UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

Form 10-Q

(Mark One)



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

For the quarterly period ended ~~September~~June 30, ~~2017~~2020



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

For the transition period from to

Commission File Number: 001-35186

SPIRIT AIRLINES, INC.

(Exact name of registrant as specified in its charter)

Delaware

38-1747023

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2800 Executive Way

~~Miramar, Florida~~

Miramar

Florida

33025

(Address of principal executive offices)

(Zip Code)

(954) 447-7920

(Registrant’s telephone number, including area code)

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

Title of each class

Name of exchange on which registered

Trading Symbol

Common Stock, $0.0001 par value

New York Stock Exchange

SAVE

Series A Preferred Stock Purchase Rights

New York Stock Exchange

SAVE

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

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

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

Large accelerated filer

ý☒

Accelerated filer

o☐

Non-accelerated filer

o☐

Smaller reporting company

o☐

(Do not check if a smaller reporting company)

Emerging growth company

o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities Act.~~Exchange Act.. o☐

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on ~~October 19, 2017:~~

July 15, 2020:



Class						Number of Shares
Common Stock, $0.0001 par value						~~69,373,154~~88,671,536

Table of Contents

INDEX

Page No.

Part I. Financial Information

Item 1.

Condensed Financial Statements (unaudited)

Condensed Statements of Operations - Three and ~~Nine~~ Six Months Ended ~~September~~Jun e 30 ~~2017~~, 2020 and ~~2016~~2019

Condensed Statements of Comprehensive Income - Three and ~~Nine~~Six Months Ended ~~September~~June 30 ~~2017~~, 2020 and ~~2016~~2019

Condensed Balance Sheets – ~~September~~June 30 ~~2017~~, 2020 and December 31, ~~2016~~2019

Condensed Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30 ~~2017~~, 2020 and ~~2016~~2019

Condensed Statements of Shareholders' Equity - Six Months Ended June 30 , 2020 and 2019

Notes to Condensed Financial Statements

Item 2.

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

1728

Glossary of Airline Terms

3045

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3247

Item 4.

Controls and Procedures

3348

Part II. Other Information

Unregistered Sales of Equity Securities and Use of Proceeds

3757

Item 3.

Defaults Upon Senior Securities

3757

Item 4.

Mine Safety Disclosures

PART I. Financial Information


~~ITEM 1.~~	~~UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

ITEM 1.UNAUDITED CONDENSED FINANCIAL STATEMENTS

Spirit Airlines, Inc.

Condensed Statements of Operations

(unaudited, in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016				2020		2019		2020		2019
Operating revenues:													Operating revenues:
Passenger	$	356,207		$	331,004		$	1,027,891		$	900,031		Passenger	$	130,817	$	994,430	$	884,367	$	1,832,495
Non-ticket	331,024			290,325			952,768			843,574
Other													Other	7,712		18,526		25,243		36,257
Total operating revenues	687,231			621,329			1,980,659			1,743,605			Total operating revenues	138,529		1,012,956		909,610		1,868,752

Operating expenses:													Operating expenses:
Aircraft fuel													Aircraft fuel	19,910		265,006		233,118		494,642
Salaries, wages and benefits	134,114			120,190			391,144			349,530			Salaries, wages and benefits	213,579		216,375		454,059		420,276
Aircraft fuel	158,300			121,844			440,376			321,018
Aircraft rent	53,396			49,367			163,032			151,433
Landing fees and other rents	48,498			39,345			134,538			114,096			Landing fees and other rents	40,348		64,711		107,469		124,360
Depreciation and amortization	36,840			25,304			103,680			73,370			Depreciation and amortization	69,113		54,913		135,104		105,639
Aircraft rent													Aircraft rent	49,256		46,522		94,402		92,304
Distribution													Distribution	11,352		40,602		45,095		76,321
Maintenance, materials and repairs	26,176			30,443			81,473			72,010			Maintenance, materials and repairs	19,227		34,688		53,303		66,292
Distribution	29,469			25,565			85,875			73,190
Special charges	7,853			7,355			12,629			31,609
Loss on disposal of assets	516			423			3,114			1,166			Loss on disposal of assets	—		1,550		—		3,463
Special credits													Special credits	(151,911)		—		(151,911)		—
Other operating	87,965			66,277			268,553			197,833			Other operating	58,039		124,651		187,347		233,713
Total operating expenses	583,127			486,113			1,684,414			1,385,255			Total operating expenses	328,913		849,018		1,157,986		1,617,010

Operating income	104,104			135,216			296,245			358,350
Operating income (loss)													Operating income (loss)	(190,384)		163,938		(248,376)		251,742

Other (income) expense:													Other (income) expense:
Interest expense	15,018			11,362			41,237			29,588			Interest expense	27,792		25,266		51,670		50,237
Capitalized interest	(3,203		)	(3,067		)	(10,125		)	(9,163		)	Capitalized interest	(3,757)		(2,975)		(7,421)		(5,532)
Interest income	(2,605		)	(1,222		)	(5,746		)	(4,235		)	Interest income	(1,949)		(7,066)		(5,542)		(13,990)
Other expense	114			180			221			407
Other (income) expense													Other (income) expense	66		144		47		377

Total other (income) expense	9,324			7,253			25,587			16,597			Total other (income) expense	22,152		15,369		38,754		31,092

Income before income taxes	94,780			127,963			270,658			341,753
Provision for income taxes	34,590			46,581			100,390			125,367
Income (loss) before income taxes													Income (loss) before income taxes	(212,536)		148,569		(287,130)		220,650
Provision (benefit) for income taxes													Provision (benefit) for income taxes	(68,108)		34,068		(114,874)		50,073

Net income	$	60,190		$	81,382		$	170,268		$	216,386
Basic earnings per share	$	0.87		$	1.17		$	2.45		$	3.06
Diluted earnings per share	$	0.87		$	1.17		$	2.45		$	3.05
Net income (loss)													Net income (loss)	$	(144,428)	$	114,501	$	(172,256)	$	170,577
Basic earnings (loss) per share													Basic earnings (loss) per share	$	(1.81)	$	1.67	$	(2.33)	$	2.49
Diluted earnings (loss) per share													Diluted earnings (loss) per share	$	(1.81)	$	1.67	$	(2.33)	$	2.49

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

Spirit Airlines, Inc.

Condensed Statements of Comprehensive Income (Loss)

(unaudited, in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income (loss)	$	(144,428)	$	114,501	$	(172,256)	$	170,577


Unrealized gain on short-term investment securities and cash and cash equivalents, net of deferred taxes of $5, $29, $59 and $67	18		98		203		228
Interest rate derivative loss reclassified into earnings, net of taxes of $15, $19, $39 and $46	48		54		89		101
Other comprehensive income	$	66	$	152	$	292	$	329
Comprehensive income (loss)	$	(144,362)	$	114,653	$	(171,964)	$	170,906

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 60,190
$ 81,382
$ 170,268
$ 216,386
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of $7, $3, ($6) and $3 13
4
(11 ) 4
Interest rate derivative losses reclassified into earnings, net of taxes of $31, $32, $92 and $97
53
56
160
170
Other comprehensive income (loss) $ 66
$ 60
$ 149
$ 174
Comprehensive income $ 60,256
$ 81,442
$ 170,417
$ 216,560

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

Spirit Airlines, Inc.

Condensed Balance Sheets

(unaudited, in thousands)


	September 30, 2017			December 31, 2016				June 30, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	863,680		$	700,900		Cash and cash equivalents	$	1,127,460	$	978,957
Restricted cash							Restricted cash	30,000		—
Short-term investment securities	100,732			100,155			Short-term investment securities	106,298		105,321
Accounts receivable, net	46,235			41,136			Accounts receivable, net	56,043		73,807
Aircraft maintenance deposits, net	166,386			87,035			Aircraft maintenance deposits, net	75,147		102,906
Income tax receivable							Income tax receivable	146,961		21,013

Prepaid expenses and other current assets	67,707			46,619			Prepaid expenses and other current assets	126,051		103,439
Total current assets	1,244,740			975,845			Total current assets	1,667,960		1,385,443

Property and equipment:							Property and equipment:
Flight equipment	2,017,888			1,461,525			Flight equipment	4,071,980		3,730,751
Ground property and equipment	148,324			126,206			Ground property and equipment	320,526		291,998
Less accumulated depreciation	(183,065		)	(122,509		)	Less accumulated depreciation	(582,098)		(492,447)
	1,983,147			1,465,222				3,810,408		3,530,302
Deposits on flight equipment purchase contracts	304,732			325,688
Operating lease right-of-use assets							Operating lease right-of-use assets	1,430,897		1,369,555
Pre-delivery deposits on flight equipment							Pre-delivery deposits on flight equipment	382,652		291,930
Long-term aircraft maintenance deposits	138,672			199,415			Long-term aircraft maintenance deposits	63,623		67,682
Deferred heavy maintenance, net	87,566			75,534			Deferred heavy maintenance, net	376,745		361,603
Other long-term assets	112,085			110,223			Other long-term assets	35,659		36,897
Total assets	$	3,870,942		$	3,151,927		Total assets	$	7,767,944	$	7,043,412

Liabilities and shareholders’ equity							Liabilities and shareholders’ equity
Current liabilities:							Current liabilities:
Accounts payable	$	30,961		$	15,193		Accounts payable	$	41,060	$	43,601
Air traffic liability	276,933			206,392			Air traffic liability	452,023		315,408
Current maturities of long-term debt	105,958			84,354
Current maturities of long-term debt and finance leases							Current maturities of long-term debt and finance leases	288,498		258,852
Current maturities of operating leases							Current maturities of operating leases	128,536		120,662
Deferred salaries, wages and benefits							Deferred salaries, wages and benefits	114,052		—
Other current liabilities	249,132			226,011			Other current liabilities	247,013		373,521
Total current liabilities	662,984			531,950			Total current liabilities	1,271,182		1,112,044

Long-term debt, less current maturities	1,214,138			897,359
Long-term debt and finance leases, less current maturities							Long-term debt and finance leases, less current maturities	2,333,600		1,960,453
Operating leases, less current maturities							Operating leases, less current maturities	1,269,670		1,218,014
Deferred income taxes	406,080			308,143			Deferred income taxes	517,537		469,292
Deferred gains and other long-term liabilities	17,204			19,868			Deferred gains and other long-term liabilities	32,793		22,277
Shareholders’ equity:							Shareholders’ equity:
Common stock	7			7			Common stock	27		7
Additional paid-in-capital	557,772			551,004			Additional paid-in-capital	636,317		379,380
Treasury stock, at cost	(219,930		)	(218,692		)	Treasury stock, at cost	(74,009)		(72,455)
Retained earnings	1,233,901			1,063,633			Retained earnings	1,781,322		1,955,187
Accumulated other comprehensive loss	(1,214		)	(1,345		)
Accumulated other comprehensive income (loss)							Accumulated other comprehensive income (loss)	(495)		(787)
Total shareholders’ equity	1,570,536			1,394,607			Total shareholders’ equity	2,343,162		2,261,332
Total liabilities and shareholders’ equity	$	3,870,942		$	3,151,927		Total liabilities and shareholders’ equity	$	7,767,944	$	7,043,412

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

Spirit Airlines, Inc.

Condensed Statements of Cash Flows

(unaudited, in thousands)


	Six Months Ended June 30,
	2020		2019
Operating activities:
Net income (loss)	$	(172,256)	$	170,577
Adjustments to reconcile net income (loss) to net cash provided by operations:


Losses reclassified from other comprehensive income	128		148
Share-based compensation	6,442		6,413
Allowance for doubtful accounts (recoveries)	(226)		—
Amortization of deferred gains, losses and debt issuance costs	4,633		4,365
Depreciation and amortization	135,104		105,639
Accretion of convertible debt	2,029		—
Deferred income tax expense	31,518		44,511
Loss on disposal of assets	—		3,463





Changes in operating assets and liabilities:

Accounts receivable, net	17,360		(30,465)
Aircraft maintenance deposits, net	11,254		(6,214)
Prepaid income taxes	—		1,962
Long-term deposits and other assets	(16,717)		10,212
Deferred heavy maintenance	(57,306)		(88,350)
Income tax receivable	(125,948)		—
Accounts payable	(6,477)		2,024
Air traffic liability	136,615		111,009
Deferred salaries, wages and benefits, net	114,052		—
Other liabilities	(127,204)		6,154
Other	40		(424)
Net cash provided (used) by operating activities	(46,959)		341,024

Nine Months Ended September 30,
2017 2016
Operating activities:

Net income $ 170,268
$ 216,386
Adjustments to reconcile net income to net cash provided by operations:

Losses reclassified from other comprehensive income 252

267
Equity-based compensation 6,723
5,503
Allowance for doubtful accounts (recoveries) (53 ) 213
Amortization of deferred gains and losses and debt issuance costs 6,415
3,837
Depreciation and amortization 103,680
73,370
Deferred income tax expense 97,834
77,627
Loss on disposal of assets 3,114
1,166
Lease termination costs 12,629

31,609

Changes in operating assets and liabilities:

Accounts receivable (5,046 ) (7,840 )
Aircraft maintenance deposits, net (28,422 ) (38,299 )
Prepaid income taxes (160 )
66,218
Long-term deposits and other assets (81,622 ) (43,252 )
Accounts payable 13,829
(7,044 )
Air traffic liability 70,540
21,963
Other liabilities 16,152
38,317
Other 339
—
Net cash provided by operating activities 386,472
440,041
Investing activities:
Purchase of available-for-sale investment securities (96,851 )
(100,076 )
Proceeds from the maturity of available-for-sale investment securities 95,881

—
Proceeds from sale of property and equipment —
50
Pre-delivery deposits for flight equipment, net of refunds (121,702 ) (109,260 )
Capitalized interest (8,054 )
(7,032 )
Purchase of property and equipment (428,061 ) (447,455 )
Net cash used in investing activities (558,787 ) (663,773 )
Financing activities:
Proceeds from issuance of long-term debt 405,827

378,569
Proceeds from stock options exercised 45
92
Payments on debt and capital lease obligations (63,643 ) (29,663 )
Excess tax (deficiency) benefit from equity-based compensation —
(497 )
Repurchase of common stock (1,238 ) (102,390 )
Debt issuance costs (5,896 )
(107 )
Net cash provided by financing activities 335,095
246,004
Net (decrease) increase in cash and cash equivalents 162,780
22,272
Cash and cash equivalents at beginning of period 700,900
803,632
Cash and cash equivalents at end of period $ 863,680
$ 825,904
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest $ 22,541
$ 26,025
Income taxes paid, net of refunds $ 4,352
$ (18,169 )
Non-cash transactions:
Capital expenditures funded by capital lease borrowings $ (1,370 )
$ (31 )


Investing activities:
Purchase of available-for-sale investment securities	(54,992)		(57,355)
Proceeds from the maturity and sale of available-for-sale investment securities	54,195		56,595


Pre-delivery deposits on flight equipment, net of refunds	(153,353)		(75,826)
Capitalized interest	(6,289)		(4,936)
Assets under construction for others	(2,282)		(2,235)
Purchase of property and equipment	(294,633)		(154,702)
Net cash used in investing activities	(457,354)		(238,459)
Financing activities:
Proceeds from issuance of long-term debt	674,146		94,706

Proceeds from issuance of common stock and warrants	203,723		—
Proceeds from stock options exercised	39		1
Payments on debt obligations	(149,429)		(85,785)
Payments on finance lease obligations	(25,020)		(1,796)



Reimbursement for assets under construction for others	2,322		2,235
Repurchase of common stock	(1,554)		(5,248)
Long-term debt and equity issuance costs	(21,411)		(614)
Net cash provided by financing activities	682,816		3,499
Net increase (decrease) in cash, cash equivalents, and restricted cash	178,503		106,064
Cash and cash equivalents at beginning of period	978,957		1,004,733
Cash, cash equivalents, and restricted cash at end of period (1)	$	1,157,460	$	1,110,797
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest	$	37,636	$	41,279
Income taxes paid (received), net	$	(19,631)	$	7,394
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	103,127	$	95,643

Financing cash flows for finance leases	$	139	$	339
Non-cash transactions:
Capital expenditures funded by finance lease borrowings	$	565	$	96,371
Capital expenditures funded by operating lease borrowings	$	120,961	$	159,548

(1) The sum of cash and cash equivalents and restricted cash on our condensed balance sheets equals cash, cash equivalents, and restricted cash in our statement of cash flows.

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

Spirit Airlines, Inc.

Condensed Statements of Shareholders’ Equity

(unaudited, in thousands)


	Six Months Ended June 30, 2019
	Common Stock		Additional Paid-In-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2018	$	7	$	371,225	$	(67,016)	$	1,625,481	$	(1,193)	$	1,928,504
Effect of ASU No. 2016-02 implementation	—		—		—		(5,549)		—		(5,549)
Share-based compensation	—		3,671		—				—		3,671
Repurchase of common stock	—		—		(5,223)		—		—		(5,223)
Proceeds from options exercised	—		—		—		—		—		—
Changes in comprehensive income	—		—		—		—		177		177
Net income	—		—		—		56,076		—		56,076
Balance at March 31, 2019	$	7	$	374,896	$	(72,239)	$	1,676,008	$	(1,016)	$	1,977,656
Share-based compensation	—		2,742		—		—		—		2,742
Repurchase of common stock	—		—		(25)		—		—		(25)
Proceeds from options exercised	—		1		—		—		—		1
Changes in comprehensive income	—		—		—		—		152		152
Net income	—		—		—		114,501		—		114,501
Balance at June 30, 2019	$	7	$	377,639	$	(72,264)	$	1,790,509	$	(864)	$	2,095,027


	Six Months Ended June 30, 2020
	Common Stock		Additional Paid-In-Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at December 31, 2019	$	7	$	379,380	$	(72,455)	$	1,955,187	$	(787)	$	2,261,332
Effect of ASU No. 2016-13 implementation (refer to Note 3)	—		—		—		(1,609)		—		(1,609)
Share-based compensation	—		3,790		—		—		—		3,790
Repurchase of common stock	—		—		(1,536)		—		—		(1,536)
Proceeds from options exercised	—		16		—		—		—		16
Changes in comprehensive income	—		—		—		—		226		226
Net loss	—		—		—		(27,828)		—		(27,828)
Balance at March 31, 2020	$	7	$	383,186	$	(73,991)	$	1,925,750	$	(561)	$	2,234,391
Issuance of common stock and warrants, net	20		194,866		—		—		—		194,886
Equity component value of convertible debt issuance, net	—		55,590		—		—		—		55,590
Share-based compensation	—		2,652		—		—		—		2,652
Repurchase of common stock	—		—		(18)		—		—		(18)
Proceeds from options exercised	—		23		—		—		—		23
Changes in comprehensive income	—		—		—		—		66		66
Net loss	—		—		—		(144,428)		—		(144,428)
Balance at June 30, 2020	$	27	$	636,317	$	(74,009)	$	1,781,322	$	(495)	$	2,343,162

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

Notes to Condensed Financial Statements

(unaudited)


1.	~~Basis of Presentation~~

1. Basis of Presentation

The accompanying unaudited condensed financial statements include the accounts of Spirit Airlines, Inc. (the ~~Company)~~"Company"). These unaudited condensed financial statements reflect all normal recurring adjustments which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the audited annual financial statements prepared in accordance with U.S. generally accepted accounting principles ~~(GAAP)~~("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed 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~~10-K/A for the year ended December 31, ~~2016~~2019 filed with the Securities and Exchange Commission on ~~February 13, 2017.~~April 16, 2020.

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 financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations as demand is generally greater in the second and third quarters of each year. The air transportation business is also volatile and highly affected by economic cycles and trends. In addition, the Company experienced significant impacts from the global coronavirus ("COVID-19") pandemic during the three and six months ended June 30, 2020.

~~Certain~~

2. Impact of COVID-19

As the COVID-19 pandemic continues to evolve, the Company's financial and operational outlook remains subject to change. The Company continues to monitor the impacts of the pandemic on its operations and financial condition, and to implement mitigation strategies while working to preserve cash and protect the long-term sustainability of the Company.

The Company has implemented measures for the safety of its Guests and Team Members as well as to mitigate the impact of COVID-19 on its financial position and operations.

Caring for Guests and Team Members

The Company’s Operations and Task Force teams remain in constant contact with authorities, continuing to evolve its response to ensure the safety of Guests and Team Members. In addition to previously existing procedures including utilization of hospital-grade disinfectants and state-of-the-art HEPA filters that capture 99.97% of airborne particles on board the aircraft, the Company has implemented the following steps to protect its Guests and Team Members:

•Secured and distributed additional supplies of gloves and sanitizer across the Company's network and augmented the contents of onboard supply kits to contain additional cleaning and sanitizing materials;

•Secured and provided face coverings for all crew and Guest facing team members;

•Expanded cleaning protocols at airports and other facilities, including the use of EPA-registered disinfectants in all check-in and gate areas and the use of electrostatic sprayers at high-traffic airports;

•Expanded aircraft turn and overnight cleaning protocols focusing on high frequency touch points as well as enhanced cockpit cleaning and the use of ultra-low volume ("ULV") fogging process to apply a safe, high grade- EPA-registered airborne disinfectant that is effective against coronaviruses;

•Launched a new antimicrobial fogging tool in our facilities and aircraft that uses a product that forms an invisible barrier on all surfaces killing bacteria and viruses on contact for 30 days;

•Split the Company's Operational Control Center ("OCC")into multiple units to enable social distancing and prepared the OCC to work remotely to minimize potential operational disruption;

•Implemented a remote work policy for the Support Center teams to maintain support of the Company's operations;

•Required all Guests and Guest-facing Team Members to wear an appropriate face covering when traveling through the airport or onboard aircraft;

•Offered future flight credits with extended expiration dates to Guests with impacted travel plans and waived change and cancellation fees for Guests who booked travel by July 31, 2020.

Supporting Communities

During this unprecedented time, many travelers became stranded abroad when bans and other restrictions on travel were implemented globally and domestically with little notice. The Company has worked with embassies and local governments in Aruba, Colombia, Dominican Republic, Ecuador, Haiti, Honduras, Panama and the U.S. to operate special flights for stranded travelers in such countries. Thus far, the Company has provided over 140 flights to more than 18,000 stranded travelers and preparations continue to transport many more. In addition, the Company has pledged $250 thousand in vouchers for flights to minority organizations.

The Company has also made efforts to address the growing needs of its communities through The Spirit Airlines Charitable Foundation (the “Foundation”). As part of the its focus on supporting families, the Foundation partnered with other non-profit organizations including the YMCA and Jack and Jill Children’s Center to provide food to seniors and families struggling during this time and supported organizations creating face coverings for healthcare workers. In addition, the Company has partnered to offer Guests face coverings for a small contribution to the Red Cross.

Capacity Reductions

In March 2020, in response to government restrictions on travel and drastically reduced consumer demand, the Company began to reduce capacity. The Company reduced capacity for April 2020 by 76.2%, year over year and May 2020 capacity was reduced by 93.9%, year over year. The Company had initially expected to reduce June 2020 capacity by approximately 95%, year over year. However, due to an increase in demand for air travel, the Company added some flights back to the June schedule, building throughout the month, resulting in an average capacity reduction of 79.0%, year over year. Capacity in July, August and September of 2020 has been reduced by approximately 18%, 35% and 45% respectively, year over year. The Company continues to closely monitor demand and will make adjustments to the flight schedule as appropriate. The Company currently estimates that air travel demand recovery will be volatile and will fluctuate in the upcoming months as the lingering effects of COVID-19 continue to emerge. The Company expects that air travel demand will continue to gradually recover in the second half of 2020 through 2021. However, the situation continues to be fluid and actual capacity adjustments may be different than what the Company currently expects. Refer to Note 4, Revenue, for discussion of the impact of COVID-19 on the Company's air traffic liability, credit shells and refunds.

CARES Act

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")into law. The CARES Act is a relief package intended to assist many aspects of the American economy, including providing the airline industry with up to $25 billion in grants to be used for employee salaries, wages and benefits and up to$25.0 billion in secured loans.

On April 20, 2020, the Company entered into a Payroll Support Program Agreement ("PSP") with the United States Department of the Treasury ("Treasury"), pursuant to which the Company expects to receive a total of $334.7 million, to be used exclusively to pay for salaries, wages and benefits for the Company’s Team Members through September 30, 2020. Of that amount, $70.4 million is in the form of a low-interest 10-year loan. In addition, in connection with its participation in the PSP, the Company is obligated to issue to Treasury warrants pursuant to a warrant agreement to purchase up to 500,150 shares of the Company’s common stock at a strike price of $14.08 per share (the closing price for the shares of the Company's common stock on April 9, 2020). As of June 30, 2020, the Company received total proceeds of $301.3 million, representing 3 of the 4 installments of funding under the PSP, in exchange for which the Company issued to Treasury $60.4 million in 10-year notes and warrants to purchase 428,829 shares of common stock valued and recorded at $2.5 million in additional paid-in-capital ("APIC") and $238.4 million in deferred salaries, wages and benefits within the Company's condensed balance sheets. Refer to Note 13, Debt and Other Obligations, for additional information on the notes issued and Note 14, Equity, for additional information on the warrants. The Company expects to receive the remaining proceeds of $33.4 million with the fourth and final installment of the PSP on or around July 31, 2020, in exchange for an additional $10.0 million in 10-year notes and warrants to purchase an additional 71,321 shares of common stock to be issued to the Treasury. The warrants issued represent less than 1% of the outstanding shares of the Company's common stock as of July 15, 2020.

During the three and six months ended June 30, 2020, the Company recognized $123.9 million of deferred salaries, wages and benefits within special credits on the Company’s condensed statements of operations. Refer to Note 6, Special Credits, for additional information.

In connection with the Company’s receipt of funds under the PSP, the Company is subject to certain restrictions, including, but not limited to:

•Restrictions on payment of dividends and stock buybacks through September 30, 2021;

•Requirements to maintain certain levels of scheduled service through September 30, 2020;

•A prohibition on involuntary terminations or furloughs of the Company's employees (except for health, disability, cause, or certain disciplinary reasons) through September 30, 2020;

•A prohibition on reducing the salary, wages, or benefits of the Company's employees (other than the Company's executive officers or independent contractors, or as otherwise permitted under the terms of the PSP) through September 30, 2020;

•Limits on certain executive compensation, including limiting pay increases and severance pay or other benefits upon terminations, through March 24, 2022;

•Use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits and;

•The Company is subject to additional reporting and recordkeeping requirements relating to the CARES Act funds.

On April 29, 2020, the Company applied for additional funds under the Treasury's loan program under the CARES Act (“Loan Program”). The expected maximum availability to the Company under the Loan Program is approximately $741 million in the form of a secured loan. However, the loan amount is dependent on the amount and types of collateral accepted, which may result in an actual loan less than $741 million, if the Company accepts the loan. Any loan received pursuant to the Loan Program would be subject to the restrictions and relevant provisions of the CARES Act, including many of those noted above for the PSP. The Company’s participation in the Loan Program could materially increase the funds available to the Company as it works through the operational and business issues related to the COVID-19 pandemic and provide a base of available funding that could encourage private market transactions. On July 1, 2020, the Company executed a non-binding letter of intent with the Treasury which summarizes the principal terms of the financing request submitted by the Company to the Treasury. The Company continues to negotiate the terms of a definitive financing agreement under the Loan Program with the Treasury. In addition, subject to such negotiations, the Company will continue to evaluate its future cash flow needs and will determine whether or not to accept any or all of the funds available from the Loan Program. The deadline to make the election under the Loan Program is September 30, 2020.

The CARES Act also provides an employee retention credit (“CARES Employee Retention credit”) which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages through year end. The Company qualified for the credit beginning on April 1, 2020 and expects to continue to receive additional credits for qualified wages through December 31, 2020. During the three and six months ended June 30, 2020, the Company recorded $28.0 million related to the CARES Employee Retention credit within special credits on the Company’s condensed statements of operations and within accounts receivable, net on the Company's condensed balance sheet. The Company expects to record an additional approximately $10 million in CARES Employee Retention credits in the remainder of 2020. Refer to Note 6, Special Credits, for additional information.

The CARES Act also provides for certain tax loss carrybacks and a waiver on federal fuel taxes through December 31, 2020. As of June 30, 2020, the Company had recognized $140.8 million in related tax loss carrybacks and $0.8 million in federal fuel tax savings reflected within fuel in the Company’s statements of operations. The Company expects to recognize an additional $5 million in savings related to the waiver on federal fuel taxes in the remainder of 2020.

Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. This is expected to provide the Company with approximately $24 million of additional liquidity during the current year. As of June 30, 2020, the Company has deferred $10.0 million in social security tax payments. The deferred amounts are recorded as a liability within other current liabilities on the Company’s condensed balance sheet.

Income Taxes

The Company's effective tax rate for the six months ended June 30, 2020 was 40.0% compared to 22.7% for the six months ended June 30, 2019. The increase in tax rate, as compared to the prior year period, ~~amounts~~is primarily due to a $54.9 million discrete federal tax benefit recorded during the six months ended June 30, 2020 related to the passage of the CARES Act. The CARES Act allows for carryback of net operating losses generated at a 21% tax rate to recover taxes paid at a 35% tax rate. Excluding this discrete tax benefit, the Company's effective tax rate for the six months ended June 30, 2020 would have been ~~reclassified~~20.9%. While the Company expects its tax rate to ~~conform~~be fairly consistent in the near term, it will tend to vary depending on recurring items such as the ~~current year's presentation.~~amount of income we earn in each state and the state tax rate applicable to such income. Discrete items particular to a given year may also affect our effective tax rates.


2.	~~Recent Accounting Developments~~

~~Revenue from Contracts with Customers~~Balance Sheet, Cash Flow and Liquidity

~~In May 2014,~~Since the ~~Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09) "Revenue from Contracts with Customers." The objective~~onset of ~~ASU 2014-09 is to establish a single comprehensive model for entities to use~~the spread of COVID-19 in ~~accounting for revenue arising from contracts with customers. The new guidance is effective for~~ the ~~Company~~U.S. in the first quarter of ~~2018. Entities have~~2020, the ~~option~~Company has taken several actions to ~~use either~~increase liquidity and strengthen its financial position. As a ~~full retrospective or~~result of these actions, as of June 30, 2020, the Company had unrestricted cash and cash equivalents and short-term investment securities of $1,233.8 million.

In March 2020, the Company entered into a ~~modified retrospective approach~~senior secured revolving credit facility (the "2022 revolving credit facility") for an initial commitment amount of $110.0 million, and subsequently, in the second quarter of 2020, increased its commitment amount to ~~adopt ASU 2014-09.~~$180.0 million. As of June 30, 2020, the Company had fully drawn the available amount of $180.0 million under the 2022 revolving credit facility. The 2022 revolving credit facility matures on March 30, 2022. The Company ~~currently anticipates utilizing~~continues to pursue additional financing secured by its unencumbered assets. Refer to Note 13, Debt and Other Obligations, for additional information about the ~~full retrospective method of adoption allowed by the standard, in order to provide for comparative results in all periods presented, and plans to adopt the standard as of January 1, 2018. While~~2022 revolving credit facility.

On May 12, 2020, the Company ~~is still evaluating~~completed the ~~impact, it currently believes the most significant impact~~public offering of ~~this ASU~~$175.0 million aggregate principal amount of 4.75% convertible senior notes due 2025 (the “convertible notes”). The convertible notes will be the elimination of the incremental cost method for frequent flier program accounting, which will require the Company to re-value and record a liability associated with customer flight miles earned as part of the Company’s frequent flier program with a relative fair value approach. While our evaluation is ongoing, the Company currently estimates that applying a relative fair value would increase its air traffic liability by approximately $10 millionbear interest at the ~~date~~rate of ~~adoption.~~4.75% per year and will mature on May 15, 2025. Interest on the convertible notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2020. The Company ~~also expects the classification~~received proceeds of $168.3 million, net of total issuance costs of $6.7 million and ~~timing~~recorded $95.6 million in long-term debt, net of ~~recognition~~debt issuance costs of certain ancillary fees to be impacted by the adoption of ASU 2014-09. While the Company believes the adoption will not have a significant impact on earnings, the classification of certain revenues, such as bags, seats and other travel-related fees may be deemed part of the single performance obligation of providing passenger transportation. The Company expects that these revenues currently classified as non-ticket revenue, approximately $1 billion annually, will be reclassified to passenger revenue after adoption.

~~Financial Instruments~~

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

~~Leases~~

~~Notes to Condensed Financial Statements—(Continued)~~

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This standard will require all leases with durations greater than twelve months to be recognized on the condensed balance sheet and is effective for the Company in the first quarter of 2019, with early adoption permitted. The Company is currently evaluating the new guidance and believes adoption of this standard will have a significant impact$3.8 million on its condensed balance sheets, ~~although adoption~~related to the debt component of the convertible notes, and $72.7 million in APIC, net of issuance costs of $2.9 million on its condensed balance sheets, related to the equity component of the convertible notes. Refer to Note 13, Debt and Other Obligations for additional information about the Company’s convertible debt.

Also on May 12, 2020, the Company completed the public offering of 20,125,000 shares of its voting common stock, which includes full exercise of the underwriters’ option to purchase an additional 2,625,000 shares of common stock, at a public offering price of $10.00 per share (the “common stock offering”). The Company received proceeds of $192.4 million, net of issuance costs of $8.9 million. Refer to Note 14, Equity, for further information about the Company’s common stock offering.

In June 2020, the Company entered into an agreement to amend its revolving credit facility entered into in 2018 to finance aircraft pre-delivery payments. The agreement amends the revolving credit facility to extend the final maturity date from December 30, 2020 to March 31, 2021. Upon execution of the amended agreement, the maximum borrowing capacity decreased from $160.0 million to $111.2 million and during the six months ended June 30, 2020 we made net principal payments of $48.8 million. This facility is ~~not expected~~secured by the collateral assignment of certain of the Company’s rights under the purchase agreement with Airbus, related to ~~significantly change~~20 Airbus A320neo aircraft scheduled to be delivered between August 2020 and October 2022. The initial maximum borrowing capacity of $111.2 million will continue to decrease as the ~~recognition, measurement or presentation~~Company takes delivery of ~~lease expenses within~~ the ~~statements~~related aircraft. The amendment will provide an additional approximately $54 million in liquidity through March 2021. Refer to Note 13, Debt and Other Obligations, for further information.

Also, in June 2020, the Company entered into an agreement to defer certain aircraft deliveries originally scheduled in 2020 and 2021, as well as the related pre-delivery deposit payments. During the six months ended June 30, 2020, the Company took delivery of ~~operations~~9 aircraft and ~~cash flows. See~~with this agreement, the Company has 3 remaining aircraft scheduled for delivery during the remainder of 2020 and 16 aircraft scheduled for delivery in 2021. Refer to Note 8,11, Commitments and Contingencies, for further information ~~regarding~~about the Company’s future aircraft deliveries.

In addition, since the onset of the COVID-19 pandemic, the Company has taken additional action, including:

•Reduced planned discretionary non-aircraft capital spend in 2020 by approximately $50 million;

•Deferred $20 million in heavy maintenance events from 2020 to 2021;

•Reduced planned non-fuel operating costs for 2020 by $20 million to $30 million, excluding savings related to reduced capacity;

•Suspended hiring across the Company except to fill essential roles;

•Entered into agreements to defer payments in 2020 related to facility rents and other airport services contracts at certain locations;

•Continued to work with lessors and service providers to temporarily defer aircraft rent and other maintenance and service contract payments;

•Continued to work with unionized and non-unionized employees to create voluntary leave programs;

•Continued to pursue additional financing secured by its unencumbered assets.

The Company continues to engage in discussions with the Company's ~~undiscounted~~significant stakeholders and vendors regarding financial support or contract adjustments, including extensions of payment terms, during this transition period.

For purposes of assessing its liquidity needs, the Company estimates that demand will continue to improve slightly in the second half of 2020, but remain well below 2019 levels, and continue to recover into 2021. The Company believes the actions described above address its future ~~lease payments~~liquidity needs, yet anticipates it may implement further discretionary changes and other cost reduction and liquidity preservation measures, as needed, to address the volatility and quickly changing dynamics of passenger demand and the ~~timing~~impact of ~~those payments.~~revenue changes, regulatory and public health directives and prevailing government policy and financial market conditions.

~~Share-Based Compensation~~

3. Recent Accounting Developments

~~In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment~~

Recently Adopted Accounting" which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification on the statement of cash flows. The Company adopted this guidance on January 1, 2017. As a result, excess income tax benefits and deficiencies related to share-based compensation are now included within income tax expense rather than additional paid in capital. For the nine months ended September 30, 2017, $0.6 million of income tax deficiency related to share-based compensation was included within income tax expense on the Company's statements of operations. Additionally, excess income tax benefits and deficiencies for share-based payments are now included in net operating cash flows rather than net financing cash flows. The changes have been applied prospectively in accordance with the guidance and prior periods have not been adjusted. Pronouncements

Accounting for Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses." The standard requires the use of an "expected loss" model on certain types of financial instruments. For accounts receivables, aircraft maintenance deposits and security deposits (recorded within other long-term assets on the Company's condensed balance sheets) the Company is required to estimate lifetime expected credit losses. The standard also amends the impairment model for available-for-sale securities and requires estimated credit losses to be recorded as allowances ~~instead of~~rather than as reductions to the amortized cost of the securities. ~~This standard is effective for~~As such, the Company is required to recognize an allowance for ~~fiscal years, and interim periods within those years, beginning~~credit losses for its short-term available-for-sale investment securities, with the exception of U.S. Treasury securities which do not require an allowance for credit losses. The Company adopted this standard effective January 1, ~~2020,~~2020. In connection with ~~early~~the adoption ~~permitted. The~~of this standard, the Company ~~is evaluating~~recognized a cumulative effect adjustment, net of tax, of $1.6 million to retained earnings on the ~~new guidance, but does~~Company's condensed balance sheets with corresponding reserves against certain of our outstanding financial instruments. These amounts were not ~~expect it~~material to ~~have a material impact on its~~the Company's financial ~~statements.~~statements individually or in the aggregate.

~~Statement of Cash Flows~~Cloud Computing Arrangements

In August ~~2016,~~2018, the FASB issued ASU No. ~~2016-15, "Statement~~2018-15, "Intangibles - Goodwill and Other - Internal-Use Software." This new standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification ("ASC") 350-40, "Accounting for Internal-Use Software," to determine which implementation costs to capitalize as assets and amortize over the term of ~~Cash Flows."~~the hosting arrangement or expense as incurred. The Company adopted this standard ~~is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This standard is~~ effective ~~for the Company for fiscal years, and interim periods within those years, beginning~~ January 1, ~~2018, with early~~2020 and is applying the standard prospectively to all implementation costs incurred after the date of adoption. This adoption ~~permitted. The Company is evaluating the new guidance, but does~~has not ~~expect it to have~~had a material impact on the Company's financial statement presentation or results.

4. Revenue

Operating revenues is 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 six months ended June 30, 2020 and June 30, 2019.


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Operating revenues:
Fare	$	63,769	$	515,696	$	385,216	$	932,041
Non-fare	67,048		478,734		499,151		900,454
Total passenger revenues	130,817		994,430		884,367		1,832,495
Other	7,712		18,526		25,243		36,257
Total operating revenues	$	138,529	$	1,012,956	$	909,610	$	1,868,752

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
DOT—Domestic	$	134,373	$	890,388	$	832,293	$	1,644,502
DOT—Latin America	4,156		122,568		77,317		224,250
Total	$	138,529	$	1,012,956	$	909,610	$	1,868,752

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

As a result of the COVID-19 pandemic, the Company experienced significantly increased customer requests for credit shells, or customer travel funds held by the Company that can be redeemed for future travel, and refunds beginning in the second half of March 2020 and continuing through the second quarter of 2020 primarily due to flight cancellations. The total value of refunds issued during the three and six months ended June 30, 2020 were $77.4 million and $121.0 million, respectively.

The Company expects that the level of requests for credit shells and refunds in the upcoming months will continue to fluctuate and vary as the effects of COVID-19 continue to emerge. In addition, in response to COVID-19, the Company increased the expiration period on some of its ~~financial statements.~~credit shells from 60 days to 12 months and waived change and cancellation fees for the Guests who booked travel by July 31, 2020. As a result, the outstanding balance of the unused credit shells (which is recorded within ATL on the Company's condensed balance sheets), as of June 30, 2020, significantly exceeds the balance in the prior year period. As of June 30, 2020 and December 31, 2019, the Company had ATL balances of $452.0 million and $315.4 million, respectively. The balance of the Company's ATL, including the balance of credit shells, is expected to be recognized within 12 months of the respective balance sheet date. Refer to Note 2, Impact of COVID-19, for further information on COVID-19's impact to the Company.


3.	~~Special Charges~~

For credit shells that the Company estimates are not likely to be used prior to expiration (“breakage”), the Company recognizes the associated value proportionally during the period over which the remaining credit shells may be used. Breakage estimates are based on the Company's historical information about customer behavior as well as assumptions about customers' future travel behavior. Assumptions used to generate breakage estimates can be impacted by several factors including, but not limited to, changes to the Company's ticketing policies, changes to the Company’s refund, exchange, and credit shell policies, and economic factors. Given the unprecedented amount of cancellations in the first and second quarters of 2020 and the related increase in credit shells provided, the Company expects additional variability in the amount of breakage revenue recorded in future periods, as the estimates of the portion of those funds that will expire unused may differ from historical experience.

5. Loss on Disposal of Assets

During the three and six months ended ~~September~~June 30, ~~2017,~~2020, the Company ~~purchased one aircraft which was previously financed under an operating lease agreement. The purchase price~~had 0 loss on disposal of assets in the condensed statement of operations.

During the three and six months ended June 30, 2019, the Company recorded $1.6 million and $3.5 million in loss on disposal of assets in the condensed statement of operations. These amounts primarily related to the disposal of excess and obsolete inventory.

6. Special Credits

During the second quarter of 2020, the Company recorded $237.9 million, net of issuance costs of $0.5 million, related to the grant component of the ~~aircraft was $20.0 million, comprised of a cash payment of $12.6 million~~PSP with the Treasury within deferred salaries, wages and the non-cash application of maintenance and security deposits held by the previous lessor of $7.4 million. The Company estimated the fair value of the aircraft to be $11.9 million and has recorded the 1 purchased aircraft at fair value within flight equipmentbenefits on the Company's condensed balance sheets. The funds are to be used exclusively to pay for salaries, wages and benefits for the Company's Team Members through September 30, 2020. During the three and six months ended June 30, 2020, the Company ~~determined the valuation~~recognized $123.9 million of the ~~aircraft based on a third-party appraisal considering the condition of the aircraft (a Level 3 measurement). The Company recognized $7.9 million as a cost of terminating the lease~~deferred salaries, wages and benefits within special ~~charges~~credits on the Company’s condensed statements of operations.

In addition, during the three and six months ended June 30, 2020, the Company recorded $28.0 million related to the CARES Act Employee Retention credit within special credits on the Company’s condensed statements of operation. Refer to Note 2, Impact of COVID-19, for further information on the CARES Act.

During the three and six months ended June 30, 2019, the Company had 0 special credits in the condensed statement of ~~operations, made up of the excess of the purchase price paid over the fair value of the aircraft, less other non-cash items of $0.2 million.~~operations.

During the three months ended September 30, 2016, the Company purchased three A319 aircraft which were formerly financed under operating lease agreements. The purchase price for the 3 aircraft was $58.8 million, comprised of a cash payment of $58.1 million and the application of security deposits held by the previous lessor of $0.7 million. The Company estimated the fair value of the aircraft to be $38.2 million and has recorded the 3 purchased aircraft within flight equipment on the condensed balance sheets. The Company determined the valuation of the aircraft based on a third-party appraisal considering the condition of each aircraft (a Level 3 measurement). The Company recognized $7.4 million as a cost of terminating the leases within special charges on the condensed statement of operations, made up of the excess of the purchase price paid over the fair value of the aircraft, less previously expensed supplemental rent and other non-cash items of $13.2 million.

7. Earnings (Loss) per Share

~~Notes to Condensed Financial Statements—(Continued)~~

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

During the nine months ended September 30, 2016, the Company purchased six A319 aircraft which were previously financed under operating lease agreements. The purchase price of the 6 aircraft was $124.7 million, comprised of a cash payment of $91.9 million and the non-cash application of maintenance and security deposits held by the previous lessor of $32.8 million. The Company estimated the fair value of the aircraft to be $79.4 million and has recorded the 6 purchased aircraft at fair value within flight equipment on the condensed balance sheets. The Company determined the valuation of the aircraft based on a third-party appraisal considering the condition of each aircraft (a Level 3 measurement). The Company recognized $31.6 million as a cost of terminating the leases within special charges on the condensed statement of operations, made up of the excess of the purchase price paid over the fair value of the aircraft, less other non-cash items of $13.7 million.


4.	~~Earnings 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,					Three Months Ended June 30,						Six Months Ended June 30,
	2017		2016		2017		2016			2020		2019		2020		2019
	(in thousands, except per share amounts)									(in thousands, except per share amounts)
Numerator									Numerator
Net income	$	60,190	$	81,382	$	170,268	$	216,386
Net income (loss)									Net income (loss)	$	(144,428)	$	114,501	$	(172,256)	$	170,577
Denominator									Denominator
Weighted-average shares outstanding, basic	69,370		69,727		69,363		70,689		Weighted-average shares outstanding, basic	79,601		68,439		74,061		68,410
Effect of dilutive stock awards	88		81		174		143		Effect of dilutive stock awards	—		181		—		158
Adjusted weighted-average shares outstanding, diluted	69,458		69,808		69,537		70,832		Adjusted weighted-average shares outstanding, diluted	79,601		68,620		74,061		68,568
Net income per share
Basic earnings per common share	$	0.87	$	1.17	$	2.45	$	3.06
Diluted earnings per common share	$	0.87	$	1.17	$	2.45	$	3.05
Earnings (loss) per share									Earnings (loss) per share
Basic earnings (loss) per common share									Basic earnings (loss) per common share	$	(1.81)	$	1.67	$	(2.33)	$	2.49
Diluted earnings (loss) per common share									Diluted earnings (loss) per common share	$	(1.81)	$	1.67	$	(2.33)	$	2.49

Anti-dilutive weighted-average shares	124		122		76		87		Anti-dilutive weighted-average shares	565		127		524		143

~~Notes to Condensed Financial Statements—(Continued)~~13


5.	~~Short-term Investment Securities~~

8. Short-term Investment Securities

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

As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had ~~$100.7~~$106.3 million and ~~$100.2~~$105.3 million in short-term available-for-sale investment securities, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, these investments earned interest income at a weighted-average fixed rate of approximately 1.5%. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, an unrealized loss and an unrealized gain of ~~$13~~$199 thousand and ~~an unrealized loss of $11~~$123 thousand, respectively, net of deferred taxes of $7$59 thousand and $6$36 thousand, respectively, was recorded within accumulated other comprehensive income ("AOCI") related to these investment securities. For the three and six months ended June 30, 2019, an unrealized gain of $98 thousand and $228 thousand, respectively, net of deferred taxes of $29 thousand and $67 thousand, respectively, was recorded within AOCI related to these investment securities. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, an unrealized gain of $4 thousand, net of deferred taxes of $3 thousand, was recorded within AOCI related to these investment securities. The~~2020, the Company ~~has not recognized any~~had substantially 0 realized gains or losses related to these ~~securities~~securities. For the three and six months ended June 30, 2019, the Company had 0 realized gains or losses as the Company ~~has~~did not ~~transacted~~sell any ~~sale~~ of these ~~securities.~~securities during these periods. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016, $34~~2019, $227 thousand and ~~$23~~$104 thousand, net of tax, respectively, remained in AOCI, related to these instruments.


6.	~~Accrued Liabilities~~

9. Accrued Liabilities

Other current liabilities as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 consist of the following:


	June 30, 2020		December 31, 2019
	(in thousands)
Salaries, wages and benefits	$	92,056	$	89,163
Airport obligations	37,309		80,134
Federal excise and other passenger taxes and fees payable	22,947		65,312
Aircraft maintenance	21,615		38,099
Aircraft and facility lease obligations	21,163		20,656
Interest payable	17,871		16,941
Fuel	5,259		28,510
Other	28,793		34,706
Other current liabilities	$	247,013	$	373,521

September 30, 2017 December 31, 2016
(in thousands)
Salaries and wages $ 50,635
$ 54,578
Airport obligations 47,289
43,989
Federal excise and other passenger taxes and fees payable 43,860
42,064
Aircraft maintenance 41,781
30,233
Interest payable 15,168
8,499
Fuel 14,940
14,828
Aircraft and facility lease obligations 11,678
10,378
Other 23,781
21,442
Other current liabilities $ 249,132
$ 226,011


7.	~~Financial Instruments and Risk Management~~

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

The Company is exposed to credit losses in the event of nonperformance by counterparties to these financial instruments. The Company periodically reviews and seeks to mitigate exposure to the financial deterioration and nonperformance of any counterparty by monitoring the absolute exposure levels, each counterparty's credit ratings and the historical performance of counterparties relating to hedge transactions. The credit exposure related to these financial instruments is limited to the fair value of contracts in a net receivable position at the reporting date. The Company also maintains security agreements that require the Company to post collateral if the value of selected instruments falls below specified mark-to-market thresholds. As of 10.~~September 30, 2017~~Leases, the Company did not hold any derivatives with requirements to post collateral. The Company records financial derivative instruments at fair value, which includes an evaluation of each counterparty's credit risk.

~~Fuel Derivative Instruments~~

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

The Company ~~accounts~~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 ~~its fuel derivative contracts at fair value~~variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, enplaned passengers, and ~~recognizes them in~~airports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's condensed balance sheet in prepaid expenses and other current assets or other current liabilities. The Company did not enter into any fuel derivative instruments during the nine months ended September 30, 2017 and 2016 and did not have any outstanding fuel derivatives as of September 30, 2017 and December 31, 2016. Historically, the Company has not elected hedge accounting on any fuel derivative instruments entered into and,sheets as a ~~result, changes in the fair value of fuel derivative contracts, if any, were recorded in aircraft fuel expense.~~

~~Interest Rate Swaps~~

~~During 2015, the Company settled six forward interest rate swaps that were designed~~right-of-use asset and lease liability. Lease terms are generally 8 years to fix the benchmark interest rate component of interest payments on the debt related to three Airbus A321 aircraft, which the Company took delivery of during the third quarter of 2015. These instruments limited the Company's exposure to changes in the benchmark interest rate in the period from the trade date through the date of maturity. The interest rate swaps were designated as cash flow hedges. The Company accounts18 years for interest rate swaps at fair value and recognizes them in the condensed balance sheet in prepaid expenses and other current assets or other current liabilities with changes in fair value recorded within accumulated other comprehensive income (AOCI). As of September 30, 2017 and December 31, 2016, the Company did not have any outstanding interest rate swaps.

~~Notes to Condensed Financial Statements—(Continued)~~

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


8.	~~Commitments and Contingencies~~

~~Aircraft-Related Commitments and Financing Arrangements~~

~~The Company’s contractual purchase commitments consist primarily of~~ aircraft and ~~engine acquisitions through manufacturers. During the first quarter of 2017, the Company negotiated revisions~~up to ~~its A320 aircraft order. The Company originally had four A320neo aircraft scheduled~~99 years for ~~delivery in 2018 of which two were converted to A320ceo aircraft, to be delivered in 2017,~~other leased equipment and ~~the remaining two are deferred until 2019. As of September 30, 2017, the Company's aircraft orders consisted of the following:~~

Airbus
A320ceo A320neo A321ceo Total
remainder of 2017 2
4 6
2018 5
5 10
2019 1 14
15
2020
16
16
2021
18
18
8 48 9 65

~~The Company also has four spare engine orders for V2500 SelectTwoengines with International Aero Engines (IAE) and nine spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2018 through~~ ~~2023~~. Purchase commitments for these aircraft and spare engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $227.8 million for the remainder of 2017, $528.4 million in 2018, $773.7 million in 2019, $820.5 million in 2020, $784.8 million in 2021, and $24.6 million in 2022 and beyond. As of September 30, 2017, the Company had secured debt financing commitments of $160.0 million for 4 aircraft, scheduled for delivery in the remainder of 2017, and did not have financing commitments in place for the remaining 61 Airbus aircraft currently on firm order, which are scheduled for delivery in 2017 through 2021.

Interest commitments related to the secured debt financing of 40 delivered aircraft as of September 30, 2017 are $19.5 million for the remainder of 2017, $52.9 million in 2018, $48.2 million in 2019, $43.6 million in 2020, $39.0 million in 2021, and $141.5 million in 2022 and beyond. For principal commitments related to these financed aircraft, refer to Note 10, Debt and Other Obligations. As of September 30, 2017, principal and interest commitments related to the Company's future secured debt financing of 4 undelivered aircraft under bank debt are zero for the remainder of 2017, $16.5 million in 2018, $16.4 million in 2019, $17.3 million in 2020, $16.2 million in 2021, and $137.2 million in 2022 and beyond.property.

As of ~~September~~June 30, ~~2017,~~2020, the Company had a fleet consisting of ~~107~~154 A320 family aircraft. ~~During the nine months ended September~~As of June 30, ~~2017,~~2020, the Company ~~took delivery of eleven aircraft financed under secured debt arrangements, two~~had 55 aircraft financed under operating leases ~~purchased one previously leased aircraft~~with lease term expirations between 2022 and ~~returned one aircraft to its lessor.~~2038. In addition, the Company ~~took delivery~~owned 99 aircraft of ~~two~~which 29 were purchased ~~engines and one engine financed under an operating~~off lease and purchased one previously leased engine. For further discussion on the previously leased aircraft and engine, refer to Note 3, Special Charges. New purchased aircraft are capitalized within flight equipment with depreciable liveswere unencumbered as of ~~25 years and estimated residual values of 10%.~~June 30, 2020. As of ~~September~~June 30, ~~2017,~~2020, the Company also had ~~59 aircraft and 11~~8 spare engines financed under operating leases with lease term expiration dates ranging from ~~2017~~2023 to ~~2029. The~~2027 and owned 16 spare engines, all of which, as of June 30, 2020, were pledged as partial collateral under the Company's 2022 revolving credit facility.

In accordance with Topic 842, the Company ~~entered into sale and leaseback transactions with third-party aircraft lessors for~~has elected not to apply the ~~majority~~recognition requirements to short-term leases (i.e., leases of ~~these aircraft and engine leases. Deferred losses resulting from~~

~~Notes to Condensed Financial Statements—(Continued)~~

~~these sale and leaseback transactions are included in other long-term assets on the accompanying condensed balance sheets. Deferred losses~~12 months or less). Instead, lease payments are recognized ~~as an increase to rent expense~~in profit or loss on a straight-line basis over the lease term. In addition, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use asset.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company's leases generally do not provide a readily determinable implicit rate. Therefore, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company uses publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates. The Company has options to extend certain of its operating leases for an additional period of time and options to early terminate several of its operating leases. The lease term consists of the ~~respective operating leases. Deferred gains~~noncancellable period of the lease, periods covered by options to extend the lease if the Company is reasonably certain to exercise the option, periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the option and periods covered by an option to extend or not terminate the lease in which the exercise of the option is controlled by the lessor. The Company's lease agreements do not contain any residual value guarantees. The Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components.

Some of the Company’s aircraft and engine master lease agreements provide 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 balance sheets. Fixed maintenance reserve payments that are not probable of being recovered are considered lease payments and are included in ~~deferred credits~~the right-of-use asset and ~~other long-term liabilities~~lease liability. Maintenance reserve payments that are based on ~~the accompanying condensed balance sheets. Deferred gains~~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 ~~decrease~~certain level. As of June 30, 2020, the Company is 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 over the term~~basis. Aircraft rent expense also includes maintenance reserves paid to aircraft lessors in advance of the ~~respective operating leases.~~performance of major maintenance activities that are not probable of being reimbursed and probable lease return condition obligations.

Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as ~~supplemental rent expense~~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. As a result of COVID-19, the Company is currently operating its aircraft at lower utilization levels. If the Company continues flying its aircraft at lower utilization levels beyond its current projections, the timing of future maintenance events may change such that the Company will be required to accrue lease return costs and/or record reserves against its maintenance deposits earlier than it would have expected and such amounts could be significant. 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.

~~In July 2015,~~During the six months ended June 30, 2020, the Company ~~executed~~took delivery of 6 aircraft under secured debt arrangements, purchased 2 previously leased aircraft, and took delivery of 3 aircraft under operating leases. In addition, the Company also purchased 2 engines and returned 1 previously leased engine.

On December 31, 2019, the Company entered into an ~~upgrade service~~aircraft sale agreement ~~with Airbus Americas Customer Services Inc. (Airbus)~~ to ~~reconfigure~~acquire 2 A319 aircraft previously operated by the ~~seating and increase capacity~~Company under operating leases. The contract was deemed a lease modification, which resulted in 40a change of

classification from operating leases to finance leases for the 2 aircraft. In January 2020, the purchase of the ~~Company’s A320ceos from 178 to 182 seats (reconfiguration). The reconfiguration of the~~2 aircraft ~~commenced in the first quarter of 2016 and is expected to be completed in the fourth quarter of 2017 for a remaining committed cost of $0.6 million, as of September 30, 2017.~~was completed. These ~~amounts will be capitalized~~aircraft were recorded within flight equipment on the Company's condensed balance ~~sheets.~~sheets as of June 30, 2020.

In September 2015, the Company executed a lease agreement with Wayne County Airport Authority (the Authority), which owns and operates Detroit Metropolitan Wayne County Airport (DTW). Under the lease agreement, the Company leases a 10-acre site, adjacent to the airfield at DTW, in order to construct, operate and maintain an approximately 126,000-square-foot hangar facility (the project). The project allows for the developmentAs of ~~a maintenance hangar in order to fulfill the requirements of~~June 30, 2020, the Company's ~~growing fleet and will reduce dependence on third-party facilities and contract maintenance. The~~finance lease agreement has a 30-year term with two 10-year extension options. Upon termination of the lease, title of the project, which will be fully depreciated, will automatically pass to the Authority. The Company completed the project during the first quarter of 2017 and has no remaining commitments related to this project as of September 30, 2017.

~~Future minimum lease payments under capital leases and noncancellable operating leases with initial or remaining terms in excess of one year at~~ ~~September 30, 2017~~ ~~were as follows:~~

Capital Leases Aircraft and Spare Engine Leases Property Facility Leases
Total
Operating and Capital Lease Obligations
(in thousands)
remainder of 2017 $ 134
$ 53,017
$ 12,409
$ 65,560
2018 537
204,292
43,726
248,555
2019 504
189,106
36,512
226,122
2020 188
180,842
25,604
206,634
2021 28
170,643
12,740
183,411
2022 and thereafter —
570,120
73,142
643,262
Total minimum lease payments $ 1,391
$ 1,368,020
$ 204,133
$ 1,573,544
Less amount representing interest 114

Present value of minimum lease payments $ 1,277

Less current portion 468

Long-term portion $ 809

~~The majority of the Company's capital lease~~ obligations primarily relate to the lease of computer equipment used by the Company's flight ~~crew.~~crew and office equipment. Payments under ~~this~~these finance lease ~~agreement~~agreements are fixed for terms ranging from 4 to 5 years. Finance lease assets are recorded within property and equipment and the ~~3-year term~~related liabilities are recorded within current maturities of long-term debt and finance leases and long-term debt and finance leases, less current maturities in the Company's condensed 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 ~~which began~~of a 2.6-acre parcel of land, in Dania Beach, Florida, where the Company intends to build a new headquarters campus. In connection with the lease agreement, the Company is expected to build a 200-unit residential building. The 8.5-acre parcel of land is capitalized within ground property and equipment on the Company's condensed 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 balance sheets. Operating lease commitments related to this lease are included in the ~~second quarter of 2017.~~table below within property facility leases.

~~Aircraft rent expense consists of monthly lease rents for aircraft and spare engines under the terms~~

The following table provides details of the Company's ~~aircraft~~future minimum lease payments under finance lease liabilities and ~~spare engine~~operating lease ~~agreements recognized~~liabilities recorded on ~~a straight-line basis. Aircraft rent expense also includes supplemental rent. Supplemental rent is made up~~the Company's condensed balance sheets as of ~~maintenance reserves paid~~June 30, 2020. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.


		Finance Leases		Operating Leases
						Aircraft and Spare Engine Leases			Property Facility Leases			Other			Total Operating and Finance Lease Obligations
	(in thousands)
remainder of 2020		$	381	$	102,077		$	2,237		$	228		$	104,923
2021		753		204,153			4,552			—			209,458
2022		725		205,231			4,262			—			210,218
2023		349		192,586			3,260			—			196,195
2024		98		170,524			2,722			—			173,344
2025 and thereafter		—		1,065,928			144,127			—			1,210,055
Total minimum lease payments		$	2,306	$	1,940,499		$	161,160		$	228		$	2,104,193
Less amount representing interest		192		568,343			135,335			3			703,873
Present value of minimum lease payments		$	2,114	$	1,372,156		$	25,825		$	225		$	1,400,320
Less current portion		658		125,219			3,092			225			129,194
Long-term portion		$	1,456	$	1,246,937		$	22,733		$	—		$	1,271,126

Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's condensed balance sheets are expected to be ~~paid~~$2.6 million for the remainder of 2020 and NaN for 2021 and beyond. During the six months ended 2020, the Company entered into agreements to ~~aircraft lessors~~defer payments in ~~advance of~~2020 related to facility rents and other airport services contracts at certain locations.

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

~~Notes~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Finance lease cost
Amortization of leased assets	$	135	$	519	$	270	$	728
Interest of lease liabilities	26		309		139		339
Operating lease cost
Operating lease cost (1)	51,006		48,639		98,223		98,353
Short-term lease cost (1)	6,884		3,509		13,598		6,958
Variable lease cost (1)	25,568		31,653		55,383		59,770
Total lease cost	$	83,619	$	84,629	$	167,613	$	166,148

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

The table below presents lease terms and discount rates related to ~~Condensed Financial Statements—(Continued)~~

the Company's finance and operating leases:


	June 30, 2020		June 30, 2019
Weighted-average remaining lease term
Operating leases	13.1 years		9.8 years
Finance leases	3.1 years		0.8 years
Weighted-average discount rate
Operating leases	6.07	%	6.52	%
Finance leases	5.56	%	3.93	%

~~performance~~

11. Commitments and Contingencies

Aircraft-Related Commitments and Financing Arrangements

The Company’s contractual purchase commitments consist primarily of ~~major maintenance activities that are not probable~~aircraft and engine acquisitions through manufacturers and aircraft leasing companies. During the fourth quarter of ~~being reimbursed,~~2019, the Company entered into an A320 NEO Family Purchase Agreement with Airbus for the purchase of 100 new Airbus A320neo family aircraft, with options to purchase up to 50 additional aircraft. In June 2020, the Company entered into an agreement to defer certain aircraft deliveries scheduled in 2020 and ~~probable return condition obligations.~~ 2021, as well as the related pre-delivery deposit payments. During the six months ended June 30, 2020, the Company took delivery of 9 aircraft and with this agreement, the Company has 3 remaining aircraft scheduled for delivery during the remainder of 2020 and 16 aircraft scheduled for delivery in 2021. For additional information, please refer to Note 2, Impact of COVID-19. As of June 30, 2020, the Company's total firm aircraft orders consisted of 129 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. In addition, the Company has financing agreements in place for 10 direct operating leases for A320neos with third-party lessors with deliveries scheduled in 2021.

The Company ~~expects supplemental rent to increase as individual aircraft lease agreements approach their respective termination dates~~also has 1 spare engine order for a V2500 SelectTwo engine with International Aero Engines ("IAE") and ~~the Company begins to accrue the estimated cost~~2 spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2021 through 2023. As of ~~return conditions for the corresponding aircraft.~~

Some of the Company’s master lease agreements provide that the Company pay maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. Substantially all 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 contractual amounts. Fixed maintenance reserve paymentsJune 30, 2020, purchase commitments for these aircraft and ~~related flight equipment,~~engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be ~~$1.9~~$119.0 million for the remainder of ~~2017, $6.9 million in 2018, $5.7 million in 2019, $5.4 million in~~ 2020, ~~$5.5~~$356.4 million in 2021, ~~and $17.7~~$606.1 million in 2022, $707.6 million in 2023, $1,073.0 million in 2024, and $3,763.4 million in 2025 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 ~~lease agreements provide~~tariffs include aircraft and other parts that ~~maintenance reserves are reimbursable to~~ the Company ~~upon completion~~is already contractually obligated to purchase including those reflected above. In February 2020, the rate of this tariff was increased from 10% to 15%. The imposition of these tariffs may substantially increase the cost of new Airbus aircraft and parts required to service the Company's Airbus fleet.

As of June 30, 2020, the Company has secured debt financing commitments for 2 aircraft scheduled for delivery from Airbus in 2020. As of June 30, 2020, the Company did not have financing commitments in place for the remaining 127 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 ~~maintenance event~~aircraft included in ~~an amount equal to either (1)~~ the ~~amount~~A320 NEO Family Purchase Agreement signed in the fourth quarter of 2019. The agreement provides a standby credit facility in the ~~maintenance reserves held by~~form of senior secured mortgage debt financing. In addition, as of June 30, 2020, the ~~lessor associated~~Company has secured 10 direct operating leases for A320neos with ~~the specific maintenance event or (2) the qualifying costs~~third-party lessors, with deliveries expected in 2021.

As of June 30, 2020, principal and interest commitments related to the ~~specific maintenance event. Some~~Company's future secured debt financing of the ~~master lease agreements do not require that~~2 undelivered aircraft are approximately $0.9 million for the ~~Company pay maintenance reserves~~remainder of 2020, $8.5 million in 2021, $6.5 million in 2022, $7.0 million in 2023, $7.1 million in 2024, and $64.7 million in 2025 and beyond. Aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors are expected to be approximately0for the remainder of 2020, $18.2 million in 2021, $33.4 million in 2022, $33.4 million in 2023, $33.4 million in 2024, and $282.5 million in 2025 and beyond.

Interest commitments related to the secured debt financing of 70 delivered aircraft as ~~long as~~of June 30, 2020 are $40.7 million for the remainder of 2020, $76.2 million in 2021, $69.5 million in 2022, $58.9 million in 2023, $47.9 million in 2024, and $131.2 million in 2025 and beyond. As of June 30, 2020, interest commitments related to the Company's ~~cash balance does not fall below a certain level. As~~unsecured term loans and convertible debt financing are $4.4 million for the remainder of ~~September 30, 2017, the Company was~~2020, $8.9 million in ~~full compliance with those requirements~~2021, $8.9 million in 2022, $8.9 million in 2023, $8.9 million in 2024, and ~~does not anticipate having to pay reserves~~$10.7 million in 2025 and beyond. For principal commitments related to ~~these master leases in~~ the ~~future.~~Company's debt financing, refer to Note 13, Debt and Other Obligations.

The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system ~~new airport kiosks~~ and other miscellaneous subscriptions and services as of ~~September~~June 30, ~~2017: $1.8~~2020: $10.7 million for the remainder of ~~2017, $5.7 million in 2018, $1.6 million in 2019, $1.0 million in~~ 2020, ~~$0.5~~$17.1 million in 2021, $16.2 million in 2022, $14.4 million in 2023, $14.5 million in 2024, and ~~$0.2~~$50.3 million in 2025 and thereafter. ~~The Company's current agreement~~During the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in ~~2018.~~2028.

Litigation

The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations.

Credit Card Processing Arrangements

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

The Company's credit card processors do not require the Company to maintain cash collateral ifprovided that the Company satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to place a holdback resulting in a commensurate reduction of unrestricted cash. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the ~~Company was in compliance with such liquidity and other financial covenants in its~~Company's credit card ~~processing agreements and the~~ processors were holding back no0 remittances.

The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and $9 Fare Club memberships as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, was ~~$322.3~~$417.3 million and ~~$234.6~~$342.3 million,, respectively.

~~Notes to Condensed Financial Statements—(Continued)~~

Employees

The Company has ~~four~~5 union-represented employee groups that together represented approximately ~~75%~~81% of all employees ~~at September~~as of June 30, ~~2017.~~2020. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of ~~September~~June 30, ~~2017~~.

2020.

Employee Groups

Representative

Amendable Date

Percentage of Workforce

Pilots

Air Line Pilots Association, International ~~(ALPA)~~("ALPA")

~~August 2015~~February 2023

~~26%~~28%

Flight Attendants

Association of Flight Attendants ~~(AFA-CWA)~~("AFA-CWA")

May 2021

~~44%~~46%

Dispatchers

~~Transport Workers Union (TWU)~~Professional Airline Flight Control Association ("PAFCA")

~~August 2018~~October 2023

Ramp Service Agents

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

June 2020

4%3%

Passenger Service Agents

Transport Workers Union of America ("TWU")

In ~~August 2015,~~February 2020, the Company's collective bargaining agreement with its pilots, represented by ALPA, became amendable. In June 2016, ALPA requested the services of the National Mediation Board (NMB) to facilitate negotiations for an amended agreement andIAMAW notified the Company, ~~joined ALPA in the request. The NMB has assigned mediators and the parties continue to work toward an amended agreement with the guidance of the mediator. Under~~as required by the Railway Labor Act, ~~(RLA),~~that it intends to submit proposed changes to the ~~parties' current~~collective bargaining agreement ~~remains~~covering the Company's ramp service agents which became amendable in ~~effect until an amended agreement is reached.~~June 2020. The parties expect to schedule meeting dates for negotiations soon.

~~In March 2016, under~~

The Company's passenger service agents are represented by the ~~supervision of~~TWU, but the ~~NMB,~~representation applies only to the Company's Fort Lauderdale station where the Company has direct employees in the passenger service classification. The Company and ~~AFA-CWA reached a tentative agreement for a five-year contract~~the TWU began meeting in late October 2018 to negotiate an initial collective bargaining agreement. As of June 30, 2020, the Company continued to negotiate with the Company's flight attendants. In May 2016, the flight attendants voted to approve the new five-year contract with the Company. In connection with this agreement, the Company paid a $9.6 million ratification incentive of which $8.4 million was recorded within salaries, wages and benefits in the condensed statement of operations for the nine months ended September 30, 2016.TWU.

The Company is self-insured for ~~health care~~healthcare claims, up to a ~~stop loss~~stop-loss amount for eligible participating employees and qualified dependent medical claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company has accrued ~~$5.5~~$5.2 million and ~~$5.7~~$5.2 million in health care claims as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.


9.	~~Fair Value Measurements~~

~~Under ASC 820,~~ 12.Fair Value Measurements

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

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

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

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

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

~~Fuel Derivative Instruments~~

From time to time, the Company may enter into fuel derivative contracts in order to mitigate the risk of future volatility in fuel prices. The Company’s fuel derivative contracts generally consist of jet fuel swaps and jet fuel options. These instruments are valued using energy and commodity market data, which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities.

The Company ~~utilizes~~records impairment charges on long-lived assets used in operations when events and circumstances indicate that the ~~market approach~~assets may be impaired, the undiscounted cash flows estimated to ~~measure fair value for its fuel derivative instruments, if any. The market approach uses prices and other relevant information~~be generated by ~~market transactions involving identical or comparable~~those assets ~~or liabilities.~~

~~Notes to Condensed Financial Statements—(Continued)~~

~~The Company does not elect hedge accounting on its fuel derivative instruments. As a result,~~are less than the ~~Company records the fair value adjustment~~carrying amount of ~~its fuel derivatives in the accompanying statement of operations within aircraft fuel~~those assets, and ~~on the condensed balance sheets within prepaid expenses and other current assets or other current liabilities, depending on whether~~ the net ~~fair~~book value of the derivatives is in an asset or liability position as of the respective date. Fair values of the fuel derivative instruments are determined using standard option valuation models. The Company also considers counterparty risk and its own credit risk in its determination of allassets exceeds their estimated fair values. The Company offsets fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement. The Company determines fair value of jet fuel options utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets.value. The Company has ~~consistently applied these valuation techniques in all periods presented~~assessed whether any impairment of its long-lived assets existed and ~~believes it~~ has ~~obtained~~determined that no charges were deemed necessary under applicable accounting standards as of June 30, 2020. The Company’s assumptions about future conditions important to its assessment of potential impairment of its long-lived assets, including the ~~most accurate information available for the types of derivative contracts it holds.~~

~~The fair value~~impact of the ~~Company's jet fuel swaps is determined based on inputs that~~COVID-19 pandemic to its business, are ~~readily available in public markets or can be derived from information available in publicly quoted markets; therefore,~~subject to uncertainty, and the Company ~~categorizes~~will continue to monitor these ~~instruments~~conditions in future periods as Level 2. Due to the fact that certain inputs utilized to determine the fair value of jet fuel options are unobservable (principally implied volatility), the Company categorizes these derivatives as Level 3. Implied volatility of a jet fuel option is the volatility of the price of the underlying commodity that is implied by the market price of the option based on an option pricing model. Thus, it is the volatility that when used in a particular pricing model yields a theoretical value for the option equal to the current market price of that option. Implied volatility, a forward-looking measure, differs from historical volatility because the latter is calculated from known past returns. At each balance sheet date, the Company substantiatesnew information becomes available, and adjusts unobservable inputs. The Company routinely assesses the valuation model's sensitivity to changes in implied volatility. Based on the Company's assessment of the valuation model's sensitivity to changes in implied volatility, it concluded that holding other inputs constant, a significant increase (decrease) in implied volatility would result in a significantly higher (lower) fair value measurement for the Company's aircraft fuel derivatives. As of September 30, 2017 and December 31, 2016, the Company had no outstanding jet fuel derivatives.will update its analyses accordingly.

Long-Term Debt

The estimated fair value of the Company's ~~non-publicly held~~term loan debt agreements ~~has~~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 ~~public~~Level 2 long-term debt.

The carrying amounts and estimated fair values of the Company's long-term debt at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows:


	June 30, 2020						December 31, 2019			Fair Value Level Hierarchy
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(in millions)
Fixed-rate senior term loans	$	279.4	$	262.8	$	296.1	$	296.4	Level 3

Fixed-rate term loans	992.2		976.8		778.2		823.6		Level 3
Unsecured term loans	60.4		60.4		—		—		Level 3
2015-1 EETC Class A	333.5		321.9		348.6		372.2		Level 2
2015-1 EETC Class B	68.0		59.3		72.0		74.5		Level 2
2015-1 EETC Class C	92.4		65.8		98.1		100.5		Level 2
2017-1 EETC Class AA	221.4		208.1		228.4		237.0		Level 2
2017-1 EETC Class A	73.8		61.8		76.1		78.8		Level 2
2017-1 EETC Class B	65.6		51.8		70.6		72.0		Level 2
2017-1 EETC Class C	85.5		60.5		85.5		88.0		Level 2
Convertible debt	101.4		264.1		—		—		Level 2
Revolving credit facilities	291.2		291.2		160.0		160.0		Level 3
Total long-term debt	$	2,664.8	$	2,684.5	$	2,213.6	$	2,303.0

September 30, 2017 December 31, 2016 Fair Value Level Hierarchy
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
(in millions)
Senior term loans $ 426.4
$ 446.2
$ 451.9
$ 463.9
Level 3
Junior term loans 41.3
42.7
47.1
48.1
Level 3
Fixed-rate loans 363.4
370.1
—
—
Level 3
Class A enhanced equipment trust certificates 423.6
440.6
409.8
416.0
Level 2
Class B enhanced equipment trust certificates 100.0
103.3
103.6
105.7
Level 2
Total long-term debt $ 1,354.7
$ 1,402.9
$ 1,012.4
$ 1,033.7

Cash and Cash Equivalents

Cash and cash equivalents at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 are comprised of liquid money market funds and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions.

Restricted Cash

Restricted cash is comprised of cash held in account subject to account control agreements or otherwise pledged as collateral against the Company's letters of credit and is categorized as a Level 1 instrument. As of June 30, 2020, the Company had a $30.0 million standby letter of credit secured by cash, of which $23.1 million had been drawn upon for issued letters of credit.

Short-term Investment Securities

~~Notes to Condensed Financial Statements—(Continued)~~

Short-term investment securities at ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 are ~~comprised~~classified as available-for-sale and generally consist of ~~available-for-sale asset-backed~~U.S. Treasury and U.S. government agency securities with contractual maturities of ~~twelve~~12 months or ~~less and~~less. The Company's short-term investment securities are categorized as Level 1 instruments, as the Company uses quoted market prices in active markets when determining the fair value of these securities. For additional information, refer to Note 8, Short-term Investment Securities.

Assets Held for Sale

The Company's assets held for sale consist of rotable aircraft parts. When long-lived assets are identified as held for sale and the required criteria are met, the Company reclassifies the assets from property and equipment to prepaid expenses and

other current assets on the Company's condensed balance sheets and discontinues depreciation. The assets are measured at the lower of the carrying amount or fair value less cost to sell and a loss is recognized for any initial adjustment of the asset’s carrying amount to fair value less cost to sell. Such valuations include estimations of fair values and incremental direct costs to transact a sale. The fair value measurements for the Company's held-for-sale assets were based on Level 3 inputs, which include information obtained from third-party valuation sources. As of June 30, 2020 and December 31, 2019, the Company had $2.3 million in assets held for sale recorded within prepaid expenses and other current assets in the Company's condensed balance sheets.

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


	Fair Value Measurements as of June 30, ,2020
	Total		Level 1		Level 2		Level 3
	(in millions)
Cash and cash equivalents	$	1,127.5	$	1,127.5	$	—	$	—


Restricted cash	30.0		30.0		—		—
Short-term investment securities	106.3		106.3		—		—
Assets held for sale	2.3		—		—		2.3
Total assets	$	1,266.1	$	1,263.8	$	—	$	2.3




Total liabilities	$	—	$	—	$	—	$	—

Fair Value Measurements as of September 30, 2017
Total
Level
1
Level
2
Level
3

(in millions)
Cash and cash equivalents $ 863.7

$ 863.7

$ —

$ —
Short-term investment securities 100.7

100.7

—

—
Total assets $ 964.4

$ 964.4

$ —

$ —

Total liabilities $ —

$ —

$ —

$ —

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

(in millions)
Cash and cash equivalents $ 700.9

$ 700.9

$ —

$ —
Short-term investment securities 100.2

100.2

—

—
Total assets $ 801.1

$ 801.1

$ —

$ —

Total liabilities $ —

$ —

$ —

$ —


	Fair Value Measurements as of December 31, 2019
	Total		Level 1		Level 2		Level 3
	(in millions)
Cash and cash equivalents	$	979.0	$	979.0	$	—	$	—


Short-term investment securities	105.3		105.3		—		—
Assets held for sale	2.3						2.3
Total assets	$	1,086.6	$	1,084.3	$	—	$	2.3




Total liabilities	$	—	$	—	$	—	$	—

The Company had no transfers of assets or liabilities between any of the above levels during the ~~nine~~three months ended ~~September~~June 30, ~~2017.~~2020 and the year ended December 31, 2019.


	Assets Held for Sale Activity for the Six Months Ended June 30, 2020
	(in millions)
Balance at December 31, 2019	$	2.3
Purchases	—
Sales	—

Total realized or unrealized gains (losses) included in earnings, net	$	—
Balance at March 31, 2020	$	2.3
Purchases	—
Sales	—
Total realized or unrealized gains (losses) included in earnings, net	—
Balance at June 30, 2020	$	2.3

The Company's Valuation Group, which reports to the Chief Financial Officer, is made up of individuals from the Company's Treasury and Corporate Accounting departments. The Valuation Group is responsible for the execution of the Company's valuation policies and procedures. The Valuation Group compares the results of the Company's internally developed valuation methods with counterparty reports at each balance sheet date, assesses the Company's valuation methods for accurateness and identifies any needs for modification.

13. Debt and Other Obligations


~~10.~~	~~Debt and Other Obligations~~

As of ~~September~~June 30, ~~2017,~~2020, the Company ~~held~~had outstanding non-public and public debt instruments. During the six months ended June 30, 2020, the Company incurred debt through fixed-rate secured and unsecured term loans, secured a new revolving credit facility and issued convertible notes described below.

Fixed-rate secured term loans

The Company entered into facility agreements which as of June 30, 2020, provided $249.0 million for 6 Airbus A320 aircraft delivered during the six months ended June 30, 2020. The loans extended under these facility agreements are secured by a first-priority security interest on the individual aircraft. These loans have a term life of 11 to 12 years and amortize on a mortgage-style basis, which requires quarterly principal and interest payments.

Fixed-rate unsecured term loans

On April 20, 2020, the Company entered into the PSP agreement with the Treasury, pursuant to which the Company has received $301.3 million as of June 30, 2020 and expects to receive an additional $33.4 million on or about July 31, 2020 for a total of $334.7 million under the PSP. These funds are to be used exclusively to pay for salaries, wages and benefits for the Company’s Team Members through September 30, 2020. Of the total amount received as of June 30, 2020, $60.4 million is in the form of a low-interest 10-year unsecured term loan. Of the $33.4 million expected in July 2020, $10.0 million will be in the form of an unsecured term loan under the PSP agreement, resulting in an expected maximum principal amount of $70.4 million. Interest on the loan is payable semi-annually at a rate of 1.0% in years 1 through 5 and a rate of the Secured Overnight Financing Rate plus 2.0% in years 6 through 10. The notes are prepayable at any time, without penalty, at the Company’s option and have principal due at maturity in 2030.

The Company has concluded that no terms exist within the contract that would require a short-term classification of the debt instrument within the Company’s condensed balance sheet at the inception of the loan. Therefore, the debt has been recorded at face value and classified within long-term debt in the Company’s condensed balance sheets. As of June 30, 2020, the Company had recorded $60.4 million in long-term debt on its condensed balance sheets, related to the PSP.

Revolving credit facility due in 2022

On March 30, 2020, the Company entered into the 2022 revolving credit facility for $110.0 million, with an option to increase the overall commitment amount up to $350 million with the consent of any participating lenders and subject to borrowing base availability. In the second quarter of 2020, the commitment was increased to $180.0 million. As of June 30, 2020, the Company had fully drawn the $180.0 million available. Any amounts drawn on this facility are included in long-term debt and finance leases, less current maturities on the Company's condensed balance sheets. The final maturity of the facility is March 30, 2022.

The Company may pledge the following types of assets as collateral to secure its obligations under the revolving credit facility: (i) certain take-off and landing rights of the Company at LaGuardia Airport, (ii) certain eligible aircraft spare parts and ground support equipment, (iii) aircraft, spare engines and flight simulators, (v) real property assets and (vi) cash and cash equivalents. The revolving credit facility bears variable interest based on LIBOR, plus a 2.00% margin per annum, or another rate, at the Company's election, based on certain market interest rates, plus a 1.00% margin per annum, in each case with a floor of 0%.

The 2022 revolving credit facility requires the Company to maintain (i) so long as any loans or letters of credit are outstanding under the 2022 revolving credit facility, unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities (including the 2022 revolving credit facility) aggregating not less than $400 million, of which no more than $200 million may be derived from unused commitments under the 2022 revolving credit facility, (ii) a minimum ratio of the borrowing base of the collateral described above (determined as the sum of a specified percentage of the appraised value of each type of such collateral) to outstanding obligations under the 2022 revolving credit facility of not less than 1.0 to 1.0 (if the Company does not meet the minimum collateral coverage ratio, it must either provide additional collateral to secure its obligations under the 2022 revolving credit facility or repay the loans under the 2022 revolving credit facility by an amount necessary to maintain compliance with the collateral coverage ratio), and (iii) at any time following the date that is one month after the effective date of the 2022 revolving credit facility, the pledged take-off and landing rights of the Company at LaGuardia Airport and a specified number of spare engines in the collateral described above so long as any loans or letters of credit are outstanding under the 2022 revolving credit facility.

Revolving credit facility due in 2021

During the fourth quarter of 2018, the Company entered into a revolving credit facility for up to $160.0 million secured by the collateral assignment of certain of the Company's rights under the purchase agreement with Airbus, related to 43 Airbus A320neo aircraft scheduled to be delivered between August 2019 and December 2021.

In June 2020, the Company entered into an agreement to amend the revolving credit facility originally maturing in December 2020. The agreement amends the revolving credit facility to extend the final maturity date from December 30, 2020 to March 31, 2021. Upon execution of the amended agreement, the maximum borrowing capacity decreased from $160.0 million to $111.2 million. This facility is secured by the collateral assignment of certain of the Company’s rights under the purchase agreement with Airbus, related to 20 Airbus A320neo aircraft scheduled to be delivered between August 2020 and September 2022. The initial maximum borrowing capacity of $111.2 million will decrease as the Company takes delivery of the related aircraft.

As of June 30, 2020 and December 31, 2019, the Company had drawn $111.2 million and $160.0 million, respectively, on the facility, which is included in current maturities of long-term debt and capital leases on the Company's condensed balance sheets. The revolving credit facility bears variable interest based on LIBOR.

Convertible debt

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. The convertible notes bear interest at the rate of 4.75% per year and will mature on May 15, 2025. Interest on the notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2020.

To allocate the proceeds of the convertible notes, the Company first determined the fair value of the debt component of the convertible notes based on a similar liability with no conversion feature and utilized a discounted cash flow method whereby the contractual cash flows have been discounted at a risk-adjusted yield reflective of both the time value of money and the credit risk inherent in the convertible notes, as well as certain observable inputs. The Company allocated the remaining proceeds of the convertible notes to the equity component within APIC. The Company will accrete the resulting discount on the debt component through interest expense, using the effective interest method, over the 5-year life of the instrument. The Company received proceeds of $168.3 million as a result of the offering, net of total issuance costs of $6.7 million. The Company recorded $95.6 million in long-term debt, net of debt issuance costs of $3.8 million on its condensed balance sheets, related to the debt component of the convertible notes, and $72.7 million in APIC, net of issuance costs of $2.9 million on its condensed balance sheets, related to the equity component of the convertible notes. As of June 30, 2020, the if-converted value exceeds the principal amount of the convertible notes by $38 million using an average stock price in the period.

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.

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. 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. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its convertible notes in connection with such a corporate event in certain circumstances. In the event of a “Fundamental Change,” as defined in the indenture governing the convertible notes, the holders may require the Company to purchase for cash all or a portion of their notes at a purchase price equal to the principal amount of the notes, plus accrued and unpaid interest, if any. The Company may not redeem the notes at its option prior to the maturity date.

Long-term debt is comprised of the following:

~~Notes to Condensed Financial Statements—(Continued)~~


	As of									As of
			June 30, 2020			December 31, 2019			June 30, 2020			December 31, 2019
	(in millions)									(weighted-average interest rates)
Fixed-rate senior term loans due through 2027	$	279.4		$	296.1		3.55	%		4.02	%
Fixed-rate loans due through 2031	992.2			778.2			3.34	%		3.70	%
Unsecured term loans due in 2030	60.4			—			1.00	%		N/A
Fixed-rate class A 2015-1 EETC due through 2028	333.5			348.6			4.10	%		4.10	%
Fixed-rate class B 2015-1 EETC due through 2024	68.0			72.0			4.45	%		4.45	%
Fixed-rate class C 2015-1 EETC due through 2023	92.4			98.1			4.93	%		4.93	%
Fixed-rate class AA 2017-1 EETC due through 2030	221.4			228.4			3.38	%		3.38	%
Fixed-rate class A 2017-1 EETC due through 2030	73.8			76.1			3.65	%		3.65	%
Fixed-rate class B 2017-1 EETC due through 2026	65.6			70.6			3.80	%		3.80	%
Fixed-rate class C 2017-1 EETC due through 2023	85.5			85.5			5.11	%		5.11	%
Convertible debt due in 2025	101.4			—			4.75	%		N/A
Revolving credit facility due in 2021	111.2			160.0			1.58	%		3.12	%
Revolving credit facility due in 2022	180.0			—			2.19	%		N/A
Long-term debt	2,664.8			2,213.6
Less current maturities	287.8			214.0
Less unamortized discounts, net	44.8			40.4
Total	$	2,332.2		$	1,959.2

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

Less current maturities 106.0
84.4

Less unamortized discounts

34.6
30.6

Total $ 1,214.1
$ 897.4

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 the Company made scheduled principal payments of ~~$13.4~~$106.9 million and ~~$63.4~~$149.4 million, respectively, on its outstanding debt ~~obligations, respectively.~~obligations. During the three and ~~nine~~six months ended ~~September~~and June 30, ~~2016,~~2019, the Company made scheduled principal payments of ~~$10.0~~$47.9 million and ~~$29.6~~$85.8 million, respectively, on its outstanding debt ~~obligations, respectively.~~obligations.

At ~~September~~June 30, ~~2017,~~2020, long-term debt principal payments for the next five years and thereafter are as follows:


	June 30, 2020
	(in millions)
remainder of 2020	$	110.2
2021	278.3
2022	365.6
2023	329.8
2024	215.1
2025 and beyond	1,365.8
Total debt principal payments	$	2,664.8

September 30, 2017
(in millions)
Remainder of 2017 $ 39.0
2018 108.0
2019 107.5
2020 107.1
2021 106.9
2022 and beyond 886.2
Total debt principal payments $ 1,354.7

Interest Expense

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

~~Notes to Condensed Financial Statements—(Continued)~~


	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
	(in thousands)
Fixed-rate senior term loans	$	2,601		$	3,878		$	5,414		$	7,823
Fixed-rate junior term loans	—			489			—			1,012
Fixed-rate term loans	8,210			6,432			15,823			12,634
Unsecured term loans	57			—			57			—
Class A 2015-1 EETC	3,403			3,709			6,952			7,547
Class B 2015-1 EETC	752			841			1,548			1,721
Class C 2015-1 EETC	1,138			1,280			2,347			2,615
Class AA 2017-1 EETC	1,868			1,997			3,755			3,986
Class A 2017-1 EETC	673			720			1,354			1,437
Class B 2017-1 EETC	623			737			1,267			1,491
Class C 2017-1 EETC	1,092			1,092			2,184			2,171
Convertible debt (1)	3,138			—			3,138			—
Revolving credit facilities	1,456			1,559			2,614			2,973
Amortization of deferred financing costs	2,526			2,177			4,632			4,369
Commitment and other fees	228			46			445			119
Finance leases	27			309			140			339
Total	$	27,792		$	25,266		$	51,670		$	50,237

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands)
Senior term loans $ 4,564
$ 4,917
$ 13,854
$ 14,929
Junior term loans 746
879
2,323
2,721
Fixed-rate loans 2,811
—
4,555
—
Class A enhanced equipment trust certificates 4,366
3,538
12,995
7,419
Class B enhanced equipment trust certificates 1,118
1,015
3,410
2,124
Commitment fees 29
32
87
97
Amortization of debt discounts 1,362
979
3,883
2,289
Total $ 14,996
$ 11,360
$ 41,107
$ 29,579

(1) Includes $2.0 million of accretion and $1.1 million of interest expense for the three and six months ended June 30, 2020.


~~11.~~	~~Subsequent Events~~

14. Equity

Common Stock Offering

On May 12, 2020, Spirit Airlines, Inc. (the “Company”) completed the public offering of 20,125,000 shares of voting common stock of the Company, which includes full exercise of the underwriters’ option to purchase an additional 2,625,000 shares of common stock, at a public offering price of $10.00 per share (the “Common Stock Offering”). In connection with the common stock offering, the Company received proceeds of $192.4 million, net of $8.9 million in related issuance costs. The Company recorded common stock at par of $20.2 thousand and the excess proceeds within APIC.

Preferred Stock and Material Modifications to Rights of Security Holders

On ~~October 25, 2017,~~March 29, 2020, the ~~Company's~~ Board of Directors ~~authorized~~of the Company declared a ~~new repurchase program~~dividend of up1 preferred stock purchase right (a “Right”) for each outstanding share of common stock of the Company. The dividend was paid on April 9, 2020 (the “Record Date”) to ~~$100 million~~holders of record as of the close of business on that date. Pursuant to a Rights Agreement (the "Rights Agreement") between the Company and Equiniti Trust Company, as Rights Agent. The Rights will initially trade with, and will be inseparable from, the Company's common stock, and the registered holders of the Company's common stock will be deemed to be the registered holders of the Rights. In addition, each share issued upon conversion of the convertible notes and the common stock issued on May 12, 2020 pursuant to our offering of common stock will have such Right.

The Board of Directors has adopted the Rights Agreement to reduce the likelihood that a potential acquirer would gain (or seek to influence or change) control of the Company by open market accumulation or other tactics without paying an appropriate premium for the Company’s shares. In general terms and subject to certain exceptions, it works by imposing a significant penalty upon any person or group (including a group of persons that are acting in ~~aggregate value~~concert with each other) that acquires 10% or more of ~~shares~~the outstanding common stock of ~~our Common~~the Company without the approval of the Board of Directors.

The Rights will not be exercisable until after the Distribution Date (as defined below). After the Distribution Date, each Right will be exercisable to purchase, for $60.00 (the “Purchase Price”), one one-thousandth of a share of Series A Participating Cumulative Preferred Stock, par value $0.0001 per share ~~from time~~(the “Preferred Stock”). This portion of a share of Preferred Stock will give the stockholder approximately the same dividend, voting or liquidation rights as would one share of the Company’s common stock. Prior to ~~time~~exercise, Rights holders in ~~open market or privately negotiated transactions.~~their capacity as such have no rights as a stockholder of the Company, including the right to vote and to receive dividends. The ~~authorization~~Rights will expire on ~~October 25, 2018.~~ March 29, 2021, unless earlier exercised, exchanged, amended or redeemed.

The ~~timing~~Board of Directors may redeem all of the Rights at a price of $0.001 per Right at any time before any person has become an Acquiring Person. If the Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price per Right. The redemption price will be subject to adjustment.

The “Distribution Date” generally means the earlier of:

•the close of business on the 10^th business day after the date of the first public announcement that a person or any of its affiliates and ~~amount~~associates has become an “Acquiring Person,” as defined below, and

•the close of business on the 10^th business day (or such later day as may be designated by the Board of Directors before any person has become an Acquiring Person) after the date of the commencement of a tender or exchange offer by any person which would, if consummated, result in such person becoming an Acquiring Person.

An “Acquiring Person” generally means any person who or which, together with all affiliates and associates of such person obtains beneficial ownership of 10% or more of shares of the Company’s common stock, with certain exceptions, including that an Acquiring Person does not include the Company, any subsidiary of the Company, any employee benefit plan of the Company or any subsidiary of the Company, any entity or trustee holding the Company’s common stock for or pursuant to the terms of any such plan or for the purpose of funding any such plan or other benefits for employees of the Company or of any subsidiary of the Company or any passive investor. A passive investor generally means any person beneficially owning shares of the Company’s common stock ~~repurchases are~~without a plan or an intent to seek control of or influence the Company. The Rights Agreement also provides that any person that would otherwise be deemed an Acquiring Person as of the date of the adoption of the Rights Agreement will be exempted but only for so long as it does not acquire, without the prior approval of the Board, beneficial ownership of any additional common stock of the Company following the adoption of the Rights Agreement.

The value of one one-thousandth interest in a share of Preferred Stock should approximate the value of one share of Common Stock, subject to ~~prevailing~~adjustment. Each one one-thousandth of a share of Preferred Stock, if issued:

•will not be redeemable,

•will entitle holders to quarterly dividend payments of $0.01 per share, or an amount equal to the dividend paid on one share of Common Stock, whichever is greater,

•will entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of Common Stock, whichever is greater,

•will have the same voting power as one share of Common Stock,

•if shares of the Common Stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of Common Stock.

Consequences of a Person or Group Becoming an Acquiring Person

Flip in. Subject to the Company’s exchange rights, described below, at any time after any person has become an Acquiring Person, each holder of a Right (other than an Acquiring Person, its affiliates and associates) will be entitled to purchase for each Right held, at the Purchase Price, a number of shares of the Company’s common stock having a market ~~conditions~~value of twice the Purchase Price.

Exchange. At any time on or after any person has become an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the outstanding shares of the Company's common stock or the occurrence of any of the events described in the next paragraph), the Board of Directors may exchange all or part of the Rights (other than Rights beneficially owned by an Acquiring Person, its affiliates and associates) for shares of the Company’s common stock at an exchange ratio of one share of the Company’s common stock per Right.

Flip over. If, after any person has become an Acquiring Person, (1) the Company is involved in a merger or other business combination in which the Company is not the surviving corporation or its common stock is exchanged for other securities or assets or (2) the Company and/or one or more of its subsidiaries sell or otherwise transfer assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries, taken as a whole, then each Right (other than Rights beneficially owned by an Acquiring Person, its affiliates and associates) will entitle the holder to purchase for each Right held, for the Purchase Price, a number of shares of common stock of the other party to such business combination or sale (or in certain circumstances, an affiliate) having a market value of twice the Purchase Price.

Warrants

In connection with its participation in the PSP agreement with the Treasury, the Company is obligated to issue to Treasury warrants pursuant to a warrant agreement to purchase up to 500,150 shares of the Company’s common stock at a strike price of $14.08 per share (the closing price for the shares of the Company's common stock on April 9, 2020). The warrant agreement sets out the Company’s obligations to issue warrants in connection with disbursements under the PSP and to file a resale shelf registration statement for the warrants and the underlying shares of common stock. The Company has also granted the Treasury certain demand and piggyback registration rights with respect to the warrants and the underlying common stock. The warrants will include adjustments for below market issuances, payment of dividends and other ~~considerations.~~customary anti-dilution provisions. The warrants will be transferable and have no voting rights. The warrants will expire in five years from the date of issuance and, at the Company’s option, may be settled on a “net cash” or “net shares” basis. Refer to Note 2, Impact of COVID-19, for further information on the PSP agreement with Treasury. As of June 30, 2020, the Company received total proceeds of $301.3 million, representing 3 of the 4 installments of funding under the PSP, in exchange for which the Company issued to Treasury $60.4 million in 10-year notes and warrants to purchase 428,829shares of the Company's common stock, representing less than 1% of the outstanding shares of the Company's common stock as of July 15, 2020.

The Company concluded that the PSP warrants agreement is a derivative contract classified within equity, at fair value upon issuance, within the Company’s condensed balance sheet. Equity-classified contracts are initially measured at fair value and subsequent changes in fair value are not recognized as long as the contract continues to be classified in equity. As of June 30, 2020, the Company had recorded $2.5 million, net of issuance cost, in APIC related to the fair value of the warrants issued in the period.


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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~Securities Act)~~"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~Exchange Act)~~"Exchange Act"), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical factors are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” in this report and in Item 1A "Risk Factors" in our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2016~~2019 and subsequent Quarterly Reports on Form ~~10-Q.~~10-Q or Current Reports on Form 8-K. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

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

Exchange ("NYSE").

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

We ~~are focused~~focus on ~~price-sensitive~~value-conscious travelers who pay for their own travel, and our business model is designed to deliver what ~~we believe~~ our ~~customers~~Guests want: low ~~fares. We aggressively use low~~ fares to address an underserved market, which helps us to increase passenger volume, load factors and non-ticket revenue on the flights we operate. We also have high-density seating configurations on our aircraft and a ~~simplified onboard product designed to lower costs, which is part of our Plane Simple~~^TMstrategy. High passenger volumes and load factors help us sell more ancillary products and services, which in turn allows us to reduce the base fare we offer even further. We strive to be recognized by our customers and potential customers as the low-fare leader in the markets we serve.

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

~~We allow our customers~~Guests to see all available options and their respective prices prior to purchasing a ticket, and this full transparency illustrates that our total price, including options selected, is lower on average than other ~~airlines~~airlines. By offering Guests unbundled base fares, we give them the power to save by paying only for the À La Smarte^TM 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 ~~average. Through branded campaigns, we educate~~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 ~~public~~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 ~~how~~the go, and our ~~unbundled pricing model works, showing them how it gives them choice on how they spend their money~~airport kiosks and ~~saves them money compared to other airlines.~~self-bag tagging help our Guests move through the airport more quickly.

Comparative Operating Statistics:

The following tables set forth our operating statistics for the three and ~~nine-month~~six month periods ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~:2019:


	Three Months Ended June 30,						Percent Change
	2020		2019
Operating Statistics (unaudited) (A):
Average aircraft	151.9		134.5		12.9	%
Aircraft at end of period	154		135		14.1	%

Average daily aircraft utilization (hours)	2.0		12.8		(84.4)	%
Average stage length (miles)	960		1,004		(4.4)	%
Block hours	27,423		157,182		(82.6)	%
Departures	10,754		58,517		(81.6)	%
Passenger flight segments (PFSs) (thousands)	900		8,953		(89.9)	%
Revenue passenger miles (RPMs) (thousands)	894,900		9,157,488		(90.2)	%
Available seat miles (ASMs) (thousands)	1,809,874		10,775,878		(83.2)	%
Load factor (%)	49.4	%	85.0	%	(35.6) pts
Fare revenue per passenger flight segment ($)	70.82		57.60		23.0	%
Non-ticket revenue per passenger flight segment ($)	83.03		55.54		49.5	%
Total revenue per passenger flight segment ($)	153.85		113.14		36.0	%
Average yield (cents)	15.48		11.06		40.0	%
TRASM (cents)	7.65		9.40		(18.6)	%
CASM (cents)	18.17		7.88		130.6	%
Adjusted CASM (cents)	26.57		7.86		238.0	%
Adjusted CASM ex-fuel (cents)	25.47		5.41		370.8	%
Fuel gallons consumed (thousands)	18,997		122,447		(84.5)	%
Average economic fuel cost per gallon ($)	1.05		2.16		(51.4)	%

Three Months Ended September 30, Percent Change
2017 2016
Operating Statistics (unaudited) (A):
Average aircraft 105.5
87.4
20.7 %
Aircraft at end of period 107
89
20.2 %
Average daily aircraft utilization (hours) 11.6
12.3
(5.7 )%
Average stage length (miles) 1,006
968
3.9 %
Block hours 112,701
98,586
14.3 %
Departures 42,599
38,310
11.2 %
Passenger flight segments (PFSs) (thousands) 6,307
5,674
11.2 %
Revenue passenger miles (RPMs) (thousands) 6,452,529
5,599,370
15.2 %
Available seat miles (ASMs) (thousands) 7,681,312
6,507,204
18.0 %
Load factor (%) 84.0 % 86.0 % (2.0) pts
Average ticket revenue per passenger flight segment ($) 56.48
58.34
(3.2 )%
Average non-ticket revenue per passenger flight segment ($) 52.48
51.17
2.6 %
Total revenue per passenger flight segment ($) 108.96
109.51
(0.5 )%
Average yield (cents) 10.65
11.10
(4.1 )%
TRASM (cents) 8.95
9.55
(6.3 )%
CASM (cents) 7.59
7.47
1.6 %
Adjusted CASM (cents) 7.48
7.35
1.8 %
Adjusted CASM ex-fuel (cents) 5.42
5.48
(1.1 )%
Fuel gallons consumed (thousands) 90,274
78,288
15.3 %
Average economic fuel cost per gallon ($) 1.75
1.56
12.2 %

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

Nine Months Ended September 30, Percent Change
2017 2016
Operating Statistics (unaudited) (A):
Average aircraft 101.9
84.1
21.2 %
Aircraft at end of period 107
89
20.2 %
Average daily aircraft utilization (hours) 11.7
12.6
(7.1 )%
Average stage length (miles) 991
978
1.3 %
Block hours 326,033
290,529
12.2 %
Departures 123,492
111,495
10.8 %
Passenger flight segments (PFSs) (thousands) 18,083
16,268
11.2 %
Revenue passenger miles (RPMs) (thousands) 18,285,588
16,219,093
12.7 %
Available seat miles (ASMs) (thousands) 21,851,789
18,909,627
15.6 %
Load factor (%) 83.7 % 85.8 % (2.1) pts
Average ticket revenue per passenger flight segment ($) 56.84
55.32
2.7 %
Average non-ticket revenue per passenger flight segment ($) 52.69
51.85
1.6 %
Total revenue per passenger flight segment ($) 109.53
107.17
2.2 %
Average yield (cents) 10.83
10.75
0.7 %
TRASM (cents) 9.06
9.22
(1.7 )%
CASM (cents) 7.71
7.33
5.2 %
Adjusted CASM (cents) 7.64
7.15
6.9 %
Adjusted CASM ex-fuel (cents) 5.62
5.45
3.1 %
Fuel gallons consumed (thousands) 254,871
225,851
12.8 %
Average economic fuel cost per gallon ($) 1.73
1.42
21.8 %


	Six Months Ended June 30,						Percent Change
	2020		2019
Operating Statistics (unaudited) (A):
Average aircraft	149.7		132.6		12.9	%
Aircraft at end of period	154		135		14.1	%

Average daily aircraft utilization (hours)	6.8		12.5		(45.6)	%
Average stage length (miles)	1,011		1,016		(0.5)	%
Block hours	185,270		300,612		(38.4)	%
Departures	68,928		110,692		(37.7)	%
Passenger flight segments (PFSs) (thousands)	8,554		16,773		(49.0)	%
Revenue passenger miles (RPMs) (thousands)	8,843,863		17,290,518		(48.9)	%
Available seat miles (ASMs) (thousands)	12,723,808		20,604,922		(38.2)	%
Load factor (%)	69.5	%	83.9	%	-14.4 pts
Fare revenue per passenger flight segment ($)	45.04		55.57		(18.9)	%
Non-ticket revenue per passenger flight segment ($)	61.31		55.85		9.8	%
Total revenue per passenger flight segment ($)	106.35		111.42		(4.6)	%
Average yield (cents)	10.29		10.81		(4.8)	%
TRASM (cents)	7.15		9.07		(21.2)	%
CASM (cents)	9.10		7.85		15.9	%
Adjusted CASM (cents)	10.29		7.83		31.4	%
Adjusted CASM ex-fuel (cents)	8.46		5.43		55.8	%
Fuel gallons consumed (thousands)	136,942		232,275		(41.0)	%
Average economic fuel cost per gallon ($)	1.70		2.13		(20.2)	%

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

Executive Summary

We experienced healthy passenger booking and revenue trends for the first two months of 2020 and year-over-year increases that were in line with our expectations. However, as a result of the COVID-19 pandemic, we experienced sharp declines in passenger demand and bookings beginning in March 2020, which continued through the second quarter of 2020, and had an unprecedented level of cancellations. As a result, our operations were adversely affected by this reduction in air travel demand in the second quarter of 2020.

With the sudden and significant reduction in air travel demand resulting from the COVID-19 pandemic, our load factor significantly decreased beginning in the latter part of March 2020 and remained as such through the majority of the second quarter of 2020. Load factor for the second quarter of 2020 was 49.4% as compared to 85.0% for the same period in the prior year. We continued to experience weak passenger demand and bookings in the quarter driving a decrease in operating revenues of 86.3%, year over year, and a decrease in capacity of 83.2%, year over year. As the COVID-19 pandemic evolves, our financial and operational outlook remains subject to change. We continue to monitor the impact of the pandemic on our operations and financial condition, and to implement mitigation strategies while working to preserve our cash and protect our long-term sustainability.

We have implemented measures for the safety of our Guests and Team Members as well as to mitigate the impact of COVID-19 on our financial position and operations.

Caring for Guests and Team Members

Our Operations and Task Force teams remain in constant contact with authorities, continuing to evolve its response to ensure the safety of Guests and Team Members. In addition to previously existing procedures including utilization of hospital-grade disinfectants and state-of-the-art HEPA filters that capture 99.97% of airborne particles on board the aircraft, we have implemented the following steps to protect its Guests and Team Members:

•Secured and distributed additional supplies of gloves and sanitizer across the our network and augmented the contents of onboard supply kits to contain additional cleaning and sanitizing materials;

•Secured and provided face coverings for all crew and Guest facing team members;

•Launched a new antimicrobial fogging tool in our facilities and aircraft that uses a product that forms an invisible barrier on all surfaces killing bacteria and viruses on contact for 30 days;

•Split our Operational Control Center ("OCC")into multiple units to enable social distancing and prepared the OCC to work remotely to minimize potential operational disruption;

•Implemented a remote work policy for the Support Center teams to maintain support of our operations;

•Required all Guests and Guest-facing Team Members to wear an appropriate face covering when traveling through the airport or onboard aircraft;

•Offered future flight credits with extended expiration dates to Guests with impacted travel plans and waived change and cancellation fees for Guests who booked travel by July 31, 2020.

Supporting Communities

During this unprecedented time, many travelers became stranded abroad when bans and other restrictions on travel were implemented globally and domestically with little notice. We have worked with embassies and local governments in Aruba, Colombia, Dominican Republic, Ecuador, Haiti, Honduras, Panama and the U.S. to operate special flights for stranded travelers in such countries. Thus far, we have provided over 140 flights to more than 18,000 stranded travelers and preparations continue to transport many more. In addition, we have pledged $250 thousand in vouchers for flights to minority organizations.

We have also made efforts to address the growing needs of its communities through The Spirit Airlines Charitable Foundation (the “Foundation”). As part of the its focus on supporting families, the Foundation partnered with other non-profit organizations including the YMCA and Jack and Jill Children’s Center to provide food to seniors and families struggling during this time and supported organizations creating face coverings for healthcare workers. In addition, we have partnered to offer Guests face coverings for a small contribution to the Red Cross.

Capacity Reductions

In March 2020, in response to government restrictions on travel and drastically reduced consumer demand, we began to reduce capacity. We reduced capacity for April 2020 by 76.2% in April, year over year and May 2020 capacity was reduced by approximately 93.9%, year over year. We had initially expected to reduce June 2020 capacity by approximately 95%, year over year. However, due to an increase in demand for air travel, we added some flights back to the June schedule, building throughout the month, resulting in an average capacity reduction of 79.0%, year over year. Capacity in July, August and September of 2020 has been reduced by approximately 18%, 35% and 45% respectively, year over year. We continue to closely monitor demand and will make adjustments to the flight schedule as appropriate. We currently estimate that air travel demand recovery will be volatile and will fluctuate in the upcoming months as the lingering effects of COVID-19 continue to emerge. Overall, we expect that air travel demand will continue to gradually recover in the second half of 2020 through 2021. However, the situation continues to be fluid and actual capacity adjustments may be different than what we currently expect. Refer to "Notes to Condensed Financial Statements—4. Revenue," for discussion of the impact of COVID-19 on our air traffic liability, credit shells and refunds.

CARES Act

providing the airline industry with up to $25 billion in grants to be used for employee salaries, wages and benefits and up to $25 billion in secured loans.

On April 20, 2020, we entered into a Payroll Support Program Agreement ("PSP") with the United States Department of the Treasury ("Treasury"), pursuant to which we expect to receive a total of $334.7 million, to be used exclusively to pay for salaries, wages and benefits for our Team Members through September 30, 2020. Of that amount, up to $70.4 million is in the form of a low-interest 10-year loan. In addition, in connection with its participation in the PSP, we are obligated to issue to Treasury warrants pursuant to a warrant agreement to purchase up to 500,150 shares of our common stock at a strike price of $14.08 per share (the closing price for the shares of our common stock on April 9, 2020). As of June 30, 2020, we had received total proceeds of $301.3 million, representing 3 of the 4 installments of funding under the PSP, in exchange for which we issued to Treasury $60.4 million in 10-year notes and warrants to purchase 428,829 shares of common stock valued and recorded at $2.5 million in APIC and $238.4 million in deferred salaries, wages and benefits within our condensed balance sheet. For additional information on the notes issued, please refer to "Notes to Condensed Financial Statements—13. Debt and Other Obligations." For additional information on the warrants issued, please refer to "Notes to Condensed Financial Statements—14. Equity." We expect to receive proceeds of $33.4 million with the fourth and final installment of the PSP on or around July 31, 2020, in exchange for an additional $10.0 million in 10-year notes and warrants to purchase an additional 71,321 shares of common stock to be issued to the Treasury. The warrants issued represent less than 1% of the outstanding shares of our common stock as of July 15, 2020.

During the ~~third~~three and six ended June 30, 2020, we recognized $123.9 million of the deferred salaries, wages and benefits within special credits on our condensed statements of operations. For additional information, refer to "Notes to Condensed Financial Statements—6. Special Credits."

In connection with our receipt of funds under the PSP, we are subject to certain restrictions, including, but not limited to:

•Restrictions on payment of dividends and stock buybacks through September 30, 2021;

•Requirements to maintain certain levels of scheduled service through September 30, 2020;

•A prohibition on involuntary terminations or furloughs of our employees (except for health, disability, cause, or certain disciplinary reasons) through September 30, 2020;

•A prohibition on reducing the salary, wages, or benefits of our employees (other than our executive officers or independent contractors, or as otherwise permitted under the terms of the PSP) through September 30, 2020;

•Limits on certain executive compensation, including limiting pay increases and severance pay or other benefits upon terminations, through March 24, 2022;

•Use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits and;

•We are subject to additional reporting and recordkeeping requirements relating to the CARES Act funds.

On April 29, 2020, we applied for additional funds under the Treasury's loan program under the CARES Act (“Loan Program”). The expected maximum availability under the Loan Program is approximately $741 million in the form of a secured loan. However, the loan amount is dependent on the amount and types of collateral accepted, which may result in an actual loan less than $741 million, if we accept the loan. Any loan received pursuant to the Loan Program would be subject to the restrictions and relevant provisions of the CARES Act, including many of those noted above for the PSP. Our participation in the Loan Program could materially increase the funds available to us as we work through the operational and business issues related to the COVID-19 pandemic and provide a base of available funding that could encourage private market transactions. On July 1, 2020, we executed a non-binding letter of intent with the Treasury which summarizes the principal terms of the financing request submitted to the Treasury. We continue to negotiate the terms of a definitive financing agreement under the Loan Program with the Treasury. In addition, subject to such negotiations, we will continue to evaluate our future cash flow needs and will determine whether or not to accept any or all of the funds available from the Loan Program. The deadline to make the election under the Loan Program is September 30, 2020.

qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages through year end. We qualified for the credit beginning on April 1, 2020 and expect to continue to receive additional credits for qualified wages through December 31, 2020. During the three and six months ended June 30, 2020, we recorded $28.0 million related to the CARES Employee Retention credit within special credits on the Company’s condensed statements of operations and within accounts receivable, net on our condensed balance sheet. We expect to record an additional approximately $10 million in CARES Employee Retention credits in the remainder of 2020. For additional information, refer to "Notes to Condensed Financial Statements—6. Special Credits."

The CARES Act also provides for certain tax loss carrybacks and a waiver on federal fuel taxes through December 31, 2020. As of ~~2017~~June 30, 2020, we ~~achieved~~had recognized $140.8 million in related tax loss carrybacks and $0.8 million in federal fuel tax savings reflected within fuel in the Company’s statements of operations. We expect to recognize an additional $5 million in savings related to the waiver on federal fuel taxes in the remainder of 2020.

Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.This is expected to provide us with approximately $24 million of additional liquidity during the current year. As of June 30, 2020, the we had deferred $10.0 million in social security tax payments. The deferred amounts are recorded as a liability within other current liabilities on our condensed balance sheet.

Balance Sheet, Cash Flow and Liquidity

Since the onset of the spread of COVID-19 in the U.S. in the first quarter of 2020, we have taken several actions to increase liquidity and strengthen our financial position. As a result of these actions, as of June 30, 2020, we had unrestricted cash and cash equivalents and short-term investment securities of $1,233.8 million.

In March 2020, we entered into a senior secured revolving credit facility (the "2022 revolving credit facility") for an initial commitment amount of $110.0 million, and subsequently, in the second quarter of 2020, increased the commitment amount to $180.0 million. As of June 30, 2020, we had fully drawn the available amount of $180.0 million under the 2022 revolving credit facility. The 2022 revolving credit facility matures on March 30, 2022. The Company continues to pursue additional financing secured by its unencumbered assets. Refer to~~15.1%~~ "Notes to Condensed Financial Statements—13. Debt and Other Obligations," for additional information about the 2022 revolving credit facility.

On May 12, 2020, we completed the public offering of $175.0 million aggregate principal amount of 4.75% convertible senior notes due 2025 (the “convertible notes”). The convertible notes will bear interest at the rate of 4.75% per year and will mature on May 15, 2025. Interest on the convertible notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2020. We received proceeds of $168.3 million, net of total issuance costs of $6.7 million and recorded $95.6 million in long-term debt, net of debt issuance costs of $3.8 million on the condensed balance sheets, related to the debt component of the convertible notes, and $72.7 million in APIC, net of issuance costs of $2.9 million on the condensed balance sheets, related to the equity component of the convertible notes. For additional information on our convertible debt, refer to "Notes to Condensed Financial Statements—13. Debt and Other Obligations."

Also on May 12, 2020, we completed the public offering of 20,125,000 shares of our voting common stock, which includes full exercise of the underwriters’ option to purchase an additional 2,625,000 shares of common stock, at a public offering price of $10.00 per share (the “common stock offering”). We received proceeds of $192.4 million, net of issuance costs of $8.9 million. For additional information about our common stock offering, refer to "Notes to Condensed Financial Statements—14. Equity."

In June 2020, we entered into an agreement to amend our revolving credit facility entered into in 2018 to finance aircraft pre-delivery payments. The agreement amends the revolving credit facility to extend the final maturity date from December 30, 2020 to March 31, 2021. Upon execution of the amended agreement, the maximum borrowing capacity decreased from $160.0 million to $111.2 million and during the six months ended June 30, 2020 the Company made net principal payments of $48.8 million. This facility is secured by the collateral assignment of certain of our rights under the purchase agreement with Airbus, related to 20 Airbus A320neo aircraft scheduled to be delivered between August 2020 and October 2022. The initial maximum borrowing capacity of $111.2 million will continue to decrease as we take delivery of the related aircraft. The amendment will provide an additional approximately $54 million in liquidity through March 2021. For additional information, refer to "Notes to Condensed Financial Statements—Note 13. Debt and Other Obligations."

Also, in June 2020, we entered into an agreement to defer certain aircraft deliveries originally scheduled in 2020 and 2021, as well as the related pre-delivery deposit payments. During the six months ended June 30, 2020, we took delivery of 9 aircraft

and with this agreement, we have 3 remaining aircraft scheduled for delivery during the remainder of 2020 and 16 aircraft scheduled for delivery in 2021. For additional information about our future aircraft deliveries, refer to "Notes to Condensed Financial Statements—Note 11. Commitments and Contingencies."

In addition, since the onset of the COVID-19 pandemic, we have taken additional action, including: