passenger basis and include food and beverages, fuel, liability insurance,
      and
      ticketing costs. The incremental costs do not include allocations of overhead
      expenses, salaries, aircraft cost or flight profit or losses . The
      Company does not record a liability for mileage earned by participants who
      have
      not reached the level to become eligible for a free travel award. The Company
      does not record a liability for the expected redemption of miles for non-travel
      awards since the cost of these awards to us is negligible.





As
      of
      March 31, 2007 and 2006, the Company estimated that approximately 324,000 and
      193,000 round-trip flight awards, respectively, were eligible for redemption
      by
      EarlyReturns members who have mileage credits exceeding the 15,000-mile free
      round-trip domestic ticket award threshold. As of March 31, 2007 and 2006,
      the
      Company had recorded a liability of approximately $4,249,000 and $2,776,000,
      respectively, for these rewards.





The
      Company also sells points in EarlyReturns to third parties. The portion of
      the
      sale that is for travel is deferred and recognized as passenger revenue when
      the
      Company estimates the transportation is provided. The remaining portion,
      referred to as the marketing component, is recognized as other revenue in the
      month received.





***Co-Branded
      Credit Card Arrangement***





The
      Company entered into a co-branded credit card arrangement with a MasterCard
      issuing bank in March 2003. This affinity agreement provides that the Company
      will receive a fixed fee for each new account, which varies based on the type
      of
      account, and a percentage of the annual renewal fees that the bank receives.
      The
      Company receives an increased fee for new accounts it solicits. The Company
      also
      receives fees for the purchase of frequent flier miles awarded to the credit
      card customers.





The
      Company accounts for all fees received under the co-branded credit card program
      by allocating the fees between the portion that represents the estimated value
      of the subsequent travel award to be provided, and the portion which represents
      a marketing fee to cover marketing and other related costs to administer the
      program. This latter portion (referred to as the marketing component) represents
      the residual after determination of the value of the travel component. The
      component representing travel is determined by reference to an equivalent
      restricted fare, which is used as a proxy for the value of travel of a frequent
      flyer mileage award. The travel component is deferred and recognized as revenue
      over the estimated usage period of the frequent flyer mileage awards of 20
      months. The Company has estimated the period over which the frequent flier
      mileage awards will be used based on the history of usage of the frequent
      flier


F-12
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


mileage
      awards. The Company records the marketing component of the revenue earned under
      this agreement as other revenue in the month received.





For
      the
      year ended March 31, 2007, the Company earned total fees of $36,917,000. Of
      that
      amount, $25,219,000 was initially deferred as the travel award component, and
      the remaining marketing component of $11,698,000 was recognized as other
      revenue. For the year ended March 31, 2006, the Company earned total fees of
      $24,986,000 under the credit card agreement. Of that amount, $19,686,000 was
      deferred as the travel award component, and the remaining marketing component
      of
      $5,300,000 was recognized as other revenue. For the year ended March 31, 2005,
      the Company earned total fees of $12,227,000. Of that amount, $8,455,000 was
      deferred as the travel award component, and the remaining marketing component
      of
      $3,772,000 was recognized as other revenue. Amortization of deferred revenue
      recognized in earnings during the years ended March 31, 2007, 2006 and 2005
      was
      $20,158,000, $11,059,000 and $4,396,000, respectively.





***Supplemental
      Disclosure of Cash Flow Information***





*Cash
      Paid During the Year for:*





**2007**
            
            **2006**
            
            **2005****(In
                thousands)**Interest
            
            $
            28,047
            
            $
            18,911
            
            $
            12,345Taxes
            
            $
            176
            
            $
            7
            
            $
            161




Interest
      incurred during the year ended March 31, 2007 was $31,948,000, of which
      $2,050,000 was capitalized.





***Derivative
      Instruments***





The
      Company accounts for derivative financial instruments in accordance with the
      provisions of Statement of Financial Accounting Standards No. 133, *“Accounting
      for Derivative Instruments and Hedging Activities”* (“SFAS
      133”),  as
      amended and interpreted. SFAS 133 requires the Company to measure all
      derivatives at fair value and to recognize them in the balance sheet as an
      asset
      or liability. For derivatives designated as cash flow hedges, changes in fair
      value of the derivative are generally reported in other comprehensive income
      (“OCI”) and are subsequently reclassified into earnings when the hedged item
      affects earnings. Changes in fair value of derivative instruments not designated
      as hedging instruments and ineffective portions of hedges are recognized in
      earnings in the current period.





The
      Company entered into a derivative transaction to hedge the interest payments
      associated with a portion of its LIBOR-based borrowings and fuel purchases.
      The
      Company designated an interest rate swap, which expired on March 31, 2007,
      as a
      qualifying cash flow hedge. This transaction was accounted for as a cash flow
      hedge under SFAS 133. As a result, the Company recorded this instrument at
      fair
      market value and recognized changes in the mark to market gain or loss in OCI,
      net of taxes. The Company also enters into derivative transactions to reduce
      exposure to the effect of fluctuations in fuel prices. These transactions are
      accounted for as trading instruments under SFAS 133. As a result, the Company
      records these instruments at fair market value and recognizes realized and
      unrealized gains and losses in aircraft fuel expense.




F-13


**FRONTIER
      AIRLINES HOLDINGS, INC.**





**Notes
      to the Consolidated Financial Statements, continued**





***Self-Insurance***





The
      Company is self-insured for the majority of the group health insurance costs,
      subject to specific retention levels. The Company records its liability for
      health insurance claims based on its estimate of claims that have been incurred
      but not reported.





The
      Company is also self-insured for the majority of its workers’ compensation cost.
      The liability for workers’ compensation claims is the estimated total cost of
      the claims on a fully-developed basis, up to a maximum stop loss coverage,
      based
      on reserves for these claims that are established by a third-party
      administrator.





***Stock-Based
      Compensation***





Effective
      April 1, 2006, the Company adopted the provisions of Statement of Financial
      Accounting Standards No. 123(R), *Share-Based Payment* ,
      and
      related interpretations (“SFAS 123(R)”), to account for stock-based compensation
      using the modified prospective transition method and therefore will not restate
      prior period results. SFAS 123(R) supersedes Accounting Principles Board Opinion
      No. 25 *,
      Accounting for Stock Issued to Employees* (“APB
      No. 25”), and revises guidance in SFAS 123, *Accounting for Stock-Based Compensation* .
      Among
      other things, SFAS 123(R) requires that compensation expense be recognized
      in
      the financial statements for share-based awards based on the grant date fair
      value of those awards. The modified prospective transition method applies to
      both (1) unvested awards under the Company’s 2004 Equity Incentive Plan (“2004
      Plan”) outstanding as of March 31, 2006, based on the grant date fair value
      estimated in accordance with the pro forma provisions of SFAS 123 and (2) any
      new share-based awards granted subsequent to March 31, 2006, based on the
      grant-date fair value estimated in accordance with the provisions of SFAS
      123(R). Additionally, stock-based compensation expense includes an estimate
      for
      pre-vesting forfeitures and is recognized over the requisite service periods
      of
      the awards on a straight-line basis, which is commensurate with the vesting
      term. The Company's options are typically granted with graded vesting
      provisions, and compensation cost is amortized over the service period using
      the
      straight-line method.





***New
      Accounting Standards Not Yet Adopted***





In
      July 2006, the FASB issued Interpretation No. 48,*Accounting
      for Uncertainty in Income Taxes, (“FIN 48”)*.
      This
      Interpretation prescribes a recognition threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This Interpretation also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. The Company has not yet reached a
      final determination of the potential financial statement impact of the adoption
      of FIN 48 but does not expect it to have a material impact on the Company’s
      financial position, results of operations or cash flows.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, *Fair
      Value Measurements* (“FAS
      157”). FAS 157 defines fair value, establishes a framework for measuring fair
      value under U.S. generally accepted accounting principles and expands
      disclosures about fair value measurements. FAS 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007 and
      interim periods within those fiscal years. The Company has not yet determined
      the impact of adopting FAS 157.





In
      February, 2007 the FASB issued Statement of Financial Accounting Standards
      No.
      159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* ("FAS
      159"). This standard permits companies to


F-14
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


choose
      to
      measure many financial instruments and certain other items at fair value,
      following the provisions of SFAS No. 157. FAS 159 is effective for fiscal years
      beginning after November 15, 2007. The Company has not yet determined the impact
      of adopting FAS 159.





**2.
      Derivative Instruments**





***Fuel
      Hedging***





In
      November 2002, the Company initiated a fuel hedging program comprised of swap
      and collar agreements. Under a swap agreement, the cash settlements are
      calculated based on the difference between a fixed swap price and a price based
      on an agreed upon published spot price for the underlying commodity. If the
      index price is higher than the fixed price, the Company receives the difference
      between the fixed price and the spot price. If the index price is lower, the
      Company pays the difference. A collar agreement has a cap price and a floor
      price. When the hedged product’s index price is above the cap, the Company
      receives the difference between the index and the cap. When the hedged product’s
      index price is below the floor the Company pays the difference between the
      index
      and the floor. When the price is between the cap price and the floor, no
      payments are required. These fuel hedges have been designated as trading
      instruments, as such realized and non-cash mark to market adjustments are
      included in aircraft fuel expense. The results of operations for the year ended
      March 31, 2007, 2006 and 2005 include non-cash mark to market derivative
      gains/(losses) of $12,753,000, $(2,163,000) and $2,837,000, respectively. Cash
      settlements for fuel derivatives contracts for the year ended March 31, 2007
      was
      net payments of $3,925,000, and were net receipts of $5,338,000 and $4,768,000
      for the years ended March 31, 2006 and 2005, respectively.





The
      Company had the following swap and collar agreements outstanding at March 31,
      2007 and 2006, which had fair values resulting in assets of $13,729,000 and
      $976,000, respectively:





**March
      31, 2007:**


**Date**
            **Product
                ***
            **Notional
                volume ****
              **(barrels
                per month)**
            **Period
                covered**
            **Price
                (per gallon or barrel)**January
                2007
            Jet
                A
            100,000
            April
                1, 2007 -June,
                30,2007
            $1.817
                per gallon, with a floating priceJanuary
                2007
            Crude
                Oil
            40,000
            July
                1, 2007-September
                30, 2007
            $64.70
                per barrel cap, with a floor of $59.15January
                2007
            Crude
                Oil
            80,000
            October
                1, 2007 -December
                31, 2007
            $65.90
                per barrel cap, with a floor of $59.90January
                2007
            Crude
                Oil
            80,000
            April
                1, 2007 -June,
                30, 2007
            $59.30
                per barrel cap, with a floor of $49.30January
                2007
            Crude
                Oil
            80,000
            July
                1, 2007-September
                30, 2007
            $60.75
                per barrel cap, with a floor of $50.45January
                2007
            Crude
                Oil
            80,000
            October
                1, 2007 -December
                31, 2007
            $62.00
                per barrel cap, with a floor of $51.10January
                2007
            Crude
                Oil
            80,000
            January
                1, 2008 -March
                31, 2008
            $62.60
                per barrel cap, with a floor of
                $52.10


F-15
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


**March
      31, 2006:**


**Contract
                date**
            **Product
                ***
            **Notional
                volume ****
              **(barrels
                per month)**
            **Period
                covered**
            **Price
                (per gallon or barrel)**November
                2005
            Jet
                A
            50,000
            April
                1, 2006 -June
                30, 2006
            $1.83
                per gallon, with a floor of
              $1.6925
                per gallon





*Jet
      A is
      Gulf Coast Jet A fuel. Crude oil is West Texas Intermediate crude
      oil.


**
      One
      barrel is equal to 42 gallons.





***Interest
      Rate Hedging Program***





In
      March
      2003, the Company entered into an interest rate swap agreement with a notional
      amount of $27,000,000 to hedge the interest payments associated with a portion
      of its LIBOR-based borrowings through March 31, 2007. Under the interest rate
      swap agreement, the Company paid a fixed rate of 2.45% and received a variable
      rate based on the three month LIBOR, which was reset quarterly. Interest expense
      for the years ended March 31, 2007 and 2006 were reduced by $187,000 and
      $216,000, respectively, for settlement payments received from the counter party
      for the period. Interest expense for the year ended March 31, 2005 includes
      $177,000 of settlement amounts paid to the counter party for the period. At
      March 31, 2007 and 2006, the Company’s interest rate swap agreement had
      estimated values of $0 and $105,000, respectively, and were included in deferred
      loan fees and other assets.





Changes
      in the fair value of interest rate swaps designated as hedging instruments
      are
      reported in accumulated other comprehensive income included in stockholders’
equity. Approximately $105,000 of mark to market gains are included in
      accumulated other comprehensive income included in stockholders’ equity, net of
      income taxes of $40,000, for the year ended March 31, 2007. Approximately
      $194,000 of mark to market gains are included in accumulated other comprehensive
      income included in stockholders’ equity, net of income taxes of $74,000, for the
      year ended March 31, 2006. Approximately $655,000 of unrealized losses are
      included in accumulated other comprehensive income included in stockholders’
equity, net of income taxes of $246,000, for the year ended March 31, 2005.
      The
      mark to market gains and losses have been reclassified into interest expense
      as
      a yield adjustment in the same period in which the related interest payments
      on
      the LIBOR-based borrowings effects earnings.





**3.**  **Assets
      Held For Sale**





In
      April
      2005, the Company retired its remaining Boeing aircraft and has classified
      all
      remaining Boeing aircraft rotable spare parts and expendable inventories as
      “assets held for sale.” As such, these assets have been valued at the lower of
      the carrying amount or the estimated market value less selling costs.




In
      August
      2004, the Company began selling Boeing spare parts and entered into agreements
      with two vendors to sell these parts on a consignment basis. The Company
      monitors resale values for Boeing parts quarterly using estimates obtained
      from
      outside vendors. During the year ended March 31, 2005, the Company recorded
      total impairments on Boeing rotable spare parts and expendable inventories
      of
      $5,123,000 due to declines in the resale values of these parts. Based on the
      current market prices and recent sales history, the Company has determined
      that
      there is currently no additional impairment required for the Boeing rotable
      spare parts and expendable inventories for the years ending March 31, 2007
      and
      2006. During the years ended March 31, 2007 and 2006, the Company realized
      net
      gains of $1,203,000 and $1,333,000, respectively, on the sale of these assets.




F-16


**FRONTIER
      AIRLINES HOLDINGS, INC.**





**Notes
      to the Consolidated Financial Statements, continued**





**4.
      Property and Equipment, Net**





At
      March
      31, 2007 and 2006, property and equipment consisted of the
      following:





**2007**
              **(In
                thousands)**
            
            
            
            **2006**
              **(In
                thousands)**Aircraft,
                spare aircraft parts, and improvements to leased aircraft
            
            
            
            
            $
            667,364
            
            
            
            
            $
            555,574Ground
                property, equipment and leasehold improvements
            
            
            
            
            
            42,301
            
            
            
            
            
            35,937Computer
                software
            
            
            
            
            
            10,234
            
            
            
            
            
            6,585Construction
                in progress
            
            
            
            
            
            5,191
            
            
            
            
            
            1,597725,090
            
            
            
            
            
            599,693Less
                accumulated depreciation
            
            
            
            
            
            (119,959
            )
            
            
            
            
            (89,265
            )Property
                and equipment, net
            
            
            
            
            $
            605,131
            
            
            
            
            $
            510,428




Property
      and equipment includes capitalized interest of $1,970,000 in 2007.





In
      June
      2006, the Company completed a sale-leaseback transaction for an Airbus 319
      that
      resulted in a gain of $733,000. This gain was deferred and is being amortized
      over the 12-year lease term. In October 2004 and December 2005, the Company
      completed sale-leaseback transactions for three Airbus 319 engines on the same
      day the aircraft purchase transaction closed. As such, no gain or loss was
      recorded on these transactions in fiscal years 2006 and 2005. The Company agreed
      to lease these engines over 10-year terms.





**5.
      Deferred Revenue and Other Liabilities**





At
                March 31, 2007 and March 31, 2006, deferred revenue and other liabilities
                consisted of the following:





**2007**
            
            
            
            **2006**Deferred
                revenue primarily related to co-branded credit card
            
            $
            19,047
            
            
            
            
            $
            15,185Deferred
                rent
            
            
            18,861
            
            
            
            
            
            19,093Other
            
            
            630
            
            
            
            
            
            589Total
                deferred revenue and other liabilities
            
            
            38,538
            
            
            
            
            
            34,867Less:
                current portion
            
            
            (16,400
            )
            
            
            
            
            (12,437
            )$
            22,138
            
            
            
            
            $
            22,430


F-17
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


**6.
      Other Accrued Expenses**





At
                March 31, 2007 and March 31, 2006, other accrued expenses consisted
                of the
                following:





**March
                31,**
            
            **March
                31,****2007**
            
            **2006****(In
                thousands)**Accrued
                salaries and benefits
            
            $
            42,616
            
            $
            35,203Federal
                excise and other passenger taxes payable
            
            
            26,914
            
            
            23,715Property
                tax payable and income taxes payable
            
            
            2,593
            
            
            2,529Other
            
            
            8,201
            
            
            6,236Total
                other accrued expenses
            
            $
            80,324
            
            $
            67,683





**7.
      Lease Commitments**




***Aircraft
      Leases***





At
      March
      31, 2007 and 2006, the Company operated 38 and 34 **** leased **** aircraft,
      respectively, which are accounted for under operating lease agreements with
      initial terms of 12 years. Security deposits related to leased aircraft and
      future leased aircraft deliveries at March 31, 2007 and 2006 totaled $18,205,000
      and $16,984,000, respectively, and are reported in the consolidated balance
      sheets in security and other deposits.





In
      addition to scheduled future minimum lease payments, the
      Company is required to make supplemental rent payments to cover the cost of
      major scheduled maintenance overhauls of these aircraft. These
      supplemental rentals are
      based
      on the number of flight hours flown and/or flight departures and are included
      in
      maintenance expense .
      The
      lease agreements require the Company to pay taxes, maintenance, insurance,
      and
      other operating expenses applicable to the leased property. During the years
      ended March 31, 2007, 2006 and 2005, supplemental rent payments were
      $26,187,000, $24,933,000 and $25,974,000, respectively.




***Other
      Leases***





The
      Company leases office and hangar space, spare engines and office equipment
      for
      its headquarters, reservation facilities, airport facilities, and certain other
      equipment. The Company also leases certain airport gate facilities on a
      month-to-month basis.





For
      leases that contain escalations, the Company records the total rent payable
      during the lease term on a straight-line basis over the term of the lease and
      records the difference between the rent paid and the straight-line rent as
      a
      deferred rent liability.


F-18
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


At
      March
      31, 2007, commitments under non-cancelable operating leases (excluding aircraft
      supplemental rent requirements) with terms in excess of one year were as
      follows:





**Aircraft**
            
            **Other**
            
            **Total****(In
                thousands)**2008
            
            $
            139,457
            
            $
            24,525
            
            $
            163,9822009
            
            
            148,958
            
            
            23,023
            
            
            171,9812010
            
            
            160,404
            
            
            21,187
            
            
            181,5912011
            
            
            160,404
            
            
            7,960
            
            
            168,3642012
            
            
            160,404
            
            
            6,081
            
            
            166,485Thereafter
            
            
            822,643
            
            
            15,295
            
            
            837,938Total
                minimum lease payments
            
            $
            1,592,270
            
            $
            98,071
            
            $
            1,690,341





Rental
      expense under operating leases, including month-to-month leases, for the years
      ended March 31, 2007, 2006 and 2005 was $159,206,000, $138,911,000, and
      $130,205,000, respectively.





**8.
      Aircraft Lease and Facility Exit Costs**





During
      the year ended March 31, 2006, the Company ceased using three of its Boeing
      737-300 leased aircraft with original lease termination dates in June 2005,
      August 2005 and May 2006. The Company negotiated an early return and one-time
      payment for the one aircraft with an original lease termination date of May
      2006. This resulted in a charge of $3,312,000, representing the estimated fair
      value of the remaining lease payments and a negotiated one-time termination
      payment. During the year ended March 31, 2006, the Company also recorded
      $102,000 of facility lease exit costs related to a property in which a sublease
      was not obtained in a period originally estimated for an airport exited in
      fiscal year 2005. This reflects the Company’s revised estimated future payments
      on this lease. These charges are reported in the consolidated statements of
      operations as aircraft and facility lease exit costs.





A
      summary
      of the activity charged to the aircraft and property lease termination
      liabilities is as follows:





**Aircraft**
            
            **Facility**
            
            **Total****(In
                thousands)****Balance,
                March 31, 2005**
            
            $
            933
            
            $
            250
            
            $
            1,183Additions
            
            
            3,312
            
            
            102
            
            
            3,414Lease
                payments
            
            
            (4,245
            )
            
            (142
            )
            
            (4,387
            )**Balance,
                March 31, 2006**
            
            $
            -
            
            $
            210
            
            $
            210Lease
                payments
            
            
            -
            
            
            (153
            )
            
            (153
            )Reversals
            
            
            -
            
            
            (57
            )
            
            (57
            )**Balance,
                March 31, 2007**
            
            $
            -
            
            $
            -
            
            $
            -




F-19


**FRONTIER
      AIRLINES HOLDINGS, INC.**





**Notes
      to the Consolidated Financial Statements, continued**





**9.
      Long-term Debt**





Long-term
      debt at March 31, 2007 and 2006 consisted of the following:





**2007**
              **(In
                thousands)**
            
            
            
            
            **2006**
                **(In
                  thousands)****Unsecured
                Debt**Convertible
                Notes, fixed interest rate of 5.0% (1)
            
            $
            92,000
            
            
            
            
            $
            92,000**Debt
                Secured by Aircraft**Aircraft
                notes payable,
                fixed interest rates with a6.62%weighted
                average interest rate (2)
            
            
            34,314
            
            
            
            
            
            37,100Aircraft
                notes payable, variable interest rates based on LIBOR
                plus a margin, for an overall weighted average rate of
                7.18% and 6.51% at March 31, 2007 and March 31, 2006,
                respectively(3)
            
            
            348,426
            
            
            
            
            
            294,042Aircraft
                junior note payable, variable interest rate based onLIBOR plus a
                margin, with a rate of 9.13% and 8.38% at March 31, 2007 and March
                31,
                2006, respectively (4)
            
            
            4,015
            
            
            
            
            
            4,614Total
                Debt
            
            
            478,755
            
            
            
            
            
            427,756Less:
                current maturities
            
            
            (26,847
            )
            
            
            
            
            (22,274
            )Long-term
                debt
            
            $
            451,908
            
            
            
            
            $
            405,482




Maturities
      of long-term debt, including balloon payments, are as follows (In
      thousands):





2008
            
            $
            26,8472009
            
            
            28,4432010
            
            
            30,1392011
            
            
            31,9322012
            
            
            51,004Thereafter
            
            
            310,390$
            478,755








(1) ***Convertible
      Notes due 2025***





On
      December 7, 2005, the Company completed the sale of $92,000,000 aggregate
      principal amount of 5.0% Convertible Notes due 2025 (“Convertible Notes”) in a
      public offering pursuant to the Company’s shelf registration statement. Interest
      is payable semi-annually, beginning on June 15, 2006. The Convertible Notes
      are
      unsecured and rank effectively junior in right of payment to existing and future
      secured debt, including the Company’s Credit Facility and aircraft notes. At any
      time on or after




F-20
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**


December
      20, 2010, the Company may redeem any of the Convertible Notes for cash at a
      redemption price of 100% of the principal amount plus accrued interest. Holders
      may require the Company to repurchase the Convertible Notes for cash at a
      repurchase price of 100% of the principal amount plus accrued interest on
      December 15, 2010, 2015 and 2020.





The
      Convertible Notes are convertible, at the option of the holders, into shares
      of
      the Company’s common stock at a conversion rate of 96.7352 shares per principal
      amount of notes (representing a conversion price of approximately $10.34 per
      share), subject to certain adjustments, at any time prior to maturity. Upon
      conversion, the Company will have the right to deliver a combination of cash
      and
      shares of common stock. In addition, holders of the Convertible Notes have
      the
      right to require the Company to repurchase the notes upon the occurrence of
      a
      specified designated event at a price of 100% of the principal amount plus
      accrued interest. Upon the occurrence of a specified designated event prior
      to
      December 15, 2010, the conversion rate will be increased by a specified number
      of shares for a maximum of 2,224,910 additional shares issued.





The
      Company incurred and capitalized $3,241,000 in fees in connection with the
      sale
      of the Convertible Notes, which are included in deferred loan fees and other
      assets. The debt issuance costs will be amortized using the effective interest
      rate method over the shortest period in which the note holders may require
      the
      Company to repurchase the notes, which is five-years.





(2) ***Secured
      Aircraft Notes payable - fixed interest rates***





During
      the year ended March 31, 2002, the Company entered into a credit agreement
      to
      borrow up to $72,000,000 for the purchase of three Airbus aircraft with a
      maximum borrowing of $24,000,000 per aircraft. During the year ended March
      31,
      2003, the Company entered into a sale-leaseback transaction for one of these
      purchased aircraft and repaid the loan with the proceeds of the sale. The two
      remaining aircraft loans have a term of 10 years and are payable in equal
      monthly installments, including interest, payable in arrears. The remaining
      loans require monthly principal and interest payments of $218,000 and $215,000,
      respectively, bear interest with rates of 6.71% and 6.54%, with maturities
      in
      May and August 2011, at which time a balloon payment totaling $10,200,000 is
      due
      with respect to each loan.





(3) ***Secured
      Aircraft Notes payable - variable interest rates***





During
      the years ended March 31, 2003 through March 31, 2007, the Company borrowed
      $415,838,000 for the purchase of 17 Airbus aircraft. These loans have terms
      of
      12 years with floating interest rates adjusted based on three and six month
      LIBOR rates plus a margin. These loans bear interest at rates of 6.63% to 7.99%
      at March 31, 2007 with maturities in May 2014 to August 2018. At the end of
      the
      terms there are balloon payments ranging from $2,640,000 to $9,215,000.





(4) ***Junior
      Secured Aircraft Notes payable - variable interest rates***





During
      the year ended March 31, 2006, the Company borrowed $4,900,000 for the purchase
      of an Airbus aircraft. This junior loan has a seven-year term with quarterly
      installments currently of $250,000. The loan bears interest at a floating
      interest rate adjusted quarterly based on LIBOR plus a margin, which was 9.13%
      at March 31, 2007.


F-21
 **FRONTIER
        AIRLINES HOLDINGS, INC.**
 
 **Notes
        to the Consolidated Financial Statements, continued**
 
  
 ***Letters
        of credit***
 
 In
        July
        2005, the Company entered into an agreement with a financial institution
        for a
        $5,000,000 revolving line of credit that allows the Company to issue letters
        of
        credit up to $3,500,000. In June 2006, the revolving letter of credit was
        increased to $5,750,000 and it now permits us to issue letters of credit
        up to
        $5,000,000. As of March 31, 2007, the Company has utilized $4,821,000 under
        this
        agreement for standby letters of credit that provide credit support for certain
        facility leases, which reduced the amount available for borrowings to $929,000.
        A cash compensating balance of $2,750,000 and $2,000,000 were required to
        be
        maintained and to secure the letters of credit, as of March 31, 2007 and
        2006,
        respectively, which have been classified as restricted investments on the
        consolidated balance sheets.
 
 In
        March
        2005, the Company entered into a two-year revolving credit facility (“Credit
        Facility”) to be used in support of letters of credit and for general corporate
        purposes, which was renewed for another two-year period ending May 2009.
        Under
        this facility, the Company may borrow the lesser of $20,000,000 (“maximum
        commitment amount”) or 60% of the current market value of pledged eligible spare
        parts. Letters of credit available is the maximum commitment amount under
        the
        facility less current borrowings. Interest under the Credit Facility is based
        on
        the Eurodollar rate plus a margin or prime plus a margin. In addition, there
        is
        a quarterly commitment fee of 0.50% per annum of the unused portion of the
        facility based on the maximum commitment amount. The agreement contains a
        covenant that will not permit the Company to maintain an unrestricted cash
        and
        cash equivalent position of less than $120,000,000, with a 30-day cure period.
        The amount available for borrowings under the Credit Facility based on the
        current market value of the pledged eligible spare parts at March 31, 2007
        was
        $16,500,000, which was reduced by letters of credit issued of $11,300,000.
        The
        amount available for borrowings under the Credit Facility based on the current
        market value of the pledged eligible spare parts at March 31, 2006 was
        $11,299,000, which was reduced by letters of credit issued of
        $9,500,000.
 
 At
        March
        31, 2007, the Company was in compliance with the covenants for all debt and
        lease agreements.
 
 **10.
        Income Taxes**
 
 Income
        tax expense (benefit) for the years ended March 31, 2007, 2006, and 2005
        is
        presented below:
 
 **Current**
                
                **Deferred**
                
                **Total****(In
                    thousands)**Year
                    ended March 31, 2006:Year
                    ended March 31, 2007:
                
                $
                -
                
                $
                (4,177
                )
                $
                (4,177
                )U.S.
                    federal
                
                
                257
                
                
                (706
                )
                
                (449
                )State
                    and local
                
                $
                257
                
                $
                (4,883
                )
                $
                (4,626
                )Year
                    ended March 31, 2006:U.S.
                    federal
                
                $
                -
                
                $
                (6,410
                )
                $
                (6,410
                )State
                    and local
                
                
                54
                
                
                (141
                )
                
                (87
                )$
                54
                
                $
                (6,551
                )
                $
                (6,497
                )Year
                    ended March 31, 2005:U.S.
                    federal
                
                $
                -
                
                $
                (11,823
                )
                $
                (11,823
                )State
                    and local
                
                
                107
                
                
                (692
                )
                
                (585
                )$
                107
                
                $
                (12,515
                )
                $
                (12,408
                )
  
 F-22
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
 The
        differences between the Company’s effective rate for income taxes and the
        federal statutory rate of 35% are shown in the following table:
  **2007**
              
              **2006**
              
              **2005****(In
                  thousands)**Income
                  tax benefit at the statutory rate
              
              $
              (8,749
              )
              $
              (7,164
              )
              $
              (12,543
              )State
                  and local income tax, net of federal income tax benefit
              
              
              (667
              )
              
              (579
              )
              
              (932
              )State
                  net operating loss adjustment
              
              
              (63
              )
              
              -
              
              
              -Valuation
                  allowance
              
              
              3,980
              
              
              273
              
              
              262Nondeductible
                  expenses
              
              
              777
              
              
              732
              
              
              650Adjustment
                  to deferred taxes
              
              
              (176
              )
              
              76
              
              
              -Other,
                  net
              
              
              272
              
              
              165
              
              
              155$
              (4,626
              )
              $
              (6,497
              )
              $
              (12,408
              )Effective
                  tax rate
              
              
              18.5
              %
              
              31.7
              %
              
              34.6
              %
 
 The
        tax
        effects of temporary differences that give rise to significant portions of
        the
        deferred tax assets (liabilities) at March 31, 2007 and 2006 are presented
        below:
  **2007**
                
                **2006**Deferred
                    tax assets:
                
                **(In
                    thousands)**Accrued
                    vacation
                
                $
                4,058
                
                $
                3,495Accrued
                    workers compensation liability
                
                
                2,704
                
                
                1,973Deferred
                    rent
                
                
                7,105
                
                
                7,223Provision
                    recorded on inventory and impairments of fixed assets
                
                
                1,657
                
                
                2,188Start-up/organizational
                    costs
                
                
                1,173
                
                
                -Stock-based
                    compensation
                
                
                214
                
                
                -Net
                    operating loss carryforwards
                
                
                121,618
                
                
                95,012Alternative
                    minimum tax credit carryforward
                
                
                1,757
                
                
                1,757Accruals
                
                
                2,456
                
                
                2,340Deferred
                    loan fees and other assets
                
                
                208
                
                
                48Other
                
                
                341
                
                
                226Deferred
                    tax assets
                
                
                143,291
                
                
                114,262Valuation
                    allowance
                
                
                (4,521
                )
                
                (536
                )Net
                    deferred tax assets
                
                
                138,770
                
                
                113,726Deferred
                    tax liabilities:Property
                    and equipment
                
                
                (132,367
                )
                
                (117,235
                )Prepaid
                    commissions
                
                
                (1,198
                )
                
                (805
                )Other
                
                
                (5,205
                )
                
                (639
                )Total
                    gross deferred tax liabilities
                
                
                (138,770
                )
                
                (118,679
                )Net
                    deferred tax liability
                
                $
                -
                
                $
                (4,953
                )
  F-23
 **FRONTIER
              AIRLINES HOLDINGS, INC.**
 
 **Notes
              to the Consolidated Financial Statements, continued**
 The
        net
        deferred tax assets (liabilities) are reflected in the accompanying consolidated
        balance sheets as
        follows:
 
 **2007**
              
              **2006**Current
                  deferred tax assets
              
              $
              -
              
              $
              7,780Non-current
                  deferred tax liabilities
              
              
              -
              
              
              (12,733
              )Net
                  deferred tax liability
              
              $
              -
              
              $
              (4,953
              )
 
 
 During
        the year ended March 31, 2007, the Company recorded a valuation allowance
        against net deferred tax asset.  In assessing the realizability of deferred
        tax assets, management considers whether it is more likely than not that
        some
        portion or all of the deferred tax assets will not be realized.  The
        ultimate realization of deferred tax assets is dependent upon the generation
        of
        future taxable income during the periods in which those temporary differences
        become deductible.  Management considers the scheduled reversal of deferred
        tax liabilities, projected future taxable income, and tax planning strategies
        in
        making this assessment.  The Company acquired a significant number of new
        aircraft over the past six years in conjunction with their fleet transition
        plan.  New aircraft purchases are depreciated for tax purposes over seven
        years compared to book depreciation of 25 years, resulting in significant
        deferred tax liabilities that will reverse over their seven year tax life. 
The net operating losses that have been generated over the past six years
        are
        due in large part to the accelerated depreciation over a shorter useful life
        for
        tax purposes.  While the Company continues to take delivery of new
        aircraft, they expect their fleet acquisitions to be substantially complete
        by
        fiscal 2009.  Since the Company’s net operating losses do not begin to
        expire until 2023, the Company expects these net operating looses to be
        available in future periods when tax depreciation is at minimal levels, and
        taxable income is high. Based upon the level of historical book losses, the
        Company provided a valuation allowance during the year ended March 31, 2007
        for
        the net deferred tax asset.   Based upon the projections for future
        taxable income over the periods in which the deferred tax assets become
        deductible, and available tax planning strategies, management believes it
        is
        more likely than not that the Company will realize the benefits of the
        deductible differences, net of the existing valuation allowances at March
        31,
        2007.  The amount of the deferred tax asset considered realizable, however,
        could be reduced in the near term if estimates of future taxable income during
        the carryforward period are reduced.  The Company has included in the total
        valuation allowance, a valuation allowance for state net operating loss
        carryforwards expected to expire unused which totaled $583,000 and $273,000
        at
        March 31, 2007 and 2006, respectively.
 
 As
        of
        March 31, 2007, the Company had federal net operating loss carryforwards
        totaling $318,100,000, expiring as follows:  $45,600,000 in 2023,
        $59,000,000 in 2024, $92,300,000 in 2025, $51,800,000 in 2026 and $69,500,000
        estimated for 2007 which would expire in 2027.
  F-24
 **FRONTIER
          AIRLINES HOLDINGS, INC.**
 
 **Notes
          to the Consolidated Financial Statements, continued**
  **11.
        Stockholders’ Equity**
 
 ***Warrants
        and Stock Purchase Rights***
 
 In
        February 2003, the Company issued warrants to purchase 3,833,946 shares of
        common stock at $6.00 per share to the Air Transportation Stabilization Board
        (“ATSB”) and to two other guarantors which were exercisable immediately. The
        warrants had an estimated fair value of $9,283,000 when issued and expire
        seven
        years after issuance. The fair value for these options was estimated at the
        date
        of grant using a Black-Scholes option pricing model. These warrants were
        subsequently repriced in September 2003 as a result of the Company’s secondary
        public offering and again in December 2005 as a result of the Company’s
        convertible debt offering to $5.87 per share. In May 2006, the ATSB transferred
        the ownership of all its outstanding warrants to seven institutional investors
        and one other guarantor transferred ownership of its outstanding warrants
        in
        December 2003.
 
 ***Treasury
        Shares***
 
 In
        March
        2007, the Company purchased 300,000 shares of its common stock for $1,838,000.
        These shares were purchased to fund the Company’s 2007 contribution to the
        Employee Stock Ownership Plan (“ESOP”). These shares were contributed to the
        ESOP in April 2007.
 
 **12.
        Equity Based Compensation Plans**
 
 On
        September 9, 2004, the shareholders of Frontier approved the 2004 Plan. Frontier
        Holdings assumed all of the outstanding options and awards under the 2004
        Plan
        effective upon the closing of the Reorganization. The 2004 Plan, which includes
        stock options issued since 1994 under a previous equity incentive plan, allows
        the Compensation Committee of the Board of Directors to grant stock options,
        stock appreciation rights payable only in stock (“SARs”), and restricted stock
        units, (“RSUs”), any or all of which may be made contingent upon the achievement
        of service or performance criteria. Eligible participants include members
        of the
        Company’s Board of Directors, all full-time director and officer level employees
        of the Company, and such other employees as may be identified by the
        Compensation Committee from time to time who are legally eligible to
        participate. Subject to plan limits, the Compensation Committee has the
        discretionary authority to determine the size and timing of an award and
        the
        vesting requirements related to the award. The 2004 Plan expires September
        12,
        2009. The 2004 Plan allows up to a maximum of 2,500,000 shares for option
        grants
        and 500,000 shares for RSUs, subject to adjustment only to reflect stock
        splits
        and similar recapitalization events. The Company issues new shares of common
        stock for stock option and SARs exercised and settlement of vested restricted
        units. With certain exceptions, stock options and SARs issued under the 2004
        Plan generally vest in equal installments over a five-year period from the
        date
        of grant and expire ten years from the grant date. RSUs cliff vest on the
        third
        or fifth anniversary of the date of grant. As of March 31, 2007, the Company
        had
        1,777,000 shares available for future grants.
 
 SFAS
        123(R) requires the Company to estimate pre-vesting option forfeitures at
        the
        time of grant and periodically revise those estimates in subsequent periods
        if
        actual forfeitures differ from those estimates. The Company records stock-based
        compensation expense only for those awards expected to vest using an estimated
        forfeiture rate based on its historical pre-vesting forfeiture data.
 F-25
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
 Previously,
        the Company accounted for forfeitures as
        they occurred under the pro forma disclosure provisions of SFAS 123 for periods
        prior to April 1, 2006.
  The
        Company has recorded $845,000 of stock-based compensation expense, net of
        estimated forfeitures, during the year ended March 31, 2007, as a result
        of its
        adoption of SFAS 123(R). Unrecognized stock-based compensation expense related
        to unvested options and RSU awards outstanding as of March 31, 2007 was
        approximately $3,293,000, and will be recorded over the remaining vesting
        periods of one to five years, which at March 31, 2007, was a weighted average
        remaining recognition period of 1.7 years for options and 3.4 years for RSU
        awards, respectively.
 
 SFAS
        123(R) requires the benefits associated with tax deductions in excess of
        recognized compensation cost to be reported as a financing cash flow rather
        than
        as an operating cash flow as previously required. For the year ended March
        31,
        2007, the Company did not record any excess tax benefit generated from option
        exercises.
 
 Prior
        to
        April 1, 2006, the Company accounted for stock-based compensation in accordance
        with APB No. 25 and related interpretations. Accordingly, compensation expense
        for a stock option grant was recognized only if the exercise price was less
        than
        the market value of the Company’s common stock on the grant date. The accounting
        for stock-based compensation for restricted stock units did not change with
        the
        adoption of SFAS 123(R). Prior to the Company’s adoption of SFAS 123(R), as
        required under the disclosure provisions of SFAS 123, as amended, the Company
        provided pro forma net loss and loss per common share for each period as
        if the
        Company had applied the fair value method to stock option grants, amortized
        on a
        straight-line basis, to measure stock-based compensation expense.
 
 The
        following table illustrates the effect on the net loss and loss per common
        share
        for the years ended March 31, 2006 and 2005 as if the Company had applied
        the
        fair value method to measure stock-based compensation, as required under
        the
        disclosure provisions of SFAS 123:
 **2006**
                
                **2005
                    (1)****(In
                    thousands, except per share amounts)**Net
                    loss as reported
                
                $
                (13,971
                )
                $
                (23,430
                )Add:
                    stock-based compensation expenseincluded
                    in reported net loss, net of tax
                
                
                91
                
                
                -Less:
                    total compensation expense determinedunder
                    fair value method, net of tax
                
                
                (533
                )
                
                (4,202
                )Pro
                    forma net income (loss)
                
                $
                (14,413
                )
                $
                (27,632
                )Loss
                    per share, basic and diluted:As
                    reported
                
                $
                (0.39
                )
                $
                (0.66
                )Pro
                    forma
                
                $
                (0.40
                )
                $
                (0.78
                )
 F-26
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
 The
        table
        below summarizes the impact on the Company’s results of operations for the years
        ended March 31, 2007 of outstanding stock options, stock appreciation rights
        (“SARs”) and restricted stock units (“RSUs”) issued under the 2004 Plan as
        recognized under the provisions of SFAS 123(R):
 
 **2007****(In
                  thousands)**Stock-based
                  compensation expense:Stock
                  options and SARs
              
              $
              630RSUs
              
              
              215Income
                  tax benefit
              
              
              (213
              )Net
                  increase to net loss
              
              $
              632Increase
                  to loss per share:Basic
                  and diluted
              
              $
              0.02
 
 (1)
                In
                    September and October 2004, when the price of the Company’s stock was
                    $8.21 and $7.63, respectively, the Company’s Board of Directors approved
                    that certain of the Company’s stock options with exercise prices in excess
                    of the stock’s current market price be modified to accelerate vesting. The
                    purpose of the accelerated vesting was to enable the Company
                    to avoid
                    recognizing stock-based compensation expense in its statement
                    of
                    operations associated with these options in future periods upon
                    adoption
                    of SFAS No. 123(R). As a result, a total of 671,500 options became
                    immediately vested. These options originally vested between October
                    2004
                    and March 2009. Exercise prices for these options ranged from
                    $8.00 to
                    $24.17 per share. There were 35 employees affected by the modification.
                    The total accelerated pro forma expense as a result of the modification
                    was approximately $2,997,000, net of taxes, and is included in
                    the fiscal
                    year 2005 pro forma numbers presented in the table above.
  
 
 ***Stock
        Options and SARs***
 
 The
        Company utilizes a Black-Scholes-Merton option pricing model to estimate
        the
        fair value of share-based awards under SFAS 123(R), which is the same valuation
        technique the Company previously used for pro forma disclosures under SFAS
        123.  The Black-Scholes-Merton option pricing model incorporates various
        and subjective assumptions, including expected term and expected
        volatility.
 
 The
        Company estimates the expected term of options and SARs granted using its
        historical exercise patterns, which the Company believes are representative
        of
        future exercise behavior. The Company estimates volatility of its common
        stock
        using the historical closing prices of its common stock for the period equal
        to
        the expected term of the options, which the Company believes is representative
        of the future behavior of the common stock. The Company’s risk-free interest
        rate assumption is determined using the Federal Reserve nominal rates for
        U.S.
        Treasury zero-coupon bonds with maturities similar to those of the expected
        term
        of the award being valued. The Company has never paid any cash dividends
        on its
        common stock and the Company does not
 F-27
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
 anticipate
        paying any cash dividends in the foreseeable future. Therefore, the Company
        assumed an expected dividend yield of zero. Stock options and SARs are
        classified as equity awards.
 
 The
        following table shows the Company’s assumptions used to compute the stock-based
        compensation expense and pro forma information for stock option and SAR grants
        issued during the years ended March 31, 2007, 2006 and 2005:
 
 **2007**
              
              **2006**
              
              **2005**Assumptions:Risk-free
                  interest rate
              4.85%
              
              4.06%
              
              3.35%Dividend
                  yield
              0%
              
              0%
              
              0%Volatility
              70.76%
              
              74.41%
              
              73.88%Expected
                  life (years)
              5
              
              5
              
              7
 
 The
        per
        share weighted-average grant-date fair value of SARs granted during fiscal
        year
        2007 was $4.61 using the above weighted-average assumptions.
 
 A
        summary
        of the stock option and SARs activity and related information for the year
        ended
        March 31, 2007 is as follows:
 
 **Weighted-****Options**
              
              **Average****and**
              
              **Exercise****SARs**
              
              **Price**Outstanding,
                  March 31, 2006
              
              
              2,564,787
              
              $
              11.07Granted
              
              
              178,907
              
              $
              7.43Exercised
              
              
              (35,750
              )
              $
              4.51Surrendered
              
              
              (293,351
              )
              $
              15.13Outstanding,
                  March 31, 2007
              
              
              2,414,593
              
              $
              10.41Exercisable
                  at end of period
              
              
              1,969,780
              
              $
              10.88
 
 Exercise
        prices for options and SARs outstanding under the 2004 Plan as of March 31,
        2007
        ranged from $2.13 per share to $24.17 per share. The weighted-average remaining
        contractual life of these equity awards is 5.0 years. The aggregate intrinsic
        value of vested options and SARs was $484,777 as of March 31, 2007 and the
        intrinsic value of options exercised during the year ended March 31, 2007
        was
        $108,000.
  F-28
 **FRONTIER
          AIRLINES HOLDINGS, INC.**
 
 **Notes
          to the Consolidated Financial Statements, continued**
 
 A
        summary
        of the outstanding and exercisable options and SARs at March 31, 2007,
        segregated by exercise price ranges, is as follows:
  Weighted-Options
              
              
              
              Average
              
              Exercisableand
              
              Weighted-
              
              Remaining
              
              Options
              
              Weighted-Exercise
                  Price
              
              SARs
              
              Average
              
              Contractual
              
              and
              
              AverageRange
              
              Outstanding
              
              Exercise
                  Price
              
              Life
                  (in years)
              
              SARs
              
              Exercise
                  Price$2.13
                  - $5.42
              
              
              473,500
              
              $
              4.95
              
              
              2.5
              
              
              451,500
              
              $
              4.94$5.80
                  - $7.77
              
              
              484,840
              
              $
              7.14
              
              
              6.8
              
              
              215,500
              
              $
              6.96$8.00
                  - $10.06
              
              
              410,194
              
              $
              9.32
              
              
              5.8
              
              
              294,129
              
              $
              9.06$10.12
                  - $12.95
              
              
              411,759
              
              $
              11.07
              
              
              5.1
              
              
              374,351
              
              $
              10.94$13.59
                  - $17.93
              
              
              462,500
              
              $
              15.92
              
              
              5.1
              
              
              462,500
              
              $
              15.92$18.26
                  - $24.17
              
              
              171,800
              
              $
              20.85
              
              
              4.7
              
              
              171,800
              
              $
              20.852,414,593
              
              $
              10.41
              
              
              5.0
              
              
              1,969,780
              
              $
              10.88
 
 ***Restricted
        Stock Units***
 
 SFAS
        123R
        requires that the grant-date fair value of RSUs be equal to the market price
        of
        the share on the date of grant if vesting is based on a service condition.
        The
        grant-date fair value of RSU awards are being expensed over the vesting period.
        RSUs are classified as equity awards. As of March 31, 2007, the Company had
        outstanding RSUs with service conditions and vesting periods that range from
        three to five years.
 
 A
        summary
        of the activity for RSUs for the twelve months ended March 31, 2007 is as
        follows :
 
 **RSUs**Number
                of
                RSUs
              
              
              Weighted-
                Average
                Grant
                Date
                Market
                ValueOutstanding,
                  March 31, 2006
              
              
              75,604
              
              $
              10.15Granted
              
              
              136,139
              
              $
              7.36Surrendered
              
              
              (14,797
              )
              $
              8.50Released
              
              
              (2,000
              )
              $
              7.03Outstanding,
                  March 31, 2007
              
              
              194,946
              
              $
              8.36
 
  F-29
 **FRONTIER
          AIRLINES HOLDINGS, INC.**
 
 **Notes
          to the Consolidated Financial Statements, continued**
  
 **13.
        Retirement Plans**
 
 ***ESOP***
 
 The
        Company has established an ESOP which is for the benefit of each employee
        of the
        Company, except those employees covered by a collective bargaining agreement
        that does not provide for participation in the ESOP. Company contributions
        to
        the ESOP are discretionary and may vary from year to year. In order for an
        employee to receive an allocation of Company common stock from the ESOP,
        the
        employee must be employed on the last day of the ESOP’s plan year, with certain
        exceptions. The Company’s annual contribution to the ESOP, if any, is allocated
        among the eligible employees of the Company as of the end of each plan year
        in
        proportion to the relative compensation (as defined in the ESOP) earned that
        plan year by each of the eligible employees. The ESOP does not provide for
        contributions by participating employees. Employees vest in contributions
        made
        to the ESOP based upon their years of service with the Company. A year of
        service is an ESOP plan year during which an employee has at least 1,000
        hours
        of service. Vesting generally occurs at the rate of 20% per year, beginning
        after the first year of service, so that a participating employee will be
        fully
        vested after five years of service. Distributions from the ESOP will not
        be made
        to employees during employment. However, upon termination of employment with
        the
        Company, each employee will be entitled to receive the vested portion of
        his or
        her account balance. Forfeitures are reallocated among active participants.
        In
        November 2005, the Company negotiated a new union contract in which employees
        covered by the contract became immediately vested in their accounts and received
        stock certificates for the balance in their account.
 
 In
        March
        2007, the Company’s Board of Directors approved the purchase of 300,000 shares
        of its common stock. These shares were used to fund the 2007 ESOP contribution.
        The shares were contributed in April 2007. During the year ended March 31,
        2006
        and 2005, the Company issued and contributed 400,000 and 346,400 shares,
        respectively, to the ESOP. Total Company contributions to the ESOP from
        inception total 2,888,000 shares, including the 300,000 shares contributed
        in
        April 2007.
 
 The
        Company recognized compensation expense during the years ended March 31,
        2007, 2006 and 2005 of $2,564,000, $2,969,000, and $2,940,000, respectively,
        related to its contributions to the ESOP. Compensation expense under the
        ESOP is
        determined by multiplying the number of the shares contributed by the fair
        market value of the shares on the date contributed, or the purchase price
        of the
        shares. The fair value of the unearned ESOP shares contributed to the ESOP,
        which is what the Company paid for the shares, was $1,838,000. The fair value
        of
        the unearned ESOP shares on March 31, 2007 was $1,803,000.
 
 ***Retirement
        Savings Plans***
 
 The
        Company has established a Retirement Savings Plan under section 401(k) of
        the
        Internal Revenue Code (“401(k) Plan”). Participants may contribute from 1% to
        60% of their pre-tax annual compensation up the maximum amount allowed under
        the
        Internal Revenue Code. Participants are immediately vested in their voluntary
        contributions. The Company’s Board of Directors has elected to match 50% of
        participant contributions up to 10% of salaries from May 2000 through December
        2007 for the participants of the 401(k) Plan. During the years ended March
        31,
        2007, 2006, and 2005, the Company recognized compensation expense associated
        with the matching contributions to the 401(k) Plan totaling $5,107,000,
        $4,201,000, and $3,924,000, respectively. Future matching contributions,
        if any,
        will be determined annually by the Board of Directors. In order to receive
        the
        matching contribution, participants must be employed on the last day of the
        plan
        year. Participants vest in employer contributions made to the 401(k) Plan
        based
        upon their years of service with the Company. A year of service is a plan
        year
        during which a participant has at least 1,000 hours of service. Vesting
        generally occurs at the rate of 20% per year,
 F-30
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
 beginning
        after the first year of service, so that a participant will be fully vested
        after five years of service. Upon termination of employment with the Company,
        each participant will be entitled to receive the vested portion of his or
        her
        account balance.
 
 On
        March
        2, 2007, the Company established the Frontier Airlines, Inc. Pilots Retirement
        Plan (“the FAPA Plan”) for pilots covered under the collective bargaining
        agreement with the Frontier Airlines Pilots’ Association. The FAPA Plan is a
        defined contribution retirement plan. The Company contributes up to 6% of
        each
        eligible and active participant’s compensation. Contributions begin after a
        pilot has reached two years of service and the contributions vest immediately.
        Participants are entitled to begin receiving distributions of all vested
        amounts
        beginning at age 59 1⁄2. During the year ended March 31, 2007, the Company
        recognized compensation expense associated with the contributions to the
        FAPA
        Plan of $238,000.
 
 ***Retirement
        Health Plans***
 
 In
        conjunction with the Company’s collective bargaining agreement with its pilots,
        retired pilots and their dependents, they may retain medical benefits under
        the
        terms and conditions of the Health and Welfare Plan for Employees of Frontier
        Airlines, Inc. (the “Retirement Health Plan”) until age 65. The cost of retiree
        medical benefits are continued under the same contribution schedule as active
        employees.
 
 On
        March
        31, 2007, the Company adopted the recognition and disclosure provisions of
        SFAS
        158. SFAS 158 required the Company to recognized the funded status (i.e.,
        the
        difference between the fair value of plan assets and the projected benefit
        obligations) of its benefit plans in the March 31, 2007 consolidated balance
        sheet, with a corresponding adjustment to accumulated other comprehensive
        income, net of tax. The net adjustment to other comprehensive income at adoption
        was $36,000, ($22,000 net of tax) and represents the net unrecognized actuarial
        losses and unrecognized prior service costs. The effects of adopting the
        provisions of SFAS 158 on the Company’s consolidated balance sheet at March 31,
        2007, are presented in the following table.
 
 The
        following table provides a reconciliation of the changes in the benefit
        obligations under the Retirement Health Plan for the years ended March 31,
        2007
        and 2006:
 
 Reconciliation
        of benefit obligation:
  **2007**
                
                **2006****(In
                    thousands)**Obligation
                    at beginning of period
                
                $
                5,130
                
                $
                4,575Service
                    cost
                
                
                992
                
                
                954Interest
                    cost
                
                
                318
                
                
                271Benefits
                    paid
                
                
                (17
                )
                
                (117
                )Net
                    actuarial gain
                
                
                (633
                )
                
                (553
                )Obligation
                    at end of period
                
                $
                5,790
                
                $
                5,130
 
  F-31
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
  
 The
          following is a statement of the funded status as of March 31, 2007 and
          2006:
 
 **2007**
                
                **2006****(In
                    thousands)**Funded
                    status
                
                $
                (5,790
                )
                $
                (5,130
                )Unrecognized
                    net actuarial loss
                
                
                36
                
                
                680SFAS
                    158 adjustment
                
                
                (36
                )
                
                -Accrued
                    benefit liability
                
                $
                (5,790
                )
                $
                (4,450
                )
 
 Net
          periodic benefit cost of the Retirement Health Plan for the years ended
          March
          31, 2007, 2006 and 2005 include the following components.
 
 **2007**
                
                **2006**
                
                **2005**(**In
                    thousands)**Service
                    cost
                
                $
                992
                
                $
                954
                
                $
                933Interest
                    cost
                
                
                318
                
                
                271
                
                
                218Recognized
                    net actuarial loss
                
                
                11
                
                
                61
                
                
                89Net
                    periodic benefit cost
                
                $
                1,321
                
                $
                1,286
                
                $
                1,240
 
 Assumed
          healthcare cost trend rates have a significant effect on the amounts reported
          for the other post-retirement benefit plans. A 1% change in the healthcare
          cost
          trend rate used in measuring the accumulated post-retirement benefit obligation
          (“APBO”) at March 31, 2007 would have the following effects:
 
 **1%
                    increase**
                
                **1%
                    decrease********(In
                    thousands)**Increase
                    (decrease) in total service and interest cost
                
                $
                160
                
                $
                (159
                )Increase
                    (decrease) in the APBO
                
                $
                705
                
                $
                (611
                )
 
 The
          measurement dates used to determine the benefit measurements for the plan
          are
          March 31, 2007, 2006 and 2005. The Company used the following actuarial
          assumptions, which were based upon information available as of the beginning
          of
          the fiscal year, to account for this post-retirement benefit plan:
 
 **2007**
                **2006**
                **2005**Weighted
                    average discount rate
                6.10%
                6.25%
                6.00%Assumed
                    healthcare cost trend (1)
                9.00%
                9.50%
                9.50%
 
 (1)
                Trend
                    rates were assumed to reduce until 2015 when an ultimate rate
                    of 5.00% is
                    reached.
  F-32
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
  The
          estimated benefit payments expected to be paid by the Retirement Health
          Plan,
          and funded by the Company, for the next ten years are as follows (In
          thousands):
 
 Fiscal
                    year 2008
                
                $
                124Fiscal
                    year 2009
                
                $
                246Fiscal
                    year 2010
                
                $
                317Fiscal
                    year 2011
                
                $
                373Fiscal
                    year 2012
                
                $
                455Fiscal
                    year 2013 - 2017
                
                $
                3,376
 
 
 Certain
          other union employees are included in a multi-employer pension plan to
          which the
          Company makes contributions in accordance with the union contract. Such
          contributions are made on a monthly basis in accordance with the requirements
          of
          the union contract. Contributions to multi-employer pension plans were
          $558,000,
          $537,000 and $471,000 for the years ended March 31, 2007, 2006 and 2005,
          respectively.
 
 **14.
          Loss Per Share**
 
 The
          Company accounts for earnings per share in accordance with SFAS No. 128, *Earnings
          per Share.* Basic
          net income (loss) per share is computed by dividing net income by the weighted
          average number of common shares outstanding during the periods presented.
          Diluted net income per share reflects the potential dilution that could
          occur if
          outstanding stock option and warrants were exercised. In addition, diluted
          convertible securities are included in the denominator while interest on
          convertible debt, net of tax and capitalized interest, is added back to
          the
          numerator.
 
 During
          the years ended March 31, 2007 and 2006, interest on the Convertible Notes
          of
          $1,947,000 and $1,027,000, respectively, net of tax and capitalized interest,
          and shares of 8,900,000 and 2,804,000, respectively that would be issued
          upon
          assumed conversion of the Convertible Notes, were excluded from the calculation
          of diluted earnings per share because they were anti-dilutive. For the
          years
          ended March 31, 2007, 2006 and 2005, the common stock equivalents of the
          weighted average options, SARS, RSUs, and warrants outstanding of 830,000,
          1,884,000 and 1,706,000, respectively, were excluded from the calculation
          of
          diluted earnings per share because they were anti-dilutive. For the years
          ended
          March 31, 2007, 2006 and 2005, the weighted average options, SARs, and
          RSUs
          outstanding of 2,116,000, 1,560,750 and 1,633,000, respectively, were excluded
          from the calculation of diluted earnings per share because the exercise
          prices
          were greater than the average market price of the common shares.
  **15.
          Concentration of Credit Risk**
 
 The
          Company does not believe it is subject to any significant concentration
          of
          credit risk relating to receivables. At March 31, 2007 and 2006, 63.9%
          and 53.4%
          of the Company’s receivables related to tickets sold to individual passengers
          through the use of major credit cards, travel agencies approved by the
          Airlines
          Reporting Corporation, tickets sold by other airlines and used by passengers
          on
          Company flights, manufactures’ credits and the Internal Revenue Service.
          Receivables related to tickets sold are short-term, generally being settled
          shortly after sale or in the month following ticket usage.
  F-33
 **FRONTIER
            AIRLINES HOLDINGS, INC.**
 
 **Notes
            to the Consolidated Financial Statements, continued**
  
 **16.
          Commitments and Contingencies**
 
 ***Legal
          Proceedings and Insurance***
 
 From
          time
          to time, the Company is engaged in routine litigation incidental to our
          business. The Company believes there are no legal proceedings pending in
          which
          the Company is a party or of which any of our property may be subject to
          that
          are not adequately covered by insurance maintained by us, or which, if
          adversely
          decided, would have a material adverse affect upon its business or financial
          condition.
 
 During
          the year ended March 31, 2007, the Company recorded insurance proceeds
          of
          $868,000. These insurance proceeds were a result of final settlements of
          business interruption claims that covered lost profits when the Company’s
          service to Cancun, Mexico and New Orleans, Louisiana was disrupted by hurricanes
          during the fiscal year ended March 31, 2006.
 
 
 Recently,
          the Company’s services to and from Denver, Colorado were disrupted by two major
          snowstorms that impacted the Company’s service levels, revenues and operating
          costs. The Company maintains business interruption insurance to cover lost
          profits and has made claims to recover lost profits related to these events.
          The
          Company has not recorded any anticipated recoveries because a final settlement
          of the claims has not been reached.
 
 ***Purchase
          Commitments***
 
 As
          of
          March 31, 2007, the Company has remaining firm purchase commitments for
          23
          additional aircraft and one spare Airbus engine, which have scheduled delivery
          dates continuing through August 2010 .
          Under
          the terms of the purchase agreement, the Company is required to make scheduled
          pre-delivery payments for these aircraft. These payments are non-refundable
          with
          certain exceptions. As of March 31, 2007, the Company had made pre-delivery
          payments on future deliveries totaling $52,453,000 to secure these aircraft,
          of
          which $14,833,000 related to aircraft for which the Company has not yet
          secured
          financing and $37,620,000 related to aircraft for which the Company has
          secured
          financing.
 
 The
          Company has aggregate additional amounts due under these purchase commitments
          and estimated amounts for buyer-furnished equipment, spare parts for purchased
          aircraft and to equip the aircraft with LiveTV. The
          Company is not under any contractual obligations with respect to spare
          parts. In
          addition, the Company has commercial commitments under an agreement with
          SabreSonicTM for its
          SabreSonic passenger solution to power the reservations and check-in
          capabilities. The estimated aggregate amount for these purchase commitments
          is
          $721,788,000; $353,463,000 which is due in fiscal year 2008. The Company
          has
          obtained financing for all of its aircraft deliveries through February
          2008.
 
 ***Fuel
          Consortia***
 
 The
          Company participates in numerous fuel consortia with other carriers at
          major
          airports to reduce the costs of fuel distribution and storage. Interline
          agreements govern the rights and responsibilities of the consortia members
          and
          provide for the allocation of the overall costs to operate the consortia
          based
          on usage. The consortia (and in limited cases, the participating carriers)
          have
          entered into long-term agreements to lease certain airport fuel storage
          and
          distribution facilities that are typically financed through tax-exempt
          bonds
          (either special facilities lease revenue bonds or general airport revenue
          bonds), issued by various local municipalities. In general, each consortium
          lease agreement requires the consortium to make lease payments in amounts
          sufficient to pay the maturing principal and interest payments on the bonds.
          As
  F-34
 **FRONTIER
              AIRLINES HOLDINGS, INC.**
 
 **Notes
              to the Consolidated Financial Statements, continued**
 of
          March 31, 2007, approximately $562,757,000 principal amount of such bonds
          were secured by fuel facility leases at major hubs in which the Company
          participates, as to which each of the signatory airlines has provided indirect
          guarantees of the debt. The Company’s exposure is approximately $24,412,000
          principal amount of such bonds based on our most recent consortia participation.
          The Company’s exposure could increase if the participation of other carriers
          decreases of if other carriers default. The Company can exit all of their
          fuel
          consortia agreements with limited penalties  and
          certain advance notice requirements. The guarantees will expire when the
          tax-exempt bonds are paid in full, which ranges from 2011 to 2033. The
          Company
          has not recorded a liability on our consolidated balance sheets related
          to these
          indirect guarantees.
 
 ***Employees***
 
 As
          of
          March 31, 2007, the Company had 5,200 employees, of which approximately
          22% are
          represented by unions. Of those employees covered by collective bargaining
          agreements, approximately 3% presently have contracts under negotiation
          or
          becoming amendable in fiscal year 2008. The Company believes that mutually
          acceptable agreements can be reached with such employees, although the
          ultimate
          outcome of the negotiations is unknown at this time.
 
 **17.** **Selected
          Quarterly Financial Data (Unaudited)**
  **First**
                  
                  **Second**
                  
                  **Third**
                  
                  **Fourth****Quarter**
                  
                  **Quarter**
                  
                  **Quarter**
                  
                  **Quarter****2007**Revenues
                  
                  $
                  304,808
                  
                  $
                  312,470
                  
                  $
                  271,253
                  
                  $
                  282,418Operating
                      expenses
                  
                  $
                  294,127
                  
                  $
                  309,381
                  
                  $
                  289,719
                  
                  $
                  288,424Net
                      income (loss)
                  
                  $
                  3,957
                  
                  $
                  509
                  
                  $
                  (14,406
                  )
                  $
                  (10,430
                  )Loss
                      per share:Basic
                  
                  $
                  0.11
                  
                  $
                  0.01
                  
                  $
                  (0.39
                  )
                  $
                  (0.29
                  )Diluted
                  
                  $
                  0.10
                  
                  $
                  0.01
                  
                  $
                  (0.39
                  )
                  $
                  (0.29
                  )**2006**Revenues
                  
                  $
                  237,577
                  
                  $
                  259,953
                  
                  $
                  249,002
                  
                  $
                  254,990Operating
                      expenses
                  
                  $
                  238,800
                  
                  $
                  246,318
                  
                  $
                  260,666
                  
                  $
                  263,635Net
                      income (loss)
                  
                  $
                  (2,733
                  )
                  $
                  6,905
                  
                  $
                  (10,290
                  )
                  $
                  (7,853
                  )Loss
                      per share:Basic
                  
                  $
                  (0.08
                  )
                  $
                  0.19
                  
                  $
                  (0.28
                  )
                  $
                  (0.22
                  )Diluted
                  
                  $
                  (0.08
                  )
                  $
                  0.18
                  
                  $
                  (0.28
                  )
                  $
                  (0.22
                  )
 
    F-35