HomeMy WebLinkAboutAir Services Agreement with United Execution Version
AIR SERVICES AGREEMENT
BETWEEN UNITED AIRLINES AND
GALLATIN FOUNDATION,INC
This Air Services Agreement (this "Agreement") is entered into to be effective on the _ day of
October, 2019, by and between UNITED AIRLINES, INC. ("United"), a Delaware corporation having
its principal offices at 233 S. Wacker Drive, Chicago, Illinois 60606 and the GALLATIN
FOUNDATION, INC (the "Guarantor"), with principal offices located at 2000 Commerce Way,
Bozeman,Montana 59715.
WHEREAS, the Guarantor has an interest in promoting air service to and from Bozeman
Gallatin Field Airport("BZN");
WHEREAS, United is a certified air carrier conducting scheduled and unscheduled flight
operations within the U.S.and between the U.S. and a number of foreign locations;
WHEREAS, Guarantor desires to increase access to and from BZN from and to certain locations
where United operates so as to benefit the citizens of the surrounding community and Guarantor's interest
therein;
WHEREAS, Guarantor desires to secure new and/or additional air transportation service to BZN
and has requested that United commence operating scheduled non-stop air service between Newark
Liberty International Airport ("EWR") and BZN, and in consideration thereof Guarantor shall
compensate United and make certain concessions,as provided herein; and
WHEREAS, subject to the foregoing and to the obtainment of appropriate governmental
authorizations,United is willing to operate scheduled air service between EWR and BZN;
NOW,THEREFORE,in consideration of the mutual promises made herein,and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Schedule to be Operated.
A. United will operate scheduled round-trip air service to and from BZN as follows:
• Departs EWR at approximately 8:35 a.m. and arrives BZN at
approximately 11:44 a.m. and departs BZN at approximately 1:50 p.m.
and arrives EWR at approximately 8:00 p.m.
— Sunday operations only from January 6, 2020 through February
12, 2020 (both dates inclusive), with A319 aircraft with 8 First Class
seats and 120 Coach Class seats or similar.
Each flight between EWR and BZN described above is hereinafter to as the "BZN
Flight" and the flights between EWR and BZN are hereinafter, collectively, referred to as the
"BZN Flights"
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B. The parties acknowledge that due to operating conditions, including weather
related issues,United may operate the BZN Flights with fewer passengers than the capacity of the
aircraft used for operating the BZN Flights.
C. At its discretion, United may change the schedule or aircraft operating the BZN
Flights. The BZN Flights will be operated under the direction and control of United and
Guarantor shall have no right to make decisions with respect to the operation of the BZN Flights.
Without limiting the generality of the foregoing provisions of this paragraph and the provisions of
Section 2 below, United agrees to use good faith efforts to consider Guarantor's comments on
issues related to the marketing,pricing and revenue management of the BZN Flights.
D. For the avoidance of doubt, Guarantor acknowledges that if United operates (or
causes to be operated) flights to and from BZN in addition to the BZN Flights or operates flights
to and from BZN after the end of the Term(as defined in Section 9 of this Agreement, such other
flights shall not be governed by or operated under the terms of this Agreement.
2. Air Fares. United agrees to establish fares for the BZN Flights that are consistent with
United's current internal pricing strategies while remaining competitive within the airline industry
generally; provided, however, for the avoidance of doubt, United shall have no obligation to establish
fares for the BZN Flights that are the same as or similar to fares established by other airlines.
3. Financial Performance Guaranty. During the period that United is operating the BZN
Flights, the Guarantor will unconditionally guaranty that United will receive "Minimum Revenues" as
defined below for operating the BZN Flights equal to:
the sum of (i) US $62,024 per round-trip (the "Per Round-Trip Cost"}, (ii) US
$11.75 each way for each revenue passenger, and (iii) 5.5% of passenger revenue for
each BZN Flight.
The sum of(i), (ii), and (iii) above shall be referred to as the "Minimum Revenue"
and may also be referred to herein as the"Guaranteed Amount."
4. Revenues Guaranty Payment and MRG Cat).
A. For purposes of this Agreement, "Revenues" shall mean the total segment
revenues (including passenger revenue and surcharges, cargo revenue and any other revenue,but
excluding revenues estimated to be accrued with respect to and/or under this Agreement)received
by United from the operation of the BZN Flights, as measured by (and using the methodology
used by) United's Flight Profitability System("FPS"); provided, however, and for the avoidance
of doubt, "Revenues" shall exclude any revenues, such as MileagePlus Premium revenue, not
directly attributable to the operation of the BZN Flights.
B. To the extent that during the Term, United receives less than the Guaranteed
Amount in Revenue from the BZN Flights, Guarantor will pay to United an amount equal to the
difference between the Guaranteed Amount applicable to the BZN Flights and the amount of
Revenue actually received by United from operating the BZN Flights (the aggregate difference
being the"Guaranty Payment").
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C. The Guaranty Payment Guarantor will be required to pay for the BZN Flights for
the Term under this Agreement shall not exceed US $84,158 (the"MRG Cap').
D. To the extent that a Guaranty Payment is owed, the Guarantor will pay to United
in U.S. dollars the amount of the Guaranty Payment within thirty (30) days of receipt of an
invoice for the Guaranty Payment. Guarantor acknowledges that the invoice for payment of the
Guaranty Payment will be submitted after the end of the Term. Notwithstanding the foregoing or
anything contained herein to the contrary, in no case shall a failure or delay by United to render
or the timing of the rendering of an invoice for the Guaranty Payment affect Guarantor's
obligation to pay to United or United's right to receive from Guarantor the Guaranty Payment as
provided in this Agreement. The Guarantor's obligation to make payments in accordance with
the provisions of this Agreement shall survive the expiration or earlier termination of this
Agreement.
S. Letter of Credit. To secure Guarantor's performance under this Agreement, including
Guarantor's prompt payment of the Guaranty Payment, Guarantor will, on or prior to the date hereof,
provide to United an irrevocable standby letter of credit (in a form reasonably acceptable to United), or
other form of security acceptable to United, with a bank that is reasonably acceptable to United in the
amount of US $80,000, Such letter of credit will remain in effect during the Term of this Agreement and
until the later of May 15, 2020 or until all amounts due to United from Guarantor have been paid in full.
If Guarantor fails to make payment of the Guaranty Amount, as provided in this Agreement,United shall
have the right to draw upon such letter of credit (or other form of security approved by United and
provided by the Guarantor). The provisions of this Section 5 shall survive the expiration or earlier
termination of this Agreement.
6. Cost of Service.
A. United shall bear all costs of providing the service described and provided for in
this Agreement, including by way of illustration but not by way of limitation, the costs of all
required aircraft, equipment and facilities (including facilities for ticketing, baggage handling,
and like services); personnel; ground costs, including landing fees and use charges; credit card
commissions;travel agent commissions; deicing; and fuel ferrying.
B. The amounts/percentages referred to in Section 3 hereof are based on United's
assumed total cost of jet fuel (into plane) inclusive of all charges including taxes (the "Assumed
Baseline Fuel Cost")for the BZN Flights. The Assumed Baseline Fuel Cost for the BZN Flights
is $2.23 per gallon. Notwithstanding anything contained herein to the contrary, the parties will
adjust the Per Round-Trip Cost referenced in Section 3 and hence the Guaranteed Amount owed
on a cent for cent basis to the extent the monthly average cost of fuel varies, either up or down,
from the Assumed Baseline Fuel Cost to take into account changes in the price of fuel. At the
end of each month, United will determine, through FPS, the monthly average cost of jet fuel per
gallon for the BZN Flights (the "Average FPS Fuel Cost"). If the Average FPS Fuel Cost for
the applicable BZN Flights varies from the Assumed Baseline Fuel Cost,the Guaranteed Amount
will be adjusted as follows:
by $67 for the per penny difference between the Assumed Baseline Fuel Cost for the
E BZN Flights for a month and the Average FPS Fuel Cost for the BZN Flights for that
month.
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For example: If United determines that the Average FPS Fuel Cost in December for the
BZN Flights is $2.25 per gallon,then the Per Round-Trip Cost in December for the BZN
Flights will reflect an increase of$134 for each round-trip of the BZN Flights.
7. Marketing Support. Guarantor will work with United in good faith to market the BZN
Flights in a mutually beneficial cost-effective manner. In furtherance thereof, Guarantor will give United
prominent placement (such placement to be, in any event, no less than that received by any other carrier)
in any marketing campaign conducted by Guarantor to promote similar service to and from BZN.
8. Government Authority and Slot Availability. United's ability and willingness to operate the
BZN Flights is contingent on United's being able to maintain all necessary governmental approvals to
operate the BZN Flights, access to departure and arrival slots that are acceptable to United and ticket
counter and other facilities that are acceptable to United.
9. Term. The term (the "Term") of this Agreement shall commence on the date first written
above and shall continue, unless terminated earlier as provided herein, until midnight on February 12,
2020,
10. Termination Renegotiation and Flight Cancellation/Diversions,
A. In addition to the rights of either party enumerated elsewhere in this Agreement
or available to either party at law or in equity, either party may terminate this Agreement upon
written notice to the other party if the other party fails to perform any of its material obligations
under this Agreement and such failure continues un-remedied during the ten (10) day period
following the receipt by the other party of the notice of termination. The effective date of any
such termination shall be the date provided in the notice from the party terminating this
Agreement,but may not be less than the ten(10)day period provided above.
B. This Agreement will terminate if United ceases to hold the governmental
authorities or slots necessary to operate the BZN Flights.
C. If (i) United notifies Guarantor of a "Material Cost Circumstance", as defined
below, United may request a renegotiation of the amounts of Minimum Revenues and/or the
MRG Cap or (ii) Guarantor notifies United of a "Material Cost Circumstance", Guarantor may
request a renegotiation of the amounts of Minimum Revenues and/or the MRG Cap. If, within
ten (10) business days of such request, negotiations do not result in the establishment of revised
Minimum Revenues and/or MRG Cap amounts reasonably acceptable to United, United may
terminate this Agreement upon at least five (5) days' prior written notice to Guarantor, at which
time all of United's obligations under this Agreement shall cease. For the purposes of this
Agreement, "Material Cost Circumstance" means that, at any time during the Term of this
Agreement, the Spot Price for Kerosene-Type Jet fuel,U.S. Gulf Coast as published by the U,S.
Energy Information Administration in its weekly "Petroleum Status Report" exceeds $2.30 per
gallon.
D. United may request a renegotiation of the Per Round-Trip Cost and/or MRG Cap
if prior to or during the period that United is operating the BZN Flights (i) Guarantor markets
and/or subsidizes any additional flights to and/or from BZN other than those that currently
operated from BZN to EWR, LaGuardia Airport ("LGA") or John F. Kennedy International
Airport ("JFK") or (ii) any additional air service to/from BZN is announced to or from EWR,
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LGA or JFK airports. If,within ten (10)business days of such request,negotiations do not result
in terms reasonably acceptable to United,United may terminate this Agreement with at least five
(5) days' written notice to Guarantor, at which time all of United's obligations under this
Agreement shall cease.
E. United may terminate this Agreement upon no less than thirty (30) days' prior
written notice to the Guarantor if United believes the MRG Cap, as calculated by United's FPS,
may be achieved at any time (without regard to the timing of the monthly close-out of United's
FPS)during the Term.
F. United and Guarantor acknowledge that United may be required to cancel or
divert flights, including BZN Flights, due to mechanical problems, weather conditions, or other
circumstances beyond the reasonable control of United. If circumstances or conditions result in
canceled or diverted BZN Flights, United, at its sole cost, shall have the obligation to provide
alternate air and/or ground transportation to BZN, from the airport to which the applicable BZN
Flight is diverted for passengers who are ticketed on the BZN Flights to BZN in compliance with
United's standard procedures for such circumstances. The costs of any cancelled BZN Flights
shall not be included in the calculation of any Guaranteed Amount.
Except as otherwise provided in this Agreement, upon termination of this Agreement, neither
party shall have any obligation to the other party except for those obligations that may have accrued
through the date of such termination (including Guarantor's obligation to pay any Guaranty Payment
hereunder) and such obligations that,by the express terms of this Agreement or by their nature, survive
the expiration or earlier termination of this Agreement.
11. Remedies Upon Termination.
A A termination pursuant to Section 10 shall not limit United's right to pursue or
enforce any of its rights under this Agreement or otherwise.
B. Any termination or expiration of this Agreement shall not affect Guarantor's
obligation to pay United all amounts owed to United as of the effective date of such expiration or
termination.
C. In the event of a termination of this Agreement prior to its natural expiration for
any reason, in accordance with the provisions of this Agreement, Guarantor shall pay all amounts
owed to United,as of the effective date of the termination,within ten(10)days after receipt of an
invoice from United.
The provisions of this Section 11 shall survive the expiration or earlier termination of this
Agreement
12. Force Maiet ure. United shall have no obligation to operate the BZN Flights, where
cessation of such flights is due to an event or events beyond United's reasonable control, including,
without limitation, equipment failures,air traffic control,governmental actions,strikes and Acts of God.
13. Audit. Upon reasonable notice, the Guarantor, at its expense,shall have the right to audit
and inspect, at United's offices during normal business hours, United's books and records as they related
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to the determination of Revenue on the BZN Flights for the sole purpose of ensuring that, in determining
the amount of Revenue, United is utilizing the same methodology as is applied to all of United's similar
routes.
14. Confidentiality. No party hereto may disclose to a third party any part of this Agreement,
any information pertaining to the specific contents of this Agreement or any proprietary information
received from the other party pursuant to this Agreement unless such information shall have already
become publicly known without breach of this provision or unless required to do so pursuant to
applicable law,regulation, governmental order or subpoena, provided that in the case of any such law,
regulation, governmental order or subpoena the parties will consult in good faith as to how to proceed
with the aim of taking all appropriate action to limit the scope of such governmental order or subpoena
and/or obtain confidential treatment for any material required to be disclosed in response thereto. The
parties shall agree upon the timing and content of any public disclosure or press release relating to this
Agreement or the BZN Flights and no such public disclosure or press release shall be made or issued that
has not been agreed upon by the parties hereto. Neither party shall have the right to use the other party's
name,logo or other marks without the express written permission of the other party.
15. Indemnification and Hold Harmless. To the extent permitted by law, each party (the
"Indemnifying Party") shall indemnify and hold harmless the other party, and its officers, directors,
employees and agents(each an"Indemnified Party"and,collectively,the"Indemnified Parties") from
and against all liabilities, damages, losses, claims, suits, judgments, costs and expenses (including
reasonable attorneys' fees) of any nature whatsoever suffered by the Indemnified Party as a result of
claims by third parties arising out of the willful misconduct or negligent acts, errors or omissions of the
Indemnifying Party in connection with this Agreement, except to the extent caused by any Indemnified
Party's negligence or willful misconduct. The provisions of this Section 15 shall survive the expiration or
earlier termination of this Agreement.
16. Insurance.
A. United. At all times during the Term of this Agreement, United shall carry and
maintain, at its sole cost and expense, airline liability insurance in an amount not less than
$10,000,000 combined single limit,including advertisers liability with aggregate limits of at least
$10,000,000, USD for bodily injury (including death of any person) and any damage to
(including destruction of) property. United will furnish Guarantor within thirty (30) days of
Guarantor's request,an insurance certificate which: (i) indicates that the insurer has accepted and
insured United as provided in this Section 16.A. of this Agreement; (ii) includes the insurer's
commitment to give Guarantor not less than thirty (30)days' advance written notice in the event
of cancellation or adverse material change in coverage.
B. Guarantor. At all times during the Term of this Agreement,Guarantor shall carry
and maintain, at its sole cost and expense, commercial general liability insurance including
advertisers liability insurance in an amount not less than$10,000,000 USD combined single limit
covering all liability arising out of any bodily injury (including death of any person) and any
damage to (including destruction of) property. Guarantor will furnish United within thirty (30)
days of United's request, an insurance certificate(s) which (i) indicates that the insurer has
accepted and insured Guarantor as provided in this Section 16.B. of this Agreement; (ii) include
the insurer's commitment to give United not less than thirty(30)days' advance written notice in
the event of cancellation or adverse material change in coverage.
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17. Attorneys' Fees. In the event of any litigation between the parties hereto concerning this
Agreement and the enforcement hereof, the prevailing party in such action shall be entitled to receive
from the other party all reasonable costs and expenses, including reasonable attorneys' fees, incurred by
the prevailing party in such action.
18. Counterparts and Headings. This Agreement may be executed in several counterparts,
which together shall constitute one and the same instrument, and any party hereto may execute this
Agreement by pdf or other electronic signature, which shall be effective as an original signature for all
intents and purposes. The headings used to identify Section are for reference purposes only and shall
have no bearing on the interpretation of this Agreement.
19. Notice. All notices and other communications required or permitted under this
Agreement shall be in writing and shall be deemed given(A)upon delivery by hand, (B)one(1)day after
delivery to a commercial courier(example,FedEx)for next business day delivery properly addressed and
prepaid, or (C) within three (3) days after placement in the U.S. mail properly addressed and with
sufficient postage for certified mail, return receipt requested to the addresses set forth in the first
paragraph of this Agreement or such address as a party may designate in writing pursuant to this notice
provision (provided, however, and notwithstanding the foregoing, any invoices rendered by United may
be sent to Guarantor via electronic communication to Daryl Schliem at dschliem(&bozemanchauiber.com
and Scott Humphrey at Scott.Humphrey(i�bozemanairport.com).
20. Miscellaneous.
A. This Agreement constitutes the entire understanding between the parties with respect to
the subject matter hereof.
B. This Agreement or any provision of this Agreement may not be amended, modified or
waived except by a written agreement signed by both parties hereto.
C. This Agreement may not be assigned by either party hereto without the written consent of
the other party; provided that United may assign this Agreement without such consent to an air
carrier that is its corporate affiliate or successor without such consent.
D. THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAW OF THE STATE OF ILLINOIS. The
parties hereto represent that they have the authority to enter into this Agreement.
E. Each party hereto represents that it has the authority to enter into this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF,United and Guarantor have each caused this Agreement to be signed
and delivered by its duly authorized representative,all as of the date first written above.
Winter 2019/2020
UNITED AIRLINES,INC.
FH
By:
Ankit Gupta
Vice President Domestic Network
GALLATIN FOUNDAT ON,INC
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