UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File No. 001-35186
Spirit Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
Miramar
2800 Executive Way
Florida
(Address of principal executive offices)
38-1747023
(I.R.S. Employer
Identification No.)
33025
(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
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value
SAVE
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T 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.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or
issued its audit report
Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $1.9 billion computed by reference to the last
sale price of the common stock on the New York Stock Exchange on June 30, 2023, the last trading day of the registrant’s most recently completed second
fiscal quarter. Shares held by each executive officer, director and by certain persons that own 10 percent or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other
purposes.
The number of shares of each registrant's classes of common stock outstanding as of the close of business on February 1, 2024:
Class
Number of Shares
Common Stock, $0.0001 par value per share
109,477,999
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for the registrant's 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this
Form 10-K to the extent stated herein. The Proxy Statement will be filed within 120 days of the registrant's fiscal year ended December 31, 2023.
PART I
TABLE OF CONTENTS
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . .
Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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ITEM 1.
BUSINESS
Overview
PART I
Spirit Airlines, Inc. ("Spirit Airlines"), headquartered in Miramar, Florida, offers affordable travel to value-conscious
guests ("Guests"). Our all-Airbus fleet is one of the youngest and most fuel efficient in the United States. During 2023, we
served 93 destinations in 15 countries throughout the United States, Latin America and the Caribbean. Our stock trades under
the symbol "SAVE" on the New York Stock Exchange ("NYSE").
Our ultra low-cost carrier, or ULCC, business model allows us to compete principally by offering Guests unbundled base
fares that remove components traditionally included in the price of an airline ticket. By offering Guests unbundled base fares,
we give Guests the power to save by paying only for the À La Smarte® options they choose, such as checked and carry-on bags,
advance seat assignments, priority boarding, refreshments and Wi-Fi. We record revenue related to these options as non-fare
passenger revenue, which is recorded within passenger revenues in our consolidated statements of operations.
Our History
We were founded in 1964 as Clippert Trucking Company, a Michigan corporation. We began air charter operations in
1990 and renamed ourselves Spirit Airlines, Inc. in 1992. In 1994, we reincorporated in Delaware, and in 1999 we relocated our
headquarters to Miramar, Florida.
Our Corporate Information
Our mailing address and executive offices are located at 2800 Executive Way, Miramar, Florida 33025, and our
telephone number at that address is (954) 447-7920. We are subject to the information and periodic reporting requirements of
the Securities Exchange Act of 1934, as amended, or Exchange Act, and, in accordance therewith, file periodic reports, proxy
statements and other information with the Securities and Exchange Commission or SEC. Such periodic reports, proxy
statements and other information are available on the SEC's website at http://www.sec.gov. We also post on the Investor
Relations page of our website, www.spirit.com, a link to our filings with the SEC, our Corporate Governance Guidelines and
Code of Business Conduct and Ethics, which applies to all directors and all our employees, and the charters of our Audit,
Compensation, Finance, Safety, Security and Operations and Nominating and Corporate Governance committees. Our filings
with the SEC are posted as soon as reasonably practical after they are filed electronically with the SEC. Please note that
information contained on our website is not incorporated by reference in, or considered to be a part of, this report.
Our Corporate Structure
In August 2020, Spirit Airlines formed several new subsidiaries; Spirit Finance Cayman 1 Ltd. (“HoldCo 1”), Spirit
Finance Cayman 2 Ltd. (“HoldCo 2), Spirit IP Cayman Ltd. (“Spirit IP”) and Spirit Loyalty Cayman Ltd. (“Spirit Loyalty”).
Each are Cayman Islands exempted companies incorporated with limited liability. Spirit IP and Spirit Loyalty are wholly-
owned subsidiaries of HoldCo 2 (other than the special share issued to the special shareholder, who granted a proxy to vote
such share to the collateral agent for the 8.00% senior secured notes (as defined herein)). HoldCo 1 and HoldCo 2 are special
purpose holding companies. HoldCo 2 is a wholly-owned direct subsidiary of HoldCo 1 (other than the special share issued to
the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes).
HoldCo 1 is a wholly-owned subsidiary of Spirit Airlines (other than the special share issued to the special shareholder, who
granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes).
Current Developments
JetBlue Merger
On July 28, 2022, we 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
will merge with and into Spirit, with Spirit continuing as the surviving entity (the “Merger”). As a result of the Merger, each
existing share of Spirit's common stock (except for dissenting shares, treasury stock, and shares of Spirit's common stock
owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be converted into the right to receive
an amount in cash per share, without interest, equal to (such amount, the “Merger Consideration”) (i) $33.50 minus (ii) (A)
$2.50 (the “Approval Prepayment Amount”), paid on October 26, 2022 following the adoption by Spirit stockholders of the
Merger Agreement on October 19, 2022, and (B) an additional monthly per share prepayment amount calculated as the product
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of $0.10 and the number of additional prepayments paid (or, in the event the Closing occurs after the record date of, but before
the payment date of any such additional prepayment, to the extent payable after the Closing), not to exceed $1.15 per share of
Spirit common stock, by JetBlue to Spirit stockholders in accordance with the Merger Agreement (each such payment is
referred to as an “Additional Prepayment” and such $0.10 amount is referred to as the “Additional Prepayment Amount”). If an
aggregate of $1.15 of Additional Prepayment Amounts has been paid out before consummation or termination of the Merger,
Spirit stockholders will thereafter continue to receive monthly Additional Prepayments, at the same $0.10 per month rate until
the transaction closes or the Merger Agreement is terminated. The Merger Agreement becomes unilaterally terminable by either
JetBlue or Spirit after July 24, 2024.
In accordance with the terms of the Merger Agreement, JetBlue is required to pay or cause to be paid the Approval
Prepayment Amount to Spirit stockholders as of the record date established by Spirit for the special meeting to approve the
Merger Agreement within five business days following such Spirit stockholder approval. Thereafter, on or prior to the last
business day of each month beginning after December 31, 2022 until the earlier of the Closing or termination of the Merger
Agreement, JetBlue will also pay or cause to be paid the Additional Prepayment Amount to Spirit stockholders as of a record
date not more than five business days prior to the last business day of such month. Payments made from JetBlue to Spirit
stockholders do not impact our results of operations or cash flows.
On October 19, 2022, Spirit’s stockholders approved the Merger Agreement at a special meeting of stockholders. The
record date for both Spirit's special meeting and the Approval Prepayment was September 12, 2022. In accordance with the
terms of the Merger Agreement, on October 26, 2022, JetBlue paid the Spirit stockholders the Approval Prepayment Amount of
$2.50 per share. Additionally, beginning January 2023, JetBlue paid on a monthly basis the Additional Prepayments of $0.10
per share of common stock to all Spirit stockholders as of each record date per the agreement.
Due to the payment of the Approval Prepayment and each of the Additional Prepayment Amounts, in accordance with
the terms of the respective debt indentures and warrant agreements, we announced related adjustments to the conversion rates of
our convertible notes due 2025 and our convertible notes due 2026 as well as adjustments to the exercise prices and warrant
shares of the outstanding warrants issued in connection with our participation in the Payroll Support Program authorized by the
CARES Act (“PSP1”), as extended by the Consolidated Appropriations Act of 2021 (“PSP2”) and the American Rescue Plan
Act (“PSP3”). As of December 31, 2023, the conversion rates of the convertible notes due 2025 and 2026 were 94.9262 and
24.6649 shares of voting common stock per $1,000 principal amount of convertible notes, respectively. In addition, as of
December 31, 2023, the exercise prices of the PSP1, PSP2 and PSP3 warrants were $11.663, $20.229 and $30.196,
respectively, and the number of warrant shares issuable upon the exercise of the PSP1, PSP2 and PSP3 warrants were adjusted
to 628,725.19, 166,292.37 and 97,219.73, respectively.
Completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among other
things: (1) approval of the transactions by Spirit’s stockholders, which was received on October 19, 2022; (2) receipt of
applicable regulatory approvals, including approvals from the U.S. Federal Communications Commission, the U.S. Federal
Aviation Administration and the U.S. Department of Transportation and the expiration or early termination of the statutory
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other competition laws, and
other required regulatory approvals; (3) the absence of any law or order prohibiting the consummation of the transactions; and
(4) the absence of any material adverse effect (as defined in the Merger Agreement) on Spirit.
On March 7, 2023, the U.S. Department of Justice (“DOJ”) filed suit to block the Merger and a trial was held in late
2023. On January 16, 2024, the United States District Court for the District of Massachusetts (the “District Court”) granted a
permanent injunction against the Merger (the "Injunction"). On January 19, 2024, Spirit and JetBlue filed a notice of appeal to
reverse the District Court's decision and allow Spirit and JetBlue to complete the Merger. On January 25, 2024, JetBlue made a
public filing stating that certain closing conditions required by the Merger Agreement may not be satisfied prior to the outside
dates set forth in the Merger Agreement and, accordingly, the Merger Agreement may be terminable on and after January 28,
2024. We do not believe there is a basis for terminating the Merger Agreement, and we will continue to abide by all of our
obligations under the Merger Agreement. On January 29, 2024, Spirit and JetBlue filed a request with the U.S. Court of
Appeals for the First Circuit (the "Court of Appeals") seeking an expedited schedule for their appeal. On February 2, 2024, the
Court of Appeals granted our motion, stating it would hear arguments in June 2024.
In addition, Spirit has agreed, among other things, that neither it nor any of its directors, officers, employees and
representatives will (1) solicit alternative transactions, (2) participate in any discussions or negotiations relating to alternative
transactions, (3) furnish any non-public information in connection with alternative transactions or (4) enter into any agreement
relating to alternative transactions, except under limited circumstances described in the Merger Agreement. However, in certain
circumstances, Spirit may terminate the Merger Agreement to enter into a definitive agreement for a Superior Proposal (as
5
defined in the Merger Agreement). In addition, Spirit, JetBlue and Merger Sub each make certain customary representations,
warranties and covenants, as applicable, in the Merger Agreement.
The Merger Agreement contains certain termination rights for Spirit and JetBlue, including, without limitation, a right
for either party to terminate if the Merger is not consummated on or before July 28, 2023 (the "Outside Date"), subject to
certain automatic extensions up to July 24, 2024 if needed to obtain regulatory approvals. Since all regulatory approvals
required to consummate the Merger were not obtained as of July 28, 2023 and January 28, 2024, the current Outside Date has
been automatically extended to July 24, 2024. Upon termination of the Merger Agreement under specified circumstances, Spirit
will be required to pay JetBlue a termination fee of $94.2 million. Upon the termination of the Merger Agreement by JetBlue
because of a material uncured breach by Spirit of the Merger Agreement, Spirit will be required to pay JetBlue an amount equal
to the sum of all amounts paid by JetBlue to the Spirit stockholders. Upon the termination of the Merger Agreement for failure
to obtain antitrust regulatory clearance, JetBlue will be required to pay (i) to Spirit, $70.0 million, and (ii) to the Spirit
stockholders, the excess of (A) $400.0 million minus (B) the sum of the Approval Prepayment Amount and all Additional
Prepayment Amounts previously paid by JetBlue to the Spirit stockholders.
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 PW1100G-
JM ("GTF") fleet, which powers our A320neo family of aircraft.
In September 2023, Pratt & Whitney notified us that all the geared turbofan GTF neo engines in our fleet, including the
engines slotted for future aircraft deliveries, for a yet to be determined period, are subject to the inspection and possible
replacement, of the powdered metal high-pressure turbine and compressor discs. In addition, Pratt & Whitney issued a special
instruction ("SI"), requiring accelerated engine removals and inspections covering the initial tranche of operational engines, no
later than September 15, 2023. As of December 31, 2023, in accordance with the SI issued by Pratt & Whitney, we have
removed five engines from service, three of which are currently awaiting induction for inspection.
For the remaining engines, Pratt & Whitney has provided an initial analysis on an inspection and removal schedule for
these engines. In addition, to the 5 engines removed from service, we had 12 neo aircraft grounded as of December 31, 2023 for
reliability, durability, and inspection requirements combined. For 2024, we had an average of 13 grounded neo aircraft in
January 2024, and we expect the average number of grounded neo aircraft will increase to approximately 40 in December 2024,
averaging approximately 25 grounded for the full year. We currently estimate the majority of affected engines will require
removal and inspection in 2024, but will continue through 2026, based on service bulletins ("SB") issued by Pratt & Whitney
and related airworthiness directives issued by the FAA.
The temporary removal of engines from service is expected to drive a significant decrease in our near-term growth
projections. We have reduced capacity in amounts and timing commensurate with the initially scheduled removal and
inspection of these impacted engines; however, we continue to assess the impact on our future capacity plans. Pratt & Whitney
stated that it is focused on addressing the challenges arising from the powdered metal manufacturing issue and will proactively
take steps to support and mitigate the operational impact to its customers. We are in discussions with Pratt & Whitney regarding
compensation for the loss of utilization; however, the amount, timing or structure of the compensation that will be agreed upon
is not yet known.
Retirement of A319 Aircraft
We operate a single-fleet type of Airbus A320-family aircraft that is one of the youngest in the United States. During the
fourth quarter of 2022, we made the decision to accelerate the retirement of 29 of our A319 aircraft. During the twelve months
ended December 31, 2023, we completed the sale of 12 A319 airframes and 20 A319 engines. The remaining A319 aircraft had
an average age of 16.9 years as of December 31, 2023. Excluding the A319 aircraft to be sold, the average age of our fleet
would have been 5.5 years as of December 31, 2023. In addition, we are scheduled to take delivery of 121 new Airbus A320-
family aircraft through 2029, potentially making ours the youngest fleet in the United States. Refer to “Notes to Consolidated
Financial Statements— 1. Summary of Significant Accounting Policies" for additional information.
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or
may adversely affect our business, financial condition, results of operations, cash flows and prospects. These risks are discussed
more fully in Item 1A. Risk Factors herein. These risk factors include, but are not limited to, the following:
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The impact on our business of the Merger and our ability to complete the Merger in a timely manner;
The competitiveness of our industry;
Volatility in fuel costs or significant disruptions in the supply of fuel;
Adverse domestic or global economic conditions on our business, results of operations and financial condition,
including our ability to obtain financing or access capital markets;
Factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, major
construction or improvements at airports, adverse weather conditions, increased security measures, new travel related
taxes or the outbreak of disease;
Increased labor costs, union disputes, employee strikes and other labor-related disruption;
Our maintenance costs, which will increase as our fleet ages;
The extensive regulation by the FAA, DOT, TSA and other U.S. and foreign governmental agencies to which we are
subject;
Our reliance on technology and automated systems to operate our business;
Our reliance on third-party service providers to perform functions integral to our operations, including for ground
handling, fuel, catering, passenger handling, maintenance, reservations and other services;
Our reliance on a limited number of suppliers for our aircraft and engines;
Reduction in demand for air transportation, or governmental reduction or limitation of operating capacity, in the
domestic U.S., Caribbean or Latin American markets;
The success of the Free Spirit Program and the Spirit Saver$ Club®; and
Our significant amount of aircraft-related fixed obligations and additional debt that we have incurred, and may incur in
the future.
Our Business Model
Our ULCC business model provides Guests low, unbundled base fares with a range of optional services, allowing Guests
the freedom to choose only the options they value. The success of our model is driven by our low-cost structure, which has
historically, up to 2020, allowed us to maintain high profit margins while offering low base fares. Our low-cost structure is
primarily driven by having a high fleet utilization. Throughout most of 2023, we were unable to achieve historical high levels of
fleet utilization primarily due to pilot and industry infrastructure constraints. In the post-pandemic period, lower utilization as
well as wage and other inflationary pressures, have increased our operating costs. In addition, the industry has experienced
capacity increases, leading to increased competition in the markets we serve and resulting in a decrease on our average fares.
We are focused on value-conscious travelers who pay for their own travel, and our business model is designed to deliver
what our Guests want: low fares and a great experience. We use low fares to address underserved markets, which helps us to
increase passenger volume and load factors on the flights we operate. We also have high-density seating configurations on our
aircraft and a simplified onboard product designed to lower costs. High passenger volumes and load factors help increase our
sales of ancillary products and services, which in turn allows us to reduce the base fare we offer even further. We strive to be
recognized by our Guests and potential Guests as the low-fare leader in the markets we serve.
We compete based on total price. We believe that we and our Guests benefit when we allow our Guests to know the total
price of their travel by breaking out the cost of optional products or services. We allow our Guests to see all available options
and their respective prices prior to purchasing a ticket, and this full transparency illustrates that our total price, including the
options selected is lower, on average, than other airlines.
Through branded campaigns, we educate the public on how our unbundled pricing model works, how it provides a choice
on how they spend their money and how it saves them money compared to other airlines. We show our commitment to
delivering the best value in the sky by continuing to make improvements to the Guest experience, including a freshly updated
cabin interior with ergonomically-designed seats and self bag-tagging in most airports to reduce check-in processing time.
Our Strengths
We believe we compete successfully in the airline industry by leveraging the following demonstrated business strengths:
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Ultra Low-Cost Structure. Our unit operating costs are among the lowest of all airlines operating in the United States.
We believe this unit cost advantage helps protect our market position and enables us to offer some of the lowest base fares in
our markets and support continued growth. Our operating costs per available seat mile ("CASM") of 10.52 cents in 2023 was
significantly lower than those of the major domestic network carriers and among the lowest of the domestic low-cost carriers.
We achieve these low unit operating costs in large part due to:
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high aircraft utilization;
high-density seating configurations on our aircraft along with a simplified onboard product designed to lower costs;
• minimal hub-and-spoke network inefficiencies;
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highly productive workforce;
opportunistic outsourcing of operating functions;
operating a single-fleet type of Airbus A320-family aircraft that is one of the youngest and most fuel efficient in the
United States and operated by common flight crews;
reduced sales, marketing and distribution costs through direct-to-consumer marketing;
efficient flight scheduling, including minimal ground times between flights; and
a company-wide business culture that is keenly focused on driving costs lower.
Innovative Revenue Generation. We execute our innovative, unbundled pricing strategy to generate significant non-
ticket revenue, which enables our passengers to identify, select and pay for only the products and services they want to use. In
implementing our unbundled strategy, we have grown non-ticket revenue per passenger flight segment from approximately $5
in 2006 to $69 in 2023 generally by:
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charging for checked and carry-on baggage;
passing through most distribution-related expenses;
charging for premium seats and advance seat selection;
applying dynamic pricing for ancillary products and services;
• maintaining consistent ticketing policies, including service charges for changes and cancellations;
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•
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generating subscription revenue from our Spirit Saver$ Club®;
deriving brand-based revenues from proprietary services, such as our Free Spirit affinity credit card program;
offering a combination of our most popular Á La Smarte® items at a discount, such as boost-it and bundle-it combos;
offering third-party travel products (travel packages), such as hotel rooms, ground transportation (rental and hotel
shuttle products) and attractions (show or theme park tickets) packaged with air travel on our website; and
selling third-party travel insurance through our website.
Our Network. We have developed a substantial network of destinations in U.S. domestic markets, targeted growth
markets in the Caribbean and Latin America and high-volume routes flown by price-sensitive travelers. We seek to balance
growth between large domestic markets, large leisure destinations and opportunities in the Caribbean and Latin America
according to current economic and industry conditions.
Experienced International Operator. We believe we have substantial experience in foreign aviation, security and
customs regulations, local ground operations and flight crew training required for successful international and overwater flight
operations. All of our aircraft are certified for overwater operations. We believe we compete favorably against other low-cost
carriers because we have been conducting international flight operations since 2003 and have developed substantial experience
in complying with the various regulations and business practices in the international markets we serve. During 2023, 2022 and
2021, no revenue from any one foreign country represented greater than 4% of our total passenger revenue. We attribute
operating revenues by geographic region based upon the origin and destination of each passenger flight segment.
Loyalty Programs
We operate 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. We also operate the Free Spirit
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loyalty program (the “Free Spirit Program”), which attracts members and partners and builds customer loyalty for us by
offering a variety of awards, benefits and services. Free Spirit Program members earn and accrue points for dollars spent on our
flights and services from non-air partners such as retail merchants, hotels or car rental companies or by making purchases with
credit cards issued by partner banks and financial services providers. Points earned and accrued by Free Spirit Program
members can be redeemed for travel awards such as free (other than taxes and government-imposed fees), discounted or
upgraded travel.
Route Network
During 2023, our route network included over 420 markets served by 93 airports throughout the United States, Latin
America and the Caribbean. For more details on the destinations to which we fly, refer to our route map on our website,
www.spirit.com/en/route-map.
Our network expansion targets underserved and/or overpriced markets. We employ a rigorous process to identify
opportunities to deploy new aircraft where we believe they will be most profitable. To monitor the profitability of each route,
we analyze weekly and monthly profitability reports as well as near-term forecasting.
Competition
The airline industry is highly competitive. The principal competitive factors in the airline industry are fare pricing, total
price, flight schedules, aircraft type, passenger amenities, number of routes served from a city, customer service, safety record
and reputation, code-sharing relationships and loyalty programs and redemption opportunities. We typically compete in markets
served by traditional U.S. network airlines, and other low-cost carriers and ULCCs, and, to a lesser extent, regional airlines.
As of December 31, 2023, our top three largest network overlaps, as measured by overlapping available seat miles in
metro markets, are with Southwest Airlines, American Airlines and Frontier Airlines. Our principal competitive advantage is
our relative cost advantage which allows us to offer low base fares. In 2023, our unit operating costs were among the lowest in
the U.S. airline industry. In most operating environments, we believe our low unit costs coupled with our relatively stable non-
ticket revenues allow us to price our fares at levels where we can be profitable while our primary competitors cannot.
The airline industry is particularly susceptible to price discounting because, once a flight is scheduled, airlines incur only
nominal incremental costs to provide service to passengers occupying otherwise unsold seats. The expenses of a scheduled
aircraft flight do not vary significantly with the number of passengers carried and, as a result, a relatively small change in the
number of passengers or in pricing could have a disproportionate effect on an airline’s operating and financial results. Price
competition occurs on a market-by-market basis through price discounts, changes in pricing structures, fare matching, target
promotions and loyalty initiatives. Airlines typically use discount fares and other promotions to stimulate traffic during
normally slower travel periods to generate cash flow and to maximize TRASM. The prevalence of discount fares can be
particularly acute when a competitor has excess capacity that it is unable to fill at higher rates. A key element to our competitive
strategy is to maintain very low unit costs in order to permit us to compete successfully in price-sensitive markets.
Seasonality
Our business is subject to significant seasonal fluctuations. We generally expect demand to be greater in the second and
third quarters each year due to more vacation travel during these periods, as compared to the rest of the year. The air
transportation business is also volatile and highly affected by economic cycles and trends.
Distribution
The majority of our tickets are sold through direct channels, including online via www.spirit.com, our call center and our
airport ticket counters, with www.spirit.com being the primary channel. We also partner with a number of third parties to
distribute our tickets, including online and traditional travel agents and electronic global distribution systems.
Customers
We believe our customers are primarily leisure travelers who are paying for their own ticket and who make their purchase
decision based largely on value. By maintaining a low-cost structure, we have historically been able to successfully sell tickets
at lower fares while maintaining a strong profit margin. However, industry capacity increases have led to increased competition
in the markets we serve and resulted in a decrease in our average fares.
Customer Service
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We are committed to taking care of our customers. We believe focusing on customer service in every aspect of our
operations, including personnel, flight equipment, in-flight and ancillary amenities, on-time performance, flight completion
ratios, and baggage handling will strengthen customer loyalty and attract new customers. We proactively aim to improve our
operations to ensure further improvement in customer service.
Our online booking process allows our customers to see all available options and their prices prior to purchasing a ticket.
We maintain a campaign that illustrates our total prices are lower, on average, than those of our competitors, even when options
are included.
Fleet
We fly only Airbus A320 family aircraft, which provides us significant operational and cost advantages compared to
airlines that operate multiple aircraft types. By operating a single aircraft type, we avoid the incremental costs of training crews
across multiple types. Flight crews are entirely interchangeable across all of our aircraft, and maintenance, spare parts
inventories and other operational support remains highly simplified compared to those airlines with more complex fleets. Due
to this commonality among Airbus single-aisle aircraft, we can retain the benefits of a fleet comprised of a single type of
aircraft while still having the flexibility to match the capacity and range of the aircraft to the demands of each route.
As of December 31, 2023, we had a fleet of 205 Airbus single-aisle aircraft, which are commonly referred to as “A320
family” aircraft. A320 family aircraft include the A319, A320 and A321 models, which have broadly common design and
equipment but differ most notably in fuselage length, service range and seat capacity. Within the A320 family of aircraft,
models using existing engine technology may carry the suffix “ceo,” denoting the “current engine option,” while models
equipped with new-generation engines may carry the suffix “neo,” denoting the “new engine option.” As of December 31,
2023, our fleet consisted of 19 A319ceos, 64 A320ceos, 84 A320neos, 30 A321ceos and 8 A321neos, and the average age of
the fleet was 6.6 years. As of December 31, 2023, we owned 73 aircraft, of which 29 aircraft were financed through fixed-rate
long-term debt, 27 aircraft were financed through enhanced equipment trust certificates ("EETCs") and 17 were purchased off
lease. As of December 31, 2023, we had 132 leased aircraft, of which 117 aircraft were financed under operating leases and 15
aircraft would have been deemed finance leases resulting in failed sale-leaseback transactions. In addition, as of December 31,
2023, we had 6 spare engines financed under operating leases and owned 28 spare engines. Refer to “Notes to Consolidated
Financial Statements—13. Debt and Other Obligations” and “Notes to Consolidated Financial Statements—14. Leases" for
additional information.
On December 20, 2019, we entered into an A320 NEO Family Purchase Agreement with Airbus S.A.S. ("Airbus") for the
purchase of 100 new Airbus A320neo family aircraft, with options to purchase up to 50 additional aircraft. This agreement
included a mix of Airbus A319neo, A320neo and A321neo aircraft with such aircraft scheduled for delivery through 2027. As
of December 31, 2023, our firm aircraft orders consisted of 99 A320 family aircraft with Airbus, including A320neos and
A321neos, with deliveries expected through 2029. As of December 31, 2023, we had secured financing for 18 aircraft,
scheduled for delivery from Airbus through 2025 which will be financed through sale-leaseback transactions. In addition, as of
December 31, 2023, we had agreements in place for the delivery of 22 direct operating leases of A321neos with third-party
lessors, expected through 2025.
During the third quarter of 2021, we entered into an Engine Purchase Support Agreement which requires us 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
December 31, 2023, we are committed to purchase 19 PW1100G-JM spare engines, with deliveries through 2029. The firm
aircraft orders provide for capacity growth as well as the flexibility to add to, or replace, the aircraft in our present fleet. We
may elect to supplement these deliveries by additional acquisitions from the manufacturer or in the open market if demand
conditions merit. We also may adjust or defer deliveries, or change models of aircraft in our delivery stream, from time to time,
as a means to match our future capacity with anticipated demand and growth trends.
Consistent with our ULCC business model, each of our aircraft is configured with a high density seating configuration,
which helps us maintain a lower unit cost. Our high density seating configuration accommodates more passengers than those of
our competitors when comparing the same type of aircraft.
Maintenance and Repairs
We maintain our aircraft in accordance with an FAA-approved maintenance program built from the manufacturers
recommended maintenance schedule and maintained by our Technical Services department. Our maintenance technicians
undergo extensive initial and recurrent training to ensure the safe operation of our aircraft. For the sixth year in a row, Spirit has
achieved the FAA’s highest award for Technical Training, the Diamond Award of Excellence. This award is only achieved if
100% of technicians receive the FAA’s Aircraft Maintenance Technician (“AMT”) Certificate of Training.
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Aircraft maintenance and repair consists of routine and non-routine maintenance, and work performed is divided into
three general categories: line maintenance, heavy maintenance and component service. Line maintenance consists of routine
daily and weekly scheduled maintenance checks on our aircraft, including pre-flight, daily, weekly and overnight checks, and
any diagnostics and routine repairs and any unscheduled items on an as needed basis. Additionally, maintenance program tasks
that may take up to two years to fully complete are performed periodically in line maintenance at scheduled day visits or
segmented into overnight work packages. Line maintenance events are currently serviced by in-house mechanics supplemented
by contract labor and are primarily completed at airports we currently serve. Heavy airframe maintenance checks consist of a
series of more complex tasks that generally can take from one to four weeks to accomplish and typically are required
approximately every 36 months. Heavy engine maintenance is generally performed every six years and includes a more
complex scope of work. Due to our relatively small fleet size and projected fleet growth, we believe outsourcing all of our
heavy maintenance activity, such as engine servicing, heavy airframe maintenance checks, major part repair and component
service repairs is more economical. Outsourcing eliminates the substantial initial capital requirements inherent in heavy aircraft
maintenance. We have entered into a long-term flight hour agreement for the majority of our current fleet with International
Aero Engines AG ("IAE") and Pratt & Whitney for our engine overhaul services and with various maintenance providers on an
hour-by-hour basis for component services. We outsource our heavy airframe maintenance to FAA-qualified maintenance
providers.
Our recent maintenance expenses have been lower than what we expect to incur in the future because of the relatively
young age of our aircraft fleet. Our maintenance costs are expected to increase as the scope of repairs increases with the
increasing age of our fleet. As our aircraft age, scheduled scope of work and frequency of unscheduled maintenance events is
likely to increase like any maturing fleet. Our aircraft utilization rate could decrease with the increase in aircraft maintenance.
We own and operate a 126,000-square-foot maintenance hangar facility, adjacent to the airfield at the Detroit
Metropolitan Wayne County Airport (DTW). In addition, we lease and operate a 63,700-square-foot maintenance hangar
facility and 35,900-square-foot maintenance warehouse, adjacent to the airfield at the Houston George Bush Intercontinental
Airport (IAH). These hangars and warehouse allow us to reduce our dependence on third-party facilities and contract line
maintenance. Please see “Properties—Ground Facilities.”
Employees
Our business is labor intensive, with labor costs representing approximately 27.6%, 22.1% and 32.4% of our total
operating costs for 2023, 2022 and 2021, respectively. As of December 31, 2023, we had 3,561 pilots, 6,208 flight attendants,
100 dispatchers, 366 ramp service agents, 284 passenger service agents, 685 aircraft maintenance technicians (a union contract
with the Aircraft Mechanics Fraternal Association ("AMFA") is currently under negotiation) and 1,963 non-unionized
personnel, airport agents/other and employees in administrative roles, for a total of 13,167 active employees compared to
12,025 active employees as of December 31, 2022. During the twelve months ended December 31, 2023, there were 2,345
employee terminations, including both voluntary and involuntary terminations, for an overall employee turnover rate of 19.5%.
As of December 31, 2023, approximately 85% of our employees were represented by six labor unions. On an average full-time
equivalent basis, for the full year 2023, we had 12,798 employees, compared to 12,102 in 2022.
FAA regulations require pilots to have commercial licenses with specific ratings for the aircraft to be flown and be
medically certified as physically fit to fly. FAA and medical certifications are subject to periodic renewal requirements,
including recurrent training and recent flying experience. Flight attendants must have initial and periodic competency training
and qualification. For the year ended December 31, 2023, paid training hours for our pilots and flight attendants were 196,503
and 68,508 hours, representing 12.1% and 2.1% of total crew block hours, respectively. Mechanics, quality-control inspectors
and dispatchers must be certificated and qualified for specific aircraft. Training programs are subject to approval and
monitoring by the FAA. Management personnel directly involved in the supervision of flight operations, training, maintenance
and aircraft inspection must also meet experience standards prescribed by FAA regulations. All safety-sensitive employees are
subject to pre-employment, random and post-accident drug testing.
Consistent with our core values, we focus on hiring highly productive and qualified employees and ensure they have
comprehensive training. Our training programs focus on and emphasize the importance of safety, customer service,
productivity, and cost control. We provide continuous training for our crew members including technical training as well as
regular training focused on safety and front-line training for our customer service teams. Our training programs include
classroom learning, extensive real-world flying experience, and instruction in full flight simulators, as appropriate.
Our Diversity, Equity, Inclusion and Belonging ("DEI&B") journey began in 2020 with us listening, learning, and
building awareness. By 2022, we had implemented a DEI&B governance structure and commitment, and had pivoted to a focus
on meaningful impact. Our seven Team Member-run employee resource groups ensure all Team Members have a voice in
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paving our path; our Supplier Diversity program ensures a focus on minority-owned business partners and diverse suppliers;
and our activation plan ensures purposeful change, which includes a focus on Community Responsibility, Ensuring Equitable
and Inclusive Total Rewards, Creating an Environment of Inclusion for All and Fostering Belonging Though Representation.
We believe a direct relationship between Team Members and our leadership is in the best interests of our crew members,
our customers, and our shareholders. Our leadership team communicates on a regular basis with all Team Members, including
crew members, in order to maintain a direct relationship and to keep them informed about news, strategy updates, and
challenges affecting the airline and the industry. Effective and frequent communication throughout the organization is fostered
through various means including email messages from our CEO and other senior leaders, open forum meetings across our
network, periodic leadership visits to our stations, and annual Team Member engagement surveys. We also seek to build human
rights awareness among our Team Members and Guests and we have recently implemented a Human Rights Policy.
The Railway Labor Act, or RLA, governs our relations with labor organizations. Under the RLA, our collective
bargaining agreements (CBAs) do not expire, but instead become amendable as of a stated date, subject to standard early opener
provisions. If either party wishes to modify the terms of any such agreement, they must notify the other party in the manner
agreed to by the parties. Under the RLA, after receipt of such notice, the parties must meet for direct negotiations. If no
agreement is reached, either party may request the National Mediation Board, or NMB, appoint a federal mediator. The RLA
prescribes no set timetable for the direct negotiation and mediation process. It is not unusual for those processes to last for many
months, and even several years. If no agreement is reached in mediation, the NMB in its discretion may declare at some time
that an impasse exists. If an impasse is declared, the NMB proffers binding arbitration to the parties. Either party may decline to
submit to arbitration. If arbitration is rejected by either party, a 30-day “cooling off” period commences. During that period (or
after), a Presidential Emergency Board, or PEB, may be established, which examines the parties’ positions and recommends a
solution. The PEB process lasts for 30 days and is followed by another “cooling off” period of 30 days. At the end of the
“cooling off” periods, unless an agreement is reached or action is taken by Congress, the labor organization and the airline each
may resort to “self-help,” including, for the labor organization, a strike or other labor action, and for the airline, the imposition
of any or all of its proposed amendments and the hiring of new employees to replace any striking workers. Congress and the
President have the authority to prevent “self-help” by enacting legislation that, among other things, imposes a settlement on the
parties. The table below sets forth our employee groups and status of their collective bargaining agreements.
Employee Groups
Pilots
Flight Attendants
Dispatchers
Ramp Service Agents
Passenger Service Agents
Aircraft Maintenance
Technicians
Representative
Air Line Pilots Association, International (ALPA)
Association of Flight Attendants (AFA-CWA)
Professional Airline Flight Control Association (PAFCA)
International Association of Machinists and Aerospace Workers
(IAMAW)
Transport Workers Union of America (TWU)
Amendable Date (1)
January 2025
January 2026
October 2023
November 2026
February 2027
Aircraft Mechanics Fraternal Association (AMFA) (2)
N/A (2)
(1) Subject to standard early opener provisions.
(2) Collective bargaining agreement is currently under negotiation.
During the fourth quarter of 2022, we reached an agreement with ALPA for a new two-year agreement, which was
ratified by ALPA members on January 10, 2023. The ratified agreement includes increased pay rates and other enhanced
benefits.
In February 2021, we entered into a Letter of Agreement with the AFA-CWA to change the amendable date of the
collective bargaining agreement from May 4, 2021 to September 1, 2021. All other terms of the collective bargaining agreement
remained the same. In June 2021, the AFA-CWA notified us, as required by the RLA, that it intended to submit proposed
changes to the collective bargaining agreement covering our flight attendants. We commenced negotiations with the AFA-
CWA on September 27, 2021. In February 2023, we reached an agreement with our flight attendants which was ratified by the
flight attendants on April 13, 2023 and becomes amendable in January 2026. The ratified agreement includes increased pay
rates and other enhanced benefits.
Our dispatchers are represented by PAFCA. In October 2018, we reached a tentative agreement with PAFCA for a new
five-year agreement, which was ratified by the PAFCA members in October 2018. In May 2023, PAFCA provided notice that it
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intends to amend its Collective Bargaining Agreement with our dispatchers. The parties began negotiating changes to the CBA
on July 12, 2023. As of December 31, 2023, we continued to negotiate with PAFCA.
Our ramp service agents are represented by IAMAW. Representation only applies to our Fort Lauderdale station where
we have direct employees in the ramp service agent classification. In February 2020, the IAMAW notified us, as required by
the RLA, that it intended to submit proposed changes to the collective bargaining agreement covering our ramp service agents
which became amendable in June 2020. On September 28, 2021, we filed an “Application for Mediation Services” with the
NMB. We were able to reach a tentative agreement with the IAMAW with the assistance of the NMB on October 16, 2021. Our
ramp service agents ratified the five-year agreement in November 2021.
In June 2018, our passenger service agents voted to be represented by the TWU, but the representation only applies to our
Fort Lauderdale station where we have direct employees in the passenger service classification. We began meeting with the
TWU in late October 2018 to negotiate an initial collective bargaining agreement. During February 2022, we reached a
tentative agreement with the TWU. Our passenger service agents ratified the five-year agreement on February 21, 2022.
In August 2022, our aircraft maintenance technicians ("AMTs") voted to be represented by AMFA as their collective
bargaining agent. As of December 31, 2023, we employed approximately 700 AMTs. In November 2022, AMFA notified us of
its intent to negotiate a CBA and began negotiations. In October 2023, AMFA filed for mediation with the NMB, and we are
currently waiting for mediation dates from the NMB to continue negotiating with AMFA.
Safety and Security
We are committed to the safety and security of our passengers and employees. We strive to comply with or exceed health
and safety regulation standards. In pursuing these goals, we maintain an active aviation safety program. All of our personnel are
expected to participate in the program and take an active role in the identification, reduction and elimination of hazards.
Our ongoing focus on safety relies on training our employees to proper standards and providing them with the tools and
equipment they require so they can perform their job functions in a safe and efficient manner. Safety in the workplace targets
several areas of our business, including: flight operations, maintenance, in-flight, dispatch and station operations. The
Transportation Security Administration, or TSA, is charged with aviation security for both airlines and airports. We maintain
active, open lines of communication with the TSA at all of our locations to ensure proper standards for security of our
personnel, customers, equipment and facilities are exercised throughout our business.
Insurance
We maintain insurance policies we believe are customary in the airline industry and as required by the DOT. The policies
principally provide liability coverage for public and passenger injury; damage to property; loss of or damage to flight
equipment; fire and extended coverage; war risk (terrorism); directors’ and officers’ liability; advertiser and media liability;
cyber risk liability; fiduciary; and workers’ compensation and employer’s liability. Renewing coverage could result in a change
in premium and more restrictive terms. Although we currently believe our insurance coverage is adequate, there can be no
assurance that the amount of such coverage will not be changed or that we will not be forced to bear substantial losses from
accidents.
Management Information Systems
We have continued our commitment to technology improvements to support our ongoing operations and initiatives. In
2021, we focused on additional modernization capabilities to enhance the travel experience of our Guests. In cooperation with
the TSA, our Automated Self Service Bag Drop project is installed and functioning in several airports. Our plan is to accelerate
the deployment of this experience as well as to further enhance the customer convenience features. In addition, we have
achieved a broad investment in a mobility tool for all our workforce that enhances productivity and capabilities. Furthermore,
we believe the launch of our new Free Spirit Program has delivered an exceptional improvement in the Guest experience and
utility. In 2021, the Azure Cloud migration of Data and Application continued. Lastly, our secondary Operations Control Center
in Orlando went into production mid-year and will provide substantial improvements in disaster recovery scenarios.
In 2022, we targeted the modernization of our crew applications and technologies to accelerate the response to irregular
operations. These improvements involved upgrades to the main flight operations system, enabling and enhancing chat
functionality for our crews, improving crew scheduling voice response, and providing real time operational monitoring
capabilities. In addition to operations, we have made significant improvements to our digital transformation for Guest
experience through the implementation of our customer data platform. We have successfully migrated our maintenance and
flight operation systems to the Azure cloud. Our journey to full cloud continues as we continue to seek opportunities to
optimize cloud solutions.
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In 2023, we continued our technology modernization with a new mobile workplace application for the Flight Attendant
team. This application improves the experience for streamlining daily tasks such as check-in, assigning positions, viewing
manifests and personal work schedules. Our digital transformation journey added capabilities providing self-service options to
our Guests and employees such as refund automation, flight status, employee benefits and more. This year we matured our
cyber security programs within the CIS v8 framework as we refine our environments to meet the rapidly changing cyber threat
landscape. One major focus has been providing a more frequent cycle of timely and consistent cyber security awareness to our
team members. The cloud strategy continues to evolve as operational and cyber security imperatives guide us, migration of
services and data continues in our multi-region footprint and we have begun planning for a diverse cloud provider strategy.
Foreign Ownership
Under DOT regulations and federal law, we must be owned and controlled by U.S. citizens. In order to qualify, at least
75% of our stock must be voted by U.S. citizens, 51% of our outstanding equity must be owned by U.S. citizens, and our
president and at least two-thirds of our board of directors and senior management must be U.S. citizens.
We believe we are currently in compliance with such foreign ownership rules.
Government Regulation
Operational Regulation
The airline industry is heavily regulated, especially by the federal government. Two of the primary regulatory authorities
overseeing air transportation in the United States are the DOT and the FAA. The DOT has jurisdiction over economic and
consumer issues affecting air transportation, such as competition, route authorizations, advertising and sales practices, baggage
liability, disabled passenger transportation, reporting of mishandled bags, tarmac delays and responding to customer complaints
among other areas.
In July 2021, the DOT issued a Notice of Proposed Rulemaking (NRPM) requiring airlines to refund checked bag fees for
delayed bags if they are not delivered to the passenger within a specified number of hours and refunding ancillary fees for
services related to air travel that passengers did not receive.
In November 2021, the DOT reopened the comment period on an NPRM regarding short-term improvements to lavatory
accessibility, including new proposed requirements for onboard wheelchairs (OBWs) (Part 1). This NPRM was to gather
information about all aspects of OBW design, including stowage, before issuing any final binding regulation on the topic.
In March 2022, the DOT issued a NPRM (Part 2) requiring airlines to ensure that at least one lavatory on new single-aisle
aircraft with at least 125 passenger seats is large enough to permit a passenger with a disability (with the help of an assistant, if
necessary) to approach, enter and maneuver within the lavatory, as necessary, to use all lavatory facilities and to leave by means
of the aircraft’s on-board wheel chair. If enacted as currently proposed, this NPRM (Part 2) would apply to new aircraft ordered
18 years or delivered 20 years after the effective date of a final rule. The DOT published its Accessible Lavatories on Single-
Aisle Aircraft final rule on August 1, 2023, which became effective October 2, 2023. Among other requirements, the final rule
requires new single-aisle aircraft with 125 seats or more that are ordered 10 years after or delivered 12 years after October 2,
2023, to have accessible lavatories.
In July 2022, the DOT published its Airline Passengers with Disabilities Bill of Rights, applicable to U.S. and foreign
carriers, and required airlines to publish the same on their websites with appropriate email notifications sent to passengers with
disabilities. The DOT continues to review potential rules regarding disabled passengers, including a NPRM scheduled to be
released next year regarding wheelchair handling and training initiatives.
In July 2022, the Office of Aviation Consumer Protection (OACP) issued a notice urging airlines to provide seats to
children 13 years or younger with an adult on the same booking with no additional charge. In response to the OACP’s notice
during 2023, the DOT added to their website a Child Seating dashboard comparing reporting carriers and their procedures on
seating children 13 years or younger with an adult on a booking.
In August 2022, the DOT issued a NPRM requiring airlines and ticket agents to provide non-expiring travel vouchers or
credits to consumers holding non-refundable tickets for scheduled flights to, from, or within the United States as a result of the
carrier cancelling or making a significant change to a scheduled flight, a serious communicable disease or for several other
reasons. The NPRM will further define the terms “significant change” and “cancellation” and will require airlines and ticket
agents to provide refunds if they receive significant financial assistance from the government as a result of a public health
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emergency. As of December 31, 2023, a final rule has not been issued; however, it is our understanding that the DOT will
combine this NPRM with the July 2021 PRM, regarding refunding of certain checked bag fees and ancillary fees, and that the
DOT anticipates issuing a final rule in February 2024.
At the end of August 2022, the DOT added an Airline Customer Service Dashboard to their website that compares what
reporting carriers offer passengers during a significant controllable delay or cancellation.
In October 2022, the DOT issued a NRPM which would require airlines to increase disclosure of bag fees, change and
cancellation fees, and family seating policies during the ticket purchase process in an effort to improve the transparency of
airline pricing. The comment period closed on January 23, 2023. The DOT is expected to issue its final rule on fee disclosures
in March 2024.
Additional rules and executive orders, including those pertaining to disabled passengers, may be issued. See “Risk
Factors—Risks Related to Our Industry—Restrictions on, or increased taxes applicable to, charges for ancillary products and
services paid by airline passengers and burdensome consumer protection regulations or laws could harm our business, results of
operations and financial condition.”
The DOT has authority to issue certificates of public convenience and necessity required for airlines to provide air
transportation. We hold a DOT certificate of public convenience and necessity authorizing us to engage in scheduled air
transportation of passengers, property and mail within the United States, its territories and possessions and between the United
States and all countries that maintain a liberal aviation trade relationship with the United States (known as “open skies”
countries). We also hold DOT certificates to engage in air transportation to certain other countries with more restrictive aviation
policies.
The FAA is responsible for regulating and overseeing matters relating to air carrier flight operations, including airline
operating certificates, aircraft certification and maintenance and other matters affecting air safety, including rest periods and
work hours for all airlines certificated under Part 121 of the Federal Aviation Regulations. The FAA requires each commercial
airline to obtain and hold an FAA air carrier certificate. This certificate, in combination with operations specifications issued to
the airline by the FAA, authorizes the airline to operate at specific airports using aircraft approved by the FAA. As of
December 31, 2023, we had FAA airworthiness certificates for all of our aircraft, we had obtained the necessary FAA authority
to fly to all of the cities we currently serve, and all of our aircraft had been certified for overwater operations. Any new or
revised operational regulations in the future could result in further increased costs. We believe we hold all necessary operating
and airworthiness authorizations, certificates and licenses and are operating in compliance with applicable DOT and FAA
regulations, interpretations and policies.
On June 6, 2023, the FAA issued a final rule which requires aircraft manufactured two years after August 25, 2023,
which are operated in domestic commercial service by Part 121 airlines to have an installed physical secondary barrier that
protects the flightdeck from unauthorized intrusion when the flightdeck door is opened. We are currently evaluating the
impacts, if any, of the ruling, which we do not expect to be material.
International Regulation
All international service is subject to the regulatory requirements of the foreign government involved. We generally offer
international service to Aruba, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras,
Jamaica, Mexico, Nicaragua, Peru and St. Maarten, as well as Puerto Rico and the U.S. Virgin Islands. If we decide to increase
our routes to additional international destinations, we will be required to obtain necessary authority from the DOT and the
applicable foreign government. We are also required to comply with overfly regulations in countries that lay along our routes
but which we do not serve.
International service is also subject to Customs and Border Protection, or CBP, immigration and agriculture requirements
and the requirements of equivalent foreign governmental agencies. Like other airlines flying international routes, from time to
time we may be subject to civil fines and penalties imposed by CBP if unmanifested or illegal cargo, such as illegal narcotics, is
found on our aircraft. These fines and penalties, which in the case of narcotics are based upon the retail value of the seizure,
may be substantial. We have implemented a comprehensive security program at our airports to reduce the risk of illegal cargo
being placed on our aircraft, and we seek to cooperate actively with CBP and other U.S. and foreign law enforcement agencies
in investigating incidents or attempts to introduce illegal cargo.
We will continue to comply with all contagious disease requirements issued by the US and foreign governments, but we
cannot forecast what additional requirements may be imposed in the future or the costs or revenue impact that would be
associated with complying with such requirements. See, “Risk Factors—Risks Related to Our Business—We are subject to
15
extensive and increasing regulation by the FAA, DOT, TSA and other U.S. and foreign governmental agencies, compliance
with which could cause us to incur increased costs and adversely affect our business and financial results.”
Security Regulation
The TSA was created in 2001 with the responsibility and authority to oversee the implementation, and ensure the
adequacy of security measures at airports and other transportation facilities. Funding for passenger security is provided in part
by a per enplanement ticket tax (passenger security fee); which as of December 19, 2014, was limited to a round-trip fee of
$11.20. We cannot forecast what additional security and safety requirements may be imposed in the future or the costs or
revenue impact that would be associated with complying with such requirements.
Environmental Regulation
We are subject to various federal, state and local laws and regulations relating to the protection of the environment and
affecting matters such as aircraft engine emissions, aircraft noise emissions and the discharge or disposal of materials and
chemicals, which laws and regulations are administered by numerous state and federal agencies. The Environmental Protection
Agency, or EPA, regulates operations, including air carrier operations, which affect the quality of air in the United States. We
believe the aircraft in our fleet meet all emission standards issued by the EPA. Concern about climate change and greenhouse
gases may result in additional regulation or taxation of aircraft emissions in the United States and abroad.
Federal law recognizes the right of airport operators with special noise problems to implement local noise abatement
procedures so long as those procedures do not interfere unreasonably with interstate and foreign commerce and the national air
transportation system. These restrictions can include limiting nighttime operations, directing specific aircraft operational
procedures during takeoff and initial climb, and limiting the overall number of flights at an airport.
Other Regulations
We are subject to certain provisions of the Communications Act of 1934, as amended, and are required to obtain an
aeronautical radio license from the Federal Communications Commission, or FCC. To the extent we are subject to FCC
requirements, we will take all necessary steps to comply with those requirements. We are also subject to state and local laws
and regulations at locations where we operate and the regulations of various local authorities that operate the airports we serve.
In addition, we are subject to the deployment of new 5G C-band service by wireless communications providers. The DOT and
the FAA are currently working with AT&T and Verizon to create appropriate safeguards in the deployment of their new 5G C-
band service, which includes the installation of buffer zones around airports and other measures. The DOT and the FAA have
required that all U.S. based carriers have 5G C-Band-tolerant radio altimeters or install approved filters by February 2024.
Future Regulations
The U.S. and foreign governments may consider and adopt new laws, regulations, interpretations and policies regarding a
wide variety of matters that could directly or indirectly affect our results of operations. We cannot predict what laws,
regulations, interpretations and policies might be considered in the future, nor can we judge what impact, if any, the
implementation of any of these proposals or changes might have on our business.
Corporate Responsibility and Sustainability
We are committed to integrating environmental, social and governance (“ESG”) practices into and within our business
practices and commit to sustainable operations which support the long-term success of our business, shareholders, Team
Members, Guests and business partners. We have established four strategic focus areas of our ESG initiatives, practices and
commitments: environment, social, workforce and governance. Recognizing the fundamental importance of ESG matters,
Spirit’s Board and its committees provide guidance and oversight. The Nominating and Corporate Governance Committee is
responsible for oversight of our ESG strategy and practices and periodically reports on these matters to the Board.
We recognize aviation’s impact on climate and our responsibility to help reduce the carbon footprint of air travel. Fuel
burn is our greatest environmental and financial impact, and our greatest source of carbon emissions. To address the impact of
our flights and operations over the short-term and long-term, our climate and emissions approach focuses on reducing emissions
through both fleet and operational efficiencies that conserve fuel and improve overall fuel burn. Our all-Airbus fleet is one of
the youngest in the United States and our dense seating configuration, along with our consistent focus on weight-saving
measures, has made us consistently one of the most fuel-efficient carriers in the United States.
Further illustrating our commitment, during the fourth quarter of 2023, we issued our 2021/2022 Sustainability Report,
showing results of our longstanding commitment to meaningful advancements in environmental sustainability, Guest and
community service, Team Member support, and governance. The report highlights our plan for continued progress in
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broadening ESG initiatives and improving communities. Refer to “Spirit’s 2021/2022 Sustainability Report” on the Investor
Relations section of our website at www.spirit.com.
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ITEM 1A.
RISK FACTORS
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on
our management’s beliefs and assumptions and on information currently available to our management. All statements other
than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can
identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-
looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could
cause actual results and the timing of certain events to differ materially from future results expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those
identified below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by
law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of
such statements. Additional risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be
immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or
future results. You should carefully consider the risks described below and the other information in this report. If any of the
following risks materialize, our business could be materially harmed, and our financial condition and results of operations
could be materially and adversely affected. References in this report to “Spirit,” “we,” “us,” “our,” or the “Company” shall
mean Spirit Airlines, Inc., unless the context indicates otherwise.
Risks Related to Recent Events
The pendency of the proposed Merger may cause disruption in our business.
On July 28, 2022, we entered into the Merger Agreement with JetBlue and Merger Sub, pursuant to which and subject to
the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving entity.
On March 7, 2023, the DOJ filed suit to block the Merger and a trial was held in late 2023. On January 16, 2024, the
District Court granted the Injunction. On January 19, 2024, Spirit and JetBlue filed a notice of appeal to reverse the Injunction
and allow Spirit and JetBlue to complete the Merger. On January 25, 2024, JetBlue informed us that certain closing conditions
required by the Merger Agreement may not be satisfied prior to the outside dates set forth in the Merger Agreement and,
accordingly, the Merger Agreement may be terminable on and after January 28, 2024. We do not believe there is a basis for
terminating the Merger Agreement, and we will continue to abide by all of our obligations under the Merger Agreement. On
January 29, 2024, Spirit and JetBlue filed a request with the Court of Appeals seeking an expedited hearing of their appeal of
the Injunction. On February 2, 2024, the Court of Appeals granted our motion, stating it would hear arguments in June 2024.
The Merger Agreement restricts us from taking specified actions without JetBlue’s consent until the Merger is completed
or the Merger Agreement is terminated, including amending our organizational documents, issuing shares of our common
stock, divesting certain assets (including certain intellectual property rights), declaring or paying dividends, making certain
significant acquisitions or investments, entering into any new lines of business, incurring certain indebtedness in excess of
certain thresholds, amending or modifying certain material contracts, making non-ordinary course capital expenditures, making
certain non-ordinary course changes to personnel and employee compensation, changing the cabin configuration or amenities
on our aircraft and taking actions that may result in the loss of our FAA airworthiness certification or takeoff and landing slots.
These restrictions and others more fully described in the Merger Agreement may affect our ability to execute our business
strategies and attain our financial and other goals and may impact our business, results of operations and financial condition.
The pendency of the proposed Merger could cause disruptions to our business or business relationships, which could have
an adverse impact on our results of operations. Parties with which we have business relationships, including Guests, pilots,
employees, suppliers, third-party service providers and third-party distribution channels, may be uncertain as to the future of
such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to
alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business
relationships may seek alternative relationships with third parties.
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The pursuit of the Merger and the preparation for our integration with JetBlue’s business is expected to place a significant
burden on our management and internal resources. The diversion of management’s attention away from day-to-day business
concerns and any difficulties encountered in the transition and integration process could adversely affect our business, results of
operations and financial condition.
We have incurred and will continue to incur significant costs, expenses and fees for professional services and other
transaction costs in connection with the Merger. The substantial majority of these costs will be non-recurring expenses relating
to the Merger, and many of these costs are payable regardless of whether or not the Merger is consummated. We also have been
subject to, and may face additional, litigation related to the proposed Merger, which could prevent or delay the consummation
of the Merger and result in significant costs and expenses.
Failure to complete the Merger in a timely manner or at all could negatively impact the market price of our common
stock, as well as our future business and our results of operations and financial condition.
The Merger cannot be completed until conditions to closing are satisfied or (if permissible under applicable law) waived.
The Merger is subject to numerous closing conditions, including among other things, (1) approval of the transactions by our
stockholders (which was received on October 19, 2022); (2) receipt of applicable regulatory approvals, including approvals
from the FCC, FAA and DOT and the expiration or early termination of the statutory waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and other competition laws, and other required regulatory approvals;
(3) the absence of any law or order prohibiting the consummation of the transactions; and (4) the absence of any material
adverse effect (as defined in the Merger Agreement) on the Company.
The failure to satisfy the required conditions could delay the completion of the Merger for a significant period of time or
prevent it from occurring. There can be no assurance that the conditions to the closing of the Merger will be satisfied or waived,
that our appeal of the District Court's decision will be successful or that the Merger will be completed.
Following the Injunction, and in the event the Merger is not completed in a timely manner or at all, our ongoing business
may be adversely affected as follows:
• we have experienced and continue to experience negative reactions from the financial markets, and our stock price has
declined and could continue to decline to the extent that the current market price reflects an assumption that the
Merger will be completed;
• we may experience negative reactions from employees, Guests, suppliers or other third parties;
• we may be subject to litigation, which could result in significant costs and expenses;
• management’s focus may be diverted from day-to-day business operations and from pursuing other opportunities that
could have been beneficial to the Company; and
•
our costs of pursuing the Merger may be higher than anticipated.
Additionally, in approving the Merger Agreement, the Board of Directors considered a number of factors and potential
benefits, including the fact that the merger consideration to be received by holders of common stock represented a significant
premium over the last closing stock price prior to announcement of the Merger. If the Merger is not completed, the holders of
our common stock will not realize this benefit of the Merger.
In addition to the above risks, we may be required, under certain circumstances, to pay JetBlue a breakup fee equal to
$94.2 million and/or to reimburse or indemnify JetBlue for certain of its expenses. If the Merger is not consummated due to the
inability to receive regulatory approval, JetBlue would be required to pay Spirit a reverse termination fee of $70 million. The
reverse termination fee may not be sufficient to cover all of the expenses Spirit incurred in connection with the Merger, which
may have an adverse effect on our liquidity and results of operations. If the Merger is not consummated, there can be no
assurance that these risks will not materialize and will not materially adversely affect our stock price, business, results of
operations and financial condition.
In order to complete the Merger, the Company and JetBlue must obtain certain governmental approvals, and if such
approvals are not granted or are granted with conditions, completion of the Merger may be jeopardized or the
anticipated benefits of the Merger could be reduced.
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Although the Company and JetBlue have agreed to use reasonable best efforts, subject to certain limitations, to make
certain governmental filings and obtain the required governmental approvals, including from the FCC, FAA and DOT, or
expiration or earlier termination of relevant waiting periods, as the case may be, there can be no assurance that the relevant
waiting periods will expire or be terminated or that the relevant approvals will be obtained. As a condition to approving the
Merger, these governmental authorities may impose conditions, terms, obligations or restrictions or require divestitures or place
restrictions on the conduct of the combined company's business after completion of the Merger. There can be no assurance that
regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or
restrictions will not have the effect of delaying or preventing completion of the Merger or imposing additional material costs on
or materially limiting the revenues of the combined company following the Merger, or otherwise adversely affecting, including
to a material extent, our business, results of operations and financial condition after completion of the Merger. If we are
required to divest assets or businesses, there can be no assurance that we will be able to negotiate such divestitures
expeditiously or on favorable terms or that the governmental authorities will approve the terms of such divestitures. We can
provide no assurance that these conditions, terms, obligations or restrictions will not result in the abandonment of the Merger.
On March 7, 2023, the DOJ filed suit to block the Merger. A trial was held in late 2023. On January 16, 2024, the District
Court granted the Injunction. On January 19, 2024, Spirit and JetBlue filed a notice of appeal to reverse the District Court's
decision and allow Spirit and JetBlue to complete the Merger. On January 29, 2024, Spirit and JetBlue filed a request with the
Court of Appeals seeking an expedited schedule for their appeal. On February 2, 2024, the Court of Appeals granted our
motion, stating it would hear arguments in June 2024. The appeal of the Injunction will be time-consuming and expensive and
there can be no assurance that we or JetBlue would ultimately be successful, or that if the Injunction is reversed, that the DOJ
would not further appeal. Furthermore, any of the other governmental authorities from which we need approvals may also sue
us and JetBlue in U.S. federal court to prevent the Merger from being consummated. Defending any such lawsuit will be time-
consuming and expensive and there can be no assurance that we and JetBlue would ultimately be successful.
Additionally, if the Merger is not consummated, Spirit stockholders and holders of Spirit's convertible notes and warrants
will not receive the merger consideration that would have been paid at the closing of the Merger.
You must be a Spirit stockholder as of the specified record dates to receive the prepayments of merger consideration.
The prepayments of merger consideration by JetBlue will only be made to Spirit stockholders as of the specified record
dates. If you are not a Spirit stockholder as of that record date, you will not receive the relevant prepayment even if you are a
Spirit stockholder at the time of consummation of the Merger. As a result, if you are not a Spirit stockholder at each relevant
time, you will receive less than $33.50 (or less than the up to $34.15 maximum amount of merger consideration, depending on
the timing of Closing) in total for each share of Spirit common stock you own upon the consummation of the Merger.
We operate in an extremely competitive industry.
Risks Related to Our Industry
We face significant competition with respect to routes, fares and services. Within the airline industry, we compete with
traditional network airlines, other low-cost airlines and regional airlines on many of our routes. Competition in most of the
destinations we presently serve is intense, sometimes due to the large number of carriers in those markets. Furthermore, other
airlines may begin service or increase existing service on routes where we currently face little competition. Most of our
competitors are larger than us and have significantly greater financial and other resources than we do.
The airline industry is particularly susceptible to price discounting because once a flight is scheduled, airlines incur only
nominal additional costs to provide service to passengers occupying otherwise unsold seats. Increased fare or other price
competition has adversely affected, and may continue to adversely affect, our revenue generation. Moreover, many other
airlines have begun to unbundle services by charging separately for services such as baggage and advance seat selection. This
unbundling and other cost reducing measures could enable competitor airlines to reduce fares on routes that we serve.
Beginning in 2015, and continuing through 2019, more widespread availability of low fares, including from legacy network
carriers, coupled with an increase in domestic capacity led to dramatic changes in pricing behavior in many U.S. markets. Many
domestic carriers began matching lower cost airline pricing, either with limited or unlimited inventory. Additionally, changes in
practices, including with respect to change and cancellation fees, as a result of the COVID-19 pandemic has led to further
pricing changes among our competitors.
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Airlines increase or decrease capacity in markets based on perceived profitability, market share objectives, competitive
considerations and other reasons. Decisions by our competitors that increase overall industry capacity, or capacity dedicated to
a particular domestic or foreign region, market or route, could have a material adverse impact on our business. If a traditional
network airline were to successfully develop a low-cost structure, compete with us on price or if we were to experience
increased competition from other low-cost carriers, our business could be materially adversely affected.
Many of the traditional network airlines in the United States have on one or more occasions initiated bankruptcy
proceedings in attempts to restructure their debt and other obligations and reduce their operating costs. They also have
completed large mergers that have increased their scale and share of the travel market. The mergers between AMR Corporation
and US Airways Group, Inc., between Delta Air Lines and Northwest Airlines, between United Airlines and Continental
Airlines, between Southwest Airlines and AirTran Airways, and between Alaska Airlines and Virgin America, have created five
large airlines, with substantial national and international networks which create a more challenging competitive environment for
smaller airlines like us. In the future, there may be additional consolidation in our industry. For example, on December 3, 2023,
Alaska Airlines and Hawaiian Airlines announced a proposed merger. Any business combination could significantly alter
industry conditions and competition within the airline industry, which could have an adverse effect on our business.
Our growth and the success of our ULCC business model could stimulate competition in our markets through our
competitors’ development of their own ULCC strategies, new pricing policies designed to compete with ULCCs or new market
entrants. Any such competitor may have greater financial resources and access to less expensive sources of capital than we do,
which could enable them to operate their business with a lower cost structure, or enable them to operate with lower marginal
revenues without substantial adverse effects, than we can. If these competitors adopt and successfully execute a ULCC business
model, we could be materially adversely affected. In 2015, Delta Air Lines began to market and sell a “Basic Economy”
product which was designed in part to provide its customers with a low base fare similar to Spirit. In 2017, American Airlines
and United Airlines announced their own “Basic Economy” product and beginning in late 2019, other airlines like Alaska
Airlines and JetBlue, have followed suit.
The extremely competitive nature of the airline industry could prevent us from attaining the level of passenger traffic or
maintaining the level of fares or revenues related to ancillary services required to sustain profitable operations in new and
existing markets and could impede our growth strategy, which could harm our operating results. Due to our relatively small
size, we are susceptible to a fare war or other competitive activities in one or more of the markets we serve, which could have a
material adverse effect on our business, results of operations and financial condition.
Our low-cost structure is one of our primary competitive advantages, and many factors could affect our ability to
control our costs.
Our low-cost structure is one of our primary competitive advantages. However, we have limited control over many of our
costs. For example, we have limited control over the price and availability of aircraft fuel, aviation insurance, airport costs and
related infrastructure taxes, the cost of meeting changing regulatory requirements and our cost to access capital or financing. In
addition, the compensation and benefit costs applicable to a significant portion of our employees are established by the terms of
our collective bargaining agreements. We cannot guarantee we will be able to maintain a cost advantage over our competitors.
If our cost structure increases and we are no longer able to maintain a sufficient cost advantage over our competitors, it could
have a material adverse effect on our business, results of operations and financial condition.
The airline industry is heavily influenced by the price and availability of aircraft fuel. Continued volatility in fuel costs
or significant disruptions in the supply of fuel, including hurricanes and other events affecting the Gulf Coast in
particular, could materially adversely affect our business, results of operations and financial condition.
Aircraft fuel costs represented 31.1%, 34.1% and 27.8% of our total operating expenses for 2023, 2022 and 2021,
respectively. As such, our operating results are significantly affected by changes in the availability and the cost of aircraft fuel,
especially aircraft fuel refined in the U.S. Gulf Coast region, on which we are highly dependent. Both the cost and the
availability of aircraft fuel are subject to many meteorological, economic and political factors and events occurring throughout
the world, which we can neither control nor accurately predict. For example, a major hurricane making landfall along the Gulf
Coast could disrupt oil production, refinery operations and pipeline capacity in that region, possibly resulting in significant
increases in the price of aircraft fuel and diminished availability of aircraft fuel supply. Any disruption to oil production,
refinery operations, or pipeline capacity in the Gulf Coast region could have a disproportionate impact on our operating results
compared to other airlines that have more diversified fuel sources. Fuel prices also may be affected by geopolitical and
macroeconomic conditions and events that are outside of our control, including volatility in the relative strength of the U.S.
dollar, the currency in which oil is denominated. Instability within major oil producing regions, such as the Middle East and
Venezuela, Russia's ongoing conflict in Ukraine, the conflict in Gaza, changes in demand from major petroleum users such as
China, and secular increases in competing energy sources are examples of these trends.
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Aircraft fuel prices have been subject to high volatility, fluctuating substantially over the past several years. For example,
our fuel prices spiked at a high of $3.82 per gallon, in the third quarter of 2022, and fell as low as $1.05 per gallon in the second
quarter of 2020. We cannot predict the future availability, price volatility or cost of aircraft fuel. Due to the large proportion of
aircraft fuel costs in our total operating cost base, even a relatively small increase or decrease in the price of aircraft fuel can
have a significant negative impact on our operating costs or revenues and on our business, results of operations and financial
condition.
Fuel derivative activity, if any, may not reduce fuel costs.
From time to time, we may enter into fuel derivative contracts in order to mitigate the risk to our business from future
volatility in fuel prices, refining risk between the price of crude oil and the price of refined jet fuel, and to manage the risk of
increasing fuel prices. Our derivatives may generally consist of United States Gulf Coast jet fuel swaps (“jet fuel swaps”) and
United States Gulf Coast jet fuel options (“jet fuel options”). Both jet fuel swaps and jet fuel options can be used at times to
protect the refining risk between the price of crude oil and the price of refined jet fuel, and to manage the risk of increasing fuel
prices. As of December 31, 2023, we had no outstanding jet fuel derivatives, and we have not engaged in fuel derivative
activity since 2015. There can be no assurance that we will be able to enter into fuel derivative contracts in the future if we are
required or choose to do so. In the past we have not had, and in the future we may not have, sufficient creditworthiness or
liquidity to post the collateral necessary to hedge our fuel requirements. Our liquidity and general level of capital resources
impacts our ability to hedge our fuel requirements. Even if we are able to hedge portions of our future fuel requirements, we
cannot guarantee that our derivative contracts will provide sufficient protection against increased fuel costs or that our
counterparties will be able to perform under our derivative contracts, such as in the case of a counterparty’s insolvency.
Furthermore, our ability to react to the cost of fuel, absent hedging, is limited because we set the price of tickets in advance of
incurring fuel costs. Our ability to pass on any significant increases in aircraft fuel costs through fare increases could also be
limited. In the event of a reduction in fuel prices compared to our hedged position, if any, our hedged positions could counteract
the cost benefit of lower fuel prices and may require us to post cash margin collateral. In a falling fuel price environment, we
may be required to make cash payments to our counterparties which may impair our liquidity position and increase our costs.
Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Trends and
Uncertainties Affecting Our Business—Aircraft Fuel.”
Restrictions on, or increased taxes applicable to, charges for ancillary products and services paid by airline passengers
and burdensome consumer protection regulations or laws could harm our business, results of operations and financial
condition.
During 2023, 2022 and 2021, we generated non-ticket revenues of $3,024.4 million, $2,612.6 million and $1,087.8
million, respectively. Our non-ticket revenues are generally generated from charges for, among other things, baggage, bookings
through certain of our distribution channels, advance seat selection, itinerary changes and loyalty programs. The DOT has rules
governing many facets of the airline-consumer relationship, including, for instance, price advertising, tarmac delays, bumping
of passengers from flights, ticket refunds and the carriage of disabled passengers. If we are not able to remain in compliance
with these rules, the DOT may subject us to fines or other enforcement action, including requirements to modify our passenger
reservations system, which could have a material adverse effect on our business. The U.S. Congress and federal administrative
agencies have investigated the increasingly common airline industry practice of unbundling the pricing of certain products and
services. If new taxes are imposed on non-ticket revenues, or if other laws or regulations are adopted that make unbundling of
airline products and services impermissible, or more cumbersome or expensive, our business, results of operations and financial
condition could be harmed. Congressional and other government scrutiny may also change industry practice or public
willingness to pay for ancillary services. See also “Risks Related to Our Business—We are subject to extensive and increasing
regulation by the FAA, DOT, TSA and other U.S. and foreign governmental agencies, compliance with which could cause us to
incur increased costs and adversely affect our business and financial results.”
The airline industry is particularly sensitive to changes in economic conditions. Adverse economic conditions would
negatively impact our business, results of operations and financial condition.
Our business and the airline industry in general are affected by many changing economic conditions beyond our control,
including, among others:
•
•
changes and volatility in general economic conditions, including the severity and duration of any downturn in the U.S.
or global economy and financial markets and the rate of inflation;
changes in consumer preferences, perceptions, spending patterns or demographic trends, including any increased
preference for higher-fare carriers offering higher amenity levels, and reduced preferences for low-fare carriers
offering more basic transportation;
22
•
•
•
higher levels of unemployment and varying levels of disposable or discretionary income in part due to the effect of
high inflation rates and rising interest rates in the United States;
depressed housing and stock market prices; and
lower levels of actual or perceived consumer confidence.
These factors can adversely affect, and from time to time have adversely affected, our results of operations, our ability to
obtain financing on acceptable terms and our liquidity. Unfavorable general economic conditions, such as higher
unemployment rates, a constrained credit market, housing-related pressures and increased focus on reducing business operating
costs, can reduce spending for price-sensitive leisure and business travel. For many travelers, in particular the price-sensitive
travelers we serve, air transportation is a discretionary purchase that they may reduce or eliminate from their spending in
difficult economic times. The overall decrease in demand for air transportation in the United States in 2008 and 2009 resulting
from record high fuel prices and the economic recession required us to take significant steps to reduce our capacity, which
reduced our revenues. Additionally, in 2020 and 2021, we were required to reduce our capacity as a result of a dramatic drop in
demand due to, and restrictions imposed as a result of, the COVID-19 pandemic and demand has not fully recovered to pre-
COVID-19 levels. Unfavorable economic conditions could also affect our ability to raise prices to counteract the effect of
increased fuel, labor or other costs, resulting in a material adverse effect on our business, results of operations and financial
condition.
The airline industry faces ongoing security concerns and related cost burdens, furthered by threatened or actual
terrorist attacks or other hostilities, that could significantly harm our industry and our business.
The terrorist attacks of September 11, 2001 and their aftermath negatively affected the airline industry. The primary
effects experienced by the airline industry included:
•
•
•
•
•
substantial loss of revenue and flight disruption costs caused by the grounding of all commercial air traffic in or
headed to the United States by the FAA for days after the terrorist attacks;
increased security and insurance costs;
increased concerns about future terrorist attacks;
airport shutdowns and flight cancellations and delays due to security breaches and perceived safety threats; and
significantly reduced passenger traffic and yields due to the subsequent dramatic drop in demand for air travel.
Since September 11, 2001, the Department of Homeland Security and the TSA have implemented numerous security
measures that restrict airline operations and increase costs, and are likely to implement additional measures in the future. For
example, following the widely publicized attempt of an alleged terrorist to detonate plastic explosives hidden underneath his
clothes on a Northwest Airlines flight on Christmas Day in 2009, passengers became subject to enhanced random screening,
which included pat-downs, explosive detection testing and body scans. Enhanced passenger screening, increased regulation
governing carry-on baggage and other similar restrictions on passenger travel may further increase passenger inconvenience and
reduce the demand for air travel. In addition, increased or enhanced security measures have tended to result in higher
governmental fees imposed on airlines, resulting in higher operating costs for airlines, which we may not be able to pass on to
consumers in the form of higher prices. Any future terrorist attacks or attempted attacks, even if not made directly on the airline
industry, or the fear of such attacks or other hostilities (including elevated national threat warnings or selective cancellation or
redirection of flights due to terror threats) would likely have a material adverse effect on our business, results of operations and
financial condition and on the airline industry in general.
Airlines are often affected by factors beyond their control, any of which could harm our business, operating results and
financial condition.
Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air
traffic control inefficiencies, major construction or improvements at airports at which we operate, adverse weather conditions,
increased security measures, new travel-related taxes, the outbreak of disease, new regulations or policies from the presidential
administration and Congress, and supply chain disruptions, in particular those causing inability to obtain, or delays in obtaining,
aircraft or spare parts such as engines. Factors that cause flight delays frustrate passengers and increase costs, which in turn
could adversely affect profitability. The federal government currently controls all U.S. airspace, and airlines are completely
dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The air traffic control system, which is
operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. and foreign air-traffic
controllers often rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient,
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indirect routes resulting in delays. A significant portion of our operations is concentrated in markets such as South Florida, the
Caribbean, Latin America and the Northeast and northern Midwest regions of the United States, which are particularly
vulnerable to weather, airport traffic constraints and other delays. Adverse weather conditions and natural disasters, such as
hurricanes affecting southern Florida and the Caribbean (such as Hurricanes Irma and Maria in September 2017, Hurricane
Dorian in August 2019, Hurricane Laura in August 2020, Hurricane Ian in September 2022 and Hurricane Idalia in August
2023) as well as southern Texas (such as Hurricane Harvey in August 2017), winter snowstorms or earthquakes (such as the
September 2017 earthquakes in Mexico City, Mexico and the December 2019 and January 2020 earthquakes in Puerto Rico)
can cause flight cancellations, significant delays and facility disruptions. For example, during 2017, the timing and location of
Hurricanes Irma and Maria produced a domino effect on our operations, resulting in approximately 1,400 flight cancellations
and numerous flight delays, which resulted in an adverse effect on our results of operations. Cancellations or delays due to
adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security, staffing
shortages, or other factors may affect us to a greater degree than other, larger airlines that may be able to recover more quickly
from these events, and therefore could harm our business, results of operations and financial condition to a greater degree than
other air carriers. For example, during 2022, a number of adverse weather events, as well as increases in air traffic control
programs and restrictions, led to a significant number of flight delays and cancellations. Because of our high utilization, point-
to-point network, operational disruptions can have a disproportionate impact on our ability to recover. In addition, many airlines
reaccommodate their disrupted passengers on other airlines at prearranged rates under flight interruption manifest agreements.
We have been unsuccessful in procuring any of these agreements with our peers, which makes our recovery from disruption
more challenging than for larger airlines that have these agreements in place. Similarly, outbreaks of pandemic or contagious
diseases, such as Ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu, Zika virus and
COVID-19, could result in significant decreases in passenger traffic, the imposition of government restrictions in service,
supply chain bottlenecks or issues, and staffing shortages and could have a material adverse impact on the airline industry. For
example, in 2020 and 2021, the U.S. government and government authorities in other countries around the world implemented
travel bans, testing requirements and other restrictions in response to the COVID-19 pandemic and recommended against air
travel, which drastically reduced consumer demand for air travel. Any resurgence of COVID-19 or another pandemic or public
health crisis that results in similar or other restrictions could have a material adverse effect on our business and results of
operations. Air travel is continuing its resurgence following widespread adoption of vaccines, but the situation is fluid and
actual capacity adjustments could be different than what we currently expect. Any increases in travel-related taxes could also
result in decreases in passenger traffic. Any general reduction in airline passenger traffic could have a material adverse effect on
our business, results of operations and financial condition. Moreover, U.S. federal government shutdowns may cause delays and
cancellations or reductions in discretionary travel due to longer security lines, including as a result of furloughed government
employees, or reductions in staffing levels, including air traffic controllers. U.S. government shutdowns may also impact our
ability to take delivery of aircraft and commence operations in new domestic stations. Any extended shutdown like the one in
January 2019 may have a negative impact on our operations and financial results. In addition, supply chain issues have led to
delays in aircraft deliveries and negatively impacted our ability to source spare parts and complete maintenance on a timely
basis, which could have an adverse effect on our business and results of operations.
Restrictions on or litigation regarding third-party membership discount programs could harm our business, operating
results and financial condition.
We generate a relatively small but growing portion of our revenue from commissions, revenue share and other fees paid
to us by third-party merchants for customer click-throughs, distribution of third-party promotional materials and referrals
arising from products and services of the third-party merchants that we offer to our customers on our website. Some of these
third-party referral-based offers are for memberships in discount programs or similar promotions made to customers who have
purchased products from us, and for which we receive a payment from the third-party merchants for every customer that
accepts the promotion. Certain of these third-party membership discount programs have been the subject of consumer
complaints, litigation and regulatory actions alleging that the enrollment and billing practices involved in the programs violate
various consumer protection laws or are otherwise deceptive. Any private or governmental claim or action that may be brought
against us in the future relating to these third-party membership programs could result in our being obligated to pay damages or
incurring legal fees in defending claims. These damages and fees could be disproportionate to the revenues we generate through
these relationships. In addition, customer dissatisfaction or a significant reduction in or termination of the third-party
membership discount offers on our website as a result of these claims could have a negative impact on our brand, and could
have a material adverse effect on our business, results of operations and financial condition.
We face competition from air travel substitutes.
In addition to airline competition from traditional network airlines, other low-cost airlines and regional airlines, we also
face competition from air travel substitutes. On our domestic routes, we face competition from some other transportation
alternatives, such as bus, train or automobile. In addition, technology advancements may limit the demand for air travel. For
example, video teleconferencing and other methods of electronic communication may reduce the need for in-person
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communication and add a new dimension of competition to the industry as travelers seek lower-cost substitutes for air travel. If
we are unable to adjust rapidly in the event the basis of competition in our markets changes, it could have a material adverse
effect on our business, results of operations and financial condition.
Risks Related to Our Business
Increased labor costs, union disputes, employee strikes and other labor-related disruption may adversely affect our
business, results of operations and financial conditions.
Our business is labor intensive, with labor costs representing approximately 27.6%, 22.1% and 32.4% of our total
operating costs for 2023, 2022 and 2021, respectively. As of December 31, 2023, approximately 85% of our workforce was
represented by labor unions. We cannot assure that our labor costs going forward will remain competitive, because in the future
our labor agreements may be amended or become amendable and new agreements could have terms with higher labor costs; one
or more of our competitors may significantly reduce their labor costs, thereby reducing or eliminating our comparative
advantages as to one or more of such competitors; or our labor costs may increase in connection with our growth. As further
described below, our aircraft maintenance technicians ("AMTs") voted to be represented by the Aircraft Mechanics Fraternal
Association (the “AMFA”). We are currently negotiating a collective bargaining agreement. Any such negotiation may cause us
to incur higher labor costs for our AMTs over the term of the agreement than we would have incurred absent such agreement.
We may also become subject to additional collective bargaining agreements in the future given the possibility that other non-
unionized workers may unionize.
Relations between air carriers and labor unions in the United States are governed by the RLA. Under the RLA, collective
bargaining agreements generally contain “amendable dates” rather than expiration dates, subject to standard opener provisions,
and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date
through a multi-stage and usually lengthy series of bargaining processes overseen by the NMB. This process continues until
either the parties have reached agreement on a new collective bargaining agreement or the parties have been released to “self-
help” by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions
are free to engage in self-help measures such as lockouts and strikes.
During 2017, we experienced operational disruption from pilot-related work action which adversely impacted our results.
We obtained a temporary restraining order to enjoin further illegal labor action. In January 2018, under the guidance of the
NMB-assigned mediators, the parties reached a tentative agreement. In February 2018, the pilot group voted to approve the
current five-year agreement with us.
During the fourth quarter of 2022, we reached an agreement with ALPA for a new two-year agreement, which was ratified
by ALPA members on January 10, 2023. The ratified agreement includes increased pay rates and other enhanced benefits.
In March 2016, under the supervision of the NMB, we reached a tentative agreement for a five-year contract with our
flight attendants. Our flight attendants ratified the agreement in May 2016. In February 2021, we entered into a Letter of
Agreement with the AFA-CWA to change the amendable date of the collective bargaining agreement from May 4, 2021 to
September 1, 2021. All other terms of the collective bargaining agreement remained the same. In June 2021, the AFA-CWA
notified us, as required by the RLA, that it intended to submit proposed changes to the collective bargaining agreement
covering our flight attendants. We commenced negotiations with the AFA-CWA on September 27, 2021. In February 2023, we
reached an agreement with our flight attendants which was ratified by the flight attendants on April 13, 2023 and becomes
amendable in January 2026. The ratified agreement includes increased pay rates and other enhanced benefits.
Our dispatchers are represented by the PAFCA. In October 2018, we reached a tentative agreement with PAFCA for a
new five-year agreement, which was ratified by the PAFCA members in October 2018. In May 2023, PAFCA provided notice
that it intends to amend its Collective Bargaining Agreement with our dispatchers. The parties began negotiating changes to the
CBA on July 12, 2023. As of December 31, 2023, we continued to negotiate with PAFCA.
Our ramp service agents are represented by IAMAW. Representation only applies to our Fort Lauderdale station where
we have direct employees in the ramp service agent classification. In February 2020, the IAMAW notified us, as required by
the RLA, that it intended to submit proposed changes to the collective bargaining agreement covering our ramp service agents
which became amendable in June 2020. On September 28, 2021, we filed an “Application for Mediation Services” with the
NMB. We were able to reach a tentative agreement with the IAMAW with the assistance of the NMB on October 16, 2021. Our
ramp service agents ratified the five-year agreement in November 2021.
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In June 2018, our passenger service agents voted to be represented by the TWU, but the representation only applies to our
Fort Lauderdale station where we have direct employees in the passenger service classification. We began meeting with the
TWU in late October 2018 to negotiate an initial collective bargaining agreement. During February 2022, we reached a
tentative agreement with the TWU. Our passenger service agents ratified the five-year agreement on February 21, 2022.
In August 2022, our AMTs voted to be represented by AMFA as their collective bargaining agent. In November 2022,
AMFA notified us of its intent to negotiate a CBA and began negotiations. In October 2023, AMFA filed for mediation with the
NMB, and we are currently waiting for mediation dates from the NMB to continue negotiating with AMFA.
If we are unable to reach an agreement with any of our unionized work groups in current or future negotiations regarding
the terms of their CBAs, we may be subject to work interruptions or stoppages, such as the strike by our pilots in June 2010 and
the operational disruption from pilot-related work action experienced in 2017. A strike or other significant labor dispute with
our unionized employees is likely to adversely affect our ability to conduct business. Any agreement we do reach could increase
our labor and related expenses.
A deterioration in worldwide economic conditions may adversely affect our business, operating results, financial
condition, liquidity and ability to obtain financing or access capital markets.
The general worldwide economy has in the past experienced downturns due to the effects of the COVID-19 pandemic,
the European debt crisis, unfavorable U.S. economic conditions and slowing growth in certain Asian economies, including
general credit market crises, collateral effects on the finance and banking industries, energy price volatility, concerns about
inflation, higher interest rates, slower economic activity, decreased consumer confidence, reduced corporate profits and capital
spending, adverse business conditions, geopolitical conflict, pandemic risks, government constraints on international trade and
liquidity concerns. We cannot accurately predict the nature, extent, duration, effect or likelihood of any economic slowdown or
the timing, strength or sustainability of a subsequent economic recovery worldwide or in the United States or the impact of the
foregoing on the aviation industry.
Negative conditions in the general economy both in the United States and globally, including conditions resulting from
changes in gross domestic product growth, declines in consumer confidence, labor shortages, inflationary pressures, rising
interest rates, and financial and credit market fluctuations could result in decreases in spending on air travel and otherwise,
increases in labor costs and delayed deliveries of aircraft, all of which could materially and adversely affect the growth of our
business. In particular, although inflation in the United States has been relatively low in recent years, the U.S. economy has
recently experienced a significant inflationary effect from, among other things, supply chain disruptions and governmental
stimulus or fiscal policies adopted in response to the COVID-19 pandemic. While we cannot predict any future trends in the
rate of inflation, there is currently significant uncertainty in the near-term economic outlook. Continued inflation would further
raise our costs for labor, materials and services, which could negatively impact our profitability and cash flows. Additionally,
we may be unable to raise our fares in amounts equal to the rate of inflation.
In addition, we have significant obligations for aircraft and spare engines that we have ordered from Airbus, IAE and
Pratt & Whitney over the next several years, and we will need to finance these purchases. We may not have sufficient liquidity
or creditworthiness to fund the purchase of aircraft and engines, including payment of pre-delivery deposit payments (“PDPs”),
or for other working capital. Factors that affect our ability to raise financing or access the capital markets include market
conditions in the airline industry, economic conditions, the perceived residual value of aircraft and related assets, the level and
volatility of our earnings, our relative competitive position in the markets in which we operate, our ability to retain key
personnel, our operating cash flows and legal and regulatory developments. Regardless of our creditworthiness, at times the
market for aircraft purchase or lease financing has been very constrained due to such factors as the general state of the capital
markets and the financial position of the major providers of commercial aircraft financing.
We rely on maintaining a high daily aircraft utilization rate to implement our low-cost structure, which makes us
especially vulnerable to flight delays or cancellations or aircraft unavailability.
We maintain a high daily aircraft utilization rate. Our average daily aircraft utilization was 11.1 hours for 2023 and 10.7
hours for 2022. During 2021, we operated our aircraft at a slightly lower utilization level due to the COVID-19 pandemic
leading to an average daily aircraft utilization of 9.7 hours, which was lower compared to prior years. Aircraft utilization is the
average amount of time per day that our aircraft spend carrying passengers. Our revenue per aircraft can be increased by high
daily aircraft utilization, which is achieved in part by reducing turnaround times at airports so we can fly more hours on average
in a day. Aircraft utilization is reduced by delays and cancellations from various factors, many of which are beyond our control,
including air traffic congestion at airports or other air traffic control problems, adverse weather conditions, increased security
measures or breaches in security, international or domestic conflicts, terrorist activity, outbreaks of pandemics or contagious
diseases or other changes in business conditions. A significant portion of our operations are concentrated in markets such as
South Florida, the Caribbean, Latin America and the Northeast and northern Midwest regions of the United States, which are
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particularly vulnerable to weather, airport traffic constraints and other delays. In addition, pulling aircraft out of service for
unscheduled and scheduled maintenance, the occurrence of which will increase as our fleet ages, may materially reduce our
average fleet utilization and require that we seek short-term substitute capacity at increased costs. Similarly, removing aircraft
from service to inspect and repair the PW1100G engines could reduce our average fleet utilization. Due to the relatively small
size of our fleet and high daily aircraft utilization rate, the unavailability of aircraft and resulting reduced capacity could have a
material adverse effect on our business, results of operations and financial condition.
Our maintenance costs will increase as our fleet ages, and we will periodically incur substantial maintenance costs due
to the maintenance schedules of our aircraft fleet.
As of December 31, 2023, the average age of our aircraft was approximately 6.6 years. Our relatively new aircraft require
less maintenance now than they will in the future. Our fleet will require more maintenance as it ages and our maintenance and
repair expenses for each of our aircraft will be incurred at approximately the same intervals. For our leased aircraft, we expect
that the final heavy maintenance events will be amortized over the remaining lease term rather than until the next estimated
heavy maintenance event, because we account for heavy maintenance under the deferral method. This will result in significantly
higher depreciation and amortization expense related to heavy maintenance in the last few years of the leases as compared to
the costs in earlier periods. Moreover, because our current fleet was acquired over a relatively short period, significant
maintenance that is scheduled on each of these planes is occurring at roughly the same time, meaning we will incur our most
expensive scheduled maintenance obligations, known as heavy maintenance, across our present fleet around the same time.
These more significant maintenance activities result in out-of-service periods during which our aircraft are dedicated to
maintenance activities and unavailable to fly revenue service. In addition, the terms of some of our lease agreements require us
to pay maintenance reserves to the lessor in advance of the performance of major maintenance, resulting in our recording
significant prepaid deposits on our consolidated balance sheet. Depending on their recoverability, these maintenance reserves
may be expensed as supplemental rent. We expect scheduled and unscheduled aircraft maintenance expenses to increase over
the next several years. Any significant increase in maintenance and repair expenses would have a material adverse effect on our
business, results of operations and financial condition.
Our lack of marketing alliances could harm our business.
Many airlines, including the domestic traditional network airlines (American, Delta and United) have marketing alliances
with other airlines, under which they market and advertise their status as marketing alliance partners. These alliances, such as
OneWorld, SkyTeam and Star Alliance, generally provide for code-sharing, loyalty program reciprocity, coordinated
scheduling of flights to permit convenient connections and other joint marketing activities. Such arrangements permit an airline
to market flights operated by other alliance members as its own. This increases the destinations, connections and frequencies
offered by the airline and provides an opportunity to increase traffic on that airline’s segment of flights connecting with alliance
partners. We currently do not have any alliances with U.S. or foreign airlines. Our lack of marketing alliances puts us at a
competitive disadvantage to traditional network carriers who are able to attract passengers through more widespread alliances,
particularly on international routes, and that disadvantage may result in a material adverse effect on our passenger traffic,
business, results of operations and financial condition.
We are subject to extensive and increasing regulation by the FAA, DOT, TSA and other U.S. and foreign governmental
agencies, compliance with which could cause us to incur increased costs and adversely affect our business and financial
results.
Airlines are subject to extensive and increasing regulatory and legal compliance requirements, both domestically and
internationally, that involve significant costs. In the last several years, Congress has passed laws, and the DOT, FAA and TSA
have issued regulations, relating to the operation of airlines that have required significant expenditures. We expect to continue
to incur expenses in connection with complying with government regulations. Additional laws, regulations, taxes and increased
airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or
reduce the demand for air travel. If adopted, these measures could have the effect of raising ticket prices, reducing revenue and
increasing costs.
The DOT has been aggressive in enforcing regulations for violations of the tarmac delay rules, passenger with
disability rules, advertising rules and other consumer protection rules that could increase the cost of airline operations or reduce
revenues. In December 2020, the DOT issued a Final Rule on Traveling by Air with Service Animals. This rule limits service
animals to a dog that is individually trained to do work or perform tasks for the benefit of a person with a disability, and no
longer considers an emotional support animal to be a service animal. This eliminates the requirement to carry emotional support
animals for free, and will likely reduce costs. Additionally, in December 2020, the DOT withdrew a Request for Information
soliciting information on whether airline restrictions on the distribution or display of airline flight information constitute an
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unfair and deceptive business practice and/or an unfair method of competition. The DOT said that decisions on how and where
to sell their services should be left to the airlines.
In its first day in office, the Biden Administration issued an executive order that froze review and approval of any new
rulemaking. This freeze led the DOT to withdraw the Final Rule on Tarmac Delay and the Advance Notice of Proposed
Rulemaking (ANPRM) on Airfare Advertising. The ANPRM may not be reissued.
In October 2018, Congress passed the FAA Reauthorization Act of 2018, which extends FAA funds through fiscal
year 2023. The legislation contains provisions which could have effects on our results of operations and financial condition.
Among other provisions, the new law requires the DOT to lift the payment cap on denied boarding compensation, create new
requirements for the treatment of disabled passengers, and treble the maximum civil penalty for damage to wheelchairs and
other assistive devices or for injuring a disabled passenger. Under the Act, the FAA is required to issue rules establishing
minimum dimensions for passenger seats, including seat pitch, width and length. The Act also establishes new rest requirements
for flight attendants and requires, within one year, that the FAA issue an order mandating installation of a secondary cockpit
barrier on each new aircraft.
In December 2023, Congress passed the Airport and Airway Extension Act of 2023, Part II, which extends FAA funds
through March 8, 2024 while Congress works to pass a long-term extension. A five-year extension of FAA funds has passed the
House of Representatives, but remains stalled in the Senate. In the event that authorization of FAA funds lapses, our operations
and results of operations could be materially adversely affected.
In January 2021, the DOT issued a final rule, effective April 2021, to clarify that the maximum amount of Denied
Boarding Compensation (DBC) that a carrier may provide to a passenger denied boarding involuntarily is not limited. We
cannot forecast how eliminating this maximum amount of payment will affect our costs.
In 2021 and 2022, the DOT issued several NPRMs relating to air travel and airline ticketing and fees. In July 2021, the
DOT issued a NRPM requiring airlines to refund checked bag fees for delayed bags if they are not delivered to the passenger
within a specified number of hours and refunding ancillary fees for services related to air travel that passengers did not receive.
In November 2021, the DOT reopened the comment period on a NPRM regarding short-term improvements to lavatory
accessibility, including new proposed requirements for OBWs (Part 1). This NPRM was to gather information about all aspects
of OBW design, including stowage, before issuing any final binding regulation on the topic. In March 2022, the DOT issued a
NPRM (Part 2) requiring airlines to ensure that at least one lavatory on new single-aisle aircraft with at least 125 passenger
seats is large enough to permit a passenger with a disability (with the help of an assistant, if necessary) to approach, enter and
maneuver within the lavatory, as necessary, to use all lavatory facilities and to leave by means of the aircraft’s on-board wheel
chair. If enacted as currently proposed, this NPRM (Part 2) would apply to new aircraft ordered 18 years or delivered 20 years
after the effective date of a final rule. In August 2022, the DOT issued a NPRM requiring airlines and ticket agents to provide
non-expiring travel vouchers or credits to consumers holding non-refundable tickets for scheduled flights to, from or within the
United States as a result of the carrier cancelling or making a significant change to a scheduled flight, a serious communicable
disease or for several other reasons. The NPRM will further define the terms “significant change” and “cancellation” and will
require airlines and ticket agents to provide refunds if they receive significant financial assistance from the government as a
result of a public health emergency. As of December 31, 2023, a final rule has not been issued; however, it is our understanding
that the DOT will combine this NPRM with the July 2021 NPRM, regarding the refunding of certain checked bag fees ancillary
fees. In October 2022, the DOT issued a NRPM which would require airlines to increase disclosure of bag fees, change and
cancellation fees, and family seating policies during the ticket purchase process in an effort to improve the transparency of
airline pricing. The comment period closed on January 23, 2023. If any of these NPRMs are enacted as proposed, they may
increase our costs and our results of operations could be materially adversely affected.
We cannot assure that these and other laws or regulations enacted in the future will not harm our business. In addition,
the TSA mandates the federalization of certain airport security procedures and imposes additional security requirements on
airports and airlines, most of which are funded by a per ticket tax on passengers and a tax on airlines. We cannot forecast what
additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be
associated with complying with such requirements.
Our ability to operate as an airline is dependent on our maintaining certifications issued to us by the DOT and the
FAA. The FAA has the authority to issue mandatory orders relating to, among other things, the grounding of aircraft, inspection
of aircraft, installation of new safety-related items and removal and replacement of aircraft parts that have failed or may fail in
the future. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, our aircraft, for any
reason, could negatively affect our business and financial results. Federal law requires that air carriers operating large aircraft
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be continuously “fit, willing and able” to provide the services for which they are licensed. Our “fitness” is monitored by the
DOT, which considers factors such as unfair or deceptive competition, advertising, baggage liability and disabled passenger
transportation. While the DOT has seldom revoked a carrier's certification for lack of fitness, such an occurrence would render
it impossible for us to continue operating as an airline. The DOT may also institute investigations or administrative proceedings
against airlines for violations of regulations.
The U.S. government is under persistent pressure to implement cost cutting and efficiency initiatives. In addition, the
U.S. government has recently and may in the future experience delays in the completion of its budget process which could
delay funding for government departments and agencies that regulate or otherwise are tied to the aviation industry, including
the DOT and FAA. To the extent that any such initiatives or budgeting delays affect the operations of these government
departments and agencies, including by forcing mandatory furloughs of government employees, our operations and results of
operations could be materially adversely affected.
International routes are regulated by treaties and related agreements between the United States and foreign
governments. Our ability to operate international routes is subject to change because the applicable arrangements between the
United States and foreign governments may be amended from time to time. Our access to new international markets may be
limited by our ability to obtain the necessary certificates to fly the international routes. In addition, our operations in foreign
countries are subject to regulation by foreign governments and our business may be affected by changes in law and future
actions taken by such governments, including granting or withdrawal of government approvals and restrictions on competitive
practices. We are subject to numerous foreign regulations based on the large number of countries outside the United States
where we currently provide service. If we are not able to comply with this complex regulatory regime, our business could be
significantly harmed. Please see “Business — Government Regulation.”
Government-imposed travel requirements and entry bans from certain countries based on emerging viruses or variants
of existing viruses could be imposed in the future. We will continue to comply with all contagious disease requirements issued
by the U.S. and foreign governments, but we cannot forecast what additional requirements may be imposed in the future or the
extent of any pre-travel testing requirements that may be under consideration in the United States and that may be in place, or
renewed, in any foreign jurisdiction we serve, including the effect of such requirements on passenger demand or the costs or
revenue impact that would be associated with complying with such requirements.
Changes in legislation, regulation and government policy have affected, and may in the future have a material adverse
effect on, our business.
Changes in, and uncertainty with respect to, legislation, regulation and government policy at the local, state or federal
level have affected, and may in the future significantly impact, our business and the airline industry. For example, the Tax Cuts
and Jobs Act, enacted on December 22, 2017, limits deductions for borrowers for net interest expense on debt. Specific
legislative and regulatory proposals that could have a material impact on us in the future include, but are not limited to,
infrastructure renewal programs; changes to immigration policy; modifications to international trade policy, including
withdrawing from trade agreements and imposing tariffs; changes to financial legislation, including the partial or full repeal of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) or the Tax Cuts and Jobs
Act; public company reporting requirements; environmental regulation and antitrust enforcement. Any such changes may make
it more difficult and/or more expensive for us to obtain new aircraft or engines and parts to maintain existing aircraft or engines
or make it less profitable or prevent us from flying to or from some of the destinations we currently serve.
To the extent that any such changes have a negative impact on us or the airline industry, including as a result of related
uncertainty, these changes may materially and adversely impact our business, financial condition, results of operations and cash
flows.
Any tariffs imposed on commercial aircraft and related parts imported from outside the United States may have a
material adverse effect on our fleet, business, financial condition and our results of operations.
Certain of the products and services that we purchase, including our aircraft and related parts, are sourced from suppliers
located in foreign countries, and the imposition of new tariffs, or any increase in existing tariffs, by the U.S. government on the
importation of such products or services could materially increase the amounts we pay for them. In early October 2019, the
World Trade Organization ruled that the United States could impose $7.5 billion in retaliatory tariffs in response to illegal
European Union subsidies to Airbus. On October 18, 2019, the United States imposed these tariffs on certain imports from the
European Union, including a 10% tariff on new commercial aircraft. In February 2020, the United States announced an increase
to this tariff from 10% to 15%. These tariffs apply to aircraft that we are already contractually obligated to purchase. In June
2021, the United States Trade Representative announced that the United States and European Union had agreed to suspend
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reciprocal tariffs on large civilian aircraft for five years, pending discussions to resolve their trade dispute. However, these
tariffs are under continuing review and at any time could be increased, decreased, eliminated or applied to a broader range of
products we use. The imposition of these tariffs may substantially increase the cost of, among other things, imported new
Airbus aircraft and parts required to service our Airbus fleet, which in turn could have a material adverse effect on our business,
financial condition and/or results of operations. We may also seek to postpone or cancel delivery of certain aircraft currently
scheduled for delivery, and we may choose not to purchase as many aircraft as we intended in the future. Any such action could
have a material adverse effect on the size of our fleet, business, financial condition and/or results of operations.
We may not be able to implement our growth strategy.
Our growth strategy includes acquiring additional aircraft, increasing the frequency of flights and size of aircraft used in
markets we currently serve, and expanding the number of markets we serve where our low-cost structure would likely be
successful. Effectively implementing our growth strategy is critical for our business to achieve economies of scale and to
sustain or increase our profitability. We face numerous challenges in implementing our growth strategy, including our ability
to:
• maintain profitability;
•
•
•
•
•
acquire delivery positions of and/or financing for new or used aircraft;
access airports located in our targeted geographic markets where we can operate routes in a manner that is consistent
with our cost strategy;
acquire new and used aircraft in accordance with our intended delivery schedule, and obtain sufficient spare parts or
related support services from our suppliers on a timely basis;
gain access to international routes;
access sufficient gates and other services at airports we currently serve or may seek to serve; and
• maintain efficient utilization and capacity of our existing aircraft.
Our growth is dependent upon our ability to maintain a safe and secure operation and requires additional personnel,
equipment and facilities. An inability to hire and retain personnel, timely secure the required equipment and facilities in a cost-
effective manner, efficiently operate our expanded facilities or obtain the necessary regulatory approvals may adversely affect
our ability to achieve our growth strategy, which could harm our business. In addition, expansion to new markets may have
other risks due to factors specific to those markets. We may be unable to foresee all of the existing risks upon entering certain
new markets or respond adequately to these risks, and our growth strategy and our business may suffer as a result. In addition,
our competitors may reduce their fares and/or offer special promotions to deter our entry into a new market or to stop our
growth into existing markets or new markets. We cannot assure you that we will be able to profitably expand our existing
markets or establish new markets.
Some of our target growth markets in the Caribbean and Latin America include countries with less developed economies
that may be vulnerable to unstable economic and political conditions, such as significant fluctuations in gross domestic product,
interest and currency exchange rates, high inflation, civil disturbances, government instability, nationalization and expropriation
of private assets and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets
served by us and the resulting instability may adversely affect our ability to implement our growth strategy.
In 2008, in response to record high fuel prices and rapidly deteriorating economic conditions, we modified our growth
plans by terminating our leases for seven aircraft. We incurred significant expenses relating to our lease terminations, and have
incurred additional expenses to acquire new aircraft in place of those under the terminated leases as we expanded our network.
In November 2023, we announced that we will discontinue service at Denver International Airport, effective January 9, 2024,
as a result of underperforming routes and Pratt & Whitney’s GTF engine availability issues. See “—We depend on a limited
number of suppliers for our aircraft and engines.” We may in the future determine to reduce further our future growth plans
from previously announced levels, which may impact our business strategy and future profitability.
We rely heavily on technology and automated systems to operate our business and any failure of these technologies or
systems or failure by their operators could harm our business.
We are highly dependent on technology and automated systems to operate our business and achieve low operating costs.
These technologies and systems include our computerized airline reservation system, flight operations system, financial
planning, management and accounting system, telecommunications systems, website, maintenance systems and check-in
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kiosks. The performance and reliability of our technology are critical to our ability to operate and compete effectively. The
execution of our strategic plans could be negatively affected by (i) our ability to timely and effectively implement, transition,
and maintain related information technology systems and infrastructure; (ii) our ability to effectively balance our investment of
incremental operating expenses and capital expenditures related to our strategies against the need to effectively control cost; and
(iii) our dependence on third parties with respect to our ability to implement our strategic plans. We cannot assure you that our
security measures, change control procedures and disaster recovery plans will be adequate to prevent disruptions or delays.
Disruption in or changes to these systems could result in an interruption to our operations or loss of important data. Any of the
foregoing could result in a material adverse effect on our business, reputation, results of operations and financial condition.
In order for our operations to work efficiently, our website and reservation system must be able to accommodate a high
volume of traffic, maintain secure information and deliver flight information with a high degree of reliability. Substantially all
of our tickets are issued to passengers as electronic tickets. We depend on our reservation system, which is hosted and
maintained under a long-term contract by a third-party service provider, to be able to issue, track and accept these electronic
tickets. If our third-party service provider experiences operational failures or claims that it cannot perform as a result of a force
majeure, due to the effects of COVID-19 or otherwise, we may not be able to operate our reservation system. If our reservation
system fails or experiences interruptions, and we are unable to book seats for any period of time, we could lose a significant
amount of revenue as customers book seats on competing airlines. We have experienced short duration reservation system
outages from time to time and may experience similar outages in the future. For example, in November 2010, we experienced a
significant service outage with our third-party reservation service provider on the day before Thanksgiving, one of the
industry’s busiest travel days and in August 2013, we experienced a 13-hour outage that affected our sales and customer service
response times. We also rely on third-party service providers of our other automated systems for technical support, system
maintenance and software upgrades. If our automated systems are not functioning or if the current providers were to fail to
adequately provide technical support or timely software upgrades for any one of our key existing systems, we could experience
service disruptions, which could harm our business and result in the loss of important data, increase our expenses and decrease
our revenues. In the event that one or more of our primary technology or systems’ vendors goes into bankruptcy, ceases
operations or fails to perform as promised, replacement services may not be readily available on a timely basis, at competitive
rates or at all and any transition time to a new system may be significant.
In addition, our automated systems cannot be completely protected against events that are beyond our control, including
natural disasters, cyber attacks, disruption of electrical grid or telecommunications failures. Substantial or sustained system
failures could cause service delays or failures and result in our customers purchasing tickets from other airlines. We have
implemented security measures and change control procedures and have disaster recovery plans; however, we cannot assure
you that these measures are adequate to prevent disruptions. Disruption in, changes to or a breach of, these systems could result
in a disruption to our business and the loss of important data. Moreover, in the event of system outages or interruptions, we may
not be able to recover from our information technology and software providers all or any portion of the costs or business losses
we may incur. Any of the foregoing could result in a material adverse effect on our business, results of operations and financial
condition.
We are subject to cyber security risks and may incur increasing costs in an effort to minimize those risks.
Our business employs systems and websites that allow for the secure storage and transmission of proprietary or
confidential information regarding our customers, employees, suppliers and others, including personal identification
information, credit card data and other confidential information. Security breaches could expose us to a risk of loss or misuse of
this information, litigation and potential liability. Although we take steps to secure our management information systems, and
although auditors review and approve the security configurations and management processes of these systems, including our
computer systems, intranet and internet sites, email and other telecommunications and data networks, the security measures we
have implemented may not be effective, and our systems may be vulnerable to theft, loss, damage and interruption from a
number of potential sources and events, including unauthorized access or security breaches, natural or man-made disasters,
cyber attacks (including ransom attacks in which malicious persons encrypt our systems, steal data, or both, and demand
payment for decryption of systems or to avoid public release of data), computer viruses, power loss or other disruptive
events. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber
attacks. Attacks may be targeted at us, our customers and suppliers, or others who have entrusted us with information. In
addition, attacks not targeted at us, but targeted solely at suppliers, may cause disruption to our computer systems or a breach of
the data that we maintain on customers, employees, suppliers and others.
Actual or anticipated attacks may cause us (and at times have caused us) to incur increasing costs, including costs to
deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants, or
costs incurred in connection with the notifications to employees, suppliers or the general public as part of our notification
obligations to the various governments that govern our business. Advances in computer capabilities, new technological
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discoveries, or other developments may result in the breach or compromise of technology used by us to protect transaction or
other data. In addition, data and security breaches can also occur as a result of non-technical issues, including breaches by us or
by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential
information. Our reputation, brand and financial condition could be adversely affected if, as a result of a significant cyber event
or other security issues: our operations are disrupted or shut down; our confidential, proprietary information is stolen or
disclosed; we incur costs or are required to pay fines in connection with stolen customer, employee or other confidential
information; we must dedicate significant resources to system repairs or increase cyber security protection; or we otherwise
incur significant litigation or other costs.
Our processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental
regulation.
In the processing of our customer transactions, we receive, process, transmit and store a large volume of identifiable
personal data, including financial data such as credit card information. This data is increasingly subject to legislation and
regulation, such as the California Consumer Privacy Act and the Fair Accurate Credit Transparency Act and Payment Card
Industry legislation, typically intended to protect the privacy of personal data that is collected, processed and transmitted. More
generally, we rely on consumer confidence in the security of our system, including our website on which we sell the majority of
our tickets. Our business, results of operations and financial condition could be adversely affected if we are unable to comply
with existing privacy obligations or legislation or regulations are expanded to require changes in our business practices.
We may not be able to maintain or grow our non-ticket revenues.
Our business strategy includes expanding our portfolio of ancillary products and services. There can be no assurance that
passengers will pay for additional ancillary products and services or that passengers will continue to choose to pay for the
ancillary products and services we currently offer. Further, regulatory initiatives could adversely affect ancillary revenue
opportunities. Failure to maintain our non-ticket revenues would have a material adverse effect on our results of operations and
financial condition. Please see “Risks Related to Our Industry—Restrictions on, or increased taxes applicable to, charges for
ancillary products and services paid by airline passengers and burdensome consumer protection regulations or laws could harm
our business, results of operations and financial condition.”
Our inability to expand or operate reliably or efficiently out of our key airports where we maintain a large presence
could have a material adverse effect on our business, results of operations and financial condition.
We are highly dependent on markets served from airports where we maintain a large presence. Our results of operations
may be affected by actions taken by governmental or other agencies or authorities having jurisdiction over our operations at
airports, including, but not limited to:
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increases in airport rates and charges;
limitations on take-off and landing slots, airport gate capacity or other use of airport facilities;
termination of our airport use agreements, some of which can be terminated by airport authorities with little notice to
us;
increases in airport capacity that could facilitate increased competition;
international travel regulations such as customs and immigration;
increases in taxes;
changes in the law that affect the services that can be offered by airlines in particular markets and at particular airports;
restrictions on competitive practices;
the adoption of statutes or regulations that impact customer service standards, including security standards; and
the adoption of more restrictive locally-imposed noise regulations or curfews.
In general, any changes or disruptions in airport operations could have a material adverse effect on our business, results
of operations and financial condition.
We rely on third-party service providers to perform functions integral to our operations.
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We have entered into agreements with third-party service providers to furnish certain facilities and services required for
our operations, including ground handling, catering, passenger handling, engineering, maintenance, refueling, reservations and
airport facilities as well as administrative and support services. We are likely to enter into similar service agreements in new
markets we decide to enter, and there can be no assurance that we will be able to obtain the necessary services at acceptable
rates.
Although we seek to monitor the performance of third parties that provide us with our reservation system, ground
handling, catering, passenger handling, engineering, maintenance services, refueling and airport facilities, the efficiency,
timeliness and quality of contract performance by third-party service providers are often beyond our control, and any failure by
our service providers to perform their contracts, including as a result of operational failures or a force majeure, due to the
effects of COVID-19 or otherwise, may have an adverse impact on our business and operations. For example, in 2008, our call
center provider went bankrupt. Though we were able to quickly switch to an alternative vendor, we experienced a significant
business disruption during the transition period and a similar disruption could occur in the future if we changed call center
providers or if an existing provider ceased to be able to serve us. We expect to be dependent on such third-party arrangements
for the foreseeable future.
We rely on third-party distribution channels to distribute a portion of our airline tickets.
We rely on third-party distribution channels, including those provided by or through global distribution systems, or GDSs,
conventional travel agents and online travel agents, or OTAs, to distribute a portion of our airline tickets, and we expect in the
future to rely on these channels to an increasing extent to collect ancillary revenues. These distribution channels are more
expensive and at present have less functionality in respect of ancillary revenues than those we operate ourselves, such as our
call centers and our website. Certain of these distribution channels also effectively restrict the manner in which we distribute
our products generally. To remain competitive, we will need to successfully manage our distribution costs and rights, and
improve the functionality of third-party distribution channels, while maintaining an industry-competitive cost structure.
Negotiations with key GDSs and OTAs designed to manage our costs, increase our distribution flexibility, and improve
functionality could be contentious, could result in diminished or less favorable distribution of our tickets, and may not provide
the functionality we require to maximize ancillary revenues. Any inability to manage our third-party distribution costs, rights
and functionality at a competitive level or any material diminishment in the distribution of our tickets could have a material
adverse effect on our competitive position and our results of operations. Moreover, our ability to compete in the markets we
serve may be threatened by changes in technology or other factors that may make our existing third-party sales channels
impractical, uncompetitive or obsolete.
Our reputation and business could be materially adversely affected in the event of an emergency, accident or similar
incident involving our aircraft.
We are exposed to potential significant losses in the event that any of our aircraft is subject to an emergency, accident,
terrorist incident or other similar incident, and significant costs related to passenger claims, repairs or replacement of a damaged
aircraft and its temporary or permanent loss from service. There can be no assurance that we will not be affected by such events
or that the amount of our insurance coverage will be adequate in the event such circumstances arise and any such event could
cause a substantial increase in our insurance premiums. Please see “Risks Related to Our Business—Increases in insurance
costs or significant reductions in coverage could have a material adverse effect on our business, financial condition and results
of operations.” In addition, any future aircraft emergency, accident or similar incident, even if fully covered by insurance or
even if it does not involve our airline, may create a public perception that our airline or the equipment we fly is less safe or
reliable than other transportation alternatives, or could cause us to perform time consuming and costly inspections on our
aircraft or engines which could have a material adverse effect on our business, results of operations and financial condition.
Negative publicity regarding our customer service or otherwise could have a material adverse effect on our business.
In the past, we have experienced a relatively high number of customer complaints related to, among other things, our
customer service and reservations and ticketing systems. In particular, we generally experience a higher volume of complaints
when we make changes to our unbundling policies, such as charging for baggage. In addition, in 2009, we entered into a
consent order with the DOT for our procedures for bumping passengers from oversold flights and our handling of lost or
damaged baggage. Under the consent order, we were assessed a civil penalty of $375,000, of which we were required to pay
$215,000 based on an agreement with the DOT and not having similar violations in the year after the date of the consent order.
Further, media reports about incidents on our aircraft unrelated to customer complaints could negatively impact our reputation
and our operations. If we do not meet our customers’ expectations with respect to reliability and service, customers could
decide not to fly with us, which would materially adversely affect our business and reputation.
We depend on a limited number of suppliers for our aircraft and engines.
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One of the elements of our business strategy is to save costs by operating a single-family aircraft fleet - currently Airbus
A320-family, single-aisle aircraft, powered by engines manufactured by IAE and Pratt & Whitney. If any of Airbus, IAE or
Pratt & Whitney become unable to perform its contractual obligations, or if we are unable to acquire or lease aircraft or engines
from these or other owners, operators or lessors on acceptable terms, we would have to find other suppliers for a similar type of
aircraft or engine. In late 2022, we were notified by Airbus that a number of the aircraft we originally had scheduled for
delivery in 2023 will be delayed into 2024 and beyond. These delays have required us to reduce capacity expectations for the
next year or so. If we have to lease or purchase aircraft from another supplier, we would lose the significant benefits we derive
from our current single fleet composition. We may also incur substantial transition costs, including costs associated with
retraining our employees, replacing our manuals and adapting our facilities and maintenance programs. Our operations could
also be harmed by the failure or inability of aircraft, engine and parts suppliers to provide sufficient spare parts or related
support services on a timely basis, particularly in connection with new-generation introductory technology. Our business would
be significantly harmed if a design defect or mechanical problem with any of the types of aircraft, engines or components
currently on order or that we operate were discovered that would halt or delay our aircraft delivery stream or that would ground
any of our aircraft while the defect or problem was corrected, assuming it could be corrected at all. Since the addition of
A320neo aircraft in 2016, we had experienced introductory issues with the new-generation PW1100G engines, designed and
manufactured by Pratt & Whitney, which had previously resulted in diminished service availability of such aircraft. Beginning
in the second half of 2020, the A320neo aircraft fleet reliability had stabilized and the PW1100G engine technical issues had
improved. However, beginning in the second half of 2022, we began experiencing reliability issues with the PW1100G engines
once again resulting in diminished service availability of aircraft. Supply chain delivery issues and limited capacity at engine
maintenance, repair, and overhaul (“MRO”) shops available to service PW1100G engines have resulted in extended turnaround
time to perform these inspections and the modifications required to improve the reliability of these engines. These impacts are
expected to continue throughout 2024 and beyond, until supply chain and engine MRO shop capacity returns to required levels
to support our growth. In addition, in July 2023, 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 GTF fleet, which powers the
A320neo aircraft. As of December 31, 2023, we have removed five engines from service, three of which are currently awaiting
induction for inspection. Pratt & Whitney notified us that all GTF engines in its fleet, including the engines slotted for future
aircraft deliveries, for a yet to be determined period, may be subject to the removal and inspection, or replacement, of the
powdered metal high-pressure turbine and compressor discs. We currently estimate these engines will require removal and
inspection in 2024, but continuing through 2026. For 2024, we estimate the average number of grounded neo aircraft will climb
steadily from 13 in January 2024 to 41 in December 2024, averaging 26 grounded for the full year 2024. Lower capacity
resulting from manufacturer or supplier issues may lead to significant impact on our business and operating results. For
instance, partially as a result of the Pratt & Whitney engine issues, in November 2023, we announced that we will discontinue
service at Denver International Airport, effective January 9, 2024.
We cannot be certain that new technical issues may be mitigated given the relatively short life these engines have been in
service. We continuously work with the engine manufacturer to secure support and relief in connection with possible engine
related operation disruptions. Should appropriate design or mechanical modifications not be implemented or not be effective,
this could materially adversely affect our business, results of operations and financial condition. These types of events, if
appropriate design or mechanical modifications cannot be implemented, and related operations disruptions, including from
required inspections, could materially adversely affect our business, results of operations and financial condition. Moreover, the
use of our aircraft could be suspended or restricted by regulatory authorities in the event of actual or perceived mechanical or
design problems. Our business would also be significantly harmed if the public began to avoid flying with us due to an adverse
perception of the types of aircraft, engines or components that we operate stemming from safety concerns or other problems,
whether real or perceived, or in the event of an accident involving those types of aircraft, engines or components. Carriers that
operate a more diversified fleet are better positioned than we are to manage such events.
Reduction in demand for air transportation, or governmental reduction or limitation of operating capacity, in the
domestic U.S., Caribbean or Latin American markets could harm our business, results of operations and financial
condition.
A significant portion of our operations are conducted to and from the domestic U.S., Caribbean or Latin American
markets. Our business, results of operations and financial condition could be harmed if we lost our authority to fly to these
markets, by any circumstances causing a reduction in demand for air transportation, or by governmental reduction or limitation
of operating capacity, in these markets, such as adverse changes in local economic or political conditions, negative public
perception of these destinations, unfavorable weather conditions, public health concerns or terrorist-related activities.
Furthermore, our business could be harmed if jurisdictions that currently limit competition allow additional airlines to compete
on routes we serve. Many of the countries we serve are experiencing either economic slowdowns or recessions, which may
translate into a weakening of demand and could harm our business, results of operations and financial condition.
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Increases in insurance costs or significant reductions in coverage could have a material adverse effect on our business,
financial condition and results of operations.
We carry insurance for third-party liability, passenger liability, property damage and all-risk coverage for damage to our
aircraft. As a result of the September 11, 2001 terrorist attacks, aviation insurers significantly reduced the amount of insurance
coverage available to commercial air carriers for liability to persons other than employees or passengers for claims resulting
from acts of terrorism, war or similar events (war risk insurance). Accordingly, our insurance costs increased significantly and
our ability to continue to obtain certain types of insurance remains uncertain. While the price of commercial insurance has
declined since the period immediately after the terrorist attacks, in the event commercial insurance carriers further reduce the
amount of insurance coverage available to us, or significantly increase its cost, we would be adversely affected. We currently
maintain commercial airline insurance with several underwriters. However, there can be no assurance that the amount of such
coverage will not be changed, or that we will not bear substantial losses from accidents. We could incur substantial claims
resulting from an accident in excess of related insurance coverage that could have a material adverse effect on our results of
operations and financial condition. Renewing coverage may result in higher premiums and more restrictive terms. Our business,
results of operations and financial condition could be materially adversely affected if we are unable to obtain adequate
insurance.
Failure to comply with applicable environmental regulations could have a material adverse effect on our business,
results of operations and financial condition.
We are subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the
protection of the environment, including those relating to emissions to the air, discharges to surface and subsurface waters, safe
drinking water and the management of hazardous substances, oils and waste materials. Compliance with all environmental laws
and regulations can require significant expenditures and any future regulatory developments in the United States and abroad
could adversely affect operations and increase operating costs in the airline industry. For example, climate change legislation
was previously introduced in Congress and such legislation could be re-introduced in the future by Congress and state
legislatures, and could contain provisions affecting the aviation industry, compliance with which could result in the creation of
substantial additional costs to us. Similarly, the EPA issued a rule that regulates larger emitters of greenhouse gases. Future
operations and financial results may vary as a result of such regulations. Compliance with these regulations and new or existing
regulations that may be applicable to us in the future could increase our cost base and could have a material adverse effect on
our business, results of operations and financial condition.
There is also an increasing international focus on climate change, carbon emissions and environmental regulation. The
principal deputy assistant secretary for aviation and international affairs at the DOT spent the last 25 years working on
international aviation climate change policy at Environmental Defense Fund. This may signal increased emphasis on new
environmental regulation on commercial aviation.
Members of the International Civil Aviation Organization (“ICAO”) have been negotiating a global agreement in
greenhouse gas emissions for the aviation industry. In October 2016, the ICAO adopted the Carbon Offsetting and Reduction
Scheme for International Aviation (“CORSIA”), which is a global, market-based emissions offset program designed to
encourage carbon-neutral growth beyond 2020. Further, in June 2018 the ICAO adopted standards pertaining to the collection
and sharing of information in international aviation emissions beginning in 2019. We are a participant in the CORSIA program.
The CORSIA will increase operating costs for Spirit and other U.S. airlines that operate internationally. The CORSIA is being
implemented in phases beginning with a voluntary pilot which began in 2021 and will continue through 2023. The COVID-19
pandemic has depressed international aviation such that 2020 emissions will not be included in setting a baseline. Airlines will
have until January 2025 to cancel eligible emissions units to comply with their total offsetting requirements for the pilot phase.
From 2021, all flights will be subject to offsetting with certain exceptions. Certain details are still being developed and the
impact cannot be fully predicted. Compliance with CORSIA could significantly increase our operating costs. The potential
impact of CORSIA or other emissions-related requirements on our costs will ultimately depend on a number of factors,
including baseline emissions, the price of emission allowances or offsets that we would need to acquire, the efficiency of our
fleet and the number of flights subject to these requirements. These costs have not been completely defined and could fluctuate.
Governmental authorities in several U.S. and foreign cities are also considering or have already implemented aircraft
noise reduction programs, including the imposition of nighttime curfews and limitations on daytime take-offs and landings. We
have been able to accommodate local noise restrictions imposed to date, but our operations could be adversely affected if
locally-imposed regulations become more restrictive or widespread.
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If we are unable to attract and retain qualified personnel or fail to maintain our company culture, our business, results
of operations and financial condition could be harmed.
Our business is labor intensive. We require large numbers of pilots, flight attendants, maintenance technicians and other
personnel. The airline industry has from time to time experienced a shortage of qualified personnel, particularly with respect to
pilots and maintenance technicians. In addition, we currently face, and may continue to face, high employee turnover, including
with respect to our pilots. We may be required to increase wages and/or benefits in order to attract and retain qualified
personnel. If we are unable to hire, train and retain qualified employees, our operations and business could be harmed and we
may be unable to implement our growth plans. Since 2021, we have experienced a shortage of qualified workers as the U.S.
labor market tightened, in particular shortages of qualified pilots. As a result, our operations were negatively impacted and our
labor costs have increased substantially in 2021 and through 2023.
In addition, as we hire more people and grow, we believe it may be increasingly challenging to continue to hire people
who will maintain our company culture. Our company culture, which we believe is one of our competitive strengths, is
important to providing high-quality customer service and having a productive, accountable workforce that helps keep our costs
low. As we continue to grow, we may be unable to identify, hire or retain enough people who meet the above criteria, including
those in management or other key positions. Our company culture could otherwise be adversely affected by our growing
operations and geographic diversity. If we fail to maintain the strength of our company culture, our competitive ability and our
business, results of operations and financial condition could be harmed.
Our business, results of operations and financial condition could be materially adversely affected if we lose the services
of our key personnel.
Our success depends to a significant extent upon the efforts and abilities of our senior management team and key
financial and operating personnel. In particular, we depend on the services of our senior management team. Competition for
highly qualified personnel is intense. For example, the pendency of the Merger may make it difficult to retain and hire qualified
personnel. The loss of any executive officer or other key employee without adequate replacement or the inability to attract new
qualified personnel could have a material adverse effect on our business, results of operations and financial condition. We do
not maintain key-person life insurance on our management team.
The requirements of being a public company may strain our resources, divert management’s attention and affect our
ability to attract and retain qualified board members.
As a public company, we incur significant legal, accounting and other expenses, including costs associated with public
company reporting requirements. We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley
Act of 2002, as amended, the Dodd-Frank Act and related rules implemented or to be implemented by the SEC and the New
York Stock Exchange. The expenses incurred by public companies generally for reporting and corporate governance purposes
have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us
to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations
could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board
committees, or as our executive officers and may divert management’s attention. Furthermore, if we are unable to satisfy our
obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory
action and potentially civil litigation.
Risks Related to Our Programs
The success of the Free Spirit Program and the Spirit Saver$ Club® program depend on the success of the Company.
The Free Spirit Program and the Spirit Saver$ Club® program depend on our continued success as a commercial airline
and our continued performance under certain Free Spirit Agreements. The success or failure of our business will have a direct
impact the success and the value of the Free Spirit Program and the Spirit Saver$ Club® program.
Business decisions made by the Company, including with respect to ticket prices, routes, the location of hubs, cabin
designs, safety procedures, any initiatives to retain customers and otherwise, could have an adverse impact on our appeal to air
travelers, which could negatively affect participation in the Free Spirit Program and the Spirit Saver$ Club® program, damage
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our reputation or harm our relationships with the Free Spirit Partners. For instance, certain business decisions may negatively
adjust the rate at which points are purchased by third parties under the terms of the applicable Free Spirit Agreement, and
decisions by the Company with respect to mergers, divestitures or other corporate events may provide for termination rights of
third parties under Free Spirit Agreements, each of which could have a material adverse effect on the financial and operational
success, as well as the appraised value of the Free Spirit Program and the Spirit Saver$ Club® program.
The success of the Free Spirit Program and the Spirit Saver$ Club® program may be harmed by decisions or actions of
our partners that are beyond our control.
The Free Spirit Program and the Spirit Saver$ Club® program depend in part on the decisions or actions of our partners.
For example, issuers of our co-branded credit cards have certain rights to alter terms and conditions of the credit card accounts
of their customers, including finance charges and other fees and required minimum monthly payments, in order to maintain
their competitive position in the credit card industry or to comply with, among other things, regulatory guidelines, relevant law
or prudent business practices. Changes in the terms of such credit card accounts may reduce the number of new accounts, the
volume of credit card spend or negatively impact account retention, which in turn may reduce the number of points accrued and
sold or impact the Free Spirit Program. Although issuers of our co-branded credit cards may consult the Company prior to
implementing any such changes, no assurance can be given that issuers of our co-branded credit cards will not take actions that
adversely affect the success of Free Spirit Program and the Spirit Saver$ Club® program.
Covenant restrictions on the Free Spirit Program and the Spirit Saver$ Club® program in our debt agreements will
impose restrictions on our operations, and if we are not able to comply with such covenants, our creditors could
accelerate our indebtedness or exercise other remedies.
The covenants in the indenture governing the Secured Notes contains a number of provisions that impose restrictions on
the Free Spirit Program and the Spirit Saver$ Club® program which, subject to certain exceptions, limit the ability of the
Company to, among other things, amend the policies and procedures of the Free Spirit Program and the Spirit Saver$ Club®
program in a manner that would be reasonably expected to have a material adverse effect, compete with the Free Spirit Program
and the Spirit Saver$ Club® by establishing another mileage or loyalty program (subject to certain exceptions) and sell pre-paid
miles in excess of $25.0 million annually and $125.0 million in the aggregate. The indenture contains additional restrictions on
the Free Spirit Program and the Spirit Saver$ Club® program, including the ability to terminate or modify certain licenses and
certain material Free Spirit Agreements. The indenture also requires Spirit to maintain a minimum liquidity of at least $400.0
million on a daily basis. Such covenants are in addition to the other restrictions in the indenture, such as restrictions on the
ability of the issuers and guarantors of the Secured Notes to make restricted payments, incur additional indebtedness, enter into
certain transactions with affiliates, create or incur certain liens on the collateral, merge, consolidate, or sell assets, sell, transfer
or otherwise convey the collateral and designate certain subsidiaries as unrestricted.
Complying with these covenants and other restrictive covenants that may be contained in any future debt agreements will
limit our ability to operate our business and may limit our ability to take advantage of business opportunities that are in our
long-term interest.
The failure to comply with any of these covenants or restrictions could result in a default under the indenture governing the
Secured Notes or any future debt agreement, which could lead to an acceleration of the debt under such instruments and, in
some cases, the acceleration of debt under other instruments that contain cross-default or cross-acceleration provisions, each of
which could have a material adverse effect on the Company. In the case of an event of default, or in the event of a cross-default
or cross-acceleration, we may not have sufficient funds available to make the required payments under our debt agreements.
Risks Related to Our Leverage and Liquidity
We have a significant amount of aircraft-related fixed obligations and we have incurred, and may incur in the future,
significant additional debt, that could impair our liquidity and thereby harm our business, results of operations and
financial condition.
The airline business is capital intensive and, as a result, many airline companies are highly leveraged. As of
December 31, 2023, we had $1,667.7 million in aircraft-related debt and $1,771.4 million of other long-term debt on our
consolidated balance sheet. In 2023 and 2022, we made scheduled principal payments of $337.5 million and $193.0 million on
our outstanding debt obligations, respectively. In addition. during the fourth quarter of 2023, the Company early extinguished
$323.3 million of outstanding fixed-rate term loans. As of December 31, 2023, we had future principal debt obligations of $3.4
billion, of which $305.2 million is due in 2024.
37
In 2023 and 2022, we paid the lessors rent of $389.6 million and $286.0 million, respectively. As of December 31, 2023,
we had future aircraft and spare engine operating lease obligations of approximately $5.6 billion.
In addition, we have significant obligations for aircraft and spare engines that we have ordered from Airbus, IAE, and
Pratt & Whitney for delivery over the next several years.
Our ability to pay the fixed and other costs associated with our contractual obligations will depend on our operating
performance, cash flow and our ability to secure adequate financing, which will in turn depend on, among other things, the
success of our current business strategy, fuel price volatility, weakening or improvement in the U.S. economy, as well as
general economic and political conditions and other factors that are beyond our control. From time to time and subject to market
conditions and any applicable contractual requirements, we may refinance portions of our debt, including our 2025 maturities,
which, at current interest rates and market conditions, may negatively impact our interest expense or result in higher dilution.
The amount of our aircraft-related fixed obligations, our obligations under our other debt arrangements, and the related need to
obtain financing could have a material adverse effect on our business, results of operations and financial condition and could:
•
•
•
require a substantial portion of cash flow from operations for operating lease and maintenance deposit payments, and
principal and interest on our indebtedness, thereby reducing the availability of our cash flow to fund working capital,
capital expenditures and other general corporate purposes;
limit our ability to make required pre-delivery deposit payments, or PDPs, including those payable to our aircraft and
engine manufacturers for our aircraft and spare engines on order;
limit our ability to obtain additional financing to support our expansion plans and for working capital and other
purposes on acceptable terms or at all;
• make it more difficult for us to pay our other obligations as they become due during adverse general economic and
market industry conditions because any related decrease in revenues could cause us to have insufficient cash flows
from operations to make our scheduled payments;
•
•
reduce our flexibility in planning for, or reacting to, changes in our business and the airline industry and, consequently,
place us at a competitive disadvantage to our competitors with fewer fixed payment obligations or which are subject to
fewer limitations or restrictions; and
cause us to lose access to one or more aircraft and forfeit our rent deposits if we are unable to make our required
aircraft lease rental and debt payments and our lessors or lenders exercise their remedies under the lease and debt
agreements, including cross default provisions in certain of our leases and mortgages.
A failure to pay our operating lease, debt and other fixed cost obligations or a breach of our contractual obligations could
result in a variety of adverse consequences, including the exercise of remedies by our creditors and lessors. In such a situation,
it is unlikely that we would be able to cure our breach, fulfill our obligations, make required lease or debt payments or
otherwise cover our fixed costs, which would have a material adverse effect on our business, results of operations and financial
condition.
Downgrades in our credit ratings could increase future debt financing costs and limit the future availability of debt
financing.
Our credit ratings are important to our cost and availability of capital. The major rating agencies routinely evaluate our
credit profile and assign credit ratings to us. This evaluation is based on a number of factors, which include financial strength,
business and financial risk, transparency with rating agencies, and timeliness of financial reporting, as well as overall industry
risk. We have experienced downgrades in our credit ratings based on our increased level of credit risk as a result of the financial
impacts of the COVID-19 pandemic and a continued lack of profitability.
Beginning in 2020 with the onset of the COVID-19 pandemic and through January 2024, on occasion, our corporate credit
rating and the credit ratings of our Spirit Airlines Pass Through Trust Certificates have been downgraded by Fitch, S&P Global
and/or Moody's. As of January 2024, our Fitch, S&P Global and Moody's credit ratings were B-, CCC+ and Caa2, respectively.
As of January 2024, the S&P Global credit ratings of our Spirit Airlines Pass Through Trust Certificates Series 2015-1
Class A and B were BB+ and B+, respectively, and the credit ratings of our Spirit Airlines Pass Through Trust Certificates
Series 2017-1 Class AA, A and B were BBB, BB+ and B, respectively. As of January 2024, the Fitch credit ratings of our Spirit
38
Airlines Pass Through Trust Certificate Series 2015-1 Class B and 2017-1 Class B were BB and the Fitch credit ratings of our
Spirit Airlines Pass Through Trust Certificate Series 2017-1 Class AA was A+.
If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our ratings
levels, the airline industry, or us, it could increase future debt financing costs and limit the future availability of debt financing,
which would have an adverse effect on our business, results of operations and financial condition.
Despite our current indebtedness levels, we may incur additional indebtedness in the future, which could further
increase the risks associated with our leverage.
We may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. Our
debt agreements do not prohibit us from incurring additional unsecured indebtedness or certain secured indebtedness. If other
such indebtedness is incurred in the future, our debt service obligations will increase. The more leveraged we become, the more
we will be exposed to the risks created by our current substantial indebtedness.
Our ability to incur secured indebtedness is subject to compliance with certain covenants in the indenture governing the
Secured Notes and, in certain circumstances, the liens securing such additional indebtedness will be permitted to be pari passu
with the liens securing the Secured Notes.
To the extent that the terms of our current or future debt agreements would prevent us from incurring additional
indebtedness, we may be able to obtain amendments to those agreements that would allow us to incur such additional
indebtedness, and such additional indebtedness could be material.
For additional information, refer to “Notes to Consolidated Financial Statements—13. Debt and Other Obligations” and
“Notes to Consolidated Financial Statements—10. Equity.”
We are highly dependent upon our cash balances and operating cash flows.
As of December 31, 2023, we have a revolving credit facility, maturing in 2025, for up to $300.0 million which was
undrawn and available as of December 31, 2023. For additional information, refer to “Management's Discussion and Analysis
of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements—13. Debt and Other
Obligations.” This credit facility is not adequate to finance our operations, and we will continue to be dependent on our
operating cash flows and cash balances to fund our operations and to make scheduled payments on our aircraft-related fixed
obligations. In addition, we have sought, and may continue to seek, financing from other available sources to fund our
operations. In addition, our credit card processors are entitled to withhold receipts from customer purchases from us, under
certain circumstances. If we fail to maintain certain liquidity and other financial covenants, their rights to holdback would
become operative, which would result in a reduction of unrestricted cash that could be material. If we fail to generate sufficient
funds from operations to meet our operating cash requirements or do not obtain a line of credit, other borrowing facility or
equity financing, we could default on our operating lease and fixed obligations. Our inability to meet our obligations as they
become due would have a material adverse effect on our business, results of operations and financial condition.
Our net operating losses may be limited for U.S. federal income tax purposes under Section 382 of the U.S. Internal
Revenue Code.
If a corporation with net operating losses (“NOLs”) undergoes an “ownership change” within the meaning of Section 382
of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), then such corporation’s use of such “pre-change” NOLs
to offset income incurred following such ownership change generally will be subject to an annual limitation specified in Section
382 of the Code. Such limitation also may apply to certain losses or deductions that are “built-in” (i.e., attributable to periods
prior to the ownership change, but not yet taken into account for tax purposes) as of the date of the ownership change that are
subsequently recognized. An ownership change generally occurs when there is either (i) a shift in ownership involving one or
more “5% shareholders,” or (ii) an “equity structure shift” and, as a result, the percentage of stock of the corporation owned by
one or more 5% shareholders (based on value) has increased by more than 50 percentage points over the lowest percentage of
stock of the corporation owned by such shareholders during the “testing period” (generally the three years preceding the testing
date). If the use of our net operating losses to offset our income is subject to such an annual limitation, it is possible that our
cash flows, business operations or financial conditions could be adversely affected.
Risks Related to Our Securities
39
The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, or warrants issued
to the Treasury under the PSP1, PSP2 or PSP3, could depress the trading price of our common stock and Convertible
Notes.
We may conduct future offerings of our common stock, preferred stock or other securities that are convertible into or
exercisable for our common stock to finance our operations or fund acquisitions, or for other purposes. In connection with our
participation in PSP1, PSP2 and PSP3, we issued to the Treasury 739,089 warrants which may be exercised for shares of our
common stock in consideration for the receipt of funding from the Treasury.The warrants expire in five years from the date of
issuance, are transferable, have no voting rights and contain customary terms regarding anti-dilution. If the Treasury or any
subsequent warrant holder exercises the warrants, the interest of our holders of common stock would be diluted and we would
be partially owned by the U.S. government, which could have a negative impact on our common stock price, and which could
require increased resources and attention by our management. Additionally, in 2020 we issued 9,000,000 shares pursuant to our
ATM Program and in 2021 we completed the registered direct placement of 10,594,073 shares of our voting common stock.
Further, we reserve shares of our common stock for future issuance under our equity incentive plans, which shares are eligible
for sale in the public market to the extent permitted by the provisions of various agreements and, to the extent held by affiliates,
the volume and manner of sale restrictions of Rule 144. If these additional shares are sold, or if it is perceived that they will be
sold, into the public market, the price of our common stock could decline substantially. The indenture for the 4.750%
convertible senior notes due 2025 (the “2025 Convertible Notes”) and the 1.00% convertible senior notes due 2026 (the “2026
Convertible Notes”, and together with the 2025 Convertible Notes, the “Convertible Notes”) does not restrict our ability to issue
additional equity securities in the future. If we issue additional shares of our common stock or rights to acquire shares of our
common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives
that such issuances or sales may occur, then the trading price of our common stock, and, accordingly, the Convertible Notes,
may significantly decline. In addition, any issuance of additional shares of common stock will dilute the ownership interests of
our existing common stockholders, including holders of our Convertible Notes who have received shares of our common stock
upon conversion of their Convertible Notes.
Conversion of the Convertible Notes may dilute the ownership interest of existing stockholders, including holders of the
Convertible Notes who have previously converted their Convertible Notes.
At our election, we may settle Convertible Notes tendered for conversion partly or, in the case of the 2025 Convertible
Notes, entirely, in shares of our common stock. As a result, the conversion of some or all of the Convertible Notes may dilute
the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such
conversion of the Convertible Notes could adversely affect prevailing market prices of our common stock and, in turn, the price
of the Convertible Notes. In addition, the existence of the Convertible Notes may encourage short selling by market participants
because the conversion of the Convertible Notes could depress the price of our common stock.
Provisions in the indenture governing the Convertible Notes could delay or prevent an otherwise beneficial takeover of
us.
Certain provisions in the Convertible Notes and the indenture governing the Convertible Notes could make the Merger or
another third party attempt to acquire us more difficult or expensive. For example, if a takeover, including the Merger,
constitutes a fundamental change, then holders of the Convertible Notes will have the right to require us to repurchase their
notes for cash. In addition, if a takeover, including the Merger, constitutes a make-whole fundamental change, then we may be
required to temporarily increase the conversion rate. In either case, and in other cases, our obligations under the Convertible
Notes and the indenture governing the Convertible Notes could increase the cost of the Merger or acquiring us or otherwise
discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of the
Convertible Notes or holders of our common stock may view as favorable.
The market price of our common stock has been, and may continue to be, volatile, which could cause the value of an
investment in our stock to decline.
The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond
our control, including:
•
announcements, media reports, analyst reports or other publications regarding the Merger or the litigation concerning
the Merger;
40
•
•
•
announcements concerning our competitors, the airline industry or the economy in general;
strategic actions by us or our competitors, such as acquisitions or restructurings;
increased price competition;
• media reports and publications about the safety of our aircraft or the aircraft type we operate;
•
•
•
•
•
•
•
•
new regulatory pronouncements and changes in regulatory guidelines;
changes in the price of aircraft fuel;
announcements concerning the availability of the type of aircraft we use;
general and industry-specific economic conditions, including the level of inflation;
changes in financial estimates or recommendations by securities analysts or failure to meet analysts’ performance
expectations;
sales of our common stock or other actions by investors with significant shareholdings;
trading strategies related to changes in fuel or oil prices; and
general market, political and economic conditions.
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating
performance of particular companies. These types of broad market fluctuations may adversely affect the trading price of our
common stock. The price of our common stock has recently declined substantially in response to the announcement of the
Injunction and statements by JetBlue related to the Merger and the Injunction. Any significant future declines in the price of our
common stock could have an adverse impact on investor confidence and employee retention, which could have a material
adverse effect on our business, results of operations and financial condition.
In the past, stockholders have sometimes instituted securities class action litigation against companies following periods
of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert
management’s attention and resources and harm our business or results of operations.
We may be unable to purchase the Secured Notes or the Convertible Notes upon the occurrence of an applicable change
of control or other event.
Upon the occurrence of a Parent Change of Control, as defined in the indenture governing the Secured Notes, the issuers of
the Secured Notes would be required to offer to purchase such notes for cash at a price equal to 101% of their aggregate
principal amount, plus accrued and unpaid interest, if any, to, but not including, the repurchase date. Additionally, holders of
the Convertible Notes may require us to repurchase their notes following a fundamental change, as defined in the indenture
governing the Convertible Notes, at a cash repurchase price generally equal to the principal amount of the Convertible Notes to
be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion, we will satisfy part or all of our
conversion obligation in cash unless we elect to settle conversions solely in shares of our common stock.
Applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to
repurchase the Secured Notes or Convertible Notes or pay the cash amounts due upon conversion of the Convertible Notes.
Moreover, the exercise by holders of the Secured Notes or Convertible Notes of the right to require the issuers to repurchase
their respective notes, or the failure to repurchase such notes, could cause a default under our other debt, even if the event itself
does not result in a default under such debt, due to the financial effect of such repurchase. In addition, we may not have enough
available cash or be able to obtain financing at the time we are required to repurchase the Convertible Notes or the Secured
Notes, or pay the cash amounts due upon conversion of the Convertible Notes. Therefore, we cannot assure you that sufficient
funds will be available when necessary to make any required repurchases.
In addition, the indenture governing the Secured Notes sets forth certain Mandatory Prepayment Events, as defined in the
indenture governing the Secured Notes. Upon the occurrence of any such Mandatory Prepayment Event, we would be required
to prepay the Secured Notes pro rata to the extent of any net cash proceeds received in connection with such event, at a price
equal to 100% of the principal amount to be redeemed plus an applicable premium and accrued and unpaid interest, if any,
thereon to, but excluding, the prepayment date. Our failure to complete any such mandatory prepayment would result in a
41
default under the indenture governing the Secured Notes. Such a default may, in turn, constitute a default under any other of our
debt agreements that may then be outstanding.
Finally, the indenture governing the Secured Notes sets forth certain Mandatory Repurchase Offer Events, as defined in the
indenture governing the Secured Notes. Upon the occurrence of any such Mandatory Repurchase Offer Event, we would be
required to offer to repurchase the Secured Notes pro rata to the extent of any net cash proceeds received in connection with
such event, at a price equal to 100% of the principal amount to be repurchased plus accrued and unpaid interest thereon to, but
excluding, the repurchase date. Our failure to discharge this obligation would result in a default under the indenture governing
the Secured Notes. Such a default may, in turn, constitute a default under other of our debt agreements that may then be
outstanding.
The indenture governing the Secured Notes impose certain restrictions which may adversely affect our business and
liquidity.
The indenture governing the Secured Notes imposes certain restrictions on the issuers of the Secured Notes and certain
guarantors. These restrictions limit their ability to, among other things: (i) make restricted payments, (ii) incur additional
indebtedness, (iii) create certain liens on the collateral, (iv) sell or otherwise dispose of the collateral and (v) consolidate, merge,
sell or otherwise dispose of all or substantially all of the issuers’ assets, among other restrictions. As a result of these
restrictions, we may be limited in how we conduct our business, in our ability to compete effectively or in our ability to
implement changes or take advantage of business opportunities—including by making strategic acquisitions, investments or
alliances, restructuring our organization or financing capital needs—that would be in our interest. We may also be unable to
raise additional indebtedness or equity financing to operate during general economic or business downturns.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports
about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts
publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or
unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage
of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock
price and trading volume to decline.
Our anti-takeover provisions may delay or prevent a change of control, which could adversely affect the price of our
common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may
make it difficult to remove our board of directors and management and may discourage or delay “change of control”
transactions, which could adversely affect the price of our common stock. These provisions include, among others:
•
•
•
•
our board of directors is divided into three classes, with each class serving for a staggered three-year term, which
prevents stockholders from electing an entirely new board of directors at an annual meeting;
actions to be taken by our stockholders may only be effected at an annual or special meeting of our stockholders and
not by written consent;
special meetings of our stockholders can be called only by the Chairman of the Board or by our corporate secretary at
the direction of our board of directors; and
advance notice procedures that stockholders must comply with in order to nominate candidates to our board of
directors and propose matters to be brought before an annual meeting of our stockholders may discourage or deter a
potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise
attempting to obtain control of our company.
Our corporate charter and bylaws include provisions limiting voting by non-U.S. citizens and specifying an exclusive
forum for stockholder disputes.
To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our amended and restated
certificate of incorporation and amended and restated bylaws restrict voting of shares of our common stock by non-U.S.
citizens. The restrictions imposed by federal law currently require that no more than 25% of our stock be voted, directly or
indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of the members of our board of
directors and senior management be U.S. citizens. Our amended and restated bylaws provide that the failure of non-U.S.
42
citizens to register their shares on a separate stock record, which we refer to as the “foreign stock record,” would result in a
suspension of their voting rights in the event that the aggregate foreign ownership of the outstanding common stock exceeds the
foreign ownership restrictions imposed by federal law.
Our amended and restated bylaws further provide that no shares of our common stock will be registered on the foreign
stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. If it is
determined that the amount registered in the foreign stock record exceeds the foreign ownership restrictions imposed by federal
law, shares will be removed from the foreign stock record in reverse chronological order based on the date of registration
therein, until the number of shares registered therein does not exceed the foreign ownership restrictions imposed by federal law.
As of December 31, 2023, we believe we were in compliance with the foreign ownership rules.
As of December 31, 2023, there are no shares of non-voting common stock outstanding. When shares of non-voting
common stock are outstanding, the holders of such stock may convert such shares, on a share-for-share basis, in the order
reflected on our foreign stock record as shares of common stock are sold or otherwise transferred by non-U.S. citizens to U.S.
citizens.
Our amended and restated certificate of incorporation also specifies that the Court of Chancery of the State of Delaware
shall be the exclusive forum for substantially all disputes between us and our stockholders. Because the applicability of the
exclusive forum provision is limited to the extent permitted by applicable law, we do not intend for the exclusive forum
provision to apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the
federal courts have exclusive jurisdiction, and acknowledge that federal courts have concurrent jurisdiction over all suits
brought to enforce any duty or liability created by the Securities Act. We note that there is uncertainty as to whether a court
would enforce the provision as it applies to the Securities Act and that investors cannot waive compliance with the federal
securities laws and the rules and regulations thereunder. This provision may have the effect of discouraging lawsuits against our
directors and officers.
We do not intend to pay cash dividends for the foreseeable future.
We have never declared or paid cash dividends on our common stock. We currently intend to retain our future earnings, if
any, to finance the further development and expansion of our business and fund share repurchases under programs approved by
our Board of Directors. We do not intend to pay cash dividends in the foreseeable future. The Merger Agreement restricts us
from declaring or paying dividends without JetBlue's consent until the Merger is completed or the Merger Agreement is
terminated. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our
financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments,
business prospects and such other factors as our Board of Directors deems relevant. The timing of any share repurchases under
share repurchase programs will depend upon market conditions, our capital allocation strategy and other factors. Additionally,
the Merger Agreement restricts us from repurchasing shares of our common stock without JetBlue’s consent until the Merger is
completed or the Merger Agreement is terminated.
43
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
The Company’s cybersecurity program is designed to secure the continuity of operations and protect the privacy of
company, guest and team member data. The Company uses multiple layers of security controls and unique threat intelligence
within the “Center for Internet Security v8 Cybersecurity Framework” across five core security functions: Identify risks and
threats, Protect, Detect, Respond and Recover. In addition, the Company requires that its employees complete annual
compliance training on cybersecurity and online habits.
The Company’s cybersecurity program is managed by a dedicated cybersecurity function reporting to the Chief
Information Security Officer (“CISO”) who reports to the Chief Information Officer (“CIO”) and is responsible for the
Company’s cybersecurity strategy, policies, standards, architecture and process. The CISO has over 20 years of executive
experience in IT operations and security, primarily in the airline industry, and maintains several active certifications in Risk and
Information Security including CIPPUS, CISSP-ISSMP, CISM, CRISC, and CISSP. The program includes periodic and ad hoc
reporting on relevant developments, including monitoring, prevention, detection, mitigation and remediation of the current
cybersecurity landscape as well as reporting on any cybersecurity incidents to the Company’s CEO and the Safety, Security and
Operations Committee of the Board of Directors, which has oversight of management’s cybersecurity function. The CISO also
engages external government and commercial expertise to continuously evaluate, test and adapt the program. External vendors
participate in in-depth security assessments based on the Company’s vendor management security policy.
Currently, the Company is not aware of any material risks from cybersecurity threats that have materially affected or are
reasonably likely to materially affect the Company’s operations. However, the nature of potential cybersecurity risks and threats
are uncertain, and any future incidents, outages or breaches could have a material adverse effect on the Company’s business
strategy, results of operations or financial condition.
ITEM 2.
PROPERTIES
Aircraft
As of December 31, 2023, we operated a fleet of 205 aircraft as detailed in the following table:
Aircraft Type
Seats
Average Age
(years)
Number of
Aircraft
Number
Owned
A319
A320ceo
A320neo
A321ceo
A321neo
145
182
182
228
235
16.9
9.2
2.7
7.0
0.4
6.6
19
64
84
30
8
205
17
27
4
25
—
73
Number
Leased(1)
2
37
80
5
8
132
(1) Includes 15 aircraft recorded as failed sale-leaseback transactions. Refer to “Notes to Consolidated Financial Statements—13. Debt and Other
Obligations" and "Notes to Consolidated Financial Statements—14. Leases" for additional information.
On December 20, 2019, we entered into an A320 NEO Family Purchase Agreement with Airbus for the purchase of 100
new Airbus A320neo family aircraft, with options to purchase up to 50 additional aircraft. This agreement included a mix of
Airbus A319neo, A320neo and A321neo aircraft. On July 31, 2023, we entered into Amendment No. 6 (the “Amendment”) to
the A320 NEO Family Purchase Agreement. The Amendment converts the remaining A319neo aircraft to be delivered under
the Airbus Purchase Agreement to A321neo aircraft. The Amendment also (i) defers certain A320neo aircraft deliveries from
2024 to 2025 and later years, (ii) extends delivery dates for certain A320neo and A321neo aircraft deliveries from 2025-2027 to
2025-2029 and (iii) adjusts the timing of option aircraft delivery dates from 2026-2028 to 2027-2029. In addition, the
Amendment creates a more equal distribution of aircraft deliveries and option rights across the delivery periods. As of
December 31, 2023, our firm aircraft orders consisted of 99 A320 family aircraft with Airbus, including A320neos and
A321neos, with deliveries expected through 2029. As of December 31, 2023, we had secured financing for 18 aircraft,
scheduled for delivery from Airbus through 2025, which will be financed through sale-leaseback transactions. In addition, we
had 22 direct operating leases for A321neos with third-party lessors, with deliveries expected through 2025. During the third
44
quarter of 2021, we entered into an Engine Purchase Support Agreement which requires us 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 December 31, 2023, we were
committed to purchase 19 PW1100G-JM spare engines, with deliveries through 2029.
During the fourth quarter of 2022, we made the decision to accelerate the retirement of 29 of our A319 aircraft. During the
twelve months ended December 31, 2023, we completed the sale of 12 A319 airframes and 20 A319 engines. The remaining
A319 aircraft subject to the sale agreement remain in service and will continue to operate until immediately before the sale of
the aircraft. Excluding the A319 aircraft to be sold, the average age of our fleet would have been 5.5 years as of December 31,
2023. In addition, we are scheduled to take delivery of 121 new Airbus A320-family aircraft through 2029, potentially making
ours the youngest fleet in the United States. Refer to “Notes to Consolidated Financial Statements— 1. Summary of Significant
Accounting Policies" for additional information.
Ground Facilities
We lease all of our facilities at each of the airports we serve, with the exception of our aircraft maintenance hangar in
Detroit, which we own and operate on leased land. Our leases for terminal passenger service facilities, which include ticket
counter and gate space, operations support areas and baggage service offices, generally have a term ranging from month-to-
month to 24 years, and contain provisions for periodic adjustments of lease rates. We also are responsible for maintenance,
insurance and other facility-related expenses and services. We also have entered into use agreements at the airports we serve
that provide for the non-exclusive use of runways, taxiways and other airfield facilities. Landing fees paid under these
agreements are based on the number of landings and weight of the aircraft.
As of December 31, 2023, Ft. Lauderdale/Hollywood International Airport (FLL) remained our single largest airport
served, with approximately 22% of our capacity operating through FLL during 2023. We operate primarily out of Terminals 3
and 4 at FLL. We currently use up to thirteen gates simultaneously at Terminal 3 and Terminal 4. We have preferential access
to six of the Terminal 4 gates, preferential access to four of the Terminal 3 gates, common use access to the four airport
controlled Terminal 4 gates, and common use access to the one airport controlled Terminal 3 gate. Other airports through which
we conduct significant operations include Orlando International Airport (MCO), McCarran International Airport (LAS),
Hartsfield-Jackson Atlanta International Airport (ATL) and Los Angeles International Airport (LAX).
Our largest maintenance facility is a hangar currently located at Detroit, Michigan. The lease with the Detroit, Michigan
airport authority expires in September 2032. Our second largest maintenance facility is a hangar and warehouse currently
located at Houston, Texas. As of December 31, 2023, we also conduct additional maintenance operations in leased facilities in
Fort Lauderdale, Florida; Chicago, Illinois; Atlantic City, New Jersey; Dallas, Texas; Las Vegas, Nevada; Orlando, Florida;
Atlanta, Georgia; Myrtle Beach, South Carolina; Philadelphia, Pennsylvania; Baltimore, Maryland; Miami, Florida; Tampa,
Florida and Los Angeles, California.
Our principal executive offices and headquarters are located in a leased facility at 2800 Executive Way, Miramar, Florida
33025, consisting of approximately 56,000 square feet. The lease for this facility expires in January 2025. In January 2014, we
expanded our principal executive offices and headquarters by leasing an additional facility located at 2844 Corporate Way,
Miramar, Florida 33025, consisting of approximately 15,000 square feet. The lease for this facility expires in January 2025. In
March 2018, we added approximately 26,000 square feet of office space at 2877-2899 N Commerce Parkway, Miramar, FL
33025 to further support the corporate headquarters. The lease on this space expires in January 2025.
During the fourth quarter of 2019, we purchased an 8.5-acre parcel of land and entered into a 99-year lease agreement for
the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where we are building a new headquarters campus and a 200-unit
residential building. During the first quarter of 2022, we began building our new headquarters campus and a 200-unit residential
building with an expected completion during the first quarter of 2024.
ITEM 3.
LEGAL PROCEEDINGS
We are subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be
asserted or maintained from time to time. We believe the ultimate outcome of pending lawsuits, proceedings and reviews will
not, individually or in the aggregate, have a material adverse effect on our financial position, liquidity, or results of operations.
In making a determination regarding accruals, using available information, we evaluate the likelihood of an unfavorable
outcome in legal or regulatory proceedings and assessments to which we are a party and record 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 our defenses, and consultation with legal counsel.
Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates. It is possible that
45
resolution of one or more of the legal matters currently pending or threatened could result in losses material to our consolidated
results of operations, liquidity or financial condition.
In 2017, a purported class action lawsuit was filed against us in the Eastern District of New York ("EDNY"), styled Cox,
et al. v. Spirit Airlines, Inc., alleging state-law claims of breach of contract, unjust enrichment and fraud relating to our practice
of charging fees for ancillary products and services. The original action was dismissed by the EDNY, however, following the
plaintiff’s appeal to the Second Circuit, the case was remanded to the EDNY for further review on the breach of contract claim.
A hearing on our Motion for Summary Judgment and plaintiff’s Motion for Class Certification was held on December 10, 2021.
The EDNY granted the plaintiff’s class certification motion on March 29, 2022. We subsequently filed a motion for
reconsideration on April 26, 2022 and an oral argument was held on May 19, 2022. The EDNY denied our motion for
reconsideration on February 14, 2023. On April 3, 2023, we moved to compel arbitration of and/or dismiss certain class
members’ claims for lack of personal jurisdiction. Trial was set to begin on January 16, 2024. However, in June 2023, we
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 paid depends
on a number of factors, including participation of class members and any conditions on the settlement approved by the EDNY.
Currently, our best estimate of the probable loss associated with the settlement is $6.0 million, and we have recorded this
amount in other operating expenses within our consolidated statements of operations.
On February 27, 2023, ALPA filed a grievance against us claiming that we violated the collective bargaining agreement
(“CBA”) by excluding its pilots from our retention award programs granted as part of the former merger agreement with
Frontier Airlines (the "Former Frontier Merger Agreement") and the Merger Agreement with JetBlue. On September 8, 2023,
we filed a motion to dismiss the grievance, as we do not believe that ALPA filed the grievance within the timeline set forth in
the CBA. As of December 31, 2023, 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 IRS related to the collection of federal excise taxes on optional passenger seat selection charges
covering the second quarter of 2018 through the fourth quarter of 2020, on March 31, 2022, we were assessed $34.9 million. On
July 19, 2022, the assessment was reduced to $27.5 million. We believe we have defenses available and intend to challenge the
assessment; therefore, we have not recognized a loss contingency.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
46
PART II
ITEM 5.
AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
Our common stock is listed and traded on the NYSE under the symbol "SAVE." As of January 26, 2024, there were
approximately 67 holders of record of our common stock. Because many of our shares are held by brokers and other institutions
on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the holders.
The information under the caption “Equity Compensation Plan Information” in our 2024 Proxy Statement is incorporated
herein by reference.
Dividend Policy
We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our common stock. Any
future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors
and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital
requirements, business prospects and other factors our board of directors may deem relevant.
Our Repurchases of Equity Securities
The following table reflects our repurchases of our common stock during the fourth quarter of 2023. Repurchases of
equity securities during the period include repurchases made from employees who received restricted stock awards, market
share awards and performance share awards. All employee stock repurchases were made at the election of each employee
pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted the portion of vested shares necessary
to satisfy tax withholding requirements.
ISSUER PURCHASES OF EQUITY SECURITIES
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
1,052
$
16.31
—
55,906
—
16.31
56,958
$
16.31
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under Plans or
Programs
$
—
—
—
—
—
—
—
Period
October 1-31, 2023
November 1-30, 2023
December 1-31, 2023
Total
During the first three quarters of 2023, we repurchased approximately 85 thousand shares for a total of $1.7 million.
Repurchases of equity securities during this period include repurchases made from employees who received restricted stock
awards, market share awards or performance share awards.
47
Stock Performance Graph
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total
return on the NYSE ARCA Airline Index and the S&P 500 Index for the period beginning on December 31, 2018 and ending
on December 31, 2023. The graph assumes an investment of $100 in our stock and the two indices, respectively, on
December 31, 2018, and further assumes the reinvestment of all dividends. Stock price performance, presented for the period
from December 31, 2018 to December 31, 2023, is not necessarily indicative of future results.
Spirit . . . . . . . . . . . . . . . . . . . . $
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023
28.30
100.00 $
37.72 $
33.63 $
42.21 $
69.60 $
NYSE ARCA Airline Index . . $
100.00 $
122.74 $
93.00 $
91.37 $
59.45 $
76.93
S&P 500 Index . . . . . . . . . . . . $
100.00 $
131.47 $
155.65 $
200.29 $
163.98 $
207.04
48
SpiritNYSE ARCA Airline IndexS&P 500 Index 12/31/1812/31/1912/31/2012/31/202112/31/202212/31/2023050100150200250300
ITEM 6.
SELECTED FINANCIAL DATA
Not applicable.
49
ITEM 7.
OF OPERATIONS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
You should read the following discussion of our financial condition and results of operations in conjunction with the
consolidated financial statements and the notes thereto included elsewhere in this annual report. Our discussion and analysis of
fiscal year 2023 compared to fiscal year 2022 is included herein. Unless expressly stated otherwise, for discussion and analysis
of fiscal year 2021 items and fiscal year 2022 compared to fiscal year 2021, please refer to Item 7 of Part II, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2022, which was filed with the United States Securities and Exchange Commission on February 6,
2023 and is incorporated herein by reference.
We evaluate our financial performance utilizing various accounting principles generally accepted in the United States of
America (“GAAP”) and non-GAAP financial measures, including Adjusted CASM and Adjusted CASM ex-fuel. These non-
GAAP financial measures are provided as supplemental information to the financial information presented in this annual
report that is calculated and presented in accordance with GAAP and these non-GAAP financial measures are presented
because management believes that they supplement or enhance management’s, analysts’ and investors’ overall understanding
of our underlying financial performance and trends and facilitate comparisons among current, past and future periods.
Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered
superior to and are not intended to be considered in isolation or as a substitute for the related GAAP financial measures
presented in this annual report and may not be the same as or comparable to similarly titled measures presented by other
companies due to possible differences in the method of calculation and in the items being adjusted. We encourage investors to
review our financial statements and other filings with the Securities and Exchange Commission in their entirety and not to rely
on any single financial measure.
The information below provides an explanation of certain adjustments reflected in the non-GAAP financial measures and
shows a reconciliation of non-GAAP financial measures reported in this annual report to the most directly comparable GAAP
financial measures. Within the financial tables presented, certain columns and rows may not add due to the use of rounded
numbers. Per unit amounts presented are calculated from the underlying amounts.
Operating expenses per available seat mile (“CASM”) is a common metric used in the airline industry to measure an
airline’s cost structure and efficiency. We exclude loss on disposal of assets, special charges (credits) and a litigation loss
contingency recorded in the second quarter of 2023 to determine Adjusted CASM. We believe that also excluding aircraft fuel
and related taxes ("Adjusted CASM ex-fuel") from certain measures is useful to investors because it provides an additional
measure of management’s performance excluding the effects of a significant cost item over which management has limited
influence and increases comparability with other airlines that also provide a similar metric.
2023 Year in Review
JetBlue Merger
On July 28, 2022, we entered into the “Merger Agreement with JetBlue and Merger Sub, pursuant to which and subject
to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving entity.
As a result of the Merger, each existing share of Spirit's common stock (except for dissenting shares, treasury stock, and shares
of Spirit's common stock owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be
converted into the right to receive an amount in cash per share, without interest, equal to the Merger Consideration. If an
aggregate of $1.15 of Additional Prepayment Amounts has been paid out before consummation or termination of the Merger,
Spirit stockholders will thereafter continue to receive monthly Additional Prepayments, at the same $0.10 per month rate until
the transaction closes or the Merger Agreement is terminated. The Merger Agreement becomes unilaterally terminable by either
JetBlue or Spirit after July 24, 2024.
JetBlue will pay or cause to be paid the Approval Prepayment Amount to Spirit stockholders as of the record date
established by Spirit for the special meeting to approve the Merger Agreement within five business days following such Spirit
stockholder approval. Thereafter, on or prior to the last business day of each month beginning after December 31, 2022 until the
earlier of the Closing or termination of the Merger Agreement, JetBlue will also pay or cause to be paid the Additional
Prepayment Amount to Spirit stockholders as of a record date not more than five business days prior to the last business day of
such month. Payments made from JetBlue to Spirit stockholders do not impact our results of operations or cash flows.
50
On October 19, 2022, Spirit’s stockholders approved the Merger Agreement at a special meeting of stockholders. The
record date for both the Spirit’s special meeting and the Approval Prepayment was September 12, 2022. In accordance with the
terms of the Merger Agreement, on October 26, 2022, JetBlue paid the Spirit stockholders the Approval Prepayment Amount of
$2.50 per share. Additionally, beginning January 2023, JetBlue paid on a monthly basis the Additional Prepayments of $0.10
per share of common stock to all Spirit stockholders as of each record date per the agreement.
Due to the payment of the Approval Prepayment and each of the Additional Prepayment Amounts, in accordance with
the terms of the respective debt indentures and warrant agreements, we announced related adjustments to the conversion rates of
our convertible notes due 2025 and our convertible notes due 2026 as well as adjustments to the exercise prices and warrant
shares of the PSP1, PSP2 and PSP3 warrants outstanding. As of December 31, 2023, the conversion rates of the convertible
notes due 2025 and 2026 were 94.9262 and 24.6649 shares of voting common stock per $1,000 principal amount of convertible
notes, respectively. In addition, as of December 31, 2023, the exercise prices of the PSP1, PSP2 and PSP3 warrants were
$11.663, $20.229 and $30.196, respectively and the number of warrant shares issuable upon the exercise of the PSP1, PSP2 and
PSP3 warrants were adjusted to 628,725.19, 166,292.37 and 97,219.73, respectively.
Completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among other
things: (1) approval of the transactions by Spirit’s stockholders, which was received on October 19, 2022; (2) receipt of
applicable regulatory approvals, including approvals from the U.S. Federal Communications Commission, the U.S. Federal
Aviation Administration and the U.S. Department of Transportation and the expiration or early termination of the statutory
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other competition laws, and
other required regulatory approvals; (3) the absence of any law or order prohibiting the consummation of the transactions; and
(4) the absence of any material adverse effect (as defined in the Merger Agreement) on Spirit.
On March 7, 2023, the DOJ filed suit to block the Merger and a trial was held in late 2023. On January 16, 2024, the
District Court granted the Injunction. On January 19, 2024, Spirit and JetBlue filed a notice of appeal to reverse the District
Court's decision and allow Spirit and JetBlue to complete the Merger. On January 25, 2024, JetBlue made a public filing stating
that certain closing conditions required by the Merger Agreement may not be satisfied prior to the outside dates set forth in the
Merger Agreement and, accordingly, the Merger Agreement may be terminable on and after January 28, 2024. We do not
believe there is a basis for terminating the Merger Agreement, and we will continue to abide by all of our obligations under the
Merger Agreement. On January 29, 2024, Spirit and JetBlue filed a request with the Court of Appeals seeking an expedited
schedule for their appeal. On February 2, 2024, the Court of Appeals granted our motion, stating it would hear arguments in
June 2024.
In addition, Spirit has agreed, among other things, that neither it nor any of its directors, officers, employees and
representatives will (1) solicit alternative transactions, (2) participate in any discussions or negotiations relating to alternative
transactions, (3) furnish any non-public information in connection with alternative transactions or (4) enter into any agreement
relating to alternative transactions, except under limited circumstances described in the Merger Agreement. However, in certain
circumstances, Spirit may terminate the Merger Agreement to enter into a definitive agreement for a Superior Proposal (as
defined in the Merger Agreement). In addition, Spirit, JetBlue and Merger Sub each make certain customary representations,
warranties and covenants, as applicable, in the Merger Agreement.
The Merger Agreement contains certain termination rights for Spirit and JetBlue, including, without limitation, a right
for either party to terminate if the Merger is not consummated on or before July 28, 2023 (the "Outside Date"), subject to
certain automatic extensions up to July 24, 2024 if needed to obtain regulatory approvals. Since all regulatory approvals
required to consummate the Merger were not obtained as of January 28, 2023, the current Outside Date has been automatically
extended to July 24, 2024. Upon the termination of the Merger Agreement under specified circumstances, Spirit will be
required to pay JetBlue a termination fee of $94.2 million. Upon the termination of the Merger Agreement by JetBlue because
of a material uncured breach by Spirit of the Merger Agreement, Spirit will be required to pay JetBlue an amount equal to the
sum of all amounts paid by JetBlue to the Spirit stockholders. Upon the termination of the Merger Agreement for failure to
obtain antitrust regulatory clearance, JetBlue will be required to pay (i) to Spirit, $70.0 million, and (ii) to the Spirit
stockholders, the excess of (A) $400.0 million minus (B) the sum of the Approval Prepayment Amount and all Additional
Prepayment Amounts previously paid by JetBlue to the Spirit stockholders.
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 GTF fleet,
which powers our A320neo family of aircraft.
51
In September 2023, Pratt & Whitney notified us that all the geared turbofan GTF neo engines in our fleet, including the
engines slotted for future aircraft deliveries, for a yet to be determined period, are subject to the inspection and possible
replacement, of the powdered metal high-pressure turbine and compressor discs. In addition, Pratt & Whitney issued a SI,
requiring accelerated engine removals and inspections covering the initial tranche of operational engines, no later than
September 15, 2023. As of December 31, 2023, in accordance with the SI issued by Pratt & Whitney, we have removed five
engines from service, three of which are currently awaiting induction for inspection.
For the remaining engines, Pratt & Whitney has provided an initial analysis on an inspection and removal schedule for
these engines. In addition, to the 5 engines removed from service, we had 12 neo aircraft grounded as of December 31, 2023 for
reliability, durability, and inspection requirements combined. For 2024, we had an average of 13 grounded neo aircraft in
January 2024, and we expect the average number of grounded neo aircraft will increase to approximately 40 in December 2024,
averaging approximately 25 grounded for the full year. We currently estimate the majority of affected engines will require
removal and inspection in 2024, but will continue through 2026, based on SBs issued by Pratt & Whitney and related
airworthiness directives issued by the FAA.
The temporary removal of engines from service is expected to drive a significant decrease in our near-term growth
projections. We have reduced capacity in amounts and timing commensurate with the initially scheduled removal and
inspection of these impacted engines, however, we continue to assess the impact on our future capacity plans. Pratt & Whitney
stated that they are focused on addressing the challenges arising from the powdered metal manufacturing issue and will
proactively take steps to support and mitigate the operational impact to its customers. We are in discussions with Pratt &
Whitney regarding compensation for the loss of utilization; however, the amount, timing, or structure of the compensation that
will be agreed upon is not yet known.
Summary of Results
During 2023, we generated a pre-tax loss of $558.6 million and a net loss of $447.5 million, $(4.10) per share, compared
to a pre-tax loss of $700.7 million and a net loss of $554.2 million, $(5.10) per share, in 2022. The decrease in pre-tax loss was
primarily driven by a decrease in special charges, year over year, as well as a decrease in aircraft fuel expense driven by a
15.8% decrease in fuel price per gallon, period over period. These decreases were partially offset by an increase in salaries,
wages and benefits expense as compared to the prior year period. In addition, the reduced net loss reflects an increase in
operating revenues due to a 13.7% increase in our traffic and a 14.6% increase in our capacity, as compared to 2022.
For the year ended December 31, 2023, we had a negative operating margin of 9.2% on $5,362.5 million in operating
revenues. TRASM in 2023 was 9.63 cents, a decrease of 7.8% compared to the prior year. Total revenue per passenger flight
segment decreased 7.7%, year over year, from $131.78 to $121.58. Fare revenue per passenger flight segment decreased 17.0%,
while non-ticket revenue per passenger flight segment increased by 0.9%, as compared to the prior year.
Our operating cost structure is a primary area of focus and is at the core of our ULCC business model. Our unit operating
costs continue to be among the lowest of any airline in the United States. During 2023, our Adjusted CASM ex-fuel was 7.06
cents as compared to 6.73 cents for 2022. The increase on a per-ASM basis was primarily due to increases in salaries, wages
and benefits expense and aircraft rent expense, partially offset by a decrease in depreciation and amortization expense.
During 2023, we added 4 new destinations: Charleston, South Carolina, Norfolk, Virginia, San Jose, California and
Tulum, Mexico. During 2023, we grew our fleet of Airbus single-aisle aircraft from 194 to 205 aircraft as we took delivery of
10 aircraft under sale-leaseback transactions and 13 aircraft under direct operating leases and sold 12 A319 aircraft. We also
took delivery of 4 new engines through cash purchases. As of December 31, 2023, our 205 Airbus A320-family aircraft fleet
was comprised of 19 A319ceos, 64 A320ceos, 84 A320neos, 30 A321ceos and 8 A321neos. As of December 31, 2023, we
owned 73 aircraft, of which 29 aircraft were financed through fixed-rate long-term debt, 27 aircraft were financed through
enhanced equipment trust certificates ("EETCs") and 17 were purchased off lease. As of December 31, 2023, we had 132 leased
aircraft, of which 117 aircraft were financed under operating leases and 15 aircraft would have been deemed finance leases
resulting in failed sale-leaseback transactions. As of December 31, 2023, our aircraft orders from Airbus consisted of 99 A320
family aircraft scheduled for delivery through 2029. In addition, as of December 31, 2023, we had secured financing
for 22 aircraft to be leased directly from third-party lessors, scheduled for delivery through 2025.
Operating Revenues
Our operating revenues are comprised of passenger revenues and other revenues.
Passenger revenues
52
Fare revenues. Tickets sold are initially deferred within air traffic liability on our consolidated balance sheet. Passenger
fare revenues are recognized at time of departure when transportation is provided. Generally, all tickets sold by us are
nonrefundable. Fare revenues are recorded within passenger revenues on our consolidated statement of operations. Refer to our
disaggregated revenue table within “Notes to Consolidated Financial Statements— 1. Summary of Significant Accounting
Policies."
Customers may elect to change or cancel their itinerary prior to the date of departure. For changes, a service charge is
recognized at time of departure of newly scheduled travel and is deducted from the face value of the original purchase price of
the ticket, and the original ticket becomes invalid. For cancellations, a service charge is assessed and the amount remaining
after deducting the service charge is called a credit shell. For credit shells that we estimate are not likely to be used prior to
expiration, we recognize the associated value proportionally during the period over which the remaining credit shells may be
used. Estimating the amount of credits that will go unused involves some level of subjectivity and judgment and can be
impacted by several factors including, but not limited to, changes to our ticketing policies, changes to our refund, exchange, and
credit shell policies, and economic factors.
Non-fare revenues. Our most significant non-fare revenues generally include revenues generated from air travel-related
services paid for baggage, passenger usage fees, advance seat selection and itinerary changes. These ancillary items are deemed
part of the single performance obligation of providing passenger transportation and as such, are recognized in non-fare revenues
within passenger revenues on our consolidated statement of operations. Refer to our disaggregated revenue table within “Notes
to Consolidated Financial Statements— 1. Summary of Significant Accounting Policies." Substantially all of our passenger
non-fare revenues are recognized at time of departure when transportation is provided.
Passenger revenues are generally recognized once the related flight departs. Accordingly, the value of tickets and non-
fare revenues sold in advance of travel is included under our current liabilities as “air traffic liability,” or ATL, until the related
air travel is provided. An unused ticket expires at the date of scheduled travel, at which time a service charge is assessed, and is
recognized as revenue at the date of scheduled travel.
Guests may earn points based on their spending with the Free Spirit affinity credit card program which we have an
agreement to sell points. The contract to sell points under this agreement has multiple performance obligations, as discussed
below.
Our co-branded credit card agreement provides for joint marketing where cardholders earn points for making purchases
using co-branded cards. During 2023, we extended our agreement with the administrator of the Free Spirit affinity credit card
program through December 31, 2028. We account for this agreement consistently with the accounting method that allocates the
consideration received to the individual products and services delivered. The value is allocated based on the relative stand-alone
selling prices of those products and services, which generally consists of (i) points to be awarded, (ii) airline benefits and
(iii) licensing of brand and access to member lists and (iv) advertising and marketing efforts. We determined the estimate of the
stand-alone selling prices by considering discounted cash flow analysis using multiple inputs and assumptions, including: (1)
the expected number of points awarded and number of points redeemed, (2) the estimated stand-alone selling price of the award
travel obligation and airline benefits, (3) licensing of brand and access to member lists and (4) the costs of advertising and
marketing efforts.
Other revenues
Other revenues primarily consist of the marketing component of the sale of loyalty points to our credit card partner and
commissions revenue from the sale of various items such as hotels and rental cars.
Substantially all of our revenues are denominated in U.S. dollars. We recognize revenues net of certain taxes and airport
passenger fees, which are collected by us on behalf of airports and governmental agencies and remitted to the applicable
governmental entity or airport on a periodic basis. These taxes and fees include U.S. federal transportation taxes, federal
security charges, airport passenger facility charges and foreign arrival and departure taxes. These items are collected from
customers at the time they purchase their tickets, but are not included in our revenues. Upon collection from the customer, we
record a liability within other current liabilities on our consolidated balance sheets and relieve the liability when payments are
remitted to the applicable governmental agency or airport.
Operating Expenses
Our operating expenses consist of the following line items.
53
Aircraft Fuel. Aircraft fuel expense includes the cost of jet fuel, related federal taxes, fueling into-plane fees and
transportation fees. It also includes realized and unrealized gains and losses arising from activity on our fuel derivatives, if any.
Salaries, Wages and Benefits. Salaries, wages and benefits expense includes the salaries, hourly wages, bonuses and
equity compensation paid to employees for their services, as well as the related expenses associated with employee benefit
plans and employer payroll taxes.
Landing Fees and Other Rents. Landing fees and other rents include both fixed and variable facilities expenses, such as
the fees charged by airports for the use or lease of airport facilities, overfly fees paid to other countries and the monthly rent
paid for our headquarters facility.
Aircraft Rent. Aircraft rent expense consists of all minimum lease payments under the terms of our aircraft and spare
engine lease agreements recognized on a straight-line basis. Aircraft rent expense also includes supplemental rent.
Supplemental rent is primarily made up of probable and estimable return condition obligations on leased aircraft. As of
December 31, 2023, 117 (excluding 15 aircraft that would have been deemed finance leases resulting in failed sale-leaseback
transactions) of our 205 aircraft and 6 of our 34 spare engines are financed under operating leases.
Depreciation and Amortization. Depreciation and amortization expense includes the depreciation of fixed assets we own
and leasehold improvements. It also includes the amortization of capitalized software costs and heavy maintenance. Under the
deferral method, the cost of our heavy maintenance is capitalized and amortized on a straight-line or usage basis until the earlier
of the next estimated heavy maintenance event or the remaining lease term.
Maintenance, Materials and Repairs. Maintenance, materials and repairs expense includes parts, materials, repairs and
fees for repairs performed by third-party vendors and in-house mechanics required to maintain our fleet. It excludes direct labor
cost related to our own mechanics, which is included under salaries, wages and benefits. It also excludes the amortization of
heavy maintenance expenses, which we defer under the deferral method of accounting and amortize as a component of
depreciation and amortization expense.
Distribution. Distribution expense includes all of our direct costs, including the cost of web support, our third-party call
center, travel agent commissions and related GDS fees and credit card transaction fees, associated with the sale of our tickets
and other products and services.
Special Charges (Credits). Special charges and credits include legal, advisory and other fees related to the Former
Frontier Merger Agreement and the JetBlue Merger Agreement, the retention bonus programs, recognition of impairment
charges related to the planned acceleration of the retirement of 29 of our A319 aircraft, the grant component of the PSP2 and
PSP3 agreements with the Treasury, the CARES Act Employee Retention credit and amounts paid in connection with our
involuntary employee separation programs.
Loss on Disposal of Assets. Loss on disposal of assets includes the net losses on the disposal of our fixed assets, the net
losses or gains resulting from our aircraft and engine sale-leaseback transactions as well as the net losses or gains resulting from
sale of our A319 airframes and engines.
Other Operating Expenses. Other operating expenses include airport operations expense and fees charged by third-party
vendors for ground handling services and food and liquor supply service expenses, passenger re-accommodation expense, the
cost of passenger liability and aircraft hull insurance, all other insurance policies except for employee related insurance, travel
and training expenses for crews and ground personnel, professional fees, personal property taxes and all other administrative
and operational overhead expenses. No individual item included in this category represented more than 5% of our total
operating expenses.
Other (Income) Expense
Interest Expense. Interest expense in 2023 and 2022 primarily related to the financing of purchased aircraft, the interest
and accretion related to our 8.00% senior secured notes, the interest and discount amortization related to our convertible notes
and favorable mark to market adjustments of the derivative liability related to our convertible notes due 2026. Interest expense
in 2021 primarily related to the financing of purchased aircraft as well as the interest related to our convertible notes and the
interest and accretion related to our 8.00% senior secured notes.
Loss (gain) on Extinguishment of Debt. Gain on extinguishment of debt in 2023 was primarily related to the gain
recognized due to the early extinguishment of certain of our outstanding fixed-rate term loans, and was partially offset by the
write-offs of related deferred financing costs. Refer to "Notes to Consolidated Financial Statements —13. Debt and Other
Obligations" for more information. We had no loss (gain) on extinguishment of debt in 2022. Loss on extinguishment of debt in
54
2021 primarily related to premiums paid to early extinguish a portion of our 8.00% senior secured notes and convertible notes
due 2025. In addition, it includes the write-off of related deferred financing costs and original issuance discount.
Capitalized Interest. We capitalize the interest that is primarily attributable to the outstanding PDP balances as a
percentage of the related debt on which interest is incurred. Capitalized interest represents interest cost incurred during the
acquisition period of a long-term asset and is the amount which theoretically could have been avoided had we not paid PDPs for
the related aircraft or engines. Capitalization of interest ceases when the asset is ready for service. Capitalized interest for 2023,
2022 and 2021 primarily relates to the interest incurred on long-term debt. In addition, during 2023, we capitalized interest
related to the outstanding work in progress in connection to the building of our new headquarters.
Interest Income. For 2023, 2022 and 2021, interest income represents interest income earned on cash, cash equivalents
and short-term investments as well as interest earned on income tax refunds.
Other Expense. Other expense primarily includes realized gains and losses related to foreign currency transactions.
Income Taxes
We account for income taxes using the asset and liability method. We record a valuation allowance to reduce the deferred
tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred taxes are recorded based on differences between the financial statement basis and tax basis
of assets and liabilities and available tax loss and credit carryforwards. In assessing the realizability of the deferred tax assets,
we consider whether it is more likely than not that some or all of the deferred tax assets will be realized. In evaluating the
ability to utilize our deferred tax assets, we consider all available evidence, both positive and negative, in determining future
taxable income on a jurisdiction by jurisdiction basis.
Trends and Uncertainties Affecting Our Business
We believe our operating and business performance is driven by various factors affecting airlines and their markets,
trends affecting the broader travel industry and trends affecting the specific markets and customer base that we target. The
following key factors may affect our future performance.
Ability to Execute our Growth Strategy and Maintain or Grow Capacity. Over recent years, we have pursued a high-
growth strategy, which we expect to continue. Execution of such a strategy requires us to effectively deploy new flying into our
network, as new routes or increased frequency of existing routes develop. New flying may not perform as well as expected or
may result in a competitive reaction. Moreover, our growth strategy depends on the timely delivery of aircraft and engines in
accordance with the intended delivery schedule in accordance with the applicable agreement. Delivery delays and engine
performance issues, as we have experienced in recent years, may cause us to scale back our growth. Our growth strategy also
relies in part on our ability to obtain additional facilities in airports, some of which are constrained, as well as additional flight
crew, maintenance, and other personnel.
In addition, we pursue a high-growth strategy that expands revenue and maintains lower cost due to economies of scale
and lower initial expense for aircraft and labor. Execution of such a strategy depends on the ability to maintain efficient
utilization of existing capacity and the timely delivery of new aircraft and engines. In addition, we previously experienced
aircraft operational reliability issues and delivery delays particularly regarding our PW1100G engine on our A320neo aircraft.
Beginning in the second half of 2020, the A320neo aircraft fleet reliability had stabilized and the PW1100G engine technical
issues had improved. However, beginning in the second half of 2022, we began experiencing reliability issues with the
PW1100G engines once again resulting in diminished service availability of aircraft. Supply chain delivery issues and limited
capacity at MRO shops available to service PW1100G engines have resulted in extended turnaround time to perform the
modifications required to improve the reliability of these engines. These impacts are expected to continue throughout 2024 and
beyond, until supply chain and engine MRO shop capacity returns to required levels to support our growth. In addition, in July
2023, 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 GTF fleet, which powers the A320neo aircraft. As of December
31, 2023, we have removed five engines from service, three of which are currently awaiting induction for inspection. Pratt &
Whitney notified us that all GTF engines in its fleet, including the engines slotted for future aircraft deliveries, for a yet to be
determined period, may be subject to the removal and inspection, or replacement, of the powdered metal high-pressure turbine
and compressor discs. We currently estimate these engines will require removal and inspection in 2024, but continuing through
2026. Lower capacity resulting from manufacturer or supplier issues may lead to a significant adverse impact on our financial
position and results of operations.
Supply chain delivery issues and limited capacity at MRO shops available to service PW1100G engines have resulted in
extended turnaround time to perform the modifications required to improve the reliability of these engines. The new generation
55
aircraft provide fuel burn and other efficiencies, as compared to the older A320ceo aircraft, and the ability to serve additional
markets with greater operating range. However, ongoing or expanded reliability and delivery issues could materially impact our
operations, revenues, costs and net results.
In addition to the effects of Pratt & Whitney GTF engine issues on our operations, we have experienced an overall
increase in volatility in seasonality as well as a decrease in year over year unit revenue and persistently high fuel prices, which
have negatively affected revenue and costs. Should these trends continue into the future, our operating results may be
negatively impacted. As a result, we have assessed the impact of such trends on our liquidity requirements and expect to have
sufficient liquidity to meet our future cash needs for the next twelve months with cash and cash equivalents, cash flows from
operations, the implementation of discretionary cost reduction strategies, and other financing arrangements. We also expect to
receive compensation from Pratt & Whitney for the loss of utilization of the GTF engines.
Competition. The airline industry is highly competitive. The principal competitive factors in the airline industry are fare
pricing, total price, flight schedules, aircraft type, passenger amenities, number of routes served from a city, customer service,
safety record, reputation, code-sharing relationships, loyalty programs and redemption opportunities. Price competition occurs
on a market-by-market basis through price discounts, changes in pricing structures, fare matching, target promotions and
loyalty program initiatives. Airlines typically use discount fares and other promotions to stimulate traffic during normally
slower travel periods in efforts to maximize unit revenue. The prevalence of discount fares can be particularly acute when a
competitor has excess capacity that it is under financial pressure to sell tickets.
Moreover, the network carriers have developed a fare-class pricing approach, in which a portion of available seats may be
sold at or near ULCC prices, but without most product features available to their passengers paying at higher fare levels on the
same flight. Broad fare discounting may have the effect of diluting the profitability of revenues of high-cost carriers but the
fare-class approach may allow network carriers to continue offering a competitive price to ULCCs on some flights or routes,
while maintaining higher pricing to their traditional constituencies of corporate and less price-sensitive travelers. Refer to “Risk
Factors—Risks Related to Our Industry—We operate in an extremely competitive industry."
Seasonality and Volatility. Our results of operations for any interim period are not necessarily indicative of those for the
entire year because the air transportation business is subject to significant seasonal fluctuations. We generally expect demand to
be greater in the second and third quarters compared to the rest of the year. The air transportation business is also volatile and
highly affected by economic cycles and trends. Consumer confidence and discretionary spending, fear of terrorism or war,
weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions, changes in governmental regulations
on taxes and fees, weather, outbreaks of pandemic or contagious diseases and other factors have resulted in significant
fluctuations in revenues and results of operations in the past. We believe demand for business travel historically has been more
sensitive to economic pressures than demand for low-price travel. Finally, a significant portion of our operations are
concentrated in markets such as South Florida, the Caribbean, Latin America and the Northeast and northern Midwest regions
of the United States, which are particularly vulnerable to weather, airport traffic constraints and other delays.
Aircraft Fuel. Fuel costs represents one of our largest operating expenses, as it does for most airlines. Fuel costs have
been subject to wide price fluctuations in recent years. Fuel availability and pricing are also subject to refining capacity, periods
of market surplus, and shortage and demand for heating oil, gasoline and other petroleum products, as well as meteorological,
economic and political factors and events occurring throughout the world, which we can neither control nor accurately predict.
We source a significant portion of our fuel from refining resources located in the southeast United States, particularly facilities
adjacent to the Gulf of Mexico. Gulf Coast fuel is subject to volatility and supply disruptions, particularly in hurricane season
when refinery shutdowns have occurred, or when the threat of weather-related disruptions has caused Gulf Coast fuel prices to
spike above other regional sources. Our fuel hedging practices are dependent upon many factors, including our assessment of
market conditions for fuel, our access to the capital necessary to support margin requirements, the pricing of hedges and other
derivative products in the market, our overall appetite for risk and applicable regulatory policies. As of December 31, 2023, we
had no outstanding jet fuel derivatives and we have not engaged in fuel derivative activity since 2015. The cost and future
availability of jet fuel cannot be predicted with any degree of certainty.
Labor. The airline industry is heavily unionized. The wages, benefits and work rules of unionized airline industry
employees are determined by CBAs. Relations between air carriers and labor unions in the United States are governed by the
RLA. Under the RLA, CBAs generally contain “amendable dates” rather than expiration dates, subject to standard early opener
provisions, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the
amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the NMB. This process
continues until either the parties have reached agreement on a new CBA, or the parties have been released to “self-help” by the
NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to
engage in self-help measures such as strikes and lockouts.
56
We have six union-represented employee groups comprising approximately 85% of our employees at December 31,
2023. Our pilots are represented by the Air Line Pilots Association, International, or ALPA, our flight attendants are
represented by the Association of Flight Attendants, or AFA-CWA, our dispatchers are represented by the Professional Airline
Flight Control Association, or PAFCA, our ramp service agents are represented by the International Association of Machinists
and Aerospace Workers, or IAMAW and our passenger service agents are represented by the Transport Workers Union, or
TWU. In addition, our aircraft maintenance technicians are represented by the Aircraft Mechanics Fraternal Association, or
AMFA. The related collective bargaining agreement is currently under negotiation. Conflicts between airlines and their unions
can lead to work slowdowns or stoppages.
During the fourth quarter of 2022, we reached an agreement with ALPA for a new two-year agreement, which was
ratified by ALPA members on January 10, 2023. The ratified agreement includes increased pay rates and other enhanced
benefits.
In February 2021, we entered into a Letter of Agreement with the AFA-CWA to change the amendable date of the
collective bargaining agreement from May 4, 2021 to September 1, 2021. All other terms of the collective bargaining agreement
remained the same. In June 2021, the AFA-CWA notified us, as required by the RLA, that it intended to submit proposed
changes to the collective bargaining agreement covering our flight attendants. We commenced negotiations with the AFA-
CWA on September 27, 2021. In February 2023, we reached an agreement with our flight attendants which was ratified by the
flight attendants on April 13, 2023 and becomes amendable in January 2026. The ratified agreement includes increased pay
rates and other enhanced benefits.
Our dispatchers are represented by the PAFCA. In October 2018, we reached a tentative agreement with PAFCA for a
new five-year agreement, which was ratified by the PAFCA members in October 2018. In May 2023, PAFCA provided notice
that it intends to amend its Collective Bargaining Agreement with our dispatchers. The parties began negotiating changes to the
CBA on July 12, 2023. As of December 31, 2023, we continued to negotiate with PAFCA.
Our ramp service agents are represented by IAMAW. Representation only applies to our Fort Lauderdale station where
we have direct employees in the ramp service agent classification. In February 2020, the IAMAW notified us, as required by
the RLA, that it intended to submit proposed changes to the collective bargaining agreement covering our ramp service agents
which became amendable in June 2020. On September 28, 2021, we filed an “Application for Mediation Services” with the
NMB. We were able to reach a tentative agreement with the IAMAW with the assistance of the NMB on October 16, 2021. Our
ramp service agents ratified the five-year agreement in November 2021.
In June 2018, our passenger service agents voted to be represented by the TWU, but the representation only applies to our
Fort Lauderdale station where we have direct employees in the passenger service classification. We began meeting with the
TWU in late October 2018 to negotiate an initial collective bargaining agreement. During February 2022, we reached a
tentative agreement with the TWU. Our passenger service agents ratified the five-year agreement on February 21, 2022.
In August 2022, our AMTs voted to be represented by AMFA as their collective bargaining agent. In November 2022,
AMFA notified us of its intent to negotiate a CBA and began negotiations. In October 2023, AMFA filed for mediation with the
NMB, and we are currently waiting for mediation dates from the NMB to continue negotiating with AMFA.
We believe our CBAs provide us with competitive labor costs compared to other U.S.-based low-cost carriers. If we are
unable to reach agreement with any of our unionized work groups in current or future negotiations regarding the terms of their
CBAs, we may be subject to work interruptions or stoppages, such as the strike by our pilots in June 2010. A strike or other
significant labor dispute with our unionized employees is likely to adversely affect our ability to conduct business. Any
agreement we do reach could increase our labor and related expenses.
In 2010, the Patient Protection and Affordable Care Act was passed into law. This law may be repealed in its entirety or
certain aspects may be changed or replaced. If the law is repealed or modified or if new legislation is passed, such action could
potentially increase our operating costs, with healthcare costs increasing at a higher rate than our employee headcount.
Maintenance Expense. Maintenance expense grew through 2023 and 2022 mainly as a result of increased aircraft
utilization compared to the prior year, a growing fleet and the gradual increase of required maintenance for the older aircraft in
our fleet. As our fleet ages, we expect that maintenance costs will increase in absolute terms. The amount of total maintenance
costs and related amortization of heavy maintenance (included in depreciation and amortization expense) is subject to many
variables such as future utilization rates, average stage length, the interval between heavy maintenance events, the size and
makeup of the fleet in future periods and the level of unscheduled maintenance events and their actual costs. Accordingly, we
cannot reliably quantify future maintenance expenses for any significant period of time.
57
As a result of a majority of our fleet being acquired over a relatively short period of time, heavy maintenance
scheduled on certain aircraft will overlap, meaning we will incur our most expensive scheduled maintenance obligations on
certain aircraft at roughly the same time. These more significant maintenance activities will result in out-of-service periods
during which our aircraft will be dedicated to maintenance activities and unavailable to fly revenue service. When accounting
for maintenance expense under the deferral method, heavy maintenance is amortized over the shorter of either the remaining
lease term or the next estimated heavy maintenance event. As a result, deferred maintenance events occurring closer to the end
of the lease term will generally have shorter amortization periods than those occurring earlier in the lease term. This will create
higher depreciation and amortization expense specific to any aircraft related to heavy maintenance during the final years of the
lease as compared to earlier periods.
Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition and results of operations is based on our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United
States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the
reported amount of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities at the
date of our consolidated financial statements. For a detailed discussion of our significant accounting policies, refer to “Notes to
Consolidated Financial Statements—1. Summary of Significant Accounting Policies.”
Critical accounting policies are defined as those policies that reflect significant judgments or estimates about matters both
inherently uncertain and material to our financial condition or results of operations.
Leased Aircraft Return Costs. Our aircraft lease agreements often contain provisions that require us to return aircraft
airframes and engines to the lessor in a certain condition or pay an amount to the lessor based on the airframe and engine's
actual return condition. Lease return costs include all costs that would be incurred at the return of the aircraft, including costs
incurred to repair the airframe and engines to the required condition as stipulated by the lease. Lease return costs are recognized
beginning when it is probable that such costs will be incurred and they can be estimated. When costs become both probable and
estimable, they are accrued as a component of supplemental rent, through the remaining lease term. We expensed $14.0 million
and $16.5 million of supplemental rent recorded within aircraft rent during 2023 and 2022, respectively. Supplemental rent,
recorded within aircraft rent expense, is primarily made up of probable and estimable return condition obligations and lease
return costs adjustments for aircraft and engines purchased off lease.
When determining the need to accrue lease return costs, there are various factors which need to be considered such as the
contractual terms of the lease agreement, current condition of the aircraft, the age of the aircraft at lease expiration, and
projected number of hours run on the engine at the time of return, among others. In addition, typically near the lease return date,
the lessors may allow reserves to be applied as return condition consideration or pass on certain return provisions if they do not
align with their current plans to remarket the aircraft. As a result of the different factors listed above, management assesses the
need to accrue lease return costs periodically throughout the year or whenever facts and circumstances warrant an assessment.
Lease return costs will generally be estimable closer to the end of the lease term but may be estimable earlier in the lease term
depending on the contractual terms of the lease agreement and the timing of maintenance events for a particular aircraft. We
expect lease return costs will increase as individual aircraft lease agreements approach their respective termination dates and we
begin to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a
breach by us, we 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.
Results of Operations
In 2023, we generated operating revenues of $5,362.5 million and had an operating loss of $495.8 million resulting in a
negative operating margin of 9.2% and a net loss of $447.5 million. In 2022, we generated operating revenues of $5,068.4
million and had an operating loss of $598.9 million, resulting in a negative operating margin of 11.8% and a net loss of $554.2
million. The increase in operating revenues, year over year, is primarily due to an increase in traffic of 13.7%, year over year,
partially offset by a decrease in average yield of 7.0%, year over year. Increased salaries, wages and benefits expense and
aircraft rent expense compared to the prior year period, primarily contributed to higher operating expenses. In addition,
increased operations resulted in higher operating expenses across the board.
As of December 31, 2023, our cash and cash equivalents was $865.2 million, a decrease of $481.1 million compared to
the prior year. Cash and cash equivalents is generally driven by cash from our operating activities as well as capital from debt
and equity financings, offset by cash used to fund PDPs and capital expenditures and principal payments related to our long-
58
term debt. In addition to cash and cash equivalents, as of December 31, 2023, we had $112.5 million in short-term investment
securities.
Comparative Operating Statistics
The following tables set forth our operating statistics for the twelve month periods ended December 31, 2023 and 2022:
Operating Statistics (unaudited) (A):
Average aircraft
Aircraft at end of period
Average daily aircraft utilization (hours)
Average stage length (miles)
Departures
Passenger flight segments (PFSs) (thousands)
Revenue passenger miles (RPMs) (thousands)
Available seat miles (ASMs) (thousands)
Load factor (%)
Fare revenue per passenger flight segment ($)
Non-ticket revenue per passenger flight segment ($)
Total revenue per passenger flight segment ($)
Average yield (cents)
TRASM (cents)
CASM (cents)
Adjusted CASM (cents)
Adjusted CASM ex-fuel (cents)
Fuel gallons consumed (thousands)
Average fuel cost per gallon ($)
Twelve Months Ended December 31,
2023
2022
Percent
Change
199.5
205
11.1
1,007
297,900
44,105
180.7
194
10.7
1,013
261,079
38,463
45,243,787
39,775,253
55,665,561
48,567,978
10.4 %
5.7 %
3.7 %
(0.6) %
14.1 %
14.7 %
13.7 %
14.6 %
81.3 %
81.9 %
(0.6) pts
53.01
68.57
121.58
11.85
9.63
10.52
10.33
7.06
591,796
3.08
63.85
67.93
131.78
12.74
10.44
11.67
10.71
6.73
527,290
3.66
(17.0) %
0.9 %
(7.7) %
(7.0) %
(7.8) %
(9.9) %
(3.5) %
4.9 %
12.2 %
(15.8) %
(A) See "Glossary of Airline Terms" elsewhere in this annual report for definitions used in this table.
59
Operating Revenues
Operating revenues:
Fare (thousands)
Non-fare (thousands)
Passenger (thousands)
Other (thousands)
Total operating revenue (thousands)
Total operating revenue per ASM (TRASM) (cents)
Fare revenue per passenger flight segment
Non-ticket revenue per passenger flight segment
Total revenue per passenger flight segment
Year Ended 2023
% change 2023
versus 2022
Year Ended 2022
$
$
$
$
2,338,191
2,929,970
5,268,161
94,388
5,362,549
9.63
53.01
68.57
121.58
(4.8)%
15.6%
5.6%
19.4%
5.8%
(7.8)%
(17.0)%
0.9%
(7.7)%
$
$
$
$
2,455,817
2,533,548
4,989,365
79,082
5,068,447
10.44
63.85
67.93
131.78
Operating revenues increased by $294.1 million, or 5.8%, to $5,362.5 million in 2023 compared to 2022, primarily due to
an increase in traffic of 13.7%, partially offset by a decrease in average yield of 7.0%, year over year.
TRASM for 2023 was 9.63 cents, a decrease of 7.8% compared to 2022. This decrease was primarily a result of a 7.0%
decrease in operating yield, year over year.
Total revenue per passenger flight segment decreased 7.7% from $131.78 in 2022 to $121.58 in 2023. The decrease in
total revenue per passenger flight segment was primarily due to a decrease of 7.0% in average yield, year over year. Fare
revenue per passenger flight segment decreased 17.0%, as compared to the prior year period, while non-ticket revenue per
passenger flight segment increased slightly by 0.9%, as compared to the prior year period.
Operating Expenses
Since adopting our ULCC model, we have continuously sought to reduce our unit operating costs and have created one of
the industry's lowest cost structures in the United States. The table below presents our unit operating costs (CASM) and year-
over-year changes.
Operating expenses:
Aircraft fuel
Salaries, wages and benefits
Landing fees and other rentals
Aircraft rent
Depreciation and amortization
Maintenance, materials and repairs
Distribution
Special charges (credits)
Loss on disposal of assets
Other operating expenses
Total operating expense
CASM
Adjusted CASM (1)
Adjusted CASM ex fuel (2)
(1)
Reconciliation of CASM to Adjusted CASM:
Year Ended 2023
Change 2023 versus 2022
Year Ended 2022
CASM
Per-ASM Change
Percent change
CASM
$3.27
$(0.70)
(17.6)%
$3.97
0.32
0.01
0.10
(0.06)
0.01
(0.03)
(0.75)
(0.04)
(0.04)
(1.15)
(0.38)
0.33
12.4
1.4
17.2
(9.4)
2.6
(8.1)
NM
NM
(2.7)
(9.9)
(3.5)
4.9
2.58
0.72
0.58
0.64
0.39
0.37
0.87
0.10
1.46
11.67
10.71
6.73
2.90
0.73
0.68
0.58
0.40
0.34
0.12
0.06
1.42
10.52
10.33
7.06
60
CASM (cents)
Less:
Special charges (credits)
Loss on disposal of assets
Litigation loss contingency
Adjusted CASM (cents)
Year Ended December 31,
2023
2022
(in millions)
Per ASM
(in millions)
Per ASM
$
69.5
34.0
6.0
10.52
0.12 $
0.06
0.01
10.33
420.2
46.6
—
11.67
0.87
0.10
—
10.71
(2)
Excludes aircraft fuel expense, loss on disposal of assets, special charges (credits) and a litigation loss contingency recorded in the
second quarter of 2023.
Operating expenses increased by $190.9 million, or 3.4%, in 2023 primarily due to an increase in salaries, wages and
benefits expense, aircraft rent expense, other operating expense and landing fees and other rents expense, compared to the prior
year period. In addition, we had an increase in operations, as reflected by a 13.7% increase in traffic and a 14.6% increase in
capacity, as a result of increased travel demand as compared to the prior year. These increases were offset by decreases in
special charges, period over period, as well as a decrease of 15.8% in fuel price per gallon, of which contributed to a $108.8
million decrease in aircraft fuel expense, period over period.
Our Adjusted CASM ex-fuel for the twelve months ended December 31, 2023 was 7.06 cents, as compared to 6.73 cents
for the twelve months ended December 31, 2022. The increase on a per-ASM basis was primarily due to increases in salaries,
wages and benefits expense and aircraft rent expense, partially offset by a decrease in depreciation and amortization expense.
Aircraft fuel expenses includes both into-plane expense (as defined below) and realized and unrealized net gains or losses
from fuel derivatives, if any. Into-plane fuel expense is defined as the price that we generally pay at the airport, including taxes
and fees. Into-plane fuel prices are affected by the global oil market, refining costs, transportation taxes and fees, which can
vary by region in the United States and other countries where we operate. Into-plane fuel expense approximates cash paid to the
supplier and does not reflect the effect of any fuel derivatives. We had no activity related to fuel derivative instruments during
2023 and 2022.
Aircraft fuel expense decreased by 5.6% from $1,930.0 million in 2022 to $1,821.2 million in 2023. This decrease was
due to a 15.8% decrease in fuel price per gallon, partially offset by a 12.2% increase in fuel gallons consumed.
The elements of the changes in aircraft fuel expense are illustrated in the following table:
Fuel gallons consumed
Into-plane fuel cost per gallon
Aircraft fuel expense (per consolidated statements of operations)
Twelve Months Ended
December 31,
2023
2022
(in thousands, except per-
gallon amounts)
Percent
Change
591,796
527,290
$
3.08 $
3.66
$ 1,821,165 $ 1,929,969
12.2 %
(15.8) %
(5.6) %
Gulf Coast Jet indexed fuel is the basis for a substantial majority of our fuel consumption and is impacted by both the
price of crude oil as well as increases or decreases in refining margins associated with the conversion of crude oil to jet fuel.
Salaries, wages and benefits expense in 2023 increased by $365.6 million, or 29.2%, compared to 2022. This increase on
a dollar and per-ASM basis was primarily driven by higher salaries, vacation-time expense, 401(k) expense and crew overtime.
These increases were mainly driven by contractual pay rate increases related to the collective bargaining agreements with our
pilots and flight attendants ratified in January 2023 and April 2023, respectively. In addition, these increases were driven by a
16.4% increase in our pilot and flight attendant workforce, period over period, as well as an increase in operations as compared
to the prior year period. The increase in salaries, wages and benefits expense is also due to an increase in health insurance
expense, mainly driven by higher volume of claims.
Landing fees and other rents for 2023 increased by $61.0 million, or 17.6%, compared to 2022. On a dollar basis, landing
fees and other rents expense primarily increased as a result of an increase in facility rent, landing fees and station baggage rent,
driven by increased operations, higher rent rates and the addition of new stations as well as new gates at our existing stations,
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period over period. Gate charges, landing fees, as well as a portion of facility rent and station baggage rent are variable in nature
and vary based on factors such as the number of departures and passengers. As compared to the prior year period, departures
increased by 14.1% and passenger flight segments increased by 14.7%. On a per-ASM basis, landing fees and other rents
remained relatively consistent, period over period.
Aircraft rent expense in 2023 increased by $98.8 million, or 35.0%, compared to 2022. This increase in aircraft rent
expense was primarily due to an increase in the number of aircraft financed under operating leases throughout the current
period, as compared to the prior year period. The increase on a dollar and per-ASM basis in aircraft rent expense was primarily
due to an increase in the number of aircraft financed under operating leases throughout the current period, as compared to the
prior year period. Since 2022, we have recorded 29 new operating leases related to new and previously owned aircraft.
Depreciation and amortization increased by $7.8 million, or 2.5%, compared to the prior year. The increase in
depreciation and amortization expense on a dollar basis was primarily driven by an increase in spare engines and computer
software, as well as amortization of new engine overhauls capitalized in the period. Since 2022, we have taken delivery of four
spare engines purchased with cash. This increase was partially offset by a decrease in depreciation and amortization expense in
the current period, as a result of the impact of the impairment of 29 of our A319 aircraft associated with the decision to
accelerate their retirement during the fourth quarter of 2022 and the sale of 12 A319 airframes and 20 A319 engines during the
twelve months ended December 31, 2023. On a per-ASM basis, depreciation and amortization expense decreased due to a
change in the composition of our aircraft fleet between purchased aircraft (for which depreciation expense is recorded under
depreciation and amortization) and leased aircraft (for which rent expense is recorded under aircraft rent). Since the prior year
period, we have taken delivery of 23 new leased aircraft, which increased capacity but had no effect on depreciation expense.
We account for heavy maintenance under the deferral method. Under the deferral method, the cost of heavy maintenance
is capitalized and amortized as a component of depreciation and amortization expense in the consolidated statements of
operations until the earlier of the next heavy maintenance event or end of the lease term. The amortization of heavy
maintenance costs was $79.8 million and $96.7 million for the year ended December 31, 2023 and 2022, respectively. The
decrease in amortization of heavy maintenance costs, period over period, was primarily related to the impact of the impairment
of 29 of our A319 aircraft, including the related net capitalized maintenance, associated with the decision to accelerate their
retirement during the fourth quarter of 2022. However, as our fleet continues to age, we expect that the amount of deferred
heavy maintenance events will increase and will result in an increase in the amortization of those costs. If the amortization of
heavy maintenance events were recorded within maintenance, materials and repairs expense in the consolidated statements of
operations, our maintenance, materials and repairs expense would have been $303.1 million and $284.5 million for the year
ended December 31, 2023 and 2022, respectively.
Maintenance, materials and repairs expense increased by $35.5 million, or 18.9%, in 2023, as compared to 2022. The
increase on a dollar basis was mainly due to a higher volume of aircraft and rotable maintenance events as a result of a 14.1%
increase in departures in the current period as compared to the prior year period. On a per-ASM basis, maintenance, materials
and repairs expense remained relatively stable since the prior year period.
Distribution expense increased by $13.3 million, or 7.5%, in 2023, compared to 2022. The increase on a dollar was
primarily due to increased sales volume as well as an increase in credit card fee rates, which impacts our variable distribution
costs such as credit card fees. On a per-ASM basis, distribution costs decreased primarily due to lower average fare resulting in
a decrease in credit card fees, year over year, and also due to a decrease in sales from third-party travel agents.
Special charges (credits) for the year ended 2023 consisted of $50.0 million in legal, advisory and other fees related to the
Merger Agreement with JetBlue, as well as $19.5 million related to the retention award program in connection with the Merger
Agreement with JetBlue. Special charges (credits) for the year ended 2022 consisted of $333.7 million in impairment charges
related to the purchase agreement to sell 29 of our A319 aircraft, $47.2 million in legal, advisory and other fees related to the
Former Frontier Merger Agreement, JetBlue's unsolicited proposal to acquire all of our outstanding shares in an all-cash
transaction and the JetBlue Merger Agreement as well as $39.3 million related to our retention award programs. For additional
information, refer to "Notes to Consolidated Financial Statements— 4. Special Charges and Credits."
Loss on disposal of assets totaled $34.0 million for the year ended 2023. This loss on disposal of assets primarily
consisted of a $32.1 million loss related to the 6 aircraft sale-leaseback transactions (on existing aircraft), a net loss of
$1.6 million related to the sale of 12 A319 airframes and 20 A319 engines as well as a $3.3 million loss primarily related to the
disposal of obsolete assets, partially offset by a net gain of $3.0 million related to 10 aircraft sale-leaseback transactions related
to new aircraft deliveries completed during the twelve months ended December 31, 2023. Loss on disposal of assets totaled
$46.6 million for the year ended 2022. This loss on disposal of assets primarily consisted of $38.5 million related to the loss on
16 aircraft sale-leaseback transactions completed during 2022 and $6.6 million related to the impairment of 1 spare engine
during the first quarter of 2022 which was damaged beyond economic repair.
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Other operating expenses in 2023 increased by $81.0 million, or 11.4%, compared to 2022. The increase in other
operating expenses on a dollar basis was primarily due to an increase in ground handling expense, software maintenance, travel
and lodging expense and other airport services expense, period over period, primarily as a result of an increase in operations. As
compared to the prior year period, departures increased by 14.1%, and we had 14.7% more passenger flight segments, which
drove increases in variable other operating expenses. Additionally, we recorded a litigation loss contingency of $6.0 million in
the second quarter of 2023. These increases were offset by a decrease in passenger reaccommodation expense, period over
period, related to a number of adverse weather events and increases in air traffic control programs and restrictions, which led to
a significant number of flight delays and cancellations during the first half of 2022. In addition, these increases were partially
offset by engine credits earned in the current period. On a per-ASM basis, other operating expenses decreased primarily due to
a decrease in passenger reaccommodation expense compared to the prior year period as well as engine credits earned in the
period, partially offset by an increase in software maintenance.
Other (Income) Expense
Other (income) expense, net decreased from $101.8 million in 2022 to $62.8 million in 2023, was primarily driven by an
increase in interest income of $41.6 million as well as an increase in gain on extinguishment of debt of $15.4 million,
recognized from favorable interest rate swap provisions contained in certain debt agreements extinguished during the fourth
quarter of 2023, and partially offset by the write-off of related deferred financing costs. The increase in interest income was
primarily due to an increase in interest rates as compared to the prior year period. These increases in interest income and gain
on extinguishment of debt were partially offset by an increase in interest expense of $29.3 million, which was primarily due to
the increase in interest and accretion, year over year, as a result of the additional $600.0 million 8.00% senior secured notes
incurred during the fourth quarter 2022.
Income Taxes
In 2023, our effective tax rate was 19.9% compared to 20.9% in 2022. While we expect our tax rate to be fairly consistent
in the near term, it will tend to vary depending on recurring items such as the amount of income we earn in each state and the
state tax rate applicable to such income. Discrete items particular to a given year may also affect our effective tax rates.
Liquidity and Capital Resources
Our primary sources of liquidity generally include cash on hand, cash provided by operations and capital from debt
and equity financing. Primary uses of liquidity are for working capital needs, capital expenditures, aircraft and engine pre-
delivery deposit payments ("PDPs") and debt and lease obligations. We expect to meet our cash needs for the next twelve
months with cash and cash equivalents, cash flows from operations, the implementation of discretionary cost reduction
strategies and other financing arrangements. As of December 31, 2023, we had $1,277.7 million in liquid assets comprised of
unrestricted cash and cash equivalents, short-term investment securities and funds available under our revolving credit facility.
From time to time and subject to market conditions and any applicable contractual requirements, we may refinance portions of
our debt, including our 2025 maturities, which, at current interest rates and market conditions, may negatively impact our
interest expense or result in higher dilution. In addition, from time to time, we may decide to repurchase or otherwise retire
portions of our existing indebtedness through transactions in the open market, privately negotiated transactions, tender offers,
exchange offers or otherwise, or we may redeem or prepay portions of our existing indebtedness pursuant to its terms. Any such
action will depend on market conditions and any applicable contractual requirements.
63
As of December 31, 2023, we had $25.1 million recorded within current maturities of long-term debt and finance leases
on our consolidated balance sheets related to our convertible notes due 2025. As of December 31, 2023, the convertible notes
due 2025 may be converted by noteholders through March 31, 2024. During the first quarter of 2023, $0.3 million of our
convertible notes due 2025 were converted to 27,204 shares of our voting common stock. Refer to “Notes to Consolidated
Financial Statements—13. Debt and Other Obligations,” for additional information.
As of December 31, 2023, we had $472.6 million, net of the related unamortized debt discount of $27.4 million, recorded
within long-term debt, net and finance leases, less current maturities on our consolidated balance sheets related to our
convertible notes due 2026. As of December 31, 2023, the convertible notes due 2026 did not qualify for conversion by
noteholders through March 31, 2024. Refer to “Notes to Consolidated Financial Statements —13. Debt and Other Obligations”
for additional information.
Currently, one of our largest capital expenditure needs is funding the acquisition costs of our aircraft. Aircraft are
acquired through debt financing, cash purchases, direct leases or sale-leaseback transactions. During the twelve months ended
December 31, 2023, we took delivery of 13 aircraft under direct operating leases, 10 aircraft under sale-leaseback transactions
and 4 spare engines purchased with cash. During the twelve months ended December 31, 2023, we made $730.1 million in debt
payments (principal, interest and fees) on our outstanding aircraft debt obligations.
Under our purchase agreements for aircraft and engines, we are required to pay PDPs relating to future deliveries at
various times prior to each delivery date. During 2023, we paid $23.2 million in PDPs, net of refunds, and $21.9 million of
capitalized interest for future deliveries of aircraft and spare engines. As of December 31, 2023, we had $480.7 million of pre-
delivery deposits on flight equipment, including capitalized interest, on our consolidated balance sheet.
As of December 31, 2023, we had secured financing for 22 aircraft to be leased directly from third-party lessors,
scheduled for delivery through 2025, and 18 aircraft which will be financed through sale-leaseback transactions, scheduled for
delivery through 2025. As of December 31, 2023, we did not have financing commitments in place for the remaining 81 Airbus
firm aircraft orders, scheduled for delivery through 2029. However, we have signed a financing letter of agreement with Airbus
which provides backstop financing for a majority of the aircraft included in the A320 NEO Family Purchase Agreement. The
agreement provides a standby credit facility in the form of senior secured mortgage debt financing. Future aircraft deliveries
may be paid in cash, leased or otherwise financed based on market conditions, our prevailing level of liquidity, and capital
market availability.
As of December 31, 2023, we were compliant with our credit card processing agreements, and not subject to any credit
card holdbacks. The maximum potential exposure to cash holdbacks by our credit card processors, based upon advance ticket
sales and Spirit Saver$ Club® memberships, as of December 31, 2023 and December 31, 2022, was $408.3 million and $468.5
million, respectively.
During the fourth quarter of 2023, we early extinguished $323.3 million of outstanding fixed-rate term loans on 16 of our
aircraft. In connection with this debt extinguishment, we received $17.8 million related to favorable interest rate swap
provisions contained in the debt agreements associated with these fixed-rate term loans. This amount was recorded within loss
(gain) on extinguishment of debt on our consolidated statement of operations for the twelve months ended December 31, 2023.
In addition, during December 2023, we completed 20 sale-leaseback transactions (on aircraft we previously owned) of which, 6
resulted in operating leases and 14 would have been deemed finance leases resulting in failed sale-leaseback transactions. Refer
to “Notes to Consolidated Financial Statements — Note 14”, Leases for additional information on the 20 sale-leaseback
transactions.
Net Cash Flows Provided (Used) By Operating Activities. Operating activities in 2023 used $246.7 million in cash
compared to $89.0 million used in 2022. Cash used by operating activities during 2023 was primarily related to the net loss in
the period as well as an increase in deferred heavy maintenance and a decrease in deferred income tax benefit in the period. The
cash used in the period was partially offset by higher non-cash expense of depreciation and amortization, as well as increases in
other liabilities and air traffic liability.
Operating activities in 2022 used $89.0 million in cash compared to $208.9 million provided in 2021. Cash used by
operating activities during 2022 was primarily related to the net loss in the period as well as an increase in deferred heavy
maintenance and a decrease in deferred income tax benefit in the period. The cash used in the period was partially offset by
higher non-cash expense of fixed asset impairment and depreciation and amortization, as well as increases in other liabilities
and air traffic liability.
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Net Cash Flows Used In Investing Activities. During 2023, investing activities used $36.5 million, compared to $265.4
million used in 2022. The cash used was mainly driven by the purchase of property, plant and equipment, partially offset by
proceeds from the sale of property, plant and equipment.
During 2022, investing activities used $265.4 million, compared to $352.4 million used in 2021. The cash used was
mainly driven by the purchase of property, plant and equipment.
Net Cash Provided (Used) By Financing Activities. During 2023, financing activities used $198.0 million. Cash used was
mainly driven by cash payments on debt obligations and payments to extinguish debt early, partially offset by the proceeds of
the issuance of long-term debt. Refer to "Notes to Consolidated Financial Statements —13. Debt and Other Obligations" for
additional information.
During 2022, financing activities provided $391.3 million. During the twelve months ended December 31, 2022, we
received $591.0 million, net, related to the issuance of the 8.00% Additional Notes due 2025, partially offset by $193.0 million
in payments on debt obligations. Refer to "Notes to Consolidated Financial Statements —13. Debt and Other Obligations" for
additional information.
Commitments and Contractual Obligations
Our contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and
aircraft leasing companies. As of December 31, 2023, our firm aircraft orders consisted of 99 A320 family aircraft with Airbus,
including A320neos and A321neos, with deliveries expected through 2029. On July 31, 2023, we entered into Amendment No.
6 (the “Amendment”) to the Airbus Purchase Agreement. The Amendment converts the A319neo aircraft to be delivered under
the Airbus Purchase Agreement to A321neo aircraft. The Amendment also (i) defers certain A320neo aircraft deliveries from
2024 to 2025 and later years, (ii) extends delivery dates for certain A320neo and A321neo aircraft deliveries from 2025-2027 to
2025-2029 and (iii) adjusts the timing of option aircraft delivery dates from 2026-2028 to 2027-2029. In addition, the
Amendment creates a more equal distribution of aircraft deliveries and option rights across the delivery periods. As of
December 31, 2023, we had secured financing for 18 aircraft, scheduled for delivery from Airbus from through 2025, which
will be financed through sale-leaseback transactions. The contractual purchase amounts for these aircraft from Airbus are
included within the flight equipment purchase obligations in the table below. We did not have financing commitments in place
for the remaining 81 Airbus aircraft currently on firm order, which are scheduled for delivery through 2029. However, we have
signed a financing letter of agreement with Airbus which provides backstop financing for a majority of the aircraft included in
the A320 NEO Family Purchase Agreement. The agreement provides a standby credit facility in the form of senior secured
mortgage debt financing.
During the third quarter of 2021, we entered into an Engine Purchase Support Agreement which requires us 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
December 31, 2023, we are committed to purchase 19 PW1100G-JM spare engines, with deliveries through 2029.
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 we are
already contractually obligated to purchase including those reflected below. 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. For further discussion on this topic, please refer to
"Risk Factors - Risks Related to Our Business - Any tariffs imposed on commercial aircraft and related parts imported from
outside the United States may have a material adverse effect on our fleet, business, financial condition and our results of
operations."
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In addition to the aircraft purchase agreement, as of December 31, 2023, we had secured financing for 22 aircraft to be
leased directly from third-party lessors, scheduled for delivery through 2025. Aircraft rent commitments for future aircraft
deliveries to be financed under these direct leases from third-party lessors and sale-leaseback transactions are expected to be
approximately $72.4 million in 2024, $167.8 million in 2025, $183.3 million in 2026, $183.3 million in 2027, $183.3 million in
2028 and $1,409.3 million in 2029 and beyond. These future commitments are not included in the table below.
We have significant obligations for aircraft and spare engines as we had 132 leased aircraft, of which 117 aircraft were
financed under operating leases and 15 aircraft would have been deemed finance leases resulting in failed sale-leaseback
transactions, and 6 spare engines were financed under operating leases. Aircraft rent payments were $389.6 million and $286.0
million for 2023 and 2022, respectively, for aircraft which were financed under operating leases. Aircraft rent payments were
$6.5 million and $4.3 million for 2023 and 2022, respectively, for aircraft which would have been deemed finance leases
resulting in failed sale-leaseback transactions. Refer to “Notes to Consolidated Financial Statements—13. Debt and Other
Obligations” and “Notes to Consolidated Financial Statements—14. Leases" for additional information.
We have contractual obligations and commitments primarily with regard to future purchases of aircraft and engines,
payment of debt and lease arrangements. The following table discloses aggregate information about our contractual obligations
as of December 31, 2023 and the periods in which payments are due (in millions):
Long-term debt (1)
Interest and fee commitments (2)
Finance and operating lease obligations
Flight equipment purchase obligations (3)
Other (4)
Total
2024
2025 - 2026
2027 - 2028
$
3,439 $
305 $
1,934 $
403 $
744
5,741
5,620
131
177
453
508
65
236
844
2,053
46
119
761
2,135
20
2029 and
beyond
797
212
3,683
924
—
Total future payments on contractual obligations
$
15,675 $
1,508 $
5,113 $
3,438 $
5,616
(1)
Includes principal only associated with our 8.00% senior secured notes, fixed-rate loans (includes failed sale-leaseback
transactions), unsecured term loans, Class A and Class B Series 2015-1 EETCs, Class AA, Class A and Class B Series
2017-1 EETCs, convertible notes and our revolving credit facilities. Refer to “Notes to Consolidated Financial
Statements—13. Debt and Other Obligations.”
(2) Related to our 8.00% senior secured notes, fixed-rate loans (includes failed sale-leaseback transactions), unsecured
term loans and Class A and Class B Series 2015-1 EETCs, and Class AA, Class A and Class B Series 2017-1 EETCs
and convertible debt. Includes interest accrued as of December 31, 2023 related to our variable-rate revolving credit
facility.
Includes estimated amounts for contractual price escalations and PDPs.
(3)
(4) Primarily related to our new headquarters campus and residential building, reservation system and other miscellaneous
subscriptions and services. Refer to “Notes to Consolidated Financial Statements—17. Commitments and
Contingencies.”
During the fourth quarter of 2019, we purchased an 8.5-acre parcel of land for $41.0 million and entered into a 99-year
lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where we are building a new headquarters
campus. During the first quarter of 2022, we began building our new headquarters campus with an expected completion during
the first quarter of 2024. Operating lease commitments related to this lease are included in the table above under the caption
"Finance and operating lease obligations." For more detailed information, please refer to “Notes to Consolidated Financial
Statements— 14. Leases."
Off-Balance Sheet Arrangements
As of December 31, 2023 and 2022, we had a line of credit for $20.1 million and $20.1 million, respectively, related to
corporate credit cards. As of December 31, 2023 and 2022, we had drawn $1.5 million and $1.8 million, respectively, which is
included within accounts payable on our consolidated balance sheets.
As of December 31, 2023, we had lines of credit with counterparties for both physical fuel delivery and derivatives, if
any, in the amount of $25.0 million. As of December 31, 2023, we had not drawn on these lines of credit for physical fuel
delivery. We are required to post collateral for any excess above the lines of credit if the derivatives, if any, are in a net liability
66
position and make periodic payments in order to maintain an adequate undrawn portion for physical fuel delivery. As of
December 31, 2023, we did not hold any derivatives.
As of December 31, 2023, we had $13.0 million in uncollateralized surety bonds and $85.0 million standby letters of
credit collateralized by $75.0 million of restricted cash, representing an off balance-sheet commitment, of which $55.9 million
were issued letters of credit.
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Set forth below is a glossary of industry terms:
GLOSSARY OF AIRLINE TERMS
“Adjusted CASM” means operating expenses, excluding loss on disposal of assets, special charges (credits) and a
litigation loss contingency recorded in the second quarter of 2023, divided by ASMs.
“Adjusted CASM ex fuel” means operating expenses excluding aircraft fuel expense, loss on disposal of assets, special
charges (credits) and a litigation loss contingency recorded in the second quarter of 2023, divided by ASMs.
“AFA-CWA” means the Association of Flight Attendants-CWA.
“Air traffic liability” or “ATL” means the value of tickets sold in advance of travel.
“ALPA” means the Air Line Pilots Association, International.
“AMFA” means the Aircraft Mechanics Fraternal Association.
“ASIF” means an Aviation Security Infrastructure Fee assessed by the TSA on each airline.
“Available seat miles” or “ASMs” means the number of seats available for passengers multiplied by the number of miles
the seats are flown, also referred to as "capacity."
“Average aircraft” means the average number of aircraft in our fleet as calculated on a daily basis.
“Average daily aircraft utilization” means block hours divided by number of days in the period divided by average
aircraft.
“Average fuel cost per gallon” means total aircraft fuel expense divided by the total number of fuel gallons consumed.
“Average stage length” represents the average number of miles flown per flight.
“Average yield” means average operating revenue earned per RPM, calculated as total revenue divided by RPMs, also
referred to as "passenger yield."
“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate
departure before take-off until the time of gate arrival at the destination.
“CASM” or “unit costs” means operating expenses divided by ASMs.
“CBA” means a collective bargaining agreement.
“CBP” means United States Customs and Border Protection.
“DOT” means the United States Department of Transportation.
"EETC" means enhanced equipment trust certificate.
“EPA” means the United States Environmental Protection Agency.
“FAA” means the United States Federal Aviation Administration.
“Fare revenue per passenger flight segment” means total fare passenger revenue divided by passenger flight segments.
“FCC” means the United States Federal Communications Commission.
"FLL Airport" means the Fort Lauderdale Hollywood International Airport.
“GDS” means Global Distribution System (e.g., Amadeus, Galileo, Sabre and Worldspan).
"IAMAW" means the International Association of Machinists and Aerospace Workers.
“Into-plane fuel cost per gallon” means into-plane fuel expense divided by number of fuel gallons consumed.
“Into-plane fuel expense” represents the cost of jet fuel and certain other charges such as fuel taxes and oil.
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“Load factor” means the percentage of aircraft seats actually occupied on a flight (RPMs divided by ASMs).
“NMB” means the National Mediation Board.
"Non-ticket revenue" means total non-fare passenger revenue and other revenue.
“Non-ticket revenue per passenger flight segment” means total non-fare passenger revenue and other revenue divided by
passenger flight segments.
“OTA” means Online Travel Agent (e.g., Orbitz and Travelocity).
"PAFCA" means the Professional Airline Flight Control Association.
“Passenger flight segments” means the total number of passengers flown on all flight segments.
“PDP” means pre-delivery deposit payment.
“Revenue passenger mile” or “RPM” means one revenue passenger transported one mile. RPMs equals revenue
passengers multiplied by miles flown, also referred to as "traffic."
“RLA” means the United States Railway Labor Act.
“Total operating revenue per ASM,” “TRASM” or “unit revenue” means operating revenue divided by ASMs.
“TWU” means the Transport Workers Union of America.
“TSA” means the United States Transportation Security Administration.
“ULCC” means “ultra low-cost carrier.”
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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk-Sensitive Instruments and Positions
We are subject to certain market risks, including commodity prices (specifically aircraft fuel) and interest rates. We
purchase the majority of our jet fuel at prevailing market prices and seek to manage market risk through execution of our
hedging strategy and other means. However, we do not currently hold any derivative financial instruments. We have market-
sensitive instruments in the form of fixed-rate debt instruments. The adverse effects of changes in these markets could pose a
potential loss as discussed below. The sensitivity analysis provided below does not consider the effects that such adverse
changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to
such changes. Actual results may differ.
Aircraft Fuel. Our results of operations can vary materially due to changes in the price and availability of aircraft fuel.
Aircraft fuel expense for the years ended December 31, 2023, represented approximately 31.1% of our operating expenses.
Volatility in aircraft fuel prices or a shortage of supply could have a material adverse effect on our operations and operating
results. We source a significant portion of our fuel from refining resources located in the southeast United States, particularly
facilities adjacent to the Gulf of Mexico. Gulf Coast fuel is subject to volatility and supply disruptions, particularly during
hurricane season when refinery shutdowns have occurred, or when the threat of weather-related disruptions has caused Gulf
Coast fuel prices to spike above other regional sources. Gulf Coast Jet indexed fuel is the basis for a substantial majority of our
fuel consumption. Based on our annual fuel consumption, a hypothetical 10% increase in the average price per gallon of aircraft
fuel would have increased into-plane aircraft fuel cost for 2023 by $182.1 million.
Interest Rates. We have market risk associated with our short-term investment securities, which had a fair market value
of $112.5 million as of December 31, 2023.
Fixed-Rate Debt. As of December 31, 2023, we had $1,667.7 million outstanding in fixed-rate debt related to 41 Airbus
A320 aircraft and 30 Airbus A321 aircraft, which had a fair value of $1,611.1 million. In addition, as of December 31, 2023, we
had $1,110.0 million and $136.3 million outstanding in fixed-rate debt related to our 8.00% senior secured notes and our
unsecured term loans, respectively, which had fair values of $1,121.9 million and $128.3 million. As of December 31, 2023, we
also had $525.1 million outstanding in convertible debt which had a fair value of $392.2 million.
Variable-Rate Debt. As of December 31, 2023, we did not have any outstanding variable-rate long term debt.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements:
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm (Ernst & Young, LLP, Miami, FL, Auditor Firm ID: 42)
Page
72
73
74
75
77
78
108
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Spirit Airlines, Inc.
Consolidated Statements of Operations
(In thousands, except per-share data)
Year Ended December 31,
2023
2022
2021
Operating revenues:
Passenger
Other
Total operating revenues
Operating expenses:
Aircraft fuel
Salaries, wages and benefits
Landing fees and other rents
Aircraft rent
Depreciation and amortization
Maintenance, materials and repairs
Distribution
Special charges (credits)
Loss on disposal of assets
Other operating
Total operating expenses
Operating income (loss)
Other (income) expense:
Interest expense
Loss (gain) on extinguishment of debt
Capitalized interest
Interest income
Other (income) expense
Total other (income) expense
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
$ 5,268,161 $ 4,989,365 $ 3,175,802
54,973
3,230,775
94,388
5,362,549
79,082
5,068,447
1,821,165
1,616,803
408,262
381,239
320,872
223,339
190,891
69,537
33,966
792,232
5,858,306
1,929,969
1,251,225
347,268
282,428
313,090
187,820
177,557
420,172
46,624
711,211
5,667,364
913,945
1,065,461
315,999
246,601
297,211
159,502
132,499
(377,715)
3,320
530,826
3,287,649
(495,757)
(598,917)
(56,874)
169,191
(15,411)
(33,360)
(61,647)
4,065
62,838
139,905
—
(22,818)
(20,083)
4,818
101,822
155,611
331,630
(18,998)
(5,374)
577
463,446
(558,595)
(111,131)
(700,739)
(146,589)
(520,320)
(47,751)
$ (447,464) $ (554,150) $ (472,569)
$
$
(4.10) $
(5.10) $
(4.10) $
(5.10) $
(4.50)
(4.50)
`
See accompanying Notes to Consolidated Financial Statements.
72
Spirit Airlines, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Net income (loss)
Unrealized gain (loss) on short-term investment securities and cash and
cash equivalents, net of deferred taxes of $84, $(65) and $(27)
Interest rate derivative loss reclassified into earnings, net of taxes of
$72, $47 and $49
Other comprehensive income (loss)
Comprehensive income (loss)
Year Ended December 31,
2023
2022
2021
$
(447,464) $
(554,150) $
(472,569)
287
242
529 $
(216)
152
(64) $
(92)
178
86
(446,935) $
(554,214) $
(472,483)
$
$
See accompanying Notes to Consolidated Financial Statements.
73
Spirit Airlines, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investment securities
Accounts receivable, net
Income tax receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment:
Flight equipment
Ground property and equipment
Less accumulated depreciation
Operating lease right-of-use assets
Pre-delivery deposits on flight equipment
Deferred heavy maintenance, net
Other long-term assets
Total assets
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable
Air traffic liability
Current maturities of long-term debt, net, and finance leases
Current maturities of operating leases
Other current liabilities
Total current liabilities
Long-term debt and finance leases, less current maturities
Operating leases, less current maturities
Deferred income taxes
Deferred gains and other long-term liabilities
Shareholders’ equity:
Common stock: Common stock, $0.0001 par value, 240,000,000 shares authorized at
December 31, 2023 and 2022, respectively; 111,303,660 and 110,840,751 issued and
109,263,005 and 108,941,920 outstanding as of December 31, 2023 and 2022,
respectively
Additional paid-in-capital
Treasury stock, at cost: 2,040,655 and 1,898,831 as of December 31, 2023 and 2022,
respectively
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31, 2023
December 31, 2022
$
$
$
865,211 $
119,400
112,501
205,468
—
209,547
1,512,127
1,346,350
119,392
107,115
197,276
36,261
187,589
1,993,983
3,961,785
726,364
(1,169,021)
3,519,128
3,561,028
480,717
313,505
30,732
9,417,237 $
4,326,515
521,802
(1,098,819)
3,749,498
2,699,574
487,553
190,349
63,817
9,184,774
42,098 $
383,751
315,580
224,865
705,298
1,671,592
3,055,221
3,298,871
107,761
149,450
75,449
429,618
346,888
188,296
556,330
1,596,581
3,200,376
2,455,619
226,843
133,704
11
1,158,278
(80,635)
56,755
(67)
1,134,342
11
1,146,015
(77,998)
504,219
(596)
1,571,651
$
9,417,237 $
9,184,774
See accompanying Notes to Consolidated Financial Statements.
74
Spirit Airlines, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Operating activities:
Net income (loss)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Losses reclassified from other comprehensive income
Share-based compensation
Allowance for doubtful accounts (recoveries)
Amortization of debt issuance costs
Depreciation and amortization
Accretion of convertible debt and 8.00% senior secured notes
Amortization of debt discount
Deferred income tax benefit
Fixed asset impairment charges
Loss on disposal of assets
Loss (gain) on extinguishment of debt
Changes in operating assets and liabilities:
Accounts receivable, net
Deposits and other assets
Prepaid income taxes
Deferred heavy maintenance
Income tax receivable
Accounts payable
Air traffic liability
Other liabilities
Other
Net cash provided by (used in) operating activities
Year Ended December 31,
2023
2022
2021
$ (447,464) $ (554,150) $ (472,569)
314
199
226
11,963
11,483
12,536
159
(108)
(88)
15,454
13,468
12,912
320,872
313,090
297,211
4,210
8,145
1,421
13,962
1,272
—
(119,239)
(148,611)
(49,502)
—
333,691
33,966
46,624
—
3,320
—
—
331,630
(8,351)
4,215
—
(68,340)
(28,883)
—
(85,800)
47,855
156
(202,926)
(149,287)
(74,083)
36,261
(34,051)
(45,867)
176,440
(762)
1,629
9,032
47,301
68,389
68
109,570
13,057
(19,649)
80,103
731
(246,661)
(89,022)
208,888
75
Investing activities:
Purchase of available-for-sale investment securities
Proceeds from the maturity and sale of available-for-sale investment securities
Proceeds from sale of property and equipment
Pre-delivery deposits on flight equipment, net of refunds
Capitalized interest
Assets under construction for others
Purchase of property and equipment
Net cash provided by (used in) investing activities
Financing activities:
Proceeds from issuance of long-term debt
Proceeds from issuance of common stock and warrants
Payments on debt obligations
Payments for the early extinguishment of debt
Payments on finance lease obligations
Reimbursement for assets under construction for others
Repurchase of common stock
Debt issuance costs
Net cash provided by (used in) financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period (1)
Cash, cash equivalents, and restricted cash at end of period (1)
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest
Income taxes paid (received), net
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Financing cash flows for finance leases
Non-cash transactions:
Capital expenditures funded by finance lease borrowings
Capital expenditures funded by operating lease borrowings
(127,627)
(110,690)
(105,361)
125,570
230,788
23,156
(21,860)
(10,972)
109,500
104,500
—
—
(8,498)
(119,352)
(18,166)
(17,258)
(2)
(1,207)
(255,563)
(237,584)
(213,767)
(36,508)
(265,440)
(352,445)
457,950
591,000
—
—
614,496
375,662
(337,475)
(193,033)
(956,788)
(323,251)
—
(317,905)
(496)
10,974
(2,637)
(3,027)
(842)
2
(2,359)
(3,471)
(831)
996
(1,515)
(2,775)
(197,962)
391,297
(288,660)
(481,131)
36,835
(432,217)
1,465,742
1,428,907
1,861,124
$ 984,611 $ 1,465,742 $ 1,428,907
$ 138,380 $ 107,443 $ 135,500
$
(32,854) $
(82) $ (112,461)
$ 400,999 $ 295,468 $ 261,435
$
$
30 $
57 $
93
145 $
— $
538
$ 1,076,456 $ 897,109 $ 683,333
(1) The sum of cash and cash equivalents and restricted cash on the consolidated balance sheets equals cash, cash equivalents, and restricted cash in the
consolidated statements of cash flows.
See accompanying Notes to Consolidated Financial Statements.
76
Spirit Airlines, Inc.
Consolidated Statements of Shareholders’ Equity
(In thousands)
Balance at December 31, 2020
Effect of ASU No. 2020-06
implementation
Share-based compensation
Repurchase of common stock
Changes in comprehensive
income (loss)
Issuance of common stock and
warrants, net
Net income (loss)
Common Stock
Additional
Paid-In Capital
Treasury Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
$
10 $
799,549 $
(74,124) $ 1,524,878 $
(618) $ 2,249,695
—
—
—
—
1
—
(55,590)
12,536
—
—
375,331
—
—
—
(1,515)
—
—
—
6,060
—
—
—
—
(472,569)
—
—
—
86
—
—
(49,530)
12,536
(1,515)
86
375,332
(472,569)
Balance at December 31, 2021
$
11 $ 1,131,826 $
(75,639) $ 1,058,369 $
(532) $ 2,114,035
Convertible debt conversions . . . .
Share-based compensation
Repurchase of common stock
Changes in comprehensive
income (loss)
Issuance of common stock and
warrants, net
Net income (loss)
—
—
—
—
—
—
2,706
11,483
—
—
—
—
—
—
(2,359)
—
—
—
—
—
—
—
—
(554,150)
—
—
—
(64)
—
—
2,706
11,483
(2,359)
(64)
—
(554,150)
Balance at December 31, 2022
$
11 $ 1,146,015 $
(77,998) $
504,219 $
(596) $ 1,571,651
Convertible debt conversions
Share-based compensation
Repurchase of common stock
Changes in comprehensive
income (loss)
Net income (loss)
—
—
—
—
—
300
11,963
—
—
—
—
—
(2,637)
—
—
—
—
—
—
(447,464)
—
—
—
529
—
300
11,963
(2,637)
529
(447,464)
Balance at December 31, 2023
$
11 $ 1,158,278 $
(80,635) $
56,755 $
(67) $ 1,134,342
See accompanying Notes to Consolidated Financial Statements.
77
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Spirit Airlines, Inc. ("Spirit") and its
consolidated subsidiaries (the "Company"). Spirit is an ultra low-cost, low-fare airline that provides affordable travel
opportunities principally throughout the domestic United States, the Caribbean and Latin America and is headquartered in
Miramar, Florida. Spirit manages operations on a system-wide basis due to the interdependence of its route structure in the
various markets served. As only one service is offered (i.e., air transportation), management has concluded there is only one
reportable segment.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States
of America requires the Company's management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. The Company's estimates and assumptions are based on historical
experience and changes in the business environment. However, actual results may differ from estimates under different
conditions, sometimes materially.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of less than three months at the date of acquisition
to be cash equivalents. Investments included in this category primarily consist of cash and money market funds. Cash and cash
equivalents are stated at cost, which approximates fair value.
Restricted Cash
The Company's restricted cash is comprised of cash held in account subject to account control agreements to be used for
the payment of interest and fees on the Company's 8.00% senior secured notes and cash pledged as collateral against the
Company's secured letters of credit.
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 twelve months or less. These securities are stated at fair
value within current assets on the Company's consolidated balance sheet. For all short-term investments, at each reset period or
upon reinvestment, the Company accounts for the transaction as proceeds from the maturity of short-term investment securities
for the security relinquished, and purchase of short-term investment securities for the security purchased, in the Company's
consolidated statements of cash flows. Realized gains and losses on sales of investments, if any, are reflected in non-operating
other (income) expense in the consolidated statements of operations. Unrealized gains and losses on investment securities are
reflected as a component of accumulated other comprehensive income.
Accounts Receivable
Accounts receivable primarily consist of amounts due from credit card processors associated with the sales of tickets,
amounts due from the Internal Revenue Service related to federal excise fuel tax and amounts expected to be received related to
the CARES Employee Retention credit. The Company records an allowance for amounts not expected to be collected. The
Company estimates the allowance based on historical write-offs and aging trends as well as an estimate of the expected lifetime
credit losses. The allowance for doubtful accounts was immaterial as of December 31, 2023 and 2022.
In addition, the provision for doubtful accounts and write-offs for 2023, 2022 and 2021 were each immaterial.
Income Tax Receivable
Income tax receivable consists of amounts due from tax authorities for recovery of income taxes paid in prior periods.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation of operating
property and equipment is computed using the straight-line method applied to each unit of property. Residual values for new
aircraft, new engines, major spare rotable parts, avionics and assemblies are generally estimated to be 10%. Property under
78
Notes to Consolidated Financial Statements—(Continued)
finance leases and related obligations are initially recorded at an amount equal to the present value of future minimum lease
payments computed using the Company's incremental borrowing rate or, when known, the interest rate implicit in the lease.
Amortization of property under finance leases is recorded on a straight-line basis over the lease term and is included in
depreciation and amortization expense.
The depreciable lives used for the principal depreciable asset classifications are:
Aircraft, engines and flight simulators
Spare rotables and flight assemblies
Other equipment and vehicles
Internal use software
Finance leases
Leasehold improvements
Buildings
Estimated Useful Life
25
7 to 25 years
5 to 7 years
3 to 10 years
Lease term or estimated useful life of the asset
Lesser of lease term or estimated useful life of the
improvement
Lesser of lease term or 30 years
As of December 31, 2023, the Company had 88 aircraft (including 15 aircraft that would have been deemed finance
leases resulting in failed sale-leaseback transactions), 28 spare engines and 3 flight simulators capitalized within flight
equipment with depreciable lives of 25 years. As of December 31, 2023, the Company had 117 aircraft financed through
operating leases with lease terms from 4 years to 18 years. In addition, the Company had 6 spare engines financed through
operating leases with lease terms from 12 years to 18 years.
The following table illustrates the components of depreciation and amortization expense:
Year Ended December 31,
2023
2022
2021
Depreciation
Amortization of heavy maintenance
Amortization of capitalized software
Total depreciation and amortization
(in thousands)
$ 218,106 $ 199,118 $ 193,079
91,929
12,203
$ 320,872 $ 313,090 $ 297,211
79,768
22,998
96,707
17,265
The Company capitalizes certain internal and external costs associated with the acquisition and development of internal-
use software for new products, and enhancements to existing products, that have reached the application development stage and
meet recoverability tests. Capitalized costs include external direct costs of materials and services utilized in developing or
obtaining internal-use software, and labor cost for employees who are directly associated with, and devote time, to internal-use
software projects. Capitalized computer software, included as a component of ground and other equipment in the accompanying
consolidated balance sheets, net of amortization, was $53.6 million and $41.1 million at December 31, 2023 and 2022,
respectively.
The Company accounts for heavy maintenance and major overhaul under the deferral method whereby the cost of heavy
maintenance and major overhaul is deferred and amortized until the earlier of the end of the useful life of the related asset, the
end of the remaining lease term or the next scheduled heavy maintenance event.
The Company records amortization of capitalized software on a straight-line basis within depreciation and amortization
expense in the accompanying consolidated statements of operations. The Company placed in service internal-use software of
$35.5 million, $25.7 million and $20.5 million, during the years ended 2023, 2022 and 2021, respectively.
Operating Lease Right-of-Use Asset and Liabilities
Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities
represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are
recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When
available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company's
leases generally do not provide a readily determinable implicit rate. Therefore, the Company estimates the incremental
borrowing rate to discount lease payments based on information available at lease commencement. The Company uses publicly
available data for instruments with similar characteristics when calculating its incremental borrowing rates. The Company has
options to extend certain of its operating leases for an additional period of time and options to early terminate several of its
79
Notes to Consolidated Financial Statements—(Continued)
operating leases. The lease term consists of the noncancellable period of the lease, periods covered by options to extend the
lease if the Company is reasonably certain to exercise the option, periods covered by an option to terminate the lease if the
Company is reasonably certain not to exercise the option and periods covered by an option to extend or not terminate the lease
in which the exercise of the option is controlled by the lessor. The Company's lease agreements do not contain any residual
value guarantees. The Company elected to not separate non-lease components from the associated lease component for all
underlying classes of assets with lease and non-lease components.
The Company elected not to apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12
months or less) but instead recognize these lease payments in income on a straight-line basis over the lease term. The Company
elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease
payments are not included in the recognition of a lease liability or right-of-use asset.
Pre-Delivery Deposits on Flight Equipment
The Company is required to make pre-delivery deposit payments ("PDPs") towards the purchase price of each new
aircraft and engine prior to the scheduled delivery date. These deposits are initially classified as pre-delivery deposits on flight
equipment on the Company's consolidated balance sheets until the aircraft or engine is delivered, at which time the related
PDPs are deducted from the final purchase price of the aircraft or engine and are reclassified to flight equipment on the
Company's consolidated balance sheets.
In addition, the Company capitalizes the interest that is attributable to the outstanding PDP balances as a percentage of
the related debt on which interest is incurred. Capitalized interest represents interest cost incurred during the acquisition period
of a long-term asset, and is the amount which theoretically could have been avoided had the Company not paid PDPs for the
related aircraft or engines.
Related interest is capitalized and included within pre-delivery deposits on flight equipment through the acquisition
period until delivery is taken of the aircraft or engine and the asset is ready for service. Once the aircraft or engine is delivered,
the capitalized interest is also reclassified into flight equipment on the Company's consolidated balance sheets along with the
related PDPs as they are included in the cost of the aircraft or engine. Capitalized interest for 2023, 2022 and 2021 was
primarily related to the interest incurred on long-term debt.
Measurement of Asset Impairments
The Company records impairment charges on long-lived assets used in operations when events and circumstances
indicate that the assets may be impaired, the undiscounted future cash flows estimated to be generated by those assets are less
than the carrying amount of those assets, and the net book value of the assets exceeds their estimated fair value. Factors which
could be indicators of impairment include but are not limited to (1) a decision to permanently remove flight equipment or other
long-lived assets from operations, (2) significant changes in the estimated useful life, (3) significant changes in projected cash
flows, (4) permanent and significant declines in related fair values and (5) changes to the regulatory environment. In making
these determinations, the Company uses certain assumptions, including, but not limited to: (i) estimated fair value of the assets;
and (ii) estimated, undiscounted future cash flows expected to be generated by these assets, which are based on additional
assumptions such as asset utilization, length of service the asset will be used in the Company’s operations, and estimated
salvage values.
During 2023, the Company did not recognize impairment-related charges. During the fourth quarter of 2022, the
Company made the decision to accelerate the retirement of 29 of its A319 aircraft, which were owned and unencumbered, as of
December 31, 2022. In January 2023, the Company executed a purchase agreement to sell these aircraft over the next two years.
The Company concluded that Management’s plan to early retire and ultimately sell these 29 A319 aircraft is an impairment
indicator which required the Company to test the recoverability of the related asset group as of December 31, 2022. No
impairment indicators existed and no charges were necessary under applicable accounting standards as of December 31, 2022,
for the remaining flight equipment, which together represent one asset group.
The Company concluded that the net book value of this specific asset group of owned A319 aircraft is not recoverable as
of December 31, 2022, due to changes to the estimated future cash flows primarily driven by the significant reductions to their
remaining operating lives. As a result, during 2022, the Company recognized $333.7 million in impairment-related charges for
the amount by which the carrying amount of this asset group, including the related net capitalized maintenance, exceeded its
estimated fair value. During 2022, the impairment charges were recorded within special charges (credits) in the Company’s
consolidated statement of operations. The fair values of these assets were determined using Level 3 fair value inputs primarily
based on the agreed upon sales price for each aircraft, adjusted for estimated utilization in the period of operation from
December 31, 2022 to the expected future sales date. For additional information, refer to Note 4, Special Charges and Credits.
80
Notes to Consolidated Financial Statements—(Continued)
Passenger Revenues
Fare revenues. Tickets sold are initially deferred within air traffic liability ("ATL") on the Company's consolidated
balance sheet. Passenger fare revenues are recognized at time of departure when transportation is provided. Generally, all
tickets sold by the Company are nonrefundable. As of December 31, 2023 and 2022, the Company had ATL balances of $383.8
million and $429.6 million, respectively. As of December 31, 2023, substantially all of the ATL balance as of December 31,
2022 had been recognized. Substantially all of the Company's ATL balance as of December 31, 2023 is expected to be
recognized within 12 months.
Non-fare revenues. Non-fare revenues is primarily comprised of certain ancillary items such as bags, seats and other
travel-related fees, which are deemed part of the single performance obligation of providing passenger transportation. These
ancillary items are recognized in non-fare revenues within passenger revenues, at the time of departure. In addition, non-fare
revenues related to other travel-related programs and services provided are recognized as deemed appropriate.
The following table shows disaggregated operating revenues for the twelve months ended December 31, 2023, 2022 and
2021:
Operating revenues:
Fare
Non-fare
Total passenger revenues
Other
Twelve Months Ended December 31,
2023
2022
2021
(in thousands)
$
2,338,191 $
2,455,817 $
2,929,970
5,268,161
94,388
2,533,548
4,989,365
79,082
1,422,927
1,752,875
3,175,802
54,973
Total operating revenues
$
5,362,549 $
5,068,447 $
3,230,775
Changes and cancellations. An unused ticket expires at the date of scheduled travel, at which time a service charge is
assessed, and is recognized as revenue at the date of scheduled travel. However, customers may elect to change or cancel their
itinerary prior to the date of departure. For changes, a service charge is recognized at time of departure of newly scheduled
travel and is deducted from the face value of the original purchase price of the ticket, and the original ticket becomes invalid.
For cancellations, a service charge is assessed and the amount remaining after deducting the service charge is called a credit
shell which generally expires 90 days from the date the credit shell is created. Credit shells can be used towards the purchase of
a new ticket and the Company’s other service offerings. Both service charge and credit shell amounts are recorded as deferred
revenue and amounts expected to expire unused are estimated based on historical experience.
Estimating the amount of credits that will go unused involves some level of subjectivity and judgment. Assumptions
used to generate breakage estimates can be impacted by several factors including, but not limited to, changes to the Company's
ticketing policies, changes to the Company’s refund, exchange, and credit shell policies, and economic factors. The amount of
credit shells issued varies, primarily due to the flight delays and cancellation events throughout the year. The Company
generally experiences some variability in the amount of breakage revenue recognized throughout the year and expects some
variability in the amount of breakage revenue recorded in future periods, as the estimates of the portion of those funds that will
expire unused may differ from historical experience.
Other Revenues
Other revenues primarily consist of the marketing component of the sale of loyalty points to the Company's credit card
partner and commissions revenue from the sale of various items such as hotels and rental cars.
Loyalty Program
The Company operates the Free Spirit loyalty program (the "Free Spirit Program"), which attracts members and partners
and builds customer loyalty for the Company by offering a variety of awards, benefits and services. Free Spirit 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 or by making purchases with credit cards issued by partner
banks and financial services providers. Points are redeemable by customers in future periods for air travel on Spirit.
81
Notes to Consolidated Financial Statements—(Continued)
To reflect the point credits earned, the program includes two types of transactions that are considered revenue
arrangements with multiple performance obligations: (1) points earned with travel and (2) points sold to its co-branded credit
card partner.
Passenger ticket sales earning points. Passenger ticket sales earning points provide customers with (1) points earned and
(2) air transportation. The Company values each performance obligation on a stand-alone basis and allocates the consideration
to each performance obligation based on their relative fair value. To value the point credits earned, the Company considers the
quantitative value a passenger receives by redeeming points for a ticket rather than paying cash, which is referred to as
equivalent ticket value ("ETV").
The Company defers revenue for the points when earned and recognizes loyalty travel awards in passenger revenue as
the points are redeemed and services are provided. The Company records the air transportation portion of the passenger ticket
sales in air traffic liability and recognizes passenger revenue when transportation is provided or if the ticket goes unused, at the
date of scheduled travel.
Sale of points. Customers may 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 contract to sell points under this agreement has multiple
performance obligations, as discussed below.
The Company's co-branded credit card agreement provides for joint marketing where cardholders earn points for making
purchases using co-branded cards. During 2023, the Company extended its agreement with the administrator of the Free Spirit
affinity credit card program through December 31, 2028. The Company accounts for this agreement consistently with the
accounting method that allocates the consideration received to the individual products and services delivered. The value is
allocated based on the relative stand-alone selling prices of those products and services, which generally consists of (i) points to
be awarded, (ii) airline benefits, (iii) licensing of brand and access to member lists and (iv) advertising and marketing efforts.
The Company determined the estimate of the stand-alone selling prices by considering discounted cash flow analysis using
multiple inputs and assumptions, including: (1) the expected number of points awarded and number of points redeemed, (2) the
estimated stand-alone selling price of the award travel obligation and airline benefits, (3) licensing of brand access to member
lists and (4) the cost of advertising and marketing efforts undertaken by the Company.
The Company defers the amount for award travel obligation as part of loyalty deferred revenue. These amounts that are
expected to be redeemed during the following twelve months are recorded within ATL on the consolidated balance sheet and
the portion that is not expected to be redeemed during the following twelve months is recorded within long-term liabilities on
the consolidated balance sheet. In addition, the Company recognizes loyalty travel awards in passenger revenue as the points
are used for travel. Revenue allocated to advertising and the remaining performance obligations, primarily marketing
components, is recorded in other revenue over time as points are delivered. Total unrecognized revenue from future Free Spirit
Program was $104.6 million and $81.3 million at December 31, 2023 and 2022, respectively. The current portion of this
balance is recorded within air traffic liability and the long-term portion of this balance is recorded within deferred gains and
other long-term liabilities in the accompanying consolidated balance sheets.
The following table illustrates total cash proceeds received from the sale of points and the portion of such proceeds
recognized in non-ticket revenue immediately as marketing component:
Year Ended
December 31, 2023
December 31, 2022
December 31, 2021
Consideration received
from credit card loyalty
programs
Portion of proceeds
recognized immediately
as marketing component
$
(in thousands)
93,147 $
80,970
48,035
48,071
40,987
23,681
Points breakage. For points that the Company estimates are not likely to be redeemed ("breakage"), the Company
recognizes the associated value proportionally during the period in which the remaining points are redeemed. Management uses
statistical models to estimate breakage based on historical redemption patterns. A change in assumptions as to the period over
which points are expected to be redeemed, the actual redemption activity for points or the estimated fair value of points
expected to be redeemed could have an impact on revenues in the year in which the change occurs and in future years.
82
Notes to Consolidated Financial Statements—(Continued)
Current activity of loyalty program. Points are combined in one homogeneous pool and are not separately identifiable.
As such, revenue is composed of points that were part of the loyalty deferred revenue balance at the beginning of the period as
well as points that were issued during the period.
Airframe and Engine Maintenance
The Company accounts for heavy maintenance and major overhaul under the deferral method whereby the cost of heavy
maintenance and major overhaul is deferred and amortized until the earlier of the end of the useful life of the related asset, the
end of the remaining lease term or the next scheduled heavy maintenance event.
Amortization of heavy maintenance and major overhaul costs charged to depreciation and amortization expense was
$79.8 million, $96.7 million and $91.9 million for the years ended 2023, 2022 and 2021, respectively. During the years ended
2023, 2022 and 2021, the Company deferred $202.9 million, $149.3 million and $74.1 million, respectively, of costs for heavy
maintenance. As of December 31, 2023 and 2022, the Company had a deferred heavy maintenance balance of $529.8 million
and $349.0 million, and accumulated heavy maintenance amortization of $216.2 million and $158.6 million, respectively.
The Company outsources certain routine, non-heavy maintenance functions under contracts that require payment on a
utilization basis, primarily based on flight hours. Costs incurred for maintenance and repair under flight hour maintenance
contracts, where labor and materials price risks have been transferred to the service provider, are expensed based on contractual
payment terms. All other costs for routine maintenance of the airframes and engines are charged to expense as performed.
The table below summarizes the components of the Company’s maintenance cost:
Utilization-based maintenance expense
Non-utilization-based maintenance expense
Total maintenance, materials and repairs
Leased Aircraft Return Costs
Year Ended December 31,
2023
2022
2021
(in thousands)
$ 117,458 $ 97,930 $ 81,591
105,881
89,890
77,911
$ 223,339 $ 187,820 $ 159,502
The Company's aircraft lease agreements often contain provisions that require the Company to return aircraft
airframes, engines and other aircraft components to the lessor in a certain condition or pay an amount to the lessor based on the
airframe and engine's actual return condition. Lease return costs include all costs that would be incurred at the return of the
aircraft, including costs incurred to repair the airframe and engines to the required condition as stipulated by the lease. Lease
return costs are recognized beginning when it is probable that such costs will be incurred and they can be estimated.
When determining the probability to accrue lease return costs, there are various estimated cost and factors which need
to be considered such as the contractual terms of the lease agreement, current condition of the aircraft, the age of the aircraft at
lease expiration, projected number of hours run on the engine at the time of return, and the number of projected cycles run on
the airframe at the time of return, among others. Management assesses the need to accrue lease return costs periodically
throughout the year or whenever facts and circumstances warrant an assessment. Lease return costs will generally be estimable
closer to the end of the lease term but may be estimable earlier in the lease term depending on the contractual terms of the lease
agreement and the timing of maintenance events for a particular aircraft.
Aircraft Fuel
Aircraft fuel expense includes jet fuel and associated into-plane costs, taxes, and oil, and realized and unrealized gains
and losses associated with fuel derivative contracts, if any.
Advertising
The Company expenses advertising and the production costs of advertising as incurred. Marketing and advertising
expenses of $9.0 million, $9.2 million and $7.1 million for the years ended 2023, 2022 and 2021, respectively, were recorded
within distribution expense in the consolidated statements of operations.
Income Taxes
The Company accounts for income taxes using the asset and liability method. The Company records a valuation
allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some
83
Notes to Consolidated Financial Statements—(Continued)
portion or all of the deferred tax assets will be not realized. As of December 31, 2023 and 2022, the Company had a valuation
allowance of $17.7 million and $10.9 million, respectively, recorded within deferred income taxes on the Company's
consolidated balance sheets. For additional information, refer to Note 16, Income Taxes.
Stock-Based Compensation
The Company recognizes cost of employee services received in exchange for awards of equity instruments based on the
fair value of each instrument at the date of grant. For the majority of awards, compensation expense is recognized on a straight-
line basis over the period during which an employee is required to provide service in exchange for an award. Certain awards
have performance conditions that must be achieved prior to vesting and are expensed based on the expected achievement at
each reporting period. The Company has issued restricted stock awards, performance share awards, market share awards and
performance and market share awards. Restricted stock awards are valued at the fair value of the shares on the date of grant.
The fair value of performance share awards based on a market condition and the market share awards are estimated through the
use of a Monte Carlo simulation model. The fair value of performance share awards based on a performance condition is based
on the fair value of the shares on the date of grant. The performance share awards based on a performance condition are
evaluated at each report date and adjustments are made to stock-based compensation expense based on the number of shares
deemed probable of issuance upon vesting. The fair value of the market and performance share awards are estimated through
the use of a Monte Carlo simulation model and adjusted based on the number of shares deemed probable of issuance upon
vesting. For additional information, refer to Note 11, Stock-Based Compensation.
Payroll Support Program
During 2020 and 2021, in order to assist the Company to pay for salaries, wages and benefits for its employees, the
Company entered into three separate Payroll Support Program Agreements under the CARES Act (“PSP1”), as extended by the
Consolidated Appropriations Act of 2021 (“PSP2”) and the American Rescue Plan Act (“PSP3”) with the Treasury. The
agreements provided the Company with grants (refer to Note 4, Special Charges and Credits for additional information),
unsecured term loans (refer to Note 13, Debt and Other Obligations for additional information) and warrants (refer to Note 10,
Equity for additional information). The funds provided were used exclusively to pay for salaries, wages and benefits for the
Company's employees. As of December 31, 2023, the Company is in compliance with the terms of the PSP1, PSP2 and PSP3.
Concentrations of Risk
The Company’s business may be adversely affected by increases in the price of aircraft fuel, the volatility of the price of
aircraft fuel, or both. Aircraft fuel, one of the Company’s largest expenditures, represented approximately 31%, 34% and 28%
of total operating expenses in 2023, 2022 and 2021, respectively.
The Company’s operations are largely concentrated in the southeast United States with Fort Lauderdale being the highest
volume fueling point in the system. Gulf Coast Jet indexed fuel is the basis for a substantial majority of the Company’s fuel
consumption. Any disruption to the oil production or refinery capacity in the Gulf Coast, as a result of weather or any other
disaster, or disruptions in supply of jet fuel, dramatic escalations in the costs of jet fuel and/or the failure of fuel providers to
perform under fuel arrangements for other reasons could have a material adverse effect on the Company’s financial condition
and results of operations.
The Company’s operations will continue to be vulnerable to weather conditions (including hurricane season or snow and
severe winter weather), which could disrupt service or create air traffic control problems. These events may result in decreased
revenue and/or increased costs.
The Company relies on a limited number of vendors for the delivery of additional aircraft and engines - currently Airbus
A320-family, single-aisle aircraft, powered by engines manufactured by IAE and Pratt & Whitney. Due to the relatively small
size of the Company's fleet and high utilization rate, the unavailability of aircraft and engines, as well as the reduced capacity,
resulting from delivery delays or performance issues from these vendors, could have a material adverse effect on the
Company’s business, results of operations and financial condition. Refer to Note 3, Current Developments, for additional
information on the Pratt & Whitney engine performance issues.
As of December 31, 2023, the Company had six union-represented employee groups that together represented
approximately 85% of all employees. The Company's aircraft maintenance technicians are represented by AMFA. The related
collective bargaining agreement is currently under negotiation. A strike or other significant labor dispute with the Company’s
unionized employees is likely to adversely affect the Company’s ability to conduct business. Additional disclosures are
included in Note 17, Commitments and Contingencies.
84
Notes to Consolidated Financial Statements—(Continued)
2.
Recent Accounting Developments
Recently Issued Accounting Pronouncements Not Yet Adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements, to clarify or improve disclosure and
presentation requirements of a variety of topics and align the requirements in the FASB accounting standard codification (ASC)
with the SEC's regulations. The amendments in this ASU 2023-06 will be effective on the date the related disclosures are
removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the
applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. 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 (“ASU 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
basis. Early adoption is permitted. The Company is currently evaluating the impact of this new standard.
3. Current Developments
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
will merge with and into Spirit, with Spirit continuing as the surviving entity (the “Merger”). As a result of the Merger, each
outstanding share of Spirit's common stock (except for dissenting shares, treasury stock, and shares of Spirit's common stock
owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be converted into the right to receive
an amount in cash per share, without interest, equal to (such amount, the “Merger Consideration”) (i) $33.50 minus (ii) (A)
$2.50 (the “Approval Prepayment Amount”), paid on October 26, 2022 following the adoption by Spirit stockholders of the
Merger Agreement on October 19, 2022 and (B) an additional monthly per share prepayment amount calculated as the product
of $0.10 and the number of additional prepayments paid (or, in the event the Closing occurs after the record date of, but before
the payment date of any such additional prepayment, to the extent payable after the Closing), not to exceed $1.15 per share of
Spirit common stock, by JetBlue to Spirit stockholders in accordance with the Merger Agreement (each such payment is
referred to as an “Additional Prepayment” and such $0.10 amount is referred to as the “Additional Prepayment Amount”). If an
aggregate of $1.15 of Additional Prepayment Amounts has been paid out before consummation or termination of the Merger,
Spirit stockholders will thereafter continue to receive monthly Additional Prepayments, at the same $0.10 per month rate, until
the transaction closes or the Merger Agreement is terminated. The Merger Agreement becomes unilaterally terminable by either
JetBlue or Spirit after July 24, 2024.
In accordance with the terms of the Merger Agreement, JetBlue is required to pay or cause to be paid the Approval
Prepayment Amount to Spirit stockholders as of the record date established by Spirit for the special meeting to approve the
Merger Agreement within five business days following such Spirit stockholder approval. Thereafter, on or prior to the last
business day of each month beginning after December 31, 2022 until the earlier of the Closing or termination of the Merger
Agreement, JetBlue will also pay or cause to be paid the Additional Prepayment Amount to Spirit stockholders as of a record
date not more than five business days prior to the last business day of such month. Payments made from JetBlue to Spirit
stockholders do not impact the Company's results of operations or cash flows.
On October 19, 2022, Spirit’s stockholders approved the Merger Agreement at a special meeting of stockholders. The
record date for both the Company’s special meeting and the Approval Prepayment was September 12, 2022. In accordance with
the terms of the Merger Agreement, on October 26, 2022, JetBlue paid the Spirit stockholders the Approval Prepayment
Amount of $2.50 per share. Additionally, beginning January 2023, JetBlue paid on a monthly basis the Additional Prepayments
of $0.10 per share of common stock to all Spirit stockholders as of each record date, per the Merger Agreement.
Due to the payment of the Approval Prepayment 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. As of December 31, 2023, the conversion rates of
the convertible notes due 2025 and 2026 were 94.9262 and 24.6649 shares of voting common stock per $1,000 principal
85
Notes to Consolidated Financial Statements—(Continued)
amount of convertible notes, respectively. In addition, as of December 31, 2023, the exercise prices of the PSP1, PSP2 and
PSP3 warrants were $11.663, $20.229 and $30.196, respectively, and the number of warrant shares issuable upon the exercise
of the PSP1, PSP2 and PSP3 warrants were adjusted to 628,725.19, 166,292.37 and 97,219.73, respectively.
Completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among other
things: (1) approval of the transactions by Spirit’s stockholders, which was received on October 19, 2022; (2) receipt of
applicable regulatory approvals, including approvals from the U.S. Federal Communications Commission, the U.S. Federal
Aviation Administration and the U.S. Department of Transportation ("DOT") and the expiration or early termination of the
statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other competition
laws, and other required regulatory approvals; (3) the absence of any law or order prohibiting the consummation of the
transactions; and (4) the absence of any material adverse effect (as defined in the Merger Agreement) on Spirit.
On March 7, 2023, the U.S. Department of Justice (“DOJ”) filed suit to block the Merger and a trial was held in late
2023. On January 16, 2024, the United States District Court for the District of Massachusetts (the “District Court”) granted a
permanent injunction against the Merger (the "Injunction"). On January 19, 2024, Spirit and JetBlue filed a notice of appeal to
reverse the District Court's decision and allow Spirit and JetBlue to complete the Merger. On January 25, 2024, JetBlue made a
public filing stating that certain closing conditions required by the Merger Agreement may not be satisfied prior to the outside
dates set forth in the Merger Agreement and, accordingly, the Merger Agreement may be terminable on and after January 28,
2024. The Company does not believe there is a basis for terminating the Merger Agreement, and will continue to abide by all of
its obligations under the Merger Agreement. On January 29, 2024, Spirit and JetBlue filed a request with the U.S. Court of
Appeals for the First Circuit (the "Court of Appeals") seeking an expedited schedule for their appeal. On February 2, 2024, the
Court of Appeals granted our motion, stating it would hear arguments in June 2024.
In addition, Spirit has agreed, among other things, that neither it nor any of its directors, officers, employees and
representatives will (1) solicit alternative transactions, (2) participate in any discussions or negotiations relating to alternative
transactions, (3) furnish any non-public information in connection with alternative transactions or (4) enter into any agreement
relating to alternative transactions, except under limited circumstances described in the Merger Agreement. However, in certain
circumstances, Spirit may terminate the Merger Agreement to enter into a definitive agreement for a Superior Proposal (as
defined in the Merger Agreement). In addition, Spirit, JetBlue and Merger Sub each make certain customary representations,
warranties and covenants, as applicable, in the Merger Agreement.
The Merger Agreement contains certain termination rights for Spirit and JetBlue, including, without limitation, a right
for either party to terminate if the Merger is not consummated on or before July 28, 2023 (the "Outside Date"), subject to
certain automatic extensions up to July 24, 2024 if needed to obtain regulatory approvals. Since all regulatory approvals
required to consummate the Merger were not obtained as of July 28, 2023 and January 28, 2024, the current Outside Date has
been automatically extended to July 24, 2024. Upon the termination of the Merger Agreement under specified circumstances,
Spirit will be required to pay JetBlue a termination fee of $94.2 million. Upon the termination of the Merger Agreement by
JetBlue because of a material uncured breach by Spirit of the Merger Agreement, Spirit will be required to pay JetBlue an
amount equal to the sum of all amounts paid by JetBlue to the Spirit stockholders. Upon the termination of the Merger
Agreement for failure to obtain antitrust regulatory clearance, JetBlue will be required to pay (i) to Spirit, $70.0 million, and (ii)
to the Spirit stockholders, the excess of (A) $400.0 million minus (B) the sum of the Approval Prepayment Amount and all
Additional Prepayment Amounts previously paid by JetBlue to the Spirit stockholders.
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 PW1100G-
JM ("GTF") fleet, which powers the Company's A320neo family of aircraft.
In September 2023, Pratt & Whitney notified the Company that all the GTF neo engines in its fleet, including the engines
slotted for future aircraft deliveries, for a yet to be determined period, are subject to the inspection and possible replacement, of
the powdered metal high-pressure turbine and compressor discs. In addition, Pratt & Whitney issued a special instruction ("SI"),
requiring accelerated engine removals and inspections covering the initial tranche of operational engines, no later than
September 15, 2023. As of December 31, 2023, in accordance with the SI issued by Pratt & Whitney, the Company has
removed five engines from service, three of which are currently awaiting induction for inspection. For the remaining engines,
Pratt & Whitney has provided an initial analysis on an inspection and removal schedule for these engines.
In addition, to the 5 engines removed from service, the Company had 12 neo aircraft grounded as of December 31, 2023
for reliability, durability, and inspection requirements combined. The Company currently estimates the majority of the affected
86
Notes to Consolidated Financial Statements—(Continued)
engines will require removal and inspection in 2024, but continuing through 2026, based on service bulletins ("SB") issued by
Pratt & Whitney and related airworthiness directives issued by the FAA.
The temporary removal of engines from service is expected 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 initially scheduled
removal and inspection of these impacted engines, however, the Company continues to assess the impact on its future capacity
plans. Pratt & Whitney stated that they are focused on addressing the challenges arising from the powdered metal
manufacturing issue and will proactively take steps to support and mitigate the operational impact to its customers. The
Company has begun discussions with Pratt & Whitney regarding compensation for the loss of utilization; however, the amount,
timing, or structure of the compensation that will be agreed upon is not yet known.
4. Special Charges and Credits
During the twelve months ended December 31, 2023, the Company recorded $50.0 million within special charges
(credits) on the Company's 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, as part of the Merger Agreement with JetBlue, the Company
implemented an employee retention award program (the "JetBlue Retention Award Program") during the third quarter of 2022.
The target retention award is payable to the Company's employees upon the successful close of the Merger. In the event the
Merger fails or is abandoned, 50% of the target retention award will be paid to the Company's employees. This amount will be
paid to the Company's employees in two installments. The first installment was paid in July 2023 and the second installment is
payable in July 2024 or upon termination or abandonment of the Merger, whichever comes first. During the twelve months
ended December 31, 2023, the Company recorded $19.5 million within special charges (credits) on the Company's consolidated
statements of operations, related to the JetBlue Retention Award Program.
During the twelve months ended December 31, 2022, the Company recorded $333.7 million within special charges
(credits) on the Company's consolidated statements of operations in impairment charges related to the planned acceleration of
the retirement of 29 of its A319 aircraft. For additional information, refer to Note 1, Summary of Significant Accounting
Policies.
In addition, during the twelve months ended December 31, 2022, the Company recorded $47.2 million within special
charges (credits) on the Company's consolidated statements of operations, in legal, advisory and other fees related to the former
merger agreement with Frontier Airlines (the "Former Frontier Merger Agreement"), JetBlue's unsolicited proposal, received in
March 2022, to acquire all of the Company's outstanding shares in an all-cash transaction and the JetBlue Merger Agreement
entered into on July 28, 2022.
As part of the Former Frontier Merger Agreement, the Company implemented an employee retention award program (the
"Frontier Retention Award Program"). On July 27, 2022, the Frontier Merger Agreement was mutually terminated; therefore,
50% of the target retention bonus was awarded to the Company's employees during the third quarter of 2022. In addition, as
part of the JetBlue Merger Agreement, the Company implemented the JetBlue Retention Award Program during the third
quarter of 2022. During the twelve months ended December 31, 2022, the Company recorded $39.3 million within special
charges (credits) on the Company's consolidated statements of operations, related to the Company's retention award programs.
During the twelve months ended December 31, 2021, the Company recorded a $342.2 million credit, net of the related
costs, within special charges (credits) on the Company’s consolidated statements of operations related to the grant component
of the PSP2 and PSP3 agreements with the Treasury.
In addition, during the twelve months ended December 31, 2021, the Company recorded a credit of $37.5 million related to
the CARES Act Employee Retention credit within special charges (credits) on the Company’s consolidated statements of
operation. These special credits were partially offset by $2.0 million in special charges recorded during the twelve months
ended December 31, 2021 related to salaries, wages and benefits paid to rehired employees, previously terminated with the
Company's involuntary employee separation program, in compliance with the restrictions of PSP2 and PSP3.
87
5. Loss on Disposal of Assets
During the twelve months ended December 31, 2023, the Company recorded $34.0 million in loss on disposal of assets in
the consolidated statement of operations. During December 2023, the Company completed 20 sale-leaseback transactions (on
aircraft previously owned by the Company) of which, 6 resulted in operating leases and 14 would have been deemed finance
leases resulting in failed sale-leaseback transactions. As a result of the 6 sale-leaseback transactions that resulted in operating
leases, the Company recorded a related loss of $32.1 million within loss on disposal of assets. Refer to Note 14, Leases for
additional information on the 20 sale-leaseback transactions. Loss on disposal of assets for the twelve months ended
December 31, 2023 also included a $3.0 million net gain recorded as a result of 10 aircraft sale-leaseback transactions related to
new aircraft deliveries completed during the twelve months ended December 31, 2023.
In addition, during the fourth quarter 2022, the Company made the decision to accelerate the retirement of 29 of its A319
aircraft and, in January 2023, the Company executed a sale agreement to sell these aircraft over the next two years. During the
twelve months ended December 31, 2023, the Company completed the sale of 12 A319 airframes and 20 A319 engines and
recorded a related net loss of $1.6 million. The remaining A319 aircraft and engines subject to the sale agreement remain in
service and will continue to operate until immediately before the sale of the aircraft. In addition, the Company recorded a
$3.3 million loss primarily related to the disposal of obsolete assets.
During the twelve months ended December 31, 2022, the Company recorded $46.6 million in loss on disposal of assets in
the consolidated statement of operations. This loss on disposal of assets mainly consisted of $38.5 million related to the loss on
16 aircraft sale-leaseback transactions completed during 2022 and $6.6 million related to the impairment of 1 spare engine
during the first quarter of 2022 which was damaged beyond economic repair.
During the twelve months ended December 31, 2021, the Company recorded $3.3 million in loss on disposal of assets in
the consolidated statement of operations. This loss on disposal of assets mainly consisted of $2.3 million related to the loss on
five aircraft sale-leaseback transactions completed during 2021 and $1.1 million related to the loss on the sale of auxiliary
power units ("APUs").
6. Letters of Credit
As of December 31, 2023, the Company had $85.0 million in standby letters of credit secured by $75.0 million of
restricted cash, of which $55.9 million were issued letters of credit. As of December 31, 2022, the Company had a $85.0
million standby letters of credit secured by $75.0 million restricted cash, of which $31.0 million were issued letters of credit.
7. Credit Card Processing Arrangements
The Company has agreements with organizations that process credit card transactions arising from the purchase of air
travel, baggage charges and other ancillary services by customers. As it is standard in the airline industry, the Company's
contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other
collateral, when future air travel and other future services are purchased via credit card transactions. The required holdback is
the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the
Company fails to fulfill its flight obligations.
The Company's credit card processors do not require the Company to maintain cash collateral provided that the Company
satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right
to place a holdback, resulting in a commensurate reduction of unrestricted cash. As of December 31, 2023 and 2022, the
Company was in compliance with such liquidity and other financial covenants in its credit card processing agreements, and the
processors were holding back no remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket
sales and Spirit Saver$ Club® memberships as of December 31, 2023 and 2022, was $408.3 million and $468.5 million,
respectively.
88
Notes to Financial Statements—(Continued)
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 twelve months or less. These securities are stated at fair
value within current assets on the Company's consolidated balance sheet. Realized gains and losses on sales of investments, if
any, are reflected in non-operating other (income) expense in the consolidated statements of operations. Unrealized gains and
losses on investment securities are reflected as a component of accumulated other comprehensive income, ("AOCI").
As of December 31, 2023 and December 31, 2022, the Company had $112.5 million and $107.1 million, respectively, in
short-term available-for-sale investment securities. During the twelve months ended December 31, 2023, 2022 and 2021, these
investments earned interest income at a weighted-average fixed rate of approximately 4.5%, 1.0% and 0.1% respectively. For
the twelve months ended December 31, 2023 and December 31, 2022, an unrealized gain of $298 thousand and an unrealized
loss of $224 thousand, net of deferred taxes, respectively, were recorded within AOCI related to these investment securities. For
the twelve months ended December 31, 2023 and December 31, 2022, the Company did not recognize any realized gains or
losses related to these securities, as the Company did not transact any sales of these securities during this period. As of
December 31, 2023 and December 31, 2022, $32 thousand and $267 thousand, net of tax, respectively, remained in AOCI,
related to these instruments.
9. Accrued Liabilities
Accrued liabilities included in other current liabilities as of December 31, 2023 and 2022 consist of the following:
Salaries, wages and benefits
Airport obligations
Federal excise and other passenger taxes and fees payable
Fuel
Aircraft maintenance
Aircraft and facility lease obligations
Interest payable
Other
Other current liabilities
As of December 31,
2023
2022
(in thousands)
$
$
187,723 $
125,278
104,447
64,149
58,800
36,115
24,732
104,054
705,298 $
154,881
84,928
96,424
76,979
59,243
22,068
32,613
29,194
556,330
10. Equity
The Company’s amended and restated certificate of incorporation dated June 1, 2011, authorizes the Company to issue up
to 240,000,000 shares of common stock, $0.0001 par value per share, 50,000,000 shares of non-voting common stock, $0.0001
par value per share and 10,000,000 shares of preferred stock, $0.0001 par value per share. All of the Company’s issued and
outstanding shares of common stock and preferred stock, if any, are duly authorized, validly issued, fully paid and non-
assessable. The Company’s shares of common stock and non-voting common stock are not redeemable and do not have
preemptive rights. As of December 31, 2023 and 2022, there were no shares of preferred stock or non-voting common stock
outstanding.
Common Stock
Dividend Rights. Holders of the Company’s common stock are entitled to receive dividends, if any, as may be declared
from time to time by the Company’s board of directors out of legally available funds ratably with shares of the Company’s non-
voting common stock, subject to preferences that may be applicable to any then outstanding preferred stock and limitations
under Delaware law.
Voting Rights. Each holder of the Company’s common stock is entitled to one vote for each share on all matters submitted
to a vote of the stockholders, including the election of directors. The Company’s stockholders do not have cumulative voting
89
Notes to Financial Statements—(Continued)
rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors
properly up for election at any given stockholders’ meeting.
Liquidation. In the event of the Company’s liquidation, dissolution or winding up, holders of the Company's common
stock will be entitled to share ratably with shares of the Company’s non-voting common stock in the net assets legally available
for distribution to stockholders after the payment of all of the Company’s debts and other liabilities and the satisfaction of any
liquidation preference granted to the holders of any then outstanding shares of preferred stock.
Rights and Preferences. Holders of the Company’s common stock have no preemptive, conversion, subscription or other
rights and there are no redemption or sinking fund provisions applicable to the Company’s common stock. The rights,
preferences and privileges of the holders of the Company’s common stock are subject to and may be adversely affected by, the
rights of the holders of shares of any series of the Company’s preferred stock that the Company may designate in the future.
Treasury Stock
Treasury stock is comprised of repurchases made from employees who received restricted stock awards or performance
share awards. During the year ended December 31, 2023, 2022 and 2021, the Company repurchased 142 thousand, 107
thousand and 54 thousand shares, respectively, for $2.6 million, $2.4 million and $1.5 million, respectively. During the year
ended December 31, 2023, 2022 and 2021, the Company did not retire any treasury shares.
Warrants
In connection with the Company's participation in the PSP1 agreement with the Treasury, during 2020, the Company
issued to the Treasury warrants pursuant to a warrant agreement to purchase up to 520,797 shares of the Company's common
stock at a strike price of $14.08 per share (the closing price for the shares of the Company's common stock on April 9, 2020). In
connection with the Company's participation in the PSP2 and PSP3 agreements with the Treasury, during 2021, the Company
issued to the Treasury warrants pursuant to a warrant agreement to purchase up to 137,753 and 80,539 shares of the Company's
common stock at a strike price of $24.42 (the closing price for the shares of the Company's common stock on December 24,
2020) and $36.45 (the closing price for the shares of the Company's common stock on March 10, 2021) per share.
The warrants are transferable and have no voting rights. The warrants expire in five years from the date of issuance and at
the Company's option, may be settled on a "net cash" or "net shares" basis. The 739,089 warrants issued in connection with the
PSP1, PSP2 and PSP3 agreements represent less than 1% of the outstanding shares of the Company's common stock as of
December 31, 2023.
The Company concluded that the PSP1, PSP2 and PSP3 warrant agreement are a derivative contract classified within
equity, at fair value upon issuance, within the Company’s consolidated balance sheet. Equity-classified contracts are initially
measured at fair value and subsequent changes in fair value are not recognized as long as the contract continues to be classified
in equity. As of December 31, 2023, the Company had recorded $4.3 million, net of issuance costs, in APIC related to the fair
value of the warrants issued.
Due to the payment of the Approval Prepayment 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 exercise
prices and warrant shares of the PSP1, PSP2 and PSP3 warrants outstanding. As of December 31, 2023, the exercise prices of
the PSP1, PSP2 and PSP3 warrants were $11.663, $20.229 and $30.196, respectively and the number of warrant shares issuable
upon the exercise of the PSP1, PSP2 and PSP3 warrants were adjusted to 628,725.19, 166,292.37 and 97,219.73, respectively.
11.
Stock-Based Compensation
The Company has stock plans under which directors, officers, key employees and consultants of the Company may be
granted restricted stock, stock options, performance share awards and other equity-based instruments as a means of promoting
the Company’s long-term growth and profitability. The plans are intended to encourage participants to contribute to, and
participate in the success of the Company.
On December 16, 2014, the Company's Board of Directors approved the 2015 Incentive Award Plan, or 2015 Plan, which
was subsequently approved by the Company's stockholders on June 16, 2015. On March 10, 2021, the Company's Board of
Directors approved an amendment of the Company's 2015 Incentive Award Plan to increase the number of authorized shares of
common stock available for issuance by 3.2 million shares. The amendment was subsequently approved by the Company's
stockholders on May 20, 2021. As of December 31, 2023 and December 31, 2022, 3,123,563 and 3,712,123 shares of the
Company’s common stock, respectively, remained available for future issuance under the 2015 Plan, as amended.
90
Notes to Financial Statements—(Continued)
Stock-based compensation cost amounted to $12.0 million, $11.5 million and $12.5 million for 2023, 2022 and 2021,
respectively. During 2023, 2022 and 2021 there was a $2.4 million, $2.4 million and $1.2 million tax benefit recognized in
income related to stock-based compensation.
Restricted Stock and Restricted Stock Units
Restricted stock and restricted stock unit awards are valued at the fair value of the shares on the date of grant. Generally,
granted shares and units vest over a two to four year graded vesting period. Each restricted stock unit represents the right to
receive one share of common stock upon vesting of such restricted stock unit. Vesting of restricted stock units is based on time-
based service conditions. In order to vest, the participant must still be employed by the Company, with certain contractual
exclusions, at each vesting event. Generally, within 30 days after vesting, the shares underlying the award will be issued to the
participant. In the event a successor corporation in a change in control situation fails to assume or substitute for the restricted
stock units, the restricted stock units will automatically vest in full as of immediately prior to the consummation of such change
in control. In the event of death or permanent disability of a participant, the restricted stock units will automatically vest in full.
Compensation expense is recognized on a straight-line basis over the requisite service period.
A summary of the status of the Company’s restricted stock shares (restricted stock awards and restricted stock unit
awards) as of December 31, 2023 and changes during the year ended December 31, 2023 is presented below:
Outstanding at December 31, 2022
Granted
Vested
Forfeited
Outstanding at December 31, 2023
Number of
Shares
Weighted-
Average
Grant Date Fair
Value ($)
624,452
500,648
(372,788)
(46,424)
705,888
24.76
19.58
25.53
21.04
20.93
There were 500,648 and 404,062 restricted stock shares granted during the years ended December 31, 2023 and
December 31, 2022, respectively. As of December 31, 2023 and December 31, 2022, there was $8.4 million and $8.6 million,
respectively, of total unrecognized compensation cost related to nonvested restricted stock to be recognized over 1.8 years and
1.7 years, respectively.
The weighted-average fair value of restricted stock granted during the years ended December 31, 2023, 2022 and 2021
was $19.58, $23.48 and $25.17, respectively. The total fair value of restricted stock shares vested during the years ended
December 31, 2023, 2022 and 2021 was $7.2 million, $7.5 million and $4.6 million, respectively.
Performance and Market Share Awards
The Company grants certain executives performance and market stock units that vest based on either market,
performance or market and performance conditions as part of a long-term incentive plan. The number of shares of common
stock underlying each award is determined at the end of the performance period. In order to vest, the executive must still be
employed by the Company, with certain contractual exclusions, at the end of the performance period.
Stock-based compensation cost related to these awards amounted to $3.0 million, $1.5 million and $3.5 million for 2023,
2022 and 2021, respectively. As of December 31, 2023 and 2022, there was $3.9 million and $3.0 million, respectively, of total
unrecognized compensation cost related to nonvested performance and market share awards expected to be recognized over 1.8
years and 1.6 years, respectively.
91
Notes to Financial Statements—(Continued)
12. Earnings (Loss) per Share
The following table sets forth the computation of basic and diluted earnings (loss) per common share:
Numerator:
Net income (loss)
Denominator:
Year Ended December 31,
2023
2022
2021
(in thousands, except per-share amounts)
$ (447,464) $ (554,150) $ (472,569)
Weighted-average shares outstanding, basic
Effect of dilutive stock awards
109,152
108,751
105,000
—
—
—
Adjusted weighted-average shares outstanding, diluted
109,152
108,751
105,000
Earnings (loss) per share:
Basic earnings (loss) per common share
Diluted earnings (loss) per common share
$
$
(4.10) $
(4.10) $
(5.10) $
(5.10) $
(4.50)
(4.50)
Anti-dilutive common stock equivalents excluded from the diluted earnings (loss) per share calculations are not
material.
92
Notes to Financial Statements—(Continued)
13.
Debt and Other Obligations
Long-term debt
As of December 31, 2023, the Company had outstanding public and non-public debt instruments.
Revolving credit facility due in 2025
As of both December 31, 2023 and December 31, 2022, the Company had $300.0 million undrawn and available under its
revolving credit facility. Any amounts drawn on this facility are included in long-term debt and finance leases, less current
maturities, on the Company's consolidated balance sheets. During the fourth quarter 2023, the Company amended the agreement
to extend the final maturity of the facility to September 30, 2025 and adjust other terms.
The Company may pledge the following types of assets as collateral to secure its obligations under the revolving credit
facility: (i) certain take-off and landing rights of the Company at LaGuardia Airport, (ii) certain eligible aircraft spare parts and
ground support equipment, (iii) aircraft, spare engines and flight simulators, (iv) real property assets and (v) cash and cash
equivalents. The revolving credit facility bears variable interest based on SOFR, plus a 2.00% margin per annum, or another rate,
at the Company's election, based on certain market interest rates, plus a 1.00% margin per annum, in each case with a floor of
0%.
The 2025 revolving credit facility requires the Company to maintain (i) so long as any loans or letters of credit are
outstanding under the 2025 revolving credit facility, unrestricted cash, cash equivalents, short-term investment securities and
unused commitments available under all revolving credit facilities (including the 2025 revolving credit facility) aggregating not
less than $450.0 million, of which no more than $300.0 million may be derived from unused commitments under the 2025
revolving credit facility, (ii) a minimum ratio of the borrowing base of the collateral described above (determined as the sum of a
specified percentage of the appraised value of each type of such collateral) to outstanding obligations under the 2025 revolving
credit facility of not less than 1.0 to 1.0 (if the Company does not meet the minimum collateral coverage ratio, it must either
provide additional collateral to secure its obligations under the 2025 revolving credit facility or repay the loans under the 2025
revolving credit facility by an amount necessary to maintain compliance with the collateral coverage ratio), and (iii) the pledged
take-off and landing rights of the Company at LaGuardia Airport and a specified number of spare engines in the collateral
described above so long as any loans or letters of credit are outstanding under the 2025 revolving credit facility.
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").
93
Notes to Financial Statements—(Continued)
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 December 31, 2023, the notes may be converted by noteholders through March 31, 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. However,
based on the terms of Merger Agreement with JetBlue, upon conversion of any convertible notes due 2025 through the closing or
termination of the Merger Agreement with JetBlue, the conversion value, including the principal amount, will be paid all in
shares of the Company's common stock. The initial conversion rate was 78.4314 shares of voting common stock per $1,000
principal amount of convertible notes (equivalent to an initial conversion price of approximately $12.75 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. Due to the payment of the Approval Prepayment and Additional Prepayment Amounts paid by JetBlue to the Company's
stockholders, in accordance with the terms of the indenture, the Company has announced related adjustments to the conversion
rate of its convertible senior notes due 2025. As of December 31, 2023, the conversion rate was 94.9262 shares of voting
common stock per $1,000 principal amount of convertible notes (equivalent to a conversion price of approximately $10.53 per
share of common stock). Refer to Note 3, Current Developments for additional information on the Approval Prepayment and
Additional Prepayment Amounts.
During the first quarter of 2023, $0.3 million of the Company's convertible notes due 2025 were converted to 27,204 shares
of the Company's voting common stock. As of December 31, 2023, the Company had recorded $0.3 million, net of issuance
costs and common stock, in additional paid-in-capital on its consolidated balance sheets related to the conversion of these notes.
Since the notes are currently convertible in accordance with the terms of the indenture governing such notes, the Company had
$25.1 million recorded within current maturities of long-term debt and finance leases on its consolidated balance sheets as of
December 31, 2023 related to its convertible notes due 2025. As of December 31, 2023, the if-converted value exceeds the
principal amount of the convertible notes due 2025 by $14.2 million using the average stock price for the twelve months ended
December 31, 2023.
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 December 31, 2023, the notes did not qualify for conversion by
noteholders through March 31, 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. However, based on the
terms of the Merger Agreement with JetBlue, upon conversion of any convertible notes due 2026 through the closing or
termination of the Merger Agreement with JetBlue, the conversion value, including the principal amount, will be paid all in cash.
The conversion value will be determined over an observation period consisting of 40 trading days. The initial conversion rate
94
Notes to Financial Statements—(Continued)
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. Due to the payment of the Approval Prepayment and Additional
Prepayment Amounts paid by JetBlue to the Company's stockholders, in accordance with the terms of the indenture, the
Company has announced related adjustments to the conversion rate of its convertible senior notes due 2026. As of December 31,
2023, the conversion rate was 24.6649 shares of voting common stock per $1,000 principal amount of convertible notes
(equivalent to a conversion price of approximately $40.54 per share of common stock). Refer to Note 3, Current Developments
for additional information on the Approval Prepayment and Additional Prepayment Amounts.
The Merger Agreement with JetBlue includes settlement terms for any conversion of the convertible notes due 2026, as
described above, that cause 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 of $49.5 million 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 consolidated
balance sheets. The 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 notes are currently not convertible in accordance with the terms of the indenture governing such notes, the
Company had $472.6 million, net of the related unamortized debt discount of $27.4 million, recorded within long-term debt and
finance leases, less current maturities on the Company's consolidated balance sheets as of December 31, 2023 related to its
convertible notes due 2026. For additional information, refer to Note 18, Fair Value Measurements.
Adoption of ASU No. 2020-06
In August 2020, the FASB issued ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's
Own Equity." This standard simplifies and adds disclosure requirements for the accounting and measurement of convertible
instruments. It eliminates the treasury stock method for convertible instruments and requires application of the “if-converted”
method for certain agreements when computing earnings per share. In addition, the standard eliminates the beneficial conversion
and cash conversion accounting models that require separate accounting for embedded conversion features and the recognition of
a debt discount and related amortization to interest expense of those embedded features.
The Company elected to early adopt this standard effective January 1, 2021 using the modified retrospective approach
transition method. Therefore, the consolidated financial statements for the years ended December 31, 2023, 2022 and 2021 are
presented under the new standard.
In connection with the adoption of this standard, the Company recognized a cumulative effect adjustment, net of tax, of
$6.1 million to retained earnings on the Company's consolidated balance sheet as of January 1, 2021. This adjustment was
primarily driven by the derecognition of interest expense related to the accretion of the debt discount associated with the
embedded conversion option recorded in the prior period as required under the legacy guidance. In addition, the Company
reclassified $75.6 million, less related tax of $17.1 million and issuance costs of $2.9 million, from additional paid-in-capital
("APIC") to long-term debt and finance leases on the Company's consolidated balance sheet as of January 1, 2021. The
reclassification was recorded in order to combine the two legacy units of account into a single instrument classified as a liability
since bifurcation of the instrument into two units of account is no longer required under this standard.
95
Notes to Financial Statements—(Continued)
Long-term debt is comprised of the following:
As of
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
(in millions)
(weighted-average interest rates)
8.00% senior secured notes due in 2025
Fixed-rate term loans due through 2039 (1)
Unsecured term loans due through 2031
Fixed-rate class A 2015-1 EETC due through 2028
Fixed-rate class B 2015-1 EETC due through 2024
Fixed-rate class C 2015-1 EETC due through 2023
Fixed-rate class AA 2017-1 EETC due through 2030
Fixed-rate class A 2017-1 EETC due through 2030
Fixed-rate class B 2017-1 EETC due through 2026
Fixed-rate class C 2017-1 EETC due through 2023
Convertible notes due in 2025
Convertible notes due in 2026
Long-term debt
Less current maturities
Less unamortized discount, net
Total
$
$
1,110.0 $
1,093.3
136.3
256.6
40.0
—
172.2
57.4
48.2
—
25.1
500.0
3,439.1 $
315.3
69.0
1,110.0
1,094.7
136.3
278.6
48.0
63.8
186.3
62.1
51.7
85.5
25.4
500.0
3,642.4
346.4
95.8
$
3,054.8 $
3,200.2
8.00 %
5.83 %
1.00 %
4.10 %
4.45 %
4.93 %
3.38 %
3.65 %
3.80 %
5.11 %
4.75 %
1.00 %
8.00 %
3.52 %
1.00 %
4.10 %
4.45 %
4.93 %
3.38 %
3.65 %
3.80 %
5.11 %
4.75 %
1.00 %
(1) Includes obligations related to 15 aircraft recorded as failed sale-leaseback transactions. Refer to Note 14, Leases for additional information.
The Company's debt financings entered into solely to finance aircraft acquisition costs are collateralized by first priority
security interest in the individual aircraft being financed. During the year ended December 31, 2023 and 2022, the Company
made principal payments of $337.5 million and $193.0 million on its outstanding debt obligations, respectively.
Extinguishment of Debt
During the fourth quarter of 2023, the Company early extinguished $323.3 million of outstanding fixed-rate term loans
related to 16 aircraft. In connection with this debt extinguishment, the Company recorded a gain of $15.4 million within loss
(gain) on extinguishment of debt on its consolidated statement of operations for the twelve months ended December 31, 2023. In
addition, during December 2023, the Company completed 20 sale-leaseback transactions (including 16 previously owned aircraft
and 4 unencumbered aircraft) of which, 6 resulted in operating leases and 14 would have been deemed finance leases resulting in
failed sale-leaseback transactions. As a result of the 14 failed sale-leaseback transactions, the Company recorded the related debt
of $458.0 million recorded within current maturities of long-term debt and finance leases and long-term debt and finance leases,
less current maturities. Refer to Note 14, Leases for additional information on the 20 sale-leaseback transactions.
At December 31, 2023, long-term debt principal payments for the next five years and thereafter are as follows:
2024
2025
2026
2027
2028
2029 and beyond
Total debt principal payments
December 31, 2023
(in millions)
$
$
305.2
1,263.7
670.0
150.3
252.5
797.4
3,439.1
Interest Expense
Interest expense related to long-term debt and finance leases consists of the following:
96
Notes to Financial Statements—(Continued)
8.00% senior secured notes (1)
Fixed-rate term loans
Unsecured term loans
Class A 2015-1 EETC
Class B 2015-1 EETC
Class C 2015-1 EETC
Class AA 2017-1 EETC
Class A 2017-1 EETC
Class B 2017-1 EETC
Class C 2017-1 EETC
Convertible notes (2)
Revolving credit facilities
Finance leases
Commitment and other fees
Amortization of deferred financing costs
Total
Twelve Months Ended December 31,
2023
2022
2021
(in thousands)
$
$
93,010 $
37,213
1,363
10,962
1,954
777
5,990
2,159
1,881
522
(3,778)
—
30
1,655
15,453
169,191 $
47,954 $
41,446
1,363
11,874
2,312
3,424
6,464
2,330
2,016
4,367
(68)
—
57
2,162
14,204
139,905 $
51,897
42,765
1,168
12,781
2,669
3,988
6,938
2,501
2,189
4,367
6,997
1,733
93
2,243
13,282
155,611
(1) Includes $4.2 million, $1.4 million and $1.3 million of accretion and $88.8 million, $46.5 million and $50.6 million of interest expense
for the twelve months ended December 31, 2023, 2022, and 2021 respectively.
(2) Includes $14.3 million and $20.3 million of amortization of the discount for the convertible notes due 2026 as well as interest expense
for the convertible notes due 2025 and 2026, offset by $18.1 million and $20.3 million of favorable mark to market adjustments for the
convertible notes due 2026 for the twelve months ended December 31, 2023 and December 31, 2022. Includes $7.0 million of interest expense
for the convertible notes due 2025 and convertible notes due 2026 for the twelve months ended December 31, 2021.
As of both December 31, 2023 and 2022, the Company had a line of credit for $20.1 million, related to corporate credit
cards. Respectively, the Company had drawn $1.5 million and $1.8 million as of December 31, 2023 and 2022, which is
included in accounts payable.
As of December 31, 2023 and 2022, the Company had lines of credit with counterparties for derivatives, if any, and
physical fuel delivery in the amount of $25.0 million and $41.5 million, respectively. As of December 31, 2023, the Company
had not drawn on these lines of credit for physical fuel delivery. As of December 31, 2022 the Company had drawn $2.0 million
on these lines of credit for physical fuel delivery, which is included within other current liabilities in the Company's consolidated
balance sheets. The Company is required to post collateral for any excess above the lines of credit if the fuel derivatives, if any,
are in a net liability position and make periodic payments in order to maintain an adequate undrawn portion for physical fuel
delivery. As of December 31, 2023 and 2022, the Company did not have any outstanding fuel derivatives.
97
Notes to Financial Statements—(Continued)
14. 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 leases 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
consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 4 to 18 years for aircraft and up
to 99 years for other leased equipment and property.
As of December 31, 2023, the Company had a fleet consisting of 205 A320 family aircraft. As of December 31, 2023, the
Company had 117 aircraft financed under operating leases with lease term expirations between 2025 and 2041. In addition, the
Company owned 73 aircraft of which, as of December 31, 2023, 17 were unencumbered. The Company also had 15 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 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 consolidated balance sheets. As
of December 31, 2023, the Company also had 6 spare engines financed under operating leases with lease term expiration dates
ranging from 2024 to 2033 and owned 28, of which, as of December 31, 2023, 4 were unencumbered and 24 were pledged as
collateral under the Company's revolving credit facility maturing in 2025.
Total rent expense for the years ended 2023, 2022 and 2021 was $673.2 million, $537.9 million and $449.4 million,
respectively. Total rental expense for aircraft and engine operating leases for the years ended December 31, 2023, 2022 and
2021 was $381.2 million, $282.4 million and $246.6 million, respectively.
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.
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, lease return costs adjustments for aircraft
and engines purchased off lease or lease extensions or amendments. The Company expensed $14.0 million, $16.5 million and
$31.7 million of supplemental rent recorded within aircraft rent during 2023, 2022 and 2021, respectively.
During the twelve months ended December 31, 2023, the Company took delivery of 13 new aircraft under direct
operating leases, 10 new aircraft under sale-leaseback transactions and 4 engines purchased with cash.
Under Topic 842, gains and losses on sale-leaseback transactions, subject to adjustment for off-market terms, are
recognized immediately and recorded within gain/loss on disposal of assets on the Company's consolidated statements of
operations. Refer to Note 5, Loss on Disposal of Assets for additional information on the losses recorded related to the sale-
leaseback transactions entered into during the twelve months ended December 31, 2023, 2022 and 2021.
As of December 31, 2023, the Company's finance lease obligations relate to the lease of computer equipment used by the
Company's flight crew and office equipment. Payments under these finance lease agreements are fixed for terms ranging from 4
to 5 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 consolidated balance sheets.
98
Notes to Financial Statements—(Continued)
During the fourth quarter of 2019, the Company purchased an 8.5-acre parcel of land for $41.0 million and entered into a
99-year lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where the Company is building its
new headquarters campus and a 200-unit residential building. During the first quarter of 2022, the Company began building its
new headquarters campus and its 200-unit residential building with an expected completion during the first quarter of 2024. As
of December 31, 2023, the 8.5-acre parcel of land and $184.6 million in related construction costs were capitalized within
ground property and equipment on the Company's consolidated balance sheets. The 99-year lease was determined to be an
operating lease and is recorded within operating lease right-of-use asset and operating lease liability on the Company's
consolidated balance sheets. Operating lease commitments related to this lease are included in the table below within property
facility leases.
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 consolidated balance sheets as of December 31, 2023. The table does not
include commitments that are contingent on events or other factors that are currently uncertain and unknown.
2024
2025
2026
2027
2028
2029 and thereafter
Total minimum lease payments
Less amount representing interest
Present value of minimum lease payments
Less current portion
Long-term portion
Finance Leases
Aircraft
and Spare Engine
Leases
Operating Leases
Property Facility
Leases
(in thousands)
Other
Total Operating
and Finance
Lease Obligations
$
251 $
446,331 $
6,623 $
177 $
154
76
27
1
—
430,843
404,529
388,569
367,803
4,143
3,994
3,166
1,754
3,539,416
143,340
—
—
—
—
—
453,382
435,140
408,599
391,762
369,558
3,682,756
$
$
$
509 $
5,577,491 $
163,020 $
177 $
5,741,197
29
2,083,159
133,791
2
2,216,981
480 $
3,494,332 $
29,229 $
175 $
3,524,216
236
219,852
4,838
175
225,101
244 $
3,274,480 $
24,391 $
— $
3,299,115
Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's
consolidated balance sheets are expected to be $3.6 million for 2024 and none for 2025 and beyond.
The table below presents information for lease costs related to the Company's finance and operating leases:
Finance lease cost
Amortization of leased assets
Interest of lease liabilities
Operating lease cost
Operating lease cost (1)
Short-term lease cost (1)
Variable lease cost (1)
Total lease cost
Year Ended December 31,
2023
2022
(in thousands)
451 $
30
377,505
39,916
227,030
644,932 $
751
57
225,112
41,696
200,965
468,581
$
$
(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's consolidated statements of operations.
The table below presents lease-related terms and discount rates as of December 31, 2023:
99
Notes to Financial Statements—(Continued)
Weighted-average remaining lease term
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
15.
Defined Contribution 401(k) Plan
December 31, 2023
December 31, 2022
14.8 years
2.3 years
6.84 %
4.25 %
14.6 years
2.1 years
6.29 %
4.21 %
The Company sponsors three defined contribution 401(k) plans, Spirit Airlines, Inc. Employee Retirement Savings Plan
(first plan), Spirit Airlines, Inc. Pilots’ Retirement Savings Plan (second plan) and Spirit Airlines, Inc. Puerto Rico Retirement
Savings Plan (third plan). The first plan is for all employees that are not covered by the pilots’ collective bargaining agreement,
who have at least 60 days of service and have attained the age of 21.
The second plan is for the Company’s pilots, and contains the same service requirements as the first plan. Beginning on
March 1, 2018, the Company contributed 11% of the individual pilot's annual compensation, regardless of the pilot's
contributions to the plan. The Company's contribution increased by 1% on an annual basis each March until 2022, at which time
the contribution was 15%. Beginning on January 1, 2024, the Company's contribution increased to 16%.
Employer contributions made to all plans were $112.4 million, $88.9 million and $72.3 million in 2023, 2022 and 2021,
respectively, and were included within salaries, wages and benefits in the accompanying consolidated statements of operations.
16.
Income Taxes
Significant components of the provision for income taxes from continuing operations are as follows:
Current:
Federal
State and local
Foreign
Total current expense (benefit)
Deferred:
Federal
State and local
Total deferred expense (benefit)
Total income tax expense (benefit)
Year Ended December 31,
2023
2022
2021
(in thousands)
$
$
5,449 $
1,309
1,350
8,108
— $
327
1,695
2,022
—
568
1,183
1,751
(115,905)
(3,334)
(119,239)
(111,131) $
(141,251)
(7,360)
(148,611)
(146,589) $
(47,468)
(2,034)
(49,502)
(47,751)
The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:
100
Notes to Financial Statements—(Continued)
Expected provision at federal statutory tax rate
State tax expense, net of federal benefit
Permanent tax differences
Premium on convertible debt repurchase
Valuation allowance
Other
Total income tax expense (benefit)
Year Ended December 31,
2023
2022
2021
21.0 %
1.5 %
(1.3) %
— %
(1.2) %
(0.1) %
19.9 %
21.0 %
1.6 %
(0.6) %
— %
(0.8) %
(0.3) %
20.9 %
21.0 %
0.8 %
(0.4) %
(11.4) %
(0.5) %
(0.3) %
9.2 %
The Company accounts for income taxes using the asset and liability method. Deferred taxes are recorded based on
differences between the consolidated financial statement basis and tax basis of assets and liabilities and available tax loss and
credit carryforwards. At December 31, 2023 and 2022, the significant components of the Company's deferred taxes consisted of
the following:
December 31,
2023
2022
(in thousands)
Deferred tax assets:
Income tax credits
Net operating losses
Deferred revenue
Nondeductible accruals
Deferred manufacturing credits
Loan liability
Operating lease liability
Interest expense
Other
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Accrued aircraft and engine maintenance
Right-of-use asset
Other
Deferred tax liabilities
Net deferred tax assets (liabilities)
$
4,298 $
4,306
340,023
20,751
25,738
14,054
11,404
598,097
38,327
27,190
(10,852)
1,392,154 $ 1,069,038
328,977
25,924
32,899
14,556
115,161
797,778
51,305
38,910
(17,654)
634,018
612,571
38,755
70,997
608,176
803,232
14,932
13,115
1,499,915
1,295,881
(107,761) $ (226,843)
$
In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that
some or all of the deferred tax assets would be realized. In evaluating the Company’s ability to utilize its deferred tax assets, it
considered all available evidence, both positive and negative, in determining future taxable income on a jurisdiction by
jurisdiction basis. As of December 31, 2023 and 2022, the Company had a valuation allowance of $17.7 million and $10.9
million, respectively, against certain deferred tax assets related to equity compensation for executives due to changes in tax law
resulting from the Tax Cuts and Jobs Act ("TCJA"), state net operating loss carryforwards and foreign tax credits.
As of December 31, 2023, the Company had $2.8 million of foreign tax credits, $1.4 million of general business tax
credits, $1.4 billion of federal net operating loss and $643.5 million of state net operating loss available, that may be applied
against future tax liabilities. The foreign tax credits will begin to expire in 2025, the state net operating losses will begin to
expire in 2027, the general business credits will begin to expire in 2038 and there is no expiration of federal net operating
losses.
101
Notes to Financial Statements—(Continued)
For tax years ended December 31, 2023, 2022 and 2021, the Company did not recognize any liabilities for uncertain tax
positions nor any interest and penalties on unrecognized tax benefits.
For tax years 2023, 2022 and 2021, all income for the Company is subject to domestic income taxes.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company's
federal income tax returns for 2020 through 2022 tax years are still subject to examination in the United States Various state
and foreign jurisdiction tax years also remain open to examination. The Company believes that any potential assessment would
be immaterial to its consolidated financial statements.
17.
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 December 31, 2023, the Company's firm aircraft orders consisted of 99
A320 family aircraft with Airbus, including A320neos and A321neos, with deliveries expected through 2029. On July 31, 2023,
the Company entered into Amendment No. 6 (the “Amendment”) to the A320 NEO Family Purchase Agreement, dated as of
December 20, 2019 (the “Airbus Purchase Agreement”) with Airbus S.A.S. (“Airbus”). The Amendment converts the
remaining A319neo aircraft to be delivered under the Airbus Purchase Agreement to A321neo aircraft. The Amendment also (i)
defers certain A320neo aircraft deliveries from 2024 to 2025 and later years, (ii) extends delivery dates for certain A320neo and
A321neo aircraft deliveries from 2025-2027 to 2025-2029 and (iii) adjusts the timing of option aircraft delivery dates from
2026-2028 to 2027-2029. In addition, the Amendment creates a more equal distribution of aircraft deliveries and option rights
across the delivery periods. As of December 31, 2023, the Company had secured financing for 18 aircraft, scheduled for
delivery from Airbus through 2025, which will be financed through sale-leaseback transactions. The Company did not have
financing commitments in place for the remaining 81 Airbus aircraft currently on firm order, which are scheduled for delivery
through 2029. However, the Company has signed a financing letter of agreement with Airbus which provides backstop
financing for a majority of the aircraft included in the A320 NEO Family Purchase Agreement. The agreement provides a
standby credit facility in the form of senior secured mortgage debt financing. The contractual purchase amounts for these
aircraft are included within the purchase commitments below.
During the third quarter of 2021, the Company entered into an Engine Purchase Support Agreement which 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 December 31, 2023, the Company is committed to purchase 19 PW1100G-JM spare engines, with deliveries
through 2029.
As of December 31, 2023, committed expenditures for these aircraft and spare engines, including estimated amounts for
contractual price escalations and pre-delivery payments, are expected to be $507.6 million in 2024, $1,018.6 million in 2025,
$1,034.3 million in 2026, $1,100.0 million in 2027, $1,035.2 million in 2028, and $923.8 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. For further discussion on this topic, please refer to
"Risk Factors - Risks Related to Our Business - Any tariffs imposed on commercial aircraft and related parts imported from
outside the United States may have a material adverse effect on our fleet, business, financial condition and our results of
operations."
In addition to the aircraft purchase agreement, as of December 31, 2023, the Company had secured financing
for 22 aircraft to be leased directly from third-party lessors, scheduled for delivery through 2025. As of December 31, 2023,
aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors and sale-
leaseback transactions are expected to be approximately $72.4 million in 2024, $167.8 million in 2025, $183.3 million in 2026,
$183.3 million in 2027, $183.3 million in 2028, and $1,409.3 million in 2029 and beyond.
Interest commitments related to the secured debt financing of 71 aircraft as of December 31, 2023 are $80.2 million in
2024, $73.6 million in 2025, $67.3 million in 2026, $60.2 million in 2027, $51.7 million in 2028, and $204.5 million in 2029
and beyond. As of December 31, 2023, interest commitments related to the Company's 8.00% senior secured notes, convertible
debt financing, unsecured term loans and revolving credit facility are $96.7 million in 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 outstanding debt obligations, refer to Note 13, Debt and Other Obligations.
102
Notes to Financial Statements—(Continued)
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 December 31, 2023: $65.0 million in 2024, $27.5 million in 2025, $18.1 million in 2026, $18.0
million in 2027, $1.9 million in 2028, and none in 2029 and beyond. During the first quarter of 2018, the Company entered into
a contract renewal with its reservation system provider which expires in 2028.
Litigation
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 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. The original action was dismissed by the EDNY; however,
following the plaintiff's appeal to the Second Circuit, the case was remanded to the EDNY for further review on the breach of
contract claim. A hearing on the Company's Motion for Summary Judgment and plaintiff's Motion for Class Certification was
held on December 10, 2021. The EDNY granted the plaintiff's class certification motion and denied Spirit’s summary judgment
motion on March 29, 2022. The Company subsequently filed a motion for reconsideration on April 26, 2022, and an oral
argument was held on May 19, 2022. The EDNY denied Spirit’s motion for reconsideration on February 14, 2023. On April 3,
2023, Spirit moved to compel arbitration of and/or dismiss certain class members’ claims for lack of personal jurisdiction. Trial
was set to begin on January 16, 2024. 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 paid depends on a number of factors, including participation of class
members and any conditions on the settlement approved by the EDNY. Currently, the Company's best estimate of the probable
loss associated with the settlement is $6.0 million, and the Company has recorded this amount in other operating expenses
within its consolidated statements of operations.
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 Merger Agreement with JetBlue. 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
December 31, 2023, 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 2018 through the fourth quarter 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 a loss in this matter is not probable and has not recognized a loss contingency.
103
Notes to Financial Statements—(Continued)
Employees
The Company has six union-represented employee groups that together represent approximately 85% of all employees at
December 31, 2023. The table below sets forth the Company's employee groups and status of the collective bargaining
agreements as of December 31, 2023.
Employee Groups
Pilots
Flight Attendants
Dispatchers
Ramp Service Agents
Passenger Service Agents
Aircraft Maintenance
Technicians
Representative
Amendable Date (1)
Percentage of
Workforce
Air Line Pilots Association, International (ALPA)
January 2025
Association of Flight Attendants (AFA-CWA)
Professional Airline Flight Control Association (PAFCA)
International Association of Machinists and Aerospace Workers
(IAMAW)
Transport Workers Union of America (TWU)
January 2026
October 2023
November 2026
February 2027
Aircraft Mechanics Fraternal Association (AMFA) (2)
N/A (2)
27%
47%
1%
3%
2%
5%
(1) Subject to standard early opener provisions.
(2) Collective bargaining agreement is currently under negotiation.
During the fourth quarter of 2022, the Company reached an agreement with ALPA for a new two-year agreement,
which was ratified by ALPA members on January 10, 2023. The ratified agreement includes increased pay rates and other
enhanced benefits.
In February 2023, the Company and AFA-CWA reached an agreement with the Company's flight attendants which
was ratified by the flight attendants on April 13, 2023 and becomes amendable in January 2026. The ratified agreement
includes increased pay rates and other enhanced benefits.
In August 2022, the Company's aircraft maintenance technicians ("AMTs") voted to be represented by the Aircraft
Mechanics Fraternal Association ("AMFA") as their collective bargaining agent. As of December 31, 2023, the Company
employed 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”). The Company is
currently waiting for mediation dates from the NMB to continue negotiating with AMFA.
In May 2023, PAFCA provided notice to the Company that it intends to amend its Collective Bargaining Agreement with
its dispatchers. The parties began negotiating changes to the CBA on July 12, 2023. As of December 31, 2023, the Company
continued to negotiate with PAFCA.
The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees
and qualified dependent medical claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred
but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is
calculated from actual claim rates and adjusted periodically as necessary. The Company has accrued $9.1 million and $11.0
million, for health care claims as of December 31, 2023, and 2022, respectively, recorded within other current liabilities on the
Company's consolidated balance sheet.
18. 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.
104
Notes to Financial Statements—(Continued)
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 facilities
has 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 December 31, 2023 and
December 31, 2022, were as follows:
As of December 31,
2023
2022
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Fair value
level
hierarchy
(in millions)
8.00% senior secured notes
$ 1,110.0 $ 1,121.9 $ 1,110.0 $ 1,085.0
Fixed-rate term loans
Unsecured term loans
2015-1 EETC Class A
2015-1 EETC Class B
2015-1 EETC Class C
2017-1 EETC Class AA
2017-1 EETC Class A
2017-1 EETC Class B
2017-1 EETC Class C
4.75% convertible notes due 2025
1.00% convertible notes due 2026
Total long-term debt
Cash and Cash Equivalents
1,093.3
1,099.9
1,094.7
1,003.9
136.3
256.6
40.0
—
172.2
57.4
48.2
—
25.1
500.0
128.3
230.8
39.4
—
149.6
48.5
42.9
—
42.3
349.9
136.3
278.6
48.0
63.8
186.3
62.1
51.7
85.5
25.4
116.0
247.5
45.6
63.1
161.6
52.3
44.9
85.1
44.9
500.0
405.1
$ 3,439.1 $ 3,253.5 $ 3,642.4 $ 3,355.0
Level 3
Level 3
Level 3
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Level 2
Cash and cash equivalents at December 31, 2023 and December 31, 2022 are 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 account 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 December 31, 2023, the
Company had a $85.0 million standby letter of credit secured by $75.0 million of restricted cash, of which $55.9 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 Company's 8.00% senior secured notes. For additional
information on the Company's 8.00% senior secured notes, refer to Note 13, Debt and Other Obligations.
Short-term Investment Securities
Short-term investment securities at December 31, 2023 and December 31, 2022 are classified as available-for-sale and
generally consist of U.S. Treasury and U.S. government agency securities with contractual maturities of twelve months or less.
105
Notes to Financial Statements—(Continued)
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
(as defined below) that caused 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 notes due 2026 as a derivative liability with subsequent changes in fair value recorded in earnings.
The Company records the fair value of the embedded derivative as a derivative liability within deferred gains and other
long-term liabilities on its 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 consolidated statements of operations and is included in other
liabilities within operating activities in the Company's consolidated statements of cash flows. During the twelve months ended
December 31, 2023 and 2022, the Company recorded $18.1 million and $20.3 million, respectively, in a favorable mark to
market adjustment, 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.
Assets and liabilities measured at gross fair value on a recurring basis are summarized below:
Cash and cash equivalents
Restricted cash
Short-term investment securities
Total assets
Derivative liability
Total liabilities
Cash and cash equivalents
Restricted cash
Short-term investment securities
Total assets
Total liabilities
Fair Value Measurements as of December 31, 2023
Total
Level
1
Level
2
Level
3
(in millions)
$
865.2 $
865.2 $
— $
119.4
112.5
119.4
112.5
—
—
$ 1,097.1 $ 1,097.1 $
— $
$
$
11.1 $
11.1 $
— $
— $
11.1 $
11.1 $
Fair Value Measurements as of December 31, 2022
Total
Level
1
Level
2
Level
3
(in millions)
$ 1,346.4 $ 1,346.4 $
— $
119.4
107.1
119.4
107.1
—
—
$ 1,572.9 $ 1,572.9 $
— $
—
—
—
—
—
—
—
—
—
—
$
29.2 $
— $
29.2 $
—
The Company had no transfers of assets or liabilities between any of the above levels during the years ended
December 31, 2023 or 2022.
19. Operating Segments and Related Disclosures
The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by
geographic region as defined by the Department of Transportation ("DOT") area are summarized below:
106
Notes to Financial Statements—(Continued)
2023
2022
2021
DOT—Domestic
DOT—Latin America and Caribbean
Total
(in millions)
$ 4,676.1 $ 4,371.8 $ 2,824.8
406.0
$ 5,362.5 $ 5,068.4 $ 3,230.8
696.6
686.4
During 2023, 2022 and 2021, no revenue from any one foreign country represented greater than 4% of the Company’s
total passenger revenue. The Company attributes operating revenues by geographic region based upon the origin and
destination of each passenger flight segment. The Company’s tangible assets consist primarily of flight equipment, which are
mobile across geographic markets and, therefore, have not been allocated.
107
Notes to Financial Statements—(Continued)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Spirit Airlines, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Spirit Airlines, Inc. (the Company) as of December 31, 2023
and 2022, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows
for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 9, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
108
Notes to Financial Statements—(Continued)
Description of
the Matter
As explained in Notes 1 and 14 to the financial statements, the Company’s lease agreements often
contain provisions that require the Company to return aircraft airframes, engines and other aircraft
components to the lessor in a certain condition or pay an amount to the lessor based on the actual return
condition. Management assesses the need to accrue lease return costs throughout the year or whenever
facts and circumstances warrant an assessment. For the year ended December 31, 2023, the Company
recorded $14 million of supplemental rent, which is made up of probable and estimable lease return
costs.
Auditing the estimate of lease return costs for engines was complex because of the significant judgment
involved in determining the timing of future maintenance events.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company’s controls that address the risks of material misstatement relating to the measurement of lease
return costs. For example, we tested controls over management’s review of the estimated timing of future
maintenance events.
To test the estimate of lease return costs, our audit procedures included, among others, testing the
assumptions used and the accuracy and completeness of the underlying data used in the calculations. For
example, to test the assumptions related to the timing of future maintenance events, we compared
projected event timing to the time interval between recently completed maintenance events, regulatory
requirements for aircraft and engine maintenance, current and projected utilization metrics for the
aircraft, and changes to the fleet plan, including the anticipated effect of the accelerated inspections
required due to manufacturing defects in engines. We also tested the historical accuracy of
management’s forecasts of maintenance events by comparing when recent maintenance events occurred
to management’s initial projections.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1995.
Miami, Florida
February 9, 2024
109
Notes to Financial Statements—(Continued)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Spirit Airlines, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Spirit Airlines, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Spirit Airlines, Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated
statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the
period ended December 31, 2023, and the related notes and our report dated February 9, 2024 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Miami, Florida
February 9, 2024
110
Notes to Financial Statements—(Continued)
ITEM 9.
FINANCIAL DISCLOSURE
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,”
as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are
designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to our management, including its principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-
benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of
December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure
controls and procedures were effective at the reasonable assurance level.
Management's Annual Report on Internal Control Over Financial Reporting
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United
States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013
framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO Framework). Based on that evaluation, management believes that our internal control over
financial reporting was effective as of December 31, 2023.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, which also audited our Consolidated Financial Statements for the
year ended December 31, 2023. Ernst & Young LLP's report on our internal control over financial reporting is included herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during 2023 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
In our earnings press release furnished on February 8, 2024, Spirit indicated that Spirit and JetBlue expect to conclude the
regulatory process and close the transaction no later than the first half of 2024. As disclosed, on January 16, 2024, the Court
granted a permanent injunction against the Merger (the "Injunction"). On January 19, 2024, Spirit and JetBlue filed a notice of
appeal to reverse the Injunction and allow Spirit and JetBlue to complete the Merger. On February 2, 2024, the Court of Appeals
granted our motion, stating it would hear arguments in June 2024. As a result, it is possible that the conditions to closing will not
111
Notes to Financial Statements—(Continued)
be satisfied before the date that one or both of the parties may have the right to terminate the merger agreement pursuant to the
terms thereof.
ITEM 9C.
DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
112
Notes to Financial Statements—(Continued)
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information under the captions, “Election of Directors,” “Corporate Governance,” “Committee and Meetings of the
Board of Directors,” “Executive Officers,” “Code of Ethics” and “Section 16(a) Beneficial Ownership Reporting Compliance”
in our 2024 Proxy Statement is incorporated herein by reference.
ITEM 11.
EXECUTIVE COMPENSATION
The information under the captions, “Director Compensation” and “Executive Compensation” in our 2024 Proxy
Statement is incorporated herein by reference.
ITEM 12.
RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
The information under the captions, “Security Ownership” and “Equity Compensation Plan Information” in our 2024
Proxy Statement is incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the captions, “Certain Relationships and Related Transactions” and “Corporate Governance” in
our 2024 Proxy Statement is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information under the captions, “Ratification of Independent Registered Public Accounting Firm” in our 2024 Proxy
Statement is incorporated herein by reference.
With the exception of the information specifically incorporated by reference in Part II Item 5 and Part III to this Annual
Report on Form 10-K from our 2024 Proxy Statement, our 2024 Proxy Statement shall not be deemed to be filed as part of this
Report.
113
Notes to Financial Statements—(Continued)
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Financial Statements:
The financial statements included in Item 8. Financial Statements and Supplementary Data above are filed as part of
this annual report.
2. Financial Statement Schedules:
There are no financial statement schedules filed as part of this annual report, since the required information is included
in the Financial Statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not
present.
3. Exhibits:
The exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index included immediately
preceding the signature page.
114
Notes to Financial Statements—(Continued)
EXHIBIT INDEX
Exhibit No.
Description of Exhibit
2.1
2.2
2.3
2.4
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Agreement and Plan of Merger, dated February 5, 2022, by and among Spirit Airlines, Inc., Frontier Group
Holdings, Inc. and Top Gun Acquisition Corp., filed as Exhibit 2.1 to the Company’s Form 8-K dated
February 7, 2022, is hereby incorporated by reference.
Amendment to Agreement and Plan of Merger, dated June 2, 2022, by and among Spirit Airlines, Inc.,
Frontier Group Holdings, Inc. and Top Gun Acquisition Corp., filed as Exhibit 2.1 to the Company’s Form
8-K dated June 2, 2022, is hereby incorporated by reference.
Amendment No. 2 to Agreement and Plan of Merger, dated June 24, 2022, by and among Spirit Airlines,
Inc., Frontier Group Holdings, Inc. and Top Gun Acquisition Corp., filed as Exhibit 2.1 to the Company’s
Form 8-K dated June 24, 2022, is hereby incorporated by reference.
Agreement and Plan of Merger, dated July 28, 2022, by and among Spirit Airlines, Inc., JetBlue Airways
Corporation and Sundown Acquisition Corp., filed as Exhibit 2.1 to the Company’s Form 8-K dated August
15, 2022, is hereby incorporated by reference.
Amended and Restated Certificate of Incorporation of Spirit Airlines, Inc., dated as of June 1, 2011, filed as
Exhibit 3.1 to the Company's Form 8-K dated June 1, 2011, is hereby incorporated by reference.
Amended and Restated Bylaws of Spirit Airlines, Inc., dated as of June 1, 2011, filed as Exhibit 3.2 to the
Company's Form 8-K dated June 1, 2011, is hereby incorporated by reference.
Certificate of Designation of Series A Participating Cumulative Preferred Stock, filed as Exhibit 3.1 to the
Company’s Form 8-K dated March 30, 2020, is hereby incorporated by reference.
Specimen Common Stock Certificate, filed as Exhibit 4.1 to the Company's Form S-1 Registration
Statement (No. 333-178336), is hereby incorporated by reference.
Pass Through Trust Agreement, dated as of August 11, 2015, between Spirit Airlines, Inc. and Wilmington
Trust, National Association, filed as Exhibit 4.1 to the Company’s Form 8-K dated August 11, 2015, is
hereby incorporated by reference.
Trust Supplement No. 2015-1A, dated as of August 11, 2015, between Spirit Airlines, Inc. and Wilmington
Trust, National Association, as Trustee, to the Pass Through Trust Agreement, dated as of August 11, 2015,
filed as Exhibit 4.2 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Trust Supplement No. 2015-1B, dated as of August 11, 2015, between Spirit Airlines, Inc. and Wilmington
Trust, National Association, as Trustee, to the Pass Through Trust Agreement, dated as of August 11, 2015,
filed as Exhibit 4.3 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Revolving Credit Agreement (2015-1A), dated as of August 11, 2015, between Wilmington Trust, National
Association, as Subordination Agent (as agent and trustee for the trustee of Spirit Airlines Pass Through
Trust 2015-1A), as Borrower, and Natixis, acting via its New York Branch, as Liquidity Provider, filed as
Exhibit 4.4 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Revolving Credit Agreement (2015-1B), dated as of August 11, 2015, between Wilmington Trust, National
Association, as Subordination Agent (as agent and trustee for the trustee of Spirit Airlines Pass Through
Trust 2015-1B), as Borrower, and Natixis, acting via its New York Branch, as Liquidity Provider, filed as
Exhibit 4.5 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Intercreditor Agreement (2015-1), dated as of August 11, 2015, among Wilmington Trust, National
Association, as Trustee of the Spirit Airlines Pass Through Trust 2015-1A and as Trustee of the Spirit
Airlines Pass Through Trust 2015-1B, Natixis, acting via its New York Branch, as Class A Liquidity
Provider and Class B Liquidity Provider, and Wilmington Trust, National Association, as Subordination
Agent, filed as Exhibit 4.6 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by
reference.
Deposit Agreement (Class A), dated as of August 11, 2015, between Wilmington Trust Company, as
Escrow Agent, and Natixis, acting via its New York Branch, as Depositary, filed as Exhibit 4.7 to the
Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
115
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
Notes to Financial Statements—(Continued)
Deposit Agreement (Class B), dated as of August 11, 2015, between Wilmington Trust Company, as Escrow
Agent, and Natixis, acting via its New York Branch, as Depositary, filed as Exhibit 4.8 to the Company’s
Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Escrow and Paying Agent Agreement (Class A), dated as of August 11, 2015, among Wilmington Trust
Company, as Escrow Agent, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Credit Suisse
Securities (USA) LLC, as Underwriters, Wilmington Trust, National Association, not in its individual
capacity, but solely as Pass Through Trustee for and on behalf of Spirit Airlines Pass Through Trust
2015-1A, and Wilmington Trust, National Association, as Paying Agent, filed as Exhibit 4.9 to the
Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Escrow and Paying Agent Agreement (Class B), dated as of August 11, 2015, among Wilmington Trust
Company, as Escrow Agent, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Credit Suisse
Securities (USA) LLC, as Underwriters, Wilmington Trust, National Association, not in its individual
capacity, but solely as Pass Through Trustee for and on behalf of Spirit Airlines Pass Through Trust
2015-1B, and Wilmington Trust, National Association, as Paying Agent, filed as Exhibit 4.10 to the
Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Note Purchase Agreement, dated as of August 11, 2015, among Spirit Airlines, Inc., Wilmington Trust,
National Association, as Pass Through Trustee under each of the Pass Through Trust Agreements,
Wilmington Trust, National Association, as Subordination Agent, Wilmington Trust Company, as Escrow
Agent, and Wilmington Trust National Association, as Paying Agent, filed as Exhibit 4.11 to the Company’s
Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Form of Participation Agreement (Participation Agreement among Spirit Airlines, Inc., Wilmington Trust,
National Association, as Pass Through Trustee under each of the Pass Through Trust Agreements,
Wilmington Trust, National Association, as Subordination Agent, Wilmington Trust, National Association,
as Loan Trustee, and Wilmington Trust, National Association, in its individual capacity as set forth therein)
(Exhibit B to Note Purchase Agreement), filed as Exhibit 4.12 to the Company’s Form 8-K dated August
11, 2015, is hereby incorporated by reference.
Form of Indenture and Security Agreement (Indenture and Security Agreement between Spirit Airlines, Inc.
and Wilmington Trust, National Association, as Loan Trustee) (Exhibit C to Note Purchase Agreement),
filed as Exhibit 4.13 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by
reference.
Form of Pass Through Trust Certificate, Series 2015-1A (included in Exhibit A to Exhibit 4.2), filed as
Exhibit 4.14 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Form of Pass Through Trust Certificate, Series 2015-1B (included in Exhibit A to Exhibit 4.3), filed as
Exhibit 4.15 to the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Form of Series 2015-1 Equipment Notes (included in Section 2.01 of Exhibit 4.13), filed as Exhibit 4.16 to
the Company’s Form 8-K dated August 11, 2015, is hereby incorporated by reference.
Trust Supplement No. 2017-1AA, dated as of November 28, 2017, between Spirit Airlines, Inc. and
Wilmington Trust, National Association, as Trustee, to the Pass Through Trust Agreement, dated as of
August 11, 2015, filed as Exhibit 4.2 to the Company’s Form 8-K dated November 28, 2017, is hereby
incorporated by reference.
Trust Supplement No. 2017-1A, dated as of November 28, 2017, between Spirit Airlines, Inc. and
Wilmington Trust, National Association, as Trustee, to the Pass Through Trust Agreement, dated as of
August 11, 2015, filed as Exhibit 4.3 to the Company’s Form 8-K dated November 28, 2017, is hereby
incorporated by reference.
Trust Supplement No. 2017-1B, dated as of November 28, 2017, between Spirit Airlines, Inc. and
Wilmington Trust, National Association, as Trustee, to the Pass Through Trust Agreement, dated as of
August 11, 2015, filed as Exhibit 4.4 to the Company’s Form 8-K dated November 28, 2017, is hereby
incorporated by reference.
Revolving Credit Agreement (2017-1AA), dated as of November 28, 2017, between Wilmington Trust,
National Association, as Subordination Agent (as agent and trustee for the trustee of Spirit Airlines Pass
Through Trust 2017-1AA), as Borrower, and Commonwealth Bank of Australia, New York Branch, as
Liquidity Provider, filed as Exhibit 4.5 to the Company’s Form 8-K dated November 28, 2017, is hereby
incorporated by reference.
116
Notes to Financial Statements—(Continued)
Revolving Credit Agreement (2017-1A), dated as of November 28, 2017, between Wilmington Trust,
National Association, as Subordination Agent (as agent and trustee for the trustee of Spirit Airlines Pass
Through Trust 2017-1A), as Borrower, and Commonwealth Bank of Australia, New York Branch, as
Liquidity Provider, filed as Exhibit 4.6 to the Company’s Form 8-K dated November 28, 2017, is hereby
incorporated by reference.
Revolving Credit Agreement (2017-1B), dated as of November 28, 2017, between Wilmington Trust,
National Association, as Subordination Agent (as agent and trustee for the trustee of Spirit Airlines Pass
Through Trust 2017-1B), as Borrower, and Commonwealth Bank of Australia, New York Branch, as
Liquidity Provider, filed as Exhibit 4.7 to the Company’s Form 8-K dated November 28, 2017, is hereby
incorporated by reference.
Intercreditor Agreement (2017-1), dated as of November 28, 2017, among Wilmington Trust, National
Association, as Trustee of the Spirit Airlines Pass Through Trust 2017-1AA, as Trustee of the Spirit Airlines
Pass Through Trust 2017-1A and as Trustee of the Spirit Airlines Pass Through Trust 2017-1B,
Commonwealth Bank of Australia, New York Branch, as Class AA Liquidity Provider, Class A Liquidity
Provider and Class B Liquidity Provider, and Wilmington Trust, National Association, as Subordination
Agent, filed as Exhibit 4.8 to the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by
reference.
Deposit Agreement (Class AA), dated as of November 28, 2017, between Wilmington Trust Company, as
Escrow Agent, and Citibank, N.A., as Depositary, filed as Exhibit 4.9 to the Company’s Form 8-K dated
November 28, 2017, is hereby incorporated by reference.
Deposit Agreement (Class A), dated as of November 28, 2017, between Wilmington Trust Company, as
Escrow Agent, and Citibank, N.A., as Depositary, filed as Exhibit 4.10 to the Company’s Form 8-K dated
November 28, 2017, is hereby incorporated by reference.
Deposit Agreement (Class B), dated as of November 28, 2017, between Wilmington Trust Company, as
Escrow Agent, and Citibank, N.A., as Depositary, filed as Exhibit 4.11 to the Company’s Form 8-K dated
November 28, 2017, is hereby incorporated by reference.
Escrow and Paying Agent Agreement (Class AA), dated as of November 28, 2017, among Wilmington
Trust Company, as Escrow Agent, Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Goldman
Sachs & Co. LLC and Barclays Capital Inc., as Underwriters, Wilmington Trust, National Association, not
in its individual capacity, but solely as Pass Through Trustee for and on behalf of Spirit Airlines Pass
Through Trust 2017-1AA, and Wilmington Trust, National Association, as Paying Agent, filed as Exhibit
4.12 to the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Escrow and Paying Agent Agreement (Class A), dated as of November 28, 2017, among Wilmington Trust
Company, as Escrow Agent, Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Goldman Sachs
& Co. LLC and Barclays Capital Inc., as Underwriters, Wilmington Trust, National Association, not in its
individual capacity, but solely as Pass Through Trustee for and on behalf of Spirit Airlines Pass Through
Trust 2017-1A, and Wilmington Trust, National Association, as Paying Agent, filed as Exhibit 4.13 to the
Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Escrow and Paying Agent Agreement (Class B), dated as of November 28, 2017, among Wilmington Trust
Company, as Escrow Agent, Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Goldman Sachs
& Co. LLC and Barclays Capital Inc., as Underwriters, Wilmington Trust, National Association, not in its
individual capacity, but solely as Pass Through Trustee for and on behalf of Spirit Airlines Pass Through
Trust 2017-1B, and Wilmington Trust, National Association, as Paying Agent, filed as Exhibit 4.14 to the
Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Note Purchase Agreement, dated as of November 28, 2017, among Spirit Airlines, Inc., Wilmington Trust,
National Association, as Pass Through Trustee under each of the Pass Through Trust Agreements,
Wilmington Trust, National Association, as Subordination Agent, Wilmington Trust Company, as Escrow
Agent, and Wilmington Trust National Association, as Paying Agent, filed as Exhibit 4.15 to the Company’s
Form 8-K dated November 28, 2017, is hereby incorporated by reference.
117
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
Notes to Financial Statements—(Continued)
Form of Participation Agreement (Participation Agreement among Spirit Airlines, Inc., Wilmington Trust,
National Association, as Pass Through Trustee under each of the Pass Through Trust Agreements,
Wilmington Trust, National Association, as Subordination Agent, Wilmington Trust, National Association,
as Loan Trustee, and Wilmington Trust, National Association, in its individual capacity as set forth therein)
(Exhibit B to Note Purchase Agreement), filed as Exhibit 4.16 to the Company’s Form 8-K dated November
28, 2017, is hereby incorporated by reference.
Form of Indenture and Security Agreement (Indenture and Security Agreement between Spirit Airlines, Inc.
and Wilmington Trust, National Association, as Loan Trustee) (Exhibit C to Note Purchase Agreement),
filed as Exhibit 4.17 to the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by
reference.
Form of Pass Through Trust Certificate, Series 2017-1AA (included in Exhibit A to Exhibit 4.2), filed as
Exhibit 4.18 to the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Form of Pass Through Trust Certificate, Series 2017-1A (included in Exhibit A to Exhibit 4.3), filed as
Exhibit 4.19 to the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Form of Pass Through Trust Certificate, Series 2017-1B (included in Exhibit A to Exhibit 4.4), filed as
Exhibit 4.20 to the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Form of Series 2017-1 Equipment Notes (included in Section 2.01 of Exhibit 4.17), filed as Exhibit 4.21 to
the Company’s Form 8-K dated November 28, 2017, is hereby incorporated by reference.
Amended and Restated Intercreditor Agreement (2015-1), dated May 10, 2018, among Wilmington Trust,
National Association, as Trustee of the Spirit Airlines Pass Through Trust 2015-1A, as Trustee of the Spirit
Airlines Pass Through Trust 2015-1B and as Trustee of the Spirit Airlines Pass Through Trust 2015-C,
Natixis, acting via its New York Branch, as Class A Liquidity Provider and Class B Liquidity Provider, and
Wilmington Trust, National Association, as Subordination Agent, filed as Exhibit 4.1 to the Company’s
Form 10-Q dated July 26, 2018, is hereby incorporated by reference.
Form of 2015-1 First Amendment to Participation Agreement (Participation Agreement among Spirit
Airlines, Inc., Wilmington Trust, National Association, as Pass Through Trustee under each of the Pass
Through Trust Agreements, Wilmington Trust, National Association, as Subordination Agent, Wilmington
Trust, National Association, as Loan Trustee, and Wilmington Trust, National Association, in its individual
capacity as set forth therein), filed as Exhibit 4.3 to the Company’s Form 10-Q dated July 26, 2018, is
hereby incorporated by reference.
Form of 2015-1 First Amendment to Indenture and Security Agreement (Indenture and Security Agreement
between Spirit Airlines, Inc. and Wilmington Trust, National Association, as Loan Trustee), filed as Exhibit
4.4 to the Company’s Form 10-Q dated July 26, 2018, is hereby incorporated by reference.
Amended and Restated Intercreditor Agreement (2017-1), dated May 10, 2018, among Wilmington Trust,
National Association, as Trustee of the Spirit Airlines Pass Through Trust 2017-1AA, as Trustee of the
Spirit Airlines Pass Through Trust 2017-1A, as Trustee of the Spirit Airlines Pass Through Trust 2017-1B
and as Trustee of the Spirit Airlines Pass Through Trust 2017-1C, Commonwealth Bank of Australia, New
York Branch, as Class AA Liquidity Provider, Class A Liquidity Provider and Class B Liquidity Provider,
and Wilmington Trust, National Association, as Subordination Agent, filed as Exhibit 4.5 to the Company’s
Form 10-Q dated July 26, 2018, is hereby incorporated by reference.
Amended and Restated Note Purchase Agreement, dated as of May 10, 2018, among Spirit Airlines, Inc.,
Wilmington Trust, National Association, as Pass Through Trustee under each of the Pass Through Trust
Agreements, Wilmington Trust, National Association, as Subordination Agent, Wilmington Trust Company,
as Escrow Agent, and Wilmington Trust National Association, as Paying Agent, filed as Exhibit 4.7 to the
Company’s Form 10-Q dated July 26, 2018, is hereby incorporated by reference.
118
Notes to Financial Statements—(Continued)
Form of Participation Agreement (Participation Agreement among Spirit Airlines, Inc., Wilmington Trust,
National Association, as Pass Through Trustee under each of the Pass Through Trust Agreements,
Wilmington Trust, National Association, as Subordination Agent, Wilmington Trust, National Association,
as Loan Trustee, and Wilmington Trust, National Association, in its individual capacity as set forth therein)
(Exhibit B to Note Purchase Agreement), filed as Exhibit 4.8 to the Company’s Form 10-Q dated July 26,
2018, is hereby incorporated by reference.
Form of Indenture and Security Agreement (Indenture and Security Agreement between Spirit Airlines, Inc.
and Wilmington Trust, National Association, as Loan Trustee) (Exhibit C to Note Purchase Agreement),
filed as Exhibit 4.9 to the Company’s Form 10-Q dated July 26, 2018, is hereby incorporated by reference.
Form of 2017-1 First Amendment to Participation Agreement (Participation Agreement among Spirit
Airlines, Inc., Wilmington Trust, National Association, as Pass Through Trustee under each of the Pass
Through Trust Agreements, Wilmington Trust, National Association, as Subordination Agent, Wilmington
Trust, National Association, as Loan Trustee, and Wilmington Trust, National Association, in its individual
capacity as set forth therein), filed as Exhibit 4.12 to the Company’s Form 10-Q dated July 26, 2018, is
hereby incorporated by reference
Form of 2017-1 First Amendment to Indenture and Security Agreement (Indenture and Security Agreement
between Spirit Airlines, Inc. and Wilmington Trust, National Association, as Loan Trustee), filed as Exhibit
4.13 to the Company’s Form 10-Q dated July 26, 2018, is hereby incorporated by reference.
Warrant Agreement, dated as of April 20, 2020, between the Company and the United States Department of
the Treasury, filed as Exhibit 4.2 to the Company's Form 10-Q dated May 6, 2020, is hereby incorporated by
reference.
Form of Warrant to Purchase Common Stock, is hereby incorporated by reference from Exhibit B to Exhibit
4.52 hereto.
Base Indenture, dated May 12, 2020, between the Company and Wilmington Trust, National Association, as
trustee, filed as Exhibit 4.1 to the Company’s Form 8-K dated May 12, 2020, is hereby incorporated by
reference.
First Supplemental Indenture, dated May 12, 2020, between the Company and Wilmington Trust, National
Association, as trustee, filed as Exhibit 4.2 to the Company’s Form 8-K dated May 12, 2020, is hereby
incorporated by reference.
Form of Global Note representing the 4.75% Convertible Senior Notes due 2025 (included in Exhibit 4.55
hereto).
Form of Warrant to Purchase Common Stock, issued May 29, 2020, in connection with the Warrant
Agreement, dated as of April 20, 2020, between the Company and the United States Department of the
Treasury, filed as Exhibit 4.4 to the Company's Form 10-Q dated July 22, 2020, is hereby incorporated by
reference.
Form of Warrant to Purchase Common Stock, issued June 29, 2020, in connection with the Warrant
Agreement, dated as of April 20, 2020, between the Company and the United States Department of the
Treasury, filed as Exhibit 4.5 to the Company's Form 10-Q dated July 22, 2020, is hereby incorporated by
reference.
Indenture, dated as of September 17, 2020, by and among Spirit IP Cayman Ltd., Spirit Loyalty Cayman
Ltd., the guarantors named therein and Wilmington Trust, National Association, as trustee and collateral
custodian, governing the 8.00% Senior Secured Notes due 2025, filed as Exhibit 4.1 to the Company's Form
8-K dated September 11, 2020, is hereby incorporated by reference.
119
4.43
4.44
4.45
4.46
4.47
4.48
4.49
4.50
4.51
4.52
4.53
4.54
Notes to Financial Statements—(Continued)
Form of 8.00% Senior Secured Notes due 2025, is hereby incorporated by reference from Exhibit A to
Exhibit 4.59 hereto.
Form of Warrant to Purchase Common Stock dated July 31, 2020, filed as Exhibit 4.6 to the Company's
Form 8-K dated September 30, 2020, is hereby incorporated by reference.
Form of Warrant to Purchase Common Stock dated October 2, 2020, filed as Exhibit 4.1 to the Company's
Form 8-K dated October 2, 2020, is hereby incorporated by reference.
Warrant Agreement, dated as of January 15, 2021, between the Company and the United States Department
of the Treasury, filed as Exhibit 4.64 to the Company's Form 10-K dated February 10, 2021 is hereby
incorporated by reference.
Warrant Agreement, dated as of April 29, 2021, between the Company and the United States Department of
the Treasury, filed as Exhibit 4.2 to the Company’s Form 10-Q filed on July 28, 2021, is hereby
incorporated by reference.
Warrant to Purchase Common Stock dated March 5, 2021, filed as Exhibit 4.1 to the Company’s Form 8-K
dated May 18, 2021, is hereby incorporated by reference.
Warrant to Purchase Common Stock dated April 29, 2021, filed as Exhibit 4.2 to the Company’s Form 8-K
dated May 18, 2021, is hereby incorporated by reference.
Warrant to Purchase Common Stock dated June 3, 2021, filed as Exhibit 4.1 to the Company's Form 8-K
dated June 30, 2021, is hereby incorporated by reference.
Second Supplemental Indenture, dated April 30, 2021, between the Company and Wilmington Trust,
National Association, as trustee, filed as Exhibit 4.2 to the Company’s Form 8-K dated April 30, 2021, is
hereby incorporated by reference.
Form of Global Note representing the 1.00% Convertible Senior Notes due 2026, filed as Exhibit 4.3 to the
Company’s Form 8-K dated April 30, 2021, is hereby incorporated by reference.
Supplemental Indenture, dated as of November 17, 2022, among Spirit IP Cayman Ltd., Spirit Loyalty
Cayman Ltd., the guarantors named therein and Wilmington Trust, National Association, as trustee and
collateral custodian, filed as Exhibit 4.2 to the Company’s Form 8-K dated November 17, 2022, is hereby
incorporated by reference.
Form of 8.00% Senior Secured Notes due 2025, is hereby incorporated by reference from Exhibit A to
Exhibit 4.71 hereto.
Brief Description of all Securities Registered under Section 12 of the Exchange Act.
General Release, dated January 14, 2014, between Spirit Airlines, Inc. and Ben Baldanza, filed as Exhibit
10.1 to the Company's Form 10-K dated February 20, 2014, is hereby incorporated by reference.
Offer Letter, dated September 7, 2013, between Spirit Airlines, Inc. and John Bendoraitis, filed as Exhibit
10.3 to the Company's Form 10-K dated February 20, 2014, is hereby incorporated by reference.
Tax Receivable Agreement, dated as of June 1, 2011 between Spirit Airlines, Inc., Indigo Pacific Partners
LLC, and OCM FIE, LLC, filed as Exhibit 10.12 to the Company's Form S-1 Registration Statement (No.
333-178336), is hereby incorporated by reference.
Airline-Airport Lease and Use Agreement, dated as of August 17, 1999, between Broward County and
Spirit Airlines, Inc., as supplemented by Addendum dated August 17, 1999, filed as Exhibit 10.14 to the
Company's Amendment No. 3 to Form S-1 Registration Statement (No. 333-169474), is hereby incorporated
by reference.
Spirit Airlines, Inc. Executive Severance Plan, filed as Exhibit 10.16 to the Company's Amendment No. 3 to
Form S-1 Registration Statement (No. 333-169474), is hereby incorporated by reference.
120
4.55
4.56
4.57
4.58
4.59
4.60
4.61
4.62
4.63
4.64
4.65
4.66
4.67
10.1+
10.2+
10.3
10.4
10.5+
10.6+
10.7+
10.8+
10.9
10.10+
10.11+
10.12+
10.13
10.14
10.15
10.16
10.17
10.18
10.19+
10.20+
10.21
10.22
10.23
Notes to Financial Statements—(Continued)
Amended and Restated Spirit Airlines, Inc. 2005 Stock Incentive Plan and related documents, filed as
Exhibit 10.17 to the Company's Amendment No. 3 to Form S-1 Registration Statement (No. 333-169474), is
hereby incorporated by reference.
Spirit Airlines, Inc. 2011 Equity Incentive Award Plan, filed as Exhibit 10.2 to the Company's Form S-8
Registration Statement (No. 333-174812), is hereby incorporated by reference.
Offer Letter, dated September 10, 2007, between Spirit Airlines, Inc. and Thomas Canfield, filed as Exhibit
10.22 to the Company's Amendment No. 3 to Form S-1 Registration Statement (No. 333-169474), is hereby
incorporated by reference.
Form of Indemnification Agreement between Spirit Airlines, Inc. and its directors and executive officers,
filed as Exhibit 10.24 to the Company's Amendment No. 3 to Form S-1 Registration Statement (No.
333-169474), is hereby incorporated by reference.
Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the
Spirit Airlines, Inc. 2011 Equity Incentive Award Plan, filed as Exhibit 10.4 to the Company's Form S-8
Registration Statement (No. 333-174812), is hereby incorporated by reference.
Letter Agreement, dated January 16, 2012, by and between Spirit Airlines, Inc. and Jim Lynde, filed as
Exhibit 10.27 to the Company's Form 10-K dated February 20, 2014, is hereby incorporated by reference.
Separation and Transition Agreement with Tony Lefebvre, dated April 29, 2013, filed as Exhibit 10.4 to the
Company's Form 10-Q dated July 26, 2013, is hereby incorporated by reference.
Framework Agreement, dated as of October 1, 2014 by and between Spirit Airlines, Inc., BNP Paribas, New
York Branch, Landesbank Hessen-Thuringen Girozentrale, Natixis, New York Branch, KfW IPEX-Bank
GmbH, Investec Bank PLC and Wilmington Trust Company, filed as Exhibit 10.1 to the Company's Form
10-Q dated October 28, 2014, is hereby incorporated by reference.
Form of Performance Share Award Grant Notice and Performance Share Award Agreement for awards
under the Spirit Airlines, Inc. 2015 Incentive Award Plan, filed as Exhibit 10.2 to the Company’s Form 10-
Q dated July 24, 2015, is hereby incorporated by reference.
Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement for awards
under the Spirit Airlines, Inc. 2015 Incentive Award Plan, filed as Exhibit 10.3 to the Company’s Form 10-
Q dated July 24, 2015, is hereby incorporated by reference.
Form of Annual Cash Award Grant Notice and Annual Cash Award Agreement for awards under the Spirit
Airlines, Inc. 2015 Incentive Award Plan, filed as Exhibit 10.4 to the Company’s Form 10-Q dated July 24,
2015, is hereby incorporated by reference.
Non-Employee Director Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit
Award Agreement for awards under the Spirit Airlines, Inc. 2015 Incentive Award Plan, filed as Exhibit
10.5 to the Company’s Form 10-Q dated July 24, 2015, is hereby incorporated by reference.
Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement for awards under the
Spirit Airlines, Inc. 2011 Equity Incentive Award Plan, filed as Exhibit 10.6 to the Company’s Form 10-Q
dated July 24, 2015, is hereby incorporated by reference.
Robert L. Fornaro Employment Agreement, filed as Exhibit 10.35 to the Company's Form 10-K dated
February 17, 2016, is hereby incorporated by reference.
B. Ben Baldanza Separation Agreement, filed as Exhibit 10.36 to the Company's Form 10-K dated February
17, 2016, is hereby incorporated by reference.
Spirit Airlines, Inc. 2017 Executive Severance Plan, filed as Exhibit 10.1 to the Company's Form 8-K dated
August 22, 2017, is hereby incorporated by reference.
Form of Performance Award Grant Notice and Performance Award Agreement under the Spirit Airlines,
Inc. 2015 Equity Incentive Award Plan, filed as Exhibit 10.41 to the Company's Form 10-K dated February
13, 2018, is hereby incorporated by reference.
Form of Severance and Release Agreement, filed as Exhibit 10.42 to the Company's Form 10-K dated
February 13, 2018, is hereby incorporated by reference.
121
Notes to Financial Statements—(Continued)
Aircraft Sale Agreement, dated as of March 28, 2018, among Spirit Airlines, Inc. as Buyer and Wilmington
Trust Company (acting not in its individual capacity, but solely as owner trustee under each Trust
Agreement) as Sellers and AerCap Global Aviation Trust as Owner Participant; Aircraft Make and Model:
14 used Airbus model A319-100; Aircraft Manufacturer's Serial Numbers: 2433, 2470, 2473, 2485, 2490,
2673, 2679, 2704, 2711, 2978, 3007, 3017, 3026 and 3165; Make and Model of Engines: International Aero
Engines AG (IAE) model V2524-A5, filed as Exhibit 10.1 to the Company’s Form 10-Q dated April 26,
2018, is hereby incorporated by reference.
Letter Agreement, effective January 1, 2018, by and between Spirit Airlines, Inc. and Edward M. Christie
III, filed as Exhibit 10.2 to the Company’s Form 10-Q dated April 26, 2018, is hereby incorporated by
reference.
Amendment No. 26 to Navitaire Hosted Services Agreement, effective as of February 1, 2018, by and
between Navitaire LLC and Spirit Airlines, Inc., filed as Exhibit 10.3 to the Company’s Form 10-Q/A dated
June 12, 2018, is hereby incorporated by reference.
Rocky B. Wiggins Offer Letter, filed as Exhibit 10.1 to the Company’s Form 10-Q dated October 24, 2018,
is hereby incorporated by reference.
Scott M. Haralson Offer Letter, filed as Exhibit 10.2 to the Company’s Form 10-Q dated October 24, 2018,
is hereby incorporated by reference.
Edward M. Christie Employment Agreement Amendment, filed as Exhibit 10.1 to the Company's Form 10-
K dated February 13. 2019, is hereby incorporated by reference.
Robert L. Fornaro Employment Agreement Amendment , filed as Exhibit 10.2 to the Company's Form 10-K
dated February 13, 2019, is hereby incorporate by reference.
Credit and Guaranty Agreement, dated as of March 30, 2020, between Citibank, N.A, as Administrative
Agent and Wilmington Trust, National Association, as Collateral Agent, filed as Exhibit 10.1 to the
Company's Form 10-Q dated May 6, 2020, is hereby incorporated by reference.
Payroll Support Program Agreement, dated April 20, 2020, between the Company and the United States
Department of the Treasury, filed as Exhibit 10.2 to the Company's Form 10-Q dated May 6, 2020, is hereby
incorporated by reference.
Promissory Note, dated April 20, 2020, issued by the Company in the name of the United States Department
of the Treasury, filed as Exhibit 10.3 to the Company's Form 10-Q dated May 6, 2020, is hereby
incorporated by reference.
Matt Klein Offer Letter, filed as Exhibit 10.4 to the Company's Form 10-Q dated May 6, 2020, is hereby
incorporated by reference.
Payroll Support Program Agreement, dated January 15, 2021, between the Company and the United States
Department of the Treasury, filed as Exhibit 10.53 to the Company's Form 10-K dated February 10, 2021, is
hereby incorporated by reference.
Promissory Note, dated January 12, 2021, issued by the Company in the name of the United States
Department of the Treasury, filed as Exhibit 10.54 to the Company's Form 10-K dated February 10, 2021 is
hereby incorporated by reference.
First Amendment to Credit and Guaranty Agreement, dated as of March 12, 2021, among Spirit Airlines,
Inc., the lenders party thereto, Citibank, N.A., as administrative agent and issuing lender, and Wilmington
Trust, National Association, as collateral agent, filed as Exhibit 10.1 to the Company’s Form 8-K dated
March 18, 2021, is hereby incorporated by reference.
Payroll Support Program Agreement, dated April 29, 2021, between the Company and the United States
Department of the Treasury, filed as Exhibit 10.1 to the Company’s Form 10-Q dated July 28, 2021, is
hereby incorporated by reference.
122
10.24†
10.25+
10.26†
10.27+
10.28+
10.29+
10.30+
10.31
10.32
10.33
10.34+
10.35
10.36
10.37†
10.38
Notes to Financial Statements—(Continued)
Promissory Note, dated April 29, 2021, issued by the Company in the name of the United States Department
of the Treasury, filed as Exhibit 10.2 to the Company’s Form 10-Q dated July 28, 2021, is hereby
incorporated by reference.
Melinda Grindle Offer Letter, filed as Exhibit 10.58 to the Company's Form 10-K dated February 8, 2022, is
hereby incorporated by reference.
Termination Agreement, dated July 27, 2022, by and among Frontier Group Holdings, Inc., Top Gun
Acquisition Corp. and Spirit Airlines, Inc., filed as Exhibit 10.1 to the Company’s Form 8-K dated July 28,
2022, is hereby incorporated by reference.
Second Amendment to Credit and Guaranty Agreement, dated as of November 18, 2022, among Spirit
Airlines, Inc. and Citibank, N.A., as Administrative Agent, filed as exhibit 10.60 to the Company’s Form
10-K dated February 6, 2023, is hereby incorporated by reference.
Aircraft Sale and Purchase Agreement, dated January 13, 2023, by and between Spirit Airlines, Inc. and
Gryphon Trading Company, LLC, filed as exhibit 10.61 to the Company’s Form 10-K dated February 6,
2023, is hereby incorporated by reference.
Airbus A320 NEO Family Purchase Agreement, dated as of December 20, 2019, between Airbus S.A.S. and
Spirit Airlines ,Inc. as amended by Amendment No. 1 dated as of June 24, 2020, together with the amended
and restated Letter Agreement No. 8, dated as of December 20, 2019, filed as Exhibit 10.1 to the Company's
Form 10-Q dated July 22, 2020 and Amendment No. 6 dated as of July 31, 2023, together with the Second
Amended and Restated Letter Agreement No. 4, dated as of July 31, 2023, filed as exhibit 10.1 to the
Company’s Form 10-Q dated October 26, 2023, is hereby incorporated by reference.
Amended and Restated V2500 General Terms of Sale, dated as of October 1, 2013, by and between Spirit
Airlines, Inc. and IAE International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of
October 1, 2013.
Amended and Restated Fleet Hour Agreement, dated as of October 1, 2013, by and between Spirit Airlines,
Inc. and IAE International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1,
2013.
V2500 General Terms of Sale, dated as of October 1, 2013, by and between Spirit Airlines, Inc. and IAE
International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1, 2013 and Side
Letter No. 2 dated as of October 1, 2013.
Fleet Hour Agreement, dated of as October 1, 2013, by and between Spirit Airlines, Inc. and IAE
International Aero Engines AG, as supplemented by Side Letter No. 1 dated as of October 1, 2013.
PurePower PW1100G Engine Purchase Support Agreement, dated as of October 1, 2013, by and between
the Company and United Technologies Corporation, acting through its Pratt & Whitney Division.
Hosted Services Agreement, dated as of February 28, 2007, between Spirit Airlines, Inc. and Navitaire Inc.,
as amended by Amendment No. 1 dated as of October 23, 2007, Amendment No. 2 dated as of May 15,
2008, Amendment No. 3 dated as of November 21, 2008, Amendment No. 4 dated as of August 17, 2009
and Amendment No. 5 dated November 4, 2009.
Signatory Agreement, dated as of May 21, 2009, between Spirit Airlines, Inc. and U.S. Bank National
Association, as amended by First Amendment dated January 18, 2010.
Terms and Conditions for Worldwide Acceptance of the American Express Card by Airlines, dated
September 4, 1998, between Spirit Airlines, Inc. and American Express Travel Related Services Company,
Inc., as amended January 1, 2003 and August 28, 2003.
Lease, dated as of June 17, 1999, between Sunbeam Development Corporation and Spirit Airlines, Inc., as
amended by Lease Modification and Contraction Agreement dated as of May 7, 2009.
Lease Modification and Extension Agreement, dated as of September 26th, 2013, between Sunbeam
Development Corporation and Spirit Airlines, Inc.
Lease, dated as of September 26th, 2013, between Sunbeam Development Corporation and Spirit Airlines,
Inc.
10.39
10.40+
10.41
10.42†
10.43†
10.44†
10.45†
10.46†
10.47†
10.48†
10.49†
10.50†
10.51†
10.52†
10.53†
10.54†
10.55†
123
Notes to Financial Statements—(Continued)
Airbus A320 Family Purchase Agreement, dated as of May 5, 2004, between AVSA, S.A.R.L. and Spirit
Airlines, Inc.; as amended by Amendment No. 1 dated as of December 21, 2004, Amendment No. 2 dated as
of April 15, 2005, Amendment No. 3 dated as of June 30, 2005, Amendment No. 4 dated as of October 27,
2006 (as amended by Letter Agreement No. 1, dated as of October 27, 2006, to Amendment No. 4 and
Letter Agreement No. 2, dated as of October 27, 2006, to Amendment No. 4), Amendment No. 5 dated as of
March 5, 2007, Amendment No. 6 dated as of March 27, 2007, Amendment No. 7 dated as of June 26, 2007
(as amended by Letter Agreement No. 1, dated as of June 26, 2007, to Amendment No. 7), Amendment No.
8 dated as of February 4, 2008, Amendment No. 9 dated as of June 24, 2008 (as amended by Letter
Agreement No. 1, dated as of June 24, 2008, to Amendment No. 9) and Amendment No. 10 dated July 17,
2009 (as amended by Letter Agreement No. 1, dated as of July 17, 2009, to Amendment No. 10), and as
supplemented by Letter Agreement No. 1 dated as of May 5, 2004, Letter Agreement No. 2 dated as of May
5, 2004, Letter Agreement No. 3 dated as of May 5, 2004, Letter Agreement No. 4 dated as of May 5, 2004,
Letter Agreement No. 5 dated as of May 5, 2004, Letter Agreement No. 6 dated as of May 5, 2004, Letter
Agreement No. 7 dated as of May 5, 2004, Letter Agreement No. 8 dated as of May 5, 2004, Letter
Agreement No. 9 dated as of May 5, 2004, Letter Agreement No. 10 dated as of May 5, 2004 and Letter
Agreement No. 11 dated as of May 5, 2004, as further amended by Amendment No. 11 dated as of
December 29, 2011 (as amended by Letter Agreement No. 1 dated as of December 29, 2011, Letter
Agreement No. 2 dated as of December 29, 2011, Letter Agreement No. 3 dated as of December 29, 2011,
Letter Agreement No. 4 dated as of December 29, 2011, Letter Agreement No. 5 dated as of December 29,
2011, Letter Agreement No. 6 dated as of December 29, 2011, Letter Agreement No. 7 dated as of
December 29, 2011 and Letter Agreement No. 8 dated as of December 29, 2011); Amendment No. 12, dated
as of June 29, 2012; Amendment No. 13, dated as of January 10, 2013; and Amendment No. 14, dated as of
June 20, 2013; and Amendment No. 15 dated as of November 21, 2013; Amendment No. 16 dated as of
December 17, 2013; Amendment No. 17 dated as of March 11, 2014; Amendment No. 18 dated as of July
31, 2014; Amendment No. 19 dated as of August 21, 2015; Amendment No. 20 dated as of April 27, 2016,
and Amendment No. 26 dated as of June 24, 2020, filed as Exhibit 10.2 to the Company's Form 10-Q dated
July 22, 2020, which is hereby incorporated by reference.
Addendum and Amendment to the Agreement Governing Acceptance of the American Express Card by
Airlines, dated as of June 24, 2011, by and between Spirit Airlines, Inc. and American Express Travel
Related Services Company, Inc.
Second Amendment to Signatory Agreement, effective as of September 6, 2011, by and between the
Company and U.S. Bank, National Association.
Subsidiaries of the Registrant.
Consent of Ernst & Young LLP, independent registered public accounting firm.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Spirit Airlines, Inc. Dodd-Frank Clawback Policy
10.56†
10.57†
10.58†
21.0
23.1
31.1
31.2
32.1*
97.1
101.INS
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XBRL Taxonomy Extension Calculation Linkbase
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XBRL Taxonomy Extension Definition Linkbase Document.
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101.PRE
XBRL Taxonomy Extension Presentation Linkbase
124
Notes to Financial Statements—(Continued)
†
+
*
Confidential treatment granted for certain portions of this Exhibit pursuant to Rule 406 under the Securities Act or Rule
24b-2 under the Exchange Act, which portions are omitted and filed separately with the Securities and Exchange
Commission.
Indicates a management contract or compensatory plan or arrangement.
Exhibits 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act,
or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in
any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise
specifically stated in such filing.
125
Notes to Financial Statements—(Continued)
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 9, 2024
SPIRIT AIRLINES, INC.
By:
/s/ Scott M. Haralson
Scott M. Haralson
Executive Vice President and Chief Financial Officer
126
Notes to Financial Statements—(Continued)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Edward Christie, Scott Haralson and Thomas Canfield, and each of them, their true and lawful attorneys-in-fact, each
with full power of substitution, for them in any and all capacities, to sign any amendments to this report on Form 10-K and to
file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons
on behalf of the registrant in the capacities and on the dates indicated
Signature
Title
Date
President, Chief Executive Officer and Director (Principal
Executive Officer)
February 9, 2024
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
February 9, 2024
Vice President, Controller (Principal Accounting Officer)
February 9, 2024
Director (Chairman of the Board)
February 9, 2024
February 9, 2024
February 9, 2024
February 9, 2024
February 9, 2024
February 9, 2024
February 9, 2024
/s/ Edward M. Christie
Edward M. Christie
/s/ Scott M. Haralson
Scott M. Haralson
/s/ Brian J. McMenamy
Brian J. McMenamy
/s/ H. McIntyre Gardner
H. McIntyre Gardner
/s/ Mark B. Dunkerley
Mark B. Dunkerley
/s/ Robert D. Johnson
Robert D. Johnson
/s/ Barclay G. Jones
Barclay G. Jones
Director
Director
Director
/s/ Christine P. Richards
Director
Christine P. Richards
/s/ Myrna M. Soto
Director
Myrna M. Soto
/s/ Dawn M. Zier
Director
Dawn M. Zier
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