Try our mobile app

Published: 2022-10-26 00:00:00 ET
<<<  go to SAVE company page
HTTP/1.1 200 OK HTTP/1.1 200 OK X-Crawlera-Slave: 172.93.140.5:8800 X-Crawlera-Version: 1.60.1 accept-ranges: bytes content-type: text/html last-modified: Wed, 26 Oct 2022 20:59:17 GMT server: AmazonS3 x-amz-id-2: 7jiN2SXQMe79XLofWdY5u7brIZOOzYAmNb/UnJQb3HCX2tkzwGStql4bBC4lOq7waJLvQAWBkJI= x-amz-meta-mode: 33188 x-amz-meta-s3cmd-attrs: uid:504/gname:fitrprnt/uname:fitrprnt/gid:504/mode:33184/mtime:1666817948/atime:1666817948/md5:af6c49f76259fbd51ff79a6b6660dcfb/ctime:1666817949 x-amz-replication-status: COMPLETED x-amz-request-id: 220497WZPWBQHQAZ x-amz-server-side-encryption: AES256 x-amz-version-id: lL3YLuuX.PK4Hm8oOkUzl0mOaw8Kb9GO x-content-type-options: nosniff x-frame-options: SAMEORIGIN x-xss-protection: 1; mode=block x-akamai-transformed: 9 - 0 pmb=mTOE,2 expires: Wed, 05 Apr 2023 15:59:23 GMT cache-control: max-age=0, no-cache, no-store pragma: no-cache date: Wed, 05 Apr 2023 15:59:23 GMT vary: Accept-Encoding akamai-x-true-ttl: -1 strict-transport-security: max-age=31536000 ; includeSubDomains ; preload set-cookie: ak_bmsc=A2F62094C8ACB3C7F906E7E528D96BF9~000000000000000000000000000000~YAAQCRchF8/SZkaHAQAAWukkUhP++U/rLdKQpfuoQsHDpLF/wLDwfYRkPfa8XJqmy+SbP0UYRSBrHLLU8/C7iNCqiEVJpRZ30AFfwstITFSm2OPbgnlFvIAxoddsaaXXPmR6r0NYElWCmraks1zfAEWi00T9p8PcjCh9Ur0nKvKv+y/Yl8jmjW1j15LquG/9/GD0g+bizEGjLoJwINF6HakYzXK0+N6YQolrZDXRNGmGK88/McPhzZAFwiR+uO/6pvGAX/vYzuvRdMIm22CMaLxx2zZ8HphEYCHz7Vi4++S7UcT23girW3v+fGOcRmL+M/AS+oVjIckQUgW+L9KQYPfr3K2H2MfA6f2WO3WAllIjZ+6cAakvOR4Rywb/ACIDraiDR4UR; Domain=.sec.gov; Path=/; Expires=Wed, 05 Apr 2023 17:59:23 GMT; Max-Age=7200; HttpOnly set-cookie: bm_mi=793320F0AFC1D9D688F66962C3D633E1~YAAQCRchF9DSZkaHAQAAWukkUhNKFBlGOgnhoKQm/F/BGdPjQMNedlATRe2ajpijsdzi9eXJ74G21/NLPYV0IboqJeBqoPclTTqmDeaGFjwlgQ7haZ94lXNcAcQKNnV6pxcUYvV38noZuvICHXj0U5XAceQ+LIXEmJxqsBgQaiR6mEcmKI92vXz1gzfzK3PoN5FK3QZ67b9FaXGbBsXSJ5qDtSFB+bMMUxTMM3apQSHNsXTP2+i2fMD2bwmnzTcff7k61ofmIUb6LxeSeJu9QTkEPqDR2uD02yjyl1Co8CU0mim/zpqfThBA9Ns1yVtQmHEce0ql6dF2+BKCslj6koOKZqXKQSGWHMUPECke1trew1dXvE9Bphb2o3CM8KUHdin059EJPI9hjw==~1; Domain=.sec.gov; Path=/; Expires=Wed, 05 Apr 2023 15:59:23 GMT; Max-Age=0; Secure Transfer-Encoding: chunked Proxy-Connection: close Connection: close save-20220930
false2022Q3000149871012/31http://fasb.org/us-gaap/2022#AccountingStandardsUpdate202006Memberhttp://fasb.org/us-gaap/2022#LongTermDebtAndCapitalLeaseObligationsIncludingCurrentMaturitieshttp://fasb.org/us-gaap/2022#LongTermDebtAndCapitalLeaseObligationsIncludingCurrentMaturitieshttp://fasb.org/us-gaap/2022#LongTermDebtAndCapitalLeaseObligationsCurrenthttp://fasb.org/us-gaap/2022#LongTermDebtAndCapitalLeaseObligationsCurrenthttp://fasb.org/us-gaap/2022#LongTermDebtAndCapitalLeaseObligationshttp://fasb.org/us-gaap/2022#LongTermDebtAndCapitalLeaseObligations00014987102022-01-012022-09-3000014987102022-10-20xbrli:shares0001498710save:ProductsAndServicesPassengerMember2022-07-012022-09-30iso4217:USD0001498710save:ProductsAndServicesPassengerMember2021-07-012021-09-300001498710save:ProductsAndServicesPassengerMember2022-01-012022-09-300001498710save:ProductsAndServicesPassengerMember2021-01-012021-09-300001498710us-gaap:ProductAndServiceOtherMember2022-07-012022-09-300001498710us-gaap:ProductAndServiceOtherMember2021-07-012021-09-300001498710us-gaap:ProductAndServiceOtherMember2022-01-012022-09-300001498710us-gaap:ProductAndServiceOtherMember2021-01-012021-09-3000014987102022-07-012022-09-3000014987102021-07-012021-09-3000014987102021-01-012021-09-30iso4217:USDxbrli:shares00014987102022-09-3000014987102021-12-310001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:SecuredDebtMember2022-09-30xbrli:pure00014987102020-12-3100014987102021-09-300001498710us-gaap:CommonStockMember2020-12-310001498710us-gaap:AdditionalPaidInCapitalMember2020-12-310001498710us-gaap:TreasuryStockCommonMember2020-12-310001498710us-gaap:RetainedEarningsMember2020-12-310001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-3100014987102020-01-012020-12-310001498710srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2020-12-310001498710srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2020-12-310001498710srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001498710us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100014987102021-01-012021-03-310001498710us-gaap:TreasuryStockCommonMember2021-01-012021-03-310001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001498710us-gaap:RetainedEarningsMember2021-01-012021-03-310001498710us-gaap:CommonStockMember2021-03-310001498710us-gaap:AdditionalPaidInCapitalMember2021-03-310001498710us-gaap:TreasuryStockCommonMember2021-03-310001498710us-gaap:RetainedEarningsMember2021-03-310001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100014987102021-03-310001498710us-gaap:CommonStockMember2021-04-012021-06-300001498710us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000014987102021-04-012021-06-300001498710us-gaap:TreasuryStockCommonMember2021-04-012021-06-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001498710us-gaap:RetainedEarningsMember2021-04-012021-06-300001498710us-gaap:CommonStockMember2021-06-300001498710us-gaap:AdditionalPaidInCapitalMember2021-06-300001498710us-gaap:TreasuryStockCommonMember2021-06-300001498710us-gaap:RetainedEarningsMember2021-06-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-3000014987102021-06-300001498710us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001498710us-gaap:TreasuryStockCommonMember2021-07-012021-09-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001498710us-gaap:RetainedEarningsMember2021-07-012021-09-300001498710us-gaap:CommonStockMember2021-09-300001498710us-gaap:AdditionalPaidInCapitalMember2021-09-300001498710us-gaap:TreasuryStockCommonMember2021-09-300001498710us-gaap:RetainedEarningsMember2021-09-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001498710us-gaap:CommonStockMember2021-12-310001498710us-gaap:AdditionalPaidInCapitalMember2021-12-310001498710us-gaap:TreasuryStockCommonMember2021-12-310001498710us-gaap:RetainedEarningsMember2021-12-310001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001498710us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100014987102022-01-012022-03-310001498710us-gaap:TreasuryStockCommonMember2022-01-012022-03-310001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001498710us-gaap:RetainedEarningsMember2022-01-012022-03-310001498710us-gaap:CommonStockMember2022-03-310001498710us-gaap:AdditionalPaidInCapitalMember2022-03-310001498710us-gaap:TreasuryStockCommonMember2022-03-310001498710us-gaap:RetainedEarningsMember2022-03-310001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100014987102022-03-310001498710us-gaap:CommonStockMember2022-04-012022-06-300001498710us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000014987102022-04-012022-06-300001498710us-gaap:TreasuryStockCommonMember2022-04-012022-06-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001498710us-gaap:RetainedEarningsMember2022-04-012022-06-300001498710us-gaap:CommonStockMember2022-06-300001498710us-gaap:AdditionalPaidInCapitalMember2022-06-300001498710us-gaap:TreasuryStockCommonMember2022-06-300001498710us-gaap:RetainedEarningsMember2022-06-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-3000014987102022-06-300001498710us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001498710us-gaap:TreasuryStockCommonMember2022-07-012022-09-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001498710us-gaap:RetainedEarningsMember2022-07-012022-09-300001498710us-gaap:CommonStockMember2022-09-300001498710us-gaap:AdditionalPaidInCapitalMember2022-09-300001498710us-gaap:TreasuryStockCommonMember2022-09-300001498710us-gaap:RetainedEarningsMember2022-09-300001498710us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001498710save:FrontierMergerAgreementMember2022-07-272022-07-270001498710save:JetBlueAirwaysMember2022-07-280001498710save:JetBlueMergerAgreementMembersave:JetBlueAirwaysMember2022-07-272022-07-270001498710us-gaap:SubsequentEventMembersave:JetBlueAirwaysMember2022-10-260001498710save:JetBlueAirwaysMember2022-07-282022-07-280001498710save:ProductsAndServicesFareMember2022-07-012022-09-300001498710save:ProductsAndServicesFareMember2021-07-012021-09-300001498710save:ProductsAndServicesFareMember2022-01-012022-09-300001498710save:ProductsAndServicesFareMember2021-01-012021-09-300001498710save:ProductsAndServicesNonFareMember2022-07-012022-09-300001498710save:ProductsAndServicesNonFareMember2021-07-012021-09-300001498710save:ProductsAndServicesNonFareMember2022-01-012022-09-300001498710save:ProductsAndServicesNonFareMember2021-01-012021-09-300001498710us-gaap:DomesticDestinationMember2022-07-012022-09-300001498710us-gaap:DomesticDestinationMember2021-07-012021-09-300001498710us-gaap:DomesticDestinationMember2022-01-012022-09-300001498710us-gaap:DomesticDestinationMember2021-01-012021-09-300001498710us-gaap:LatinAmericaDestinationMember2022-07-012022-09-300001498710us-gaap:LatinAmericaDestinationMember2021-07-012021-09-300001498710us-gaap:LatinAmericaDestinationMember2022-01-012022-09-300001498710us-gaap:LatinAmericaDestinationMember2021-01-012021-09-30save:aircraftsave:aircraft_engine0001498710save:AuxiliaryPowerUnitsMember2021-01-012021-09-3000014987102022-04-012022-09-300001498710save:FrontierMergerAgreementAndJetblueUnsolicitedProposalMember2022-07-012022-09-300001498710save:FrontierMergerAgreementAndJetblueUnsolicitedProposalMember2022-01-012022-09-300001498710save:FrontierMergerAgreementMember2022-07-270001498710save:JetBlueMergerAgreementMember2022-09-300001498710save:PayrollSupportProgramTwoAndThreeGrantCARESActMember2021-07-012021-09-300001498710save:PayrollSupportProgramTwoAndThreeGrantCARESActMember2021-01-012021-09-300001498710save:CARESActEmployeeRetentionCreditMember2021-01-012021-06-300001498710save:PayrollSupportProgram2And3Member2021-07-012021-09-300001498710save:PayrollSupportProgram2And3Member2021-01-012021-09-300001498710save:DebtSecuritiesAvailableForSaleMember2022-09-300001498710save:DebtSecuritiesAvailableForSaleMember2021-12-310001498710save:DebtSecuritiesAvailableForSaleMember2022-01-012022-09-300001498710save:DebtSecuritiesAvailableForSaleMember2022-07-012022-09-300001498710save:DebtSecuritiesAvailableForSaleMember2021-07-012021-09-300001498710save:DebtSecuritiesAvailableForSaleMember2021-01-012021-09-300001498710srt:MinimumMembersave:AircraftMember2022-09-300001498710srt:MaximumMembersave:AircraftMember2022-09-300001498710srt:MaximumMembersave:OtherLeasedEquipmentAndPropertyMember2022-09-300001498710save:AircraftMember2022-01-012022-09-300001498710save:SpareEnginesMember2022-01-012022-09-300001498710save:A320FamilyMembersave:AircraftMember2022-09-300001498710save:A320FamilyMembersave:AircraftMember2022-09-300001498710save:AircraftMember2022-09-300001498710save:SpareEnginesMember2022-09-30save:agreement0001498710save:LeasedComputerAndOfficeEquipmentMembersrt:MinimumMember2022-09-300001498710save:LeasedComputerAndOfficeEquipmentMembersrt:MaximumMember2022-09-3000014987102019-12-31utr:acre0001498710srt:MaximumMembersave:OtherLeasedEquipmentAndPropertyMember2019-12-310001498710save:OtherLeasedEquipmentAndPropertyMember2019-12-31save:residential_building_unit0001498710save:AircraftAndSpareEngineLeasesMember2022-09-300001498710save:PropertyFacilityLeasesMember2022-09-300001498710save:OtherLeasedEquipmentAndPropertyMember2022-09-300001498710save:AirbusMember2022-09-300001498710save:AirbusMembersave:RemainderOf2022DeliveriesMember2022-09-300001498710save:A20222027DeliveryYearsMembersave:AirbusMember2022-09-300001498710save:PurePowerPW1100GJMEngineMember2022-09-300001498710us-gaap:CapitalAdditionsMember2022-09-300001498710save:A320andA321Membersave:A2022Through2024Membersave:ThirdPartyLessorMember2022-09-300001498710save:A320FamilyMembersave:ThirdPartyLessorMember2022-09-300001498710save:A320andA321Member2022-09-300001498710save:AircraftRelatedSecuredDebtMember2022-09-300001498710save:NonAircraftRelatedSecuredDebtUnsecuredDebtAndConvertibleDebtMember2022-09-300001498710save:NonaircraftRelatedCommitmentsMember2022-09-3000014987102022-07-190001498710save:CreditCardHoldbacksMember2021-12-310001498710save:CreditCardHoldbacksMember2022-09-300001498710us-gaap:UnionizedEmployeesConcentrationRiskMemberus-gaap:NumberOfEmployeesTotalMember2022-09-30save:employeeGroup0001498710us-gaap:UnionizedEmployeesConcentrationRiskMemberus-gaap:NumberOfEmployeesTotalMember2022-01-012022-09-300001498710us-gaap:UnionizedEmployeesConcentrationRiskMemberus-gaap:NumberOfEmployeesTotalMembersave:AirLinePilotsAssociationInternationalMember2022-01-012022-09-300001498710us-gaap:UnionizedEmployeesConcentrationRiskMembersave:AssociationOfFlightAttendantsMemberus-gaap:NumberOfEmployeesTotalMember2022-01-012022-09-300001498710us-gaap:UnionizedEmployeesConcentrationRiskMemberus-gaap:NumberOfEmployeesTotalMembersave:ProfessionalAirlineFlightControlAssociationMember2022-01-012022-09-300001498710us-gaap:UnionizedEmployeesConcentrationRiskMemberus-gaap:NumberOfEmployeesTotalMembersave:InternationalAssociationOfMachinistsAndAerospaceWorkersMember2022-01-012022-09-300001498710us-gaap:UnionizedEmployeesConcentrationRiskMemberus-gaap:NumberOfEmployeesTotalMembersave:TransportWorkersUnionMember2022-01-012022-09-300001498710save:TransportWorkersUnionMember2022-02-212022-02-21save:employee0001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:SecuredDebtMember2021-12-310001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:SecuredDebtMemberus-gaap:FairValueInputsLevel3Member2022-09-300001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:SecuredDebtMemberus-gaap:FairValueInputsLevel3Member2021-12-310001498710save:FixedRateLoanMember2022-09-300001498710save:FixedRateLoanMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2022-09-300001498710save:FixedRateLoanMember2021-12-310001498710save:FixedRateLoanMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2021-12-310001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMember2022-09-300001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2022-09-300001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMember2021-12-310001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2021-12-310001498710save:EquipmentNotesSeriesA20151Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesA20151Memberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:EquipmentNotesSeriesA20151Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesA20151Memberus-gaap:FairValueInputsLevel2Member2021-12-310001498710save:EquipmentNotesSeriesB20151Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesB20151Memberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:EquipmentNotesSeriesB20151Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesB20151Memberus-gaap:FairValueInputsLevel2Member2021-12-310001498710save:EquipmentNotesSeriesC20151Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Membersave:EquipmentNotesSeriesC20151Member2022-09-300001498710save:EquipmentNotesSeriesC20151Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Membersave:EquipmentNotesSeriesC20151Member2021-12-310001498710save:EquipmentNotesSeriesAA20171Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesAA20171Memberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:EquipmentNotesSeriesAA20171Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesAA20171Memberus-gaap:FairValueInputsLevel2Member2021-12-310001498710save:EquipmentNotesSeriesA20171Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesA20171Memberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:EquipmentNotesSeriesA20171Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesA20171Memberus-gaap:FairValueInputsLevel2Member2021-12-310001498710save:EquipmentNotesSeriesB20171Member2022-09-300001498710save:EquipmentNotesSeriesB20171Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:EquipmentNotesSeriesB20171Member2021-12-310001498710save:EquipmentNotesSeriesB20171Memberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-12-310001498710save:EquipmentNotesSeriesC20171Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesC20171Memberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:EquipmentNotesSeriesC20171Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMembersave:EquipmentNotesSeriesC20171Memberus-gaap:FairValueInputsLevel2Member2021-12-310001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2021-12-310001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2022-09-300001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:ConvertibleDebtMemberus-gaap:FairValueInputsLevel2Member2022-09-300001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:ConvertibleDebtMemberus-gaap:FairValueInputsLevel2Member2021-12-310001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMember2022-09-300001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMember2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMemberus-gaap:FairValueInputsLevel2Member2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMemberus-gaap:FairValueInputsLevel2Member2021-12-310001498710us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-09-300001498710us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001498710us-gaap:StandbyLettersOfCreditMemberus-gaap:SecuredDebtMember2022-09-300001498710save:ControlAgreementsForInterestAndFeePaymentsMember2022-09-300001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMember2022-02-050001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMemberus-gaap:FairValueInputsLevel2Member2022-07-012022-09-300001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMemberus-gaap:FairValueInputsLevel2Member2022-01-012022-09-300001498710us-gaap:FairValueMeasurementsRecurringMember2022-09-300001498710us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-09-300001498710us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-09-300001498710us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-09-300001498710us-gaap:FairValueMeasurementsRecurringMember2021-12-310001498710us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001498710us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001498710us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310001498710save:RevolvingCreditFacilityDueTwoThousandTwentyFourMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2021-12-310001498710save:RevolvingCreditFacilityDueTwoThousandTwentyFourMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-09-300001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-120001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2020-05-122020-05-12save:day0001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2022-04-012022-06-300001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2022-09-302022-09-300001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2022-07-012022-09-300001498710save:FourPointSevenFivePercentConvertibleSeniorNotesMemberus-gaap:ConvertibleDebtMember2022-01-012022-09-300001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMember2021-04-300001498710us-gaap:ConvertibleDebtMembersave:OnePointZeroZeroPercentConvertibleNotesDueTwoThousandTwentySixMember2021-04-302021-04-300001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:SecuredDebtMember2022-07-012022-09-300001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:SecuredDebtMember2021-07-012021-09-300001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:SecuredDebtMember2022-01-012022-09-300001498710save:EightPointZeroZeroPercentSeniorSecuredNotesDueTwoThousandTwentyFiveMemberus-gaap:SecuredDebtMember2021-01-012021-09-300001498710save:FixedRateLoanMember2022-07-012022-09-300001498710save:FixedRateLoanMember2021-07-012021-09-300001498710save:FixedRateLoanMember2022-01-012022-09-300001498710save:FixedRateLoanMember2021-01-012021-09-300001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMember2022-07-012022-09-300001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMember2021-07-012021-09-300001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMember2022-01-012022-09-300001498710save:PayrollSupportProgramCARESActMemberus-gaap:UnsecuredDebtMember2021-01-012021-09-300001498710save:EquipmentNotesSeriesA20151Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesA20151Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesA20151Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesA20151Member2021-01-012021-09-300001498710save:EquipmentNotesSeriesB20151Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesB20151Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesB20151Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesB20151Member2021-01-012021-09-300001498710save:EquipmentNotesSeriesC20151Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesC20151Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesC20151Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesC20151Member2021-01-012021-09-300001498710save:EquipmentNotesSeriesAA20171Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesAA20171Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesAA20171Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesAA20171Member2021-01-012021-09-300001498710save:EquipmentNotesSeriesA20171Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesA20171Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesA20171Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesA20171Member2021-01-012021-09-300001498710save:EquipmentNotesSeriesB20171Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesB20171Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesB20171Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesB20171Member2021-01-012021-09-300001498710save:EquipmentNotesSeriesC20171Member2022-07-012022-09-300001498710save:EquipmentNotesSeriesC20171Member2021-07-012021-09-300001498710save:EquipmentNotesSeriesC20171Member2022-01-012022-09-300001498710save:EquipmentNotesSeriesC20171Member2021-01-012021-09-300001498710us-gaap:ConvertibleDebtMember2022-07-012022-09-300001498710us-gaap:ConvertibleDebtMember2021-07-012021-09-300001498710us-gaap:ConvertibleDebtMember2022-01-012022-09-300001498710us-gaap:ConvertibleDebtMember2021-01-012021-09-300001498710us-gaap:RevolvingCreditFacilityMember2022-07-012022-09-300001498710us-gaap:RevolvingCreditFacilityMember2021-07-012021-09-300001498710us-gaap:RevolvingCreditFacilityMember2022-01-012022-09-300001498710us-gaap:RevolvingCreditFacilityMember2021-01-012021-09-300001498710save:FinanceLeaseObligationsMember2022-07-012022-09-300001498710save:FinanceLeaseObligationsMember2021-07-012021-09-300001498710save:FinanceLeaseObligationsMember2022-01-012022-09-300001498710save:FinanceLeaseObligationsMember2021-01-012021-09-300001498710us-gaap:SecuredDebtMember2022-07-012022-09-300001498710us-gaap:SecuredDebtMember2022-01-012022-09-300001498710us-gaap:SecuredDebtMember2021-07-012021-09-300001498710us-gaap:SecuredDebtMember2021-01-012021-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2026Member2022-07-012022-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2026Member2022-01-012022-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2025And2026Member2022-07-012022-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2025And2026Member2022-01-012022-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2025Member2021-07-012021-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2026Member2021-07-012021-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2026Member2021-01-012021-09-300001498710us-gaap:ConvertibleDebtMembersave:ConvertibleDebtDueIn2025Member2021-01-012021-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________________________________________________
Form 10-Q
_______________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File 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 WayMiramarFlorida33025
(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    No  

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
(Do not check if a smaller reporting company)Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on October 20, 2022:
Class Number of Shares
Common Stock, $0.0001 par value 108,857,162

1


Table of Contents
INDEX
 
 Page No.

2


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

 
 Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Operating revenues:
Passenger$1,322,079 $907,232 $3,619,694 $2,204,074 
Other21,100 15,399 57,443 39,145 
Total operating revenues1,343,179 922,631 3,677,137 2,243,219 
Operating expenses:
Salaries, wages and benefits
311,957 277,372 926,481 780,300 
Aircraft fuel508,496 259,618 1,435,714 617,373 
Landing fees and other rents95,174 77,703 270,131 231,308 
Depreciation and amortization78,184 74,260 230,844 222,275 
Aircraft rent75,332 65,873 210,008 185,296 
Maintenance, materials and repairs45,126 41,183 136,048 110,725 
Distribution47,385 36,085 131,460 94,990 
Loss on disposal of assets9,374 532 31,562 1,838 
Special charges (credits)38,359 (85,775)71,926 (377,715)
Other operating170,182 161,785 526,151 372,153 
Total operating expenses1,379,569 908,636 3,970,325 2,238,543 
Operating income (loss)(36,390)13,995 (293,188)4,676 
Other (income) expense:
Interest expense23,708 35,709 91,712 120,177 
Loss on extinguishment of debt   331,630 
Capitalized interest(5,964)(4,677)(16,903)(14,040)
Interest income(5,642)(306)(8,670)(5,050)
Other (income) expense402 271 1,115 452 
Total other (income) expense12,504 30,997 67,254 433,169 
Income (loss) before income taxes(48,894)(17,002)(360,442)(428,493)
Provision (benefit) for income taxes(12,517)(31,776)(76,956)(43,083)
Net income (loss)$(36,377)$14,774 $(283,486)$(385,410)
Basic income (loss) per share$(0.33)$0.14 $(2.61)$(3.71)
Diluted income (loss) per share$(0.33)$0.14 $(2.61)$(3.71)
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 September 30,Nine Months Ended September 30,
2022202120222021
Net income (loss)$(36,377)$14,774 $(283,486)$(385,410)
Unrealized gain (loss) on short-term investment securities and cash and cash equivalents, net of deferred taxes of $32, $(1), $(96) and $(5)
109 (4)(329)(16)
Interest rate derivative loss reclassified into earnings, net of taxes of $11, $13, $37 and $40
38 43 114 132 
Other comprehensive income (loss)$147 $39 $(215)$116 
Comprehensive income (loss)$(36,230)$14,813 $(283,701)$(385,294)

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, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$953,428 $1,333,507 
Restricted cash95,400 95,400 
Short-term investment securities106,255 106,313 
Accounts receivable, net172,212 128,828 
Aircraft maintenance deposits, net13,756 10,726 
Income tax receivable36,363 37,890 
Prepaid expenses and other current assets173,139 129,827 
Total current assets1,550,553 1,842,491 
Property and equipment:
Flight equipment4,447,877 4,356,523 
Ground property and equipment477,752 384,928 
Less accumulated depreciation(1,044,492)(884,858)
3,881,137 3,856,593 
Operating lease right-of-use assets2,332,808 1,950,520 
Pre-delivery deposits on flight equipment496,812 484,821 
Long-term aircraft maintenance deposits25,880 38,166 
Deferred heavy maintenance, net360,034 330,062 
Other long-term assets38,271 37,372 
Total assets$8,685,495 $8,540,025 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable$112,007 $44,952 
Air traffic liability495,815 382,317 
Current maturities of long-term debt, net and finance leases353,937 208,948 
Current maturities of operating leases175,614 158,631 
Other current liabilities531,158 480,754 
Total current liabilities1,668,531 1,275,602 
Long-term debt, net and finance leases, less current maturities2,657,830 2,975,823 
Operating leases, less current maturities2,104,484 1,751,351 
Deferred income taxes297,875 375,472 
Deferred gains and other long-term liabilities116,998 47,742 
Shareholders’ equity:
Common stock11 11 
Additional paid-in-capital1,143,076 1,131,826 
Treasury stock, at cost(77,446)(75,639)
Retained earnings774,883 1,058,369 
Accumulated other comprehensive loss(747)(532)
Total shareholders’ equity1,839,777 2,114,035 
Total liabilities and shareholders’ equity$8,685,495 $8,540,025 
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,
20222021
Operating activities:
Net loss$(283,486)$(385,410)
Adjustments to reconcile net loss to net cash provided (used) by operations:
Losses reclassified from other comprehensive income 151 172 
Share-based compensation 8,545 9,972 
Allowance for doubtful accounts (recoveries)(108)138 
Amortization of debt issuance costs9,897 9,685 
Depreciation and amortization230,844 222,275 
Accretion of 8.00% senior secured notes
782 1,012 
Amortization of debt discount10,154  
Mark to market adjustments on derivative liability25,200  
Deferred income tax benefit(77,538)(44,119)
Loss on disposal of assets31,562 1,838 
Loss on extinguishment of debt 331,630 
Changes in operating assets and liabilities:
Accounts receivable, net(43,276)(90,860)
Aircraft maintenance deposits, net9,256 42,598 
Long-term deposits and other assets(39,809)(8,495)
Prepaid income taxes 11 
Deferred heavy maintenance(99,314)(45,189)
Income tax receivable1,527 109,570 
Accounts payable48,081 21,538 
Air traffic liability113,498 45,504 
Other liabilities21,466 54,631 
Other310 538 
Net cash provided (used) by operating activities(32,258)277,039 
4


Investing activities:
Purchase of available-for-sale investment securities(59,707)(84,134)
Proceeds from the maturity and sale of available-for-sale investment securities59,000 83,500 
Pre-delivery deposits on flight equipment, net of refunds(15,636)(116,771)
Capitalized interest(13,306)(12,704)
Assets under construction for others(2)(1,206)
Purchase of property and equipment(174,751)(132,131)
Net cash used in investing activities(204,402)(263,446)
Financing activities:
Proceeds from issuance of long-term debt 562,996 
Proceeds from issuance of warrants 375,662 
Payments on debt obligations(139,783)(903,168)
Payments for the early extinguishment of debt (317,905)
Payments on finance lease obligations(631)(615)
Reimbursement for assets under construction for others2 995 
Repurchase of common stock(1,807)(1,352)
Debt issuance costs(1,200)(2,746)
Net cash used by financing activities(143,419)(286,133)
Net decrease in cash, cash equivalents, and restricted cash(380,079)(272,540)
Cash, cash equivalents, and restricted cash at beginning of period (1)1,428,907 1,861,124 
Cash, cash equivalents, and restricted cash at end of period (1) $1,048,828 $1,588,584 
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest$79,791 $105,804 
Income taxes received, net$(411)$(108,544)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$211,944 $197,448 
Financing cash flows for finance leases $47 $72 
Non-cash transactions:
Capital expenditures funded by finance lease borrowings$ $538 
Capital expenditures funded by operating lease borrowings $490,690 $511,277 
(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.
5


Spirit Airlines, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited, in thousands)
Nine Months Ended September 30, 2021
Common StockAdditional Paid-In-CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance at December 31, 2020$10 $799,549 $(74,124)$1,524,878 $(618)$2,249,695 
Effect of ASU No. 2020-06 implementation
— (55,590)— 6,060 — (49,530)
Share-based compensation— 4,254 — — — 4,254 
Repurchase of common stock— — (1,307)— — (1,307)
Changes in comprehensive income— — — — 52 52 
Issuance of warrants— 2,146 — — — 2,146 
Net loss— — — (112,321)— (112,321)
Balance at March 31, 2021$10 $750,359 $(75,431)$1,418,617 $(566)$2,092,989 
Issuance of common stock and warrants, net 1 373,186 — — — 373,187 
Share-based compensation— 2,486 — — — 2,486 
Repurchase of common stock— — (17)— — (17)
Changes in comprehensive income— — — — 25 25 
Net loss— — — (287,863)— (287,863)
Balance at June 30, 2021$11 $1,126,031 $(75,448)$1,130,754 $(541)$2,180,807 
Share-based compensation— 3,232 — — — 3,232 
Repurchase of common stock— — (28)— — (28)
Changes in comprehensive income— — — — 39 39 
Net income— — — 14,774 — 14,774 
Balance at September 30, 2021$11 $1,129,263 $(75,476)$1,145,528 $(502)$2,198,824 


Nine Months Ended September 30, 2022
Common StockAdditional Paid-In-CapitalTreasury StockRetained Earnings Accumulated 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 loss— — — (194,703)— (194,703)
Balance at March 31, 2022$11 $1,135,872 $(77,411)$863,666 $(762)$1,921,376 
Convertible debt conversions 2,705 — — — 2,705 
Share-based compensation— 1,677 — — — 1,677 
Repurchase of common stock— — (5)— — (5)
Changes in comprehensive income— — — — (132)(132)
Net loss— — — (52,406)— (52,406)
Balance at June 30, 2022$11$1,140,254$(77,416)$811,260$(894)$1,873,215
Share-based compensation— 2,822 — — — 2,822 
Repurchase of common stock— — (30)— — (30)
Changes in comprehensive income— — — — 147 147 
Net loss— — — (36,377)— (36,377)
Balance at September 30, 2022$11 $1,143,076 $(77,446)$774,883 $(747)$1,839,777 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
6


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

The accompanying unaudited condensed consolidated financial statements include the accounts of Spirit Airlines, Inc. (“Spirit”) and its consolidated subsidiaries (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") 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, 2021 filed with the Securities and Exchange Commission on February 8, 2022.

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. However, beginning in early 2020, as a result of the COVID-19 pandemic, demand has not always been in line with such trends. The air transportation business is volatile and highly affected by economic cycles and trends.


2. Merger

Termination of Frontier Merger

On July 27, 2022, Spirit, Frontier Group Holdings, Inc., a Delaware corporation (“Frontier”), and Top Gun Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of Frontier (“Frontier Merger Sub”), entered into a Termination Agreement (the “Termination Agreement”), pursuant to which the parties agreed to terminate the Agreement and Plan of Merger, dated as of February 5, 2022 (as amended on June 2, 2022 and June 24, 2022, the “Frontier Merger Agreement”), among Spirit, Frontier and Frontier Merger Sub, effective immediately. Under the terms of the Termination Agreement, Spirit paid $25.0 million in cash to Frontier for Frontier’s reasonable and documented out-of-pocket costs and expenses (the “Frontier Expenses”).

Announcement of JetBlue Merger

On July 28, 2022, Spirit entered into an Agreement and Plan of Merger (the “Merger Agreement”) with JetBlue Airways Corporation, a Delaware corporation (“JetBlue”), and Sundown Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of JetBlue (“Merger Sub”), pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving entity (the “Merger”). As a result of the Merger, each outstanding share of Spirit's common stock (except for dissenting shares, treasury stock, and shares of Spirit's common stock owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be converted into the right to receive an amount in cash per share, without interest, equal to (such amount, the “Merger Consideration”) (i) $33.50 minus (ii) (A) $2.50 (the “Approval Prepayment Amount”), to the extent paid (the “Approval Prepayment”) upon the adoption by Spirit stockholders of the Merger Agreement (or, in the event that the closing of the Merger (the “Closing”) occurs after the record date for the prepayment of, but before the payment date of, such Approval Prepayment Amount, to the extent payable after the Closing), and (B) an additional 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 after December 31, 2022 (each such payment is referred to as an “Additional Prepayment” and such $0.10 amount is referred to as the “Additional Prepayment Amount”).

7


JetBlue will pay or cause to be paid the Approval Prepayment Amount to Spirit stockholders as of the record date established by Spirit for the special meeting to approve the Merger Agreement within five business days following such Spirit stockholder approval. Thereafter, on or prior to the last business day of each month beginning after December 31, 2022 until the earlier of the Closing or termination of the Merger Agreement, JetBlue will also pay or cause to be paid the Additional Prepayment Amount to Spirit stockholders as of a record date not more than 5 business days prior to the last business day of such month. The Company expects payments made from JetBlue to Spirit stockholders will not impact the Company's results of operations or cash flows. Under the terms of the Merger Agreement, JetBlue reimbursed the Company for the $25.0 million Frontier Expenses discussed above.

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 is September 12, 2022. Therefore, all Spirit stockholders of record as of September 12, 2022 are entitled to receive the Approval Prepayment in accordance with the Merger Agreement. On October 26, 2022, JetBlue paid the Spirit stockholders the Approval Prepayment Amount of $2.50 per share.

Completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among other things: (1) approval of the transactions by Spirit’s stockholders, which was received on October 19, 2022; (2) receipt of applicable regulatory approvals, including approvals from the U.S. Federal Communications Commission, the U.S. Federal Aviation Administration and the U.S. Department of Transportation ("DOT") and the expiration or early termination of the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other competition laws, and other required regulatory approvals; (3) the absence of any law or order prohibiting the consummation of the transactions; and (4) the absence of any material adverse effect (as defined in the Merger Agreement) on Spirit.

Spirit, JetBlue and Merger Sub each make certain customary representations, warranties and covenants, as applicable, in the Merger Agreement.

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).

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.
8


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 and nine months ended September 30, 2022 and 2021.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
Operating revenues:
Fare$673,848 $421,015 $1,796,044 $964,993 
Non-fare648,231 486,217 1,823,650 1,239,081 
Total passenger revenues1,322,079 907,232 3,619,694 2,204,074 
Other21,100 15,399 57,443 39,145 
Total operating revenues$1,343,179 $922,631 $3,677,137 $2,243,219 

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 September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
DOT—Domestic$1,163,193 $801,766 $3,154,984 $1,980,762 
DOT—Latin America179,986 120,865 522,153 262,457 
Total$1,343,179 $922,631 $3,677,137 $2,243,219 
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 September 30, 2022 and December 31, 2021, the Company had ATL balances of $495.8 million and $382.3 million, respectively. Substantially all of the Company's ATL is expected to be recognized within 12 months of the respective balance sheet date.

Loyalty Programs

The Company operates the Spirit Saver$ Club®, which is a subscription-based loyalty program that allows members access to unpublished, extra-low fares as well as discounted prices on bags and seats, shortcut boarding and security, "Flight Flex" flight modification product, and exclusive offers on hotels, rental cars and other travel necessities. The Company also operates the Free Spirit loyalty program, which attracts members and partners and builds customer loyalty for the Company by offering a variety of awards, benefits and services. Free Spirit loyalty program members earn and accrue points for dollars spent on Spirit for flights and other non-fare services as well as services from non-air partners such as retail merchants, hotels or car rental companies or by making purchases with credit 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.


9


4. Loss on Disposal

During the three and nine months ended September 30, 2022, the Company recorded $9.4 million and $31.6 million, respectively, in loss on disposal of assets in the condensed consolidated statements of operations. Loss on disposal of assets for the three months ended September 30, 2022 primarily consisted of $9.4 million related to the loss on four aircraft sale leaseback transactions completed during the third quarter of 2022. Loss on disposal of assets for the nine months ended September 30, 2022 primarily consisted of $23.8 million related to the loss on 11 aircraft sale leaseback transactions completed during the nine months ended September 30, 2022 and $6.6 million related to the impairment of one spare engine during the first quarter of 2022 which was damaged beyond economic repair.

During the three and nine months ended September 30, 2021, the Company recorded $0.5 million and $1.8 million, respectively, in loss on disposal of assets in the condensed consolidated statements of operations. Loss on disposal of assets for the three months ended September 30, 2021 primarily consisted of $0.5 million related to the loss on one aircraft sale leaseback transaction completed during the third quarter of 2021. Loss on disposal of assets for the nine months ended September 30, 2021 primarily consisted of $1.1 million related to the sale of auxiliary power units ("APUs"), $0.6 million related to the loss on three aircraft sale leaseback transactions completed during the second and third quarters of 2021 and disposal of excess and obsolete inventory.


5. Special Charges (Credits)

During the three and nine months ended September 30, 2022, the Company recorded $17.7 million and $39.2 million, respectively, within special charges (credits) on the Company's condensed consolidated statements of operations, in legal, advisory and other fees related to the former Frontier Merger Agreement, JetBlue's unsolicited proposal, received in March 2022, to acquire all of the Company's outstanding shares in an all-cash transaction and the JetBlue Merger Agreement entered into on July 28, 2022.

As part of the former Frontier Merger Agreement, the Company implemented an employee retention bonus program. On July 27, 2022, the Frontier Merger Agreement was mutually terminated; therefore, 50% of the target retention bonus was awarded to the Company's employees during the third quarter of 2022. In addition, as part of the JetBlue Merger Agreement, the Company implemented an additional employee retention bonus program during the third quarter of 2022. The target retention bonus will be paid to the Company's employees upon the successful close of the Merger. In the event the Merger fails or is abandoned, 50% of the target retention bonus will be paid to the Company's employees upon termination of the Merger. During the three and nine months ended September 30, 2022, the Company recorded $20.6 million and $32.7 million, respectively, within special charges (credits) on the Company's condensed consolidated statements of operations, related to the Company's retention bonus programs.

During the three and nine months ended September 30, 2021, the Company recorded $86.4 million and $342.2 million, respectively, net of related costs, within special credits on the Company’s condensed consolidated statements of operations related to the grant component of the agreements with the United States Department of the Treasury (the "Treasury") pursuant to the Consolidated Appropriations Act, which extended the Payroll Support Program (“PSP”) portion of the CARES Act through March 31, 2021 (“PSP2”) and the American Rescue Plan Act of 2021, which also authorized the Treasury to provide additional assistance to passenger air carriers that received financial assistance under PSP2 (“PSP3”).

In addition, during the first and second quarters of 2021, the Company recorded $37.5 million related to the CARES Act Employee Retention credit within special credits on the Company’s condensed consolidated statements of operation. During the third quarter of 2021, the Company did not qualify for the employee retention credit. These special credits were partially offset by $0.6 million and $2.0 million in special charges recorded during the three and nine months ended September 30, 2021, respectively. The $0.6 million and $2.0 million were related to salaries, wages and benefits paid to rehired employees, previously terminated with the Company's involuntary employee separation program, in compliance with the restrictions of PSP2 and PSP3.



10


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,
 2022202120222021
(in thousands, except per-share amounts)
Numerator
Net income (loss)$(36,377)$14,774 $(283,486)$(385,410)
Interest on convertible debt, net of income taxesN/A259 N/AN/A
Net income after assumed conversions for diluted earnings per shareN/A$15,033 N/AN/A
Denominator
Weighted-average shares outstanding, basic108,853 108,403 108,711 103,851 
Effect of dilutive shares (1)
 2,632   
Adjusted weighted-average shares outstanding, diluted108,853 111,035 108,711 103,851 
Earnings (loss) per share
Basic earnings (loss) per common share$(0.33)$0.14 $(2.61)$(3.71)
Diluted earnings (loss) per common share$(0.33)$0.14 $(2.61)$(3.71)
(1) Includes the effect of dilutive shares related to the convertible debt due in 2025, restricted stock awards, performance share awards and warrants issued.
Anti-dilutive common stock equivalents excluded from the diluted loss per share calculation for any of the periods presented are not material.


7. Short-term Investment Securities

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

As of September 30, 2022 and December 31, 2021, the Company had $106.3 million in short-term available-for-sale investment securities. During the nine months ended September 30, 2022, these investments earned interest income at a weighted-average fixed rate of approximately 0.5%. For the three and nine months ended September 30, 2022, an unrealized gain of $100 thousand and unrealized loss of $335 thousand, respectively, net of deferred taxes, was recorded within accumulated other comprehensive income ("AOCI") related to these investment securities. For the three and nine months ended September 30, 2021, an unrealized loss of $1 thousand and $8 thousand, respectively, net of deferred taxes, was recorded within AOCI related to these investment securities. For the three and nine months ended September 30, 2022 and September 30, 2021, the Company had no realized gains or losses as the Company did not sell any of these securities during these periods. As of September 30, 2022 and December 31, 2021, $378 thousand and $43 thousand, net of tax, respectively, remained in AOCI, related to these instruments.


11


8. Accrued Liabilities

Other current liabilities as of September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022December 31, 2021
(in thousands)
Salaries, wages and benefits$162,455 $142,893 
Federal excise and other passenger taxes and fees payable88,401 77,409 
Airport obligations78,890 85,772 
Fuel54,313 55,103 
Aircraft maintenance46,861 39,178 
Interest payable25,412 24,526 
Aircraft and facility lease obligations22,729 23,049 
Other52,097 32,824 
Other current liabilities$531,158 $480,754 


9.Leases

The Company leases aircraft, engines, airport terminals, maintenance and training facilities, aircraft hangars, commercial real estate, and office and computer equipment, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, enplaned passengers, and airports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's condensed consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 8 years to 18 years for aircraft and up to 99 years for other leased equipment and property.
During the nine months ended September 30, 2022, the Company took delivery of 11 aircraft under sale leaseback transactions and 3 spare engines purchased with cash. As of September 30, 2022, the Company had a fleet consisting of 184 A320 family aircraft. As of September 30, 2022, the Company had 78 aircraft financed under operating leases with lease term expirations between 2024 and 2040. In addition, the Company owned 105 aircraft of which 33 were purchased off lease and were unencumbered as of September 30, 2022. The Company also had one aircraft recorded as a failed sale leaseback. The related finance obligation is recorded within long-term debt in the Company's condensed consolidated balance sheets. Refer to Note 12, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment in the Company's condensed consolidated balance sheets. As of September 30, 2022, the Company also had 6 spare engines financed under operating leases with lease term expiration dates ranging from 2024 to 2033 and owned 23 spare engines, of which, as of September 30, 2022, 2 were unencumbered and 21 were pledged as collateral under the Company's revolving credit facility maturing in 2024.
As of September 30, 2022, one of the Company’s aircraft and engine master lease agreements provides that the Company pays maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles, while some maintenance reserve payments are fixed, time-based contractual amounts. Maintenance reserve payments that are probable of being recovered when the Company performs qualifying maintenance are recorded in aircraft maintenance deposits on the Company's condensed consolidated balance sheets. Fixed maintenance reserve payments that are not probable of being recovered are considered lease payments and are included in the right-of-use asset and lease liability. Maintenance reserve payments that are based on a utilization measure and are not probable of being recovered are considered variable lease payments that are recognized when they are probable of being incurred and are not included in the right-of-use asset and lease liability.
Some of the master lease agreements do not require that the Company pay maintenance reserves so long as the Company's cash balance does not fall below a certain level. As of September 30, 2022, the Company was in full compliance with those requirements and does not anticipate having to pay reserves related to these master leases in the future.
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 maintenance reserves paid to aircraft lessors in advance of the performance of major maintenance activities that are not probable of being reimbursed and probable lease return condition obligations.
12


Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition) when it is probable that such amounts will be incurred. When determining probability and estimated cost of lease return obligations, there are various other factors that need to be considered such as the contractual terms of the lease, the ability to swap engines or other aircraft components, current condition of the aircraft, the age of the aircraft at lease expiration, utilization of engines and other components, the extent of repairs needed at return, return locations, current configuration of the aircraft and cost of repairs and materials at the time of return. Management assesses the factors listed above and the need to accrue lease return costs throughout the lease as facts and circumstances warrant an assessment. The Company expects lease return costs and unrecoverable maintenance deposits will increase as individual aircraft lease agreements approach their respective termination dates and the Company begins to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.
As of September 30, 2022, the Company's finance lease obligations primarily relate to the lease of computer equipment used by the Company's flight crew and office equipment. Payments under these finance lease agreements are fixed for terms ranging from 4 to 5 years. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within long-term debt and finance leases in the Company's 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 an expected completion during the fourth quarter 2023. 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 September 30, 2022. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
Finance LeasesOperating Leases
Aircraft and Spare Engine LeasesProperty Facility LeasesOtherTotal
Operating and Finance Lease Obligations
(in thousands)
Remainder of 2022$210 $74,815 $1,598 $39 $76,662 
2023465 296,016 6,385 13 302,879 
2024215 283,930 4,526  288,671 
2025117 269,042 3,072  272,231 
202639 242,728 2,989  245,756 
2027 and thereafter 2,134,609 143,389  2,277,998 
Total minimum lease payments$1,046 $3,301,140 $161,959 $52 $3,464,197 
Less amount representing interest43 1,049,330 133,723  1,183,096 
Present value of minimum lease payments$1,003 $2,251,810 $28,236 $52 $2,281,101 
Less current portion569 170,740 4,822 52 176,183 
Long-term portion$434 $2,081,070 $23,414 $ $2,104,918 
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 $3.6 million for the remainder of 2022 and none for 2023 and beyond.
The table below presents information for lease costs related to the Company's finance and operating leases:
13


Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
Finance lease cost
Amortization of leased assets$188 $194 $563 $539 
Interest of lease liabilities13 23 47 72 
Operating lease cost
Operating lease cost (1)
66,241 56,991 194,922 161,764 
Short-term lease cost (1)
10,451 7,638 30,259 21,729 
Variable lease cost (1)
54,711 45,387 153,433 134,047 
Total lease cost$131,604 $110,233 $379,224 $318,151 
(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:
September 30, 2022September 30, 2021
Weighted-average remaining lease term
Operating leases14.5 years13.9 years
Finance leases2.1 years2.7 years
Weighted-average discount rate
Operating leases5.94 %5.81 %
Finance leases4.45 %4.86 %


10. Commitments and Contingencies

Aircraft-Related Commitments and Financing Arrangements
The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. As of September 30, 2022, the Company's total firm aircraft orders consisted of 114 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. Out of these 114 aircraft, the Company has 6 aircraft scheduled for delivery in the remainder of 2022 and 17 aircraft scheduled for delivery in 2023. As of September 30, 2022, the Company had secured financing for the 6 aircraft scheduled for delivery from Airbus through the remainder of 2022, which will be financed through sale leaseback transactions. As of September 30, 2022, the Company did not have financing commitments in place for the remaining 108 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 included within the purchase commitments below.

During the third quarter of 2021, the Company entered into an Engine Purchase Support Agreement which requires the Company to purchase a certain number of spare engines in order to maintain a contractual ratio of spare engines to aircraft in the fleet. As of September 30, 2022, the Company is committed to purchase 13 PW1100G-JM spare engines, with deliveries through 2027.

As of September 30, 2022, purchase commitments for the Company's aircraft and engine orders, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $297.1 million for the remainder of 2022, $907.1 million in 2023, $1,045.6 million in 2024, $1,226.1 million in 2025, $1,424.4 million in 2026, and $862.8 million in 2027 and beyond.

During the third quarter of 2019, the United States announced its decision to levy tariffs on certain imports from the European Union, including commercial aircraft and related parts. These tariffs include aircraft and other parts that the Company is already contractually obligated to purchase including those reflected above. In June 2021, the United States Trade Representative announced that the United States and European Union had agreed to suspend reciprocal tariffs on large civilian aircraft for five years, pending discussions to resolve their trade dispute.
14



In addition to the aircraft purchase agreement, as of September 30, 2022, the Company has agreements in place for 40 A320neos and A321neos to be financed through direct leases with third-party lessors with deliveries scheduled from the remainder of 2022 through 2024. As of September 30, 2022, 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 $8.6 million for the remainder of 2022, $92.7 million in 2023, $187.8 million in 2024, $216.4 million in 2025, $216.4 million in 2026, and $1,874.8 million in 2027 and beyond.
Interest commitments related to the secured debt financing of 73 delivered aircraft as of September 30, 2022 are $18.9 million for the remainder of 2022, $64.6 million in 2023, $53.3 million in 2024, $45.8 million in 2025, $38.3 million in 2026, and $90.3 million in 2027 and beyond. As of September 30, 2022, interest commitments related to the Company's 8.00% senior secured notes, convertible debt financing, unsecured term loans and revolving credit facility are $13.6 million for the remainder of 2022, $48.4 million in 2023, $48.4 million in 2024, $45.4 million in 2025, $5.9 million in 2026, and $14.0 million in 2027 and beyond. For principal commitments related to the 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 headquarters campus and residential building and other miscellaneous subscriptions and services as of September 30, 2022: $74.8 million for the remainder of 2022, $38.2 million in 2023, $18.1 million in 2024, $18.1 million in 2025, $17.5 million in 2026, and $19.2 million in 2027 and thereafter. During the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in 2028.
 
Litigation and Assessments
The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings and assessments to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. These subjective determinations are based on the status of such legal or regulatory proceedings, the merits of the Company's defenses, and consultation with legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company's current estimates. It is possible that resolution of one or more of the legal matters currently pending or threatened could result in losses material to the Company's 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 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 Company intends to vigorously defend against this lawsuit. As of September 30, 2022, 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 a loss in this matter is not probable and has not recognized a loss contingency.
15


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 provided that the Company satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to place a holdback resulting in a commensurate reduction of unrestricted cash. As of September 30, 2022 and December 31, 2021, the Company's credit card processors were holding back no remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and Spirit Saver$ Club® memberships as of September 30, 2022 and December 31, 2021, was $558.9 million and $371.8 million, respectively.
Employees
The Company has 5 union-represented employee groups that together represented approximately 80% of all employees as of September 30, 2022. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of September 30, 2022.
Employee GroupsRepresentative
Amendable Date (1)
Percentage of Workforce
PilotsAir Line Pilots Association, International ("ALPA")February 202327%
Flight AttendantsAssociation of Flight Attendants ("AFA-CWA")September 202147%
DispatchersProfessional Airline Flight Control Association ("PAFCA")October 20231%
Ramp Service AgentsInternational Association of Machinists and Aerospace Workers ("IAMAW")November 20263%
Passenger Service AgentsTransport Workers Union of America ("TWU")February 20272%
(1) Subject to standard early opener provisions.

In September 2022, ALPA notified the Company of its intent to amend the current CBA with its pilots and began negotiations. As of September 30, 2022, the Company continued to negotiate with ALPA.

The Company's passenger service agents are represented by the TWU, but the representation applies only to the Company's Fort Lauderdale station where the Company has direct employees in the passenger service classification. The Company and the TWU began meeting in late October 2018 to negotiate an initial collective bargaining agreement. During February 2022, the Company reached a tentative agreement with the TWU. The Company's passenger service agents ratified the five-year agreement on February 21, 2022.

In February 2021, the Company entered into a Letter of Agreement with the AFA-CWA to change the amendable date of the collective bargaining agreement from May 4, 2021 to September 1, 2021. All other terms of the collective bargaining agreement remained the same. In June 2021, the AFA-CWA notified the Company, as required by the Railway Labor Act, that it intends to submit proposed changes to the collective bargaining agreement covering the Company’s flight attendants. The Company and the AFA-CWA began the negotiation sessions on September 27, 2021. As of September 30, 2022, the Company continued to negotiate with the AFA-CWA.

In August 2022, the Company's aircraft maintenance technicians ("AMTs") voted to be represented by the Aircraft Mechanics Fraternal Association ("AMFA") as their collective bargaining agent. Currently, negotiation dates have not been scheduled. As of September 30, 2022, the Company had approximately 600 AMTs.


11.Fair Value Measurements

16


Under ASC 820, "Fair Value Measurements and Disclosures," disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities.
Long-Term Debt
The estimated fair value of the Company's secured notes, term loan debt agreements and revolving credit 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 determined to be Level 2 as the Company utilizes quoted market prices in markets with low trading volumes to estimate the fair value of its Level 2 long-term debt.
    The carrying amounts and estimated fair values of the Company's long-term debt at September 30, 2022 and December 31, 2021 were as follows:
September 30, 2022December 31, 2021Fair Value Level Hierarchy
 Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
(in millions)
8.00% senior secured notes
$510.0 $470.5 $510.0 $530.4 Level 3
Fixed-rate term loans1,127.3 1,003.1 1,223.5 1,262.6 Level 3
Unsecured term loans136.3 108.8 136.3 146.4 Level 3
2015-1 EETC Class A 289.6 255.6 300.6 311.1 Level 2
2015-1 EETC Class B 52.0 49.3 56.0 56.4 Level 2
2015-1 EETC Class C69.5 67.9 75.2 74.0 Level 2
2017-1 EETC Class AA186.3 160.4 200.3 203.3 Level 2
2017-1 EETC Class A62.1 51.8 66.8 65.8 Level 2
2017-1 EETC Class B51.7 44.4 55.8 53.6 Level 2
2017-1 EETC Class C85.5 84.2 85.5 84.1 Level 2
4.75% convertible notes due 2025
25.4 43.4 28.2 55.6 Level 2
1.00% convertible notes due 2026
500.0 420.1 500.0 432.5 Level 2
Total long-term debt$3,095.7 $2,759.5 $3,238.2 $3,275.8 

Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2022 and December 31, 2021 are comprised of liquid money market funds and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions.
Restricted Cash

17


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 September 30, 2022, the Company had $85.0 million in standby letters of credit secured by $75.0 million of restricted cash, of which $25.7 million were issued letters of credit. In addition, the Company had $20.4 million of restricted cash held in accounts subject to control agreements to be used for the payment of interest and fees on the 8.00% senior secured notes.
Short-term Investment Securities

Short-term investment securities at September 30, 2022 and December 31, 2021 were classified as available-for-sale and generally consisted of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. The Company's short-term investment securities are categorized as Level 1 instruments, as the Company uses quoted market prices in active markets when determining the fair value of these securities. For additional information, refer to Note 7, Short-term Investment Securities.

Derivative Liability

The Frontier Merger Agreement and the Merger Agreement with JetBlue include settlement terms for any conversion of the convertible notes due 2026 (as defined below) 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 notes due 2026 as a derivative liability with subsequent changes in fair value recorded in earnings.

As of February 5, 2022, which is the date the terms of the convertible notes were modified by the Frontier Merger Agreement, the Company recorded the fair value of the embedded derivative of $49.5 million as a derivative liability within deferred gains and other long-term liabilities and a debt discount within long-term debt and finance leases, less current maturities on its condensed consolidated balance sheets. The fair value of the derivative liability was estimated as the difference in value of the traded price of the convertible notes, including the conversion option and the value of the convertible notes in the absence of the conversion option (the debt component). The 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 and nine months ended September 30, 2022, the Company recorded $15.0 million and $24.3 million in favorable mark to market adjustments, respectively, related to the change in fair value of the derivative liability. The fair value of the conversion option did not materially change upon the termination of the Frontier Merger Agreement on July 27, 2022 and the execution of the Merger Agreement with JetBlue on July 28, 2022. 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 September 30, 2022
 TotalLevel
1
Level
2
Level
3
(in millions)
Cash and cash equivalents$953.4 $953.4 $ $ 
Restricted cash95.4 95.4   
Short-term investment securities106.3 106.3   
Assets held for sale2.5   2.5 
Total assets$1,157.6 $1,155.1 $ $2.5 
Derivative liability$25.2 $ $25.2 $ 
Total liabilities$25.2 $ $25.2 $ 

18


 Fair Value Measurements as of December 31, 2021
 TotalLevel
1
Level
2
Level
3
(in millions)
Cash and cash equivalents$1,333.5 $1,333.5 $ $ 
Restricted cash95.4 95.4   
Short-term investment securities106.3 106.3   
Assets held for sale2.5   2.5 
Total assets$1,537.7 $1,535.2 $ $2.5 
Total liabilities$ $ $ $ 

The Company had no transfers of assets or liabilities between any of the above levels during the nine months ended September 30, 2022 and the year ended December 31, 2021.


12. Debt and Other Obligations

As of September 30, 2022, the Company had outstanding public and non-public debt instruments.

Revolving credit facility due in 2024

As of September 30, 2022 and December 31, 2021, the Company had a $240.0 million revolving credit facility which was 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 condensed consolidated balance sheets. This facility matures on March 30, 2024.

Convertible senior notes due 2025

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

Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; and (4) at any time from, and including, February 18, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. As of September 30, 2022, the notes may be converted by noteholders through December 31, 2022.

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 Frontier Merger Agreement executed on February 5, 2022 (the Frontier Merger Agreement date), upon conversion of any convertible notes due 2025 through the closing or termination of the Frontier Merger, the conversion value, including the principal amount, were to be paid all in shares of the Company's common stock. On July 27, 2022, the Frontier Merger Agreement was terminated; however, on July 28, 2022, the Company entered into the Merger Agreement with JetBlue. 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 common stock. The initial conversion rate is 78.4314 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to an initial conversion price of approximately $12.75 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

19


During the second quarter of 2022, $2.8 million of the Company's convertible notes due 2025 were converted to 217,226 shares of the Company's voting common stock. As of September 30, 2022, the Company had recorded $2.7 million, net of issuance costs and common stock, in additional paid-in-capital on its condensed consolidated balance sheets as of September 30, 2022 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 $25.4 million recorded within current maturities of long-term debt and finance leases on its condensed consolidated balance sheets as of September 30, 2022 related to its convertible notes due 2025. As of September 30, 2022, the if-converted value exceeds the principal amount of the convertible notes due 2025 by $21.4 million and $20.1 million using the average stock price for the three and nine months ended September 30, 2022, respectively.

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 September 30, 2022, the notes did not qualify for conversion by noteholders through December 31, 2022.

Based on the terms of the indenture, the Company will have the right to elect to settle conversions in cash, shares of the Company’s common stock or a combination of cash and shares of common stock. Upon conversion of any notes, the Company will pay the conversion value in cash up to at least the principal amount of the notes being converted. However, based on the terms of the Frontier Merger Agreement executed on February 5, 2022 (the Frontier Merger Agreement date), upon conversion of any convertible notes due 2026 through the closing or termination of the Frontier Merger, the conversion value, including the principal amount, were to be paid all in cash. On July 27, 2022, the Frontier Merger Agreement was terminated; however, on July 28, 2022, the Company entered into the Merger Agreement with JetBlue. Based on the terms of the Merger Agreement with JetBlue, upon conversion of any convertible notes due 2026 through the closing or termination of the Merger Agreement with JetBlue, the conversion value, including the principal amount, will be paid all in cash. The conversion value will be determined over an observation period consisting of 40 trading days. The initial conversion rate is 20.3791 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to an initial conversion price of approximately $49.07 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

The notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after May 15, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price for a specified period of time. However, the Company may not redeem less than all of the outstanding notes unless at least $150.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice.

The Frontier Merger Agreement and the Merger Agreement with JetBlue include 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. As of February 5, 2022, which is the date the terms of the convertible notes were modified by the Frontier Merger Agreement, the Company recorded the fair value of the embedded derivative of $49.5 million as a derivative liability within deferred gains and other long-term liabilities and a debt discount within long-term debt and finance leases, less current maturities on its 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. The fair value of the conversion
20


option did not materially change upon the termination of the Frontier Merger Agreement on July 27, 2022 and the execution of the Merger Agreement with JetBlue on July 28, 2022.

Since the notes are currently not convertible in accordance with the terms of the indenture governing such notes, the Company had $460.7 million, net of the related unamortized debt discount of $39.3 million, recorded within long-term debt and finance leases, less current maturities on the Company's condensed consolidated balance sheets as of September 30, 2022 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:

As ofAs of
September 30, 2022December 31, 2021September 30, 2022December 31, 2021
(in millions)(weighted-average interest rates)
8.00% senior secured notes due 2025
$510.0 $510.0 8.00 %8.00 %
Fixed-rate loans due through 2039 (1)
1,127.3 1,223.5 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 2028289.6 300.6 4.10 %4.10 %
Fixed-rate class B 2015-1 EETC due through 202452.0 56.0 4.45 %4.45 %
Fixed-rate class C 2015-1 EETC due through 202369.5 75.2 4.93 %4.93 %
Fixed-rate class AA 2017-1 EETC due through 2030
186.3 200.3 3.38 %3.38 %
Fixed-rate class A 2017-1 EETC due through 2030
62.1 66.8 3.65 %3.65 %
Fixed-rate class B 2017-1 EETC due through 2026
51.7 55.8 3.80 %3.80 %
Fixed-rate class C 2017-1 EETC due through 2023
85.5 85.5 5.11 %5.11 %
Convertible notes due 202525.4 28.2 4.75 %4.75 %
Convertible notes due 2026500.0 500.0 1.00 %1.00 %
Long-term debt$3,095.7 $3,238.2 
Less current maturities353.4 208.2 
Less unamortized discounts, net
84.7 54.9 
Total$2,657.6 $2,975.1 
(1) Includes obligations related to 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, 2022, the Company made scheduled principal payments of $43.0 million and $139.8 million, respectively, on its outstanding debt obligations. During the three and nine months ended September 30, 2021, the Company made scheduled principal payments of $45.6 million and $416.3 million, respectively, on its outstanding debt obligations.
At September 30, 2022, long-term debt principal payments for the next five years and thereafter were as follows:

September 30, 2022
(in millions)
remainder of 2022$53.4 
2023336.6 
2024222.1 
2025723.8 
2026731.1 
2027 and beyond1,028.7 
Total debt principal payments$3,095.7 


Interest Expense

Interest expense related to long-term debt and finance leases consists of the following:
21


 Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
8.00% senior secured notes (1)
$10,461 $10,461 31,382 $41,436 
Fixed-rate term loans10,273 10,522 31,442 32,171 
Unsecured term loans344 344 1,020 824 
Class A 2015-1 EETC2,985 3,212 8,986 9,665 
Class B 2015-1 EETC581 671 1,772 2,039 
Class C 2015-1 EETC856 997 2,629 3,051 
Class AA 2017-1 EETC1,615 1,734 4,893 5,248 
Class A 2017-1 EETC582 625 1,764 1,892 
Class B 2017-1 EETC503 546 1,525 1,659 
Class C 2017-1 EETC1,104 1,104 3,275 3,275 
Convertible notes (2)
(9,641)1,585 (9,442)5,412 
Revolving credit facilities   1,733 
Finance leases13 23 47 72 
Commitment and other fees830 612 1,785 1,644 
Amortization of deferred financing costs3,202 3,273 10,634 10,056 
Total$23,708 $35,709 $91,712 $120,177 
(1) Includes $0.3 million and $0.8 million of accretion and $10.2 million and $30.6 million of interest expense for the three and nine months ended September 30, 2022, respectively. Includes $0.3 million and $1.0 million of accretion and $10.2 million and $40.4 million of interest expense for the three and nine months ended September 30, 2021, respectively.
(2) Includes $3.8 million and $10.2 million of amortization of the discount for the convertible notes due 2026, $1.6 million and $4.7 million of interest expense for the convertible notes due 2025 and 2026 offset by $15.0 million and $24.3 million of favorable mark to market adjustments for the convertible notes due 2026 for the three and nine months ended September 30, 2022, respectively. Includes $1.6 million and $5.4 million of interest expense for the convertible notes due 2025 and 2026 for the three and nine months ended September 30, 2021, respectively.

22


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, special charges (credits), federal excise tax recovery adjustments and accelerated depreciation 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. In prior periods, we excluded supplemental rent adjustments related to the modification of aircraft or engine leases from Adjusted CASM and Adjusted CASM ex-fuel. However, we no longer exclude supplemental rent adjustments from our non-GAAP measures. Therefore, 2021 non-GAAP measures have been revised to reflect this change and no longer exclude previously reported supplemental rent adjustments.

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"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical 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, 2021 and subsequent Quarterly Reports on Form 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, headquartered in Miramar, Florida, offers affordable travel to value-conscious customers. Our all-Airbus fleet is one of the youngest and most fuel efficient in the United States. We serve destinations throughout the United States, Latin America and the Caribbean, and are dedicated to giving back and improving those communities. Our stock trades under the symbol "SAVE" on the New York Stock Exchange ("NYSE").

We focus on value-conscious travelers who pay for their own travel, and our business model is designed to deliver what our Guests want: low fares and a great experience. We compete based on total price. We allow our Guests to see all available
23


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 airlines. 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 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 our 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 best 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 the go, and our airport kiosks and 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 month periods ended September 30, 2022 and 2021:

 
Three Months Ended September 30,Percent Change
 20222021
Operating Statistics (unaudited) (A):
Average aircraft181.4 166.6 8.9 %
Aircraft at end of period184 168 9.5 %
Average daily aircraft utilization (hours)10.6 10.4 1.9 %
Average stage length (miles)989 1,010 (2.1)%
Departures66,745 59,419 12.3 %
Passenger flight segments (PFSs) (thousands)9,980 8,319 20.0 %
Revenue passenger miles (RPMs) (thousands)10,104,170 8,579,489 17.8 %
Available seat miles (ASMs) (thousands)12,131,033 11,059,710 9.7 %
Load factor (%)83.3 %77.6 %5.7 pts
Fare revenue per passenger flight segment ($)67.52 50.61 33.4 %
Non-ticket revenue per passenger flight segment ($)67.07 60.30 11.2 %
Total revenue per passenger flight segment ($)134.59 110.91 21.4 %
Average yield (cents)13.29 10.75 23.6 %
TRASM (cents)11.07 8.34 32.7 %
CASM (cents)11.37 8.22 38.3 %
Adjusted CASM (cents)10.98 8.99 22.1 %
Adjusted CASM ex-fuel (cents)6.79 6.64 2.3 %
Fuel gallons consumed (thousands)133,140 121,126 9.9 %
Average economic fuel cost per gallon ($)3.82 2.14 78.5 %

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


24


Nine Months Ended September 30, Percent Change
 20222021
Operating Statistics (unaudited) (A):
Average aircraft177.9 161.3 10.3 %
Aircraft at end of period184 168 9.5 %
Average daily aircraft utilization (hours)10.7 9.3 15.1 %
Average stage length (miles)1,019 1,018 0.1 %
Departures190,851 153,405 24.4 %
Passenger flight segments (PFSs) (thousands)28,204 22,177 27.2 %
Revenue passenger miles (RPMs) (thousands)29,346,890 22,962,872 27.8 %
Available seat miles (ASMs) (thousands)35,696,476 29,262,614 22.0 %
Load factor (%)82.2 %78.5 %3.7 pts
Fare revenue per passenger flight segment ($)63.68 43.51 46.4 %
Non-ticket revenue per passenger flight segment ($)66.70 57.64 15.7 %
Total revenue per passenger flight segment ($)130.38 101.15 28.9 %
Average yield (cents)12.53 9.77 28.2 %
TRASM (cents)10.30 7.67 34.3 %
CASM (cents)11.12 7.65 45.4 %
Adjusted CASM (cents)10.83 8.93 21.3 %
Adjusted CASM ex-fuel (cents)6.81 6.82 (0.1)%
Fuel gallons consumed (thousands)388,027 311,874 24.4 %
Average economic fuel cost per gallon ($)3.70 1.98 86.9 %

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



Executive Summary

Termination of Frontier Merger

On July 27, 2022, Spirit, Frontier Group Holdings, Inc., a Delaware corporation (“Frontier”), and Top Gun Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of Frontier (“Frontier Merger Sub”), entered into a Termination Agreement (the “Termination Agreement”), pursuant to which the parties agreed to terminate the Agreement and Plan of Merger, dated as of February 5, 2022 (as amended on June 2, 2022 and June 24, 2022, the “Frontier Merger Agreement”), among Spirit, Frontier and Frontier Merger Sub, effective immediately. Under the terms of the Termination Agreement, Spirit paid $25.0 million in cash to Frontier for Frontier’s reasonable and documented out-of-pocket costs and expenses (the “Frontier Expenses”).

Announcement of JetBlue Merger

On July 28, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with JetBlue Airways Corporation, a Delaware corporation (“JetBlue”), and Sundown Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of JetBlue (“Merger Sub”), pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit, with Spirit continuing as the surviving entity (the “Merger”). As a result of the Merger, each existing share of Spirit's common stock (except for dissenting shares, treasury stock, and shares of Spirit's common stock owned by JetBlue, Merger Sub or any of their respective wholly owned subsidiaries), will be converted into the right to receive an amount in cash per share, without interest, equal to (such amount, the “Merger Consideration”) (i) $33.50 minus (ii) (A) $2.50 (the “Approval Prepayment Amount”), to the extent paid (the “Approval Prepayment”) upon the adoption by Spirit stockholders of the Merger Agreement (or, in the event that the closing of the Merger (the “Closing”) occurs after the record date for the prepayment of, but before the payment date of, such Approval Prepayment Amount, to the extent payable after the Closing), and (B) an additional per share prepayment amount calculated as the product of $0.10 and the number of additional
25


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 after December 31, 2022 (each such payment is referred to as an “Additional Prepayment” and such $0.10 amount is referred to as the “Additional Prepayment Amount”).

JetBlue will pay or cause to be paid the Approval Prepayment Amount to Spirit stockholders as of the record date established by Spirit for the special meeting to approve the Merger Agreement within five business days following such Spirit stockholder approval. Thereafter, on or prior to the last business day of each month beginning after December 31, 2022 until the earlier of the Closing or termination of the Merger Agreement, JetBlue will also pay or cause to be paid the Additional Prepayment Amount to Spirit stockholders as of a record date not more than 5 business days prior to the last business day of such month. We expect payments made from JetBlue to Spirit stockholders will not impact our results of operations or cash flows. Under the terms of the Merger Agreement, JetBlue reimbursed Spirit for the $25.0 million Frontier Expenses discussed above.

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 is September 12, 2022. Therefore, all Spirit stockholders of record as of September 12, 2022 are entitled to receive the Approval Prepayment in accordance with the Merger Agreement. On October 26, 2022, JetBlue paid the Spirit stockholders the Approval Prepayment Amount of $2.50 per share.

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.

Spirit, JetBlue and Merger Sub each make certain customary representations, warranties and covenants, as applicable, in the Merger Agreement.

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).

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.

Summary of Results

For the third quarter of 2022, we had a negative operating margin of 2.7%, a decrease of 4.2 percentage points compared to an operating margin of 1.5% in the prior year period. We generated a pre-tax loss of $48.9 million and a net loss of $36.4 million on operating revenues of $1,343.2 million. For the third quarter of 2021, we generated a pre-tax loss of $17.0 million and a net income of $14.8 million on operating revenues of $922.6 million.
Our Adjusted CASM ex-fuel for the third quarter of 2022 was 6.79 cents compared to 6.64 cents in the same period in the prior year. The increase on a per-ASM basis was primarily due to increases in landing fees and other rents expense, ground handling expense, salaries, wages and benefits expense and distribution expense, period over period. On a per-ASM basis, these increases were partially offset by the decrease in reaccommodation expense, period over period.
26


As of September 30, 2022, we had 184 Airbus A320-family aircraft in our fleet comprised of 31 A319s, 64 A320s, 30 A321s, and 59 A320neos. With the scheduled delivery of 13 aircraft during the remainder of 2022, we expect to end 2022 with 197 aircraft in our fleet.
Comparison of three months ended September 30, 2022 to three months ended September 30, 2021
Operating Revenues

Operating revenues increased $420.5 million, or 45.6%, to $1,343.2 million for the third quarter of 2022, as compared to the third quarter of 2021, primarily due to an increase in average yield of 23.6%, an increase in traffic of 17.8% and an increase in load factor of 5.7 pts, year over year.

Total revenue per passenger flight segment increased 21.4%, year over year. The increase in total revenue per passenger flight segment was primarily driven by a 23.6% increase in average yield, period over period. Fare revenue per passenger flight segment increased 33.4% and non-ticket revenue per passenger flight segment increased 11.2%. The increase in non-ticket revenue per passenger flight segment was primarily attributable to increases in bag revenue, passenger usage fee revenue, change fee revenue, boost-it revenue and seat revenue per passenger flight segment, as compared to the prior year.

Operating Expenses

Operating expenses increased $470.9 million, or 51.8%, to $1,379.6 million for the third quarter of 2022 compared to $908.6 million for the third quarter of 2021, primarily due to an increase in aircraft fuel expense, period over period. In addition, we had $38.4 million in special charges in the third quarter of 2022 compared to $85.8 million in special credits during the third quarter of 2021. For additional information, refer to "Notes to Condensed Consolidated Financial Statements—5. Special Charges (Credits)." We also had an increase in operations as reflected by an 17.8% increase in traffic and 9.7% increase in 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. We had no activity related to fuel derivative instruments during the three months ended September 30, 2022 and 2021.
Aircraft fuel expense increased by $248.9 million, or 95.9%, from $259.6 million in the third quarter of 2021 to $508.5 million in the third quarter of 2022. This increase in fuel expense, period over period, was due to a 78.5% increase in average economic fuel cost per gallon and a 9.9% 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,
 20222021
(in thousands, except per-gallon amounts)Percent Change
Fuel gallons consumed133,140 121,126 9.9 %
Into-plane fuel cost per gallon$3.82 $2.14 78.5 %
Aircraft fuel expense (per condensed consolidated statements of operations)$508,496 $259,618 95.9 %
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 78.5% was primarily a result of an increase in jet fuel prices.

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, 2022 and 2021, followed by explanations of the material changes on a dollar basis and/or unit cost basis:
27


 Three Months Ended September 30,Dollar ChangePercent ChangeCost per ASMPer-ASM ChangePercent Change
Three Months Ended September 30,
 2022202120222021
(in thousands)(in cents)
Salaries, wages, and benefits$311,957 $277,372 $34,585 12.5 %2.57 2.51 0.06 2.4 %
Aircraft fuel508,496 259,618 248,878 95.9 %4.19 2.35 1.84 78.3 %
Landing fees and other rents95,174 77,703 17,471 22.5 %0.78 0.70 0.08 11.4 %
Depreciation and amortization78,184 74,260 3,924 5.3 %0.64 0.67 (0.03)(4.5)%
Aircraft rent75,332 65,873 9,459 14.4 %0.62 0.60 0.02 3.3 %
Maintenance, materials and repairs45,126 41,183 3,943 9.6 %0.37 0.37 — — %
Distribution47,385 36,085 11,300 31.3 %0.39 0.33 0.06 18.2 %
Loss on disposal of assets9,374 532 8,842 NM0.08 — 0.08 NM
Special charges (credits)38,359 (85,775)124,134 NM0.32 (0.78)1.10 NM
Other operating170,182 161,785 8,397 5.2 %1.40 1.46 (0.06)(4.1)%
Total operating expenses$1,379,569 $908,636 $470,933 51.8 %11.37 8.22 3.15 38.3 %
Adjusted CASM (1)10.98 8.99 1.99 22.1 %
Adjusted CASM ex-fuel (2)6.79 6.64 0.15 2.3 %
 
(1)Reconciliation of CASM to Adjusted CASM:
Three Months Ended September 30,
20222021
(in millions)Per ASM(in millions)Per ASM
CASM (cents)11.37 8.22 
Loss on disposal of assets$9.4 0.08 $0.5 — 
Special charges (credits)38.4 0.32 (85.8)(0.78)
Adjusted CASM (cents)10.98 8.99 

(2)Excludes aircraft fuel expense, loss on disposal of assets and special charges (credits).
Our Adjusted CASM ex-fuel for the third quarter of 2022 was 6.79 cents, compared to 6.64 cents in the same period in the prior year. The increase on a per-ASM basis was primarily due to increases in landing fees and other rents expense, ground handling expense, salaries, wages and benefits expense and distribution expense, period over period. On a per-ASM basis, these increases were partially offset by the decrease in reaccommodation expense, period over period.
Salaries, wages and benefits for the third quarter of 2022 increased $34.6 million, or 12.5%, as compared to the third quarter of 2021. This increase on a dollar and per-ASM basis was primarily driven by higher salaries and health insurance expense, period over period. The increase in salaries was mainly driven by increased headcount and pay rates, period over period, as well as due to an increase in operations as compared to the prior year period. The increase in health insurance expense was mainly driven by higher volume of claims as compared to the prior year period.
Landing fees and other rents for the third quarter of 2022 increased $17.5 million, or 22.5%, as compared to the third quarter of 2021. On a dollar and per-ASM basis, landing fees and other rents expense primarily increased as a result of an increase in facility rent and station baggage rent driven by increased operations, higher rent rates and the addition of new stations as well as new gates at our existing stations, period over period. A portion of our facility rent and baggage rent is variable in nature and varies based on factors such as the number of departures and passengers. As compared to the prior year period, departures increased by 12.3% and passenger flight segments increased by 20.0%.

Depreciation and amortization for the third quarter of 2022 increased by $3.9 million, or 5.3%, as compared to the prior year period. The increase in depreciation and amortization expense on a dollar basis was primarily driven by an increase in computer software, spare rotables and capitalized heavy maintenance events. On a per-ASM basis, depreciation and amortization expense decreased due to a change in the composition of our aircraft fleet between purchased aircraft (for which depreciation expense is recorded under depreciation and amortization) and leased aircraft (for which rent expense is recorded
28


under aircraft rent). Since the prior year period, we have taken delivery of 15 new leased aircraft, which increased capacity but had no effect on depreciation expense.
We account for heavy maintenance under the deferral method. Under the deferral method, the cost of heavy maintenance is capitalized and amortized as a component of depreciation and amortization expense in the 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 $23.4 million and $22.7 million for the third quarters of 2022 and 2021, respectively. The amortization of heavy maintenance costs is driven by the timing and number of maintenance events. 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 condensed consolidated statements of operations, our maintenance, materials and repairs expense would have been $68.5 million and $63.9 million for the third quarter of 2022 and 2021, respectively.
Aircraft rent expense for the third quarter of 2022 increased by $9.5 million, or 14.4%, as compared to the third quarter of 2021. This increase in aircraft rent expense on a dollar basis was primarily due to an increase in the number of aircraft financed under operating leases throughout the current period, as compared to the prior year period. Since the third quarter of 2021, we have acquired 15 new aircraft financed under operating leases. The increase on a per-ASM basis was primarily due to an increase in the number of aircraft in our fleet that are leased, period over period.
Maintenance, materials and repairs expense for the third quarter of 2022 increased by $3.9 million, or 9.6%, as compared to the third quarter of 2021. On a dollar basis, the increase in maintenance, materials and repairs expense was mainly due to higher volume of aircraft and maintenance events as well as the aging of aircraft as compared to the prior year period. On a per-ASM basis, maintenance, materials and repairs expense remained stable, period over period.

Distribution costs increased by $11.3 million, or 31.3%, in the third quarter of 2022 as compared to the third quarter of 2021. The increase on a dollar basis was primarily due to increased sales volume. On a per-ASM basis, distribution costs increased primarily due to higher average fare resulting in an increase in credit card fees year over year.

Loss on disposal of assets for the three months ended September 30, 2022 primarily consisted of $9.4 million related to the loss on four aircraft sale leaseback transactions completed during the third quarter of 2022. Loss on disposal of assets for the three months ended September 30, 2021 primarily consisted of $0.5 million related to the loss on one aircraft sale leaseback transaction completed during the third quarter of 2021.

Special charges for the three months ended September 30, 2022 consisted of $17.7 million in legal, advisory and other fees related to the former Frontier Merger Agreement, JetBlue's unsolicited proposal to acquire all of our outstanding shares in an all-cash transaction and the JetBlue Merger Agreement as well as $20.6 million related to our retention bonus programs. Special credits for the three months ended September 30, 2021 consisted of $86.4 million related to the grant component of the PSP3 agreements with the Treasury. This special credit was partially offset by $0.6 million in special charges recorded in connection with the rehire of Team Members previously terminated under our involuntary employee separation program which were rehired in compliance with the restrictions mandated by our participation in the PSP3. For additional information, refer to "Notes to Condensed Consolidated Financial Statements—5. Special Charges (Credits)."

Other operating expenses for the three months ended September 30, 2022 increased by $8.4 million, or 5.2%, as compared to the three months ended September 30, 2021. The increase in other operating expenses on a dollar basis was primarily due to an increase in overall operations and an increase in ground handling rates at certain airports at which we operate, period over period. As compared to the prior year period, departures increased by 12.3% and passenger flight segments increased by 20.0%, which drove increases in variable other operating expenses. These increases were partially offset by a decrease in passenger reaccommodation expense, period over period. The decrease on a per-ASM basis, was primarily attributable to lower passenger reaccommodation expense, as compared to the prior year period partially offset by higher ground handling rates and other airport services as well as third party labor expense, period over period.


Other (Income) Expense

Our interest expense and corresponding capitalized interest for the three months ended September 30, 2022 primarily represented interest related to the financing of purchased 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. In addition, our interest expense for the three months ended September 30, 2022, includes favorable mark to market adjustments of $15.0 million to the derivative liability related to our convertible notes due 2026. Refer to "Notes to Condensed
29


Consolidated Financial Statements—11. Fair Value Measurements" for additional information. Our interest expense and corresponding capitalized interest for the three months ended September 30, 2021, primarily represent interest related to the financing of purchased aircraft as well as the interest related to our convertible notes and the interest and accretion related to our 8.00% senior secured notes. As of September 30, 2022 and 2021, we had 73 and 72 aircraft financed through fixed-rate long-term debt, respectively.

Our interest income for the three months ended September 30, 2022 and 2021 primarily represents interest income earned on our cash, cash equivalents and short-term investments.


Income Taxes

Our effective tax rate for the third quarter of 2022 was 25.6%, compared to 186.9% for the third quarter of 2021. The decrease in the tax rate, as compared to the prior year period, is primarily due to the increase of the annualized effective tax rate during the three months ended September 30, 2021. While we expect our tax rate to be a 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 state and the state tax applicable to such income. Discrete items particular to a given year may also affect our effective tax rates.

Comparison of nine months ended September 30, 2022 to nine months ended September 30, 2021
Operating Revenues
Operating revenues increased $1,433.9 million, or 63.9%, to $3,677.1 million for the nine months ended September 30, 2022, as compared to the prior year period, primarily due to an increase in traffic of 27.8%, an increase in average yield of 28.2% and an increase in load factor of 3.7 pts.

Total revenue per passenger flight segment increased 28.9%, year over year. The increase in total revenue per passenger flight segment was primarily due to an increase of 28.2% in average yield, period over period. Fare revenue per passenger flight segment increased 46.4%, as compared to the prior year period, while non-ticket revenue per passenger flight segment increased 15.7%, as compared to the prior year period. The increase in non-ticket revenue per passenger flight segment was primarily attributable to increases in bag revenue, passenger usage fee revenue, change fee revenue, seat revenue and boost-it and bundle-it revenue per passenger flight segment, as compared to the prior year.

Operating Expenses
Operating expenses increased for the nine months ended September 30, 2022 by $1,731.8 million, or 77.4%, as compared to the prior year period primarily due to a 86.9% increase in average economic fuel cost per gallon and a 24.4% increase in fuel gallons consumed, both of which contributed to a $818.3 million increase in aircraft fuel expense, period over period. We also had an increase in operations as reflected by a 27.8% increase in traffic and a 22.0% increase in capacity, as a result of increased travel demand as compared to the prior year period. In addition, we had $71.9 million in special charges during the nine months ended September 30, 2022 compared to $377.7 million in special credits in the same period in the prior year. For additional information, refer to "Notes to Condensed Consolidated Financial Statements—5. Special Charges (Credits)."
The elements of the changes in aircraft fuel expense are illustrated in the following table:
 Nine Months Ended September 30,
 20222021
(in thousands, except per-gallon amounts)Percent Change
Fuel gallons consumed388,027 311,874 24.4 %
Into-plane fuel cost per gallon$3.70 $1.98 86.9 %
Aircraft fuel expense (per condensed consolidated statements of operations)$1,435,714 $617,373 132.6 %

30


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, 2022 and 2021, followed by explanations of the material changes on a unit cost basis and/or dollar basis:
 Nine Months Ended September 30, Dollar ChangePercent ChangeCost per ASMPer-ASM ChangePercent Change
Nine Months Ended September 30,
 2022202120222021
(in thousands)(in cents)
Salaries, wages, and benefits$926,481 $780,300 $146,181 18.7 %2.60 2.67 (0.07)(2.6)%
Aircraft fuel1,435,714 617,373 818,341 132.6 %4.02 2.11 1.91 90.5 %
Landing fees and other rents270,131 231,308 38,823 16.8 %0.76 0.79 (0.03)(3.8)%
Depreciation and amortization230,844 222,275 8,569 3.9 %0.65 0.76 (0.11)(14.5)%
Aircraft rent210,008 185,296 24,712 13.3 %0.59 0.63 (0.04)(6.3)%
Maintenance, materials and repairs136,048 110,725 25,323 22.9 %0.38 0.38 — — %
Distribution131,460 94,990 36,470 38.4 %0.37 0.32 0.05 15.6 %
Loss on disposal of assets31,562 1,838 29,724 NM0.09 0.01 0.08 NM
Special charges (credits)71,926 (377,715)449,641 NM0.20 (1.29)1.49 NM
Other operating526,151 372,153 153,998 41.4 %1.47 1.27 0.20 15.7 %
Total operating expenses$3,970,325 $2,238,543 $1,731,782 77.4 %11.12 7.65 3.47 45.4 %
Adjusted CASM (1)10.83 8.93 1.90 21.3 %
Adjusted CASM ex-fuel (2)6.81 6.82 (0.01)(0.1)%
 
(1)Reconciliation of CASM to Adjusted CASM:
Nine Months Ended September 30,
20222021
(in millions)Per ASM(in millions)Per ASM
CASM (cents)11.12 7.65 
Loss on disposal of assets$31.6 0.09 $1.8 0.01 
Special charges (credits)71.9 0.20 (377.7)(1.29)
Federal excise tax recovery— — (2.2)(0.01)
Accelerated depreciation— — 3.5 0.01 
Adjusted CASM (cents)10.83 8.93 

(2)Excludes aircraft fuel expense, loss on disposal of assets, special charges (credits), amounts related to out-of-period interrupted trip expense credits recognized in connection with Federal Excise Tax recovery, and accelerated depreciation on current aircraft seats related to the retrofit of 36 aircraft with new Acro6 seats.
Our Adjusted CASM ex-fuel for the nine months ended September 30, 2022 was 6.81, cents as compared to 6.82 cents for the nine months ended September 30, 2021. Improved air travel demand, as compared to the prior year period, drove an increase of 22.0% in ASMs, period over period. This increase in ASMs drove a decrease in operating expenses on a per-ASM basis with the greatest impact noted on primarily fixed costs such as depreciation and amortization expense, salaries, wages, and benefits expense, and aircraft rent expense. On a per-ASM basis, these decreases were partially offset by increases in ground handling expense and travel and lodging expense, period over period.
Salaries, wages and benefits for the nine months ended September 30, 2022 increased $146.2 million, or 18.7%, as compared to the prior year period. This increase on a dollar basis was primarily driven by higher salaries, crew overtime, per diem pay, 401(k) expense and health insurance expense, period over period. The increase in salaries and per diem pay was mainly driven by an 18.0% increase in our pilot and flight attendant workforce, period over period, as well as due to an increase in operations as compared to the prior year period. The increase in crew overtime was primarily related to the increase in operations. The increase in 401(k) expense was mainly driven by higher pay to our pilot workforce driven by an increase in operations as well as higher average pay rates and 401(k) employer contribution rates to our pilots as compared to the prior year
31


period. The increase in health insurance expense was mainly driven by higher volume of claims as compared to the prior year period.

Landing fees and other rents for the nine months ended September 30, 2022 increased $38.8 million, or 16.8%, as compared to the prior year period. On a dollar basis, landing fees and other rents expense primarily increased as a result of an increase in facility rent, gate charges, overfly fees and station baggage rent driven by increased operations, higher rent rates and the addition of new stations as well as new gates at our existing stations, period over period. Gate charges, overfly fees as well as a portion of facility rent and station baggage rent are variable in nature and vary based on factors such as the number of departures and passengers. As compared to the prior year period, departures increased by 24.4% and passenger flight segments increased by 27.2%. These increases were partially offset by an increase in signatory adjustment credits as compared to the prior year period. On a per-ASM basis, landing fees and other rents decreased, period over period, primarily due to a lower average rate per landing based on the location and volume of where we operated. This decrease on a per-ASM basis was partially offset by an increase in facility rent and gate charges, as mentioned above.
Depreciation and amortization for the nine months ended September 30, 2022 increased by $8.6 million, or 3.9%, as compared to the prior year period. The increase in depreciation expense on a dollar basis was primarily driven by an increase in computer hardware and software, spare rotables and leasehold improvements. On a per-ASM basis, depreciation and amortization expense decreased due to a change in the composition of our aircraft fleet between purchased aircraft (for which depreciation expense is recorded under depreciation and amortization) and leased aircraft (for which rent expense is recorded under aircraft rent). Since the prior year period, we have taken delivery of 15 new leased aircraft, which increased capacity but had no effect on depreciation expense.
We account for heavy maintenance under the deferral method. Under the deferral method, the cost of heavy maintenance is capitalized and amortized as a component of depreciation and amortization expense in the 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 $69.3 million and $69.2 million for the nine months ended September 30, 2022 and 2021, respectively. 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 condensed consolidated statements of operations, our maintenance, materials and repairs expense would have been $205.4 million and $179.9 million for the nine months ended September 30, 2022 and 2021, respectively.
Aircraft rent expense for the nine months ended September 30, 2022 increased by $24.7 million, or 13.3%, as compared to the prior year period. This increase in aircraft rent expense was primarily due to an increase in the number of aircraft financed under operating leases throughout the current period, as compared to the prior year period. Since the third quarter of 2021, we have acquired 15 new aircraft financed under operating leases. The increase in aircraft rent was partially offset by a decrease in supplemental rent, period over period. The decrease in supplemental rent is driven by the accrual of lease return costs related to the purchase of four aircraft and two spare engines off lease made during the nine months ended September 30, 2021, partially offset by the accrual of lease return cost in the current year period related to our short-term spare engines. The decrease on a per-ASM basis was primarily due to the decrease in supplemental rent noted above.
Maintenance, materials and repairs expense for the nine months ended September 30, 2022 increased by $25.3 million, or 22.9%, as compared to the prior year period. The increase on a dollar basis was mainly due to a higher volume and aging of aircraft and maintenance events as a result of an increase of 15.1% in average daily aircraft utilization in the current period as compared to the prior year period. On a per-ASM basis, maintenance, materials and repairs expense remained stable, period over period.
Distribution costs increased by $36.5 million, or 38.4%, for the nine months ended September 30, 2022 as compared to the prior year period. The increase on a dollar basis was primarily due to increased sales volume. On a per-ASM basis, distribution costs increased primarily due to higher average fare resulting in an increase in credit card fees year over year.
Loss on disposal of assets for the nine months ended September 30, 2022 primarily consisted of $23.8 million related to the loss on eleven aircraft sale leaseback transactions completed during the nine months ended September 30, 2022 and $6.6 million related to the impairment of one spare engine during the first quarter of 2022 which was damaged beyond economic repair. Loss on disposal of assets for the nine months ended September 30, 2021 consisted of $1.1 million related to the loss on the sale of auxiliary power units ("APUs"), $0.6 million related to the loss on three aircraft sale leaseback transactions completed during the second and third quarters of 2021 and disposal of excess and obsolete inventory.
Special charges for the nine months ended September 30, 2022 consisted of $39.2 million in legal, advisory and other fees related to the former Merger Agreement with Frontier, JetBlue's unsolicited proposal to acquire all of our outstanding shares in an all-cash transaction and the JetBlue Merger Agreement as well as $32.7 million related to our retention bonus
32


programs. Special credits for the nine months ended September 30, 2021 consisted of $342.2 million related to the grant component of the PSP agreement with the Treasury. In addition, we recorded $37.5 million related to the CARES Employee Retention credit. These special credits were partially offset by $2.0 million in special charges recorded in connection with the rehire of Team Members previously terminated under our involuntary employee separation program which were rehired in compliance with the restrictions mandated by our participation in the PSP. For additional information, refer to "Notes to Condensed Consolidated Financial Statements—5. Special Charges (Credits)."
Other operating expenses for the nine months ended September 30, 2022 increased by $154.0 million, or 41.4%, as compared to the prior year period. The increase in other operating expenses on a dollar basis was primarily due to an increase in travel and lodging expense, ground handling expense and security expense, period over period, primarily as a result of an increase in operations. As compared to the prior year period, departures increased by 24.4%, and we had 27.2% more passenger flight segments, which drove increases in variable other operating expenses. In addition, we had higher passenger reaccommodation expense, period over period, related 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 half of 2022. The increase on a per-ASM basis was primarily attributable to higher ground handling expense, travel and lodging expense and passenger reaccommodation expense, as compared to the prior year period.


Other (Income) Expense

Our interest expense and corresponding capitalized interest for the nine months ended September 30, 2022 primarily represented interest related to the financing of purchased 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. In addition, our interest expense for the nine months ended September 30, 2022, includes favorable mark to market adjustments of $24.3 million to the derivative liability related to our convertible notes due 2026. Refer to "Notes to Condensed Consolidated Financial Statements—11. Fair Value Measurements" for additional information. Our interest expense and corresponding capitalized interest for the nine months ended September 30, 2021 primarily represent interest related to the financing of purchased aircraft as well as the interest related to our convertible notes and the interest and accretion related to our 8.00% senior secured notes. As of September 30, 2022 and 2021, we had 73 and 72 aircraft financed through secured long-term debt arrangements, respectively.

During the nine months ended September 30, 2022, we had no loss on extinguishment of debt in our condensed consolidated statement of operations. Our loss on extinguishment of debt for the nine months ended September 30, 2021 primarily represents premiums paid to early extinguish a portion of our 8.00% senior secured notes and 4.75% convertible notes due 2025. In addition, it includes the write-off of related deferred financing costs and original issuance discount.

Our interest income for the nine months ended September 30, 2022 and 2021 represents interest income earned on cash, cash equivalents and short-term investments as well as interest earned on income tax refunds.


Income Taxes

Our effective tax rate for the nine months ended September 30, 2022 was 21.4%, compared to 10.1% for the nine months ended September 30, 2021. The increase in tax rate, as compared to the prior year period, is primarily due to an unfavorable permanent tax adjustment recorded during the nine months ended September 30, 2021, related to the repurchase of a portion of our convertible notes due 2025. Excluding this unfavorable permanent tax adjustment, our effective tax rate for the nine months ended September 30, 2021 would have been 21.1%. While we expect 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 state and the state tax applicable to such income. Discrete items particular to a given year may also affect our effective tax rates.


Liquidity and Capital Resources

Our primary sources of liquidity generally include cash on hand, cash provided by operations and capital from debt and equity financing. Primary uses of liquidity are for working capital needs, capital expenditures, aircraft and engine pre-delivery deposit payments ("PDPs") and debt and lease obligations. We expect to meet our cash needs for the next twelve months with cash and cash equivalents, financing arrangements and cash flows from operations. As of September 30, 2022, we had $1,299.7 million of liquidity comprised of unrestricted cash and cash equivalents, short-term investment securities and funds available under our revolving credit facility due in 2024.
33



As of September 30, 2022, we had $25.4 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 September 30, 2022, the convertible notes due 2025 may be converted by noteholders through December 31, 2022. During the second quarter of 2022, $2.8 million of our convertible notes due 2025 were converted to 217,226 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 September 30, 2022, we had $460.7 million, net of the related unamortized debt discount of $39.3 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 September 30, 2022, the convertible notes due 2026 did not qualify for conversion by noteholders through December 31, 2022. 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 may be acquired through debt financing, cash purchases, direct leases or sale leaseback transactions. During the nine months ended September 30, 2022, we took delivery of 11 aircraft under sale leaseback transactions and 3 spare engines purchased with cash. During the nine months ended September 30, 2022, we made $196.3 million in debt payments (principal, interest and fees) on our outstanding aircraft debt obligations.

Under our purchase agreements for aircraft and engines, we are required to pay PDPs relating to future deliveries at various times prior to each delivery date. During the nine months ended September 30, 2022, we paid $15.6 million in PDPs, net of refunds, and $13.3 million of capitalized interest for future deliveries of aircraft and spare engines. As of September 30, 2022, we had $496.8 million of pre-delivery deposits on flight equipment, including capitalized interest, on our condensed consolidated balance sheets.

As of September 30, 2022, we have secured financing for 40 aircraft to be leased directly from third-party lessors and 6 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 108 Airbus firm aircraft orders, scheduled for delivery 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. 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.

Net Cash Flows Provided (Used) By Operating Activities. Operating activities in the nine months ended September 30, 2022 used $32.3 million in cash compared to $277.0 million provided in the nine months ended September 30, 2021. Cash used by operating activities in the nine months ended September 30, 2022 is primarily related to the net loss in the period as well as an increase in deferred heavy maintenance, net and deferred income tax benefit in the period. These increases were partially offset by higher non-cash expense of depreciation and amortization as well as increases in air traffic liability, accounts payable and other liabilities.

Net Cash Flows Used In Investing Activities. During the nine months ended September 30, 2022, investing activities used $204.4 million, compared to $263.4 million used in the prior year period. The decrease was mainly driven by a decrease in PDPs paid, net of refunds, partially offset by any increase in purchases of property and equipment, year over year.

Net Cash Flows Used By Financing Activities. During the nine months ended September 30, 2022, financing activities used $143.4 million in cash compared to $286.1 million used in the nine months ended September 30, 2021. During the nine months ended September 30, 2022, we paid $139.8 million in debt principal 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 September 30, 2022, our aircraft orders consisted of 114 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. Out of these 114 aircraft, we have 6 aircraft scheduled for delivery in the remainder of 2022 and 17 aircraft scheduled for delivery in 2023. As of September 30, 2022, we had secured financing for the 6 aircraft scheduled for delivery from Airbus through the remainder of 2022, which will be financed through sale leaseback transactions. As of September 30, 2022, we do not have financing commitments in place for the remaining 108 Airbus aircraft on firm order through 2027. However, we have a financing letter of agreement with Airbus
34


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.

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 September 30, 2022, we are committed to purchase 13 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 September 30, 2022, we had secured 40 direct leases for aircraft with third-party lessors, with deliveries in the remainder of 2022 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 $8.6 million for the remainder of 2022, $92.7 million in 2023, $187.8 million in 2024, $216.4 million in 2025, $216.4 million in 2026, and $1,874.8 million in 2027 and beyond.

We have significant obligations for aircraft and spare engines as 78 of our 184 aircraft and 6 of our 29 spare engines are financed under operating leases. These leases expire between 2024 and 2040. Aircraft rent payments were $72.1 million and $62.9 million for the three months ended September 30, 2022 and September 30, 2021, respectively. Aircraft rent payments were $205.0 million and $190.4 million for the nine months ended September 30, 2022 and September 30, 2021, 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, payments of debt, and lease arrangements. The following table discloses aggregate information about our contractual obligations as of September 30, 2022 and the periods in which payments are due (in millions): 
Remainder of 20222023 - 20242025 - 20262027 and beyondTotal
Long-term debt (1)$53 $559 $1,455 $1,029 $3,096 
Interest and fee commitments (2)33 215 135 104 487 
Finance and operating lease obligations 77 592 518 2,278 3,465 
Flight equipment purchase obligations (3)297 1,953 2,651 863 5,764 
Other (4)75 56 36 19 186 
Total future payments on contractual obligations$535 $3,375 $4,795 $4,293 $12,998 

(1) Includes principal only associated with our 8.00% senior secured 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 C Series 2017-1 EETCs and convertible notes. Refer to "Notes to Condensed Consolidated Financial Statements—12. Debt and Other Obligations."
(2) Related to our 8.00% senior secured 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 C Series 2017-1 EETCs and convertible notes. Includes interest accrued as of September 30, 2022 related to our variable-rate revolving credit facility.
(3) Includes estimated amounts for contractual price escalations and PDPs.
(4) Primarily related to our 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."
35



Currently, one of our lease agreements require that we pay maintenance reserves to aircraft lessors to be held as collateral in advance of our required performance of major maintenance activities.

During the fourth quarter of 2019, we purchased an 8.5-acre parcel of land for $41.0 million and entered into a 99-year lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where we are building a new headquarters campus and a 200-unit residential building. During the first quarter of 2022, we began building our new headquarters campus and a 200-unit residential building with an expected completion during the fourth quarter 2023. Operating lease commitments related to this lease are included in the table above under the caption "Finance and operating lease obligations." For more detailed information, please refer to “Notes to Condensed Consolidated Financial Statements—9. Leases." Commitments related to the construction of the headquarters campus and the 200-unit residential building are included in the table above under the caption "Other."

Off-Balance Sheet Arrangements
As of September 30, 2022, we had lines of credit related to corporate credit cards of $20.1 million, from which we had drawn $1.2 million.

As of September 30, 2022, we had lines of credit with counterparties for both physical fuel delivery and derivatives in the amount of $41.5 million. As of September 30, 2022, we had drawn $2.1 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, 2022, we did not hold any derivatives.
As of September 30, 2022, we had $11.4 million in uncollateralized surety bonds and $85.0 million in standby letters of credit, collateralized by $75.0 million of restricted cash, representing an off-balance sheet commitment, of which $25.7 million were issued letters of credit.


36


GLOSSARY OF AIRLINE TERMS
Set forth below is a glossary of industry terms:
“Adjusted CASM” means operating expenses, excluding loss on disposal of assets, special charges and credits, accelerated depreciation and federal excise tax recovery, divided by ASMs.
“Adjusted CASM ex fuel” means operating expenses excluding aircraft fuel expense, loss on disposal of assets, special charges and credits, accelerated depreciation and federal excise tax recovery, 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.
“ASIF” means an Aviation Security Infrastructure Fee assessed by the TSA on each airline.
“Available seat miles” or “ASMs” means the number of seats available for passengers multiplied by the number of miles the seats are flown, also referred to as "capacity."
“Average aircraft” means the average number of aircraft in our fleet as calculated on a daily basis.
“Average daily aircraft utilization” means block hours divided by number of days in the period divided by average aircraft.
“Average fuel cost per gallon” means total aircraft fuel expense divided by the total number of fuel gallons consumed.
“Average stage length” represents the average number of miles flown per flight.
“Average yield” means average operating revenue earned per RPM, calculated as total revenue divided by RPMs, also referred to as "passenger yield."
“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.
“CASM” or “unit costs” means operating expenses divided by ASMs.

“CBA” means a collective bargaining agreement.

“CBP” means United States Customs and Border Protection.

“DOT” means the United States Department of Transportation.

"EETC" means enhanced equipment trust certificate.

“EPA” means the United States Environmental Protection Agency.
“FAA” means the United States Federal Aviation Administration.
“Fare revenue per passenger flight segment” means total fare passenger revenue divided by passenger flight segments.
“FCC” means the United States Federal Communications Commission.
"FLL Airport" means the Fort Lauderdale Hollywood International Airport.
“GDS” means Global Distribution System (e.g., Amadeus, Galileo, Sabre and Worldspan).
"IAMAW" means the International Association of Machinists and Aerospace Workers.
“Into-plane fuel cost per gallon” means into-plane fuel expense divided by number of fuel gallons consumed.
“Into-plane fuel expense” represents the cost of jet fuel and certain other charges such as fuel taxes and oil.
“Load factor” means the percentage of aircraft seats actually occupied on a flight (RPMs divided by ASMs).
37


“NMB” means the National Mediation Board.
"Non-ticket revenue" means total non-fare passenger revenue and other revenue
“Non-ticket revenue per passenger flight segment” means total non-fare passenger revenue and other revenue divided by passenger flight segments.
“OTA” means Online Travel Agent (e.g., Orbitz and Travelocity).
"PAFCA" means the Professional Airline Flight Control Association.
“Passenger flight segments” means the total number of passengers flown on all flight segments.
“PDP” means pre-delivery deposit payment.
“Revenue passenger mile” or “RPM” means one revenue passenger transported one mile. RPMs equals revenue passengers multiplied by miles flown, also referred to as “traffic.”
“RLA” means the United States Railway Labor Act.
"Total operating revenue per-ASM," "TRASM" or "unit revenue" means operating revenue divided by ASMs.
“TWU” means the Transport Workers Union of America.
“TSA” means the United States Transportation Security Administration.
“ULCC” means “ultra low-cost carrier.”


38


    
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 nine months ended September 30, 2022 represented approximately 36.2% of our operating expenses. Volatility in aircraft fuel prices or a shortage of supply could have a material adverse effect on our operations and operating results. We source a significant portion of our fuel from refining resources located in the southeast United States, particularly facilities adjacent to the Gulf of Mexico. Gulf Coast fuel is subject to volatility and supply disruptions, particularly during hurricane season when refinery shutdowns have occurred, or when the threat of weather-related disruptions has caused Gulf Coast fuel prices to spike above other regional sources. 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 12 months, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased into-plane aircraft fuel expense by approximately $173 million. As of September 30, 2022, we did not have any outstanding jet fuel derivatives, and we have not engaged in fuel derivative activity since 2015.

Interest Rates. We have market risk associated with our short-term investment securities, which had a fair market value of $106.3 million as of September 30, 2022.

Fixed-Rate Debt. As of September 30, 2022, we had $1,924.0 million outstanding in fixed-rate debt related to 43 Airbus A320 aircraft and 30 Airbus A321 aircraft which had a fair value of $1,716.7 million. In addition, as of September 30, 2022, we had $510.0 million and $136.3 million outstanding in fixed-rate debt related to our 8.00% senior secured notes and our unsecured term loans, respectively, which had fair values of $470.5 million and $108.8 million. As of September 30, 2022, we also had $525.4 million outstanding in convertible debt which had a fair value of $463.5 million.

Variable-Rate Debt. As of September 30, 2022, we did not have any outstanding variable-rate long term debt.
39



ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its chief 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, 2022, 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, 2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
40


PART II. OTHER INFORMATION

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 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. We intend to vigorously defend against this lawsuit. As of September 30, 2022, 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.
41


ITEM 1A.RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 8, 2022 (our "2021 10-K"), other than the risk factors disclosed in Item 1A "Risk Factors" contained in our Quarterly Report on the Form 10-Q for the quarter ended June 30, 2022, filed with the Securities and Exchange Commission on August 9, 2022, and the addition of the following risk factors. Investors are urged to review all such risk factors carefully.

If the Merger is not consummated, holders of convertible notes will not receive any adjustment to the conversion rate as a result of any prepayment of merger consideration or ticking fee, and holders of convertible notes or warrants will not receive the merger consideration that would have been paid at closing of the Merger.

The indentures governing each series of our convertible notes outstanding do not provide for an adjustment to the conversion rate or exercise price when payments are made by a third party to our stockholders, as JetBlue has agreed to do in the Merger Agreement. As a result, if the Merger is not consummated, convertible noteholders will not receive the benefit of these payments. With respect to the Company’s warrants, if the merger is not consummated, the exercise price of the warrants will be adjusted for each prepayment for which a record date has been set, but the remainder of the merger consideration will not be paid.

Increased labor costs, union disputes, employee strikes and other labor-related disruption may adversely affect our business, results of operations and financial conditions.

Our business is labor intensive, with labor costs representing approximately 32.4%, 39.3% and 26.0% of our total operating costs for 2021, 2020 and 2019, respectively. As of September 30, 2022, approximately 80% of our workforce was represented by labor unions. We cannot assure that our labor costs going forward will remain competitive, because in the future our labor agreements may be amended or become amendable and new agreements could have terms with higher labor costs; one or more of our competitors may significantly reduce their labor costs, thereby reducing or eliminating our comparative advantages as to one or more of such competitors; or our labor costs may increase in connection with our growth. If our aircraft maintenance technicians (“AMTs”) vote to unionize, as further described below, we will be required to negotiated a collective bargaining agreement with the Aircraft Mechanics Fraternal Association (the “AMFA”). Any such negotiation may cause us to incur higher labor costs for our AMTs over the term of the agreement than we would have incurred absent such agreement. We may also become subject to additional collective bargaining agreements in the future if other non-unionized workers unionize.

Relations between air carriers and labor unions in the United States are governed by the RLA. Under the RLA, collective bargaining agreements generally contain “amendable dates” rather than expiration dates, subject to standard opener provisions, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the NMB. This process continues until either the parties have reached agreement on a new collective bargaining agreement or the parties have been released to “self-help” by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.

During 2017, we experienced operational disruption from pilot-related work action which adversely impacted our results. We obtained a temporary restraining order to enjoin further illegal labor action. In January 2018, under the guidance of the NMB-assigned mediators, the parties reached a tentative agreement. In February 2018, the pilot group voted to approve the current five-year agreement with us.

In September 2022, ALPA notified us of its intent to amend the current CBA with our pilots and began negotiations. As of September 30, 2022, we continued to negotiate with ALPA.

In March 2016, under the supervision of the NMB, we reached a tentative agreement for a five-year contract with our flight attendants. Our flight attendants ratified the agreement in May 2016. In February 2021, we entered into a Letter of Agreement with the AFA-CWA to change the amendable date of the collective bargaining agreement from May 4, 2021 to September 1, 2021. All other terms of the collective bargaining agreement remained the same. In June 2021, the AFA-CWA notified us, as required by the RLA, that it intended to submit proposed changes to the collective bargaining agreement covering our flight attendants. We commenced negotiations with the AFA-CWA on September 27, 2021. As of September 30, 2022, we continued to negotiate with the AFA-CWA.

Our dispatchers are represented by the PAFCA. In October 2018, we reached a tentative agreement with PAFCA for a new five-year agreement, which was ratified by the PAFCA members in October 2018.
42



Our ramp service agents are represented by IAMAW. In February 2020, the IAMAW notified us, as required by the RLA, that it intended to submit proposed changes to the collective bargaining agreement covering our ramp service agents which became amendable in June 2020. On September 28, 2021, we filed an “Application for Mediation Services” with the NMB. We were able to reach a tentative agreement with the IAMAW with the assistance of the NMB on October 16, 2021. Our ramp service agents ratified the five-year agreement in November 2021.

In June 2018, our passenger service agents voted to be represented by the TWU, but the representation only applies to our Fort Lauderdale station where we have direct employees in the passenger service classification. We began meeting with the TWU in late October 2018 to negotiate an initial collective bargaining agreement. During February 2022, we reached a tentative agreement with the TWU. Our passenger service agents ratified the five-year agreement on February 21, 2022.

In August 2022, our aircraft maintenance technicians ("AMTs") voted to be represented by the Aircraft Mechanics Fraternal Association ("AMFA") as their collective bargaining agent. Currently, negotiation dates have not been scheduled. As of September 30, 2022, we had approximately 600 AMTs.

If we are unable to reach agreement with any of our unionized work groups in current or future negotiations regarding the terms of their CBAs, we may be subject to work interruptions or stoppages, such as the strike by our pilots in June 2010 and the operational disruption from pilot-related work action experienced in 2017. A strike or other significant labor dispute with our unionized employees is likely to adversely affect our ability to conduct business. Any agreement we do reach could increase our labor and related expenses.

The Patient Protection and Affordable Care Act was enacted in 2010. A decision in the Supreme Court regarding this law is pending and it may be repealed in its entirety or certain aspects may be changed or replaced. If the law is repealed or significantly modified or if new healthcare legislation is passed, such action could significantly increase cost of the healthcare benefits provided to our U.S. employees. In addition, the failure to comply materially with such existing and new laws, rules and regulations could adversely affect our business, results of operations and financial conditions.

Airlines are often affected by factors beyond their control, any of which could harm our business, operating results and financial condition.

Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, major construction or improvements at airports at which we operate, adverse weather conditions, increased security measures, new travel-related taxes, the outbreak of disease, new regulations or policies from the presidential administration and Congress, and supply chain disruptions, in particular those causing any inability to obtain, or delays in obtaining, aircraft or spare parts such as engines. Factors that cause flight delays frustrate passengers and increase costs, which in turn could adversely affect profitability. The federal government currently controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The air traffic control system, which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. and foreign air-traffic controllers often rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect routes resulting in delays. A significant portion of our operations is concentrated in markets such as South Florida, the Caribbean, Latin America and the Northeast and northern Midwest regions of the United States, which are particularly vulnerable to weather, airport traffic constraints and other delays. Adverse weather conditions and natural disasters, such as hurricanes affecting southern Florida and the Caribbean (such as Hurricanes Irma and Maria in September 2017, Hurricane Dorian in August 2019 and Hurricane Laura in August 2020) as well as southern Texas (such as Hurricane Harvey in August 2017), winter snowstorms or earthquakes (such as the September 2017 earthquakes in Mexico City, Mexico and the December 2019 and January 2020 earthquakes in Puerto Rico) can cause flight cancellations, significant delays and facility disruptions. For example, during 2017, the timing and location of Hurricanes Irma and Maria produced a domino effect on our operations, resulting in approximately 1,400 flight cancellations and numerous flight delays, which resulted in an adverse effect on our results of operations. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security, staffing shortages, as a result of COVID-19 or otherwise, 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 disruptions can have a disproportionate impact on our ability to recover. In addition, many airlines reaccommodate their disrupted passengers on other airlines at prearranged rates under flight interruption manifest agreements. We have been unsuccessful in procuring any of these agreements with our peers, which makes our recovery from disruption more challenging than for larger airlines that have these agreements in place. Similarly, outbreaks of pandemic or contagious diseases, such as Ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu, Zika virus and COVID-19, could result in significant decreases in passenger traffic, the imposition of government
43


restrictions in service, supply chain bottlenecks or issues, and staffing shortages and could have a material adverse impact on the airline industry. As a result of the COVID-19 pandemic, the U.S. government and government authorities in other countries around the world have implemented travel bans and other restrictions, which have drastically reduced consumer demand. For additional information, see “—The COVID-19 pandemic and measures to reduce its spread have had, and will likely continue to have, a material adverse impact on our business, results of operations and financial condition.” Any increases in travel-related taxes could also result in decreases in passenger traffic. Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations and financial condition. Moreover, U.S. federal government shutdowns may cause delays and cancellations or reductions in discretionary travel due to longer security lines, including as a result of furloughed government employees, or reductions in staffing levels, including air traffic controllers. U.S. government shutdowns may also impact our ability to take delivery of aircraft and commence operations in new domestic stations. Any extended shutdown like the one in January 2019 may have a negative impact on our operations and financial results. In addition, supply chain issues have led to delays in aircraft deliveries and negatively impacted our ability to source spare parts and complete maintenance on a timely basis, which could have an adverse effect on our business and results of operations.

If we are unable to attract and retain qualified personnel or fail to maintain our company culture, our business, results of operations and financial condition could be harmed.

Our business is labor intensive. We require large numbers of pilots, flight attendants, maintenance technicians and other personnel. The airline industry has from time to time experienced a shortage of qualified personnel, particularly with respect to pilots and maintenance technicians. In addition, we currently face, and may continue to face, high employee turnover, including with respect to our pilots. We may be required to increase wages and/or benefits in order to attract and retain qualified personnel. If we are unable to hire, train and retain qualified employees, our operations and business could be harmed and we may be unable to implement our growth plans. Since 2021, we have experienced a shortage of qualified workers as the U.S. labor market tightened, in particular shortages of qualified pilots. As a result, our operations were negatively impacted and our labor costs have increased substantially in 2021 and 2022, and we expect to continue to face labor shortages and higher costs in 2023. In addition, COVID-19-related absences have had an adverse effect on our operations, which may have a material adverse effect on our results of operations. These labor shortages may exacerbate other risks described in our 2021 10-K.

In addition, as we hire more people and grow, we believe it may be increasingly challenging to continue to hire people who will maintain our company culture. Our company culture, which we believe is one of our competitive strengths, is important to providing high-quality customer service and having a productive, accountable workforce that helps keep our costs low. As we continue to grow, we may be unable to identify, hire or retain enough people who meet the above criteria, including those in management or other key positions. Our company culture could otherwise be adversely affected by our growing operations and geographic diversity. If we fail to maintain the strength of our company culture, our competitive ability and our business, results of operations and financial condition could be harmed.
44


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 third quarter of 2022. All stock repurchases during this period were made from employees who received restricted stock. 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
July 1-31, 2022— $— — $— 
August 1-31, 20221,227 24.48 — — 
September 1-30, 2022— — — — 
Total1,227 $24.48  

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable

ITEM 5.OTHER INFORMATION

None

45


ITEM 6.EXHIBITS
 
Exhibit NumberDescription of Exhibits
2.1
10.1
31.1
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)
 
*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.

46


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.
October 26, 2022 By:/s/ Scott M. Haralson
Scott M. Haralson
Senior Vice President and
Chief Financial Officer

47