Spirit Airlines, Inc. (NYSE:SAVE) Q2 2023 Earnings Conference Call August 3, 2023 10:00 AM ET Company Participants Vivian Taveras - Investor Relations Manager Ted Christie - President and Chief Executive Officer Matthew Klein - Executive Vice President & Chief Commercial Officer Scott Haralson - Executive Vice President and Chief Financial Officer Conference Call Participants Conor Cunningham - Melius Research Duane Pfennigwerth - Evercore ISI Scott Group - Wolfe Research Jamie Baker - JPMorgan Chase Stephe ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________________________________ Form 10-Q _______________________________________________________________________ (Mark One) (Registrant's telephone number, including area code) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1 ...

Spirit Airlines, Inc. (NYSE:SAVE) Q1 2023 Earnings Conference Call April 27, 2023 10:00 AM ET Company Participants Ted Christie - President & Chief Executive Officer and Class III Director Matthew Klein - Executive Vice President and Chief Commercial Officer Scott Haralson - Executive Vice President And Chief Financial Officer Conference Call Participants Duane Pfennigwerth - Evercore Partners Jamie Baker - JPMorgan Stephen Trent - Citi Research Conor Cunningham - Melius Research Helane Becker - Cowen Micha ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) Overview of the company's financial performance, condition, and cash flows for the period [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) Spirit Airlines reported increased Q1 2023 operating revenues and reduced net loss, alongside growing assets and positive operating cash flow Condensed Consolidated Statements of Operations ($ thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Total operating revenues** | $1,349,774 | $967,315 | | **Total operating expenses** | $1,462,169 | $1,178,783 | | **Operating income (loss)** | $(112,395) | $(211,468) | | **Net income (loss)** | $(103,911) | $(194,703) | | **Diluted earnings (loss) per share** | $(0.95) | $(1.79) | Condensed Consolidated Balance Sheets ($ thousands) | | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $1,918,083 | $1,993,983 | | **Total assets** | $9,322,317 | $9,184,774 | | **Total current liabilities** | $1,752,609 | $1,596,581 | | **Total liabilities** | $7,852,471 | $7,613,123 | | **Total shareholders' equity** | $1,469,846 | $1,571,651 | Condensed Consolidated Statements of Cash Flows ($ thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $140,777 | $19,545 | | **Net cash used in investing activities** | $(67,566) | $(57,619) | | **Net cash used by financing activities** | $(131,842) | $(47,520) | | **Net decrease in cash, cash equivalents, and restricted cash** | $(58,631) | $(85,594) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the pending JetBlue merger, revenue disaggregation, special charges, aircraft commitments, and debt adjustments - On July 28, 2022, Spirit entered into a merger agreement with JetBlue, which the U.S. Justice Department filed a suit to block on March 7, 2023, with a trial date set for October 16, 2023[25](index=25&type=chunk)[31](index=31&type=chunk) - As part of the merger agreement, JetBlue made prepayments to Spirit stockholders, including a **$2.50 per share** "Approval Prepayment" and monthly **$0.10 per share** "Additional Prepayments", leading to adjustments in the conversion rates of the company's convertible notes[25](index=25&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) Disaggregated Operating Revenues ($ thousands) | Revenue Type | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Fare | $608,861 | $418,418 | | Non-fare | $718,612 | $531,326 | | **Total passenger revenues** | **$1,327,473** | **$949,744** | | Other | $22,301 | $17,571 | | **Total operating revenues** | **$1,349,774** | **$967,315** | - Special charges in Q1 2023 totaled **$14.0 million**, comprising **$7.2 million** in merger-related legal and advisory fees and **$6.7 million** for an employee retention program linked to the JetBlue merger[41](index=41&type=chunk) - As of March 31, 2023, the company had firm orders for **107 A320 family aircraft** with deliveries through 2027 and commitments to purchase **18 spare engines**[61](index=61&type=chunk)[62](index=62&type=chunk) - The company is involved in a class-action lawsuit (Cox, et al. v. Spirit Airlines, Inc.) regarding fees for ancillary services, with a trial set for January 16, 2024, and is challenging a **$27.5 million** IRS assessment related to federal excise taxes on seat selection charges[70](index=70&type=chunk)[71](index=71&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Spirit's Q1 2023 revenue grew significantly with improved operating margin, despite rising fuel and labor costs, maintaining strong liquidity [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q1 2023 operating revenues surged from higher yield and traffic, offset by significant expense increases from fuel and labor costs Comparative Operating Statistics | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total operating revenues ($ millions) | $1,349.8 | $967.3 | 39.5% | | Operating income (loss) ($ millions) | $(112.4) | $(211.5) | 46.9% | | Load factor (%) | 80.8% | 77.2% | 3.6 pts | | Average yield (cents) | 12.64 | 10.69 | 18.2% | | TRASM (cents) | 10.22 | 8.25 | 23.9% | | Adjusted CASM ex-fuel (cents) | 7.22 | 6.68 | 8.1% | - Operating revenues increased by **$382.5 million** (**39.5%**) due to an **18.2%** increase in average yield, an **18.0%** increase in traffic (RPMs), and a **3.6 percentage point** increase in load factor[134](index=134&type=chunk) - Aircraft fuel expense increased by **32.3%** to **$487.7 million**, driven by a **16.3%** rise in average economic fuel cost per gallon and a **14.0%** increase in fuel consumption[139](index=139&type=chunk) - Salaries, wages, and benefits expense increased by **27.2%** (**$83.3 million**), mainly due to significant pay rate increases from the new pilot collective bargaining agreement ratified in January 2023[144](index=144&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Spirit maintained strong liquidity of **$1.7 billion**, with operating cash flow supporting debt payments and future aircraft commitments - As of March 31, 2023, the company had **$1,696.1 million** of liquidity, comprising unrestricted cash and cash equivalents, short-term investment securities, and available funds under its revolving credit facility[155](index=155&type=chunk)[156](index=156&type=chunk) Cash Flow Summary (Q1 2023 vs Q1 2022, $ millions) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $140.8 | $19.5 | | Net Cash Used In Investing Activities | $(67.6) | $(57.6) | | Net Cash Used By Financing Activities | $(131.8) | $(47.5) | - The company has contractual purchase commitments for **107 A320 family aircraft** with deliveries through 2027, with financing secured for **48** of these aircraft scheduled for delivery through 2024[161](index=161&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) Future Contractual Obligations (as of March 31, 2023, $ millions) | Obligation Type | Remainder of 2023 | 2024 - 2025 | 2026 - 2027 | 2028 and beyond | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $207 | $1,546 | $928 | $831 | $3,512 | | Lease obligations | $275 | $687 | $601 | $2,859 | $4,422 | | Flight equipment purchase | $543 | $2,603 | $2,309 | $0 | $5,455 | | **Total** | **$1,209** | **$5,160** | **$3,949** | **$3,761** | **$14,079** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risks stem primarily from aircraft fuel price volatility and interest rate fluctuations on the company's fixed-rate debt portfolio - Aircraft fuel expense represented **33.4%** of operating expenses for Q1 2023, where a hypothetical **10%** increase in average fuel price would have increased annual into-plane aircraft fuel expense by approximately **$205 million**[208](index=208&type=chunk) - As of March 31, 2023, the company did not have any outstanding jet fuel derivatives and has not engaged in fuel derivative activity since 2015[208](index=208&type=chunk) - As of March 31, 2023, the company had **$3.5 billion** in total fixed-rate debt, including senior secured notes, term loans, EETCs, and convertible notes, with no outstanding variable-rate long-term debt[210](index=210&type=chunk)[211](index=211&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures, with no material changes to internal controls over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[215](index=215&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected or are reasonably likely to materially affect internal controls[216](index=216&type=chunk) [Part II. Other Information](index=37&type=section&id=Part%20II.%20Other%20Information) Details on legal proceedings, risk factors, and equity security transactions [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company faces a class-action lawsuit on ancillary fees and challenges a **$27.5 million** IRS tax assessment - The company is defending a class-action lawsuit (Cox, et al. v. Spirit Airlines, Inc.) concerning fees for ancillary products, with a trial set to begin on January 16, 2024[218](index=218&type=chunk) - The company is challenging a **$27.5 million** IRS assessment for federal excise taxes on optional passenger seat selection charges from Q2 2018 to Q4 2020, believing it to be without merit[219](index=219&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes were reported to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **82,679** shares of common stock in Q1 2023 from employees for tax withholding purposes Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | January 1-31, 2023 | 75,280 | $20.58 | | February 1-28, 2023 | 0 | $0.00 | | March 1-31, 2023 | 7,399 | $16.56 | | **Total** | **82,679** | **$20.22** | - All stock repurchases were made from employees to cover tax withholding requirements for vested restricted stock and performance share awards[222](index=222&type=chunk)

Spirit Airlines, Inc. (NYSE:SAVE) Q4 2022 Earnings Conference Call February 7, 2023 10:00 AM ET Company Participants DeAnne Gabel - Senior Director, Investor Relations Ted Christie - Chief Executive Officer Matt Klein - Chief Commercial Officer Scott Haralson - Chief Financial Officer Conference Call Participants Mike Linenberg - Deutsche Bank Jamie Baker - JPMorgan Duane Pfennigwerth - Evercore ISI Dan McKenzie - Seaport Global Helane Becker - Cowen Savi Syth - Raymond James Stephen Trent - Citi Scott Grou ...

```markdown PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Spirit Airlines operates as an **Ultra Low-Cost Carrier (ULCC)** with an all-Airbus fleet, focusing on unbundled fares and non-ticket revenue, and is currently pursuing a merger with JetBlue - Spirit Airlines operates an **Ultra Low-Cost Carrier (ULCC)** business model, offering unbundled base fares and optional services to value-conscious customers[13](index=13&type=chunk)[14](index=14&type=chunk) - In **2022**, Spirit Airlines served **92 destinations** across **16 countries** in the United States, Latin America, and the Caribbean[13](index=13&type=chunk) - The company's fleet consists entirely of **Airbus A320-family aircraft**, noted for being one of the youngest and most fuel-efficient in the U.S[13](index=13&type=chunk)[27](index=27&type=chunk)[51](index=51&type=chunk) - On **July 27, 2022**, Spirit terminated its merger agreement with Frontier, paying a **$25.0 million** expense reimbursement to Frontier[18](index=18&type=chunk) - On **July 28, 2022**, Spirit entered into a Merger Agreement with JetBlue Airways Corporation. Spirit stockholders are entitled to receive a cash consideration of up to **$34.15 per share**, including an Approval Prepayment of **$2.50 per share** and potential Additional Prepayments of **$0.10 per share** monthly, up to **$1.15 initially**, and potentially an additional **$0.65**[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - Spirit's stockholders approved the JetBlue Merger Agreement on **October 19, 2022**. The merger is subject to regulatory approvals and other closing conditions[21](index=21&type=chunk)[22](index=22&type=chunk) - During **Q4 2022**, Spirit decided to accelerate the retirement of **29 A319 aircraft** (average age **16.3 years**). Excluding these, the fleet's average age would be **5.2 years**. Spirit is scheduled to receive **144 new Airbus A320-family aircraft** through **2027**[27](index=27&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Spirit's unit operating costs (**CASM**) were **11.67 cents** in **2022**, among the lowest in the U.S. airline industry, achieved through high aircraft utilization, high-density seating, efficient network, productive workforce, and direct-to-consumer marketing[33](index=33&type=chunk)[34](index=34&type=chunk) - Non-ticket revenue per passenger flight segment increased from approximately **$5 in 2006** to **$68 in 2022**, generated from charges for bags, premium seats, advance selection, and subscription programs like Spirit Saver$ Club[34](index=34&type=chunk) - As of **December 31, 2022**, Spirit had a fleet of **194 Airbus single-aisle aircraft** (**31 A319ceos**, **64 A320ceos**, **69 A320neos**, **30 A321ceos**) with an average age of **7.0 years**. **106 aircraft are owned**, and **88 are operating leases**[52](index=52&type=chunk)[53](index=53&type=chunk) - Approximately **81%** of Spirit's **12,025 active employees** as of **December 31, 2022**, were represented by five labor unions. A new two-year agreement with **ALPA** (pilots) was ratified in **January 2023**, expected to increase salaries, wages, and benefits by **$180 million** in **2023**[62](index=62&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - Spirit is subject to extensive regulation by the DOT, FAA, and TSA, covering economic, safety, security, and environmental aspects of air transportation. Recent DOT NPRMs propose increased disclosures for fees, refunds for delayed bags/ancillary services, and improved lavatory accessibility for disabled passengers[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) Spirit Airlines faces significant risks from the pending JetBlue merger, intense competition, volatile fuel costs, operational challenges, and labor disputes - The pending JetBlue merger poses significant risks, including business disruption, diversion of management attention, substantial transaction costs, potential litigation, and negative market reactions if the merger is not completed or delayed[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - Failure to obtain governmental approvals for the JetBlue merger, or approvals with burdensome conditions, could delay or prevent its completion, potentially reducing anticipated benefits or imposing additional costs[134](index=134&type=chunk) - The airline industry is highly competitive, with Spirit facing larger competitors with greater resources. Price discounting, unbundling of services by competitors, and industry consolidation (e.g., major airline mergers) intensify competitive pressures[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) Aircraft Fuel Costs as % of Total Operating Expenses | Year | % of Total Operating Expenses | | :--- | :--- | | **2022** | **34.1%** | | **2021** | **27.8%** | | **2020** | **18.6%** | - Volatility in aircraft fuel costs or supply disruptions (especially from the U.S. Gulf Coast) can materially adversely affect operations, as fuel is a significant operating expense[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[452](index=452&type=chunk) - Spirit's non-ticket revenues (e.g., baggage, seat selection, itinerary changes) are substantial, totaling **$2,612.6 million** in **2022**. Restrictions or increased taxes on these ancillary products and services, or new consumer protection regulations, could harm the business[150](index=150&type=chunk)[151](index=151&type=chunk) - The business is highly dependent on technology and automated systems (reservation, flight operations, financial, website). Failures, disruptions, or cyberattacks on these systems could interrupt operations, lead to data loss, and harm reputation and financial condition[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - Spirit relies on a limited number of suppliers for its all-Airbus fleet and engines (IAE and Pratt & Whitney). Delays in aircraft deliveries (experienced in late **2022** for **2023** deliveries) and reliability issues with new-generation engines (PW1100G) can significantly impact capacity and operations[216](index=216&type=chunk)[217](index=217&type=chunk) Labor Costs as % of Total Operating Costs | Year | % of Total Operating Costs | | :--- | :--- | | **2022** | **22.1%** | | **2021** | **32.4%** | | **2020** | **39.3%** | - Increased labor costs, union disputes, and potential strikes could adversely affect the business, as approximately **81%** of the workforce is unionized. A new pilot agreement (**ALPA**) is expected to increase salaries, wages, and benefits by **$180 million** in **2023**[160](index=160&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[170](index=170&type=chunk) - Spirit has significant aircraft-related fixed obligations, including **$1,870.7 million** in aircraft-related debt and **$1,771.7 million** in other long-term debt as of **December 31, 2022**, plus **$4.0 billion** in future operating lease obligations. This leverage could impair liquidity and financial condition[237](index=237&type=chunk)[238](index=238&type=chunk)[394](index=394&type=chunk) [Item 1B. Unresolved Staff Comments](index=44&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments were reported - No unresolved staff comments were reported[270](index=270&type=chunk) [Item 2. Properties](index=44&type=section&id=Item%202.%20Properties) Spirit Airlines operates an all-Airbus fleet of **194 aircraft**, with firm orders for **109 new aircraft** and a new headquarters under construction Spirit Airlines Fleet Composition (as of December 31, 2022) | Aircraft Type | Seats | Average Age (years) | Number of Aircraft | Number Owned | Number Leased |

Financial Data and Key Metrics Changes - The company achieved a breakeven adjusted pretax margin and reported adjusted net income of $3.6 million, or $0.03 per share [11][27] - Total revenue reached $1.34 billion, up 35.4% compared to Q3 2019, with total RASM at $0.1107, an increase of 19.3% versus 2019 [18][11] - Non-fuel operating costs were better than expected, while fuel cost per gallon was $3.82, about $0.15 higher than initially expected, leading to an additional $27 million in fuel expenses [27][28] Business Line Data and Key Metrics Changes - Passenger revenue per segment increased by 23% to $67.52, while non-ticket revenue per segment rose by 21% to $67.07 [20] - The load factor was strong throughout the quarter, although September's load factor was 2.2 points below that of September 2019 [19] Market Data and Key Metrics Changes - The company faced infrastructure constraints, particularly in Florida, which limited flight volume and network optimization [14] - Despite these constraints, demand for leisure travel remained strong, with no signs of slowing down [19] Company Strategy and Development Direction - The merger agreement with JetBlue was approved by stockholders, aiming to create a compelling low-fare challenger to dominant U.S. carriers [8][9] - The company plans to target 60 billion to 62 billion available seat miles for 2023, representing a 23% to 27% increase compared to 2022 [24] - The focus is on enhancing network reliability and gradually improving fleet utilization, with a target to achieve normalized utilization by mid-2023 [37][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by Hurricane Ian and Florida capacity constraints but expressed confidence in strong demand trends heading into Q4 [10][16] - The company is optimistic about the merger with JetBlue, viewing it as a positive for employee morale and future growth opportunities [61] Other Important Information - The company added three destinations to its network and opened two new crew bases, carrying a record of almost 10 million passengers during the quarter [26] - Liquidity at the end of Q3 was $1.3 billion, including $240 million of available capacity under the revolving credit facility [29] Q&A Session Summary Question: Update on runway timings awarded by DOT - The company has deployed the use of peak times in Newark and is utilizing the awarded timings to make flying permanent [45][47] Question: Attrition and hiring trends since the merger announcement - Management noted elevated attrition rates but emphasized efforts to reassure employees about their roles in the larger merged entity [62][60] Question: Insights on peak versus non-peak travel and seasonality - Management observed shifts in travel patterns, with off-peak days seeing increased demand, attributed to hybrid work trends [72][74] Question: CASM expectations for 2023 - The company anticipates some pressure on CASM due to reduced capacity but expects overall CASM to decrease year-over-year as utilization improves [78][99] Question: Strategy on ancillary and base fares - The company aims for a balanced approach to maximize total RASM, avoiding over-reliance on either ancillary or base fares [82][83] Question: Growth opportunities in other markets - Management reported a bounce back in international traffic and continued growth in markets like Los Angeles and Las Vegas [121]

Spirit Airlines Inc. (NYSE:SAVE) Q2 2022 Earnings Conference Call August 10, 2022 8:30 AM ET Company Participants DeAnne Gabel - Senior Director of IR Ted Christie - Chief Executive Officer Matt Klein - Executive VP and Chief Commercial Officer Scott Haralson - Senior VP and CFO Conference Call Participants Jay Gunning - Evercore ISI Shannon Doherty - Deutsche Bank Scott Group - Wolfe Research Andrew Didora - Bank of America Chris Stathoulopoulos - Susquehanna Savi Syth - Raymond James James Kirby - JPMorga ...

Part I. Financial Information [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents Spirit Airlines' unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and equity, with notes on the JetBlue merger and key accounting policies [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenues** | **$1,366,643** | **$859,309** | **$2,333,958** | **$1,320,588** | | Total operating expenses | $1,411,973 | $766,098 | $2,590,756 | $1,329,907 | | Operating income (loss) | ($45,330) | $93,211 | ($256,798) | ($9,319) | | **Net loss** | **($52,406)** | **($287,863)** | **($247,109)** | **($400,184)** | | Diluted loss per share | ($0.48) | ($2.73) | ($2.27) | ($3.94) | - Operating revenues for Q2 2022 increased significantly to **$1.37 billion** from **$859.3 million** in Q2 2021, but a sharp rise in operating expenses, particularly aircraft fuel, led to an operating loss of **$45.3 million** compared to an operating income of **$93.2 million** in the prior-year period[9](index=9&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$8,715,023** | **$8,540,025** | | Cash and cash equivalents | $1,197,065 | $1,333,507 | | Total current assets | $1,761,854 | $1,842,491 | | Total liabilities | $6,841,808 | $6,426,000 (Calculated) | | **Total shareholders' equity** | **$1,873,215** | **$2,114,035** | - Total assets increased slightly to **$8.72 billion** as of June 30, 2022, from **$8.54 billion** at year-end 2021, while total shareholders' equity decreased to **$1.87 billion** from **$2.11 billion** over the same period, primarily due to the net loss incurred[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,767 | $484,116 | | Net cash used in investing activities | ($123,058) | ($179,023) | | Net cash used by financing activities | ($100,151) | ($240,307) | | **Net decrease in cash, cash equivalents, and restricted cash** | **($136,442)** | **$64,786** | - For the first six months of 2022, net cash provided by operating activities was **$86.8 million**, a significant decrease from **$484.1 million** in the same period of 2021, with the company using cash in both investing (**$123.1 million**) and financing (**$100.2 million**) activities, resulting in a net decrease in cash of **$136.4 million**[17](index=17&type=chunk)[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, significant events like the JetBlue merger, revenue disaggregation, lease agreements, debt obligations, and fair value measurements - On July 27, 2022, Spirit terminated its merger agreement with Frontier and paid Frontier **$25.0 million** for expenses[29](index=29&type=chunk) - On July 28, 2022, Spirit entered into a new merger agreement with JetBlue for **$33.50 per share** in cash, subject to certain prepayments, with JetBlue reimbursing Spirit for the **$25.0 million** paid to Frontier[30](index=30&type=chunk)[31](index=31&type=chunk) - The JetBlue merger agreement includes potential termination fees: Spirit would pay JetBlue **$94.2 million** under certain circumstances, while JetBlue would pay Spirit **$70.0 million** and Spirit stockholders up to **$400.0 million** (less prepayments) if the deal fails to obtain antitrust clearance[35](index=35&type=chunk) Disaggregated Operating Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Fare | $703,778 | $1,122,196 | | Non-fare | $644,093 | $1,175,419 | | **Total passenger revenues** | **$1,347,871** | **$2,297,615** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, including the JetBlue merger, Q2 2022 revenue growth, increased fuel costs, and liquidity, alongside operational challenges and fleet plans - The company's business model focuses on value-conscious travelers, offering unbundled base fares and generating significant non-ticket revenue from ancillary services like baggage and seat assignments[122](index=122&type=chunk)[123](index=123&type=chunk) Q2 2022 vs Q2 2021 Operating Statistics | Metric | Q2 2022 | Q2 2021 | Percent Change | | :--- | :--- | :--- | :--- | | Available seat miles (ASMs) (thousands) | 11,846,547 | 10,226,746 | 15.8% | | Load factor (%) | 86.0% | 84.4% | 1.6 pts | | TRASM (cents) | 11.54 | 8.40 | 37.4% | | CASM (cents) | 11.92 | 7.49 | 59.1% | | Adjusted CASM ex-fuel (cents) | 6.96 | 6.52 | 6.7% | | Average economic fuel cost per gallon ($) | 4.30 | 1.95 | 120.5% | - For Q2 2022, the company reported a negative operating margin of **3.3%**, a decrease of **14.1 percentage points** from the prior year, and a net loss of **$52.4 million**[136](index=136&type=chunk) - As of June 30, 2022, the company had **$1.54 billion** of liquidity, comprising unrestricted cash, short-term investments, and available funds under its revolving credit facility[182](index=182&type=chunk) [Comparison of three months ended June 30, 2022 to three months ended June 30, 2021](index=29&type=section&id=Comparison%20of%20three%20months%20ended%20June%2030%2C%202022%20to%20three%20months%20ended%20June%2030%2C%202021) - Operating revenues increased by **$507.3 million (59.0%)** to **$1.37 billion** in Q2 2022, driven by a **34.8%** increase in average yield and an **18.0%** increase in traffic due to strong travel demand[141](index=141&type=chunk) - Operating expenses rose by **$645.9 million (84.3%)**, primarily due to a **$343.8 million (160.0%)** increase in aircraft fuel expense, with the average economic fuel cost per gallon surging **120.5%** to **$4.30**[143](index=143&type=chunk)[144](index=144&type=chunk) - Salaries, wages, and benefits increased by **$51.4 million (20.0%)** due to higher salaries, crew overtime, and a **15.8%** increase in pilot and flight attendant workforce[149](index=149&type=chunk) - Other operating expenses increased by **$70.7 million (62.0%)**, driven by higher ground handling costs, travel expenses, and significant passenger reaccommodation costs from flight delays and cancellations caused by weather and ATC issues[157](index=157&type=chunk)[158](index=158&type=chunk) [Comparison of six months ended June 30, 2022 to six months ended June 30, 2021](index=32&type=section&id=Comparison%20of%20six%20months%20ended%20June%2030%2C%202022%20to%20six%20months%20ended%20June%2030%2C%202021) - For the first half of 2022, operating revenues increased by **$1.01 billion (76.7%)** to **$2.33 billion**, driven by a **33.8%** increase in traffic and a **32.1%** rise in average yield[163](index=163&type=chunk) - Operating expenses for the six-month period increased by **$1.26 billion (94.8%)**, largely due to a **$569.5 million (159.2%)** increase in aircraft fuel expense[165](index=165&type=chunk) - Adjusted CASM ex-fuel for the six months ended June 30, 2022, decreased slightly to **6.82 cents** from **6.93 cents** in the prior year period, as the **29.5%** increase in ASMs helped spread fixed costs over a larger base[167](index=167&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2022, total liquidity was **$1.54 billion**, consisting of unrestricted cash, short-term investments, and availability under a revolving credit facility[182](index=182&type=chunk) - During the first six months of 2022, the company took delivery of **seven aircraft** via sale-leaseback transactions and purchased **two spare engines** with cash[185](index=185&type=chunk) - The company has firm orders for **113 A320 family aircraft** with deliveries through 2027 and has secured financing for deliveries through 2024[191](index=191&type=chunk) Future Contractual Obligations (in millions) | Obligation Type | Remainder of 2022 | 2023 - 2024 | 2025 - 2026 | 2027 and beyond | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $96 | $559 | $1,455 | $1,029 | $3,139 | | Lease obligations | $145 | $557 | $481 | $2,047 | $3,230 | | Flight equipment purchase | $507 | $1,907 | $2,411 | $873 | $5,698 | | **Total** | **$853** | **$3,278** | **$4,518** | **$4,072** | **$12,721** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are aircraft fuel prices and interest rates, with fuel representing **35.8%** of operating expenses and a **10%** price increase potentially raising annual fuel expense by **$148 million** - The company's main market risks are aircraft fuel prices and interest rates[236](index=236&type=chunk) - Aircraft fuel accounted for approximately **35.8%** of operating expenses in the first half of 2022, and a hypothetical **10%** increase in the average fuel price would have increased annual into-plane fuel expense by about **$148 million**[237](index=237&type=chunk) - As of June 30, 2022, the company held no jet fuel derivatives and had no outstanding variable-rate long-term debt[237](index=237&type=chunk)[240](index=240&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - Based on an evaluation as of June 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[244](index=244&type=chunk) - There were no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2022[245](index=245&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company faces commercial litigation and regulatory proceedings, including an IRS assessment of **$27.5 million** for federal excise taxes on seat selection charges - Following an IRS audit, the company was assessed **$27.5 million** for federal excise taxes on seat selection charges for the period of Q2 2018 to Q4 2020, which the company believes is without merit and plans to challenge[247](index=247&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) New risk factors include potential business disruption and stock price impact from the JetBlue merger, regulatory approval uncertainty, and increased labor costs from union negotiations - The pending merger with JetBlue introduces risks of business disruption, as parties may delay decisions or seek alternative relationships[250](index=250&type=chunk)[252](index=252&type=chunk) - Failure to complete the merger could negatively impact the stock price, and the company may be required to pay JetBlue a breakup fee of **$94.2 million** under certain circumstances[255](index=255&type=chunk)[259](index=259&type=chunk) - Obtaining governmental approvals for the merger is a key risk, as regulators may impose conditions, delay, or prevent the transaction[260](index=260&type=chunk) - Increased labor costs and potential disputes are significant risks, with **79%** of the workforce unionized as of June 30, 2022, and negotiations with the flight attendants' union ongoing while aircraft maintenance technicians are holding a union election[264](index=264&type=chunk)[267](index=267&type=chunk)[271](index=271&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased **276 shares** of common stock at an average price of **$19.76** per share from employees for tax withholding purposes Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2022 | 69 | $26.06 | | May 1-31, 2022 | 176 | $16.94 | | June 1-30, 2022 | 31 | $21.74 | | **Total** | **276** | **$19.76** | - All stock repurchases during the quarter were from employees to satisfy tax withholding requirements on vested restricted stock[275](index=275&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults on senior securities during the reporting period - None[278](index=278&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[278](index=278&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[278](index=278&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including merger agreement amendments and CEO/CFO certifications - Exhibits include amendments to the Frontier merger agreement and required CEO/CFO certifications[279](index=279&type=chunk)

JetBlue's Offer Concerns - JetBlue's offer is deemed not superior due to regulatory concerns stemming from their Northeast Alliance (NEA), which is already facing a lawsuit [7] - The acquisition of Spirit by JetBlue is viewed as anticompetitive, eliminating a key competitor and vocal opponent of JetBlue's NEA deal [7] - JetBlue's claim of the "JetBlue Effect" is based on economic modeling that Spirit believes is flawed and overstates JetBlue's impact on legacy carriers [7] - JetBlue has not adequately protected Spirit's shareholders through their limited regulatory package and inadequate reverse termination fee, given the significant closing risks [7] Financial Analysis - JetBlue's 2019 passenger yield was 10.7¢, while Frontier's was 10.1¢ and Spirit's was 14.5¢ [14] - JetBlue's 2019 average fare was $182, while Frontier's was $53 and Spirit's was $55 [14] - JetBlue has experienced approximately $1.2 billion in value destruction since making its initial offer for Spirit [21] Frontier/Spirit Merger Advantages - The Spirit Board determined that JetBlue's original proposal represented an unsatisfactorily high degree of completion risk with inadequate protections for Spirit shareholders [9] - The planned Spirit/Frontier merger is considered the superior transaction for Spirit shareholders [7] - The Frontier/Spirit merger is expected to deliver $1 billion in annual consumer savings [32] - The combined Frontier and Spirit are projected to create 10,000 direct jobs by 2026 [32] - The Frontier/Spirit merger is expected to unlock $500 million in annual run-rate operating synergies [32]