UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
Form 10-Q

(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2023
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35186

SPIRIT AIRLINES, INC.
(Exact name of registrant as specified in its charter)

Delaware38-1747023
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
2800 Executive Way
Miramar, Florida
MiramarFlorida33025
(Address of principal executive offices)(Zip Code)

(954) 447-7920
(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each className of exchange on which registeredTrading Symbol
Common Stock, $0.0001 par valueNew York Stock ExchangeSAVE

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  ý☒  No  o☐

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

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,” “small“smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerý☒Accelerated filero☐
Non-accelerated filero☐Smaller reporting companyo☐
(Do not check if a smaller reporting company)Emerging growth companyo☐
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 7(a)(2)(B)13(a) of the SecuritiesExchange Act.     o☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  o☐    No  ý☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on October 19, 2017:
April 20, 2023:
ClassNumber of Shares
Common Stock, $0.0001 par value69,373,154



Table of Contents
INDEX
ClassNumber of Shares
Common Stock, $0.0001 par value109,160,896

1

Table of Contents
INDEX
Page No.
1
1
2
3
4
5
56
1721
3031
3233
3334
3435
3536
37
37
37
37
38
39

2



PART I. Financial Information
ITEM 1.UNAUDITED CONDENSED FINANCIAL STATEMENTS
ITEM 1.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Spirit Airlines, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Operating revenues:       
Passenger$356,207
 $331,004
 $1,027,891
 $900,031
Non-ticket331,024
 290,325
 952,768
 843,574
Total operating revenues687,231
 621,329
 1,980,659
 1,743,605
        
Operating expenses:       
Salaries, wages and benefits134,114
 120,190
 391,144
 349,530
Aircraft fuel158,300
 121,844
 440,376
 321,018
Aircraft rent53,396
 49,367
 163,032
 151,433
Landing fees and other rents48,498
 39,345
 134,538
 114,096
Depreciation and amortization36,840
 25,304
 103,680
 73,370
Maintenance, materials and repairs26,176
 30,443
 81,473
 72,010
Distribution29,469
 25,565
 85,875
 73,190
Special charges7,853
 7,355
 12,629
 31,609
Loss on disposal of assets516
 423
 3,114
 1,166
Other operating87,965
 66,277
 268,553
 197,833
Total operating expenses583,127
 486,113
 1,684,414
 1,385,255
        
Operating income104,104
 135,216
 296,245
 358,350
        
Other (income) expense:       
Interest expense15,018
 11,362
 41,237
 29,588
Capitalized interest(3,203) (3,067) (10,125) (9,163)
Interest income(2,605) (1,222) (5,746) (4,235)
Other expense114
 180
 221
 407
Total other (income) expense9,324
 7,253
 25,587
 16,597
        
Income before income taxes94,780
 127,963
 270,658
 341,753
Provision for income taxes34,590
 46,581
 100,390
 125,367
        
Net income$60,190
 $81,382
 $170,268
 $216,386
Basic earnings per share$0.87
 $1.17
 $2.45
 $3.06
Diluted earnings per share$0.87
 $1.17
 $2.45
 $3.05
 Three Months Ended March 31,
20232022
Operating revenues:
Passenger$1,327,473 $949,744 
Other22,301 17,571 
Total operating revenues1,349,774 967,315 
Operating expenses:
Aircraft fuel487,711 368,585 
Salaries, wages and benefits
389,185 305,890 
Landing fees and other rents97,345 82,936 
Depreciation and amortization77,991 76,191 
Aircraft rent85,267 66,044 
Maintenance, materials and repairs54,414 45,515 
Distribution48,017 35,351 
Special charges13,983 15,563 
Loss on disposal of assets7,100 11,552 
Other operating201,156 171,156 
Total operating expenses1,462,169 1,178,783 
Operating income (loss)(112,395)(211,468)
Other (income) expense:
Interest expense51,793 37,880 
Capitalized interest(7,648)(5,262)
Interest income(15,434)(467)
Other (income) expense542 417 
Total other (income) expense29,253 32,568 
Income (loss) before income taxes(141,648)(244,036)
Provision (benefit) for income taxes(37,737)(49,333)
Net income (loss)$(103,911)$(194,703)
Basic earnings (loss) per share$(0.95)$(1.79)
Diluted earnings (loss) per share$(0.95)$(1.79)
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

1


Spirit Airlines, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in thousands)

Three Months Ended March 31,
20232022
Net income (loss)$(103,911)$(194,703)
Unrealized gain (loss) on short-term investment securities and cash and cash equivalents, net of deferred taxes of $50 and $(78)173 (267)
Interest rate derivative loss reclassified into earnings, net of taxes of $12 and $1433 37 
Other comprehensive income (loss)$206 $(230)
Comprehensive income (loss)$(103,705)$(194,933)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$60,190
 $81,382
 $170,268
 $216,386
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of $7, $3, ($6) and $313
 4
 (11) 4
Interest rate derivative losses reclassified into earnings, net of taxes of $31, $32, $92 and $97
53
 56
 160
 170
Other comprehensive income (loss)$66
 $60
 $149
 $174
Comprehensive income$60,256
 $81,442
 $170,417
 $216,560

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



2

Spirit Airlines, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
 September 30, 2017 December 31, 2016
Assets   
Current assets:   
Cash and cash equivalents$863,680
 $700,900
Short-term investment securities100,732

100,155
Accounts receivable, net46,235
 41,136
Aircraft maintenance deposits, net166,386

87,035
Prepaid expenses and other current assets67,707
 46,619
Total current assets1,244,740
 975,845
    
Property and equipment:   
Flight equipment2,017,888
 1,461,525
Ground property and equipment148,324
 126,206
Less accumulated depreciation(183,065) (122,509)
 1,983,147
 1,465,222
Deposits on flight equipment purchase contracts304,732
 325,688
Long-term aircraft maintenance deposits138,672
 199,415
Deferred heavy maintenance, net87,566
 75,534
Other long-term assets112,085
 110,223
Total assets$3,870,942
 $3,151,927
    
Liabilities and shareholders’ equity   
Current liabilities:   
Accounts payable$30,961
 $15,193
Air traffic liability276,933
 206,392
Current maturities of long-term debt105,958
 84,354
Other current liabilities249,132
 226,011
Total current liabilities662,984
 531,950
    
Long-term debt, less current maturities1,214,138
 897,359
Deferred income taxes406,080
 308,143
Deferred gains and other long-term liabilities17,204
 19,868
Shareholders’ equity:   
Common stock
7
 7
Additional paid-in-capital557,772
 551,004
Treasury stock, at cost(219,930) (218,692)
Retained earnings1,233,901
 1,063,633
Accumulated other comprehensive loss(1,214) (1,345)
Total shareholders’ equity1,570,536
 1,394,607
Total liabilities and shareholders’ equity$3,870,942
 $3,151,927
March 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$1,287,711 $1,346,350 
Restricted cash119,400 119,392 
Short-term investment securities108,357 107,115 
Accounts receivable, net186,070 197,276 
Income tax receivable36,261 36,261 
Prepaid expenses and other current assets180,284 187,589 
Total current assets1,918,083 1,993,983 
Property and equipment:
Flight equipment4,216,067 4,326,515 
Ground property and equipment574,988 521,802 
Less accumulated depreciation(1,052,373)(1,098,819)
3,738,682 3,749,498 
Operating lease right-of-use assets2,859,829 2,699,574 
Pre-delivery deposits on flight equipment516,099 487,553 
Deferred heavy maintenance, net230,014 190,349 
Other long-term assets59,610 63,817 
Total assets$9,322,317 $9,184,774 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable$53,046 $75,449 
Air traffic liability566,856 429,618 
Current maturities of long-term debt, net, and finance leases261,724 346,888 
Current maturities of operating leases195,039 188,296 
Other current liabilities675,944 556,330 
Total current liabilities1,752,609 1,596,581 
Long-term debt, net and finance leases, less current maturities3,164,061 3,200,376 
Operating leases, less current maturities2,605,011 2,455,619 
Deferred income taxes189,054 226,843 
Deferred gains and other long-term liabilities141,736 133,704 
Shareholders’ equity:
Common stock11 11 
Additional paid-in-capital1,149,588 1,146,015 
Treasury stock, at cost(79,671)(77,998)
Retained earnings400,308 504,219 
Accumulated other comprehensive loss(390)(596)
Total shareholders’ equity1,469,846 1,571,651 
Total liabilities and shareholders’ equity$9,322,317 $9,184,774 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

3

Spirit Airlines, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 Nine Months Ended September 30,
 2017 2016
Operating activities:
 
Net income$170,268
 $216,386
Adjustments to reconcile net income to net cash provided by operations:
 
Losses reclassified from other comprehensive income252

267
Equity-based compensation6,723
 5,503
Allowance for doubtful accounts (recoveries)(53) 213
Amortization of deferred gains and losses and debt issuance costs6,415
 3,837
Depreciation and amortization103,680
 73,370
Deferred income tax expense97,834
 77,627
Loss on disposal of assets3,114
 1,166
Lease termination costs12,629

31,609



 

Changes in operating assets and liabilities:

 

Accounts receivable(5,046) (7,840)
Aircraft maintenance deposits, net(28,422) (38,299)
Prepaid income taxes(160)
66,218
Long-term deposits and other assets(81,622) (43,252)
Accounts payable13,829
 (7,044)
Air traffic liability70,540
 21,963
Other liabilities16,152
 38,317
Other339
 —
Net cash provided by operating activities386,472
 440,041
Investing activities:   
Purchase of available-for-sale investment securities(96,851)
(100,076)
Proceeds from the maturity of available-for-sale investment securities95,881

—
Proceeds from sale of property and equipment—
 50
Pre-delivery deposits for flight equipment, net of refunds(121,702) (109,260)
Capitalized interest(8,054)
(7,032)
Purchase of property and equipment(428,061) (447,455)
Net cash used in investing activities(558,787) (663,773)
Financing activities:   
Proceeds from issuance of long-term debt405,827

378,569
Proceeds from stock options exercised45
 92
Payments on debt and capital lease obligations(63,643) (29,663)
Excess tax (deficiency) benefit from equity-based compensation—
 (497)
Repurchase of common stock(1,238) (102,390)
Debt issuance costs(5,896)
(107)
Net cash provided by financing activities335,095
 246,004
Net (decrease) increase in cash and cash equivalents162,780
 22,272
Cash and cash equivalents at beginning of period700,900
 803,632
Cash and cash equivalents at end of period$863,680
 $825,904
Supplemental disclosures   
Cash payments for:   
Interest, net of capitalized interest$22,541
 $26,025
Income taxes paid, net of refunds$4,352
 $(18,169)
Non-cash transactions:   
Capital expenditures funded by capital lease borrowings$(1,370)
$(31)

 Three Months Ended March 31,
20232022
Operating activities:
Net income (loss)$(103,911)$(194,703)
Adjustments to reconcile net loss to net cash provided (used) by operations:
Losses reclassified from other comprehensive income45 51 
Share-based compensation3,273 4,046 
Allowance for doubtful accounts (recoveries)6 — 
Amortization of debt issuance costs3,981 3,421 
Depreciation and amortization77,991 76,191 
Accretion of 8.00% senior secured notes1,052 261 
Amortization of debt discount3,808 2,538 
Deferred income tax benefit(37,851)(49,647)
Loss on disposal of assets7,100 11,552 
Changes in operating assets and liabilities:
Accounts receivable, net11,200 (31,844)
Deposits and other assets580 (36,183)
Deferred heavy maintenance(56,105)(17,698)
Accounts payable(37,048)(5,188)
Air traffic liability137,238 175,986 
Other liabilities129,853 80,568 
Other(435)194 
Net cash provided (used) by operating activities140,777 19,545 
Investing activities:
Purchase of available-for-sale investment securities(20,593)(26,749)
Proceeds from the maturity and sale of available-for-sale investment securities20,000 26,500 
Proceeds from sale of property and equipment23,845 — 
Pre-delivery deposits on flight equipment, net of refunds(25,443)(5,858)
Capitalized interest(4,862)(4,172)
Purchase of property and equipment(60,513)(47,340)
Net cash provided (used) in investing activities(67,566)(57,619)
Financing activities:
Payments on debt obligations(129,435)(44,338)
Payments on finance lease obligations(179)(210)
Repurchase of common stock(1,673)(1,772)
Debt issuance costs(555)(1,200)
Net cash provided (used) by financing activities(131,842)(47,520)
Net increase (decrease) in cash, cash equivalents, and restricted cash(58,631)(85,594)
Cash, cash equivalents, and restricted cash at beginning of period (1)1,465,742 1,428,907 
Cash, cash equivalents, and restricted cash at end of period (1)$1,407,111 $1,343,313 
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest$31,999 $25,781 
Income taxes paid (received), net$466 $303 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$89,807 $67,089 
Financing cash flows for finance leases$10 $18 
Non-cash transactions:
Capital expenditures funded by finance lease borrowings$145 $— 
Capital expenditures funded by operating lease borrowings$202,587 $129,213 
(1) The sum of cash and cash equivalents and restricted cash on the Company's condensed consolidated balance sheets equals cash, cash equivalents, and restricted cash in the Company's condensed consolidated statement of cash flows.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
4

Spirit Airlines, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited, in thousands)
Three Months Ended March 31, 2022
Common StockAdditional Paid-In-CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance at December 31, 2021$11 $1,131,826 $(75,639)$1,058,369 $(532)$2,114,035 
Share-based compensation— 4,046 — — — 4,046 
Repurchase of common stock— — (1,772)— — (1,772)
Changes in comprehensive income— — — — (230)(230)
Net income (loss)— — — (194,703)— (194,703)
Balance at March 31, 2022$11 $1,135,872 $(77,411)$863,666 $(762)$1,921,376 


Three Months Ended March 31, 2023
Common StockAdditional Paid-In-CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance at December 31, 2022$11 $1,146,015 $(77,998)$504,219 $(596)$1,571,651 
Convertible debt conversions— 300 — — — 300 
Share-based compensation— 3,273 — — — 3,273 
Repurchase of common stock— — (1,673)— — (1,673)
Changes in comprehensive income— — — — 206 206 
Net income (loss)— — — (103,911)— (103,911)
Balance at March 31, 2023$11 $1,149,588 $(79,671)$400,308 $(390)$1,469,846 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

5

Notes to Condensed Consolidated Financial Statements
(unaudited)
1.Basis of Presentation
1. Basis of Presentation

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

These unaudited condensed consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the audited annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP)("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 20162022 filed with the Securities and Exchange Commission on February 13, 2017.6, 2023.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect both the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

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

2. Merger

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 conformwhich and subject to the current year's presentation.
2.Recent Accounting Developments

Revenue from Contractsterms and conditions therein, Merger Sub will merge with Customers

In May 2014,and into Spirit, with Spirit continuing as the Financial Accounting Standards Boardsurviving entity (the FASB) issued Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09) "Revenue from Contracts with Customers." The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The new guidance is effective for the Company in the first quarter of 2018. Entities have the option to use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company currently anticipates utilizing the full retrospective method of adoption allowed by the standard, in order to provide for comparative results in all periods presented, and plans to adopt the standard as of January 1, 2018. While the Company is still evaluating the impact, it currently believes the most significant impact of this ASU will be the elimination of the incremental cost method for frequent flier program accounting, which will require the Company to re-value and record a liability associated with customer flight miles earned as part of the Company’s frequent flier program with a relative fair value approach. While our evaluation is ongoing, the Company currently estimates that applying a relative fair value would increase its air traffic liability by approximately $10 million at the date of adoption. The Company also expects the classification and timing of recognition of certain ancillary fees to be impacted by the adoption of ASU 2014-09. While the Company believes the adoption will not have a significant impact on earnings, the classification of certain revenues, such as bags, seats and other travel-related fees may be deemed part of the single performance obligation of providing passenger transportation. The Company expects that these revenues currently classified as non-ticket revenue, approximately $1 billion annually, will be reclassified to passenger revenue after adoption.

Financial Instruments

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10)“Merger”).” ASU 2016-01 makes several modifications to Subtopic 825-10 including the elimination of the available-for-sale classification of equity investments, and requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in net income. ASU 2016-01 is effective for the Company for interim and annual periods beginning January 1, 2018 and is not expected to have a material impact on the Company’s financial statements.

Leases

Notes to Condensed Financial Statements—(Continued)

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This standard will require all leases with durations greater than twelve months to be recognized on the condensed balance sheet and is effective for the Company in the first quarter of 2019, with early adoption permitted. The Company is currently evaluating the new guidance and believes adoption of this standard will have a significant impact on its condensed balance sheets although adoption is not expected to significantly change the recognition, measurement or presentation of lease expenses within the statements of operations and cash flows. See Note 8, Commitments and Contingencies for information regarding the Company's undiscounted future lease payments and the timing of those payments.

Share-Based Compensation

In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. The Company adopted this guidance on January 1, 2017. As a result excess income tax benefitsof the Merger, each outstanding share of Spirit's common stock (except for dissenting shares, treasury stock, and deficiencies relatedshares 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 share-based compensation are now included within income tax expense rather thanreceive 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 capital. For the nine months ended September 30, 2017, $0.6 millionevent the Closing occurs after the record date of, income tax deficiency relatedbut before the payment date of any such additional prepayment, to share-based compensation was included within income tax expense on the Company's statementsextent payable after the Closing), not to exceed $1.15 per share of operations. Additionally, excess income tax benefits and deficiencies for share-based payments are now included in net operating cash flows rather than net financing cash flows. The changes have been applied prospectivelySpirit common stock, by JetBlue to Spirit stockholders in accordance with the guidanceMerger Agreement (each such payment is referred to as an “Additional Prepayment” and prior periods have notsuch $0.10 amount is referred to as the “Additional Prepayment Amount”). If an aggregate of $1.15 of Additional Prepayment Amounts has been adjusted.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 on July 24, 2024.

Accounting for Credit Losses

In June 2016,accordance with the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses." The standard requiresterms of the use of an "expected loss" model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale securities and requires estimated credit lossesMerger Agreement, JetBlue is required to pay or cause to be recordedpaid the Approval Prepayment Amount to Spirit stockholders as allowances instead of reductions to amortized cost of the securities. This standardrecord 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
6

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, on January 31, 2023, February 28, 2023 and March 31, 2023, JetBlue paid the Additional Prepayments of $0.10 per share of common stock to all Spirit stockholders of record as of January 25, 2023, February 22, 2023 and March 27, 2023, respectively.

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 March 31, 2023, the conversion rate of the convertible notes due 2025 and 2026 were respectively, 89.7550 and 23.3213 shares of voting common stock per $1,000 principal amount of convertible notes. In addition, as of March 31, 2023, the exercise price of the PSP1, PSP2 and PSP3 warrants were $12.361, $21.440 and $32.001 and the number of warrant shares issuable upon the exercise of the PSP1, PSP2 and PSP3 warrants were adjusted to 593,222.38, 156,899.64 and 91,736.10, respectively.

Completion of the Merger is effectivesubject 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. Justice Department filed suit to block the Merger. The trial date for the lawsuit has been set for October 16, 2023 and will be held at the United States District Court of Massachusetts in Boston.

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, subject to certain extensions up to July 24, 2024 if needed to obtain regulatory approvals. 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.

7

3. Revenue
Operating revenues are comprised of passenger revenues, which includes fare and non-fare revenues, and other revenues. The following table shows disaggregated operating revenues for the three months ended March 31, 2023 and 2022.
Three Months Ended March 31,
20232022
(in thousands)
Operating revenues:
Fare$608,861 $418,418 
Non-fare718,612 531,326 
Total passenger revenues1,327,473 949,744 
Other22,301 17,571 
Total operating revenues$1,349,774 $967,315 

The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by geographic region as defined by the DOT are summarized below:
Three Months Ended March 31,
20232022
(in thousands)
DOT—Domestic$1,175,653 $827,054 
DOT—Latin America174,121 140,261 
Total$1,349,774 $967,315 
The Company defers the amount for award travel obligations as part of loyalty deferred revenue within air traffic liability ("ATL") on the Company's condensed consolidated balance sheets and recognizes loyalty travel awards in passenger revenues as points are used for travel or expire unused.

As of March 31, 2023 and December 31, 2022, the Company had ATL balances of $566.9 million and $429.6 million, respectively. Substantially all of the Company's ATL is expected to be recognized within 12 months of the respective balance sheet date.

Loyalty Programs

The Company operates the Spirit Saver$ Club®, which is a subscription-based loyalty program that allows members access to unpublished, extra-low fares as well as discounted prices on bags and seats, shortcut boarding and security, "Flight Flex" flight modification product, and exclusive offers on hotels, rental cars and other travel necessities. The Company also operates the Free Spirit loyalty program, which attracts members and partners and builds customer loyalty for the Company by offering a variety of awards, benefits and services. Free Spirit loyalty program members earn and accrue points for fiscal years,dollars spent on Spirit for flights and interim periods within those years, beginning January 1, 2020,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 early adoption permitted. Thecredit cards issued by partner banks and financial services providers. Points earned and accrued by Free Spirit loyalty program members can be redeemed for travel awards such as free (other than taxes and government-imposed fees), discounted or upgraded travel.

8

4. Loss on Disposal

During the three months ended March 31, 2023, the Company is evaluating the new guidance, but does not expect it to have a material impactrecorded $7.1 million in loss on its financial statements.

Statementdisposal of Cash Flows

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows." The standard is intended to reduce diversity in practice in how certain transactions are classifiedassets in the statementcondensed consolidated statements of cash flows. This standard is effectiveoperations. Loss on disposal of assets for the three months ended March 31, 2023 primarily consisted of a $7.8 million loss related to two aircraft sale leaseback transactions. In addition, during the fourth quarter 2022, the Company for fiscal years,made the decision to accelerate the retirement of 29 of its A319 aircraft and, interim periods within those years, beginningin January 1, 2018, with early adoption permitted.2023, the Company executed a sale agreement to sell these aircraft over the next two years. During the first quarter 2023, the Company completed the sale of four of these A319 aircraft and recorded a related net gain of $1.2 million. The Company is evaluatingremaining A319 aircraft subject to the new guidance, but does not expect itsale agreement remain in service and will to have a material impact on its financial statements.continue to operate until immediately before the sale of the aircraft.

3.Special Charges

During the three months ended September 30, 2017,March 31, 2022, the Company purchasedrecorded $11.6 million in loss on disposal of assets in the condensed consolidated statements of operations. Loss on disposal of assets for the three months ended March 31, 2022 primarily consisted of $6.6 million related to the impairment of one aircraftspare engine which was previously financed under an operating lease agreement. The purchase pricedamaged beyond economic repair and $4.3 million related to the loss on three aircraft sale leaseback transactions completed during the first quarter of the aircraft was $20.0 million, comprised of a cash payment of $12.6 million and the non-cash application of maintenance and security deposits held by the previous lessor of $7.4 million. The Company estimated the fair value of the aircraft to be $11.9 million and has recorded the 1 purchased aircraft at fair value within flight equipment on the condensed balance sheets. The Company determined the valuation of the aircraft based on a third-party appraisal considering the condition of the aircraft (a Level 3 measurement). The Company recognized $7.9 million as a cost of terminating the lease within special charges on the condensed statement of operations, made up of the excess of the purchase price paid over the fair value of the aircraft, less other non-cash items of $0.2 million.2022.


5. Special Charges

During the three months ended September 30, 2016,March 31, 2023, the Company purchased three A319 aircraft which were formerly financed under operating lease agreements. The purchase price for the 3 aircraft was $58.8recorded $7.2 million comprised of a cash payment of $58.1 million and the application of security deposits held by the previous lessor of $0.7 million. The Company estimated the fair value of the aircraft to be $38.2 million and has recorded the 3 purchased aircraft within flight equipment on the condensed balance sheets. The Company determined the valuation of the aircraft based on a third-party appraisal considering the condition of each aircraft (a Level 3 measurement). The Company recognized $7.4 million as a cost of terminating the leases within special charges on the Company's condensed statementconsolidated statements of operations, made upin legal, advisory and other fees related to the Merger Agreement with JetBlue entered into on July 28, 2022. In addition, as part of the excessMerger Agreement with JetBlue, the Company implemented an employee retention award program during the third quarter of 2022. The target retention award will be paid to the Company's employees upon the successful close of the purchase price paid overMerger. In the fair valueevent the Merger fails or is abandoned, 50% of the aircraft, less previously expensed supplemental renttarget retention award will be paid to the Company's employees. This amount will be paid to the Company's employees in two installments payable in July 2023 and other non-cash itemsJuly 2024 or upon termination or abandonment of $13.2 million.

Notes to Condensed Financial Statements—(Continued)

the Merger, whichever comes first. During the ninethree months ended September 30, 2017,March 31, 2023, the Company purchased one engine and one aircraft which were previously financed under operating lease agreements. The purchase price of the 1 engine and 1 aircraft was $8.1recorded $6.7 million and $20.0 million, respectively, comprised of a cash payment of $3.8 million and $12.6 million, respectively, and the non-cash application of maintenance and security deposits held by the previous lessor of $4.3 million and $7.4 million, respectively. The Company estimated the fair value of the engine and aircraft to be $3.1 million and $11.9 million, respectively, and has recorded the 1 purchased engine and 1 aircraft at fair value within flight equipment on the condensed balance sheets. The Company determined the valuation of the engine and aircraft based on a third-party appraisal considering the condition of the engine and aircraft (a Level 3 measurement). The Company recognized $4.8 million and $7.9 million as a cost of terminating the lease within special charges on the Company's condensed statementconsolidated statements of operations, respectively, made up ofrelated to the excess of the purchase price paid over the fair value of the engine and the aircraft, less other non-cash items of $0.2 million and $0.2 million, respectively.Company's retention award program.

During the ninethree months ended September 30, 2016,March 31, 2022, the Company purchased six A319 aircraft which were previously financed under operating lease agreements. The purchase price of the 6 aircraft was $124.7recorded $11.1 million comprised of a cash payment of $91.9 million and the non-cash application of maintenance and security deposits held by the previous lessor of $32.8 million. The Company estimated the fair value of the aircraft to be $79.4 million and has recorded the 6 purchased aircraft at fair value within flight equipment on the condensed balance sheets. The Company determined the valuation of the aircraft based on a third-party appraisal considering the condition of each aircraft (a Level 3 measurement). The Company recognized $31.6 million as a cost of terminating the leases within special charges on the Company's condensed statementconsolidated statements of operations, made upin legal, advisory and other fees related to the former merger agreement with Frontier (the "Former Frontier Merger Agreement") executed during the first quarter of 2022. In addition, as part of the excessFormer Frontier Merger Agreement, the Company implemented an employee retention award program (the "Frontier Retention Award Program"). During the three months ended March 31, 2022, the Company recorded $4.5 million within special charges on the Company's condensed consolidated statements of operations, related to the purchase price paid over the fair value of the aircraft, less other non-cash items of $13.7 million.Company's Frontier Retention Award Program.


4.Earnings per Share
6. Earnings (Loss) per Share

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

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 (in thousands, except per share amounts)
Numerator       
Net income$60,190
 $81,382
 $170,268
 $216,386
Denominator       
Weighted-average shares outstanding, basic69,370
 69,727
 69,363
 70,689
Effect of dilutive stock awards88
 81
 174
 143
Adjusted weighted-average shares outstanding, diluted69,458
 69,808
 69,537
 70,832
Net income per share       
Basic earnings per common share$0.87
 $1.17
 $2.45
 $3.06
Diluted earnings per common share$0.87
 $1.17
 $2.45
 $3.05
        
Anti-dilutive weighted-average shares124

122
 76
 87
 Three Months Ended March 31,
 20232022
(in thousands, except per-share amounts)
Numerator
Net income (loss)$(103,911)$(194,703)
Denominator
Weighted-average shares outstanding, basic109,110 108,581 
Effect of dilutive shares— — 
Adjusted weighted-average shares outstanding, diluted109,110 108,581 
Earnings (loss) per share
Basic earnings (loss) per common share$(0.95)$(1.79)
Diluted earnings (loss) per common share$(0.95)$(1.79)
Anti-dilutive common stock equivalents excluded from the diluted loss per share calculation for any of the periods presented are not material.
9



Notes to Condensed Financial Statements—(Continued)
7. Short-term Investment Securities

5.Short-term Investment Securities

The Company's short-term investment securities are classified as available-for-sale and generally consist of available-for-sale asset-backedU.S. Treasury and U.S. government agency securities with contractual maturities of twelve12 months or less. These securities are stated at fair value within current assets on the Company's condensed consolidated balance sheets. Realized gains and losses on sales of investments, if any, are reflected in non-operating income (expense)other (income) expense in the condensed consolidated statements of operations. Unrealized gains and losses on investment securities are reflected as a component of accumulated other comprehensive income (AOCI).

As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the Company had $100.7$108.4 million and $100.2$107.1 million, respectively, in short-term available-for-sale investment securities, respectively.securities. During the ninethree months ended September 30, 2017,March 31, 2023 and 2022, these investments earned interest income at a weighted-average fixed rate of approximately 1.5%.3.8% and 0.2%, respectively. For the three and nine months ended September 30, 2017,March 31, 2023, an unrealized gain of $13 thousand and an unrealized loss of $11$184 thousand, net of deferred taxes, was recorded within accumulated other comprehensive income ("AOCI") related to these investment securities. For the three months ended March 31, 2022, an unrealized loss of $7$262 thousand, and $6 thousand, respectively,net of deferred taxes, was recorded within AOCI related to these investment securities. For the three and nine months ended September 30, 2016, an unrealized gain of $4 thousand, net of deferred taxes of $3 thousand, was recorded within AOCI related to these investment securities. TheMarch 31, 2023 and March 31, 2022, the Company has not recognized anyhad no realized gains or losses related to these securities as the Company hasdid not transactedsell any sale of these securities.securities during these periods. As of September 30, 2017March 31, 2023 and December 31, 2016, $342022, $82 thousand and $23$267 thousand, net of tax, respectively, remained in AOCI, related to these instruments.


6.Accrued Liabilities
8. Accrued Liabilities

Other current liabilities as of September 30, 2017March 31, 2023 and December 31, 2016 consist2022 consisted of the following:
 September 30, 2017 December 31, 2016
 (in thousands)
Salaries and wages$50,635
 $54,578
Airport obligations47,289
 43,989
Federal excise and other passenger taxes and fees payable43,860
 42,064
Aircraft maintenance41,781
 30,233
Interest payable15,168
 8,499
Fuel14,940
 14,828
Aircraft and facility lease obligations11,678
 10,378
Other23,781
 21,442
Other current liabilities$249,132
 $226,011



7.Financial Instruments and Risk Management
As part of the Company’s risk management program, the Company, from time to time, may use a variety of financial instruments to reduce its exposure to fluctuations in the price of jet fuel and interest rates. The Company does not hold or issue derivative financial instruments for trading purposes.

March 31, 2023December 31, 2022
(in thousands)
Salaries, wages and benefits$168,431 $154,881 
Federal excise and other passenger taxes and fees payable131,700 96,424 
Airport obligations106,075 84,928 
Aircraft maintenance77,282 59,243 
Fuel59,974 76,979 
Interest payable33,379 32,613 
Aircraft and facility lease obligations27,941 22,068 
Other71,162 29,194 
Other current liabilities$675,944 $556,330 
The Company is exposed to credit losses in the event of nonperformance by counterparties to these financial instruments. The Company periodically reviews and seeks to mitigate exposure to the financial deterioration and nonperformance of any counterparty by monitoring the absolute exposure levels, each counterparty's credit ratings and the historical performance of counterparties relating to hedge transactions. The credit exposure related to these financial instruments is limited to the fair value of contracts in a net receivable position at the reporting date. The Company also maintains security agreements that require the Company to post collateral if the value of selected instruments falls below specified mark-to-market thresholds. As of September 30, 2017, the Company did not hold any derivatives with requirements to post collateral. The Company records financial derivative instruments at fair value, which includes an evaluation of each counterparty's credit risk.

Fuel Derivative Instruments

9.Leases
From time to time, the Company may enter into fuel derivative contracts in order to mitigate the risk of future volatility in fuel prices. Historically, the Company's fuel derivative contracts have generally consisted 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 have been used at times to protect the refining price risk between the price of crude oil and the price of refined jet fuel, and to manage the risk of increasing fuel prices. Fair value of such instruments is determined using standard option valuation models.

The Company accountsleases 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 its fuel derivative contracts at fair valuevariable lease payments which are based on several factors, including, but not limited to, relative leased square footage, enplaned passengers, and recognizes them inairports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's condensed consolidated balance sheet in prepaid expensessheets as a right-of-use asset and lease liability. Lease terms are generally 8 years to 18 years for aircraft and up to 99 years for other current assets or other current liabilities. The Company did not enter into any fuel derivative instruments duringleased equipment and property.
During the ninethree months ended September 30, 2017 and 2016 and did not have any outstanding fuel derivatives as of September 30, 2017 and DecemberMarch 31, 2016. Historically, the Company has not elected hedge accounting on any fuel derivative instruments entered into and, as a result, changes in the fair value of fuel derivative contracts, if any, were recorded in aircraft fuel expense.
Interest Rate Swaps
During 2015, the Company settled six forward interest rate swaps that were designed to fix the benchmark interest rate component of interest payments on the debt related to three Airbus A321 aircraft, which2023, the Company took delivery of during the third quarter of 2015. These instruments limited the Company's exposure to changes in the benchmark interest rate in the period from the trade date through the date of maturity. The interest rate swaps were designated as cash flow hedges. The Company accounts for interest rate swaps at fair valuethree aircraft under direct operating leases, two aircraft under sale leaseback transactions and recognizes them in the condensed balance sheet in prepaid expenses and other current assets or other current liabilitiesone spare engine purchased with changes in fair value recorded within accumulated other comprehensive income (AOCI).cash. As of September 30, 2017 and DecemberMarch 31, 2016, the Company did not have any outstanding interest rate swaps.
Notes to Condensed Financial Statements—(Continued)

Realized gains and losses from cash flow hedges are recorded in the statement of cash flows as a component of cash flows from operating activities. Subsequent to the issuance of each debt instrument, amounts remaining in AOCI are amortized over the life of the fixed-rate debt instrument. During the three and nine months ended September 30, 2017 and 2016, there were no unrealized gains or losses recorded within AOCI related to these instruments as they settled in 2015. For the three and nine months ended September 30, 2017, the Company reclassified interest rate swap losses of $53 thousand and $160 thousand, net of tax of $31 thousand and $92 thousand, respectively, into earnings. For the three and nine months ended September 30, 2016, the Company reclassified interest rate swap losses of $56 thousand and $170 thousand, net of tax of $32 thousand and $97 thousand, respectively, into earnings. As of September 30, 2017 and December 31, 2016, $1.2 million and $1.3 million, net of tax, respectively, remained in AOCI, related to these instruments.

8.Commitments and Contingencies
Aircraft-Related Commitments and Financing Arrangements
The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers. During the first quarter of 2017, the Company negotiated revisions to its A320 aircraft order. The Company originally had four A320neo aircraft scheduled for delivery in 2018 of which two were converted to A320ceo aircraft, to be delivered in 2017, and the remaining two are deferred until 2019. As of September 30, 2017, the Company's aircraft orders consisted of the following:
  Airbus 
  A320ceo A320neo A321ceo Total
remainder of 2017 2 
 4 6
2018 5 
 5 10
2019 1 14 
 15
2020 
 16 
 16
2021 
 18 
 18
  8 48 9 65


The Company also has four spare engine orders for V2500 SelectTwoengines with International Aero Engines (IAE) and nine spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2018 through 2023,. Purchase commitments for these aircraft and spare engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $227.8 million for the remainder of 2017, $528.4 million in 2018, $773.7 million in 2019, $820.5 million in 2020, $784.8 million in 2021, and $24.6 million in 2022 and beyond. As of September 30, 2017, the Company had secured debt financing commitments of $160.0 million for 4 aircraft, scheduled for delivery in the remainder of 2017, and did not have financing commitments in place for the remaining 61 Airbus aircraft currently on firm order, which are scheduled for delivery in 2017 through 2021.
Interest commitments related to the secured debt financing of 40 delivered aircraft as of September 30, 2017 are $19.5 million for the remainder of 2017, $52.9 million in 2018, $48.2 million in 2019, $43.6 million in 2020, $39.0 million in 2021, and $141.5 million in 2022 and beyond. For principal commitments related to these financed aircraft, refer to Note 10, Debt and Other Obligations. As of September 30, 2017, principal and interest commitments related to the Company's future secured debt financing of 4 undelivered aircraft under bank debt are zero for the remainder of 2017, $16.5 million in 2018, $16.4 million in 2019, $17.3 million in 2020, $16.2 million in 2021, and $137.2 million in 2022 and beyond.
As of September 30, 2017, the Company had a fleet consisting of 107195 A320 family aircraft. During the nine months ended September 30, 2017,As of March 31, 2023, the Company took delivery of eleven aircraft financed under secured debt arrangements, twohad 93 aircraft financed under operating leases purchased one previously leased aircraftwith lease term expirations between 2024 and returned one aircraft to its lessor.2041. In addition, the Company took deliveryowned 101 aircraft of twowhich 29 were purchased engines and one engine financed under an operatingoff lease and purchased2 were pledged as collateral under the Company's revolving credit facility maturing in 2024. The Company also had one previously leased engine. For further discussion onaircraft recorded as a failed sale leaseback. The related finance obligation is recorded within long-term debt in the previously leased aircraft and engine, referCompany's condensed consolidated balance sheets. Refer to Note 3, Special Charges. New purchased aircraft are capitalized12, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment with depreciable lives of 25 years and estimated residual values of 10%.in the Company's condensed consolidated balance sheets. As of September 30, 2017,March 31, 2023, the Company also had 59 aircraft and 116 spare engines financed under operating leases with lease term expiration dates
10

ranging from 20172024 to 2029. The Company entered into sale2033 and leaseback transactions with third-party aircraft lessorsowned 25 spare engines, of which, as of March 31, 2023, 1 was unencumbered and 24 were pledged as collateral under the Company's revolving credit facility maturing in 2024.

Aircraft rent expense consists of monthly lease rents for the majority of these aircraft and spare engines under the terms of the Company's aircraft and spare engine leases. Deferred losses resulting from
Notes to Condensed Financial Statements—(Continued)

these sale and leaseback transactions are included in other long-term assets on the accompanying condensed balance sheets. Deferred losses arelease agreements recognized as an increase to rent expense on a straight-line basis over the term of the respective operating leases. Deferred gains are included in deferred credits and other long-term liabilities on the accompanying condensed balance sheets. Deferred gains are recognized as a decrease tobasis. Supplemental rent, recorded within aircraft rent expense, on a straight-line basis over the termis primarily made up of the respective operating leases.probable and estimable return condition obligations, lease return cost adjustments related to lease modifications and aircraft and engines purchased off lease, and maintenance reserves paid to aircraft lessors that are not probable of being reimbursed.

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 supplemental rent expenseeither 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.

In July 2015,connection with the Company's assessment of lease return costs, the Company executed an upgrade service agreement with Airbus Americas Customer Services Inc. (Airbus) to reconfigurealso evaluates the seating and increase capacity in 40 of the Company’s A320ceos from 178 to 182 seats (reconfiguration). The reconfiguration of the aircraft commenced in the first quarter of 2016 and is expected to be completed in the fourth quarter of 2017 for a remaining committed cost of $0.6 million, as of September 30, 2017. These amounts will be capitalized within flight equipment on the condensed balance sheets.
In September 2015, the Company executed a lease agreement with Wayne County Airport Authority (the Authority), which owns and operates Detroit Metropolitan Wayne County Airport (DTW). Under the lease agreement, the Company leases a 10-acre site, adjacent to the airfield at DTW, in order to construct, operate and maintain an approximately 126,000-square-foot hangar facility (the project). The project allows for the development of a maintenance hangar in order to fulfill the requirements of the Company's growing fleet and will reduce dependence on third-party facilities and contract maintenance. The lease agreement has a 30-year term with two 10-year extension options. Upon termination of the lease, title of the project, which will be fully depreciated, will automatically pass to the Authority. The Company completed the project during the first quarter of 2017 and has no remaining commitments related to this project as of September 30, 2017.

Future minimum lease payments under capital leases and noncancellable operating leases with initial or remaining terms in excess of one year at September 30, 2017 were as follows:
  Capital Leases Aircraft and Spare Engine Leases Property Facility Leases 
Total
Operating and Capital Lease Obligations
 (in thousands)
remainder of 2017 $134
 $53,017
 $12,409
 $65,560
2018 537
 204,292
 43,726
 248,555
2019 504
 189,106
 36,512
 226,122
2020 188
 180,842
 25,604
 206,634
2021 28
 170,643
 12,740
 183,411
2022 and thereafter —
 570,120
 73,142
 643,262
Total minimum lease payments $1,391
 $1,368,020
 $204,133
 $1,573,544
Less amount representing interest 114
      
Present value of minimum lease payments $1,277
      
Less current portion 468
      
Long-term portion $809
      

The majority of the Company's capital lease obligations relate to the lease of computer equipment used by the Company's flight crew. Payments under this lease agreement are fixed for the 3-year term of the lease which began in the second quarter of 2017.
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. Aircraft rent expense also includes supplemental rent. Supplemental rent is made uprecoverability of maintenance reserves paid or expected to be paid to aircraftcertain lessors in advance of the
Notes to Condensed Financial Statements—(Continued)

performance of major maintenance activities that are not probable of being reimbursed, and probable return condition obligations. The Company expects supplemental rent to 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.
Some of the Company’s master lease agreements provide that the Company pay maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. Substantially allThe requirement to pay maintenance reserves has been eliminated from the Company's lease agreements for the last several years and any outstanding maintenance reserves will continue to decline as the Company is reimbursed for qualifying maintenance events. As of March 31, 2023 and December 31, 2022, the Company had $36.0 million and $38.8 million of aircraft maintenance deposits, respectively, recorded within prepaid expenses and other current assets and other long-term assets in the Company's condensed consolidated balance sheets.

As of March 31, 2023, the Company's finance lease obligations primarily related to the lease of computer equipment used by the Company's flight crews and office equipment. Payments under these finance lease agreements are fixed for terms ranging from four to five years. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within long-term debt and finance leases in the Company's condensed consolidated balance sheets.
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 the project having an expected completion during the first quarter 2024. The 8.5-acre parcel of land is capitalized within ground property and equipment on the Company's condensed 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 condensed 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 condensed consolidated balance sheets as of March 31, 2023. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
11

Finance LeasesOperating Leases
Aircraft and Spare Engine LeasesProperty Facility LeasesOtherTotal
Operating and Finance Lease Obligations
(in thousands)
Remainder of 2023$318 $268,444 $5,414 $530 $274,706 
2024201 346,156 5,460 178 351,995 
2025179 331,268 4,011 — 335,458 
2026101 304,955 3,934 — 308,990 
202727 289,246 3,104 — 292,377 
2028 and thereafter— 2,718,143 141,297 — 2,859,440 
Total minimum lease payments$826 $4,258,212 $163,220 $708 $4,422,966 
Less amount representing interest49 1,488,499 133,569 22 1,622,139 
Present value of minimum lease payments$777 $2,769,713 $29,651 $686 $2,800,827 
Less current portion367 189,083 5,272 684 195,406 
Long-term portion$410 $2,580,630 $24,379 $2 $2,605,421 
Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's condensed consolidated balance sheets are expected to be $3.9 million for the remainder of 2023 and none for 2024 and beyond.
The table below presents information for lease costs related to the Company's finance and operating leases:
Three Months Ended March 31,
20232022
(in thousands)
Finance lease cost
Amortization of leased assets$158 $188 
Interest of lease liabilities10 18 
Operating lease cost
Operating lease cost (1)
84,215 63,251 
Short-term lease cost (1)
10,905 10,257 
Variable lease cost (1)
52,655 48,694 
Total lease cost$147,943 $122,408 
(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's condensed consolidated statements of operations.
The table below presents lease terms and discount rates related to the Company's finance and operating leases:
March 31, 2023March 31, 2022
Weighted-average remaining lease term
Operating leases14.7 years14.0 years
Finance leases2.6 years2.3 years
Weighted-average discount rate
Operating leases6.39 %5.62 %
Finance leases4.46 %4.71 %


10. Commitments and Contingencies

Aircraft-Related Commitments and Financing Arrangements
12

The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. As of March 31, 2023, the Company's total firm aircraft orders consisted of 107 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. Out of these maintenance reserve payments107 aircraft, the Company has 9 aircraft scheduled for delivery in the remainder of 2023 and 25 aircraft scheduled for delivery in 2024. In late April 2023, the Company was notified that a number of the aircraft originally scheduled for delivery in 2023 and 2024 will be delayed into 2024 and 2025, respectively. Given supply chain delivery issues, the schedule of aircraft deliveries continues to be fluid and subject to change. However, the Company's total firm aircraft purchase commitments remains unchanged. As of March 31, 2023, the Company had secured financing for 16 aircraft scheduled for delivery from Airbus through 2024, which will be financed through sale leaseback transactions. As of March 31, 2023, the Company did not have financing commitments in place for the remaining 91 Airbus aircraft on firm order through 2027. However, the Company has 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 signed in the fourth quarter of 2019. The agreement provides a standby credit facility in the form of senior secured mortgage debt financing. The contractual purchase amounts for all aircraft orders from Airbus are calculated based onincluded within the purchase commitments below. In addition, rent commitments related to aircraft that will be financed through sale leaseback transactions are included within the aircraft rent commitments below.

During the third quarter of 2021, the Company entered into an Engine Purchase Support Agreement which requires the Company to purchase a utilization measure, such as flight hours or cycles, while some maintenance reserve payments are fixedcertain number of spare engines in order to maintain a contractual amounts. Fixed maintenance reserve paymentsratio of spare engines to aircraft in the fleet. As of March 31, 2023, the Company is committed to purchase 18 PW1100G-JM spare engines, with deliveries through 2027.

As of March 31, 2023, purchase commitments for thesethe Company's aircraft and related flight equipment,engine orders, including estimated amounts for contractual price escalations areand pre-delivery payments, were expected to be $1.9$542.9 million for the remainder of 2017, $6.92023, $1,375.8 million in 2018, $5.72024, $1,227.0 million in 2019, $5.42025, $1,424.4 million in 2020, $5.52026, $884.1 million in 2027, and none in 2028 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 $17.7European Union had agreed to suspend reciprocal tariffs on large civilian aircraft for five years, pending discussions to resolve their trade dispute.

In addition to the aircraft purchase agreement, as of March 31, 2023, the Company had agreements in place for 32 A320neos and A321neos to be financed through direct leases with third-party lessors with deliveries scheduled from the remainder of 2023 through 2024. As of March 31, 2023, aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors and sale leaseback transactions were expected to be approximately $40.1 million for the remainder of 2023, $183.9 million in 20222024, $218.9 million in 2025, $218.9 million in 2026, $218.9 million in 2027, and beyond. These lease agreements provide that maintenance reserves are reimbursable to the Company upon completion of the maintenance event$1,746.3 million in an amount equal to either (1) the amount of the maintenance reserves held by the lessor associated with the specific maintenance event or (2) the qualifying costs2028 and beyond.
Interest commitments related to the specific maintenance event. Somesecured debt financing of 73 delivered aircraft as of March 31, 2023 were $47.4 million for the master lease agreements do not require that the Company pay maintenance reserves as long asremainder of 2023, $53.3 million in 2024, $45.8 million in 2025, $38.3 million in 2026, $30.1 million in 2027, and $60.2 million in 2028 and beyond. As of March 31, 2023, interest commitments related to the Company's cash balance does not fall below a certain level. As8.00% senior secured notes, convertible debt financing, unsecured term loans and revolving credit facility were $73.8 million for the remainder of September 30, 2017, the Company was2023, $96.4 million in full compliance with those requirements2024, $89.4 million in 2025, $5.9 million in 2026, $3.4 million in 2027, and does not anticipate having to pay reserves$10.5 million in 2028 and beyond. For principal commitments related to these master leases in the future.Company's debt financing, refer to Note 12, Debt and Other Obligations.
The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system, construction commitments related to its new airport kiosksheadquarters campus and residential building and other miscellaneous subscriptions and services as of September 30, 2017: $1.8March 31, 2023: $62.5 million for the remainder of 2017, $5.72023, $20.4 million in 2018, $1.62024, $18.8 million in 2019, $1.02025, $16.3 million in 2020, $0.52026, $16.3 million in 2021,2027, and $0.2$1.2 million in 2028 and thereafter. The Company's current agreementDuring the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in 2018.2028.
Litigation and Assessments
13

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 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 District Court; however, following the plaintiff's appeal to the Second Circuit, the case was remanded to the District Court 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 Court 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 Court 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 is set to begin on January 16, 2024. The Company intends to vigorously defend against this lawsuit. As of March 31, 2023, the potential outcomes of these claims 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 the assessment is without merit and intends to challenge the assessment; therefore, the Company believes a loss in this matter is not probable and has not recognized a loss contingency.
Credit Card Processing Arrangements
The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage charges, and other ancillary services by customers. As is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations.
The Company's credit card processors do not require the Company to maintain cash collateral ifprovided 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 September 30, 2017March 31, 2023 and December 31, 2016,2022, the Company was in compliance with such liquidity and other financial covenants in itsCompany's 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 $9 FareSpirit Saver$ Club® memberships as of September 30, 2017March 31, 2023 and December 31, 2016,2022, was $322.3$632.5 million and $234.6$468.5 million,, respectively.
Notes to Condensed Financial Statements—(Continued)
14

Employees
The Company has foursix union-represented employee groups that together represented approximately 75%85% of all employees at September 30, 2017.as of March 31, 2023. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of agreements.September 30, 2017.
Employee GroupsRepresentative
Amendable Date(1)
Percentage of Workforce
PilotsAir Line Pilots Association, International (ALPA)("ALPA")August 2015January 202526%
Flight AttendantsAssociation of Flight Attendants (AFA-CWA)("AFA-CWA")May 2021January 202644%48%
DispatchersTransport Workers Union (TWU)Professional Airline Flight Control Association ("PAFCA")August 2018October 20231%
Ramp Service AgentsInternational Association of Machinists and Aerospace Workers (IAMAW)("IAMAW")June 2020November 20264%3%
Passenger Service AgentsTransport Workers Union of America ("TWU")February 20272%
Aircraft Maintenance Technicians
Aircraft Mechanics Fraternal Association (AMFA) (2)
N/A (2)
5%
In August 2015, the Company's collective
(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 its pilots, representedALPA for a new two-year agreement, which was ratified by ALPA became amendable. In June 2016, ALPA requested the services of the National Mediation Board (NMB) to facilitate negotiations for an amended agreement and the Company joined ALPA in the request. The NMB has assigned mediators and the parties continue to work toward an amended agreement with the guidance of the mediator. Under the Railway Labor Act (RLA), the parties' current agreement remains in effect until an amended agreement is reached.members on January 10, 2023.

In March 2016, under the supervision of the NMB,February 2023, the Company and AFA-CWA reached a tentative agreement for a five-year contract with the Company's flight attendants. In May 2016,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 approvebe represented by the new five-year contract with the Company.Aircraft Mechanics Fraternal Association ("AMFA") as their collective bargaining agent. In connection with this agreement,November 2022, AMFA notified the Company paidof its intent to negotiate a $9.6 million ratification incentiveCBA and began negotiations. As of which $8.4 million was recorded within salaries, wages and benefits inMarch 31, 2023, the condensed statementCompany continued to negotiate with AMFA. As of operations forMarch 31, 2023, the nine months ended September 30, 2016.Company had approximately 600 AMTs.
The Company is self-insured for health care claims, up to a stop loss amount 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 $5.5 million and $5.7 million in health care claims as of September 30, 2017 and December 31, 2016, respectively.

9.Fair Value Measurements
Under ASC 820, 11.Fair Value Measurements

Under ASC 820, "Fair Value Measurements and Disclosures,," disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities.
Fuel Derivative Instruments
From time to time, the Company may enter into fuel derivative contracts in order to mitigate the risk of future volatility in fuel prices. The Company’s fuel derivative contracts generally consist of jet fuel swaps and jet fuel options. These instruments are valued using energy and commodity market data, which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities.
The Company utilizes the market approach to measure fair value for its fuel derivative instruments, if any. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Notes to Condensed Financial Statements—(Continued)


The Company does not elect hedge accounting on its fuel derivative instruments. As a result, the Company records the fair value adjustment of its fuel derivatives in the accompanying statement of operations within aircraft fuel and on the condensed balance sheets within prepaid expenses and other current assets or other current liabilities, depending on whether the net fair value of the derivatives is in an asset or liability position as of the respective date. Fair values of the fuel derivative instruments are determined using standard option valuation models. The Company also considers counterparty risk and its own credit risk in its determination of all estimated fair values. The Company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement. The Company determines fair value of jet fuel options utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds.

The fair value of the Company's jet fuel swaps is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company categorizes these instruments as Level 2. Due to the fact that certain inputs utilized to determine the fair value of jet fuel options are unobservable (principally implied volatility), the Company categorizes these derivatives as Level 3. Implied volatility of a jet fuel option is the volatility of the price of the underlying commodity that is implied by the market price of the option based on an option pricing model. Thus, it is the volatility that when used in a particular pricing model yields a theoretical value for the option equal to the current market price of that option. Implied volatility, a forward-looking measure, differs from historical volatility because the latter is calculated from known past returns. At each balance sheet date, the Company substantiates and adjusts unobservable inputs. The Company routinely assesses the valuation model's sensitivity to changes in implied volatility. Based on the Company's assessment of the valuation model's sensitivity to changes in implied volatility, it concluded that holding other inputs constant, a significant increase (decrease) in implied volatility would result in a significantly higher (lower) fair value measurement for the Company's aircraft fuel derivatives. As of September 30, 2017 and December 31, 2016, the Company had no outstanding jet fuel derivatives.
Long-Term Debt
The estimated fair value of the Company's non-publicly heldsecured notes, term loan debt agreements hasand revolving credit facilities have been determined to be Level 3 as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes a discounted cash flow method to estimate the fair value of the Level 3 long-term debt. The estimated fair value of the Company's publicly and non-publicly held EETC debt agreements and the Company's convertible notes has been
15

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 publicLevel 2 long-term debt.
The carrying amounts and estimated fair values of the Company's long-term debt at September 30, 2017March 31, 2023 and December 31, 20162022 were as follows:
March 31, 2023December 31, 2022Fair Value Level Hierarchy
 Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
(in millions)
8.00% senior secured notes$1,110.0 $1,104.1 $1,110.0 $1,085.0 Level 3
Fixed-rate term loans1,061.9 996.8 1,094.7 1,003.9 Level 3
Unsecured term loans136.3 121.9 136.3 116.0 Level 3
2015-1 EETC Class A278.6 251.4 278.6 247.5 Level 2
2015-1 EETC Class B48.0 46.0 48.0 45.6 Level 2
2015-1 EETC Class C63.8 63.8 63.8 63.1 Level 2
2017-1 EETC Class AA179.2 158.1 186.3 161.6 Level 2
2017-1 EETC Class A59.7 51.2 62.1 52.3 Level 2
2017-1 EETC Class B49.9 44.1 51.7 44.9 Level 2
2017-1 EETC Class C— — 85.5 85.1 Level 2
4.75% convertible notes due 202525.1 41.7 25.4 44.9 Level 2
1.00% convertible notes due 2026500.0 411.1 500.0 405.1 Level 2
Total long-term debt$3,512.5 $3,290.2 $3,642.4 $3,355.0 
 September 30, 2017 December 31, 2016 Fair Value Level Hierarchy
 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value 
 (in millions)  
Senior term loans$426.4
 $446.2
 $451.9
 $463.9
 Level 3
Junior term loans41.3
 42.7
 47.1
 48.1
 Level 3
Fixed-rate loans363.4
 370.1
 —
 —
 Level 3
Class A enhanced equipment trust certificates423.6
 440.6
 409.8
 416.0
 Level 2
Class B enhanced equipment trust certificates100.0
 103.3
 103.6
 105.7
 Level 2
Total long-term debt$1,354.7
 $1,402.9
 $1,012.4
 $1,033.7
  

Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2017March 31, 2023 and December 31, 2016 are2022 were comprised of liquid money market funds and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions.
Restricted Cash

Restricted cash is comprised of cash held in an 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 March 31, 2023, the Company had $85.0 million in standby letters of credit secured by $75.0 million of restricted cash, of which $31.1 million were issued letters of credit. In addition, the Company had $44.4 million of restricted cash held in accounts subject to control agreements to be used for the payment of interest and fees on the 8.00% senior secured notes.
Short-term Investment Securities
Notes to Condensed Financial Statements—(Continued)


Short-term investment securities at September 30, 2017March 31, 2023 and December 31, 2016 are comprised2022 were classified as available-for-sale and generally consisted of available-for-sale asset-backedU.S. Treasury and U.S. government agency securities with contractual maturities of twelve12 months or less andless. 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 7, 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 condensed consolidated balance sheets. The fair value of the derivative liability was estimated as the difference in value of the traded price of the convertible notes, including the conversion option and the value of the convertible
16

notes in the absence of the conversion option (the debt component). The value of the debt component was estimated using a discounted cash flow analysis with a yield calibrated to the traded price of the convertible notes. The change in fair value of the derivative liability is recorded within interest expense on the Company's condensed consolidated statements of operations. During the three months ended March 31, 2023 and 2022, the Company recorded $1.7 million in unfavorable mark to market adjustments and $0.9 million in favorable mark to market adjustments, respectively, 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 12, Debt and Other Obligations.
Assets and liabilities measured at gross fair value on a recurring basis are summarized below:
 Fair Value Measurements as of March 31, 2023
 TotalLevel
1		Level
2		Level
3
(in millions)
Cash and cash equivalents$1,287.7 $1,287.7 $— $— 
Restricted cash119.4 119.4 — — 
Short-term investment securities108.4 108.4 — — 
Assets held for sale1.9 — — 1.9 
Total assets$1,517.4 $1,515.5 $— $1.9 
Derivative liability$30.9 $— $30.9 $— 
Total liabilities$30.9 $— $30.9 $— 
 Fair Value Measurements as of September 30, 2017
 Total
Level
1
Level
2
Level
3

(in millions)
Cash and cash equivalents$863.7

$863.7

$—

$—
Short-term investment securities100.7

100.7

—

—
Total assets$964.4

$964.4

$—

$—











Total liabilities$—

$—

$—

$—
 Fair Value Measurements as of December 31, 2016
 Total
Level
1
Level
2
Level
3

(in millions)
Cash and cash equivalents$700.9

$700.9

$—

$—
Short-term investment securities100.2

100.2

—

—
Total assets$801.1

$801.1

$—

$—












Total liabilities$—

$—

$—

$—

 Fair Value Measurements as of December 31, 2022
 TotalLevel
1		Level
2		Level
3
(in millions)
Cash and cash equivalents$1,346.4 $1,346.4 $— $— 
Restricted cash119.4 119.4 — — 
Short-term investment securities107.1 107.1 — — 
Assets held for sale2.5 — — 2.5 
Total assets$1,575.4 $1,572.9 $— $2.5 
Derivative liability$29.2 $— 29.2 $— 
Total liabilities$29.2 $— $29.2 $— 

The Company had no transfers of assets or liabilities between any of the above levels during the ninetwelve months ended September 30, 2017.March 31, 2023 and the year ended December 31, 2022.

The Company's Valuation Group,
12. Debt and Other Obligations

As of March 31, 2023, the Company had outstanding public and non-public debt instruments.

Revolving credit facility due in 2024

As of March 31, 2023 and December 31, 2022, the Company had a $300.0 million revolving credit facility which reports to the Chief Financial Officer, is made up of individuals fromwas undrawn and available. Any amounts drawn on this facility are included in long-term debt and finance leases, less current maturities on the Company's Treasurycondensed consolidated balance sheets. This facility matures on March 30, 2024.

Convertible senior notes due 2025

17

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

Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and Corporate Accounting departments. The Valuation Group is responsibleincluding, 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 executionmeasurement 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 March 31, 2023, the notes may be converted by noteholders through June 30, 2023.

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 the 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 valuation policiescommon 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 procedures. The Valuation Group comparesunpaid interest. Due to the resultspayment 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 March 31, 2023, the conversion rate was 89.7550 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to a conversion price of approximately $11.14 per share of common stock). Refer to Note 2, Merger for additional information on the Approval Prepayment and Additional Prepayment Amounts.

During the first quarter of 2023, $0.3 million of the Company's internally developed valuation methods with counterparty reports at each balance sheet date, assessesconvertible notes due 2025 were converted to 27,204 shares of the Company's valuation methods for accurateness and identifies any needs for modification.


10.Debt and Other Obligations

voting common stock. As of September 30, 2017,March 31, 2023, the Company held non-publichad recorded $0.3 million, net of issuance costs and common stock, in additional paid-in-capital on its condensed consolidated balance sheets as of March 31, 2023 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 condensed consolidated balance sheets as of March 31, 2023 related to its convertible notes due 2025. As of March 31, 2023, the if-converted value exceeds the principal amount of the convertible notes due 2025 by $16.8 million using the average stock price for the three months ended March 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 March 31, 2023, the notes did not qualify for conversion by noteholders through June 30, 2023.

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
18

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 was 20.3791 shares of voting common stock per$1,000principal amount of convertible notes (equivalent to an initial conversion price of approximately$49.07per 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 March 31, 2023, the conversion rate was 23.3213 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to a conversion price of approximately $42.88 per share of common stock). Refer to Note 2, Merger 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 as a derivative liability within deferred gains and other long-term liabilities and a debt instruments. discount within long-term debt and finance leases, less current maturities on its condensed 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 $468.3 million, net of the related unamortized debt discount of $31.7 million, recorded within long-term debt and finance leases, less current maturities on the Company's condensed consolidated balance sheets as of March 31, 2023 related to its convertible notes due 2026. For additional information, refer to Note 11, Fair Value Measurements.

Long-term debt is comprised of the following:

Notes
As ofAs of
March 31, 2023December 31, 2022March 31, 2023December 31, 2022
(in millions)(weighted-average interest rates)
8.00% senior secured notes due 2025$1,110.0 $1,110.0 8.00 %8.00 %
Fixed-rate loans due through 2039 (1)
1,061.9 1,094.7 3.52 %3.52 %
Unsecured term loans due in 2031136.3 136.3 1.00 %1.00 %
Fixed-rate class A 2015-1 EETC due through 2028278.6 278.6 4.10 %4.10 %
Fixed-rate class B 2015-1 EETC due through 202448.0 48.0 4.45 %4.45 %
Fixed-rate class C 2015-1 EETC due through 202363.8 63.8 4.93 %4.93 %
Fixed-rate class AA 2017-1 EETC due through 2030
179.2 186.3 3.38 %3.38 %
Fixed-rate class A 2017-1 EETC due through 2030
59.7 62.1 3.65 %3.65 %
Fixed-rate class B 2017-1 EETC due through 2026
49.9 51.7 3.80 %3.80 %
Fixed-rate class C 2017-1 EETC due through 2023
— 85.5 5.11 %5.11 %
Convertible notes due 202525.1 25.4 4.75 %4.75 %
Convertible notes due 2026500.0 500.0 1.00 %1.00 %
Long-term debt$3,512.5 $3,642.4 
Less current maturities261.4 346.4 
Less unamortized discounts, net
87.5 95.8 
Total$3,163.6 $3,200.2 
(1) Includes obligations related to Condensed Financial Statements—(Continued)

  As of Three Months Ended September 30, Nine Months Ended September 30,
 September 30, 2017 December 31, 2016 2017 2016 2017 2016
  (in millions) (weighted-average interest rates)
Fixed-rate senior term loans due through 2027 $426.4
 $451.9
 4.10% 4.10% 4.10% 4.10%
Fixed-rate junior term loans due through 2022 41.3
 47.1
 6.90% 6.90% 6.90% 6.90%
Fixed-rate loans due through 2029 363.4
 —
 3.76% N/A
 3.76% N/A
Fixed-rate class A enhanced equipment trust certificates due through 2028 423.6
 409.8
 4.10% 4.03% 4.10% 4.03%
Fixed-rate class B enhanced equipment trust certificates due through 2024 100.0
 103.6
 4.45% 4.38% 4.45% 4.38%
Long-term debt $1,354.7
 $1,012.4
        
Less current maturities 106.0
 84.4
        
Less unamortized discounts

 34.6
 30.6
        
Total $1,214.1
 $897.4
        
one aircraft recorded as a failed sale leaseback.
Refer to Note 9, Leases for additional information.
During the three and nine months ended September 30, 2017,March 31, 2023, the Company made scheduled principal payments of $13.4 million and $63.4$129.4 million on its outstanding debt obligations, respectively.obligations. During the three and nine months ended September 30, 2016,March 31, 2022, the Company made scheduled principal payments of $10.0 million and $29.6$44.3 million on its outstanding debt obligations, respectively.obligations.
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At September 30, 2017,March 31, 2023, long-term debt principal payments for the next five years and thereafter arewere as follows:
  September 30, 2017
  (in millions)
Remainder of 2017 $39.0
2018 108.0
2019 107.5
2020 107.1
2021 106.9
2022 and beyond 886.2
Total debt principal payments $1,354.7


March 31, 2023
(in millions)
Remainder of 2023$207.2 
2024222.1 
20251,323.5 
2026731.1 
2027197.3 
2028 and beyond831.3 
Total debt principal payments$3,512.5 


Interest Expense

Interest expense related to long-term debt consistedand finance leases consists of the following:
 Three Months Ended March 31,
20232022
(in thousands)
8.00% senior secured notes (1)
$23,252 $10,461 
Fixed-rate term loans9,563 10,684 
Unsecured term loans336 336 
Class A 2015-1 EETC2,824 3,048 
Class B 2015-1 EETC528 616 
Class C 2015-1 EETC777 917 
Class AA 2017-1 EETC1,521 1,638 
Class A 2017-1 EETC548 590 
Class B 2017-1 EETC476 512 
Class C 2017-1 EETC522 1,080 
Convertible notes (2)
7,045 3,223 
Finance leases8 18 
Commitment and other fees417 535 
Amortization of deferred financing costs3,976 4,222 
Total$51,793 $37,880 
Notes(1) Includes $1.1 million of accretion and $22.2 million of interest expense for the three months ended March 31, 2023. Includes $0.3 million of accretion and $10.2 million of interest expense for the three months ended March 31, 2022.
(2) Includes $3.8 million of amortization of the discount for the convertible notes due 2026, $1.6 million of interest expense for the convertible notes due 2025 and 2026 and $1.7 million of unfavorable mark to Condensed Financial Statements—(Continued)
market adjustments for the convertible notes due 2026 for the three months ended March 31, 2023. Includes $2.5 million of amortization of the discount for the convertible notes due 2026, $1.6 million of interest expense for the convertible notes due 2025 and 2026 offset by $0.9 million of favorable mark to market adjustments for the convertible notes due 2026 for the three months ended March 31, 2022.

 Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
 (in thousands)
Senior term loans$4,564
 $4,917
 $13,854
 $14,929
Junior term loans746
 879
 2,323
 2,721
Fixed-rate loans2,811
 —
 4,555
 —
Class A enhanced equipment trust certificates4,366
 3,538
 12,995
 7,419
Class B enhanced equipment trust certificates1,118
 1,015
 3,410
 2,124
Commitment fees29
 32
 87
 97
Amortization of debt discounts1,362
 979
 3,883
 2,289
Total$14,996
 $11,360
 $41,107
 $29,579


11.Subsequent Events

On October 25, 2017, the Company's Board of Directors authorized a new repurchase program of up to $100 million in aggregate value of shares of our Common Stock, par value $0.0001 per share, from time to time in open market or privately negotiated transactions. The authorization will expire on October 25, 2018. The timing and amount of any stock repurchases are subject to prevailing market conditions and other considerations.

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 quarterly 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 quarterly 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 quarterly 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 and special charges 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.

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act)"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act)"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 factors 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, and those discussed in the section titled “Risk Factors” in this report and in Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 20162022 and subsequent Quarterly Reports on Form 10-Q.10-Q or Current Reports on Form 8-K. 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.
Overview

Spirit Airlines, is an ultra low-cost, low-fare airline headquartered in Miramar, Florida, that offers affordable travel to price-consciousvalue-conscious customers. Our all-Airbus Fit FleetTM,fleet is one of the youngest fleet of any major U.S. airline, currently operates more than 480 daily flights to 60 destinationsand most fuel efficient in the United States. We serve destinations throughout the United States, Latin America and the Caribbean, and Latin America.are dedicated to giving back and improving those communities. Our stock trades under the symbol "SAVE" on the NASDAQ Global SelectNew York Stock Market.

Exchange ("NYSE").
Our ultra low-cost carrier, or ULCC, business model allows us to compete principally by offering customers our Bare Fares
TM, which are unbundled base fares that remove components traditionally included in the price of an airline ticket. We then give customers Frill ControlTM, which provides customers the freedom to save by paying only for the options they choose, such as bags, advance seat assignments and refreshments. We record revenue related to these options in our financial statements as non-ticket revenue.

We are focusedfocus on price-sensitivevalue-conscious travelers who pay for their own travel, and our business model is designed to deliver what we believe our customersGuests want: low fares. We aggressively use low fares to address an underserved market, which helps us to increase passenger volume, load factors and non-ticket revenue on the flights we operate. We also have high-density seating configurations on our aircraft and a simplified onboard product designed to lower costs, which is part of our Plane SimpleTM strategy. High passenger volumes and load factors help us sell more 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 customers and potential customers as the low-fare leader in the markets we serve.

great experience. We compete based on total price. We believe other airlines have used an all-inclusive pricing concept to effectively maintain higher total prices to consumers, rather than lowering fares by unbundling each product or service. For example, carriers that tout “free bags” have included the cost of checking bags in the total ticket price, which does not allow passengers to see how much they would save if they did not check luggage. We believe that we and our customers benefit when we allow our customers to know the total price of their travel by breaking out the cost of optional products or services.

We allow our customersGuests to see all available options and their respective prices prior to purchasing a ticket, and this full transparency illustrates that our total price, including options selected, is lower on average than other airlinesairlines. By offering Guests unbundled base fares, we give them the power to save by paying only for the À La Smarte® options they choose, such as checked and carry-on bags and advance seat
21

assignments. We record revenue related to these options as non-fare passenger revenue, which is recorded within passenger revenues in our statement of operations.

We use low fares to address underserved markets, which helps us to increase passenger volume, load factors and non-ticket revenue. We also have high-density seating configurations on average. Through branded campaigns, we educateour fuel-efficient, all-Airbus fleet and a simplified onboard product designed to lower costs. High passenger volumes and load factors help us sell more ancillary products and services, which in turn allows us to reduce our fares even further.

We are committed to delivering the publicbest value in the sky while providing an exceptional Guest experience. Our optimized mobile-friendly website makes booking easier. Our updated mobile app allows Guests to search for the lowest fares, book and check in while on howthe go, and our unbundled pricing model works, showing them how it gives them choice on how they spend their moneyairport kiosks and saves them money compared to other airlines.self-bag tagging help our Guests move through the airport more quickly.





Comparative Operating Statistics:
The following tables set forth our operating statistics for the three and nine-monthmonth periods ended September 30, 2017March 31, 2023 and 2022:
2016:
Three Months Ended March 31,Percent Change
 20232022
Operating Statistics (unaudited) (A):
Average aircraft194.8 174.9 11.4 %
Aircraft at end of period195 176 10.8 %
Average daily aircraft utilization (hours)11.2 10.8 3.7 %
Average stage length (miles)986 1,048 (5.9)%
Departures72,749 60,958 19.3 %
Passenger flight segments (PFSs) (thousands)10,598 8,506 24.6 %
Revenue passenger miles (RPMs) (thousands)10,674,879 9,050,034 18.0 %
Available seat miles (ASMs) (thousands)13,209,136 11,718,896 12.7 %
Load factor (%)80.8 %77.2 %3.6 pts
Fare revenue per passenger flight segment ($)57.45 49.19 16.8 %
Non-ticket revenue per passenger flight segment ($)69.91 64.53 8.3 %
Total revenue per passenger flight segment ($)127.36 113.72 12.0 %
Average yield (cents)12.64 10.69 18.2 %
TRASM (cents)10.22 8.25 23.9 %
CASM (cents)11.07 10.06 10.0 %
Adjusted CASM (cents)10.91 9.83 11.0 %
Adjusted CASM ex-fuel (cents)7.22 6.68 8.1 %
Fuel gallons consumed (thousands)142,343 124,916 14.0 %
Average economic fuel cost per gallon ($)3.43 2.95 16.3 %
 Three Months Ended September 30, Percent Change
 2017 2016 
Operating Statistics (unaudited) (A):     
Average aircraft105.5
 87.4
 20.7 %
Aircraft at end of period107
 89
 20.2 %
Average daily aircraft utilization (hours)11.6
 12.3
 (5.7)%
Average stage length (miles)1,006
 968
 3.9 %
Block hours112,701
 98,586
 14.3 %
Departures42,599
 38,310
 11.2 %
Passenger flight segments (PFSs) (thousands)6,307
 5,674
 11.2 %
Revenue passenger miles (RPMs) (thousands)6,452,529
 5,599,370
 15.2 %
Available seat miles (ASMs) (thousands)7,681,312
 6,507,204
 18.0 %
Load factor (%)84.0% 86.0% (2.0) pts
Average ticket revenue per passenger flight segment ($)56.48
 58.34
 (3.2)%
Average non-ticket revenue per passenger flight segment ($)52.48
 51.17
 2.6 %
Total revenue per passenger flight segment ($)108.96
 109.51
 (0.5)%
Average yield (cents)10.65
 11.10
 (4.1)%
TRASM (cents)8.95
 9.55
 (6.3)%
CASM (cents)7.59
 7.47
 1.6 %
Adjusted CASM (cents)7.48
 7.35
 1.8 %
Adjusted CASM ex-fuel (cents)5.42
 5.48
 (1.1)%
Fuel gallons consumed (thousands)90,274
 78,288
 15.3 %
Average economic fuel cost per gallon ($)1.75
 1.56
 12.2 %

(A) See "Glossary of Airline Terms" elsewhere in this quarterly report for definitions used in this table.




 Nine Months Ended September 30, Percent Change
 2017 2016 
Operating Statistics (unaudited) (A):     
Average aircraft101.9
 84.1
 21.2 %
Aircraft at end of period107
 89
 20.2 %
Average daily aircraft utilization (hours)11.7
 12.6
 (7.1)%
Average stage length (miles)991
 978
 1.3 %
Block hours326,033
 290,529
 12.2 %
Departures123,492
 111,495
 10.8 %
Passenger flight segments (PFSs) (thousands)18,083
 16,268
 11.2 %
Revenue passenger miles (RPMs) (thousands)18,285,588
 16,219,093
 12.7 %
Available seat miles (ASMs) (thousands)21,851,789
 18,909,627
 15.6 %
Load factor (%)83.7% 85.8% (2.1) pts
Average ticket revenue per passenger flight segment ($)56.84
 55.32
 2.7 %
Average non-ticket revenue per passenger flight segment ($)52.69
 51.85
 1.6 %
Total revenue per passenger flight segment ($)109.53
 107.17
 2.2 %
Average yield (cents)10.83
 10.75
 0.7 %
TRASM (cents)9.06
 9.22
 (1.7)%
CASM (cents)7.71
 7.33
 5.2 %
Adjusted CASM (cents)7.64
 7.15
 6.9 %
Adjusted CASM ex-fuel (cents)5.62
 5.45
 3.1 %
Fuel gallons consumed (thousands)254,871
 225,851
 12.8 %
Average economic fuel cost per gallon ($)1.73
 1.42
 21.8 %

(A) See "Glossary of Airline Terms" elsewhere in this quarterly report for definitions used in this table.



Executive Summary

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
22

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 on 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, on January 31, 2023, February 28, 2023 and March 31, 2023, JetBlue paid the Additional Prepayments of $0.10 per share of common stock to all Spirit stockholders of record as of January 25, 2023, February 22, 2023 and March 27, 2023, respectively.

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 March 31, 2023, the conversion rate of the convertible notes due 2025 and 2026 were respectively, 89.7550 and 23.3213 shares of voting common stock per $1,000 principal amount of convertible notes. In addition, as of March 31, 2023, the exercise price of the PSP1, PSP2 and PSP3 warrants were $12.361, $21.440 and $32.001 and the number of warrant shares issuable upon the exercise of the PSP1, PSP2 and PSP3 warrants were adjusted to 593,222.38, 156,899.64 and 91,736.10, 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. Justice Department filed suit to block the Merger. The trial date for the lawsuit has been set for October 16, 2023 and will be held at the United States District Court of Massachusetts in Boston.

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, subject to certain extensions up to July 24, 2024 if needed to obtain regulatory approvals. Upon the termination of the Merger Agreement under specified
23

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.

Summary of Results

For the thirdfirst quarter of 2017,2023, we achievedhad a 15.1%negative operating margin a decreaseof 6.78.3%, an improvement of 13.6 percentage points compared to a negative operating margin of 21.9% in the prior year period. We generated a pre-tax incomeloss of $94.8$141.6 million and a net incomeloss of $60.2$103.9 million on operating revenues of $687.2 million.$1,349.8 million. For the thirdfirst quarter of 2016,2022, we generated a pre-tax incomeloss of $128.0$244.0 million and a net incomeloss of $81.4$194.7 million on operating revenues of $621.3$967.3 million.
Our adjustedAdjusted CASM ex-fuel for the thirdfirst quarter of 20172023 was 5.427.22 cents a 1.1% decrease year overcompared to 6.68 cents in the same period in the prior year. The decreaseincrease on a per-ASM basis was primarily due to decreasesincreases in maintenance, materials and repairs, salaries, wages and benefits andexpense, aircraft rent expense, partially offset by increases indistribution expense and other operating and depreciation and amortization expense.
During the third quarter 2017, we had over 1,650 flight cancellations related to Hurricanes Harvey, Irma and Maria. We estimate that this unusually intense hurricane season, together with the overhang of the pilot-related work action earlier in the year, negatively impacted our third quarter operating income by approximately $39 million.
As of September 30, 2017,March 31, 2023, we had 107195 Airbus A320-family aircraft in our fleet comprised of 27 A319s, 64 A320s, 30 A321s, and 74 A320neos. As of March 31, A319s, 54 A320s, and 22 A321s. With the2023, we had 139 A320 family aircraft scheduled for delivery through 2027, of 6which 21 aircraft and the retirement of 1 aircraftare scheduled for delivery during the remainder of 2017, we expect to end 2017 with 112 aircraft in our fleet.
Since the delivery of our initial five A320neo aircraft in the fourth quarter of 2016, we have experienced introductory issues with the new-generation PW1100G-JM engines, which has resulted in diminished service availability of such aircraft. As a result of the reliability problems associated with the introduction of the new engine, during the second quarter of 2017, we executed a support agreement with manufacturer Pratt & Whitney in order to obtain support and relief related to these operational disruptions. During the fourth quarter of 2017, the support agreement was extended through the end of 2017. The

2023.
support agreement provides for compensation to the Company for grounded aircraft and for back-up spare engines. We are currently negotiating certain milestone dates for remediation of the introductory into-service issues with Pratt & Whitney.

Comparison of three months ended September 30, 2017March 31, 2023 to three months ended September 30, 2016March 31, 2022
Operating Revenues

Operating revenues increased $65.9increased $382.5 million,, or 10.6%39.5%, to $687.2$1,349.8 million for the thirdfirst quarter of 2017,2023, as compared to the thirdfirst quarter of 2016,2022, primarily due primarily to an increase in average yield of 18.2%, an increase in traffic of 15.2%, offset by a decrease18.0% and an increase in passenger yieldsload factor of 4.1% .
Total revenue per available seat mile (TRASM) for the third quarter of 2017 was 8.95 cents, a decrease of 6.3%, as compared to the third quarter of 2016. This decrease was primarily driven by lower passenger yields,3.6 pts, year over year, resulting from aggressive competitive pricing in many of our markets. In addition, load factor decreased by 2.0 points, year over year.

Total revenue per passenger flight segment decreased 0.5%increased 12.0%, year over year, driven by a decrease of 3.2%year. The increase in ticket revenue per passenger flight segment offset by an increase of 2.6% in non-ticket revenue per passenger flight segment. The decrease in tickettotal revenue per passenger flight segment was primarily driven by a 4.1% decreasean 18.2% increase in average yield, period over period, due to a more aggressive pricing environment as compared to the prior year.period. In addition, we had an increase in passenger flight segments of 24.6%. Fare revenue per passenger flight segment increased 16.8% and non-ticket revenue per passenger flight segment increased 8.3%. The increase in non-ticket revenue per passenger flight segment was primarily attributable to higherincreases in bundled ancillary revenue, passenger usage fee revenue and seatbag revenue per passenger flight segment, as compared to the prior year.

Operating Expenses

Operating expenses increased $97.0$283.4 million, or 20.0%24.0%, to $583.1$1,462.2 million for the thirdfirst quarter of 20172023 compared to $486.1$1,178.8 million for the thirdfirst quarter of 2016,2022, primarily due to an increase in aircraft fuel expense and salaries, wages and benefits expense, period over period. In addition, we had an increase in other operating expense primarily due to an increase in operations as reflected by an 18.0% capacity growth and a 15.2% increase in traffic. Operating expenses also increased as a result of a 15.3%traffic and 12.7% increase in fuel gallons consumed and a 12.2% increase in average economic fuel cost per gallon which drove higher aircraft fuel expense year over year.capacity.
Aircraft fuel expense includes into-plane fuel expense (defined below) and realized and unrealized gains and losses associated with our fuel derivative contracts, 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, 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. From time to time, we may enter into fuel derivative contracts to protect the refining price risk between the price of crude oil and the price of refined jet fuel. We had no activity related to fuel derivative instruments during the ninethree months ended September 30, 2017March 31, 2023 and 2016. Historically, management has chosen not to elect hedge accounting on any fuel derivative instruments and, as a result, changes in the fair value of fuel derivative contracts have been recorded each period in aircraft fuel expense.2022.
24

Aircraft fuel expense increased in the third quarter of 2017 by $36.5$119.1 million, or 29.9%32.3%, compared to $121.8from $368.6 million in the thirdfirst quarter of 2016,2022 to $487.7 million in the first quarter of 2023. This increase in fuel expense, period over period, was due to a 15.3% increase in fuel gallons consumed and a 12.2%16.3% increase in average economic fuel cost per gallon.gallon and a 14.0% increase in fuel gallons consumed.
The elements of the changes in aircraft fuel expense are illustrated in the following table:
 Three Months Ended September 30,

 2017
2016

(in thousands, except per gallon amounts)
Percent Change
Fuel gallons consumed90,274

78,288

15.3%
Into-plane fuel cost per gallon1.75

1.56

12.2%
Into-plane fuel expense$158,300

$121,844

29.9%
Realized losses (gains) related to fuel derivative contracts, net—

—

NM
Unrealized losses (gains) related to fuel derivative contracts, net—

—

NM
Aircraft fuel expense (per statement of operations)$158,300

$121,844

29.9%


 Three Months Ended March 31,
 20232022
(in thousands, except per-gallon amounts)Percent Change
Fuel gallons consumed142,343 124,916 14.0 %
Into-plane fuel cost per gallon$3.43 $2.95 16.3 %
Aircraft fuel expense (per condensed consolidated statements of operations)$487,711 $368,585 32.3 %
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. The into-plane fuel cost per gallon increase of 12.2%16.3% was primarily a result of an increase in jet fuel prices.

We track economic fuel expense, which we believe is the best measure of the effect fuel prices are currently having on our business, because it most closely approximates the net cash outflow associated with purchasing fuel used for our operations during the period. We define economic fuel expense as into-plane fuel expense and realized gains or losses on fuel derivative contracts. The key difference between aircraft fuel expense as recorded in our statement of operations and economic fuel expense is unrealized mark-to-market changes in the value of aircraft fuel derivatives outstanding. Many industry analysts evaluate airline results using economic fuel expense and it is used in our internal management reporting.
The elements of the changes in economic fuel expense are illustrated in the following table:
 Three Months Ended September 30,

 2017
2016

(in thousands, except per gallon amounts)
Percent Change
Into-plane fuel expense$158,300

$121,844

29.9%
Realized losses (gains) related to fuel derivative contracts, net—

—

NM
Economic fuel expense$158,300

$121,844

29.9%
Fuel gallons consumed90,274

78,288

15.3%
Economic fuel cost per gallon$1.75

$1.56

12.2%

During the three months ended September 30, 2017 and 2016, we had no activity related to fuel derivatives and thus had no realized or unrealized losses (gains) related to fuel derivative contracts.
We measure our operating cost performance on a per-ASM basis, since one ASM is the unit of production of an airline’s capacity. The following table presents our cost per-ASM, or unit cost, for the three months ended September 30, 2017March 31, 2023 and 2016,2022, followed by explanations of the material changes on a dollar basis and/or unit cost basis:

Three Months Ended March 31,Dollar ChangePercent ChangeCost per ASMPer-ASM ChangePercent Change
Three Months Ended September 30, Dollar Change Percent Change Cost per ASM Per-ASM Change Percent ChangeThree Months Ended March 31,
2017 2016 2017 2016  2023202220232022
(in thousands)   (in cents)  (in thousands)(in cents)
Aircraft fuelAircraft fuel$487,711 $368,585 $119,126 32.3 %3.69 3.15 0.54 17.1 %
Salaries, wages, and benefits$134,114
 $120,190
 $13,924
 11.6 % 1.75
 1.85
 (0.10) (5.4)%Salaries, wages, and benefits$389,185 $305,890 $83,295 27.2 %2.95 2.61 0.34 13.0 %
Aircraft fuel158,300
 121,844
 36,456
 29.9 % 2.06
 1.87
 0.19
 10.2 %
Aircraft rent53,396
 49,367
 4,029
 8.2 % 0.70
 0.76
 (0.06) (7.9)%
Landing fees and other rents48,498
 39,345
 9,153
 23.3 % 0.63
 0.60
 0.03
 5.0 %Landing fees and other rents97,345 82,936 14,409 17.4 %0.74 0.71 0.03 4.2 %
Depreciation and amortization36,840
 25,304
 11,536
 45.6 % 0.48
 0.39
 0.09
 23.1 %Depreciation and amortization77,991 76,191 1,800 2.4 %0.59 0.65 (0.06)(9.2)%
Aircraft rentAircraft rent85,267 66,044 19,223 29.1 %0.65 0.56 0.09 16.1 %
Maintenance, materials and repairs26,176
 30,443
 (4,267) (14.0)% 0.34
 0.47
 (0.13) (27.7)%Maintenance, materials and repairs54,414 45,515 8,899 19.6 %0.41 0.39 0.02 5.1 %
Distribution29,469
 25,565
 3,904
 15.3 % 0.38
 0.39
 (0.01) (2.6)%Distribution48,017 35,351 12,666 35.8 %0.36 0.30 0.06 20.0 %
Special charges7,853
 7,355
 498
 NM
 0.10
 0.11
 (0.01) NM
Special charges13,983 15,563 (1,580)NM0.11 0.13 (0.02)NM
Loss on disposal of assets516
 423
 93
 NM
 0.01
 0.01
 —
 NM
Loss on disposal of assets7,100 11,552 (4,452)NM0.05 0.10 (0.05)NM
Other operating87,965
 66,277
 21,688
 32.7 % 1.15
 1.02
 0.13
 12.7 %Other operating201,156 171,156 30,000 17.5 %1.52 1.46 0.06 4.1 %
Total operating expenses$583,127
 $486,113
 $97,014
 20.0 % 7.59
 7.47
 0.12
 1.6 %Total operating expenses$1,462,169 $1,178,783 $283,386 24.0 %11.07 10.06 1.01 10.0 %
Adjusted CASM (1)        7.48
 7.35
 0.13
 1.8 %Adjusted CASM (1)10.91 9.83 1.08 11.0 %
Adjusted CASM ex-fuel (2)        5.42
 5.48
 (0.06) (1.1)%Adjusted CASM ex-fuel (2)7.22 6.68 0.54 8.1 %
 
(1)Reconciliation of CASM to Adjusted CASM:

(1)Reconciliation of CASM to Adjusted CASM:
Three Months Ended March 31,
20232022
(in millions)Per ASM(in millions)Per ASM
CASM (cents)11.07 10.06 
Special charges$14.0 0.11 $15.6 0.13 
Loss on disposal of assets7.1 0.05 11.6 0.10 
Adjusted CASM (cents)10.91 9.83 

(2)Excludes aircraft fuel expense, loss on disposal of assets and special charges.
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 Three Months Ended September 30,
 2017 2016
 (in millions) Per ASM (in millions) Per ASM
CASM (cents)  7.59
   7.47
Unrealized losses (gains) related to fuel derivative contracts, net$—
 —
 $—
 —
Loss on disposal of assets0.5
 0.01
 0.4
 0.01
Special charges7.9
 0.10
 7.4
 0.11
Adjusted CASM (cents)  7.48
   7.35

(2)Excludes aircraft fuel expense, loss on disposal of assets and special charges.
Our adjustedAdjusted CASM ex-fuel for the thirdfirst quarter of 20172023 was down 1.1% as7.22 cents, compared to 6.68 cents in the third quarter of 2016.same period in the prior year. The decreaseincrease on a per-ASM basis was primarily due to decreasesincreases in maintenance, materials and repairs, salaries, wages and benefits andexpense, aircraft rent expense, partially offset by increases indistribution expense and other operating and depreciation and amortization expense.
Labor costsSalaries, wages and benefits for the thirdfirst quarter of 20172023 increased $13.9$83.3 million, or 11.6%27.2%, as compared to the thirdfirst quarter of 2016, primarily2022. On a per dollar basis, salaries, wages and benefits expense increased due to higher salaries, vacation-time expense, 401(k) expense, crew overtime and sick-time expense as compared to the prior year period. These increases were mainly driven by significant pay rate increases related to the collective bargaining agreement with our pilots ratified in January 2023. These pay rate increases also resulted in a 22.2%one-time adjustment recorded during the first quarter 2023 related to pilot vacation-time and sick-time expense. In addition, these increases were driven by an 18.9% increase in our pilot and flight attendant workforce, resulting fromperiod over period, as well as due to an increase in operations as compared to our aircraft fleet of 18 additional aircraft since the third quarter of 2016, offset by a decrease in incentive compensation and sick-time expense.prior year period. On a per-ASM basis, labor costs decreased due to lower incentive compensation expense resulting from lower metric performance, year over year, as well as a decrease in our sick-time expense.
Aircraft rent expense for the third quarter of 2017 increased by $4.0 million, or 8.2%, as compared to the third quarter of 2016. This increase in aircraft rentsalaries, wages and benefits expense was primarily driven by the delivery of seven new aircraft, financed under operating leases, subsequent to the end of the third quarter of 2016. Thissignificant increase was partially offset by the purchase of two aircraft since the end of the third quarter of 2016, which were formerly financed under operating lease agreements. On a per-ASM basis, aircraft rent expense decreased primarily due to a change in the composition of our aircraft fleet between leased aircraft (for which rent expense is recorded under aircraft rent) and purchased aircraft (for which depreciation expense is recorded under depreciation and amortization). Since the prior yearpilot pay rates, period we have purchased 14 aircraft, of which 2 were previously financed under operating lease agreements.over period.
Landing fees and other rents for the thirdfirst quarter of 20172023 increased $9.2$14.4 million, or 23.3%17.4%, as compared to the thirdfirst quarter of 2016, primarily due to an 11.2% increase in departures. In addition, on both2022. On a dollar and per-ASM basis, landing fees and other rents expense primarily increased due to increased volume at higher cost airports, year over year, as well asa result of an increase in landing fees, facility rent resulting fromand related airport services driven by increased operations, higher rent rates and the addition of new stations as well as new gates at our existing stations, period over period. Gate charges and landing fees as well as a portion of our facility rent and 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 19.3% and passenger flight segments increased by 24.6%. On a per-ASM basis, the increase in landing fees and other rents was primarily due to rate increases in landing fees at some of our existing stations.certain airports where we operate.

Depreciation and amortization for the first quarter of 2023 increased by $11.5$1.8 million, or 45.6%2.4%, as compared to the prior year period. The increase in depreciation and amortization expense on both a dollar and per-ASM basis was primarily driven by an increase in computer software and spare rotables. 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. On a per-ASM basis, depreciation and amortization expense decreased primarily due to increased depreciation expense resulting from the purchaseimpact of 14the impairment of 29 of our A319 aircraft made sinceduring the thirdfourth quarter of 2016.2022 discussed above.
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 statement of operations until the earlier of the next heavy maintenance event or the end of the lease term. The amortization of heavy maintenance costs was $14.2$16.4 million and $10.1$23.5 million for the thirdfirst quarters of 20172023 and 2016,2022, respectively. AsThe amortization of heavy maintenance costs is driven by the timing and number of maintenance events. 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 grow and age, we generally expect that the amount of deferred heavy maintenance events will increase and will result in an increase in the amortization of those costs. If heavy maintenance events were amortized within maintenance, materials and repairs expense in the statementcondensed consolidated statements of operations, our maintenance, materials and repairs expense would have been $40.4$70.9 million and $40.5$69.0 million for the third quartersfirst quarter of 20172023 and 2016,2022, respectively.
Maintenance, materials and repairsAircraft rent expense for the thirdfirst quarter of 2017 decreased2023 increased by $4.3$19.2 million, or 14.0%29.1%, as compared to the thirdfirst quarter of 2016. The decrease2022. This increase in maintenance costsaircraft rent expense on a dollar and per-unitper-ASM basis was primarily due to a decreasedan increase in the number of scheduled maintenance events inaircraft financed under operating leases throughout the current period, as compared to the prior year periodperiod. Since the first quarter of 2022, we have acquired 23 new aircraft financed under operating leases.
Maintenance, materials and repairs expense for the first quarter of 2023 increased by $8.9 million, or 19.6%, as compared to the first quarter of 2022. On a dollar basis, the increase in maintenance, materials and repairs expense was mainly due to a higher volume of maintenance events driven by an increase in operations as evidenced by a 19.3% increase in departures as well as lower aircraft repairrate increases. On a per-ASM basis, the increase in maintenance, materials and repairs expense was primarily due to rate increases since the prior year over year. We expect maintenance expense to increase as our fleet continues to grow and age, resulting in the need for additional or more frequent repairs over time.period.

Distribution costs increased by $3.9$12.7 million, or 15.3%35.8%, in the thirdfirst quarter of 20172023 as compared to the thirdfirst quarter of 2016.2022. The increase on a dollar basis was primarily due to increased sales volume.volume, which impacts our variable distribution costs such as credit card fees. On a per-ASM basis, distribution costs remained relatively stable.increased primarily due to higher average fare resulting in an increase in credit card fees, year over year.


26

Special charges for the three months ended March 31, 2023 consisted of $7.2 million in legal, advisory and other fees related to the Merger Agreement with JetBlue as well as $6.7 million related to the retention award program in connection with the Merger Agreement with JetBlue. Special charges for the three months ended March 31, 2022 consisted of $11.1 million in legal, advisory and other fees related to the Merger Agreement and $4.5 million related to the Frontier Retention Award Program. For additional information, refer to "Notes to Condensed Consolidated Financial Statements—5. Special Charges."

Loss on disposal of assets for the three months ended March 31, 2023 primarily consisted of $7.8 million related to the loss on two aircraft sale leaseback transactions partially offset by a net gain of $1.2 million related to the sale of four A319 aircraft. Loss on disposal of assets for the three months ended March 31, 2022 primarily consisted of $6.6 million related to the impairment of one spare engine which was damaged beyond economic repair and $4.3 million related to the loss on three aircraft sale leaseback transactions completed during the first quarter of 2022. For additional information, refer to "Notes to Condensed Consolidated Financial Statements—4. Loss on Disposal."

Other operating expenseexpenses for the third quarter of 2017three months ended March 31, 2023 increased by $21.7$30.0 million, or 32.7%17.5%, as compared to the third quarter of 2016three months ended March 31, 2022. The increase in other operating expenses on a dollar basis was primarily due to an increase in overallground handling expense, travel and lodging expense and other airport services expense. These increases are primarily a result of an increase in operations and higher passenger re-accommodation expense yearas well as an increase in ground handling rates at certain airports at which we operate, period over year. Asperiod. In addition, as compared to the prior year period, wedepartures increased departures by 11.2%19.3% and had 11.2% more passenger flight segments increased by 24.6%, which drove increases in variable other operating expenses. Other operatingThese increases were partially offset by a decrease in passenger reaccommodation expense, per ASM increased primarilyperiod over period, due to a number of adverse weather events and increases in ATC programs and restrictions, which led to a significant number of flight delays and cancellations during the first quarter of 2022. The increase on a per-ASM basis was primarily attributable to higher passenger re-accommodationground handling expense and software expense, as compared to the prior year period, partially offset by a decrease in passenger reaccommodation expense, period over period.
Special charges for the third quarter of 2017 consisted of $7.9 million in lease termination charges recognized in connection with the purchase of 1 aircraft, which was formerly financed under an operating lease agreement. For the third quarter of 2016, special charges consisted of $7.4 million in lease termination charges recognized in connection with the purchase of 3 aircraft formerly financed under operating lease agreements. The amount recorded as lease termination charges represents the excess of the purchase price paid over the appraised fair value of the asset(s), less previously expensed supplemental rent and other non-cash items. For further discussion on this purchase, please see "Notes to Condensed Financial Statements - 3. Special Charges."


Other Income (Expenses)(Income) Expense

Our interest expense and corresponding capitalized interest for the three months ended September 30, 2017March 31, 2023 primarily represented interest and 2016 primarily representsaccretion related to our 8.00% senior secured notes as well as the interest related to the financing of purchased aircraft. As of September 30, 2017aircraft, the discount amortization and 2016, the Company had 40 and 28 aircraft financed through secured long-term debt arrangements, respectively. Please see "Notesmark to Condensed Financial Statements—10. Debt and Other Obligations" for further discussion.

Our interest income for the three months ended September 30, 2017 primarily represents interest income earned on cash, cash equivalents and short-term investments. Interest income for the three months ended September 30, 2016 primarily represents interest income earned on cash, cash equivalents and on funds requiredmarket adjustments related to be heldour convertible notes due in escrow in accordance with the terms of our EETC.

Income Taxes
Our effective tax rate for the third quarter of 2017 was 36.5% compared to 36.4% for the third quarter of 2016. In arriving at these rates, we considered a variety of factors, including our forecasted full-year pre-tax results, the U.S. federal rate of 35%, expected nondeductible expenses, and estimated state income taxes. We evaluate our tax rate each quarter and make adjustments when necessary. Our final effective tax rate for the full year is dependent on the level of pre-tax income2026 and the magnitude of any nondeductible expenses in relation to the respective pre-tax income.

Comparison of nine months ended September 30, 2017 to nine months ended September 30, 2016
Operating Revenues
Operating revenues increased $237.1 million, or 13.6%, to $1,980.7 million for the nine months ended September 30, 2017, compared to the prior year period, due primarily to an increase in traffic of 12.7% and an increase in passenger yields of 0.7%.
TRASM for the nine months ended September 30, 2017 was 9.06 cents, a decrease of 1.7% compared to the same period of 2016. This decrease was driven by a more aggressive competitive pricing environment noted in the third quarter of 2017 which put pressure on our passenger yields for the nine months ended September 30, 2017. In addition, load factor decreased by 2.1 points, as compared to the prior year.
Total revenue per passenger flight segment increased 2.2% from $107.17 for the nine months ended September 30, 2016 to $109.53 for the nine months ended September 30, 2017. Our average ticket fare per passenger flight segment increased from $55.32 to $56.84, or 2.7%, as compared to the prior year period, and non-ticket revenue per passenger flight segment increased from $51.85 to $52.69, or 1.6%, as compared to the prior year period. The increase in non-ticket revenue per passenger flight segment was primarily attributable to higher passenger usage fee and seat revenue per flight segment, as compared to the prior year.
Operating Expenses


Operating expenses increased for the nine months ended September 30, 2017 by $299.2 million, or 21.6%, as compared to the same period for 2016 primarily dueinterest related to our 15.6% capacity growth and a 12.7% increase in traffic. Operating expenses also increased as a result of an increase in aircraft fuel expense year over year.
Aircraft fuel expense for the nine months ended September 30, 2017 increased $119.4 million, or 37.2%, compared to the prior year period as a result of a 21.8% increase in average economic fuel price per gallon and a 12.8% increase in fuel gallons consumed.
The elements of the changes in aircraft fuel expense are illustrated in the following table:
 Nine Months Ended September 30,

 2017
2016

(in thousands, except per gallon amounts)
Percent Change
Fuel gallons consumed254,871

225,851

12.8%
Into-plane fuel cost per gallon$1.73

$1.42

21.8%
Into-plane fuel expense$440,376

$321,018

37.2%
Realized losses (gains) related to fuel derivative contracts, net—

—

NM
Unrealized losses (gains) related to fuel derivative contracts, net—

—

NM
Aircraft fuel expense (per Statement of Operations)$440,376

$321,018

37.2%
The elements of the changes in economic fuel expense are illustrated in the following table:
 Nine Months Ended September 30,

 2017
2016
 (in thousands, except per gallon amounts) Percent Change
Into-plane fuel expense$440,376

$321,018

37.2%
Realized losses (gains) related to fuel derivative contracts, net—

—

NM
Economic fuel expense$440,376

$321,018

37.2%
Fuel gallons consumed254,871

225,851

12.8%
Economic fuel cost per gallon$1.73

$1.42

21.8%
During the nine months ended September 30, 2017 and 2016, we had no activity related to fuel derivatives and thus had no realized or unrealized losses (gains) related to fuel derivative contracts.



We measure our operating cost performance on a per-ASM basis, since one ASM is the unit of production of an airline’s capacity. The following table presents our cost per-ASM, or unit cost, for the nine months ended September 30, 2017 and 2016, followed by explanations of the material changes on a unit cost basis and/or dollar basis:
 Nine Months Ended September 30, Dollar Change Percent Change Cost per ASM Per-ASM Change Percent Change
 2017 2016  2017 2016 
 (in thousands)   (in cents)  
Salaries, wages, and benefits$391,144
 $349,530
 $41,614
 11.9% 1.79
 1.85
 (0.06) (3.2)%
Aircraft fuel440,376
 321,018
 119,358
 37.2% 2.02
 1.70
 0.32
 18.8 %
Aircraft rent163,032
 151,433
 11,599
 7.7% 0.75
 0.80
 (0.05) (6.3)%
Landing fees and other rents134,538
 114,096
 20,442
 17.9% 0.62
 0.60
 0.02
 3.3 %
Depreciation and amortization103,680
 73,370
 30,310
 41.3% 0.47
 0.39
 0.08
 20.5 %
Maintenance, materials and repairs81,473
 72,010
 9,463
 13.1% 0.37
 0.38
 (0.01) (2.6)%
Distribution85,875
 73,190
 12,685
 17.3% 0.39
 0.39
 —
 — %
Special charges (credits)12,629
 31,609
 (18,980) NM
 0.06
 0.17
 (0.11) NM
Loss on disposal of assets3,114
 1,166
 1,948
 NM
 0.01
 0.01
 —
 NM
Other operating268,553
 197,833
 70,720
 35.7% 1.23
 1.05
 0.18
 17.1 %
Total operating expenses$1,684,414
 $1,385,255
 $299,159
 21.6% 7.71
 7.33
 0.38
 5.2 %
Adjusted CASM (1)        7.64
 7.15
 0.49
 6.9 %
Adjusted CASM ex-fuel (2)        5.62
 5.45
 0.17
 3.1 %
(1)Reconciliation of CASM to Adjusted CASM:
 Nine Months Ended September 30,
 2017 2016
 (in millions) Per ASM (in millions) Per ASM
CASM (cents)  7.71
   7.33
Unrealized losses (gains) related to fuel derivative contracts, net$—
 —
 $—
 —
Loss on disposal of assets3.1
 0.01
 1.2
 0.01
Special charges12.6
 0.06
 31.6
 0.17
Adjusted CASM (cents)  7.64
   7.15

(2)Excludes aircraft fuel expense, loss on disposal of assets and special charges and credits.
Our adjusted CASM ex-fuel for the nine months ended September 30, 2017 increased by 3.1% as compared to the same period in 2016. The increase on a per-ASM basis was primarily due to increases in other operating and depreciation and amortization expense, partially offset by decreases in special charges and salaries, wages and benefits expense.
Labor costs for the nine months ended September 30, 2017 increased $41.6 million, or 11.9%, as compared to the same period in 2016. The increase was primarily driven by an 18.5% increase in our pilot and flight attendant workforce resulting from an increase to our aircraft fleet of 18 additional aircraft since the end of the third quarter of 2016, partially offset by a decrease in incentive compensation expense year over year. On a per-ASM basis, labor costs decreased primarily due to lower incentive compensation expense, year over year, resulting from lower metric performance and the ratification incentive in the new flight attendant contract of $8.4 million recorded during the first quarter of 2016.
Aircraft rent expense for the nine months ended September 30, 2017 increased by $11.6 million, or 7.7%, as compared to the same period in 2016. This increase in aircraft rent expense was primarily driven by the delivery of seven new aircraft, financed under operating leases, subsequent to the end of the third quarter of 2016. This increase was partially offset by the purchase of two aircraft since the end of the third quarter of 2016, which were formerly financed under operating lease agreements. On a per-ASM basis, aircraft rent expense decreased primarily due to a change in the composition of our aircraft fleet between leased aircraft (for which rent expense is recorded under aircraft rent) and purchased aircraft (for which depreciation expense is recorded under depreciation and amortization). Since the prior year period, we have purchased 14


aircraft, of which 2 were previously financed under operating lease agreements. This decrease was partially offset by an increase in return costs for two leased aircraft. Costs associated with return conditions of leased aircraft are recorded as supplemental rent within aircraft rent expense on our statement of operations.
Landing fees and other rents for the nine months ended September 30, 2017 increased $20.4 million, or 17.9%, as compared to the same period in 2016 primarily due to a 10.8% increase in departures. In addition, on both a dollar and per-ASM basis, landing fees and other rents increased due to increased volume at higher cost airports, year over year, as well as an increase in facility rent resulting from the addition of new stations and rate increases at some of our existing stations.
Depreciation and amortization increased by $30.3 million, or 41.3%, as compared to the prior year period. The increase on both a dollar and per-ASM basis was primarily due to increased depreciation expense resulting from the purchase of 14 aircraft made since the third quarter of 2016.
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 statement of operations until the earlier of the next heavy maintenance event or end of the lease term. The amortization of heavy maintenance costs was $42.1 million and $33.0 million for the nine months ended September 30, 2017 and 2016, respectively. 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 heavy maintenance events were amortized within maintenance, materials and repairs expense in the statement of operations, our maintenance, materials and repairs expense would have been $123.5 million and $105.1 million for the nine months ended September 30, 2017 and 2016, respectively.
Maintenance, materials and repairs expense for the nine months ended September 30, 2017 increased by $9.5 million, or 13.1%, as compared to the prior year period. The increase in maintenance costs on a dollar basis was due to routine and ongoing maintenance on a growing fleet. On a per-unit basis, maintenance costs remained relatively stable as compared to the prior year period. We expect maintenance expense to increase as our fleet continues to grow and age, resulting in the need for additional or more frequent repairs over time.
Distribution costs increased by $12.7 million, or 17.3%, for the nine months ended September 30, 2017 as compared to the same period in 2016. The increase on a dollar basis was primarily due to increased sales volume. On a per-ASM basis, distribution costs remained stable, as compared to the prior period.
Other operating expense for the nine months ended September 30, 2017 increased by $70.7 million, or 35.7%, as compared to the prior year period, primarily due to an increase in overall operations and higher passenger re-accommodation expense year over year. As compared to the prior year period, we increased departures by 10.8% and had 11.2% more passenger flight segments, which drove increases in variable operating expenses. Other operating expense per ASM increased primarily due to higher passenger re-accommodation expense, as compared to the prior year period.
Special charges for the nine months ended September 30, 2017 consisted of $12.6 million in lease termination charges recognized in connection with the purchase of 1 aircraft and 1 engine, which were formerly financed under operating lease agreements. For the nine months ended September 30, 2016, special charges consisted of $31.6 million in lease termination charges recognized in connection with the purchase of 6 aircraft formerly financed under operating lease agreements. The amount recorded as lease termination charges represents the excess of the purchase price paid over the appraised fair value of the asset(s), less previously expensed supplemental rent and other non-cash items. For further discussion on this purchase, please see "Notes to Condensed Financial Statements - 3. Special Charges."

Other income (expenses)

convertible notes. Our interest expense and corresponding capitalized interest for the ninethree months ended September 30, 2017 and 2016March 31, 2022, primarily representsrepresented interest related to the financing of purchased aircraft.aircraft as well as the interest and accretion related to our 8.00% senior secured notes, the discount amortization related to our convertible notes due in 2026 and the interest related to our convertible notes. As of September 30, 2017both March 31, 2023 and 2016, the Company2022, we had 40 and 2873 aircraft financed through securedfixed-rate long-term debt arrangements, respectively. Please see "Notes to Condensed Financial Statements—10. Debt and Other Obligations" for further discussion.debt.

Our interest income for the ninethree months ended September 30, 2017March 31, 2023 and 2022 primarily represents interest income earned on cash, cash equivalents and short-term investments. Interest income for the nine months ended September 30, 2016 primarily representsAs of March 31, 2023 and 2022, we had interest income earned on cash, cash equivalentsof $15.4 million and on funds required$0.5 million, respectively. The increase in interest income was primarily due to be heldan increase in escrow in accordance withinterest rates as compared to the terms of our EETC.prior year period.


Income Taxes


Our effective tax rate for the nine months ended September 30, 2017first quarter of 2023 was 37.1%26.6%, compared to 36.7%20.2% for the nine months ended September 30, 2016. In arriving at these rates,first quarter of 2022. The increase in the tax rate, as compared to the prior year period, is primarily due to an increase in unfavorable permanent tax items and forecasted annual financial income. While we considered a variety of factors, including our forecasted full-year pre-tax results, the U.S. federal rate of 35%, expected nondeductible expenses, and estimated state income taxes. We evaluateexpect our tax rate to be fairly consistent in the near term, it will tend to vary depending on items such as changes to permanent tax items, the amount of income we earn in each quarterstate and make adjustments when necessary. Our finalthe state tax applicable to such income. Discrete items particular to a given year may also affect our effective tax rate for the full year is dependent on the level of pre-tax income and the magnitude of any nondeductible expenses in relation to the respective pre-tax income.rates.


Liquidity and Capital Resources

Our primary sources of liquidity aregenerally 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),("PDPs") and debt obligations and maintenance reserves. Our totallease obligations. We expect to meet our cash at September 30, 2017 was $863.7 million, an increase of $162.8 millionneeds for the next twelve months with cash and cash equivalents, financing arrangements and cash flows from December 31, 2016.operations. As of September 30, 2017,March 31, 2023, we had $100.7 $1,696.1
27

million of liquidity comprised of unrestricted cash and cash equivalents, short-term investment securities and funds available under our revolving credit facility due in short-term available-for-sale investment securities.2024.

As of March 31, 2023, we had $25.1 million recorded within current maturities of long-term debt and finance leases on our condensed consolidated balance sheets related to our convertible notes due 2025. As of March 31, 2023, the convertible notes due 2025 may be converted by noteholders through June 30, 2023. 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 Condensed Consolidated Financial Statements—12. Debt and Other Obligations," for additional information on the convertible notes due 2025.

As of March 31, 2023, we had $468.3 million, net of the related unamortized debt discount of $31.7 million, recorded within long-term debt, net and finance leases, less current maturities on our condensed consolidated balance sheets related to our convertible notes due 2026. As of March 31, 2023, the convertible notes due 2026 did not qualify for conversion by noteholders through June 30, 2023. Refer to "Notes to Condensed Consolidated Financial Statements —12. Debt and Other Obligations" for additional information on the convertible notes due 2026.

Currently, one of our largest capital expenditure needs is funding the acquisition costs of our aircraft. Aircraft aremay be acquired through debt financing, cash purchases, direct leases or sale leaseback transactions. During the three months ended March 31, 2023, we took delivery of three aircraft under direct operating leases, two aircraft under sale leaseback transactions direct leases or cash purchases. In debt financing transactions, capital is needed to make equity investments in capital assets and payments on debt obligations (principal and interest) after the acquisition of the aircraft.one spare engine purchased with cash. During the ninethree months ended September 30, 2017, we purchased 11 aircraft through debt financing transactions and 2 engines through cash purchases. During the nine months ended September 30, 2017,March 31, 2023, we made $93.8$146.7 million in debt payments (principal, interest and fees) on our outstanding aircraft debt obligations. Capital resources required under debt financing transactions will generally be higher than those involving sale leaseback transactions. In sale leaseback transactions, capital is needed to fund the initial purchase of the aircraft prior to the sale to the lessor. During the nine months ended September 30, 2017, we entered into no sale leaseback transactions. During the nine months ended September 30, 2017, we purchased one engine and one aircraft, which were previously financed under operating lease agreements, for $8.1 million and $20.0 million, respectively, comprised of a cash payment of $3.8 million and $12.6 million, respectively, and the non-cash application of maintenance and security deposits held by the previous lessor of $4.3 million and $7.4 million, respectively.

Under our agreement with Airbuspurchase agreements for aircraft and International Aero Engines AG (IAE) and Pratt & Whitney for engines, we are required to pay PDPs relating to future deliveries at various times prior to each delivery date. During the ninethree months ended September 30, 2017,March 31, 2023, we paid $121.7$25.4 million ofin PDPs, net of refunds, and $8.1$4.9 million of capitalized interest for future deliveries of aircraft and spare engines. As of September 30, 2017,March 31, 2023, we had $304.7$516.1 million of PDPs,pre-delivery deposits on flight equipment, including capitalized interest, on our condensed consolidated balance sheet.sheets.

As of September 30, 2017,March 31, 2023, we had secured bank debt financing for 432 aircraft scheduled for delivery in the remainder of 2017,to be leased directly from third-party lessors and did16 aircraft which will be financed through sale leaseback transactions, with deliveries expected through 2024. We do not have financing commitments in place for the remaining 6191 Airbus firm aircraft orders, scheduled for delivery between 2017 through 2021.2027. However, we have 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 signed in the fourth quarter of 2019. 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.
In addition to funding the acquisition of our fleet, we are required to make maintenance reserve payments for a portion of our current fleet. Maintenance reserves are paid to aircraft lessors and are held as collateral in advance of our performance of major maintenance activities. In the
nine months ended September 30, 2017, we recorded an increase of $28.4 million in maintenance reserves, net of reimbursements, and as of September 30, 2017, we had $305.1 million ($166.4 million in aircraft maintenance deposits and $138.7 million in long-term aircraft maintenance deposits) on our condensed balance sheet.
On October 25, 2017, our Board of Directors authorized a new repurchase program of up to $100 million in aggregate value of shares of our Common Stock, par value $0.0001 per share, from time to time in open market or privately negotiated transactions. The authorization will expire on October 25, 2018. The timing and amount of any stock repurchases are subject to prevailing market conditions and other considerations.
Net Cash Flows Provided By Operating Activities. Operating activities in the ninethree months ended September 30, 2017March 31, 2023 provided $386.5$140.8 million in cash compared to $440.0$19.5 million provided in the ninethree months ended September 30, 2016. The decrease isMarch 31, 2022. Cash provided by operating activities in the three months ended March 31, 2023 was primarily driven byrelated to cash provided from an increase in air traffic liability, an increase in other liabilities as well as higher operating costs specifically aircraft fuel, other operatingnon-cash expense of depreciation and salaries, wages, and benefits, whichamortization. These increases were slightlypartially offset by higher revenues, as compared to the prior period. The decrease is also attributed to an income tax refund of $65.0 million receivednet loss in the prior period while no refund was receivedas well as an increase in 2017.deferred heavy maintenance.

Net Cash Flows Used In Investing Activities. InDuring the ninethree months ended September 30, 2017,March 31, 2023, investing activities used $558.8$67.6 million, compared to $663.8$57.6 million used in the prior year period. The decreaseCash used by investing activities during the three months ended March 31, 2023 was mainly drivenprimarily related to cash used to purchase property and equipment and payment of PDPs, net of refunds, partially offset by the initial investment in our available-for-sale investment security portfolio made in the prior period. During the nine months ended September 30, 2016, we purchased $100.0 million of available-for-sale investment securities while in the current period all investment purchases were made from reinvestment of proceeds generated from the maturity of our investment securities. In


addition, we had a decrease in the purchasesale of property and equipment, year over year, resulting from decreased purchases of aircraft and engines.equipment.

Net Cash Flows ProvidedUsed By Financing Activities. During the ninethree months ended September 30, 2017,March 31, 2023, financing activities provided $335.1used $131.8 million in cash compared to $246.0$47.5 million providedused in the ninethree months ended September 30, 2016. We received $405.8 million in connection withMarch 31, 2022. During the debt financing of eleven aircraft delivered during the ninethree months ended September 30, 2017 andMarch 31, 2023, we paid $63.6$129.4 million in debt and capital leaseprincipal payment obligations.


Commitments and Contractual Obligations

Our contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. As of March 31, 2023, our aircraft orders consisted of 107 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. Out of these 107 aircraft, we have 9 aircraft scheduled for delivery in the remainder of 2023 and 25 aircraft scheduled for delivery in 2024. In late April 2023, we were notified that a number of the aircraft originally scheduled for delivery in 2023 and 2024 will be delayed into 2024 and
28

2025, respectively. Given supply chain delivery issues, the schedule of aircraft deliveries continues to be fluid and subject to change. However, our total firm aircraft purchase commitments remains unchanged. As of March 31, 2023, we had secured financing for the 16 aircraft scheduled for delivery from Airbus through 2024, which will be financed through sale leaseback transactions. As of March 31, 2023, we did not have financing commitments in place for the remaining 91 Airbus aircraft on firm order through 2027. However, we have 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 signed in the fourth quarter of 2019. The agreement provides a standby credit facility in the form of senior secured mortgage debt financing. The contractual purchase amounts for all aircraft orders from Airbus are included within the flight equipment purchase obligations in the table below. In addition, rent commitments related to aircraft that will be financed through sale leaseback transactions are included within the aircraft rent commitments below.

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 March 31, 2023, we were committed to purchase 18 PW1100G-JM spare engines, with deliveries through 2027.

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 would include aircraft and other parts that we are already contractually obligated to purchase including those reflected above. In June 2021, the United States Trade Representative announced that the United States and European Union had agreed to suspend reciprocal tariffs on large civilian aircraft for five years, pending discussions to resolve their trade dispute.

In addition to the aircraft purchase agreement, as of March 31, 2023, we had secured 32 direct leases for aircraft with third-party lessors, with deliveries in the remainder of 2023 through 2024. 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 $40.1 million for the remainder of 2023, $183.9 million in 2024, $218.9 million in 2025, $218.9 million in 2026, $218.9 million in 2027, and $1,746.3 million in 2028 and beyond.

We have significant obligations for aircraft and spare engines as 93 of our 195 aircraft and 6 of our 31 spare engines are financed under operating leases. These leases expire between 2024 and 2041. Aircraft rent payments were $87.0 million and $64.9 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Our fixed-rate operating leases with terms greater than 12 months are included within operating lease right-of-use assets with the corresponding liabilities included within current maturities of operating leases and operating leases, less current maturities on our condensed consolidated balance sheets. Leases with a term of 12 months or less and variable-rate leases are not recorded on our condensed consolidated balance sheets. Please see "Notes to Condensed Consolidated Financial Statements—9. Leases" for further discussion on our leases.

We have contractual obligations and commitments primarily with regard to future purchases of aircraft and engines, paymentpayments of debt, and lease arrangements. The following table discloses aggregate information about our contractual obligations as of September 30, 2017March 31, 2023 and the periods in which payments are due (in millions): 
Remainder of 20232024 - 20252026 - 20272028 and beyondTotal
Long-term debt (1)$207 $1,546 $928 $831 $3,512 
Interest and fee commitments (2)121 285 78 70 554 
Finance and operating lease obligations275 687 601 2,859 4,422 
Flight equipment purchase obligations (3)543 2,603 2,309 — 5,455 
Other (4)63 39 33 1 136 
Total future payments on contractual obligations$1,209 $5,160 $3,949 $3,761 $14,079 
  remainder of 2017 2018 - 2019 2020 - 2021 2022 and beyond Total
Long-term debt (1) $39
 $216
 $214
 $886
 $1,355
Interest commitments (2) 20
 101
 83
 142
 346
Capital and operating lease obligations 66
 475
 390
 643
 1,574
Flight equipment purchase obligations 228
 1,302
 1,605
 25
 3,160
Other (3) 2
 7
 2
 —
 11
Total future payments on contractual obligations $355
 $2,101
 $2,294
 $1,696
 $6,446


(1) Includes principal only associated with our 8.00% senior secured notes, senior term loans, due through 2027, juniorfixed-rate loans, unsecured term loans, due through 2022, fixed-rate loans due through 2029,Class A, Class B, and Class C Series 2015-1 EETCs, Class AA, Class A, Class B, and Class B enhanced equipment trust certificates due through 2028C Series 2017-1 EETCs and 2024, respectively.convertible notes. Refer to "Notes to theCondensed Consolidated Financial Statements - 10.Statements—12. Debt and Other Obligations."
(2) Related to our 8.00% senior and juniorsecured notes, senior term loans, fixed-rate loans, unsecured term loans, Class A, Class B, and Class C Series 2015-1 EETCs, Class AA, Class A, Class B, and Class B enhanced equipment trust certificates only.
(3) PrimarilyC Series 2017-1 EETCs and convertible notes. Includes interest accrued as of March 31, 2023 related to our reservation system, new airport kiosks and our A320ceo seating reconfiguration project. Refer to "Notes to the Financial Statements - 8. Commitments and Contingencies."
Some of our master lease agreements provide that we pay maintenance reserves to aircraft lessors to be held as collateral in advance of our required performance of major maintenance activities. Some maintenance reserve payments are fixed contractual amounts, while others are based on utilization. In addition to the contractual obligations disclosed in the table above, we have fixed maintenance reserve payments for these aircraft and related flight equipment, including estimated amounts for contractual price escalations, which are $1.9 million for the remainder of 2017, $6.9 million in 2018, $5.7 million in 2019, $5.4 million in 2020, $5.5 million in 2021, and $17.7 million in 2022 and beyond.

As of September 30, 2017, principal and interest commitments related to our future secured debt financing for 4 undelivered aircraft are zero for the remainder of 2017, $16.5 million in 2018, $16.4 million in 2019, $17.3 million in 2020, $16.2 million in 2021, and $137.2 million in 2022 and beyond.

In September 2015, we executed a lease agreement with Wayne County Airport Authority (the Authority), which owns and operates Detroit Metropolitan Wayne County Airport (DTW). Under the lease agreement, we lease a 10-acre site, adjacent to the airfield at DTW, in order to construct, operate and maintain an approximately 126,000-square-foot hangarvariable-rate revolving credit facility. The lease agreement has a 30-year term with two 10-year extension options. Upon termination of the lease, title of the project, which will be fully depreciated, will automatically pass to the Authority. We completed the project during the first quarter of 2017 and have no remaining commitments related to this project as of September 30, 2017.



Off-Balance Sheet Arrangements
We have significant lease obligations for our aircraft and spare engines as 59 of our 107 aircraft and 11 of our 15 spare engines are financed under operating leases and are therefore not reflected on our condensed balance sheets. These leases expire between 2017 and 2029. Aircraft rent payments were $55.0 million and $53.5 million for the three months ended September 30, 2017 and 2016, respectively, and $168.6 million and $160.3 million for the nine months ended September 30, 2017 and 2016, respectively. Our aircraft lease payments for 58 of our aircraft are fixed-rate obligations. One of our aircraft leases provide for variable rent payments, which fluctuate based on changes in the London Interbank Offered Rate (LIBOR).
Our contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers. As of September 30, 2017, our aircraft orders consisted of the following:
29

  Airbus  
  A320ceo A320neo A321ceo  Total
remainder of 2017 2 
 4  6
2018 5 
 5  10
2019 1 14 
  15
2020 
 16 
  16
2021 
 18 
  18
  8 48 9  65
We also have four spare engine orders for V2500 SelectTwo engines with IAE and nine spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2018 through 2023. Committed expenditures for these aircraft and spare engines, including(3) Includes estimated amounts for contractual price escalations and aircraft PDPs, are expectedPDPs.
(4) Primarily related to be $227.8our reservation system, construction commitments related to our new headquarters campus and residential building and other miscellaneous subscriptions and services. Refer to "Notes to Condensed Consolidated Financial Statements—10. 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 remainderlease of 2017, $528.4 milliona 2.6-acre parcel of land, in 2018, $773.7 millionDania 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 the project having an expected completion during the first quarter 2024. Operating lease commitments related to this lease are included in 2019, $820.5 millionthe table above under the caption "Finance and operating lease obligations." For more detailed information, please refer to “Notes to Condensed Consolidated Financial Statements—9. Leases." Commitments related to the construction of the headquarters campus and the 200-unit residential building are included in 2020, $784.8 million in 2021 and $24.6 million in 2022 and beyond.the table above under the caption "Other."

Off-Balance Sheet Arrangements
As of September 30, 2017,March 31, 2023, we had lines of credit related to corporate credit cards of $33.6$20.1 million, from which we had drawn $10.8$1.1 million.

As of September 30, 2017,March 31, 2023, we had lines of credit with counterparties for both physical fuel delivery and derivatives in the amount of $51.5$28.5 million. As of September 30, 2017,March 31, 2023, we had drawn $13.7$1.3 million 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 are in a net liability position and make periodic payments in order to maintain an adequate undrawn portion for physical fuel delivery. As of September 30, 2017,March 31, 2023, we did not hold any derivatives.
As of September 30, 2017,March 31, 2023, we had $8.2$11.5 million in uncollateralized surety bonds and a $35.0$85.0 million unsecuredin standby letterletters of credit, facility,collateralized by $75.0 million of restricted cash, representing an off balance-sheetoff-balance sheet commitment, of which $17.8$31.1 million had been drawn upon forwere issued letters of credit.



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GLOSSARY OF AIRLINE TERMS
Set forth below is a glossary of industry terms:
“Adjusted CASM” means operating expenses, excluding unrealized gains or losses related to fuel derivative contracts, out of period fuel federal excise tax, loss on disposal of assets and special charges, (credits), divided by ASMs.
“Adjusted CASM ex-fuel”ex fuel” means operating expenses excluding aircraft fuel expense, loss on disposal of assets and special charges, (credits), 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 economic fuel cost per gallon” means total aircraft fuel expense excluding unrealized gains or losses related to fuel derivative contracts and out of period fuel federal excise tax, divided by the total number of fuel gallons consumed.
“Average non-ticket revenue per passenger flight segment” means the total non-ticket revenue divided by passenger flight segments.
“Average ticket revenue per passenger flight segment” means total passenger revenue divided by passenger flight segments.
“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.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.

"EETC" means enhanced equipment trust certificate.

“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.


“Load factor” means the percentage of aircraft seats actually occupied on a flight (RPMs divided by ASMs).
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“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” or “PFS” 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 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3.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. We have market-sensitive instruments in the form of fixed-rate debt instruments, short-term investment securities and, from time to time, financial derivative instruments used to hedge our exposure to jet fuel price increases and interest rate increases. We do not purchase or hold any derivative financial instruments for trading purposes. 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 ninethree months ended September 30, 2017 and 2016March 31, 2023 represented 26.1% and 23.2%approximately 33.4% of our operating expenses, respectively. Increasesexpenses. 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 relatedweather-related disruptions has caused Gulf Coast fuel prices to spike above other regional sources. Both jet fuel swaps and jet fuel options are used at times to protect the refining price risk between the price of crude oil and the price of refined jet fuel, and to manage the risk of increasing fuel prices. Gulf Coast Jet indexed fuel is the basis for a substantial majority of our fuel consumption. Based on our annual fuel consumption over the last twelve12 months, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased into-plane aircraft fuel expense by approximately $57$205 million.
As of September 30, 2017 and DecemberMarch 31, 2016,2023, we had nodid not have any outstanding jet fuel derivatives. We measure our financialderivatives, and we have not engaged in fuel derivative instruments at fair value. Fair value of the instruments is determined using standard option valuation models. Changes in the related commodity derivative instrument cash flows may change by more or less than this amount based upon further fluctuations in futures prices. Outstanding financial derivative instruments could expose us to credit loss in the event of nonperformance by the counterparties to the agreements.activity since 2015.

Interest Rates. We have market risk associated with our short-term investment securities, which had a fair market value of $100.7 million and $100.2of $108.4 million as of September 30, 2017 and DecemberMarch 31, 2016, respectively. We also have market risk associated with changing interest rates due to LIBOR-based lease rates on one of our aircraft. A hypothetical 10% change in interest rates would affect total aircraft rent expense by less than $0.1 million per annum.2023.

Fixed-Rate Debt. As of September 30, 2017,March 31, 2023, we had $1,354.7$1,741.1 million outstanding in fixed-rate debt related to the purchase of 1943 Airbus A320 aircraft and 2130 Airbus A321 aircraft which had a fair value of $1,402.9$1,611.4 million. AsIn addition, as of DecemberMarch 31, 2016,2023, we had $1,012.4$1,110.0 million and $136.3 million outstanding in fixed-rate debt related to the purchaseour 8.00% senior secured notes and our unsecured term loans, respectively, which had fair values of 15 Airbus A320 aircraft$1,104.1 million and 14 Airbus A321 aircraft,$121.9 million. As of March 31, 2023, we also had $525.1 million outstanding in convertible debt which had a fair value of $1,033.7$452.8 million.

Variable-Rate Debt. As of March 31, 2023, we did not have any outstanding variable-rate long term debt.

33


ITEM 4.CONTROLS AND PROCEDURES
ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
Our management,
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 September 30, 2017March 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 Securities and Exchange Commission’sSEC’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 the Company’sour management, including its principalchief 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 September 30, 2017March 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.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), during the quarter ended September 30, 2017March 31, 2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
ITEM 1.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 such 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 2017, we were sued in the Eastern District of New York 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 our practice of charging fees for ancillary products and services. The original action was dismissed by the District Court, however, following the plaintiff’s appeal to the Second Circuit, the case was remanded to the District Court 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 Court granted the plaintiff’s class certification motion and denied Spirit’s summary judgment 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 Court 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 is set to begin on January 16, 2024. We intend to vigorously defend against this lawsuit. As of March 31, 2023, the potential outcomes of these claims 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 period of the second quarter 2018 through the fourth quarter 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 the assessment is without merit and intend to challenge the assessment; therefore, we have not recognized a loss contingency.


35

ITEM 1A.RISK FACTORS
ITEM 1A.RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A Risk Factors"Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, filed with the Securities and Exchange Commission on February 13, 2017, other than modifications to the following risk factor.6, 2023. Investors are urged to review theseall such risk factors carefully.

We depend on a limited number of suppliers for our aircraft and engines.

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. 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. For example, introductory issues with the new-generation PW1100G-JM engines, designed and manufactured by Pratt & Whitney, have resulted in the intermittent grounding of certain of our A320neo aircraft. During the fourth quarter of 2016, and continuing through the third quarter of 2017, we have experienced and continue to experience various reliability problems associated with the new engine resulting in the grounding of two of our five A320neo aircraft which we expect to continue until the defect or problem is corrected. In part, due to issues involving the new engine, we renegotiated our aircraft delivery schedule. We originally had four A320neos scheduled for delivery in 2018 of which two were converted to A320ceo aircraft, to be delivered in 2017, and the remaining two are deferred until 2019. We cannot be certain that this defect will be corrected or if the defect will require the grounding of the remaining A320neos. These types of events, if appropriate design or mechanical modifications cannot be adequately implemented, 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.

Airlines are often affected by factors beyond their control, including: air traffic congestion at airports; air traffic control inefficiencies; adverse weather conditions, such as hurricanes or blizzards; increased security measures; new travel related taxes or the outbreak of disease, 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, adverse weather conditions, increased security measures, new travel related taxes, the outbreak of disease, new regulations or policies from the presidential administration and Congress. 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, 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) as well as southern Texas (such as Hurricane Harvey in August 2017), winter snowstorms or the September 2017 earthquakes in Mexico City, Mexico, can cause flight cancellations, significant delays and certain 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 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. Because of our high utilization, point-to-point network, operational disrupt


ions 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 and Zika virus, could result in significant decreases in passenger traffic and the imposition of government restrictions in service and could have a material adverse impact on the airline industry. Increased travel taxes, such as those provided in the Travel Promotion Act, enacted March 10, 2010, which charges visitors from certain countries a $10 fee every two years to travel into the United States to subsidize certain travel promotion efforts, 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.





36

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchases of Equity Securities
The following table reflects our repurchases of our common stock during the thirdfirst quarter of 2017.2023. All stock repurchases during this period were made from employees who received restricted stock 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
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs
January 1-31, 202375,280 $20.58 — $— 
February 1-28, 2023— — — — 
March 1-31, 20237,399 16.56 — — 
Total82,679 $20.22 — 

ISSUER PURCHASES OF EQUITY SECURITIES
         
Period Total Number of Shares Purchased Average Price Paid per Share 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
July 1-31, 2017 —
 $—
 —
 $—
August 1-31, 2017 552
 $37.74
 —
 $—
September 1-30, 2017 —
 $—
 —
 $—
Total 552
 $37.74
 —
  

On October 25, 2017, our Board of Directors authorized a new repurchase program of up to $100 million in aggregate value of shares of our Common Stock, par value $0.0001 per share, from time to time in open market or privately negotiated transactions. The authorization will expire on October 25, 2018. The timing and amount of any stock repurchases are subject to prevailing market conditions and other considerations.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES
ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.MINE SAFETY DISCLOSURES
ITEM 4.MINE SAFETY DISCLOSURES

Not applicable

ITEM 5.OTHER INFORMATION
ITEM 5.OTHER INFORMATION

None


37

ITEM 6.EXHIBITS
ITEM 6.Exhibit NumberEXHIBITS
Description of Exhibits
Exhibit NumberDescription of Exhibits
10.1+10.1

12.131.1
31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
32.1*
32.2*
101.INSXBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
+*Indicates a management contract or compensatory plan or arrangement.
*Exhibits 32.1 and 32.2 are 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.


38

SIGNATURE

Pursuant to the requirements 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.

SPIRIT AIRLINES, INC.
April 26, 2023SPIRIT AIRLINES, INC. By:/s/ Scott M. Haralson
Scott M. Haralson
Date: October 26, 2017 By:/s/ Edward M. Christie   
Edward M. Christie
Executive Vice President and

Chief Financial Officer


39