Spirit Airlines, Inc. [SAVE] Filings

10-Q 1 save-20240630.htm 10-Q save-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

Form 10-Q

_______________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35186

_______________________________________________________________________

SPIRIT AIRLINES, INC.

(Exact name of registrant as specified in its charter)

_______________________________________________________________________


Delaware			38-1747023
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1731 Radiant Drive	Dania Beach	Florida	33004
(Address of principal executive offices)			(Zip Code)

(954) 447-7920

(Registrant’s telephone number, including area code)

____________________________________________________________________

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

Title of each class

Name of exchange on which registered

Trading Symbol

Common Stock, $0.0001 par value

New York Stock Exchange

SAVE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on July 24, 2024:


Class						Number of Shares
Common Stock, $0.0001 par value						109,518,296

Table of Contents

INDEX

Page No.

Part I. Financial Information

Item 1.

Condensed Consolidated Financial Statements (unaudited)

Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2024 and 2023

Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 2024 and 2023

Condensed Consolidated Balance Sheets – June 30, 2024 and December 31, 2023

Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2024 and 2023

Condensed Consolidated Statements of Shareholders' Equity - Three and Six Months Ended June 30, 2024 and 2023

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Glossary of Airline Terms

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II. Other Information

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

PART I. Financial Information

ITEM 1.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Spirit Airlines, Inc.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating revenues:
Passenger	$	1,253,803	$	1,410,061	$	2,493,113	$	2,737,534
Other	27,086		22,411		53,313		44,712
Total operating revenues	1,280,889		1,432,472		2,546,426		2,782,246

Operating expenses:
Aircraft fuel	407,296		391,032		813,647		878,743
Salaries, wages and benefits	418,378		407,705		849,861		796,890
Landing fees and other rents	116,064		106,487		222,782		203,832
Aircraft rent	125,339		92,101		240,545		177,368
Depreciation and amortization	84,486		80,542		165,832		158,533
Maintenance, materials and repairs	52,453		56,825		107,368		111,239
Distribution	45,923		50,701		91,099		98,718
Special charges (credits)	(381)		19,972		35,877		33,955
Loss (gain) on disposal of assets	(14,047)		802		(17,076)		7,902
Other operating	197,890		206,094		396,340		407,250
Total operating expenses	1,433,401		1,412,261		2,906,275		2,874,430

Operating income (loss)	(152,512)		20,211		(359,849)		(92,184)

Other (income) expense:
Interest expense	54,307		28,880		109,116		80,673
Loss (gain) on extinguishment of debt	—		—		(14,996)		—
Capitalized interest	(5,689)		(8,445)		(15,692)		(16,093)
Interest income	(12,169)		(15,962)		(25,759)		(31,396)
Other (income) expense	665		766		(65,825)		1,308

Total other (income) expense	37,114		5,239		(13,156)		34,492

Income (loss) before income taxes	(189,626)		14,972		(346,693)		(126,676)
Provision (benefit) for income taxes	3,301		17,321		(11,131)		(20,416)

Net income (loss)	$	(192,927)	$	(2,349)	$	(335,562)	$	(106,260)
Basic earnings (loss) per share	$	(1.76)	$	(0.02)	$	(3.07)	$	(0.97)
Diluted earnings (loss) per share	$	(1.76)	$	(0.02)	$	(3.07)	$	(0.97)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Spirit Airlines, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	(192,927)	$	(2,349)	$	(335,562)	$	(106,260)


Unrealized gain (loss) on short-term investment securities and cash and cash equivalents, net of deferred taxes of $3, $(102), $23 and $(51)	(15)		43		(127)		216
Interest rate derivative loss reclassified into earnings, net of taxes of $4, $(10), $10 and $2	14		53		28		86
Other comprehensive income (loss)	$	(1)	$	96	$	(99)	$	302
Comprehensive income (loss)	$	(192,928)	$	(2,253)	$	(335,661)	$	(105,958)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Spirit Airlines, Inc.

Condensed Consolidated Balance Sheets

(unaudited, in thousands)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	724,794	$	865,211
Restricted cash	120,579		119,400
Short-term investment securities	115,290		112,501
Accounts receivable, net	216,650		205,468



Prepaid expenses and other current assets	247,952		209,547
Total current assets	1,425,265		1,512,127

Property and equipment:
Flight equipment	3,775,788		3,961,785
Ground property and equipment	785,335		726,364
Less accumulated depreciation	(1,224,788)		(1,169,021)
	3,336,335		3,519,128
Operating lease right-of-use assets	4,156,810		3,561,028
Pre-delivery deposits on flight equipment	307,140		480,717

Deferred heavy maintenance, net	306,746		313,505
Other long-term assets	27,160		30,732
Total assets	$	9,559,456	$	9,417,237

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	70,014	$	42,098
Air traffic liability	496,985		383,751
Current maturities of long-term debt, net, and finance leases	142,815		315,580
Current maturities of operating leases	243,528		224,865

Other current liabilities	557,806		705,298
Total current liabilities	1,511,148		1,671,592

Long-term debt, net and finance leases, less current maturities	3,124,079		3,055,221
Operating leases, less current maturities	3,895,269		3,298,871
Deferred income taxes	96,450		107,761
Deferred gains and other long-term liabilities	122,848		149,450
Shareholders’ equity:
Common stock	11		11
Additional paid-in-capital	1,169,904		1,158,278
Treasury stock, at cost	(81,280)		(80,635)
Retained earnings (deficit)	(278,807)		56,755
Accumulated other comprehensive income (loss)	(166)		(67)
Total shareholders’ equity	809,662		1,134,342
Total liabilities and shareholders’ equity	$	9,559,456	$	9,417,237

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Spirit Airlines, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Six Months Ended June 30,
	2024		2023
Operating activities:
Net income (loss)	$	(335,562)	$	(106,260)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:


Losses reclassified from other comprehensive income	38		88
Share-based compensation	3,422		6,753
Allowance for doubtful accounts (recoveries)	823		6
Amortization of debt issuance costs	7,069		7,829
Depreciation and amortization	165,832		158,533
Accretion of 8.00% senior secured notes	2,105		2,105
Amortization of debt discount	5,767		2,378

Deferred income tax benefit	(11,345)		(20,998)

Loss (gain) on disposal of assets	(17,076)		7,902






Changes in operating assets and liabilities:

Accounts receivable, net	(12,005)		10,531

Deposits and other assets	(28,990)		(7,339)


Deferred heavy maintenance	(49,224)		(98,656)

Accounts payable	(2,599)		(500)
Air traffic liability	113,234		50,059

Other liabilities	(110,370)		119,309
Other	(1,112)		(1,028)
Net cash provided by (used in) operating activities	(269,993)		130,712



Investing activities:
Purchase of available-for-sale investment securities	(94,724)		(55,610)
Proceeds from the maturity and sale of available-for-sale investment securities	94,100		54,410
Proceeds from sale of property and equipment	161,581		36,151

Pre-delivery deposit payments on flight equipment	(1,836)		(70,648)
Pre-delivery deposit refunds on flight equipment	163,995		55,514
Capitalized interest	(10,849)		(10,863)
Assets under construction for others	395		—
Purchase of property and equipment	(60,551)		(130,979)
Net cash provided by (used in) investing activities	252,111		(122,025)
Financing activities:
Proceeds from issuance of long-term debt	123,500		—



Payments on debt obligations	(119,632)		(241,819)
Payments for the early extinguishment of debt	(124,007)		—
Payments on finance lease obligations	(177)		(293)



Reimbursement for assets under construction for others	(395)		—
Repurchase of common stock	(645)		(1,674)
Debt issuance costs	—		(555)
Net cash provided by (used in) financing activities	(121,356)		(244,341)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(139,238)		(235,654)
Cash, cash equivalents, and restricted cash at beginning of period (1)	984,611		1,465,742
Cash, cash equivalents, and restricted cash at end of period (1)	$	845,373	$	1,230,088
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest	$	83,671	$	69,466
Income taxes paid (received), net	$	7,050	$	1,197
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	249,778	$	186,225

Financing cash flows for finance leases	$	17	$	18
Non-cash transactions:
Capital expenditures funded by finance lease borrowings	$	274	$	145
Capital expenditures funded by operating lease borrowings	$	731,365	$	445,969
(1) The sum of cash and cash equivalents and restricted cash on the Company's condensed consolidated balance sheets equals cash, cash equivalents, and restricted cash in the Company's condensed consolidated statement of cash flows.

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Spirit Airlines, Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited, in thousands)


	Six Months Ended June 30, 2023
	Common Stock		Additional Paid-In-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2022	$	11	$	1,146,015	$	(77,998)	$	504,219	$	(596)	$	1,571,651
Convertible debt conversions	—		300		—		—		—		300
Share-based compensation	—		3,273		—		—		—		3,273
Repurchase of common stock	—		—		(1,673)		—		—		(1,673)

Changes in comprehensive income (loss)	—		—		—		—		206		206

Net income (loss)	—		—		—		(103,911)		—		(103,911)
Balance at March 31, 2023	$	11	$	1,149,588	$	(79,671)	$	400,308	$	(390)	$	1,469,846


Share-based compensation	—		3,480		—		—		—		3,480
Repurchase of common stock	—		—		(1)		—		—		(1)

Changes in comprehensive income (loss)	—		—		—		—		96		96
Net income (loss)	—		—		—		(2,349)		—		(2,349)
Balance at June 30, 2023	$	11	$	1,153,068	$	(79,672)	$	397,959	$	(294)	$	1,471,072


	Six Months Ended June 30, 2024
	Common Stock		Additional Paid-In-Capital		Treasury Stock		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2023	$	11	$	1,158,278	$	(80,635)	$	56,755	$	(67)	$	1,134,342

Derivative liability	—		8,204		—		—		—		8,204
Share-based compensation	—		3,080		—		—		—		3,080
Repurchase of common stock	—		—		(636)		—		—		(636)

Changes in comprehensive income (loss)	—		—		—		—		(98)		(98)

Net income (loss)	—		—		—		(142,635)		—		(142,635)
Balance at March 31, 2024	$	11	$	1,169,562	$	(81,271)	$	(85,880)	$	(165)	$	1,002,257


Share-based compensation	—		342		—		—		—		342
Repurchase of common stock	—		—		(9)		—		—		(9)

Changes in comprehensive income (loss)	—		—		—		—		(1)		(1)
Net income (loss)	—		—		—		(192,927)		—		(192,927)
Balance at June 30, 2024	$	11	$	1,169,904	$	(81,280)	$	(278,807)	$	(166)	$	809,662

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Spirit Airlines, Inc. (“Spirit”) and its consolidated subsidiaries (together with Spirit, the “Company”).

These unaudited condensed consolidated financial statements reflect all normal recurring adjustments that management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the audited annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 9, 2024.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect both 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 may differ from these estimates.

The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations as demand is generally greater in the second and third quarters of each year. The air transportation business is volatile and highly affected by economic cycles and trends.

The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business.

The Company has been impacted by an increasingly challenging pricing environment. Moreover, the expected short-term impact of certain policy changes, such as the removal of change and cancel fees, have negatively affected revenue performance. The Company expects these trends to continue for at least the remainder of 2024, which may create uncertainty in operating results.

The Company is currently in discussions with representatives of certain of its bondholders to negotiate the terms for refinancing or extending its existing 8.00% senior secured notes due in September 2025, as well as representatives of certain of its convertible notes due 2026. There is no guarantee that the Company will be able to extend or refinance its existing 8.00% senior secured notes due in September 2025 or its convertible notes due 2026. Absent additional amendment to the Company's agreement with its credit card processor, the failure to refinance or extend the specified minimum outstanding principal amount of the Company's 8.00% senior secured notes due 2025 by September 20, 2024, will result in an advancement of the termination date of such agreement from December 31, 2025 to December 31, 2024. That may, in turn, compel management to pursue further negotiations with the Company's credit card processor and other parties, or may require various additional measures to conserve or raise additional liquidity, including further recapitalizing or restructuring the business. In addition, the Company is pursuing plans to refinance the fixed-rate debt associated with the Company's owned aircraft. There can be no guarantee that such measures will be successful.

The Company has assessed the impact of the current pricing environment and its planned policy changes on its liquidity requirements over the next 12 months and has concluded that it is probable the Company will have sufficient liquidity to meet its future cash needs with cash and cash equivalents, cash flows from operations, the implementation of discretionary cost reduction strategies, execution of planned sale leaseback transactions related to owned aircraft and, in the event the specified minimum outstanding principal amount of its existing 8.00% senior secured notes due in September 2025 is not extended or refinanced prior to September 20, 2024, renegotiation of terms with the credit card processor and other parties to facilitate payment processing.

2. Recent Accounting Developments

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard improves reportable segment disclosure requirements by expanding annual and interim disclosure requirements for reportable segments, providing new segment disclosure requirements for entities with a single reportable segment, and adding other disclosure requirements. This standard is effective for the Company for fiscal years beginning January 1, 2024 and for interim periods beginning January 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact of the amendment, which is not expected to be material.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. This standard is effective for the Company for fiscal years, and interim periods within those years, beginning January 1, 2025, on a prospective or retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this new standard.

3. Current Developments

Termination of JetBlue Merger

On July 28, 2022, Spirit entered into an Agreement and Plan of Merger (the “Merger Agreement”) with JetBlue Airways Corporation, a Delaware corporation (“JetBlue”), and Sundown Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of JetBlue (“Merger Sub”), pursuant to which and subject to the terms and conditions therein, Merger Sub would have merged with and into Spirit, with Spirit continuing as the surviving entity (the “Merger”).

In accordance with the terms of the Merger Agreement, on October 26, 2022, JetBlue paid the Spirit stockholders an approval prepayment amount (the "Approval Prepayment Amount") of $2.50 per share. Additionally, beginning January 2023, and through the termination of the Merger Agreement on March 1, 2024, JetBlue paid on a monthly basis additional prepayments (the "Additional Prepayments") of $0.10 per share of common stock to all Spirit stockholders of record. Due to the payment of the Approval Prepayment Amount and each of the Additional Prepayment Amounts, in accordance with the terms of the respective debt indentures and warrant agreements, the Company announced related adjustments to the conversion rates of its convertible notes due 2025 and its convertible notes due 2026 as well as adjustments to the exercise prices and warrant shares of the PSP1, PSP2 and PSP3 warrants outstanding.

On March 1, 2024, Spirit, JetBlue and Merger Sub entered into a Termination Agreement (the “Termination Agreement”), pursuant to which the Merger Agreement was terminated, effective immediately. JetBlue ceased paying Additional Prepayment Amounts and, therefore, no further adjustments to the conversion rates of the Company's convertible notes due 2025 and convertible notes due 2026 or to the exercise prices and warrant shares of the PSP1, PSP2 and PSP3 warrants outstanding were made in connection with the Merger Agreement. As of June 30, 2024, the conversion rates of the convertible notes due 2025 and 2026 were 97.5929 and 25.3578 shares of voting common stock per $1,000 principal amount of convertible notes, respectively. In addition, as of June 30, 2024, the exercise prices of the PSP1, PSP2 and PSP3 warrants were $11.393, $19.761 and $29.496, respectively and the number of warrant shares issuable upon the exercise of the PSP1, PSP2 and PSP3 warrants were adjusted to 643,625.20, 170,230.67 and 99,526.95, respectively.

In addition, under the terms of the Termination Agreement, JetBlue paid the Company $69.0 million in cash, of which $66.7 million was recorded in other (income) expense within the Company's condensed consolidated statements of operations. The remaining $2.3 million was recorded as a reduction in accounts receivable, net within the Company's condensed consolidated balance sheets related to the amounts owed by JetBlue.

Pratt & Whitney

On July 25, 2023, RTX Corporation, parent company of Pratt & Whitney, announced that it had determined that a rare condition in the powdered metal used to manufacture certain engine parts will require accelerated inspection of the PW 1100G-JM geared turbo fan (“GTF”) fleet, which powers the Company's A320neo family of aircraft. The temporary removal of engines from service has driven and is expected to continue to drive a significant decrease in the Company's near-term growth projections. The Company has reduced capacity in amounts and timing commensurate with the currently scheduled removal and inspection of these impacted engines, however, the Company continues to assess the impact on its future capacity plans.

On March 26, 2024, the Company entered into an agreement (the “Agreement”) with International Aero Engines, LLC ("IAE"), an affiliate of Pratt & Whitney, pursuant to which IAE will provide the Company with a monthly credit, subject to certain conditions, as compensation for each of the Company's aircraft unavailable for operational service due to GTF engine issues from October 1, 2023 through the end of 2024. The credits are accounted for as vendor consideration in accordance with ASC 705-20 and are recognized as a reduction of the purchase price of the goods or services acquired from IAE during the period, which may include the purchase of maintenance, spare engines and short-term rentals of spare engines, based on an allocation that corresponds to the Company’s progress towards earning the credits. Pratt & Whitney agreed to issue the Company $93.9 million in credits related to the aircraft on ground ("AOG") days through June 30, 2024. During the three and six months ended June 30, 2024, the Company recognized $57.1 million and $75.0 million, respectively. Of the amounts recognized, as of June 30, 2024, the Company had recorded $67.8 million of credits as a reduction in the cost basis of assets purchased from IAE within flight equipment and deferred heavy maintenance, net on the Company's condensed consolidated balance sheets. During the three and six months ended June 30, 2024, the Company recorded $5.5 million and $7.1 million of these credits, respectively, on the Company's condensed consolidated statements of operations within maintenance, materials and repairs and aircraft rent. In addition, during the three and six months ended June 30, 2024, the Company recognized a benefit of $1.5 million in depreciation and amortization within the Company's condensed consolidated statements of operations related to credits recognized as a reduction of the costs basis of assets purchased from IAE. The difference remaining between the amount of credits Pratt & Whitney agreed to issue and the amount the Company has recognized will be recognized in the future as reductions in the cost basis of goods and services purchased from Pratt & Whitney.

The temporary removal of engines from service is expected to continue beyond 2024. The Company intends to discuss appropriate arrangements with Pratt & Whitney in due course for any of its aircraft that remain unavailable for operational service after December 31, 2024.

4. Revenue

Operating revenues are comprised of passenger revenues, which include fare and non-fare revenues, and other revenues. The following table shows disaggregated operating revenues for the three and six months ended June 30, 2024 and 2023.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Operating revenues:
Fare	$	531,652	$	647,344	$	1,051,594	$	1,256,205
Non-fare	722,151		762,717		1,441,519		1,481,329
Total passenger revenues	1,253,803		1,410,061		2,493,113		2,737,534
Other	27,086		22,411		53,313		44,712
Total operating revenues	$	1,280,889	$	1,432,472	$	2,546,426	$	2,782,246

The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by geographic region as defined by the DOT are summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
DOT—Domestic	$	1,141,272	$	1,244,818	$	2,235,762	$	2,420,554
DOT—Latin America	139,617		187,654		310,664		361,692
Total	$	1,280,889	$	1,432,472	$	2,546,426	$	2,782,246

The Company defers the amount for award travel obligations as part of loyalty deferred revenue within air traffic liability ("ATL") on the Company's condensed consolidated balance sheets and recognizes loyalty travel awards in passenger revenues as points are used for travel or expire unused.

As of June 30, 2024 and December 31, 2023, the Company had ATL balances of $497.0 million and $383.8 million, respectively. Substantially all of the Company's ATL is expected to be recognized within 12 months of the respective balance sheet date.

Loyalty Programs

The Company operates the Spirit Saver$ Club®, which is a subscription-based loyalty program that allows members access to unpublished, extra-low fares as well as discounted prices on bags and seats, shortcut boarding and security, "Flight Flex" flight modification product, and exclusive offers on hotels, rental cars and other travel necessities. The Company also operates the Free Spirit loyalty program, which attracts members and partners and builds customer loyalty for the Company by offering a variety of awards, benefits and services. Free Spirit loyalty program members earn and accrue points for dollars spent on Spirit for flights and other non-fare services as well as services from non-air partners such as retail merchants, hotels or car rental companies. Customers can also earn points based on their spending with the Company's co-branded credit card company with which the Company has an agreement to sell points. The Company's co-branded credit card agreement provides for joint marketing pursuant to which cardholders earn points by making purchases using co-branded cards. Points earned and accrued by Free Spirit loyalty program members can be redeemed for travel awards such as free (other than taxes and government-imposed fees), discounted or upgraded travel. The Company's agreement with the administrator of the Free Spirit affinity credit card program expires on December 31, 2028.

5. Loss (Gain) on Disposal

During the three and six months ended June 30, 2024, the Company recorded a gain of $14.0 million and $17.1 million, respectively, in loss (gain) on disposal of assets in the condensed consolidated statements of operations. Loss (gain) on disposal of assets for the three months ended June 30, 2024, included a $13.3 million gain recorded as a result of four aircraft sale leaseback transactions related to new aircraft deliveries completed during the three months ended June 30, 2024. Loss (gain) on disposal of assets for the six months ended June 30, 2024, included a $22.0 million gain recorded as a result of seven aircraft sale leaseback transactions related to new aircraft deliveries completed during the six months ended June 30, 2024.

During the three months ended June 30, 2024, the Company completed the sale of 5 A319 airframes and 9 A319 engines and recorded a related net gain of $0.6 million. During the six months ended June 30, 2024, the Company completed the sale of 10 A319 airframes and 24 A319 engines and recorded a related net loss of $3.3 million

In addition, during the first quarter of 2024, the Company completed five sale leaseback transactions (on aircraft previously owned by the Company) of which two resulted in operating leases and three would have been deemed finance leases resulting in failed sale leaseback transactions. As a result of the two sale leaseback transactions that resulted in operating leases, the Company recorded a related loss of $1.7 million within loss (gain) on disposal of assets during the six months ended June 30, 2024. Refer to Note 10, Leases for additional information on the five sale leaseback transactions.

During the three and six months ended June 30, 2023, the Company recorded a loss of $0.8 million and $7.9 million, respectively, in loss (gain) on disposal of assets in the condensed consolidated statements of operations. Loss (gain) on disposal of assets for the three months ended June 30, 2023 included a $1.2 million gain related to three aircraft sale leaseback transactions completed during the second quarter of 2023. Loss (gain) on disposal of assets for the six months ended June 30, 2023 included a $6.6 million loss related to five aircraft sale leaseback transactions completed during the first and second quarters 2023.

In addition, during the three months ended June 30, 2023, the Company completed the sale of three A319 airframes and four A319 engines and recorded a related net gain of $0.3 million. During the six months ended June 30, 2023, the Company completed the sale of 7 A319 airframes and 11 A319 engines and recorded a related net gain of $1.5 million. In addition, the Company recorded $2.3 million and $2.8 million in losses recorded during the three and six months ended June 30, 2023, respectively, related to the write-off of obsolete assets and other adjustments.

6. Special Charges (Credits)

During the three months ended June 30, 2024, the Company recorded $0.4 million in net credits within special charges (credits) on the Company's condensed consolidated statements of operations in legal, advisory and other fees related to the former Merger Agreement with JetBlue entered into on July 28, 2022 and terminated on March 1, 2024.

During the six months ended June 30, 2024, the Company recorded $27.9 million within special charges (credits) on the Company's condensed consolidated statements of operations in legal, advisory and other fees related to the former Merger Agreement with JetBlue. In addition, as part of the former JetBlue Merger Agreement, the Company implemented an employee retention award program (the "JetBlue Retention Award Program") during the third quarter of 2022. This amount was paid to the Company's employees in two installments. The first installment was paid in July 2023 and the second installment was paid in March 2024 upon termination of the former JetBlue Merger Agreement. During the six months ended June 30, 2024, the Company recorded $8.0 million within special charges (credits) on the Company's condensed consolidated statements of operations, related to the Company's JetBlue Retention Award Program.

During the three and six months ended June 30, 2023, the Company recorded $13.1 million and $20.4 million, respectively, within special charges (credits) on the Company's condensed consolidated statements of operations in legal, advisory and other fees related to the Merger Agreement with JetBlue entered into on July 28, 2022. In addition, during the three and six months ended June 30, 2023, the Company recorded $6.9 million and $13.6 million, respectively, within special charges (credits) on the Company's condensed consolidated statements of operations, related to the Company's JetBlue Retention Award Program.

7. Earnings (Loss) per Share

The following table sets forth the computation of basic and diluted earnings (loss) per common share:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands, except per-share amounts)
Numerator
Net income (loss)	$	(192,927)	$	(2,349)	$	(335,562)	$	(106,260)


Denominator
Weighted-average shares outstanding, basic	109,506		109,161		109,468		109,136
Effect of dilutive shares	—		—		—		—
Adjusted weighted-average shares outstanding, diluted	109,506		109,161		109,468		109,136
Earnings (loss) per share
Basic earnings (loss) per common share	$	(1.76)	$	(0.02)	$	(3.07)	$	(0.97)
Diluted earnings (loss) per common share	$	(1.76)	$	(0.02)	$	(3.07)	$	(0.97)

Anti-dilutive common stock equivalents excluded from the diluted loss per share calculation for any of the periods presented are not material.

8. Short-term Investment Securities

The Company's short-term investment securities are classified as available-for-sale and generally consist of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. These securities are stated at fair value within current assets on the Company's condensed consolidated balance sheets. Realized gains and losses on sales of investments, if any, are reflected in non-operating other (income) expense in the condensed consolidated statements of operations.

As of June 30, 2024 and December 31, 2023, the Company had $115.3 million and $112.5 million, respectively, in short-term available-for-sale investment securities. During the six months ended June 30, 2024 and 2023, these investments earned interest income at a weighted-average fixed rate of approximately 5.0% and 4.1%, respectively. For the three and six months ended June 30, 2024, an unrealized loss of $15 thousand and $127 thousand, net of deferred taxes, respectively, was recorded within accumulated other comprehensive income ("AOCI") related to these investment securities. For the three and six months ended June 30, 2023, an unrealized gain of $36 thousand and $221 thousand, net of deferred taxes, respectively, was recorded within AOCI related to these investment securities. For the three and six months ended June 30, 2024 and June 30, 2023, the Company had no realized gains or losses as the Company did not sell any of these securities during these periods. As of June 30, 2024 and December 31, 2023, $95 thousand and $32 thousand, net of tax, respectively, remained in AOCI, related to these instruments.

9. Accrued Liabilities

Other current liabilities as of June 30, 2024 and December 31, 2023 consisted of the following:


	June 30, 2024		December 31, 2023
	(in thousands)
Salaries, wages and benefits	$	173,592	$	187,723
Federal excise and other passenger taxes and fees payable	125,565		104,447
Airport obligations	94,452		125,278
Aircraft maintenance	53,191		58,800
Interest payable	26,185		24,732
Aircraft and facility lease obligations	18,929		36,115
Fuel	10,870		64,149
Other	55,022		104,054
Other current liabilities	$	557,806	$	705,298

10.Leases

The Company leases aircraft, engines, airport terminals, maintenance and training facilities, aircraft hangars, commercial real estate, and office and computer equipment, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, enplaned passengers, and airports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's condensed consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 4 years to 18 years for aircraft and up to 99 years for other leased equipment and property.

During the six months ended June 30, 2024, the Company took delivery of eight aircraft under direct operating leases, seven aircraft under sale leaseback transactions and purchased three spare engines with cash. As of June 30, 2024, the Company had a fleet consisting of 210 A320 family aircraft. As of June 30, 2024, the Company had 134 aircraft financed under operating leases with lease term expirations between 2025 and 2042. In addition, the Company owned 58 aircraft, of which 7 were unencumbered, as of June 30, 2024. The Company also had 18 aircraft that would have been deemed finance leases resulting in failed sale leaseback transactions. The related finance obligation is recorded within long-term debt in the Company's condensed consolidated balance sheets. Refer to Note 13, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment in the Company's condensed consolidated balance sheets. As of June 30, 2024, the Company also had 6 spare engines financed under operating leases with lease term expiration dates ranging from 2024 to 2033 and owned 31 spare engines, of which, as of June 30, 2024, 10 were unencumbered and 21 were pledged as collateral under the Company's revolving credit facility.

Aircraft rent expense consists of monthly lease rents for aircraft and spare engines under the terms of the Company's aircraft and spare engine lease agreements recognized on a straight-line basis. Supplemental rent, recorded within aircraft rent expense, is primarily made up of probable and estimable return condition obligations and lease return cost adjustments related to lease modifications and aircraft and engines purchased off lease.

Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition) when it is probable that such amounts will be incurred. When determining probability and estimated cost of lease return obligations, there are various other factors that need to be considered such as the contractual terms of the lease, the ability to swap engines or other aircraft components, current condition of the aircraft, the age of the aircraft at lease expiration, utilization of engines and other components, the extent of repairs needed at return, return locations, current configuration of the aircraft and cost of repairs and materials at the time of return. Management assesses the factors listed above and the need to accrue lease return costs throughout the lease as facts and circumstances warrant an assessment. The Company expects lease return costs will increase as individual aircraft lease agreements approach their respective termination dates and the Company begins to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.

As of June 30, 2024, the Company's finance lease obligations primarily related to the lease of computer equipment used by the Company's flight crews and office equipment. Payments under these finance lease agreements are fixed for terms ranging from four to five years. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within long-term debt and finance leases in the Company's condensed consolidated balance sheets.

The following table provides details of the Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company's condensed consolidated balance sheets as of June 30, 2024. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.


	Finance Leases		Operating Leases
			Aircraft and Spare Engine Leases		Property Facility Leases		Total Operating and Finance Lease Obligations
	(in thousands)
Remainder of 2024	$	134	$	259,723	$	3,021	$	262,878
2025	219		507,170		4,143		511,532
2026	141		480,856		3,994		484,991
2027	93		464,897		3,166		468,156
2028	67		444,130		1,754		445,951
2029 and thereafter	6		4,531,217		143,341		4,674,564
Total minimum lease payments	$	660	$	6,687,993	$	159,419	$	6,848,072
Less amount representing interest	65		2,575,753		132,862		2,708,680
Present value of minimum lease payments	$	595	$	4,112,240	$	26,557	$	4,139,392
Less current portion	215		239,973		3,555		243,743
Long-term portion	$	380	$	3,872,267	$	23,002	$	3,895,649

Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's condensed consolidated balance sheets are expected to be $3.8 million for the remainder of 2024 and none for 2025 and beyond.

The table below presents information for lease costs related to the Company's finance and operating leases:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Finance lease cost
Amortization of leased assets	$	78	$	102	$	152	$	261
Interest of lease liabilities	9		8		17		18
Operating lease cost
Operating lease cost (1)	124,703		91,146		241,866		175,361
Short-term lease cost (1)	10,975		11,464		21,137		22,369
Variable lease cost (1)	58,629		54,246		113,529		106,901
Total lease cost	$	194,394	$	156,966	$	376,701	$	304,910

(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's condensed consolidated statements of operations.

The table below presents lease terms and discount rates related to the Company's finance and operating leases:


	June 30, 2024		June 30, 2023
Weighted-average remaining lease term
Operating leases	15.0 years		15.0 years
Finance leases	3.2 years		2.5 years
Weighted-average discount rate
Operating leases	7.05	%	6.50	%
Finance leases	5.65	%	4.38	%

11. Commitments and Contingencies

Aircraft-Related Commitments and Financing Arrangements

The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. As of June 30, 2024, the Company's total firm aircraft orders consisted of 92 A320 family aircraft with Airbus S.A.S. ("Airbus"), including A320neos and A321neos, with deliveries expected through 2031. On April 3, 2024, the Company entered into Amendment No. 7 (the "Amendment") to the A320 NEO Family Purchase Agreement, dated as of December 20, 2019 (the "Airbus Purchase Agreement") with Airbus. The Amendment (i) defers all aircraft on order that are scheduled to be delivered in the second quarter of 2025 through the end of 2026 to 2030-2031, and (ii) adjusts the delivery periods of option aircraft from 2027-2029 to 2029-2031. As of June 30, 2024, the Company had secured financing for 9 aircraft scheduled for delivery from Airbus through 2030, which will be financed through sale leaseback transactions. As of June 30, 2024, the Company did not have financing commitments in place for the remaining 83 Airbus aircraft on firm order through 2031. However, the Company has a financing letter of agreement with Airbus which provides backstop financing for a majority of the aircraft included in the Airbus Purchase Agreement. The agreement provides a standby credit facility in the form of senior secured mortgage debt financing. The contractual purchase amounts for all aircraft orders from Airbus as of June 30, 2024 are included within the purchase commitments below. In addition, rent commitments related to aircraft that will be financed through sale leaseback transactions are included within the aircraft rent commitments below.

Direct Lease and PDP Transactions

On July 30, 2024, the Company entered into a direct lease transaction (the “Direct Lease Transaction”) with AerCap Holdings N.V. (“AerCap”) for 36 aircraft currently scheduled for delivery between 2027 and 2028 (the “Leased Aircraft”) which were originally part of the Company’s order book. Under the terms of the transaction, AerCap will assume the delivery positions for the Leased Aircraft and related pre-delivery payment ("PDP") obligations. AerCap has agreed to lease each Leased Aircraft to the Company upon delivery by Airbus. Each of the leases will have fixed rent payments.

In connection with the Direct Lease Transaction, on July 30, 2024, the Company entered into a transaction (the “PDP Transaction”) whereby an amount equal to certain PDPs with respect to 52 aircraft currently scheduled for delivery between 2029 and 2031 (the “Other Aircraft”) subject to the “Airbus Purchase Agreement” was paid to the Company (the “Funded PDPs”) at closing of the PDP Transaction. The Direct Lease Transaction and the PDP Transaction, in the aggregate, resulted in approximately $186 million of additional cash paid to the Company. Repayment of the Funded PDPs and related amounts with respect to the Other Aircraft will bear interest at a fixed rate.

During the third quarter of 2021, the Company entered into an Engine Purchase Support Agreement that requires the Company to purchase a certain number of spare engines in order to maintain a contractual ratio of spare engines to aircraft in the fleet. As of June 30, 2024, the Company is committed to purchase 16 PW1100G-JM spare engines, with deliveries through 2031.

As of June 30, 2024, purchase commitments for the Company's aircraft and engine orders, including estimated amounts for contractual price escalations and pre-delivery payments, were expected to be $54.3 million for the remainder of 2024, $215.7 million in 2025, $191.0 million in 2026, $1,102.5 million in 2027, $1,118.2 million in 2028 and $3,008.1 million in 2029 and beyond.

During the third quarter of 2019, the United States announced its decision to levy tariffs on certain imports from the European Union, including commercial aircraft and related parts. These tariffs include aircraft and other parts that the Company is already contractually obligated to purchase including those reflected above. In June 2021, the United States Trade Representative announced that the United States and European Union had agreed to suspend reciprocal tariffs on large civilian aircraft for five years, pending discussions to resolve their trade dispute.

In addition to the Airbus Purchase Agreement, as of June 30, 2024, the Company had agreements in place for 14 A321neos to be financed through direct leases with third-party lessors with deliveries scheduled from the remainder of 2024 through 2025. As of June 30, 2024, aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors and sale leaseback transactions were expected to be approximately $19.7 million for the remainder of 2024, $79.3 million in 2025, $85.7 million in 2026, $85.7 million in 2027, $85.7 million in 2028 and $971.5 million in 2029 and beyond.

Interest commitments related to the secured debt financing of 69 delivered aircraft as of June 30, 2024 were $43.0 million for the remainder of 2024, $81.8 million in 2025, $75.3 million in 2026, $67.9 million in 2027, $59.0 million in 2028 and $246.2 million in 2029 and beyond. As of June 30, 2024, interest commitments related to the Company's 8.00% senior secured notes, convertible debt financing, unsecured term loans and revolving credit facility were $48.2 million for the remainder of 2024, $89.4 million in 2025, $5.9 million in 2026, $3.4 million in 2027, $3.4 million in 2028, and $7.1 million in 2029 and beyond. For principal commitments related to the Company's debt financing, refer to Note 13, Debt and Other Obligations.

The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system, construction commitments related to its new headquarters campus and residential building and other miscellaneous subscriptions and services as of June 30, 2024: $25.8 million for the remainder of 2024, $38.4 million in 2025, $21.1 million in 2026, $17.8 million in 2027, $2.0 million in 2028 and $0.1 million in 2029 and thereafter. The Company's reservation system contract expires in 2028.

Litigation and Assessments

The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings and assessments to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. These subjective determinations are based on the status of such legal or regulatory proceedings, the merits of the Company's defenses, and consultation with legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company's current estimates. It is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to the Company's condensed consolidated results of operations, liquidity or financial condition.

In 2017, the Company was sued in the Eastern District of New York ("EDNY") in a purported class action, Cox, et al. v. Spirit Airlines, Inc., alleging state-law claims of breach of contract, unjust enrichment and fraud relating to the Company's practice of charging fees for ancillary products and services. In June 2023, the Company reached a tentative settlement in mediation for a maximum amount of $8.3 million. The EDNY issued a preliminary approval order on September 21, 2023, and the final approval hearing was held on December 11, 2023. The total amount to be paid depends on a number of factors, including participation of class members and any conditions on the settlement approved by the EDNY. As of December 31, 2023, the Company's best estimate of the probable loss associated with the settlement was $6.0 million recorded in other operating expenses within its condensed consolidated statements of operations. During the first quarter of 2024, the estimated probable loss recorded was reduced by $1.4 million. In addition, as of June 30, 2024, the Company has paid $3.2 million of the estimated probable loss. As of June 30, 2024, the remaining accrual of $1.3 million is recorded in other current liabilities within its condensed consolidated balance sheets.

On February 27, 2023, ALPA filed a grievance against the Company claiming that it violated the collective bargaining agreement (“CBA”) by excluding its pilots from the Company's retention award programs granted as part of the former Frontier Merger Agreement and the former JetBlue Merger Agreement. On September 8, 2023, the Company filed a motion to dismiss the grievance, as it does not believe that ALPA filed the grievance within the timeline set forth in the CBA. As of June 30, 2024, the grievance is postponed indefinitely. The potential outcomes of this claim cannot be determined, and an estimate of the reasonably possible loss or range of loss cannot be made.

Following an audit by the Internal Revenue Service ("IRS") related to the collection of federal excise taxes on optional passenger seat selection charges covering the period of the second quarter of 2018 through the fourth quarter of 2020, on March 31, 2022, the Company was assessed $34.9 million. On July 19, 2022, the assessment was reduced to $27.5 million. The Company believes it has defenses available and intends to challenge the assessment; therefore, the Company believes a loss in this matter is not probable and has not recognized a loss contingency.

Credit Card Processing Arrangements

The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage charges and other ancillary services by customers. As is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations.

As of June 30, 2024, the Company's credit card processors do not require the Company to maintain cash collateral, provided that the Company satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to place a holdback resulting in a commensurate reduction of unrestricted cash. As of June 30, 2024 and December 31, 2023, the Company's credit card processors were holding back no remittances.

The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and Spirit Saver$ Club® memberships as of June 30, 2024 and December 31, 2023, was $528.2 million and $408.3 million, respectively.

On July 2, 2024, the Company entered into a letter agreement that modifies its existing credit card processing agreement to, among other things, extend the term until December 31, 2025, including automatic extensions for two successive one-year terms, (subject to the right of either party to the agreement to opt out of any extension term by written notice to the other within a specified period of time prior to the commencement of any extension term); provided that if the Company’s senior secured notes due 2025 are not extended or refinanced by September 20, 2024, in a specified minimum outstanding principal amount thereof, then the term will revert to December 31, 2024. Based on the terms of the agreement, in July 2024, the Company deposited $200.0 million into a deposit account and deposited $50.0 million in pledged cash into a restricted account. The $200.0 million deposited into the deposit account is considered a compensating balance arrangement that does not legally restrict the Company's use of this cash. As such, the balance of the deposit account will be included in cash and cash equivalents and the $50.0 million in the restricted account will be included in restricted cash within the Company's condensed consolidated balance sheets going forward.

Employees

The Company has six union-represented employee groups that together represented approximately 84% of all employees as of June 30, 2024. The table below sets forth the Company's employee groups and status of the collective bargaining agreements.

Employee Groups

Representative

Amendable Date (1)

Percentage of Workforce

Pilots

Air Line Pilots Association, International ("ALPA")

March 2024

28%

Flight Attendants

Association of Flight Attendants ("AFA-CWA")

January 2026

44%

Dispatchers

Professional Airline Flight Control Association ("PAFCA")

October 2023

Ramp Service Agents

International Association of Machinists and Aerospace Workers ("IAMAW")

November 2026

Passenger Service Agents

Transport Workers Union of America ("TWU")

February 2027

Aircraft Maintenance Technicians

Aircraft Mechanics Fraternal Association (AMFA) (2)

N/A (2)

(1) Subject to standard early opener provisions.

(2) Collective bargaining agreement is currently under negotiation.

In August 2022, the Company's aircraft maintenance technicians ("AMTs") voted to be represented by AMFA as their collective bargaining agent. As of June 30, 2024, the Company had approximately 700 AMTs. In November 2022, AMFA notified the Company of its intent to negotiate a CBA and began negotiations. In October 2023, AMFA filed for mediation with the National Mediation Board (“NMB”). In May 2024, the parties began negotiations with a NMB mediation, and those discussions are ongoing.

In May 2023, PAFCA provided notice to the Company that it intends to amend its CBA with its dispatchers. The parties began negotiating changes to the CBA on July 12, 2023. In February 2024, PAFCA filed for mediation with the NMB. In April 2024, the parties began negotiations with a mediator. In July 2024, the Company reached an Agreement in Principle, which is subject to board approval and PAFCA member ratification.

In March 2024, ALPA provided notice to the Company that it intends to amend its CBA with its pilots. In July 2024, the parties began negotiations.

In addition, to ensure that the Company has the right level of resources to meet its reduced aircraft availability as a result of increased AOG days due to GTF engine issues and the Amendment entered into on April 3, 2024, it has decided to furlough approximately 240 pilots, effective September 1, 2024. The furlough is not likely to result in a substantial financial obligation to the Company's pilots.

12.Fair Value Measurements

Under ASC 820, "Fair Value Measurements and Disclosures," disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities.

Long-Term Debt

The estimated fair value of the Company's secured notes, term loan debt agreements and revolving credit facility have been determined to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes a discounted cash flow method to estimate the fair value of the Level 3 long-term debt. The estimated fair value of the Company's publicly and non-publicly held EETC debt agreements and the Company's convertible notes has been determined to be Level 2, as the Company utilizes quoted market prices in markets with low trading volumes to estimate the fair value of its Level 2 long-term debt.

The carrying amounts and estimated fair values of the Company's long-term debt at June 30, 2024 and December 31, 2023 were as follows:


	June 30, 2024				December 31, 2023				Fair Value Level Hierarchy
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(in millions)
8.00% senior secured notes	$	1,110.0	$	1,114.3	$	1,110.0	$	1,121.9	Level 3
Fixed-rate term loans	1,033.9		1,043.8		1,093.3		1,099.9		Level 3
Unsecured term loans	136.3		131.1		136.3		128.3		Level 3
2015-1 EETC Class A	245.6		228.2		256.6		230.8		Level 2
2015-1 EETC Class B	—		—		40.0		39.4		Level 2

2017-1 EETC Class AA	166.2		146.3		172.2		149.6		Level 2
2017-1 EETC Class A	55.4		48.0		57.4		48.5		Level 2
2017-1 EETC Class B	46.4		40.9		48.2		42.9		Level 2

4.75% convertible notes due 2025	25.1		18.3		25.1		42.3		Level 2
1.00% convertible notes due 2026	500.0		248.8		500.0		349.9		Level 2

Total long-term debt	$	3,318.9	$	3,019.7	$	3,439.1	$	3,253.5

Cash and Cash Equivalents

Cash and cash equivalents at June 30, 2024 and December 31, 2023 were comprised of liquid money market funds and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions.

Restricted Cash

Restricted cash is comprised of cash held in accounts subject to account control agreements or otherwise pledged as collateral against the Company's letters of credit and is categorized as a Level 1 instrument. As of June 30, 2024, the Company had $74.9 million in standby letters of credit secured by $76.2 million of restricted cash, of which $67.0 million were issued letters of credit. In addition, the Company had $44.4 million of restricted cash held in accounts subject to control agreements to be used for the payment of interest and fees on the 8.00% senior secured notes.

Short-term Investment Securities

Short-term investment securities at June 30, 2024 and December 31, 2023 were classified as available-for-sale and generally consisted of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. The Company's short-term investment securities are categorized as Level 1 instruments, as the Company uses quoted market

prices in active markets when determining the fair value of these securities. For additional information, refer to Note 8, Short-term Investment Securities.

Derivative Liability

The Merger Agreement with JetBlue modified the settlement terms for any conversions of the convertible notes due 2026 such that, the conversion option, which is an embedded derivative, did not qualify for the derivative accounting scope exception provided under ASC 815. As such, the Company bifurcated the fair value of the conversion option of the convertible notes due 2026 as a derivative liability with subsequent changes in fair value recorded in earnings. Refer to Note 13, Debt and Other Obligations, for additional information.

The Company recorded the fair value of the embedded derivative as a derivative liability within deferred gains and other long-term liabilities on its condensed consolidated balance sheets. The fair value of the derivative liability was estimated as the difference in value of the traded price of the convertible notes, including the conversion option and the value of the convertible notes in the absence of the conversion option (the debt component). The value of the debt component was estimated using a discounted cash flow analysis with a yield calibrated to the traded price of the convertible notes. The change in fair value of the derivative liability is recorded within interest expense on the Company's condensed consolidated statements of operations.

Upon the termination of the Merger, the conversion settlement terms reverted to the original settlement terms of the indenture. The Company performed a discounted cash flow analysis to reassess the fair value of the derivative liability as of March 3, 2024, the day prior to the announcement of the termination of the Merger Agreement. During the first quarter of 2024, the Company recorded $0.5 million in favorable mark to market adjustments related to the change in fair value of the derivative liability through the date of termination. During the three and six months ended June 30, 2023, the Company recorded $14.2 million and $12.5 million, respectively, in favorable mark to market adjustments related to the change in fair value of the derivative liability. The fair value of the derivative liability has been determined to be Level 2, as observable inputs were used to determine the fair value of derivative liability. For additional information, refer to Note 13, Debt and Other Obligations.

In addition, as of the date of the Termination Agreement, the Company reclassified the remaining derivative liability as of the Termination Agreement execution date of $8.2 million, net of taxes, to additional paid-in-capital within the Company's condensed consolidated balance sheets.

Assets and liabilities measured at gross fair value on a recurring basis are summarized below:


	Fair Value Measurements as of June 30, 2024
	Total		Level 1		Level 2		Level 3
	(in millions)
Cash and cash equivalents	$	724.8	$	724.8	$	—	$	—


Restricted cash	120.6		120.6		—		—
Short-term investment securities	115.3		115.3		—		—

Total assets	$	960.7	$	960.7	$	—	$	—




Total liabilities	$	—	$	—	$	—	$	—


	Fair Value Measurements as of December 31, 2023
	Total		Level 1		Level 2		Level 3
	(in millions)
Cash and cash equivalents	$	865.2	$	865.2	$	—	$	—
Restricted cash	119.4		119.4		—		—


Short-term investment securities	112.5		112.5		—		—

Total assets	$	1,097.1	$	1,097.1	$	—	$	—



Derivative liability	$	11.1	$	—	11.1		$	—
Total liabilities	$	11.1	$	—	$	11.1	$	—

The Company had no transfers of assets or liabilities between any of the above levels during the six months ended June 30, 2024 and the year ended December 31, 2023.

13. Debt and Other Obligations

Revolving credit facility

As of June 30, 2024 and December 31, 2023, the Company had a $300.0 million revolving credit facility, which was undrawn and available. Any amounts drawn on this facility are included in current maturities of long-term debt, net, and finance leases on the Company's condensed consolidated balance sheets. On July 2, 2024, the Company modified its revolving credit facility to extend the final maturity to September 30, 2026; provided that if the Company’s senior secured notes due 2025 are not extended or refinanced by June 20, 2025, or the Company’s convertible notes due 2026 are not extended or refinanced by February 12, 2026, in each case in a specified minimum outstanding principal amount thereof, then the facility expiration will be automatically shortened to June 21, 2025 or February 13, 2026, respectively.

Convertible senior notes due 2025

On May 12, 2020, the Company completed the public offering of $175.0 million aggregate principal amount of 4.75% convertible senior notes due 2025 ("convertible notes due 2025").

Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; and (4) at any time from, and including, February 18, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. As of June 30, 2024, the notes did not qualify for conversion by noteholders through September 30, 2024.

Based on the terms of the indenture, upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election. As of June 30, 2024, the conversion rate was 97.5929 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to a conversion price of approximately $10.25 per share of common stock). Refer to Note 3, Current Developments for additional information on the conversion rate.

The convertible notes due 2025 are recorded within current maturities of long-term debt, net, and finance leases on the Company's condensed consolidated balance sheets as of June 30, 2024.

Convertible senior notes due 2026

On April 30, 2021, the Company completed the public offering of $500.0 million aggregate principal amount of 1.00% convertible senior notes due 2026 ("convertible notes due 2026").

Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (4) if the Company calls such notes for redemption; and (5) at any time from, and including, February 17, 2026 until the close of business on the second scheduled trading day immediately before the maturity date. As of June 30, 2024, the convertible notes due 2026 did not qualify for conversion by noteholders through September 30, 2024.

Based on the terms of the indenture, the Company will have the right to elect to settle conversions in cash, shares of the Company’s common stock or a combination of cash and shares of common stock. Upon conversion of any notes, the Company will pay the conversion value in cash up to at least the principal amount of the notes being converted. The conversion value will be determined over an observation period consisting of 40 trading days. The initial conversion rate was 20.3791 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to an initial conversion price of approximately $49.07 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. As of June 30, 2024, the conversion rate was 25.3578 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to a conversion price of approximately $39.44 per share of common stock). Refer to Note 3, Current Developments for additional information on the adjusted conversion rate.

The Merger Agreement with JetBlue included settlement terms for any conversion of the convertible notes due 2026 to be paid in cash through the closing or termination of the Merger Agreement, causing the conversion option, which is an embedded derivative, not to qualify for the derivative accounting scope exception provided under ASC 815. As such, the Company bifurcated the fair value of the conversion option of the convertible senior notes due 2026 as a derivative liability with subsequent changes in fair value recorded in earnings. The Company recorded the fair value of the embedded derivative as a derivative liability within deferred gains and other long-term liabilities and a debt discount within long-term debt and finance leases, less current maturities on its condensed consolidated balance sheets. Upon the termination of the Merger, the conversion settlement terms reverted to the original settlement terms of the indenture. As such, as of the date of the Termination Agreement, the Company qualified for the derivative accounting scope exception provided under ASC 815. During March 2024, the Company derecognized the remaining derivative liability as of the Termination Agreement execution date of $8.2 million, net of taxes, as an adjustment to additional paid-in-capital within the Company's condensed consolidated balance sheets in accordance with ASC 815. The original debt discount will continue to be amortized through interest expense, using the effective interest rate method, over the remaining life of the instrument.

Since the convertible notes due 2026 are currently not convertible in accordance with the terms of the indenture governing such notes, the Company had $478.4 million, net of the related unamortized debt discount of $21.6 million, recorded within long-term debt and finance leases, less current maturities on the Company's condensed consolidated balance sheets as of June 30, 2024 related to its convertible notes due 2026. For additional information, refer to Note 12, Fair Value Measurements.

Long-term debt is comprised of the following:


	As of				As of
	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023
	(in millions)				(weighted-average interest rates)
8.00% senior secured notes due 2025	$	1,110.0	$	1,110.0	8.00	%	8.00	%
Fixed-rate loans due through 2039 (1)	1,033.9		1,093.3		6.44	%	5.83	%
Unsecured term loans due in 2031	136.3		136.3		1.00	%	1.00	%
Fixed-rate class A 2015-1 EETC due through 2028	245.6		256.6		4.10	%	4.10	%
Fixed-rate class B 2015-1 EETC due through 2024	—		40.0		4.45	%	4.45	%

Fixed-rate class AA 2017-1 EETC due through 2030	166.2		172.2		3.38	%	3.38	%
Fixed-rate class A 2017-1 EETC due through 2030	55.4		57.4		3.65	%	3.65	%
Fixed-rate class B 2017-1 EETC due through 2026	46.4		48.2		3.80	%	3.80	%

Convertible notes due 2025	25.1		25.1		4.75	%	4.75	%
Convertible notes due 2026	500.0		500.0		1.00	%	1.00	%


Long-term debt	$	3,318.9	$	3,439.1
Less current maturities	142.6		315.3
Less unamortized discounts, net	52.7		69.0
Total	$	3,123.6	$	3,054.8

(1) Includes obligations related to 18 aircraft recorded as a failed sale leaseback. Refer to Note 10, Leases for additional information.

During the three and six months ended June 30, 2024, the Company made scheduled principal payments of $72.8 million and $119.6 million, respectively, on its outstanding debt obligations. During the three and six months ended June 30, 2023, the Company made scheduled principal payments of $112.4 million and $241.8 million, respectively, on its outstanding debt obligations.

Extinguishment of Debt

During the first quarter of 2024, the Company early extinguished $139.6 million of outstanding fixed-rate term loans related to 5 aircraft. In connection with this debt extinguishment, the Company recorded a gain of $15.0 million within loss (gain) on extinguishment of debt on its condensed consolidated statement of operations for the three months ended March 31, 2024. In addition, during the first quarter of 2024, the Company completed five sale leaseback transactions (on aircraft previously owned by the Company) of which, two resulted in operating leases and three would have been deemed finance leases resulting in failed sale leaseback transactions. As a result of the three failed sale leaseback transactions, the Company recorded the related debt of $123.5 million within current maturities of long-term debt and finance leases and long-term debt and finance leases, less current maturities. Refer to Note 10, Leases for additional information on the five sale leaseback transactions.

At June 30, 2024, long-term debt principal payments for the next five years and thereafter were as follows:


	June 30, 2024
	(in millions)
Remainder of 2024	$	65.2
2025	1,267.5
2026	674.1
2027	154.7
2028	257.2
2029 and beyond	900.2
Total debt principal payments	$	3,318.9

Interest Expense

Interest expense related to long-term debt and finance leases consists of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024	2023
	(in thousands)
8.00% senior secured notes (1)	$	23,252	$	23,252	46,505	$	46,505
Fixed-rate term loans	17,503		9,339		35,355	18,901
Unsecured term loans	346		340		685	676
Class A 2015-1 EETC	2,505		2,730		5,117	5,554
Class B 2015-1 EETC	5		487		446	1,015
Class C 2015-1 EETC	—		—		—	777
Class AA 2017-1 EETC	1,403		1,521		2,823	3,042
Class A 2017-1 EETC	504		548		1,014	1,097
Class B 2017-1 EETC	440		477		885	953
Class C 2017-1 EETC	—		—		—	522
Convertible notes (2)	4,432		(14,087)		8,363	(7,041)

Finance leases	9		8		17	17
Commitment and other fees	421		412		835	827
Amortization of deferred financing costs	3,487		3,853		7,069