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What changed in Frontier Group Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Frontier Group Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+546 added−601 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-22)

Top changes in Frontier Group Holdings, Inc.'s 2023 10-K

546 paragraphs added · 601 removed · 427 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

122 edited+33 added−22 removed51 unchanged
Biggest changeRisk Factors — “We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition,” “We are subject to risks associated with climate change, including increased regulation of our CO 2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure,” “We are subject to extensive regulation by the FAA, the DOT, TSA, the CBP and other U.S. and foreign governmental agencies, compliance with which could cause us to incur increased costs and adversely affect our business, results of operations and financial condition,” and “Changes in legislation, regulation and government policy have affected, and may in the future have a material adverse effect on our business.” Available Information Our website is located at www.flyfrontier.com .
Biggest changeFor additional information, please see “Risk Factors — Risks Related to Our Industry — We are subject to extensive regulation by the FAA, the DOT, TSA, the CBP and other U.S. and foreign governmental agencies, compliance with which could cause us to incur increased costs and adversely affect our business, results of operations and financial condition,” “— We are subject to risks associated with climate change, including increased regulation of our CO 2 emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure,” “ — We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition” and “Risk Factors — Risks Related to Our Business — Changes in legislation, regulation and government policy have affected, and 20 may in the future have a material adverse effect on our business, results of operations, cash flows and financial condition.” Available Information Our website is located at www.flyfrontier.com .
Our Competitive Strengths & Our Business Strategy— Low Fares Done Right Our goal is to offer the most attractive option for air travel with a compelling combination of value, product and service, and, in so doing, to grow profitably and enhance our position among U.S. airlines.
Our Competitive Strengths & Our Business Strategy— Low Fares Done Right Our goal is to offer the most attractive option for air travel with a compelling combination of value, product and service, and, in doing so, to grow profitably and enhance our position among U.S. airlines.
In particular, in June 2015, the U.S. Environmental Protection Agency (the “EPA”) issued revised underground storage tank regulations that could affect airport fuel hydrant systems and reissued the Multi-Sector General Permit for Stormwater Discharges from Industrial Activities. Among other revisions, the reissued permit incorporates the EPA’s previously issued Airport Deicing Effluent Limitation Guidelines and New Source Performance Standards.
In particular, in June 2015, the U.S. Environmental Protection Agency (the “EPA”) issued revised underground storage tank regulations that affect airport fuel hydrant systems and reissued the Multi-Sector General Permit for Stormwater Discharges from Industrial Activities. Among other revisions, the reissued permit incorporates the EPA’s previously issued Airport Deicing Effluent Limitation Guidelines and New Source Performance Standards.
To monitor the profitability of each route, we analyze monthly profitability reports as well as actual and forecasted advanced bookings. We routinely make capacity adjustments within our network based on the financial performance of our markets, and we discontinue service in markets where we determine that long-term profitability is not likely to meet our expectations.
To monitor the profitability of each route, we analyze monthly profitability reports as well as actual and forecasted advanced bookings. We routinely make capacity adjustments 7 within our network based on the financial performance of our markets, and we discontinue service in markets where we determine that long-term profitability is not likely to meet our expectations.
Although we currently believe 15 our insurance coverage is adequate, we cannot assure that the amount of such coverage will not be changed or that we will not be forced to bear substantial losses from accidents. Foreign Ownership Under federal law and DOT policy, we must be owned and controlled by U.S. citizens.
Although we currently believe our insurance coverage is adequate, we cannot assure that the amount of such coverage will not be changed or that we will not be forced to bear substantial losses from accidents. Foreign Ownership Under federal law and DOT policy, we must be owned and controlled by U.S. citizens.
We have made and expect in the future to make public disclosures to investors and the general public by means of the investor relations section of our website at ir.flyfrontier.com. In order to receive notifications regarding new postings to our website, investors are encouraged 20 to enroll on our website to receive automatic email alerts (see https://ir.flyfrontier.com/ir-resources/email-alerts ).
We have made and expect in the future to make public disclosures to investors and the general public by means of the investor relations section of our website at ir.flyfrontier.com. In order to receive notifications regarding new postings to our website, investors are encouraged to enroll on our website to receive automatic email alerts (see https://ir.flyfrontier.com/ir-resources/email-alerts ).
In addition, as described above, we will not directly control our CORSIA compliance costs because our compliance obligations through 2032 are based 19 on the growth in emissions of the global aviation sector and begin to incorporate a factor for individual airline operator emissions growth starting in 2033.
In addition, as described above, we will not directly control our CORSIA compliance costs because our compliance obligations through 2032 are based on the growth in emissions of the global aviation sector and begin to incorporate a factor for individual airline operator emissions growth starting in 2033.
Among the hedging instruments we have used in the past and may use in the future are swaps and collar contracts on jet fuel, fixed forward prices (“FFPs”), which allow us to lock in the price of jet fuel for specified quantities and at specified locations in future periods, and call options.
Among the hedging instruments we have used in the past and may use in the future are swaps and collar contracts on jet fuel, fixed forward prices, which allow us to lock in the price of jet fuel for specified quantities and at specified locations in future periods, and call options.
The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. We currently hold an FAA air carrier certificate. 16 International Regulation All international air service is subject to certain U.S. federal requirements and approvals, as well as the regulatory requirements of the foreign countries involved.
The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. We currently hold an FAA air carrier certificate. International Regulation All international air service is subject to certain U.S. federal requirements and approvals, as well as the regulatory requirements of the foreign countries involved.
Biffle, our President and Chief Executive Officer, previously served as Chief Executive Officer for VivaColombia, Executive Vice President for Spirit Airlines and held various management roles with US Airways and American Eagle Airlines, a regional airline subsidiary of American Airlines; • James G.
Biffle, our Chief Executive Officer, previously served as Chief Executive Officer for VivaColombia, Executive Vice President and Chief Marketing Officer for Spirit Airlines, and held various management roles with US Airways and American Eagle Airlines, a regional airline subsidiary of American Airlines; • James G.
With respect to pilots, given the pilot shortage being experienced by parts of the industry, particularly regional airlines, one of our operational priorities is to maintain a robust pipeline of qualified pilot candidates.
With respect to pilots, given the pilot shortage being experienced by parts of the industry, particularly regional airlines, one of our 12 operational priorities is to maintain a robust pipeline of qualified pilot candidates.
In pursuing these goals, we maintain an active aviation safety program and all of our personnel are expected to participate in the program and take an active role in the identification, reduction and elimination of hazards.
In pursuing these goals, we maintain an active aviation safety 14 program and all of our personnel are expected to participate in the program and take an active role in the identification, reduction and elimination of hazards.
While our strategy is similar to the business models utilized by other ULCCs, including with respect to low-cost structure, low fares and flexible optional services, we believe Low Fares Done Right differentiates us from other ULCCs as a result of our focus on delivering a higher-quality, family-friendly customer experience with a more upscale look and feel than traditionally experienced on ULCCs globally.
While our strategy is similar to the business models utilized by other ULCCs, including with respect to low-cost structure, low fares and flexible optional services, we believe Low Fares Done Right differentiates us from other ULCCs as a result of our focus on delivering a family-friendly customer experience with a more upscale look and feel than traditionally experienced on ULCCs globally.
Due to our relatively small fleet size and projected fleet growth, we believe contracting with third-party specialists for all of our heavy maintenance, engine restoration and major part repair, is more economical than conducting these activities ourselves. We have entered into a long-term flight hour agreement for our engine overhaul services and an hour-by-hour basis agreement for component services.
Due to our relatively small fleet size and projected fleet growth, we believe contracting with third-party specialists for all of our heavy maintenance, engine restoration and major part repair, is more economical than conducting these activities ourselves. We have entered into long-term flight hour agreements for our engine overhaul services and an hour-by-hour basis agreement for component services.
ITEM 1. BUSINESS Overview Frontier Airlines is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right . We are headquartered in Denver, Colorado and offer flights throughout the United States and to select near international destinations in the Americas.
ITEM 1. BUSINESS Overview Frontier Airlines, Inc. (“Frontier”) is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right . We are headquartered in Denver, Colorado and offer flights throughout the United States and to select near international destinations in the Americas.
Based on these estimates, our fleet continues to be the most fuel-efficient of all major U.S. carriers, generating over 100 ASMs per gallon during the year ended December 31, 2022, representing our focus on continued fuel efficiency as we grow.
Based on these estimates, our fleet continues to be the most fuel-efficient of all major U.S. carriers, generating over 100 ASMs per gallon during the year ended December 31, 2023, representing our focus on continued fuel efficiency as we grow.
In addition, while our entire fleet features new and lightweight seats, which eliminate excess weight and reduce fuel consumption per seat, the seat density on the A320neo family aircraft is higher than the prior generation of A320ceo family aircraft.
In addition, while our entire fleet features new and lightweight seats, which eliminate excess weight and reduces fuel consumption per seat, the seat density on the A320neo family aircraft is higher than the prior generation of A320ceo family aircraft.
We also partner with organizations such as the Latino Pilots Association, National Gay Pilot’s Association, Asian Pilots Association, Organization of Black Aviation Professionals, Women in Aviation and Rotary to Airline Group to help foster opportunities and careers in aviation.
We also partner with organizations such as the Latino Pilots Association, National Gay Pilot’s Association, Asian Pilots Association, Organization of Black Aviation Professionals, Women in Aviation International and Rotary to Airline Group to help foster opportunities and support careers in aviation.
Several states are also considering or have adopted initiatives to regulate emissions of GHGs, primarily through the planned development of GHG emissions inventories and/or regional cap-and-trade programs. On March 6, 2017, the International Civil Aviation Organization (the “ICAO”) adopted new carbon dioxide certification standards for new aircraft beginning in 2020.
Several states are also considering or have adopted initiatives to regulate emissions of GHGs, primarily through the planned development of GHG emissions inventories and/or regional cap-and-trade programs. On March 6, 2017, the International Civil Aviation Organization (“ICAO”) adopted new CO2 certification standards for new aircraft beginning in 2020.
We honor and celebrate our differences throughout the year by recognizing meaningful achievements and shared stories through our company newsletters during Black History Month, Women’s History Month and Pride Month. We are focused on creating an equitable workforce, seeking to consider diverse slates of candidates for all positions.
We aim to honor and celebrate our differences throughout the year by recognizing meaningful achievements and shared stories through our company newsletters during Black History Month, Hispanic Heritage Month, Women’s History Month and Pride Month. We are focused on creating an equitable workforce, seeking to consider diverse slates of candidates for all positions.
ULCCs and regional airlines. 8 Our principal competitors on domestic routes are American Airlines, Delta Air Lines, United Airlines and Southwest Airlines (which classifies itself as an LCC), which are commonly referred to as the “Big Four” carriers, and Alaska Airlines and Hawaiian Airlines, which together with JetBlue Airways Corporation (“JetBlue”) (which classifies itself as an LCC), are commonly referred to as the “Middle Three” carriers.
Our principal competitors on domestic routes are American Airlines, Delta Air Lines, United Airlines and Southwest Airlines (which classifies itself as an LCC), which are commonly referred to as the “Big Four” carriers, and Alaska Airlines and Hawaiian Airlines, which together with JetBlue Airways Corporation (“JetBlue”) (which classifies itself as an LCC), are commonly referred to as the “Middle Three” carriers.
As of December 31, 2022, we have not been required to purchase any carbon offset credits or lower-carbon aircraft fuels for the CORSIA pilot phase (2021-2023).
As of December 31, 2023, we have not been required to purchase any carbon offset credits or lower-carbon aircraft fuels for the CORSIA pilot phase.
In January 2020, the DOT published a NPRM regarding the accessibility features of lavatories and onboard wheelchair requirements on certain single-aisle aircraft with an FAA certificated maximum capacity of 125 seats or more, training flight attendants to proficiency on an annual basis to provide assistance in transporting qualified individuals with disabilities to and from the lavatory from their aircraft seat and providing certain information on request to qualified individuals with a disability or persons inquiring on their behalf, on the carrier’s website and in printed or electronic form on the aircraft, concerning the accessibility of aircraft lavatories.
In January 2020, the DOT published a NPRM regarding short-term improvements, including with respect to the accessibility features of lavatories and onboard wheelchair requirements on certain single-aisle aircraft with an FAA certificated maximum capacity of 125 seats or more, training flight attendants to proficiency on an annual basis to provide assistance in transporting qualified individuals with disabilities to and from the lavatory from their aircraft seat and providing certain information on request to qualified individuals with a disability or persons inquiring on their behalf, on the carrier’s website and in printed or electronic form on the aircraft, concerning the accessibility of aircraft lavatories.
Third-party channels represented approximately 30% and 29% of sales for the years ended December 31, 2022 and 2021, respectively. We maintain a zero percent standard commission policy for travel agency bookings worldwide unless local regulations mandate that we pay a commission. We also have agreements with all the leading GDSs.
Third-party channels represented approximately 28% and 30% of sales for the years ended December 31, 2023 and 2022, respectively. We maintain a zero percent standard commission policy for travel agency bookings worldwide unless local regulations mandate that we pay a commission. We also have agreements with all the leading GDSs.
For example, as a result of our continuing fleet expansion, First Officers hired since late-2013 have been eligible for upgrade to Captain within 24 to 48 months of joining us. As of December 31, 2022, approximately 87% of our employees were represented by labor unions under collective-bargaining agreements.
For example, as a result of our continuing fleet expansion, First Officers hired since late-2013 have been eligible for upgrade to Captain within 24 to 48 months of joining us. As of December 31, 2023, approximately 86% of our employees were represented by labor unions under collective bargaining agreements.
U.S. commitments announced during the Biden Administration’s April 2021 Leaders Summit on Climate include working with other countries on a vision toward reducing the aviation sector’s emissions in a manner consistent with the Biden Administration’s 2050 net-zero emissions goal, continued participation in CORSIA and development of sustainable aviation fuels.
U.S. commitments announced during the Biden Administration’s April 2021 Leaders’ Summit on Climate include working with other countries on a vision toward reducing the aviation sector’s emissions in a manner consistent with the Biden Administration’s 2050 net-zero emissions goal, continued participation in CORSIA and 19 development of sustainable aviation fuels (“SAF”).
Consumer Protection Regulation The DOT also has jurisdiction over certain economic issues affecting air transportation and consumer protection matters, including unfair or deceptive practices and unfair methods of competition including undisclosed display bias, lengthy tarmac delays, chronically delayed flights, airline advertising and marketing practices, codeshare disclosure, denied boarding compensation, ticket refunds, baggage liability, contracts of carriage, customer service commitments, consumer notices and disclosures, customer complaints and transportation of passengers with disabilities.
The DOT also regulates slot transactions between airlines. 16 Consumer Protection Regulation The DOT also has jurisdiction over certain economic issues affecting air transportation and consumer protection matters, including unfair or deceptive practices and unfair methods of competition including undisclosed display bias, lengthy tarmac delays, chronically delayed flights, airline advertising and marketing practices, codeshare disclosure, denied boarding compensation, ticket refunds, baggage liability, contracts of carriage, customer service commitments, consumer notices and disclosures, customer complaints and transportation of passengers with disabilities.
In March 2020, we implemented a pay protection policy, which remains in place as of December 31, 2022, to ensure employees take necessary time away from work to recover from COVID-19. Safety and Security We prioritize the safety and security of our passengers and employees.
In March 2020, we implemented a pay protection policy, which remains in place as of December 31, 2023, to enable employees to take necessary time away from work to recover from COVID-19. Safety and Security We prioritize the safety and security of our passengers and employees.
In addition, California adopted a revised State Industrial General Permit for Stormwater Discharges on April 1, 2014, which became effective July 1, 2015. This permit places additional reporting and monitoring requirements on permittees and requires implementation of mandatory best management practices.
In addition, California adopted a revised State Industrial General Permit for Stormwater Discharges effective July 1, 2015. This permit places additional reporting and monitoring requirements on permittees and requires implementation of mandatory best management practices.
In order to enhance our brand and drive revenue growth, we intend to continue to deliver a higher-quality flight experience than historically offered by ULCCs globally and generate customer loyalty by: • continuing to offer attractive low fares; • expanding our marketing efforts, including family-friendly elements that appeal to a large audience, such as an attentive staff, popular animals on our aircraft tails and novelty cards for children, particularly 4 highlighting endangered species, and certain offers tailored for families including our Kids Fly Free program to continue to position our brand as a family-friendly and environmentally-friendly ULCC; • continuing to improve penetration of our reasonably priced bundle options, including The Works and The Perks, introducing the new GoWild!
In order to enhance our brand and drive revenue growth, we aim to deliver a higher-quality flight experience than historically offered by ULCCs globally and generate customer loyalty by: • continuing to offer attractive low fares; • expanding our marketing efforts, including family-friendly elements that appeal to a large audience, such as an attentive staff, popular animals on our aircraft tails and novelty cards for children, particularly 4 highlighting endangered species, and certain offers tailored for families including our Kids Fly Free program to continue to position our brand as a family-friendly and environmentally-conscious ULCC; • continuing to improve penetration of our reasonably priced bundle options and further enhancing our GoWild!
Approximately 70% and 71% of our total tickets sold for the years ended December 31, 2022 and 2021, respectively, were sold directly to our customers through these distribution channels. Sales through our website and mobile app represent our low-cost distribution channels.
Approximately 72% and 70% of our total tickets sold for the years ended December 31, 2023 and 2022, respectively, were sold directly to our customers through these distribution channels. Sales through our website and mobile app represent our low-cost distribution channels.
We intend to strengthen and maintain our low unit costs, including by: • maintaining high utilization levels as the U.S. market continues to recover from the COVID-19 pandemic; • utilizing new generation, fuel-efficient aircraft that deliver lower operating costs compared to prior generation aircraft; • increasing the average size and seat capacity of the aircraft in our fleet through the continued introduction and operation of the 186-seat A320neo aircraft and the recent introduction of the 240-seat A321neo aircraft; • utilizing a low-cost distribution model, with our services primarily sold through direct distribution channels including our website, mobile app and contact centers; • maintaining a highly productive workforce and third-party specialist providers; • outsourcing non-core functions, including customer contact centers, lost bag services, ground handling services and catering services; and • taking a disciplined approach to our operational performance in order to reduce disruption.
We intend to strengthen and maintain our low unit costs, including by: • maintaining high utilization levels; • utilizing new generation, fuel-efficient aircraft that deliver lower operating costs compared to prior generation aircraft; • increasing the average size and seat capacity of the aircraft in our fleet through the continued introduction and operation of 186-seat A320neo aircraft and 240-seat A321neo aircraft; • utilizing a low-cost distribution model, with our services primarily sold through direct distribution channels including our website, mobile app and contact centers; • maintaining a highly productive workforce and third-party specialist providers; • outsourcing non-core functions, including customer contact centers, lost bag services, ground handling services and catering services; and • taking a disciplined approach to our operational performance in order to reduce disruption.
Noise Federal law recognizes the right of airport operators with special noise problems to implement local noise abatement procedures so long as those procedures do not interfere unreasonably with interstate and foreign commerce and the national air transportation system, subject to FAA review under the Airport Noise and Capacity Act (“ANCA”) of 1990.
Noise The Airport Noise and Capacity Act of 1990 recognizes the right of airport operators with special noise problems to implement local noise abatement procedures so long as those procedures do not unreasonably interfere with interstate, foreign commerce or the national air transportation system, subject to FAA review.
In 2021, we implemented the Rally wellness program to incentivize employees to invest in their health, earn points and participate in various health and wellness competitions. In late 2022, we announced a new online weight management program (United Healthcare’s Real Appeal) which launched in January 2023, and aims to help members achieve real, lifelong results and live a healthier life.
We offer the Rally wellness program to incentivize employees to invest in their health, earn points and participate in various health and wellness competitions. In January 2023, we launched a new online weight management program (United Healthcare’s Real Appeal), which aims to help members achieve real, lifelong results and live a healthier life.
In March 2022, the DOT issued a NPRM requiring airlines to ensure that at least one lavatory on new single-aisle aircraft with 125 seats or more is large enough to permit a passenger with a disability (with the help of an assistant, if necessary) to approach, enter and maneuver within the lavatory, as necessary, to use all lavatory facilities and to leave by means of the aircraft’s onboard wheelchair.
In March 2022, the DOT issued a NPRM regarding long-term accessibility improvements that would require airlines to ensure that at least one lavatory on new single-aisle aircraft with 125 seats or more is large enough to permit a passenger with a disability (with the help of an assistant, if necessary) to approach, enter and maneuver within the lavatory, as necessary, to use all lavatory facilities and to leave by means of the aircraft’s onboard wheelchair.
The new CO 2 standards apply to new aircraft type designs from 2020, and to aircraft type designs already in production as of 2023. In-production aircraft that do not meet the standard by 2028 will no longer be able to be produced unless their designs are modified to meet the new standards.
The new CO2 standards apply to new aircraft type designs 18 from 2020, and to aircraft type designs already in production as of 2023. In-production aircraft that do not meet the standards by 2028 will no longer be able to be produced unless their designs are modified to meet the new standards.
We intend to continue to utilize our disciplined and methodical approach to expand our network in an efficient manner, including by: • strategically deploying our capacity where demand is highest; • continuing to take advantage of opportunities in overpriced and/or underserved markets across the United States and select international destinations in the Americas; • leveraging our diverse geographic footprint and existing crew and maintenance base infrastructure to take advantage of lower-risk network growth opportunities while maintaining high operational standards; • utilizing our low-cost structure to offer low fares which organically drive growth through market stimulation; • continuing to rebalance our network to mitigate seasonal fluctuations in our results and discontinue underperforming routes; and • focusing on what we believe are the most profitable opportunities where our cost differential drives the largest competitive advantage.
We intend to continue to utilize our disciplined and methodical approach to expand our network in an efficient manner, including by: • strategically deploying our capacity where demand is highest; • continuing to take advantage of opportunities in overpriced and/or underserved markets across the United States and select international destinations in the Americas; • leveraging our diverse geographic footprint and existing crew and maintenance base infrastructure to take advantage of lower-risk network growth opportunities while maintaining high operational standards; • utilizing our low-cost structure to offer low fares which organically drive growth through market stimulation; • enhancing our out-and-back scheduling approach, which we believe will help drive improved efficiencies and operational recoverability, as well as reducing crew travel costs; • continuing to rebalance our network to mitigate seasonal fluctuations in our results and discontinue underperforming routes; and • focusing on what we believe are the most profitable opportunities where our cost differential drives the largest competitive advantage.
Our fuel consumption and costs were as follows: Year Ended December 31, 2022 2021 Gallons consumed (millions) 312 266 Average price per gallon (a) $ 3.72 $ 2.17 __________________ (a) Average price per gallon includes related fuel fees and taxes. We have historically maintained an active hedging program designed to reduce our exposure to sudden, sharp increases in fuel prices.
Our fuel consumption and costs were as follows: Year Ended December 31, 2023 2022 Gallons consumed (millions) 365 312 Average price per gallon (a) $ 3.10 $ 3.72 __________________ (a) Average price per gallon includes related fuel fees and taxes. We have historically maintained an active hedging program designed to reduce our exposure to sudden, sharp increases in fuel prices.
In addition, our headquarters is located in a LEED-certified building, which certification indicates buildings designed to achieve energy savings, water efficiency and lower CO 2 emissions. We spent approximately 5% of total revenues on marketing, brand and distribution for each of the years ended December 31, 2022 and 2021.
In addition, our headquarters is located in a LEED-certified building, which certification indicates buildings designed to achieve energy savings, water efficiency and lower carbon dioxide (“CO 2 ”) emissions. We spent approximately 5% of total revenues on marketing, brand and distribution for each of the years ended December 31, 2023 and 2022.
Environmental Regulation We are subject to various federal, state, foreign and local laws and regulations relating to the protection of the environment and affecting matters such as air emissions, including greenhouse gas (“GHG”) emissions, noise emissions, discharges to surface and subsurface waters, safe drinking water, and the use, management, release, discharge and disposal of, and exposure to, materials and chemicals.
Environmental Regulation Environmental Compliance Requirements We are subject to various federal, state, foreign and local laws and regulations relating to the environment and those affecting matters such as air emissions, including greenhouse gas (“GHG”) emissions, noise reduction, discharges to surface and subsurface waters, safe drinking water, and the use, management, release, discharge and disposal of, and exposure to, hazardous waste, materials and chemicals.
In July 2022, we launched the F9 Pilot Cadet Program to train the next generation of pilots in as little as 24 months with the direct pathway to become a First Officer. The program, operated in partnership with Airline Transport Pilot (“ATP”) Flight School, allows applicants to complete flight training at over 70 ATP Flight School locations nationwide.
Our F9 Pilot Cadet Program is intended to train the next generation of pilots in as little as 24 months with the direct pathway to become a First Officer. The program, operated in partnership with Airline Transport Pilot (“ATP”) Flight School, allows applicants to complete flight training at over 70 ATP Flight School locations nationwide.
Debt”): • $277 million of the available $290 million under our pre-delivery deposit (“PDP”) payment credit facility with Citibank (“PDP Financing Facility”); • $71 million from our pre-purchased miles facility; • $66 million in unsecured loans as part of our participation in the payroll support programs under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”); and • $17 million under our floating rate building note.
Debt”): • $312 million of the available $365 million under our pre-delivery deposit (“PDP”) payment credit facility with Citibank (“PDP Financing Facility”); • $80 million from our pre-purchased miles facility; • $66 million in unsecured loans as part of our participation in the payroll support programs under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”); and • $16 million under our floating rate building note.
We intend to replace retired aircraft with A320neo family aircraft. As of December 31, 2022, we had a firm purchase commitment with Airbus to acquire 221 A320neo family aircraft. Additionally, we had commitments with Pratt & Whitney for 19 additional spare aircraft engines by the end of 2029.
We intend to replace retired aircraft with A320neo family aircraft. As of December 31, 2023, we had a firm purchase commitment with Airbus to acquire 210 A320neo family aircraft. Additionally, we had commitments with Pratt & Whitney for 15 additional spare aircraft engines by the end of 2029.
Once these maintenance holidays expire, these aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals. See Part I, Item IA.
Once these maintenance holidays expire, these aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals.
Members pay an annual fee to join the Discount Den . The GoWild! All-You-Can-Fly Pass is a membership launched in the fourth quarter of 2022 that allows members unlimited travel for a specified period of time for a fare price of $0.01, beginning in May 2023.
Members pay an annual fee to join the Discount Den . The GoWild! All-You-Can-Fly Pass is a membership launched in the fourth quarter of 2022 that allows members unlimited travel for a specified period of time for a base fare of $0.01 per flight.
As of December 31, 2022, we had a fleet of 120 Airbus single-aisle aircraft, consisting of 13 A320ceos, 82 A320neos, 21 A321ceos and 4 A321neos. Our unique strategy is underpinned by our low-cost structure and superior low-fare brand. Our Business Model Our business model is based on our unique Low Fares Done Right strategy.
As of December 31, 2023, we had a fleet of 136 Airbus single-aisle aircraft, consisting of 8 A320ceos, 82 A320neos, 21 A321ceos and 25 A321neos. Our unique strategy is underpinned by our low-cost structure and superior low-fare brand. Our Business Model Our business model is based on our unique Low Fares Done Right strategy.
In addition, John Wayne Airport (SNA) in Orange County, California and Long Beach Airport (LGB) in Long Beach, California have a locally imposed slot system. Our operations at these airports generally require the allocation of slots or analogous regulatory authorizations.
In addition, John Wayne Airport (SNA) in Orange County, California has a locally imposed slot system. Our operations at these airports generally require the allocation of slots or analogous regulatory authorizations.
The table below illustrates our employee diversity based on self-identification across all U.S. employees as of December 31, 2022: Male Female Minority 53% 47% 37% Compensation and Benefits We design our compensation and benefits with the goal of supporting the financial, mental, and physical well-being of our employees and their families.
The table below illustrates our employee diversity based on self-identification across all U.S. employees as of December 31, 2023: Male Female Minority 55% 45% 40% Compensation and Benefits We design our compensation and benefits with the goal of supporting the financial, mental, and physical well-being of our employees and their families.
We will continue to comply with all contagious disease requirements issued by the United States and foreign governments, including those related to the COVID-19 pandemic, but we cannot forecast what additional requirements may be imposed in the future.
We will continue to comply with all contagious disease requirements issued by the United States and foreign governments, but we cannot forecast what additional requirements may be imposed in the future.
During the year ended December 31, 2022, we served approximately 100 airports throughout the United States and international destinations in the Americas.
During the year ended December 31, 2023, we served approximately 90 airports throughout the United States and international destinations in the Americas.
Our ability to retain slots or operating authorizations is subject to “use-or-lose” provisions of the governing regulations, and our ability to expand service at slot-controlled airports similarly is limited. The DOT also regulates slot transactions between airlines.
Our ability to retain slots or operating authorizations is subject to “use-or-lose” provisions of the governing regulations, and our ability to expand service at slot-controlled airports similarly is limited.
Our firm fleet and engine commitments as of December 31, 2022 were comprised of the following aircraft: A320neo A321neo Total Aircraft (a) Engines Year Ending 2023 — 13 13 4 2024 — 33 33 2 2025 17 13 30 4 2026 19 22 41 4 2027 21 21 42 3 Thereafter 10 52 62 2 Total 67 154 221 19 __________________ (a) While the commitments presented above reflect the agreed-upon delivery dates as of December 31, 2022, we have recently experienced delays in the deliveries of Airbus aircraft which may persist in future periods.
Our firm fleet and spare engine commitments as of December 31, 2023 were comprised of the following aircraft: A320neo A321neo Total Aircraft (a) Engines Year Ending 2024 — 23 23 2 2025 17 25 42 4 2026 19 22 41 4 2027 21 21 42 3 2028 10 30 40 2 Thereafter — 22 22 — Total 67 143 210 15 __________________ (a) While the commitments presented above reflect the agreed-upon delivery dates as of December 31, 2023, we have recently experienced delays in the deliveries of Airbus aircraft which may persist in future periods.
As of December 31, 2022, we had $761 million of cash and cash equivalents, and our capital structure was comprised of the following (please refer to “Notes to Consolidated Financial Statements — 9.
As of December 31, 2023, we had $609 million of cash and cash equivalents, and our capital structure was comprised of the following (please refer to “Notes to Consolidated Financial Statements — 8.
We reward our repeat customers through our Frontier Miles frequent flyer program and also offer our Discount Den membership program, which provides subscribers with exclusive access to some of our lowest fares.
We reward our repeat customers through our FRONTIER Miles frequent flyer program and also offer our Discount Den membership program, which provides subscribers with exclusive access to some of our lowest fares as well as access to our Kids Fly Free program. We also offer the GoWild!
Impact of Regulatory Requirements on Our Business Regulatory requirements, including but not limited to those discussed above, affect operations and increase operating costs for the airline industry and future regulatory developments may continue to do the same. For additional information, please see Part I, Item 1A.
Impact of Regulatory Requirements on Our Business Regulatory requirements, including but not limited to those discussed above, affect operations and increase operating costs for the airline industry and future regulatory developments may continue to do the same.
Consistent with our ULCC business model, we use a simple marketing message to keep marketing costs low and we regularly offer promotional one-way base fares of $19. Our principal marketing tools are our proprietary email distribution list, our Frontier Miles frequent flyer program and our Discount Den subscription service, as well as advertisements in online, radio and other channels.
Consistent with our ULCC business model, we use a simple marketing message to keep marketing costs low and we offer promotional one-way base fares of $19. 8 Our principal marketing tools are our proprietary email distribution list, our FRONTIER Miles frequent flyer program, our Discount Den subscription service and our GoWild!
As of December 31, 2022, all 120 aircraft in our fleet were financed under operating leases, and the operating leases for 7, 4, 8, 20 and 17 aircraft in our fleet were scheduled to terminate during 2023, 2024, 2025, 2026 and 2027, respectively. In certain circumstances, such operating leases may be extended.
As of December 31, 2023, all 136 aircraft in our fleet were financed under operating leases, and the operating leases for 0, 8, 20, 19 and 14 aircraft in our fleet were scheduled to terminate during 2024, 2025, 2026, 2027 and 2028, respectively. In certain circumstances, such operating leases may be extended.
In addition, at least 51% of our total outstanding stock must be owned and controlled by U.S. citizens and no more than 49% of our stock may be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens and are from countries that have entered into “open skies” air transport agreements with the U.S. which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country.
In addition, up to 49% of our stock may be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens but only if those non-U.S. citizens are from countries that have entered into “open skies” air transport agreements with the United States which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country.
We evaluate our benefit programs each year in terms of value of benefit offerings and out-of-pocket costs so that they are competitive with the benefit offerings of other companies with whom we compete for talent. We continuously evaluate our benefit offerings through these market studies as well as annual employee surveys.
We evaluate our benefit programs each year in terms of value of benefit offerings and out-of-pocket costs in an effort to be competitive with the benefit offerings of other employers with whom we compete for talent. We continuously evaluate our benefit offerings through these market studies as well as employee surveys.
On September 9, 2021, the Biden Administration launched the Sustainable Aviation Fuel Grand Challenge to scale up the production of sustainable aviation fuel, which aims to reduce GHG emissions from aviation by 20% by 2030 and to replace all traditional aviation fuel with sustainable aviation fuel by 2050.
On September 9, 2021, the Biden Administration launched the Sustainable Aviation Fuel Grand Challenge, built upon by the FAA’s Aviation Climate Action Plan published November 9, 2021, which outlines plans to scale up the production of SAF, which aims to reduce GHG emissions from aviation by 20% by 2030 and to replace all traditional aviation fuel with SAF by 2050.
Stedke, our Senior Vice President, Operations, previously served as Vice President, Aircraft Technical Operations for Southwest Airlines. Strong Liquidity and Capital Structure. We intend to maintain our strong capital structure, which enables us to obtain financing for our aircraft pursuant to attractive operating leases, in order to support our growth strategies and the expansion of our fleet and network.
Strong Liquidity and Capital Structure. We intend to maintain our strong capital structure, which enables us to obtain financing for our aircraft pursuant to attractive operating leases, in order to support our growth strategies and the expansion of our fleet and network.
We also contract with third-party specialists for our heavy airframe maintenance. These contracts cover the majority of our aircraft component inventory acquisition, replacement and repairs, thereby eliminating the need to carry expensive spare parts inventory.
We also contract with third-party specialists for our heavy airframe maintenance. These contracts cover the majority of our aircraft component inventory acquisition, replacement and repairs, thereby eliminating the need to carry expensive spare parts inventory. We currently have a firm obligation to purchase 210 A320neo family aircraft by the end of 2029.
In addition, we believe our product is particularly attractive to families, featuring popular animals on our aircraft tails, novelty cards for children and certain offers tailored for families including our Kids Fly Free program and a staff that understands our goal of providing excellent customer service.
In addition, we believe our product is particularly attractive to families, featuring popular animals on our aircraft tails, novelty cards for children and certain offers tailored for families including our Kids Fly Free program and a staff that understands our goal of providing excellent customer service. 9 Overall, our business model is designed to deliver what we believe our customers want: low fares and a high-quality flight experience.
We utilize these animals in several of our online marketing campaigns and on the novelty cards we distribute to children onboard. In 2019, we introduced an initiative to highlight endangered species on our signature animal tails. Our brand includes our focus on sustainability and environmental responsibility.
We utilize these animals in several of our online marketing campaigns and on the novelty cards we distribute to children onboard, particularly highlighting endangered species. Our brand includes our focus on sustainability and environmental responsibility efforts.
The price and availability of jet fuel are volatile due to global economic and geopolitical factors as well as domestic and local supply factors, which contributed to the increase in fuel prices during the year ended December 31, 2022.
The price and availability of jet fuel are volatile due to global economic and geopolitical factors as well as domestic and local supply factors, which has contributed to fuel prices being higher than historical averages during the years ended December 31, 2023 and 2022.
We are also subject to environmental laws and regulations that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions.
Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions.
Our objective is to use our low prices, superior customer service, price-based promotions and creativity to produce viral marketing programs that are cost effective. Each of our aircraft features one of our widely-recognized animals on its tail and is named after such animal.
All-You-Can-Fly Pass membership offering, as well as advertisements in online, radio and other channels. Our objective is to use our low prices, superior customer service, price-based promotions and creativity to produce viral marketing programs that are cost effective. Each of our aircraft features one of our widely-recognized animals on its tail and is named after such animal.
Changes in U.S. aviation policies could result in the alteration or termination of the corresponding air transport agreement, diminish the value of our international route authorities or otherwise affect our operations to/from these countries.
Our flights to the Dominican Republic are governed by a bilateral air transport agreement between the United States and the Dominican Republic. Changes in U.S. aviation policies could result in the alteration or termination of the corresponding air transport agreement, diminish the value of our international route authorities or otherwise affect our operations to/from these countries.
All-You-Can-Fly Pass , and further enhancing our Discount Den membership program and our Frontier Miles offering to improve reward opportunities for our branded credit card customers; • maintaining our focus on sustainability and environmental responsibility, including our position as “America’s Greenest Airline” as measured by fuel efficiency (available seat miles (“ASMs”) per fuel gallon consumed); • modeling a carefully curated aesthetic for our livery, our website and mobile app, uniforms, seat design and on-board products, which are designed to look and feel more upscale than traditional ULCCs; • maintaining a strong online presence with a customer-friendly digital platform that includes our passenger reservation system, improved website and mobile app; • operating a modern fleet with amenities such as extra seat padding and our exit row and Stretch seating options, which provide up to a comfortable 53-inch seat pitch depending on aircraft type; and • providing our customers a dependable, reliable, on-time and friendly travel experience.
All-You-Can-Fly Pass, our Discount Den membership program and our FRONTIER Miles frequent flyer program; • maintaining our focus on sustainability and environmental responsibility, including our position as “America's Greenest Airline” as measured by fuel efficiency (available seat miles (“ASMs”) per fuel gallon consumed during the year ended December 31, 2023; compared to all other major U.S. carriers); • modeling a carefully curated aesthetic for our livery, our website and mobile app, uniforms, seat design and on-board products, which are designed to look and feel more upscale than traditional ULCCs; • maintaining a strong online presence with a customer-friendly digital platform that includes our passenger reservation system, website and mobile app; • operating a modern fleet with amenities such as extra seat padding and premium seating options, which provide extra legroom as compared to our standard seating; and • providing our customers a dependable, reliable, on-time and friendly travel experience.
The table below sets forth our employee groups and status of the collective bargaining agreements with each as of December 31, 2022: Percentage of Workforce Employee Group Representative Amendable Date December 31, 2022 Pilots Air Line Pilots Association (ALPA) January 2024 31% Flight Attendants Association of Flight Attendants (AFA-CWA) May 2024 52% Aircraft Technicians International Brotherhood of Teamsters (IBT) May 2025 (a) 3% Aircraft Appearance Agents IBT October 2023 1% Dispatchers Transport Workers Union (TWU) December 2021 (b) Material Specialists IBT March 2022 (b) Maintenance Controllers IBT October 2023 __________________ (a) We conducted off-cycle negotiations in May 2022 with our aircraft technicians, represented by IBT, where the amendable date was extended from March 2024 to May 2025.
The table below sets forth our employee groups and status of the collective bargaining agreements with each as of December 31, 2023: Percentage of Workforce Employee Group Representative Amendable Date (a) December 31, 2023 Pilots Air Line Pilots Association (ALPA) January 2024 (b) 29% Flight Attendants Association of Flight Attendants (AFA-CWA) May 2024 (c) 49% Aircraft Technicians International Brotherhood of Teamsters (IBT) May 2025 6% Aircraft Appearance Agents IBT October 2023 (d) 1% Dispatchers Transport Workers Union (TWU) August 2028 (e) 1% Material Specialists IBT March 2022 (d) Maintenance Controllers IBT October 2023 (d) __________________ (a) Subject to standard early opener provisions.
Our other revenues also include services such as our Frontier Miles affinity credit card program and commissions revenue from the sale of items such as rental cars and hotels. 6 The following table represents our revenue, on a per-passenger basis for the periods presented: Year Ended December 31, 2022 2021 Fare revenue per passenger $ 54.22 $ 38.94 Ancillary revenue per passenger: Non-fare passenger revenue per passenger 73.21 57.65 Other revenue per passenger 3.07 2.90 Total ancillary revenue per passenger 76.28 60.55 Total revenue per passenger $ 130.50 $ 99.49 Route Network The low unit cost, high quality of service and dependability that make Low Fares Done Right successful have enabled us to diversify our network across a wide range of leisure destinations as well as implement a network strategy that primarily targets high demand or underserved markets, where our low fares stimulate new traffic flows.
The following table represents our revenue, on a per-passenger basis for the periods presented: Year Ended December 31, 2023 2022 Fare revenue per passenger $ 42.26 $ 54.22 Ancillary revenue per passenger: Non-fare passenger revenue per passenger 73.85 73.21 Other revenue per passenger 2.66 3.07 Total ancillary revenue per passenger 76.51 76.28 Total revenue per passenger $ 118.77 $ 130.50 6 Route Network The low unit cost, high quality of service and dependability that make Low Fares Done Right successful have enabled us to diversify our network across a wide range of leisure destinations as well as implement a network strategy that primarily targets high demand or underserved markets, where our low fares stimulate new traffic flows.
Our international flights to Mexico are governed by a liberalized bilateral air transport agreement which the DOT has determined has all of the attributes of an “open skies” agreement. Our flights to the Dominican Republic and Jamaica are governed by bilateral air transport agreements between the United States and such countries.
With certain other countries, however, the United States has a restricted air transportation agreement. Our international flights to Mexico are governed by a liberalized bilateral air transport agreement which the DOT has determined has all of the attributes of an “open skies” agreement.
Cost estimates to comply with the above permitting requirements have not been defined, but we, along with other airlines, would share a portion of these costs at applicable airports.
Cost estimates to comply with the above permitting requirements have not been defined, but we, along with other airlines, would share a portion of these costs at applicable airports. In addition, several U.S. airport authorities have been exploring ways to limit deicing fluid discharges.
For the years ended December 31, 2022 and 2021, we had the most fuel-efficient fleet of all U.S. carriers of significant size when measured by ASMs per fuel gallon consumed.
Aircraft Fuel Aircraft fuel is one of our largest expenses, representing 31% and 34% of our total operating costs for the years ended December 31, 2023 and 2022, respectively. For the years ended December 31, 2023 and 2022, we had the most fuel-efficient fleet of all U.S. carriers of significant size when measured by ASMs per fuel gallon consumed.
A U.S. airline’s ability to operate flights to and from international destinations is subject to the air transport agreements between the United States and the foreign country and the carrier’s ability to obtain the necessary authority from the DOT and the applicable foreign government.
A U.S. airline’s ability to operate flights to and from international destinations is subject to the air transport agreements between the United States and the foreign country and the carrier’s ability to obtain the necessary authority from the DOT and the applicable foreign government. 15 The U.S. government has negotiated “open skies” agreements with many countries, which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country.
In July 2021, the DOT issued a Notice of Proposed Rulemaking (“NPRM”) requiring airlines to refund checked bag fees for delayed bags if they are not delivered to the passenger within a specified number of hours and refunding ancillary fees for services related to air travel that passengers did not receive. 17 In October 2022, the DOT issued a NPRM which would require airlines to increase disclosure of bag fees, change and cancellation fees and family seating policies during the ticket purchase process in an effort to improve the transparency of airline pricing.
In July 2021, the DOT issued a Notice of Proposed Rulemaking (“NPRM”) requiring airlines to refund checked bag fees for delayed bags if they are not delivered to the passenger within a specified number of hours and refunding ancillary fees for services related to air travel that passengers did not receive.
Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of wastes directly attributable to us. 18 Aircraft Emissions and Climate Change Requirements Concern about climate change and greenhouse gases may result in additional regulation and taxation of aircraft emissions in the United States and abroad.
Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of wastes directly attributable to us.
The DOT also has authority to review certain joint venture agreements, marketing agreements, codesharing agreements (where an airline places its designator code on a flight operated by another airline) and wet-leasing agreements (where one airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions.
The DOT also has authority to review certain joint venture agreements, marketing agreements, codesharing agreements and wet-leasing agreements (where one airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions. The DOT has recently engaged in rulemaking with respect to airlines ticketing and fees.
The principal competitive factors in the airline industry are fare pricing, total price, flight schedules, aircraft type, passenger amenities, number of routes served from a city, customer service, safety record and reputation, codesharing relationships, and frequent flyer programs and redemption opportunities. Our competitors and potential competitors include legacy network carriers, LCCs, ULCCs and new entrant airlines.
The principal competitive factors in the airline industry are fare pricing, total price, flight schedules, aircraft type, passenger amenities, number of routes served from a city, customer service, safety record and reputation, codesharing relationships (where an airline places its designator code on a flight operated by another airline), and frequent flyer programs and redemption opportunities.
As of December 31, 2022, we had a fleet of 120 Airbus single-aisle aircraft, consisting of 13 A320ceos, 82 A320neos, 21 A321ceos and 4 A321neos. We won third place for the World's Youngest Aircraft Fleet Award for 2023 by ch-aviation, and as of December 31, 2022, the average aircraft age of our fleet was approximately four years.
As of December 31, 2023, we had a fleet of 136 Airbus single-aisle aircraft, consisting of 8 A320ceos, 82 A320neos, 21 A321ceos and 25 A321neos. In January 2024, we were recognized by ch-aviation as having the third youngest fleet in North America, and as of December 31, 2023, the average aircraft age of our fleet was approximately four years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWeather-related events, natural disasters, terrorism, wars, political disruption or instability involving oil-producing countries (including due to the ongoing war between Russia and Ukraine), changes in governmental or cartel policy concerning crude oil or aircraft fuel production, labor strikes, cyberattacks or other events affecting refinery production, transportation, taxes, marketing, environmental concerns, market manipulation, price speculation and other unpredictable events may drive actual or perceived fuel supply shortages.
Biggest changeSoutheast and on the Gulf Coast where a significant portion of domestic refining capacity is located), terrorism, wars (including the war between Russia and Ukraine and the conflict in the Middle East), supply chain disruptions, political disruption or instability involving oil-producing countries, changes in production levels of individual nations or associations of oil-producing states, economic sanctions imposed against oil-producing countries or specific industry participants, changes in fuel-related government policy, the strength of the U.S. dollar against foreign currencies, labor strikes, cyberattacks or other events affecting refinery production, transportation, taxes, marketing, environmental concerns, market manipulation, price speculation and other unpredictable events may drive actual or perceived fuel supply shortages.
Efforts to transition to a low-carbon future have increased the focus by global, regional and national regulators on climate change and GHG emissions, including CO 2 emissions. In particular, ICAO has adopted rules, including those pertaining to CORSIA, which will require us to address the growth in CO 2 emissions of a significant majority of our international flights.
Efforts to transition to a low-carbon future have increased the focus by global, national and regional regulators on climate change and GHG emissions, including CO 2 emissions. In particular, ICAO has adopted rules, including those pertaining to CORSIA, which will require us to address the growth in CO 2 emissions of a significant majority of our international flights.
In addition, we will not directly control our CORSIA 28 compliance costs through 2032 because those obligations are based on the growth in emissions of the global aviation sector and begin to incorporate a factor for individual airline operator emissions growth beginning in 2033.
In addition, we will not directly control our CORSIA compliance costs through 2032 because those obligations are based on the growth in emissions of the global aviation sector and begin to incorporate a factor for 28 individual airline operator emissions growth beginning in 2033.
In addition, the ICAO and jurisdictions around the world have adopted noise regulations that require all aircraft to comply with noise-level standards, and governmental authorities in several U.S. and foreign cities are considering or have already implemented aircraft noise reduction programs, including the imposition of overnight curfews and limitations on daytime take-offs and landings.
In addition, ICAO and jurisdictions around the world have adopted noise regulations that require all aircraft to comply with noise-level standards, and governmental authorities in several U.S. and foreign cities are considering or have already implemented aircraft noise reduction programs, including the imposition of overnight curfews and limitations on daytime take-offs and landings.
Some of our target growth markets include countries with less developed economies, legal systems, financial markets and business and political environments that are vulnerable to economic and political disruptions, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments.
Some of our target growth markets include countries with less developed economies, legal systems or financial markets, and business and political environments that are vulnerable to economic and political disruptions, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments.
To the extent that any such changes have a negative impact on us or the airline industry in general, including as a result of related 45 uncertainty, these changes may materially impact our business, results of operations, cash flows and financial condition. New U.S. tax legislation may adversely affect our business, results of operations, cash flows and financial condition.
To the extent that any such changes have a negative impact on 45 us or the airline industry in general, including as a result of related uncertainty, these changes may materially impact our business, results of operations, cash flows and financial condition. New U.S. tax legislation may adversely affect our business, results of operations, cash flows and financial condition.
Under these provisions, neither Indigo, its portfolio companies, funds or other affiliates, nor any of their agents, stockholders, members, partners, officers, directors and employees will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate.
Under these provisions, neither Indigo Partners, its portfolio companies, funds or other affiliates, nor any of their agents, stockholders, members, partners, officers, directors and employees will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate.
Our results of operations may be affected by actions taken by governmental or other agencies or authorities having jurisdiction over our operations at these and other airports, including, but not limited to: • increases in airport rates and charges; • limitations on take-off and landing slots, airport gate capacity or other use of airport facilities; • termination of our airport use agreements, some of which can be terminated by airport authorities with little notice to us; • increases in airport capacity that could facilitate increased competition; • international travel regulations such as customs and immigration; • increases in taxes; 36 • changes in the law that affect the services that can be offered by airlines, in general and in particular markets or at particular airports; • restrictions on competitive practices; • the adoption of statutes or regulations that impact or impose additional customer service standards and requirements, including security standards and requirements; and • the adoption of more restrictive locally imposed noise regulations or curfews.
Our results of operations may be affected by actions taken by governmental or other agencies or authorities having jurisdiction over our operations at these and other airports, including, but not limited to: • increases in airport rates and charges; • limitations on take-off and landing slots, airport gate capacity or other use of airport facilities; • termination of our airport use agreements, some of which can be terminated by airport authorities with little notice to us; • increases in airport capacity that could facilitate increased competition; • international travel regulations such as customs and immigration; • increases in taxes; • changes in the law that affect the services that can be offered by airlines, in general and in particular markets or at particular airports; • restrictions on competitive practices; • the adoption of statutes or regulations that impact or impose additional customer service standards and requirements, including security standards and requirements; and • the adoption of more restrictive locally imposed noise regulations or curfews.
As a result, Indigo will have the ability to control all such matters affecting us, including: • the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies; • the compensation of our named executive officers; • our acquisition or disposition of assets; • our financing activities, including the issuance of additional equity securities; • any determinations with respect to mergers, acquisitions and other business combinations; • corporate opportunities that may be suitable for us and Indigo; • the payment of dividends on our common stock; and • the number of shares available for issuance under our stock plans for our existing and prospective employees.
As a result, Indigo will have the ability to control all such matters affecting us, including: • the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies; • the compensation of our named executive officers; • our acquisition or disposition of assets; • our financing activities, including the issuance of additional debt and equity securities; • any determinations with respect to mergers, acquisitions and other business combinations; • corporate opportunities that may be suitable for us and Indigo; • the payment of dividends on our common stock; and • the number of shares available for issuance under our stock plans for our existing and prospective employees.
The amount of our aircraft-related fixed obligations and our obligations under other debt arrangements could have a material adverse effect on our business, results of operations and financial condition and could: • require a substantial portion of cash flows from operations be used for operating lease and maintenance deposit payments, thereby reducing the availability of our cash flows to fund working capital, capital expenditures and other general corporate purposes; • limit our ability to make required PDPs, including those payable to our aircraft and engine manufacturers for our aircraft and spare engines on order; • limit our ability to obtain additional financing to support our expansion plans and for working capital and other purposes on acceptable terms or at all; • make it more difficult for us to pay our other obligations as they become due during adverse general economic and market industry conditions because any related decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled payments; • reduce our flexibility in planning for, or reacting to, changes in our business and the airline industry and, consequently, place us at a competitive disadvantage to our competitors with lower fixed payment obligations; and • cause us to lose access to one or more aircraft and forfeit our maintenance and other deposits if we are unable to make our required aircraft lease rental payments and our lessors exercise their remedies under the lease agreement including cross default provisions in certain of our leases.
The amount of our aircraft-related fixed obligations and our obligations under other debt arrangements could have a material adverse effect on our business, results of operations and financial condition and could: • require a substantial portion of cash flows from operations be used for operating lease and maintenance deposit payments, thereby reducing the availability of our cash flows to fund working capital, capital expenditures and other general corporate purposes; • limit our ability to make required PDPs, including those payable to our aircraft and engine manufacturers for our aircraft and spare engines on order; • limit our ability to obtain additional financing to support our expansion plans and for working capital and other purposes on acceptable terms or at all; • make it more difficult for us to pay our other obligations as they become due during adverse general economic and market industry conditions because any related decrease in revenues or increase in costs could cause us to not have sufficient cash flows from operations to make our scheduled payments; • reduce our flexibility in planning for, or reacting to, changes in our business and the airline industry and, consequently, place us at a competitive disadvantage to our competitors with lower fixed payment obligations; and • cause us to lose access to one or more aircraft and forfeit our maintenance and other deposits if we are unable to make our required aircraft lease rental payments and our lessors exercise their remedies under the lease agreement including cross default provisions in certain of our leases.
The DOT has also published final rules regarding traveling by air with service animals, defining unfair or deceptive practices, clarifying that the maximum amount of denied boarding compensation that a carrier may provide to a passenger denied boarding involuntarily is not limited, prohibiting airlines from involuntarily denying boarding to a passenger after the passenger’s boarding pass has been collected or scanned and the passenger has boarded (subject to safety and security exceptions), raising the liability limits for denied boarding compensation and raising the liability limit for mishandled baggage in domestic air transportation.
The DOT has also published final rules regarding traveling by air with service animals, defining unfair or deceptive practices, clarifying that the maximum amount of denied boarding compensation that a carrier may provide to a passenger denied boarding involuntarily is not limited, prohibiting airlines from involuntarily denying boarding to a passenger after the passenger’s boarding pass has been collected or scanned and the passenger has 26 boarded (subject to safety and security exceptions), raising the liability limits for denied boarding compensation and raising the liability limit for mishandled baggage in domestic air transportation.
The restrictions imposed by federal law and DOT policy require that we must be owned and controlled by U.S. citizens, that no more than 25.0% of our voting stock be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens, as defined in 49 U.S.C. § 40102(a)(15), that our president and at least two-thirds of the members of our board of directors and other managing officers be U.S. citizens, and that we be under the actual control of U.S. citizens.
The restrictions imposed by federal law and DOT policy require that we must be owned and controlled by U.S. citizens, that no more than 25% of our voting stock be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens, as defined in 49 U.S.C. § 40102(a)(15), that our president and at least two-thirds of the members of our board of directors and other managing officers be U.S. citizens, and that we be under the actual control of U.S. citizens.
Cancellations or delays 31 due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than other larger airlines that may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers.
Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than other larger airlines that may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers.
We believe there are currently significant restraints on gates and related ground facilities at many of the most heavily utilized airports in the United States, in addition to the fact that three major domestic airports (JFK and LaGuardia in New York and Reagan National in Washington, D.C.) require government-controlled take-off or landing “slots” to operate at those airports.
We believe there are currently significant restraints on gates and related ground facilities at many of the most heavily utilized airports in the United States, in addition to the fact that three major domestic airports (JFK and LaGuardia in New York and Reagan National in Washington, D.C.) require government-controlled take-off or landing “slots” to 33 operate at those airports.
While we have elected not to be subject to the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”) in our amended and restated certificate of incorporation, such certificate of incorporation provides that in the event Indigo Partners and its affiliates cease to beneficially own at least 15% of the then-outstanding shares of our voting common stock, we will automatically become subject to Section 203 of the DGCL to the extent applicable.
While we have elected not to be subject to the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”) in our amended and restated certificate of incorporation, such certificate of incorporation provides that in the event Indigo and its affiliates cease to beneficially own at least 15% of the then-outstanding shares of our voting common stock, we will automatically become subject to Section 203 of the DGCL to the extent applicable.
The compromise of our technology systems resulting in the loss, disclosure, misappropriation of or access to the personally identifiable information of our passengers, prospective passengers or personnel could result in governmental investigation, civil liability or regulatory penalties under laws protecting the privacy of personal information, any or all of which could disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.
Moreover, the compromise of our technology systems resulting in the loss, disclosure, misappropriation of or access to the personally identifiable information of our passengers, prospective passengers or personnel could result in governmental investigation, civil liability or regulatory penalties under laws protecting the privacy of personal information, any or all of which could disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.
In addition, replacement technologies and systems for any service we currently utilize that experiences failures or interruptions may not be readily available on a timely basis, at competitive rates or at all. Furthermore, our current technologies and systems are heavily integrated with our day-to-day operations and any transition to a new technology or system could be complex and time-consuming.
In addition, replacement technologies and systems for any service we currently utilize that experiences 43 failures or interruptions may not be readily available on a timely basis, at competitive rates or at all. Furthermore, our current technologies and systems are heavily integrated with our day-to-day operations and any transition to a new technology or system could be complex and time-consuming.
These factors have caused us recently to maintain a larger workforce than is immediately necessary for our planned operations in order to maintain network reliability and support planned growth in light of the challenges of hiring and retaining employees under current economic conditions, 22 including the current worker shortage impacting certain sectors of the U.S. labor market.
These factors have caused us recently to maintain a larger workforce than is immediately necessary for our planned operations in order to maintain network reliability and support planned growth in light of the challenges of hiring and retaining employees under current economic conditions, including the current worker shortage impacting certain sectors of the U.S. labor market.
While we believe our low fares and low costs will enable us to grow our network in new markets profitably to take advantage of new demand patterns as they arise, there can be no assurance that we will be successful in doing so or that we will be able to successfully compete with other U.S. airlines on such routes.
While we believe our low fares and low costs will enable us to grow our network profitably in new markets in order to take advantage of new demand patterns as they arise, there can be no assurance that we will be successful in doing so or that we will be able to successfully compete with other U.S. airlines on such routes.
These alliances, such as Oneworld, SkyTeam, and Star Alliance, generally provide for codesharing, frequent flyer program reciprocity, coordinated scheduling of flights to permit convenient connections and other joint marketing activities. In addition, certain of these alliances involve highly integrated antitrust immunized joint ventures. Such arrangements permit an airline to market flights operated by other alliance members as its own.
These alliances, such as Oneworld, SkyTeam and Star Alliance, generally provide for 47 codesharing, frequent flyer program reciprocity, coordinated scheduling of flights to permit convenient connections and other joint marketing activities. In addition, certain of these alliances involve highly integrated antitrust immunized joint ventures. Such arrangements permit an airline to market flights operated by other alliance members as its own.
Our inability to meet our obligations as they become due could have a material adverse effect on our business, results of operations and financial condition. Our ability to obtain financing or access capital markets may be limited. We have significant obligations to purchase aircraft and spare engines that we have on order from Airbus and Pratt & Whitney.
Our inability to meet our obligations as they become due could have a material adverse effect on our business, results of operations and financial condition. Our ability to obtain financing or access capital markets may be limited. We have significant obligations to purchase aircraft and spare engines that we have on order from Airbus and Pratt & Whitney, respectively.
Any similar litigation against us could result in substantial costs, divert management’s attention and resources and have a material adverse effect on our business, results of operations and financial condition. 48 If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our stock price and trading volume could decline.
Any similar litigation against us could result in substantial costs, divert management’s attention and resources and have a material adverse effect on our business, results of operations and financial condition. If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our stock price and trading volume could decline.
One or more of our competitors may also significantly reduce their labor costs, thereby providing them with a competitive advantage over us. Our labor costs may also increase in connection with our growth and we could also become subject to additional collective bargaining agreements in the future as non-unionized workers may unionize.
One or more of our 36 competitors may also significantly reduce their labor costs, thereby providing them with a competitive advantage over us. Our labor costs may also increase in connection with our growth and we could also become subject to additional collective bargaining agreements in the future as non-unionized workers may unionize.
The extremely competitive nature of the airline industry could prevent us from attaining the level of passenger traffic or maintaining the level of fares or revenues related to non-fare services required to achieve and sustain profitable operations in new and existing markets and could impede our growth strategy, which could harm our operating results.
The extremely competitive nature of the airline industry could prevent us from attaining the level of passenger traffic or maintaining the level of fares or revenues related to non-fare services, required to achieve and sustain profitable operations in new and existing markets. This could impede our growth strategy, which could harm our operating results.
For instance, a director of our company who also serves as a stockholder, member, partner, officer, director or employee of Indigo or any of its portfolio companies, funds or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisitions or other opportunities may not be available to us.
For instance, a director of our company who also serves as a stockholder, member, partner, officer, director or employee of Indigo Partners or any of its portfolio companies, funds or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisitions or other opportunities may not be available to us.
We cannot guarantee that, as a result of the ongoing, or future, supply chain disruptions or staffing shortages, we or our third-party service providers will be able to timely source all of the products and services we require in the course of our business, or that we will be successful in procuring suitable alternatives.
We cannot guarantee that, as a result of the ongoing, or future, supply chain disruptions or 42 staffing shortages, we or our third-party service providers will be able to timely source all of the products and services we require in the course of our business, or that we will be successful in procuring suitable alternatives.
If we fail to establish ourselves in such new markets our business, results of operations and financial condition could be materially adversely affected. Our growth and the success of our ULCC business model could stimulate competition in our markets through our competitors’ development of their own ULCC strategies or through new market entrants.
If we fail to establish ourselves in such new markets, our business, results of operations and financial condition could be materially adversely affected. 23 Our growth and the success of our ULCC business model could stimulate competition in our markets through our competitors’ development of their own ULCC strategies or through new market entrants.
While we have taken precautions to avoid an unauthorized 44 incursion of our computer systems, we cannot assure you that our precautions are either adequate or implemented properly to prevent and detect a data breach or other cybersecurity incident and its adverse financial and reputational consequences to our business.
While we have taken precautions to avoid an unauthorized incursion of our computer systems, we cannot assure you that our precautions are either adequate or implemented properly to prevent and detect a data breach or other cybersecurity incident and its adverse financial and reputational consequences to our business.
We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to and mitigate such physical effects of climate 29 change. We are not able to predict accurately the materiality of any potential losses or costs associated with the physical effects of climate change at this time.
We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to and mitigate such physical effects of climate change. We are not able to predict accurately the materiality of any potential losses or costs associated with the physical effects of climate change at this time.
In addition, seasonality may cause our quarterly and monthly results to fluctuate since passengers tend to fly more during the summer months and less in the winter months, apart from the holiday season. We cannot assure you that we will find profitable markets in which to operate during the winter 47 season.
In addition, seasonality may cause our quarterly and monthly results to fluctuate since passengers tend to fly more during the summer months and less in the winter months, apart from the holiday season. We cannot assure you that we will find profitable markets in which to operate during the winter season.
Compliance with these rules may increase our costs, while failure to remain in full compliance with these rules may subject us to fines or other enforcement action. FAR Part 117 and the minimum 26 pilot hour requirements may also reduce our ability to meet flight crew staffing requirements.
Compliance with these rules may increase our costs, while failure to remain in full compliance with these rules may subject us to fines or other enforcement action. FAR Part 117 and the minimum pilot hour requirements may also reduce our ability to meet flight crew staffing requirements.
A significant portion of our operations are concentrated in markets such as Denver, the Southeast, the Northeast and Northern Midwest regions of the United States, which are particularly vulnerable to weather, airport traffic constraints and other delays, particularly in the winter months and during hurricane season.
A significant portion of our operations are concentrated in markets such as Denver, the Southeast, the Northeast and Northern Midwest regions of the United States, which are 39 particularly vulnerable to weather, airport traffic constraints and other delays, particularly in the winter months and during hurricane season.
These potential conflicts of interest could have a material adverse effect on our business, results of operations or financial condition, if attractive corporate opportunities are allocated by Indigo to itself or its portfolio companies, funds or other affiliates instead of to us.
These potential conflicts of interest could have a material adverse effect on our business, results of operations or financial condition, if attractive corporate opportunities are allocated by Indigo Partners to itself or its portfolio companies, funds or other affiliates instead of to us.
If we are unable to obtain adequate war risk insurance or if 32 an event not covered by the insurance we maintain were to take place, our business, results of operations and financial condition could be materially adversely affected.
If we are unable to obtain adequate war risk insurance, or if an event not covered by the insurance we maintain were to take place, our business, results of operations and financial condition could be materially adversely affected.
We will continue to be dependent on our operating cash flows (if any) and cash balances to fund our operations, provide capital reserves and make scheduled payments on our aircraft-related fixed obligations, including substantial PDPs 39 related to the aircraft we have on order.
We will continue to be dependent on our operating cash flows (if any) and cash balances to fund our operations, provide capital reserves and make scheduled payments on our aircraft-related fixed obligations, including substantial PDPs related to the aircraft we have on order.
If one or more of these analysts ceases to cover our company or fails to publish reports on us regularly, demand for our stock could decrease, which may cause the trading price of our common stock and the trading volume of our common stock to decline.
If one or more of these analysts ceases to cover our company or fails to publish reports on us 48 regularly, demand for our stock could decrease, which may cause the trading price of our common stock and the trading volume of our common stock to decline.
As a result of the foregoing, there can be no assurance that we will be able to attract or retain qualified personnel and we may be required to increase wages and/or benefits in order to do so.
As a result of the foregoing, there can be no assurance that we will be able to attract or retain qualified personnel and we may be 22 required to increase wages and/or benefits in order to do so.
Our non-fare passenger revenue consists primarily of revenue generated from air 27 travel-related services such as service fees, baggage fees, seat selection fees and other passenger-related revenue and is a component of passenger revenue within our consolidated statements of operations.
Our non-fare passenger revenue consists primarily of revenue generated from air travel-related services such as service fees, baggage fees, seat selection fees and other passenger-related revenue and is a component of passenger revenue within our consolidated statements of operations.
Such claims could involve discrimination (for example, based on gender, age, race or religious affiliation), sexual harassment, privacy, patent, commercial, product liability, 54 whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings.
Such claims could involve discrimination (for example, based on gender, age, race or religious affiliation), sexual harassment, privacy, patent, commercial, product liability, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings.
To the extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our business strategy or otherwise constrain our growth and operations.
To the 40 extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our business strategy or otherwise constrain our growth and operations.
Threatened or actual terrorist attacks or security concerns, particularly involving airlines, could have a material adverse effect on our business, results of operations and financial condition.
Threatened or actual terrorist attacks or security concerns, particularly those involving airlines, could have a material adverse effect on our business, results of operations and financial condition.
The FAA has issued final regulations governing pilot rest periods and work hours for all passenger airlines certificated under Part 121 of the Federal Aviation Regulations.
The FAA has issued final regulations governing pilot rest periods and work hours for all passenger airlines certificated under Part 121 of the Federal Aviation Regulations (“FAR”).
We select target markets and routes where we believe we can achieve profitability within a reasonable timeframe, 33 and we only continue operating on routes where we believe we can achieve and maintain our desired level of profitability.
We select target markets and routes where we believe we can achieve profitability within a reasonable timeframe, and we only continue operating on routes where we believe we can achieve and maintain our desired level of profitability.
Flight delays caused by these factors may frustrate passengers and may increase costs and decrease revenues which, in turn, could adversely affect profitability. The federal government controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The federal government also controls airport security.
Flight delays caused by these factors may frustrate passengers and may increase costs and 30 decrease revenues which, in turn, could adversely affect our profitability. The federal government controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The federal government also controls airport security.
As of December 31, 2022, we were not subject to any credit card holdbacks, although if we fail to maintain certain liquidity and other financial covenants, our credit card processors have the right to hold back credit card remittances to cover our obligations to them, which would result in a reduction of unrestricted cash that could be material.
As of December 31, 2023, we were not subject to any credit card holdbacks, although if we fail to maintain certain liquidity and other financial covenants, our credit card processors have the right to hold back credit card remittances to cover our obligations to them, which would result in a reduction of unrestricted cash that could be material.
In addition, in order to successfully implement our growth strategy, which includes the planned growth of our fleet size and a firm commitment to purchase 221 A320neo family aircraft by the end of 2029, we will require access to a large number of gates and other services at airports we currently serve or may seek to serve.
In addition, in order to successfully implement our growth strategy, which includes the planned growth of our fleet size and a firm commitment to purchase 210 A320neo family aircraft by the end of 2029, we will require access to a large number of gates and other services at airports we currently serve or may seek to serve.
Within the airline industry, we compete with legacy network carriers, LCCs and ULCCs. Competition on most of the routes we presently serve is significant, due to the large number of carriers in those markets. Furthermore, other airlines may begin service or increase existing service on routes where we currently face little or no competition.
Within the airline industry, we compete with legacy network carriers, LCCs and ULCCs. Competition on most of the routes we presently serve is significant, due to the large number of carriers in those markets. Furthermore, other airlines may begin service or increase existing service on routes where we currently face relatively little competition.
Due to the relatively small size of our fleet, our point-to-point network and high daily aircraft utilization rate, the unexpected unavailability of one or more aircraft and resulting reduced capacity or even a modest decrease in demand could have a material adverse effect on our business, results of operations and financial condition.
Due to the relatively small size of our fleet and high daily aircraft utilization rate, the unexpected unavailability of one or more aircraft and resulting reduced capacity or even a modest decrease in demand could have a material adverse effect on our business, results of operations and financial condition.
Future public health threats or outbreaks of disease, including pandemics similar to the COVID-19 pandemic, as well as measures to reduce the spread of such disease and the related economic impact, could have a material adverse impact on our business, results of operations and financial condition.
Future public health threats or outbreaks of disease, including pandemics similar to the COVID-19 pandemic, as well as measures to reduce the spread of such disease and the related economic impact, could have a material adverse impact on our business, results of operations and financial conditions.
However, we have limited control over some of our costs. For example, we have limited control over the price and availability of aircraft fuel, aviation insurance, the acquisition and operating cost of aircraft, airport and related infrastructure costs, taxes, the cost of meeting changing regulatory requirements and our cost to access capital or financing.
For example, we have limited control over the price and availability of aircraft fuel, aviation insurance, the acquisition and operating cost of aircraft, airport and related infrastructure costs, taxes, the cost of meeting changing regulatory requirements and our cost to access capital or financing.
Separately, if any of Airbus, CFM International or Pratt & Whitney becomes unable to perform its contractual obligations, including a failure to delivery aircraft or engines on schedule, and we must lease or purchase aircraft or engines from another supplier, we would incur substantial transition costs, including expenses related to acquiring new aircraft, engines, spare parts, maintenance facilities and training activities, and we would lose the cost benefits from our current single-fleet composition, any of which could have a material adverse effect on our business, results of operations and financial condition.
Separately, if any of Airbus, CFM International or Pratt & Whitney becomes unable to perform its contractual obligations, including a failure to deliver aircraft or engines on schedule, and we must lease or purchase aircraft or engines from another supplier, we would incur substantial transition costs, including expenses related to acquiring new aircraft, engines, spare parts, maintenance facilities and training activities, and we would lose the cost benefits realized by our current single-fleet composition, any of which could have a material adverse effect on our business, results of operations and financial condition.
If U.S. or global economic conditions are unfavorable or uncertain for an extended period of time, including due to inflationary pressures and/or the disruption, instability and volatility in global markets resulting from the war between Russia and Ukraine, it could have a material adverse effect on our business, results of operations and financial condition.
If U.S. or global economic conditions are unfavorable or uncertain for an extended period of time, including due to inflationary pressures and/or the disruption, instability and volatility in global markets resulting from the war between Russia and Ukraine and the conflict in the Middle East, it could have a material adverse effect on our business, results of operations and financial condition.
U.S. commitments announced during President Biden’s April 2021 Leaders’ Summit on Climate include working with other countries on a vision toward reducing the aviation sector’s emissions in a manner consistent with the Biden Administration’s 2050 net-zero emissions goal, continued participation in CORSIA and development of sustainable aviation fuels.
U.S. commitments announced during President Biden’s April 2021 Leaders’ Summit on Climate include working with other countries on a vision toward reducing the aviation sector’s emissions in a manner consistent with the Biden Administration’s 2050 net-zero emissions goal, continued participation in CORSIA and development of SAF.
If we are unable to obtain sufficient insurance (including aviation hull and liability insurance and property and business interruption coverage) to cover such liabilities or losses, whether due to insurance market conditions or otherwise, our business, results of operations and financial condition could be materially adversely affected.
If we are unable to obtain sufficient insurance (including aviation hull and liability insurance, property and business interruption coverage and cybersecurity incident coverage) to cover such liabilities or losses, whether due to 32 insurance market conditions or otherwise, our business, results of operations and financial condition could be materially adversely affected.
Furthermore, as technological evolution occurs in our industry, through the use of composites and other innovations, we may be competitively disadvantaged because we have existing extensive fleet commitments that would prohibit us from adopting new technologies on an expedited basis.
Furthermore, as technological evolution occurs in our industry, through the use of composite materials and other innovations, we may be competitively disadvantaged because we have extensive existing fleet commitments that would prohibit us from adopting new technologies on an expedited basis.
Our state NOLs may expire, if not utilized, from one year to having no expiration depending on the state the NOL is attributed to, and our foreign NOLs expire in eight years.
Our state NOLs may expire, if not utilized, from one year to having no expiration depending on the state the NOL is attributed to, and our foreign NOLs expire in seven years.
In January 2020, the DOT published a NPRM regarding the accessibility features of lavatories and onboard wheelchair requirements on certain single-aisle aircraft with an FAA certificated maximum capacity of 125 seats or more, training flight attendants to proficiency on an annual basis to provide assistance in transporting qualified individuals with disabilities to and from the lavatory from their aircraft seat, and providing certain information on request to qualified individuals with a disability or persons inquiring on their behalf, on the carrier’s website and in printed or electronic form on the aircraft, concerning the accessibility of aircraft lavatories.
In January 2020, the DOT published a NPRM regarding short-term improvements, including with respect to the accessibility features of lavatories and onboard wheelchair requirements on certain single-aisle aircraft with an FAA certificated maximum capacity of 125 seats or more, training flight attendants to proficiency on an annual basis to provide assistance in transporting qualified individuals with disabilities to and from the lavatory from their aircraft seat and providing certain information on request to qualified individuals with a disability or persons inquiring on their behalf, on the carrier’s website and in printed or electronic form on the aircraft, concerning the accessibility of aircraft lavatories.
Because of our high utilization and point-to-point network, operational disruptions can have a disproportionate impact on our ability to recover from such disruptions. In addition, many airlines re-accommodate their disrupted passengers on other airlines at prearranged rates under flight interruption manifest agreements.
Because of our high utilization, operational disruptions can have a disproportionate impact on our ability to recover from such disruptions. In addition, many airlines re-accommodate their disrupted passengers on other airlines at prearranged rates under flight interruption manifest agreements.
Our reputation or brand image could be adversely impacted by, among other things, any failure to adopt or maintain high ethical, social and environmental sustainability practices for our operations and activities; our impact on the environment; any inability to maintain our position as “America’s Greenest Airline” as measured by fuel efficiency (ASMs per fuel gallon consumed) including, for example, if another major U.S. airline experiences more average fuel savings than us based on ASMs per fuel gallon consumed or if consumers perceive us to be less “green” than other airlines based on different factors or metrics or by attributing the sustainability practices of our vendors, suppliers and other third parties to us; public pressure from investors or policy groups to change our policies, such as movements to institute a “living wage;” customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs; customer perceptions of our use of social media; or customer perceptions of statements made by us, our employees and executives, agents or other third parties.
Our reputation or brand image could be adversely impacted by, among other things, any failure to adopt or maintain high ethical, social and environmental sustainability practices for our operations and activities; our impact on the environment; any inability to maintain our position as “America’s Greenest Airline” as measured by fuel efficiency (ASMs per fuel gallon consumed during the year ended December 31, 2023; compared to all other major U.S. carriers) including, for example, if another major U.S. airline experiences more average fuel savings than us based on ASMs per fuel gallon consumed or if consumers perceive us to be less “green” than other airlines based on different factors or metrics or by attributing the sustainability practices of our vendors, suppliers and other third parties to us; public pressure from investors or policy groups to change our policies, such as movements to institute a “living wage;” customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs; customer perceptions of our use of social media; or customer perceptions of statements made by us, our employees and executives, agents or other third parties.
High fuel prices or increases in fuel costs (or in the price of crude oil) would result in increased levels of expense, and we may not be able to increase ticket prices sufficiently to cover such increased fuel costs, particularly when fuel prices rise quickly, as occurred in 2022.
High fuel prices or increases in fuel costs (or in the price of crude oil) would result in increased levels of expense, and we may not be able to increase ticket prices sufficiently to cover such increased fuel costs, particularly when fuel prices rise quickly.
In connection with the $150 million borrowing from the Treasury Loan, which was repaid in full on February 2, 2022, we issued warrants to the Treasury which are exercisable for up to 2,358,090 shares of our common stock.
In connection with the $150 million borrowing from the Treasury (the “Treasury Loan”), which was repaid in full on February 2, 2022, we issued warrants to the Treasury which are exercisable for up to 2,358,090 shares of our common stock.
We are subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise, including those relating to emissions to the air, discharges (including storm water discharges) to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials.
We are subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise reduction, including those relating to air emissions, discharges (including storm water discharges) to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous waste, materials and chemicals.
A critical cost-saving element of our business strategy is to operate a single-family aircraft fleet; however, our dependence on the Airbus A320 family aircraft for all of our aircraft and on CFM International and Pratt & Whitney for our engines makes us vulnerable to any delivery delays, design defects, mechanical problems or other technical or regulatory issues associated with this aircraft type or these engines.
A critical cost-saving element of our business strategy is to operate a single-family aircraft fleet; however, our dependence on the Airbus A320 family aircraft for all of our aircraft and on CFM International, an affiliate of General Electric Company, and Pratt & Whitney for our engines makes us vulnerable to any delivery delays, design defects, mechanical problems or other technical or regulatory issues associated with this aircraft type or these engines.
In addition, we have announced a number of ESG initiatives, which will require ongoing investment, and there is no assurance that we will achieve any of these goals or that our initiatives will achieve their intended outcomes. Consumers’ perceptions of our efforts to achieve these goals often differ widely and present risks to our reputation and brand.
In addition, we have a number of ESG initiatives, which will require ongoing investment, and there is no assurance that our initiatives will achieve their intended outcomes. Consumers’ perceptions of our efforts to achieve these initiatives often differ widely and present risks to our reputation and brand.
In the event that CORSIA does not come into force as expected, we and other airlines could become subject to an unpredictable and inconsistent array of national or regional emissions restrictions, creating a patchwork of complex regulatory requirements that could affect global competitors differently without offering meaningful aviation environmental improvements.
In the event that CORSIA does not come into force as expected or is terminated for whatever reason, we and other airlines could become subject to an unpredictable and inconsistent array of national or regional emissions restrictions, creating a patchwork of complex regulatory requirements that could affect global competitors differently without offering meaningful aviation environmental improvements.
The success of our operations and our future growth is dependent on a number of federal agencies, specifically the FAA, the DOT and the TSA.
The success of our operations and our future growth is dependent on a number of federal agencies, including the FAA, the DOT and the TSA.
We have experienced an increase in flight delays and cancellations at these airports due to airport congestion, which has adversely affected our operating performance and results of operations. We have also experienced increased competition at Denver International Airport since 2017 from carriers adding flights to and from Denver.
We have experienced an increase in flight delays and cancellations at these airports due to airport congestion, which has adversely affected our operating performance and results of operations. We have also experienced increased competition at Denver International Airport and Orlando International Airport from carriers adding flights to and from Denver and Orlando, respectively.
We are one of the first airlines to utilize the A320neo family as well as the LEAP engine, and it could take several years to determine whether the reliability and maintenance costs associated with a new aircraft and engine would have a significant impact on our operations.
We were one of the first airlines to utilize the A320neo family and the LEAP engine, and it could take several years to determine whether the reliability and maintenance costs associated with a new aircraft and engine would have a significant impact on our operations.
As of December 31, 2022, we had deferred tax assets of approximately $32 million, $11 million and $7 million related to NOLs available to reduce future federal, state and foreign taxable income, respectively. Under current tax law, our federal NOL carryforwards do not expire, but the deductibility of such NOL carryforwards is limited to 80% of our taxable income.
As of December 31, 2023, we had deferred tax assets of approximately $53 million, $11 million and $11 million related to NOLs available to reduce future federal, state and foreign taxable income, respectively. Under current tax law, our federal NOL carryforwards do not expire, but the deductibility of such NOL carryforwards is limited to 80% of our taxable income.
Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, major construction or improvements at airports at which we operate, aircraft and engine defects, FAA grounding of aircraft, increased security measures, new travel-related identification requirements, taxes and fees, adverse weather conditions, natural disasters and the outbreak of disease.
Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, major construction or improvement projects at airports at which we operate, aircraft and engine defects, FAA grounding of aircraft, adverse weather conditions, increased security measures, new travel-related identification requirements, taxes and fees, natural disasters and outbreaks of disease.
Unfavorable economic conditions, such as those resulting from an inflationary economic environment and the responses by monetary authorities to control such inflation, rising interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer confidence, political turmoil, supply chain challenges, natural catastrophes and the effects of climate change, regional and global conflicts and terrorist attacks and/or reactions to the COVID-19 pandemic or other health threats, have historically impaired airline economics.
Unfavorable economic conditions, such as those resulting from an inflationary economic environment and the responses by monetary authorities to control such inflation, rising interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer confidence, political turmoil, supply chain challenges, natural catastrophes and the effects of climate change, regional and global conflicts and terrorist attacks and/or reactions to pandemics or other health threats, such as COVID-19, including measures to reduce the spread of any such disease, have historically impaired airline economics.
The agreements governing the indebtedness of our subsidiaries, including the CARES Act, impose restrictions on our subsidiaries’ ability to pay dividend distributions or other transfers to us. Each of our subsidiaries is a distinct legal entity, and under certain circumstances legal and contractual restrictions may limit our ability to obtain cash from them.
Future agreements governing the indebtedness of our subsidiaries, similar to the CARES Act, could impose restrictions on our subsidiaries’ ability to pay dividend distributions or other transfers to us. Each of our subsidiaries is a distinct legal entity, and under certain circumstances legal and contractual restrictions may limit our ability to obtain cash from 53 them.
In addition, and subject to the limitation that no more than 25.0% of our voting stock be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens, up to 49.0% of our outstanding stock may be owned or controlled, 52 directly or indirectly, by persons or entities who are not U.S. citizens but only if those non-U.S. citizens are from countries that have entered into “open skies” air transport agreements with the United States which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country.
In addition, up to 49% of our outstanding stock may be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens but only if those non-U.S. citizens are from countries that have entered into “open skies” air transport agreements 52 with the United States which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country.
An investment fund managed by Indigo, the holder of approximately 178.8 million shares of our common stock as of December 31, 2022, is entitled to rights with respect to registration of all such shares under the Securities Act pursuant to a registration rights agreement.
An investment fund managed by Indigo, which holds approximately 178.8 million shares of our common stock as of December 31, 2023, is entitled to rights with respect to registration of all such shares under the Securities Act pursuant to a registration rights agreement.
If we are unable to attract and retain qualified personnel at reasonable costs or fail to maintain our company culture, our business, results of operations and financial condition could be harmed. Our business is labor intensive. We require large numbers of pilots, flight attendants, maintenance technicians and other personnel.
If we are unable to attract and retain qualified personnel, including our senior management team or other key employees, at reasonable costs or fail to maintain our company culture, our business, results of operations and financial condition could be harmed. Our business is labor intensive. We require large numbers of pilots, flight attendants, maintenance technicians and other personnel.
Comments were reopened on this NPRM in November 2021. In July 2021, the DOT issued a NPRM requiring airlines to refund checked bag fees for delayed bags if they are not delivered to the passenger within a specified number of hours and refunding ancillary fees for services related to air travel that passengers did not receive.
In July 2021, the DOT issued a NPRM requiring airlines to refund checked bag fees for delayed bags if they are not delivered to the passenger within a specified number of hours and refunding ancillary fees for services related to air travel that passengers did not receive.
If one or more of such third parties experience operational failures as a result of the impacts of the COVID-19 pandemic, including due to the significant disruption in global supply chains and staffing shortages caused by the pandemic, or due to sanctions imposed by the United States and foreign government bodies in response to the war between Russia and Ukraine, or claim that they cannot perform due to a force majeure event, it may have a material adverse impact on our business, results of operations and financial condition.
If one or more of such third parties experience operational failures as a result of significant disruption in global supply chains, staffing shortages, or due to sanctions imposed by the United States and foreign government bodies in response to the war between Russia and Ukraine and the conflict in the Middle East, or claim that they cannot perform due to a force majeure event, it may have a material adverse impact on our business, results of operations and financial condition.
In March 2022, the DOT issued a NPRM requiring airlines to ensure that at least one lavatory on new single-aisle aircraft with 125 seats or more is large enough to permit a passenger with a disability (with the help of an assistant, if necessary) to approach, enter and maneuver within the lavatory, as necessary, to use all lavatory facilities and to leave by means of the aircraft’s onboard wheelchair.
In March 2022, the DOT issued a NPRM regarding long-term accessibility improvements that would require airlines to ensure that at least one lavatory on new single-aisle aircraft with 125 seats or more is large enough to permit a passenger with a disability (with the help of an assistant, if necessary) to approach, enter and maneuver within the lavatory, as necessary, to use all lavatory facilities and to leave by means of the aircraft’s onboard wheelchair.
We are subject to numerous foreign regulations in the countries outside the United States where we currently provide service. If we are not able to comply with this complex regulatory regime, our business could be significantly harmed. Please see “Business—Government Regulation”.
We are subject to numerous foreign regulations in the countries outside the United States where we currently provide service. If we are not able to comply with this complex regulatory regime, our business could be significantly harmed.
Realization of these NOL carryforwards depends on our future taxable income, and there is a risk that, due to the COVID-19 pandemic and other economic factors, a portion of our existing NOL carryforwards could expire before we can generate sufficient taxable income to use them.
Realization of these NOL carryforwards depends on our future taxable income, and there is a risk that, due to economic factors, a portion of our existing NOL carryforwards could expire before we can generate sufficient taxable income to use them.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Aircraft As of December 31, 2022, we operated a fleet of 120 aircraft as detailed in the following table: Aircraft Type Seats Average Age (Years) Number of Aircraft Number Owned Number Leased A320ceo 180 or 186 9 13 — 13 A320neo 186 3 82 — 82 A321ceo 230 6 21 — 21 A321neo 240 — 4 — 4 4 120 — 120 As of December 31, 2022, we had signed lease agreements with two of our leasing partners to add ten additional A321neo aircraft through direct leases, with deliveries beginning in the first quarter of 2023 and continuing into the third quarter of 2023 based on the latest delivery schedule.
Biggest changePROPERTIES Aircraft As of December 31, 2023, we operated a fleet of 136 aircraft as detailed in the following table: Aircraft Type Seats Average Age (Years) Number of Aircraft Number Owned Number Leased A320ceo 180 or 186 8 8 — 8 A320neo 186 4 82 — 82 A321ceo 230 7 21 — 21 A321neo 240 1 25 — 25 4 136 — 136 Ground Facilities Our facility leases are primarily for space at approximately 90 airports that are primarily located in the United States.
These leases are classified as operating leases and reflect the use of airport terminals, ticket counters, office space, and maintenance facilities. Generally, this space is leased from government agencies that control the use of 55 the airport. The majority of these leases are short-term in nature and renew on an evergreen basis.
These leases are classified as operating leases and reflect the use of airport terminals, ticket counters, office space, and maintenance facilities. Generally, this space is leased from government agencies that control the use of the airport. The majority of these leases are short-term in nature and renew on an evergreen basis.
For these leases, the contractual term is used as the lease term. As of December 31, 2022, the remaining lease terms vary from one month to ten years. At the majority of the U.S. airports, the lease rates depend on airport operating costs or use of the facilities and are reset at least annually.
For these leases, the contractual term is used as the lease term. As of December 31, 2023, the remaining lease terms vary from one month to eleven years. At the majority of the U.S. airports, the lease rates depend on airport operating costs or use of the facilities and are reset at least annually.
Because of the variable nature of the rates, these leases are not recorded on the consolidated balance sheets as right-of-use assets and lease liabilities. During the year ended December 31, 2022, 26% of our flights had Denver International Airport as either their origin or destination.
Because of the variable nature of the rates, these leases are not recorded on the consolidated balance sheets as right-of-use assets and lease liabilities. During the year ended December 31, 2023, 24% of our flights had Denver International Airport as either their origin or destination. We primarily operate out of Concourse A at Denver International Airport.
We primarily operate out of Concourse A at Denver International Airport, and in May 2022, we entered into a 10-year airport use and lease agreement with the City and County of Denver which includes a new ground-level boarding facility and 14 accompanying gates.
In May 2022, we entered into a 10-year airport use and lease agreement with the City and County of Denver which includes a new ground-level boarding facility and 14 accompanying gates. We typically use 11 gates within Concourse A, with preferential access to nine specified gates and common use access to the remaining gates.
Other airports through which we conduct significant operations include Orlando International Airport (MCO), McCarran International Airport (LAS), Philadelphia International Airport (PHL), Hartsfield-Jackson Atlanta International Airport (ATL), and Tampa International Airport (TPA). Our principal executive offices and headquarters are located in owned premises at 4545 Airport Way, Denver, Colorado 80239, consisting of approximately 90,000 square feet.
Our principal executive offices and headquarters are located in owned premises at 4545 Airport Way, Denver, Colorado 80239, consisting of approximately 90,000 square feet.
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In November 2021, we entered into an amendment with Airbus to purchase an additional 91 A321neo aircraft, which are expected to be delivered starting in 2024 and continuing through 2029 per the latest delivery schedule. Ground Facilities Our facility leases are primarily for space at approximately 100 airports that are primarily located in the United States.
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We also lease a hangar, consisting of approximately 154,900 square feet, which includes office space and is where we provide certain maintenance on our aircraft. Other airports through which we conduct significant operations include Orlando 56 International Airport (MCO), McCarran International Airport (LAS), Hartsfield-Jackson Atlanta International Airport (ATL) and Philadelphia International Airport (PHL).
Removed
We typically use 11 gates within Concourse A, with preferential access to 9 specified gates and common use access to the remaining gates. We also lease a 154,900 square foot hangar, which includes office space and is where we provide certain maintenance on our aircraft.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities We do not have a share repurchase program and no shares were repurchased during the fourth quarter of 2022. Under the CARES Act, we were restricted from conducting certain share repurchases through February 2, 2023. ITEM 6. [RESERVED] 57
Biggest changeIssuer Purchases of Equity Securities We do not have a share repurchase program and no shares were repurchased during the fourth quarter of 2023. ITEM 6. [RESERVED] 58
The comparison assumes $100 was invested on April 1, 2021 in each of our common stock and the indices and assumes that all dividends were reinvested. The stock performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance. Cumulative Total Returns Recent Sales of Unregistered Securities None.
The comparison assumes $100 was invested on April 1, 2021 in each of our common stock and the indices and assumes that all dividends were reinvested. The stock 57 performance shown on the following graph represents historical stock performance and is not necessarily indicative of future stock price performance. Cumulative Total Returns Recent Sales of Unregistered Securities None.
The following graph compares the cumulative total returns during the period from April 1, 2021 (the date our common stock commenced trading on Nasdaq) through December 31, 2022 of our common stock to the NYSE ARCA Airline Index and the Standard & Poor’s 500 Index.
The following graph compares the cumulative total returns during the period from April 1, 2021 (the date our common stock commenced trading on Nasdaq) through December 31, 2023 of our common stock to the NYSE ARCA Airline Index and the Standard & Poor’s 500 Index.
Following the expiration of these restrictions, any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing 56 conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed and traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “ULCC.” Holders As of February 17, 2023, there were two holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed and traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “ULCC.” Holders As of February 16, 2024, there were two holders of record of our common stock.
Removed
Dividend Policy In connection with our receipt of financial assistance under the PSP, PSP2, and PSP3 and acceptance of the loan agreement with the Treasury, we agreed not to make dividend payments in respect of our common stock until February 2, 2023.
Added
Dividend Policy There were no cash dividend declarations or payments during the year ended December 31, 2023 and we do not expect to pay cash dividends in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis was driven by an increase in average daily aircraft utilization to 11.1 hours per day for the year ended December 31, 2022, as compared to 9.8 hours per day for the year ended December 31, 2021, as well as a 6% increase in average aircraft in service during the year ended December 31, 2022, as compared to the corresponding prior year period. 65 Operating Expenses Year Ended December 31, Cost per ASM 2022 2021 Change 2022 2021 Change Operating expenses ($ in millions): (a) Aircraft fuel $ 1,160 $ 575 $ 585 102 % 3.66 ¢ 2.14 ¢ 71 % Salaries, wages and benefits 715 616 99 16 % 2.25 2.29 (2) % Aircraft rent 556 530 26 5 % 1.75 1.97 (11) % Station operations 422 384 38 10 % 1.33 1.43 (7) % Sales and marketing 164 109 55 50 % 0.52 0.41 27 % Maintenance, materials and repairs 146 119 27 23 % 0.46 0.44 5 % Depreciation and amortization 45 38 7 18 % 0.14 0.14 — % CARES Act credits — (295) 295 N/M — (1.10) N/M Transaction and merger-related costs 10 — 10 N/M 0.03 — N/M Other operating expenses 153 101 52 51 % 0.48 0.38 26 % Total operating expenses $ 3,371 $ 2,177 $ 1,194 55 % 10.62 ¢ 8.10 ¢ 31 % Operating statistics: Available seat miles (millions) 31,746 26,867 4,879 18 % Average stage length (miles) 991 968 23 2 % Departures 165,447 143,476 21,971 15 % CASM (excluding fuel) (¢) (b) 6.96 5.96 1.00 17 % Adjusted CASM (excluding fuel) (¢) (b) 6.90 7.02 (0.12) (2) % Fuel cost per gallon ($) 3.72 2.17 1.55 71 % Fuel gallons consumed (thousands) 312,115 265,558 46,557 18 % __________________ N/M = Not meaningful (a) Cost per ASM figures may not recalculate due to rounding.
Biggest changeRASM decreased 9% during the year ended December 31, 2023 as compared to the year ended December 31, 2022, driven by a 9% decrease in total revenue per passenger due to fare, as well as the 2% increase in stage length, partially offset by the 0.5 point increase in load factor. 62 Operating Expenses Year Ended December 31, Change Cost per ASM Change 2023 2022 2023 2022 Operating expenses ($ in millions): (a) Aircraft fuel $ 1,130 $ 1,160 $ (30) (3) % 2.99 ¢ 3.66 ¢ (18) % Salaries, wages and benefits 858 715 143 20 % 2.27 2.25 1 % Aircraft rent 554 556 (2) — % 1.47 1.75 (16) % Station operations 516 422 94 22 % 1.36 1.33 2 % Maintenance, materials and repairs 179 146 33 23 % 0.47 0.46 2 % Sales and marketing 164 164 — — % 0.43 0.52 (17) % Depreciation and amortization 50 45 5 11 % 0.13 0.14 (7) % Transaction and merger-related costs, net 1 10 (9) (90) % — 0.03 N/M Other operating expenses 140 153 (13) (8) % 0.38 0.48 (21) % Total operating expenses $ 3,592 $ 3,371 $ 221 7 % 9.50 ¢ 10.62 ¢ (11) % Operating statistics: ASMs (millions) 37,822 31,746 6,076 19 % Average stage length (miles) 1,007 991 16 2 % Passengers (thousands) 30,218 25,486 4,732 19 % Departures 188,841 165,447 23,394 14 % CASM (excluding fuel) (¢) (b) 6.51 6.96 (0.45) (6) % Adjusted CASM (excluding fuel) (¢) (b) 6.50 6.90 (0.40) (6) % Fuel cost per gallon ($) 3.10 3.72 (0.62) (17) % Fuel gallons consumed (thousands) 364,606 312,115 52,491 17 % ________________ N/M = Not meaningful (a) Cost per ASM figures may not recalculate due to rounding.
CASM including net interest and Adjusted CASM including net interest are not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Aircraft Fuel .
Adjusted CASM including net interest and CASM including net interest are not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Aircraft Fuel .
Investing Activities During the year ended December 31, 2022, net cash used in investing activities totaled $154 million, driven by: • $111 million in net payments for pre-delivery deposit activity; • $41 million in cash outflows for capital expenditures; and • $2 million in cash outflows relating to other investing activity.
During the year ended December 31, 2022, net cash used in investing activities totaled $154 million, driven by: • $111 million in net payments for pre-delivery deposit activity; • $41 million in cash outflows for capital expenditures; and • $2 million in cash outflows relating to other investing activity.
For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, CASM including net interest and Adjusted CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” “Adjusted CASM including net interest” or “Adjusted CASM + net interest” is a non-GAAP measure and means the sum of Adjusted CASM and Net interest expense (income) excluding special items divided by ASMs.
For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” “Adjusted CASM including net interest” or “Adjusted CASM + net interest” is a non-GAAP measure and means the sum of Adjusted CASM and net interest expense (income) excluding special items divided by ASMs.
For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, CASM including net interest and Adjusted CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” “Adjusted CASM (excluding fuel)” is a non-GAAP measure and means operating expenses less aircraft fuel expense, excluding special items, divided by ASMs.
For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” “Adjusted CASM (excluding fuel)” is a non-GAAP measure and means operating expenses less aircraft fuel expense, excluding special items, divided by ASMs.
For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, CASM including net interest and Adjusted CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” “Air traffic liability” means the value of tickets, unearned membership fees and other related fees sold in advance of travel.
For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” “Air traffic liability” means the value of tickets, unearned membership fees and other related fees sold in advance of travel.
Global pandemics and related health scares, consumer confidence and discretionary spending, fear of terrorism or war, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions, changes in governmental 61 regulations on taxes and fees, weather and other factors have resulted in significant fluctuations in revenue and results of operations in the past. Seasonality.
Global pandemics and related health scares, consumer confidence and discretionary spending, fear of terrorism or war, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions, changes in governmental regulations on taxes and fees, weather and other factors have resulted in significant fluctuations in revenue and results of operations in the past. Seasonality.
Our net loss of $37 million was also adjusted by the following non-cash items to arrive at cash used in operating activities: • $87 million in gains recognized on sale-leaseback transactions; and • $8 million in deferred tax benefits; partly offset by • $45 million in depreciation and amortization; • $15 million in stock-based compensation expense; • $7 million in losses on extinguishment of debt; and • $1 million in amortization of cash flow hedges, net of tax.
Our net loss of $37 million was also adjusted by the following non-cash items to arrive at cash used in operating activities: • $87 million in gains recognized on sale-leaseback transactions; • $8 million in deferred tax benefits; partially offset by • $45 million in depreciation and amortization; • $15 million in stock-based compensation expense; • $7 million in losses on extinguishment of debt; and • $1 million in amortization of cash flow hedges, net of tax.
“Average daily aircraft utilization” means block hours divided by number of days in the period divided by average aircraft. “Average stage length” means the average number of miles flown per flight segment.
“Average daily aircraft utilization” means block hours divided by number of days in the period divided by average aircraft in service. “Average stage length” means the average number of miles flown per flight segment.
“Treasury” means the United States Department of the Treasury. “TSA” means the United States Transportation Security Administration. “ULCC” means ultra low-cost carrier. “VFR” means visiting friends and relatives.
Department of the Treasury. “TSA” means the United States Transportation Security Administration. “ULCC” means ultra low-cost carrier. “VFR” means visiting friends and relatives.
See “Notes to Consolidated Financial Statements — 9. Debt”. (b) Represents interest on debt obligations. (c) Represents gross cash payments related to our operating lease obligations that are not subject to discount as compared to the obligations measured on our consolidated balance sheets. See “Notes to Consolidated Financial Statements — 10. Operating Leases”.
See “Notes to Consolidated Financial Statements — 8. Debt”. (b) Represents interest on debt obligations. (c) Represents gross cash payments related to our operating lease obligations that are not subject to discount as compared to the obligations measured on our consolidated balance sheets. See “Notes to Consolidated Financial Statements — 9. Operating Leases”.
Additionally, we estimate ETV, which is used to determine the value per mileage credit, based on the historical prices of the flights redeemed using mileage credits and changes to these assumptions could impact the initial allocation of consideration in our co-branded credit card partnership or the amount of revenue recognized or deferred for miles accumulated as a result of travel.
Additionally, we estimate ETV, which is used to determine the value per mile, based on the historical prices of the flights redeemed using miles and changes to these assumptions could impact the initial allocation of consideration in our co-branded credit card partnership or the amount of revenue recognized or deferred for miles accumulated as a result of travel.
As of December 31, 2022, we did not have any other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our results of operations, financial condition or cash flows.
As of December 31, 2023, we did not have any other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our results of operations, financial condition or cash flows.
Summary of Significant Accounting Policies” included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements. 78 GLOSSARY OF AIRLINE TERMS Set forth below is a glossary of industry terms: “A320 family” means, collectively, the Airbus series of single-aisle aircraft, including the A319ceo, A320ceo, A320neo, A321ceo and A321neo aircraft.
Summary of Significant Accounting Policies” included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements. 77 GLOSSARY OF AIRLINE TERMS Set forth below is a glossary of industry terms: “A320 family” means, collectively, the Airbus series of single-aisle aircraft, including the A320ceo, A320neo, A321ceo and A321neo aircraft.
These operating statistics are provided because they are commonly used in the airline industry and, as such, allow readers to compare our performance against our results for the corresponding prior year periods, as well as against the performance of our peers.
These operating statistics are provided because they are commonly used in the airline industry and, as such, allow readers to compare our performance against our results for the corresponding prior year period, as well as against the performance of our peers.
(h) Adjusted CASM is included as supplemental disclosure because we believe it is a useful metric to properly compare our cost management and performance to other peers, as derivations of Adjusted CASM are well-recognized performance measurements in the airline industry 67 that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry.
(g) Adjusted CASM is included as supplemental disclosure because we believe it is a useful metric to properly compare our cost management and performance to other peers, as derivations of Adjusted CASM are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry.
Our Low Fares Done Right strategy is underpinned by our low-cost structure, and has significantly reduced our cost base by increasing aircraft utilization (with the exception of the impacts of COVID-19), transitioning to larger and more fuel-efficient aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, migrating to a self-service customer service model, enhancing our website and mobile app, boosting employee productivity and contracting with leading specialists to provide us with select operating and other services.
Our Low Fares Done Right strategy is underpinned by our low-cost structure, and has significantly reduced our cost base by increasing aircraft utilization, transitioning to larger and more fuel-efficient aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, migrating to a self-service customer service model, enhancing our website and mobile app, boosting employee productivity and contracting with leading specialists to provide us with select operating and other services.
Commitments and Contractual Obligations Our contractual purchase commitments as of December 31, 2022 include future aircraft and engine acquisitions. Except to the extent set forth in the applicable notes to our consolidated financial statements, the table below does not include commitments that are contingent on events or other factors that are uncertain or unknown at this time.
Commitments and Contractual Obligations Our contractual purchase commitments as of December 31, 2023 include future aircraft and spare engine acquisitions. Except to the extent set forth in the applicable notes to our consolidated financial statements, the table below does not include commitments that are contingent on events or other factors that are uncertain or unknown at this time.
In addition, because derivations of Adjusted net income (loss), EBITDA and Adjusted EBITDA are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner.
In addition, because derivations of adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner.
Because of these limitations, Adjusted net income (loss), EBITDA and Adjusted EBITDA should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP.
Because of these limitations, adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP.
Some of the limitations applicable to these measures include: Adjusted net income (loss), EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; Adjusted net income (loss), EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; EBITDA, and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness or possible cash requirements related to our warrants; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and other companies in our industry may calculate Adjusted net income (loss), EBITDA and Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Some of the limitations applicable to these measures include: adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; EBITDA, and adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness or possible cash requirements related to our warrants; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements; and other companies in our industry may calculate adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.
Derivations of net income and EBITDA are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry. Adjusted net income (loss), EBITDA and Adjusted EBITDA have limitations as analytical tools.
Derivations of pre-tax income (loss), net income and EBITDA are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry. 66 Adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA have limitations as analytical tools.
Our discussion and analysis of fiscal year 2022 compared to fiscal year 2021 is included herein. For discussion of results for the fiscal year 2020 and analysis of year-to-year comparisons between 2021 and 2020, please refer to “Item 7.
Our discussion and analysis of fiscal year 2023 compared to fiscal year 2022 is included herein. For discussion of results for the fiscal year 2021 and analysis of year-to-year comparisons between 2022 and 2021, please refer to “Item 7.
Accordingly, we cannot reliably quantify future maintenance-related expenses for any significant period of time. As of December 31, 2022, the average age of our aircraft was approximately four years and all of the aircraft in our fleet were financed with operating leases, the last of which is scheduled to expire by the end of 2034.
Accordingly, we cannot reliably quantify future maintenance-related expenses for any significant period of time. As of December 31, 2023, the average age of our aircraft was approximately four years and all of the aircraft in our fleet were financed with operating leases, the last of which is scheduled to expire by the end of 2035.
While we have, over recent years, reduced our concentration in Denver to decrease the impact of seasonality in our business, 26% of our flights during the year ended December 31, 2022 had Denver International Airport as either their origin or destination, as compared to 29% of our flights during the year ended December 31, 2021. Labor .
While we have, over recent years, reduced our concentration in Denver to decrease the impact of seasonality in our business, 24% of our flights during the year ended December 31, 2023 had Denver International Airport as either their origin or destination, as compared to 26% of our flights during the year ended December 31, 2022. Labor .
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 23, 2022. Overview Frontier Airlines is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right .
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023. Overview Frontier Airlines, Inc. (“Frontier”) is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right .
These deferred tax assets are comprised of $32 million, $11 million and $7 million related to NOLs available to reduce future federal, state and foreign taxable income, respectively.
These deferred tax assets are comprised of $53 million, $11 million and $11 million related to NOLs available to reduce future federal, state and foreign taxable income, respectively.
(d) Represents purchase commitments for aircraft and engines. See “Notes to Consolidated Financial Statements — 14. Commitments and Contingencies”. (e) Represents fixed maintenance reserve payments for aircraft including estimated amounts for contractual price escalations. See “Notes to Consolidated Financial Statements — 10.
(d) Represents purchase commitments for aircraft and engines. See “Notes to Consolidated Financial Statements — 12. Commitments and Contingencies”. (e) Represents fixed maintenance reserve payments for aircraft including estimated amounts for contractual price escalations. See “Notes to Consolidated Financial Statements — 9.
“Revenue passenger miles” or “RPMs” means the number of miles flown by passengers. 80 “RLA” means the United States Railway Labor Act. “Total ancillary revenue per passenger” means ancillary revenue divided by passengers. “Total Revenue per passenger” means the sum of fare revenue, non-fare passenger revenue, and other revenue (collectively, “Total Revenue”) divided by passengers.
“Revenue passenger miles” or “RPMs” means the number of miles flown by passengers. 79 “RLA” means the United States Railway Labor Act. “Total ancillary revenue per passenger” means ancillary revenue divided by passengers. “Total revenue per passenger” means the sum of fare revenue, non-fare passenger revenue, and other revenue (collectively, “Total Revenue”) divided by passengers. “Treasury” means the U.S.
We estimate breakage (mileage credits that are expected to expire unutilized) based on statistical models derived from historical redemption patterns.
We estimate breakage (miles that are expected to expire unutilized) based on statistical models derived from historical redemption patterns.
Breakage assumptions, including the period over which mileage credits are expected to be redeemed, the actual redemption activity for mileage credits, the impact of the COVID-19 pandemic or the estimated fair value of mileage credits expected to be redeemed, could have an impact on revenues in the year in which the change occurs and in future years.
Breakage assumptions, including the period over which miles are expected to be redeemed, the actual redemption activity for miles, or the estimated fair value of miles expected to be redeemed, could have an impact on revenues in the year in which the change occurs and in future years.
For the reconciliation to corresponding GAAP measures, see “—Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, CASM including net interest and Adjusted CASM including net interest.” We generated a net loss of $37 million and $102 million during the years ended December 31, 2022 and 2021, respectively.
For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest.” We generated a net loss of $11 million and $37 million during the years ended December 31, 2023 and 2022, respectively.
Maintenance, materials and repair expense increased by $27 million, or 23%, during the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Maintenance, materials and repair expense increased by $33 million, or 23%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022.
As of December 31, 2022, we had $117 million in recoverable aircraft maintenance deposits on our consolidated balance sheets, of which $12 million was included in accounts receivable because the eligible maintenance had been performed and the remaining $105 million was included within aircraft maintenance deposits.
As of December 31, 2023, we had $96 million in recoverable aircraft maintenance deposits on our consolidated balance sheets, of which $12 million was included in accounts receivable because the eligible maintenance had been performed and the remaining $84 million was included within net aircraft maintenance deposits.
(k) CASM including net interest and Adjusted CASM including net interest are included as supplemental disclosures because we believe they are useful metrics to properly compare our cost management and performance to other peers that may have different capital structures and financing strategies, particularly as it relates to financing primary operating assets such as aircraft and engines.
This amount is a component of interest expense. 64 (i) Adjusted CASM including net interest and CASM including net interest are included as supplemental disclosures because we believe they are useful metrics to properly compare our cost management and performance to other peers that may have different capital structures and financing strategies, particularly as it relates to financing primary operating assets such as aircraft and engines.
We believe that fare discounts have and will continue to stimulate demand for Frontier due to our Low Fares Done Right strategy.
We believe that fare discounts, along with unbundled product offerings, have and will continue to stimulate demand for Frontier due to our Low Fares Done Right strategy.
A key element of our competitive strategy is to maintain very low unit costs in order to permit us to compete successfully in price-sensitive markets. In addition, some of the legacy network carriers match LCC and ULCC pricing on portions of their network.
A key element of our competitive strategy is to maintain very low unit costs in order to permit us to compete successfully in price-sensitive markets. In addition, some of the legacy network carriers match LCC and ULCC pricing on portions of their network, including through the selective deployment of so-called “basic economy” fares.
During the years ended December 31, 2022 and 2021, we made $18 million and $20 million, respectively, in maintenance deposit payments to our lessors.
During the years ended December 31, 2023 and 2022, we made $16 million and $18 million, respectively, in maintenance deposit payments, net to our lessors.
For the reconciliation to corresponding GAAP measures, see “—Results of Operations—Reconciliation of Net income (loss) to Adjusted net income (loss) and to EBITDA, Adjusted EBITDA, EBITDAR and Adjusted EBITDAR.” As of December 31, 2022, our total available liquidity was $761 million, made up of cash and cash equivalents.
For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss) and Net Income to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR.” As of December 31, 2023, our total available liquidity was $609 million, made up of cash and cash equivalents.
A320neo A321neo Total Aircraft (a) Engines Year Ending 2023 — 13 13 4 2024 — 33 33 2 2025 17 13 30 4 2026 19 22 41 4 2027 21 21 42 3 Thereafter 10 52 62 2 Total 67 154 221 19 __________________ (a) While the commitments presented above reflect the agreed-upon delivery dates as of December 31, 2022, we have recently experienced delays in the deliveries of Airbus aircraft which may persist in future periods.
A320neo A321neo Total Aircraft (a) Engines Year Ending 2024 — 23 23 2 2025 17 25 42 4 2026 19 22 41 4 2027 21 21 42 3 2028 10 30 40 2 Thereafter — 22 22 — Total 67 143 210 15 __________________ (a) While the commitments presented above reflect the agreed-upon delivery dates as of December 31, 2023, we have recently experienced delays in the deliveries of Airbus aircraft which may persist in future periods.
We have seven union-represented employee groups comprising approximately 87% of our employees as of December 31, 2022.
We have seven union-represented employee groups comprising approximately 86% of our employees as of December 31, 2023.
The following table presents the major indicators of our financial condition and liquidity: December 31, 2022 2021 ($ in millions) Cash and cash equivalents $ 761 $ 918 Total current assets, excluding cash and cash equivalents $ 259 $ 119 Total current liabilities, excluding current maturities of long-term debt and operating leases $ 933 $ 755 Current maturities of long-term debt, net $ 157 $ 127 Long-term debt, net $ 272 $ 287 Stockholders’ equity $ 509 $ 530 Debt to capital ratio 46 % 44 % Debt to capital ratio, including operating lease obligations 85 % 84 % Use of Cash and Future Obligations We expect to meet our cash requirements for the next twelve months through use of our available cash and cash equivalents, our PDP Financing Facility and cash flows from operating activities.
The following table presents the major indicators of our financial condition and liquidity: December 31, 2023 2022 ($ in millions) Cash and cash equivalents $ 609 $ 761 Total current assets, excluding cash and cash equivalents $ 262 $ 259 Total current liabilities, excluding current maturities of long-term debt and operating leases $ 858 $ 933 Current maturities of long-term debt, net $ 251 $ 157 Long-term debt, net $ 219 $ 272 Stockholders’ equity $ 507 $ 509 Debt to capital ratio 48 % 46 % Debt to capital ratio, including operating lease obligations 87 % 85 % Use of Cash and Future Obligations We expect to meet our cash requirements for the next twelve months through use of our available cash and cash equivalents, our PDP Financing Facility and cash flows from operating activities.
Our cost structure has generally allowed us to achieve strong results from operations relative to the rest of the industry during periods of competitive pricing and price discounts and has helped our ability to manage through the COVID-19 pandemic.
Our cost structure has generally allowed us to achieve strong results from operations relative to the rest of the industry during periods of competitive pricing and price discounts.
(i) On February 2, 2022, we repaid the Treasury Loan, which resulted in a one-time write-off of the remaining $7 million in unamortized deferred financing costs related to the Treasury Loan. This amount is a component of interest expense.
(h) On February 2, 2022, we repaid the Treasury Loan, which resulted in a one-time write-off of the remaining $7 million in unamortized deferred financing costs related to the Treasury Loan.
In addition, EBITDAR and Adjusted EBITDAR should not be viewed as a measure of overall performance since they exclude aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business.
In addition, EBITDAR and adjusted EBITDAR should not be viewed as a measure of overall performance since they exclude aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. Accordingly, you are cautioned not to place undue reliance on this information.
“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination. “CASM” or “unit costs” means operating expenses divided by ASMs. “CASM (excluding fuel)” is a non-GAAP measure and means CASM less fuel expenses divided by ASMs.
“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination. “CASM” or “unit costs” means operating expenses divided by ASMs.
The $14 million of outflows from changes in operating assets and liabilities includes: • $94 million in increases in other long-term assets driven by increases in prepaid maintenance and capitalized maintenance; • $40 million in increases in supplies from increased consumable and fuel inventory balances as well as increases to other current assets driven by swaption derivative premiums; • $28 million in increases in accounts receivable; • $18 million in increases in aircraft maintenance deposits; and • $4 million in decreases in accounts payable; partially offset by • $130 million in increases in other liabilities driven by growth in the business primarily through increased leased aircraft return costs, aircraft maintenance costs, and other related accruals; and • $40 million in increases in our air traffic liability as a result of increased bookings.
During the year ended December 31, 2022, net cash used in operating activities totaled $78 million, which was driven by a $37 million net loss, $14 million of outflows from changes in operating assets and liabilities and non-cash adjustments totaling $27 million. 72 The $14 million of outflows from changes in operating assets and liabilities includes: • $94 million in increases in other long-term assets driven by increases in prepaid maintenance and capitalized maintenance; • $40 million in increases in supplies from increased consumable and fuel inventory balances as well as increases to other current assets driven by swaption derivative premiums; • $28 million in increases in accounts receivable; • $18 million in increases in aircraft maintenance deposits; and • $4 million in decreases in accounts payable; partially offset by • $130 million in increases in other liabilities driven by growth in the business primarily through increased leased aircraft return costs, aircraft maintenance costs, and other related accruals; and • $40 million in increases in our air traffic liability as a result of increased bookings.
During the year ended December 31, 2021, net cash used in investing activities totaled $67 million, driven by: • $36 million in net payments for pre-delivery deposit activity; • $27 million in cash outflows for capital expenditures; and • $4 million in cash outflows relating to other investing activity. 76 Financing Activities During the year ended December 31, 2022, net cash provided by financing activities was $75 million, primarily driven by: • $273 million in cash proceeds from debt issuances, consisting of $217 million in draws on our PDP Financing Facility, net of issuance costs, and a $56 million draw on our Barclays facility; • $71 million in net proceeds received from sale-leaseback transactions; and • $1 million in proceeds from the exercise of stock options; partially offset by • $266 million in cash outflows from principal repayments on debt, which include the paydown of the $150 million Treasury Loan, $115 million in PDP Financing Facility payments and $1 million in payments pursuant to our floating rate building note; and • $4 million of payments for tax withholdings related to vesting of share-based awards.
Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $199 million, primarily driven by: • $163 million in net proceeds received from sale-leaseback transactions; • $171 million in cash proceeds from debt issuances, consisting of $162 million in draws on our PDP Financing Facility, net of issuance costs, and a $9 million draw on our Barclays facility; and • $1 million in proceeds from the exercise of stock options; partially offset by • $131 million in cash outflows from principal repayments on debt, which include $130 million in PDP Financing Facility payments and $1 million in payments pursuant to our floating rate building note; and • $5 million cash outflows for payments related to tax withholdings of share-based awards. 73 During the year ended December 31, 2022, net cash provided by financing activities was $75 million, primarily driven by: • $273 million in cash proceeds from debt issuances, consisting of $217 million in draws on our PDP Financing Facility, net of issuance costs, and $56 million draw on our Barclays facility; • $71 million in net proceeds received from sale-leaseback transactions; and • $1 million in proceeds from the exercise of stock options; partially offset by • $266 million in cash outflows from principal repayments on debt, which include the paydown of the $150 million Treasury Loan, $115 million in PDP Financing Facility payments and $1 million in payments pursuant to our floating rate building note; and • $4 million of payments for tax withholdings related to vesting of share-based awards.
None of these ten aircraft are reflected in the table above given they are not committed purchase agreements. Separately, we have various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under some of these contracts, we are party to joint and several liability regarding damages.
Separately, we have various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under some of these contracts, we are party to joint and several liability regarding damages.
Reconciliation of Net income (loss) to Adjusted net income (loss) and to EBITDA, Adjusted EBITDA, EBITDAR and Adjusted EBITDAR Year Ended December 31, 2022 2021 (in millions) Non-GAAP financial data (unaudited): Adjusted net income (loss) (a) $ (17) $ (299) EBITDA (a) $ — $ (79) EBITDAR (b) $ 556 $ 451 Adjusted EBITDA (a) $ 12 $ (364) Adjusted EBITDAR (b) $ 568 $ 156 __________________ (a) Adjusted net income (loss), EBITDA and Adjusted EBITDA are included as supplemental disclosures because we believe they are useful indicators of our operating performance.
Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss) and Net Income to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR Year Ended December 31, 2023 2022 (in millions) Non-GAAP financial data (unaudited): Adjusted pre-tax income (loss) (a) $ 34 $ (19) Adjusted net income (loss) (a) $ 28 $ (17) EBITDA (a) $ 47 $ — EBITDAR (b) $ 601 $ 556 Adjusted EBITDA (a) $ 49 $ 12 Adjusted EBITDAR (b) $ 603 $ 568 __________________ (a) Adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA are included as supplemental disclosures because we believe they are useful indicators of our operating performance.
(c) Represents $19 million in employee retention costs and $16 million in transaction costs, including banking, legal and accounting fees, incurred in connection with the proposed Merger with Spirit, offset by $25 million received from Spirit for the reimbursement of incurred Merger-related expenses.
Represent s $19 million in employee retention costs and $16 million in transaction costs, including banking, legal and accounting fees, incurred in connection with the terminated merger with Spirit, partially offset by $25 million received from Spirit for the reimbursement of incurred merger-related expenses for the year ended December 31, 2022.
“FAA” means the United States Federal Aviation Administration. “Fare revenue” consists of base fares for air travel, including mileage credits redeemed under our frequent flyer program, unused and expired passenger credits, other redeemed or expired travel credits and revenue derived from charter flights. “Fare revenue per passenger” means fare revenue divided by passengers. “FTE” means full-time equivalent employee.
“Fare revenue” consists of base fares for air travel, including miles redeemed under our frequent flyer program, unused and expired passenger credits, other redeemed or expired travel credits and revenue derived from charter flights. “Fare revenue per passenger” means fare revenue divided by passengers.
This was primarily due to higher average daily utilization per aircraft and more average aircraft in service compared to the year ended December 31, 2021, which resulted in higher maintenance including associated contract labor costs as well as higher aircraft materials expenses.
This was primarily due to more average aircraft in service and higher average daily utilization per aircraft, which resulted in higher maintenance costs, including higher airframe check and materials expenses, as well as associated contract labor costs. Sales and Marketing .
Operating Leases”. 74 Cash Flows The following table presents information regarding our cash flows in the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in millions) Net cash provided by (used in) operating activities $ (78) $ 216 Net cash used in investing activities (154) (67) Net cash provided by financing activities 75 391 Net increase (decrease) in cash, cash equivalents and restricted cash (157) 540 Cash, cash equivalents and restricted cash at beginning of period 918 378 Cash, cash equivalents and restricted cash at end of period $ 761 $ 918 Operating Activities During the year ended December 31, 2022, net cash used in operating activities totaled $78 million, which was driven by a $37 million net loss, $14 million of outflows from changes in operating assets and liabilities and non-cash adjustments totaling $27 million.
Operating Leases”. 71 Cash Flows The following table presents information regarding our cash flows in the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 (in millions) Net cash used in operating activities $ (261) $ (78) Net cash used in investing activities (90) (154) Net cash provided by financing activities 199 75 Net decrease in cash, cash equivalents and restricted cash (152) (157) Cash, cash equivalents and restricted cash at beginning of period 761 918 Cash, cash equivalents and restricted cash at end of period $ 609 $ 761 Operating Activities During the year ended December 31, 2023, net cash used in operating activities totaled $261 million, which was driven by an $11 million net loss, $211 million of outflows from changes in operating assets and liabilities and non-cash adjustments totaling $39 million.
Total operating expenses during the year ended December 31, 2022 totaled $3,371 million, resulting in a cost per available seat mile (“CASM”) of 10.62¢, compared to 8.10¢ for the year ended December 31, 2021.
Total operating expenses during the year ended December 31, 2023 totaled $3,592 million, resulting in a cost per available seat mile (“CASM”) of 9.50¢, compared to 10.62¢ for the year ended December 31, 2022. Fuel expense was 3% lower during the year ended December 31, 2023, as compared to the year ended December 31, 2022.
For the reconciliation to corresponding GAAP measures, see “—Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, CASM including net interest and Adjusted CASM including net interest.” 72 Liquidity, Capital Resources and Financial Position Overview As of December 31, 2022, we had $761 million in total available liquidity, made up of cash and cash equivalents.
For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest.” (c) Stage Length Adjusted (SLA) to 1,000 miles: Adjusted CASM (excluding fuel) * Square root (stage length / 1,000). 69 Liquidity, Capital Resources and Financial Position Overview As of December 31, 2023, we had $609 million in total available liquidity, made up of cash and cash equivalents.
On February 2, 2022, we repaid the $150 million outstanding under the Treasury Loan pursuant to the secured loan program established under the CARES Act. The repayment of this loan unencumbered our co-branded credit card program and related brand assets that secured the Treasury Loan obligation.
On February 2, 2022, we repaid the $150 million outstanding under our term loan facility (the “Treasury Loan”) with the U.S. Department of the Treasury (the “Treasury”). The repayment of this loan unencumbered our co-branded credit card program and related brand assets that secured the Treasury Loan obligation.
To the extent that we are unable to maintain our low-cost structure, our ability to compete effectively may be impaired. In addition, if our competitors engage in fare wars or similar behavior, our financial performance could be adversely impacted. Aircraft Fuel . Fuel expense represents one of the single largest operating expense for most airlines, including ours.
In addition, if our competitors engage in fare wars or similar behavior, our financial performance could be adversely impacted. Aircraft Fuel . Fuel expense represents one of the single largest operating expense for most airlines, including ours.
Operating Leases—Aircraft Rent Expense and Maintenance Obligations." Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). In doing so, we make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities.
Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP. In doing so, we make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities.
As part of our assessment of whether a valuation allowance is warranted, we consider all available positive and negative evidence in conjunction with evaluating the source and availability of taxable income to utilize such deferred tax assets.
As part of our assessment of whether a valuation allowance is warranted, we consider all available positive and negative evidence in conjunction with evaluating the source and availability of taxable income to utilize such deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023.
Leases for 21 of our aircraft could generally be renewed at rates based on fair market value at the end of a lease term for extensions ranging from less than one year to four years.
These leases expire between 2025 and the end of 2035. Leases for 42 of our aircraft could generally be renewed at rates based on fair market value at the end of a lease term for extensions ranging from two years to four years.
During October 2019, we entered into an amendment with Airbus that allows us the option to convert 18 A320neo aircraft to A321XLR aircraft. This conversion right is available until June 2023, per the latest amendment, and is not reflected in the table above as this option has not been exercised.
During October 2019, we entered into an amendment with Airbus that allows us the option to convert 18 A320neo aircraft to A321XLR aircraft. This conversion right is not reflected in the table above as this option has not been exercised. As of December 31, 2023, all 136 aircraft in our fleet were subject to operating leases.
See the reconciliation to corresponding GAAP measures provided below. 66 Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, CASM including net interest and Adjusted CASM including net interest Year Ended December 31, 2022 2021 ($ in millions) Per ASM (¢) ($ in millions) Per ASM (¢) Non-GAAP financial data (unaudited): (a) CASM 10.62 8.10 Aircraft fuel (1,160) (3.66) (575) (2.14) CASM (excluding fuel) (b) 6.96 5.96 Transaction and merger-related costs, net (c) (10) (0.03) — — Asset impairment (d) (7) (0.02) — — Collective bargaining contract ratification (e) (2) (0.01) — — Early lease termination costs (f) — — (11) (0.04) CARES Act – grant recognition and employee retention credits (g) — — 295 1.10 Adjusted CASM (excluding fuel) (b) 6.90 7.02 Aircraft fuel 1,160 3.66 575 2.14 Adjusted CASM (h) 10.56 9.16 Net interest expense (income) — — 27 0.11 CARES Act - write-off of deferred financing costs due to paydown of loan (i) (7) (0.02) — — CARES Act – mark to market impact for warrants (j) — — (22) (0.09) Adjusted CASM + net interest (k) 10.54 9.18 CASM 10.62 8.10 Net interest expense (income) — — 27 0.11 CASM + net interest (k) 10.62 8.21 __________________ (a) Cost per ASM figures may not recalculate due to rounding.
See the reconciliation to corresponding GAAP measures provided below. 63 Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest Year Ended December 31, 2023 2022 ($ in millions) Per ASM (¢) ($ in millions) Per ASM (¢) Non-GAAP financial data: (a) CASM 9.50 10.62 Aircraft fuel (1,130) (2.99) (1,160) (3.66) CASM (excluding fuel) (b) 6.51 6.96 Transaction and merger-related costs, net (c) (1) (0.01) (10) (0.03) Other operating costs - legal fees (d) (1) — — — Asset impairment (e) — — (7) (0.02) Collective bargaining contract ratification (f) — — (2) (0.01) Adjusted CASM (excluding fuel) (b) 6.50 6.90 Aircraft fuel 1,130 2.99 1,160 3.66 Adjusted CASM (g) 9.49 10.56 Net interest expense (income) (35) (0.09) — — CARES Act - write-off of deferred financing costs due to paydown of loan (h) — — (7) (0.02) Adjusted CASM + net interest (i) 9.40 10.54 CASM 9.50 10.62 Net interest expense (income) (35) (0.10) — — CASM + net interest (i) 9.40 10.62 __________________ (a) Cost per ASM figures may not recalculate due to rounding.
The following table presents our distribution channel mix: Year Ended December 31, Distribution Channel 2022 2021 Change Our website, mobile app and other direct channels 70 % 71 % (1) pts Third-party channels 30 % 29 % 1 pts Maintenance, Materials and Repairs .
The following table presents our distribution channel mix: Year Ended December 31, Change Distribution Channel 2023 2022 Our website, mobile app and other direct channels 72 % 70 % 2 pts Third-party channels 28 % 30 % (2) pts Depreciation and Amortization .
Other Operating Expenses . Other operating expenses increased by $52 million, or 51%, during the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Other Operating Expenses . Other operating expenses decreased by $13 million, or 8%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022.
While we have already completed the substantial majority of strategic initiatives to reduce our unit operating costs, we believe that we are well positioned to maintain our low unit operating costs relative to our competitors through on-going strategic initiatives, including continuing our cost optimization efforts and further realizing economies of scale.
We believe that we are well positioned to 60 maintain our low unit operating costs relative to our competitors through on-going strategic initiatives, including continuing our cost optimization efforts and further realizing economies of scale. To the extent that we are unable to maintain our low-cost structure, our ability to compete effectively may be impaired.
We refer to accounting estimates of this type as critical accounting estimates, which we discuss below. For a detailed discussion of our significant accounting policies, please refer to “Notes to Consolidated Financial Statements — 1.
We refer to accounting estimates of this type as critical accounting estimates, which we discuss below. For a detailed discussion of our significant accounting policies, please refer to “Notes to Consolidated Financial Statements — 1. Summary of Significant Accounting Policies.” Frequent Flyer Program Our FRONTIER Miles program provides frequent flyer travel awards to program members based on accumulated miles.
As a result, maintenance events occurring closer to the end of the lease term will generally have shorter depreciation periods than those occurring earlier in the lease term.
Accordingly, heavy maintenance is depreciated over the shorter of either the remaining lease term or the period until the next estimated heavy maintenance event. As a result, maintenance events occurring closer to the end of the lease term will generally have shorter depreciation periods than those occurring earlier in the lease term.
In connection with the PSP Promissory Notes and the Treasury Loan, we issued to the Treasury warrants to purchase 3,117,940 shares of our common stock at a weighted-average price of $6.95 per share.
By repaying the amounts outstanding under the Treasury Loan, our co-branded credit card program and related brand assets that collateralized the Treasury Loan are now unencumbered. In connection with the PSP Promissory Notes and Treasury Loan, we issued to the Treasury warrants to purchase 3,117,940 shares of FGHI common stock at a weighted-average price of $6.95 per share.
Leased Aircraft Return Costs Our aircraft operating lease agreements generally require us to return aircraft airframes and engines to the lessor in a certain condition or pay an amount to the lessor based on the airframe and engine’s actual return condition. 63 These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition).
For the year ended December 31, 2023, holding other factors constant, a 10% change in our estimated frequent flyer breakage rate would have resulted in a change to passenger revenues of approximately $3 million, or less than 1%. 75 Leased Aircraft Return Costs Our aircraft operating lease agreements generally require us to return aircraft airframes and engines to the lessor in a certain condition or pay an amount to the lessor based on the airframe and engine’s actual return condition.These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition).
Income Tax Valuation Allowance As of December 31, 2022, our total deferred tax assets, net of an $8 million valuation allowance, were $677 million, which included $50 million of deferred tax assets related to NOL carry forwards.
Income Tax Valuation Allowance As of December 31, 2023, our total deferred tax assets, net of a $48 million valuation allowance, were $757 million, which included $75 million of deferred tax assets related to net operating loss (“NOL”) carry forwards.
As of December 31, 2022 and 2021, our total frequent flyer liability was $45 million and $54 million, respectively. The contract to sell mileage credits under the co-branded credit card partnership has multiple performance obligations.
Miles are accumulated as a result of travel, purchases using the co-branded credit card and purchases from other participating partners. As of each of December 31, 2023 and 2022, our total frequent flyer liability was $45 million. The contract to sell miles under the co-branded credit card partnership has multiple performance obligations.
As a result, derivations of Net income and EBITDA, including Adjusted net income (loss) and Adjusted EBITDA, as presented may not be directly comparable to similarly titled measures presented by other companies. For the foregoing reasons, each of Adjusted net income (loss), EBITDA and Adjusted EBITDA has significant limitations which affect its use as an indicator of our profitability.
As a result, derivations of pre-tax income (loss), net income (loss) and EBITDA, including adjusted pre-tax income (loss), adjusted net income (loss) and adjusted EBITDA, as presented may not be directly comparable to similarly titled measures presented by other companies.
As a result of the proposed Merger with Spirit, we incurred $10 million in related net costs during the year ended December 31, 2022, including $19 million in employee retention costs and $16 million in transaction costs, which are made up of banking, legal and accounting fees, among others, charged in connection with the Merger, offset by $25 million received from Spirit for the reimbursement of incurred merger-related expenses upon the termination of the Merger agreement.
During the year ended December 31, 2023, we incurred $1 million in merger-related costs, as compared to $10 million in net costs during the year ended December 31, 2022, which included $19 million in employee retention costs and $16 million in transaction costs, primarily related to legal and other professional fees, partially offset by the $25 million received from Spirit for the reimbursement of incurred merger-related expenses.
The following table summarizes current and long-term material cash requirements as of December 31, 2022, which we expect to fund primarily with operating and financing cash flows (in millions): Material Cash Requirements 2023 2024 2025 2026 2027 Thereafter Total Debt obligations (a) $ 157 $ 137 $ — $ — $ — $ 137 $ 431 Interest commitments (b) 20 7 5 6 6 6 50 Operating lease obligations (c) 478 462 447 383 317 1,005 3,092 Flight equipment purchase obligations (d) 760 1,974 1,767 2,358 2,448 3,758 13,065 Maintenance deposit obligations (e) 3 3 3 3 4 5 21 Total $ 1,418 $ 2,583 $ 2,222 $ 2,750 $ 2,775 $ 4,911 $ 16,659 __________________ (a) Includes principal commitments only associated with our PDP Financing Facility pertaining to deliveries through 2024, our floating rate building note through 2023, our affinity card unsecured debt due through 2029 and the PSP Promissory Notes through 2031.
The following table summarizes current and long-term material cash requirements as of December 31, 2023, which we expect to fund primarily with operating and financing cash flows (in millions): Material Cash Requirements 2024 2025 2026 2027 2028 Thereafter Total Debt obligations (a) $ 252 $ 76 $ — $ — $ 66 $ 80 $ 474 Interest commitments (b) 22 8 7 7 5 3 52 Operating lease obligations (c) 566 563 500 434 352 1,417 3,832 Flight equipment purchase obligations (d) 1,391 2,500 2,358 2,448 2,403 1,356 12,456 Maintenance deposit obligations (e) 3 3 3 4 4 1 18 Total $ 2,234 $ 3,150 $ 2,868 $ 2,893 $ 2,830 $ 2,857 $ 16,832 __________________ (a) Includes principal commitments only associated with our PDP Financing Facility with borrowings as of December 31, 2023 pertaining to aircraft with deliveries through 2025, our floating rate building note through June 2024, our affinity card unsecured debt due through 2029 and the PSP Promissory Notes through 2031.
Once these maintenance holidays expire, these aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals. When these more significant maintenance activities occur, this will result in out-of-service periods during which our aircraft are dedicated to maintenance activities and unavailable to generate revenue.
Once these maintenance holidays expire, these 61 aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals.
CASM (excluding fuel) and Adjusted CASM (excluding fuel) are not determined in accordance with GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
CASM (excluding fuel) and Adjusted CASM (excluding fuel) are not determined in accordance with GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. (c) Represents $1 million in employee retention costs incurred in connection with the terminated merger with Spirit for the year ended December 31, 2023.
Certain of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations.
We believe that our insurance would cover most of our exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft, services, equipment lease and sale and financing agreements described above. 74 Certain of our aircraft and other financing transactions include provisions that require us to make payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations.
Aircraft fuel expense increased by $585 million, or 102%, during the year ended December 31, 2022, as compared to the corresponding prior year period. The increase was primarily due to a 71% increase in fuel rate and a 18% increase in fuel gallons consumed due to increased capacity. Salaries, Wages and Benefits .
Aircraft fuel expense decreased by $30 million, or 3%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022. The decrease was primarily due to a 17% decrease in fuel cost per gallon, substantially offset by the 17% increase in gallons consumed, driven by higher capacity. Salaries, Wages and Benefits .
Considering these aforementioned non-GAAP adjustments and the related tax impacts, our adjusted (non-GAAP) net loss was $17 million for the year ended December 31, 2022, as compared to an adjusted (non-GAAP) net loss of $299 million for the year ended December 31, 2021.
Considering the aforementioned non-GAAP operating adjustments along with the $7 million non-operating write-off of deferred financing costs during the year ended December 31, 2022, due to the repayment of the CARES Act loan and the related tax impacts of these adjustments, our adjusted (non-GAAP) net loss was $17 million for the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs part of our risk management program, we enter into contracts in order to limit the exposure to fluctuations in interest rates. During the year ended December 31, 2022, we paid $19 million in upfront premiums for the option to enter into and exercise cash-settled swaps with a forward starting effective date.
Biggest changeDuring the year ended December 31, 2022, we paid $19 million in upfront premiums for the option to enter into and exercise cash-settled swaps with a forward starting effective date. As of December 31, 2023, we have no interest rate hedges outstanding . 80
Based on our annual fuel consumption over the last 12 months, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased aircraft fuel expense by approximately $116 million. Interest Rates .
Based on our annual fuel consumption over the last 12 months, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased aircraft fuel expense by approximately $113 million. Interest Rates .
Our results of operations can vary materially due to changes in the price and availability of aircraft fuel and are also impacted by the number of aircraft in use and the number of flights we operate. Aircraft fuel represented approximately 34% and 26% of total operating expenses for the years ended December 31, 2022 and 2021, respectively.
Our results of operations can vary materially due to changes in the price and availability of aircraft fuel and are also impacted by the number of aircraft in use and the number of flights we operate. Aircraft fuel represented approximately 31% and 34% of total operating expenses for the years ended December 31, 2023 and 2022, respectively.
During the year ended December 31, 2022 as applied to our average debt balances, a hypothetical increase of 100 basis points in average annual interest rates on our variable-rate debt would have increased the annual interest expense by $3 million. In June 2023, LIBOR will be discontinued as a reference rate.
During the year ended December 31, 2023 as applied to our average debt balances, a hypothetical increase of 100 basis points in average annual interest rates on our variable-rate debt would have increased the annual interest expense by $4 million.
We are subject to market risk associated with changing interest rates, due to Secured Overnight Financing Rate (“SOFR”)-based interest rates on our PDP Financing Facility and London Interbank Offered Rate (“LIBOR”)-based interest rates on our floating rate building note and our affinity card advance purchase of mileage credits.
We are subject to market risk associated with changing interest rates, due to Secured Overnight Financing Rate (“SOFR”) based interest rates on our PDP Financing Facility and our floating rate building note and Effective Federal Funds Rate (“EFFR”) based interest rates on our affinity card advance purchase of miles.
As of December 31, 2022, we had $88 million of LIBOR-based debt maturing after June 2023. We are exposed to interest rate risk through aircraft lease contracts for the time period between agreement of terms and commencement of the lease, where portions of the rental payments are adjusted and become fixed based on swap rates.
We are exposed to interest rate risk through aircraft lease contracts for the time period between agreement of terms and commencement of the lease, where portions of the rental payments are adjusted and become fixed based on swap rates.
As of December 31, 2022, we had hedged $573 million in aircraft rent payments for 14 aircraft and 4 engines to be delivered by the end of 2023 . During the year ended December 31, 2021, we did not enter into any swaps and therefore, paid no upfront premiums for options. 81
As part of our risk management program, we enter into contracts in order to limit the exposure to fluctuations in interest rates. During the year ended December 31, 2023, we did not enter into any swaps and, therefore, paid no upfront premiums for options.

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