8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 25, 2016

____________________

SPIRIT AIRLINES, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

001-35186 (Commission File Number) 38-1747023 (IRS Employer Identification Number)

2800 Executive Way

Miramar, Florida 33025

(Address of principal executive offices, including Zip Code)

(954) 447-7920

(Registrant's telephone number, including area code)

____________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

The information in this report furnished pursuant to Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section. It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), if such subsequent filing specifically references the information furnished pursuant to Item 2.02 of this report.

Item 2.02. Results of Operations and Financial Condition.

On October 25, 2016, Spirit Airlines, Inc. (the “Company” or “Spirit”) issued a press release announcing its unaudited financial results for the third quarter 2016. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Non-GAAP financial measures that reflect adjustments from historical financial data prepared under GAAP, including adjustments for special items, are included in the press release as supplemental disclosures because the Company believes they are useful indicators of the Company's operating performance for comparative purposes. These non-GAAP financial measures are well recognized performance measurements in the airline industry that are frequently used by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry. The non-GAAP financial measures provided have limitations as analytical tools. Because of these limitations, non-GAAP financial measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. The Company has also provided in the press release reconciliations of these non-GAAP financial measures to the appropriate GAAP financial measures.

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

The following is furnished as an exhibit to this report and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act:

Exhibit No.	Description
99.1	Press Release regarding third quarter 2016 financial results.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 25, 2016 SPIRIT AIRLINES, INC.

By: /s/ Thomas Canfield

Name: Thomas Canfield

Title: Senior Vice President and General Counsel

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release regarding third quarter 2016 financial results.

EX-99.1

EXHIBIT 99.1

Spirit Airlines Reports Third Quarter 2016 Results

MIRAMAR, FL. (October 25, 2016) - Spirit Airlines, Inc. (NASDAQ: SAVE) today reported third quarter 2016 financial results.

• GAAP net income for the third quarter 2016 was $81.4 million ($1.17 per diluted share), or $86.3 million ($1.24per diluted share)¹ excluding special items.

• GAAP operating margin for the third quarter 2016 was 21.8 percent, or 23.0 percent² excluding special items.

• Spirit ended the thirdquarter2016 with unrestricted cash, cash equivalents, and short-term investments of $926.0 million.

• Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended September 30, 2016 was 25.3 percent³.

“During the third quarter 2016, we saw sequential improvement in total revenue directly related to our own revenue initiatives as well as a modest improvement in the industry pricing environment, and are encouraged by the constructive trends we are seeing,” said Bob Fornaro, Spirit’s President and Chief Executive Officer.  “On the operations front, we made good strides toward improving our operational performance and for the months of July, August, and September, we set new company records for on-time performance. I applaud our team for the progress made to date towards achieving consistent reliability."

Revenue Performance

For the third quarter 2016, Spirit's total operating revenue was $621.3 million, an increase of 8.1 percent compared to the third quarter 2015, driven by a 12.6 percent increase in flight volume and 0.8 point increase in load factor, partially offset by a decrease in operating yields.

Total revenue per available seat mile (TRASM) for the thirdquarter2016 decreased 7.0 percent compared to the same period last year, primarily driven by a decrease in passenger yield as a result of industry competitive pricing pressures. Although yields decreased year over year, throughout the third quarter 2016, the Company saw sequential improvement in the rate of decline.

On a per passenger flight segment ("PFS") basis, total revenue per PFS for the third quarter 2016decreased9.0 percent, or $10.84, year over year to $109.51, primarily driven by a 12.9 percent, or $8.62, decrease in ticket revenue per PFS related to industry competitive pricing pressures.

Non-ticket revenue declined 4.2 percent, or $2.22, year over year on a per PFS basis to $51.17, primarily driven by a modest decline in bag revenue per PFS.

Cost Performance

Total GAAP operating expenses, including special items of $7.8 million⁴ primarily related to lease termination charges, increased16.4 percent, or $68.5 million, year over year to $486.1 million driven by

1

an increase in flight volume. Adjusted operating expense for the third quarter 2016increased14.6 percent, or $61.0 million, to $478.3 million⁵ on a capacity increase of 16.2 percent year over year.

Aircraft fuel expense increased in the third quarter 2016 by 5.1 percent, or $5.9 million, compared to the same period last year, due to a 15.7 percentincrease in fuel gallons consumed, partially offset by an 8.8 percentdecrease in the average economic fuel cost per gallon⁶.

Spirit reported third quarter 2016 cost per available seat mile ("ASM") excluding special items and fuel (“Adjusted CASM ex-fuel”)⁵ of 5.48 cents, an increase of 1.7 percent compared to the same period last year, primarily driven by higher salaries, wages, and benefits, and higher maintenance expense partially offset by lower aircraft rent per ASM.

"Our team continues to do a good job holding the line on core cost inflation. In addition, operational reliability improvements during the quarter produced more cost savings than we anticipated, provided a better product for our customers, and a better environment for our team members: a true "win-win-win" scenario," said Ted Christie, Spirit's Chief Financial Officer.

Labor

Spirit and its pilots, represented by the Airline Pilots Association, remain in open contract negotiations under the supervision of the National Mediation Board.

Fleet

During the third quarter 2016, Spirit took delivery of 2 new A321ceo aircraft, ending the quarter with 89 aircraft in its fleet.  Also, during the quarter, Spirit purchased three A319 aircraft off lease and extended the leases for two other A319 aircraft.

Share Repurchase

During the third quarter 2016, Spirit returned $38 million to shareholders by repurchasing approximately 0.9 million shares.  Year to date Spirit has returned $100 million to shareholders by repurchasing approximately 2.3 million shares.

Recent New Service Announcements

Boston - Orlando (10/7/16)

Philadelphia - Orlando (10/7/16)

Newark - Fort Lauderdale (10/30/16)

Newark - Orlando (10/30/16)

Kansas City - Orlando (11/10/16)

Akron-Canton - Fort Lauderdale (11/10/16)

Akron-Canton - Orlando (11/10/16)

Akron-Canton - Tampa (11/10/16)*

Akron-Canton - Fort Myers (11/11/16)*

Niagara Falls - Orlando (11/17/16)

Plattsburgh - Orlando (11/17/16

Baltimore - Fort Myers (11/10/16)

Baltimore - Tampa (11/10/16)

Fort Lauderdale - Havana, Cuba (12/1/16)**

Newark - Myrtle Beach (3/9/17)

Akron-Canton - Myrtle Beach (4/27/17)*

Akron-Canton - Las Vegas (4/27/17)

*seasonal

**subject to foreign government approval

2

Conference Call/Webcast Detail

Spirit will conduct a conference call to discuss these results today, October 25, 2016, at 9:00 a.m. ET. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com. An archive of the webcast will be available under Webcasts & Presentations for 60 days.

About Spirit Airlines:

Spirit Airlines (NASDAQ: SAVE) is committed to offering the lowest total price to the places we fly, on average much lower than other airlines. Our customers start with an unbundled, stripped-down Bare Fare™ and get Frill Control™ which allows them to pay only for the options they choose - like bags, seat assignments and refreshments - the things other airlines bake right into their ticket prices. We help people save money and travel more often, create new jobs and stimulate business growth in the communities we serve. With our Fit Fleet™, the youngest fleet of any major US airline, we operate more than 400 daily flights to 56 destinations in the U.S., Latin America and the Caribbean. Come save with us at www.spirit.com.

Investors are encouraged to read the Company's periodic and current reports filed with or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, for additional information regarding the Company.

End Notes

(1) See "Reconciliation of Adjusted Net Income to GAAP Net Income" table below for more details.

(2) See "Reconciliation of Adjusted Operating Income to GAAP Operating Income" table below for more details.

(3) See "Calculation for Return on Invested Capital" table below for more details.

(4) See "Special Items" table for more details.

(5) See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for more details.

(6) See "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below for more details.

3

Forward-Looking Statements

Statements in this release and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below. Furthermore, such forward-looking statements speak only as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Additional risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or future results. You should carefully consider the risks described above and the other information in this release. If any of the above risks materialize, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely affected. References in this report to “Spirit,” “we,” “us,” “our,” or the “Company” shall mean Spirit Airlines, Inc., unless the context indicates otherwise. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

4

SPIRIT AIRLINES, INC.

Condensed Statement of Operations

(unaudited, in thousands, except per share data)

	Three Months Ended								Nine Months Ended
	September 30,						Percent		September 30,						Percent
	2016			2015			Change		2016			2015			Change
Operating revenues:
Passenger	$	331,004		$	319,812		3.5		$	900,031		$	901,851		(0.2	)
Non-ticket	290,325			255,029			13.8		843,574			719,766			17.2
Total operating revenues	621,329			574,841			8.1		1,743,605			1,621,617			7.5
Operating expenses:
Aircraft fuel	121,844			115,899			5.1		321,018			356,232			(9.9	)
Salaries, wages and benefits	120,190			95,081			26.4		349,530			281,175			24.3
Aircraft rent	49,367			53,525			(7.8	)	151,433			159,440			(5.0	)
Landing fees and other rents	39,345			34,577			13.8		114,096			98,487			15.8
Distribution	25,565			23,074			10.8		73,190			65,920			11.0
Maintenance, materials and repairs	30,443			21,473			41.8		72,010			61,904			16.3
Depreciation and amortization	25,304			19,628			28.9		73,370			51,630			42.1
Other operating	66,277			54,151			22.4		197,833			156,071			26.8
Loss on disposal of assets	423			290			45.9		1,166			1,300			(10.3	)
Special charges (credits)	7,355			(76		)	nm		31,609			673			nm
Total operating expenses	486,113			417,622			16.4		1,385,255			1,232,832			12.4
Operating income	135,216			157,219			(14.0	)	358,350			388,785			(7.8	)
Other (income) expense:
Interest expense	11,362			5,951			nm		29,588			13,182			nm
Capitalized interest	(3,067		)	(3,030		)	1.2		(9,163		)	(8,392		)	9.2
Interest income	(1,222		)	(233		)	nm		(4,235		)	(544		)	nm
Other expense	180			166			8.4		407			282			44.3
Total other (income) expense	7,253			2,854			nm		16,597			4,528			nm
Income before income taxes	127,963			154,365			(17.1	)	341,753			384,257			(11.1	)
Provision for income taxes	46,581			57,251			(18.6	)	125,367			141,437			(11.4	)
Net income	$	81,382		$	97,114		(16.2	)	$	216,386		$	242,820		(10.9	)
Basic earnings per share	$	1.17		$	1.35		(13.3	)	$	3.06		$	3.35		(8.7	)
Diluted earnings per share	$	1.17		$	1.35		(13.3	)	$	3.05		$	3.34		(8.7	)
Weighted average shares, basic	69,727			71,738			(2.8	)	70,689			72,432			(2.4	)
Weighted average shares, diluted	69,808			71,884			(2.9	)	70,832			72,680			(2.5	)

5

SPIRIT AIRLINES, INC.

Condensed Statements of Comprehensive Income

(unaudited, in thousands)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2016		2015			2016		2015
Net income	$	81,382	$	97,114		$	216,386	$	242,820
Unrealized gain (loss) on interest rate derivative instruments, net of deferred taxes of $0, ($320), $0 and ($511)	—		(553		)	—		(909		)
Unrealized gain (loss) on investment securities, net of deferred taxes of $3, $0, $3 and $0	4		—			4		—
Interest rate swap losses reclassified into earnings, net of taxes of $32, $15, $97 and $15	56		25			170		25
Other comprehensive income (loss)	$	60	$	(528	)	$	174	$	(884	)
Comprehensive income	$	81,442	$	96,586		$	216,560	$	241,936

6

SPIRIT AIRLINES, INC.

Condensed Balance Sheets

(unaudited, in thousands)

	September 30,			December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	825,904		$	803,632
Investment securities	100,083			—
Accounts receivable, net	35,892			28,266
Aircraft maintenance deposits	87,105			73,415
Prepaid income taxes	6,060			72,278
Prepaid expenses and other current assets	48,455			48,749
Total current assets	1,103,499			1,026,340
Property and equipment:
Flight equipment	1,386,310			834,927
Ground property and equipment	109,451			74,814
Less accumulated depreciation	(105,653		)	(65,524		)
	1,390,108			844,217
Deposits on flight equipment purchase contracts	272,690			286,837
Long-term aircraft maintenance deposits	198,426			206,485
Deferred heavy maintenance, net	79,878			89,127
Other long-term assets	85,024			77,539
Total assets	$	3,129,625		$	2,530,545
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	29,906		$	17,043
Air traffic liability	238,793			216,831
Current maturities of long-term debt	84,443			49,637
Other current liabilities	217,779			182,729
Total current liabilities	570,921			466,240
Long-term debt, less current maturities	894,809			596,693
Long-term deferred income taxes	299,231			221,481
Deferred gains and other long-term liabilities	20,108			20,821
Shareholders’ equity:
Common stock	7			7
Additional paid-in-capital	549,375			544,277
Treasury stock, at cost	(218,572		)	(116,182		)
Retained earnings	1,015,140			798,754
Accumulated other comprehensive loss	(1,394		)	(1,546		)
Total shareholders’ equity	1,344,556			1,225,310
Total liabilities and shareholders’ equity	$	3,129,625		$	2,530,545

7

SPIRIT AIRLINES, INC.SPIRIT AIRLINES, INC.

Condensed Statement of Cash Flows

(unaudited, in thousands)

	Nine Months Ended September 30,
	2016			2015
Operating activities:
Net income	216,386			242,820
Adjustments to reconcile net income to net cash provided by operations:
Unrealized losses on open derivative contracts, net	—			2,239
Losses reclassified from other comprehensive income	267			—
Equity-based compensation	5,503			6,999
Allowance for doubtful accounts	213			7
Amortization of deferred gains and losses	3,837			730
Depreciation and amortization	73,370			51,630
Deferred income tax expense	77,627			63,960
Loss on disposal of assets	1,166			1,300
Lease termination cost	31,609			—
Changes in operating assets and liabilities:
Accounts receivable	(7,840		)	(10,374		)
Aircraft maintenance deposits	(38,299		)	(17,488		)
Prepaid income taxes	66,218			—
Long-term deposits and other assets	(43,252		)	(44,294		)
Accounts payable	(7,044		)	2,340
Air traffic liability	21,684			56,960
Other liabilities	38,596			12,161
Net cash provided by operating activities	440,041			368,990
Investing activities:
Proceeds from sale of property and equipment	50			—
Capitalized interest	(7,032		)	(2,707		)
Pre-delivery deposits for flight equipment, net of refunds	(109,260		)	(87,658		)
Purchase of investment securities	(100,076		)	—
Purchase of property and equipment	(447,455		)	(451,799		)
Net cash used in investing activities	(663,773		)	(542,164		)
Financing activities:
Proceeds from issuance of long-term debt	378,569			416,000
Proceeds from stock options exercised	92			32
Payments on debt and capital lease obligations	(29,663		)	(16,609		)
Proceeds from sale and leaseback transactions	—			7,300
Excess tax benefit (deficiency) from equity-based compensation	(497		)	8,818
Repurchase of common stock	(102,390		)	(112,162		)
Debt issuance costs	(107		)	(14,092		)
Net cash provided by financing activities	246,004			289,287
Net increase in cash and cash equivalents	22,272			116,113
Cash and cash equivalents at beginning of period	803,632			632,784
Cash and cash equivalents at end of period	$	825,904		$	748,897
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest	$	26,025		$	3,851
Income taxes paid, net of refunds	$	(18,169	)	$	95,135

8

SPIRIT AIRLINES, INC.

Selected Operating Statistics (unaudited)

	Three Months Ended September 30,
Operating Statistics	2016	2015	Change
Available seat miles (ASMs) (thousands)	6,507,204	5,597,997	16.2	%
Revenue passenger miles (RPMs) (thousands)	5,599,370	4,768,692	17.4	%
Load factor (%)	86.0	85.2	0.8 pts
Passenger flight segments (thousands)	5,674	4,776	18.8	%
Block hours	98,586	88,045	12.0	%
Departures	38,310	34,032	12.6	%
Total operating revenue per ASM (TRASM) (cents)	9.55	10.27	(7.0	)%
Average yield (cents)	11.10	12.05	(7.9	)%
Average ticket revenue per passenger flight segment ($)	58.34	66.96	(12.9	)%
Average non-ticket revenue per passenger flight segment ($)	51.17	53.39	(4.2	)%
Total revenue per passenger flight segment ($)	109.51	120.35	(9.0	)%
CASM (cents)	7.47	7.46	0.1	%
Adjusted CASM (cents) (1)	7.35	7.45	(1.3	)%
Adjusted CASM ex-fuel (cents) (2)	5.48	5.39	1.7%
Fuel gallons consumed (thousands)	78,288	67,684	15.7	%
Average economic fuel cost per gallon ($)	1.56	1.71	(8.8	)%
Aircraft at end of period	89	76	17.1	%
Average daily aircraft utilization (hours)	12.3	12.8	(3.9)%
Average stage length (miles)	968	983	(1.5	)%

	Nine Months Ended September 30,
Operating Statistics	2016	2015	Change
Available seat miles (ASMs) (thousands)	18,909,627	15,540,759	21.7	%
Revenue passenger miles (RPMs) (thousands)	16,219,093	13,267,314	22.2	%
Load factor (%)	85.8	85.4	0.4	pts
Passenger flight segments (thousands)	16,268	13,271	22.6	%
Block hours	290,529	248,941	16.7	%
Departures	111,495	95,240	17.1	%
Total operating revenue per ASM (TRASM) (cents)	9.22	10.43	(11.6	)%
Average yield (cents)	10.75	12.22	(12.0	)%
Average ticket revenue per passenger flight segment ($)	55.32	67.96	(18.6	)%
Average non-ticket revenue per passenger flight segment ($)	51.85	54.24	(4.4	)%
Total revenue per passenger flight segment ($)	107.17	122.20	(12.3	)%
CASM (cents)	7.33	7.93	(7.6	)%
Adjusted CASM (cents) (1)	7.15	7.93	(9.8	)%
Adjusted CASM ex-fuel (cents) (2)	5.45	5.63	(3.2	)%
Fuel gallons consumed (thousands)	225,851	187,541	20.4	%
Average economic fuel cost per gallon ($)	1.42	1.91	(25.7	)%
Average daily aircraft utilization (hours)	12.6	12.8	(1.6)%
Average stage length (miles)	978	982	(0.4	)%

(1) Excludes special items.

(2) Excludes economic fuel expense and special items.

9

The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis. These non-GAAP financial measures have limitations as analytical tools. Because of these limitations, determinations of the Company's operating performance excluding unrealized gains and losses or special items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

Special Items

	Three Months Ended
	September 30,
(in thousands)	2016		2015
Operating special items include the following (1):
Unrealized losses (gains) related to fuel derivative contracts	$	—	$	82
Loss on disposal of assets	423		290
Special charges	7,355		(76		)
Total operating special items	$	7,778	$	296

Reconciliation of Adjusted Operating Expense to GAAP Operating Expense

(unaudited)

	Three Months Ended
	September 30,
(in thousands, except CASM data in cents)	2016		2015
Total operating expenses, as reported	$	486,113	$	417,622
Less operating special items (1)	7,778		296
Adjusted operating expenses, non-GAAP (2)	478,335		417,326
Less: Economic fuel expense	121,844		115,817
Adjusted operating expenses excluding fuel, non-GAAP (3)	$	356,491	$	301,509
Available seat miles	6,507,204		5,597,997
CASM (cents)	7.47		7.46
Adjusted CASM (cents) (2)	7.35		7.45
Adjusted CASM ex-fuel (cents) (3)	5.48		5.39

(1) Special items include unrealized gains and losses related to outstanding fuel derivative contracts, loss on disposal of assets, and special charges. Special charges for the third quarter 2016 are primarily related to lease termination costs.

(2) Excludes operating special items.

(3) Excludes operating special items and economic fuel expense as described in the "Reconciliation of Economic Fuel Expense to GAAP Fuel Expense" table below.

10

Reconciliation of Adjusted Net Income to GAAP Net Income

(unaudited)

	Three Months Ended
	September 30,
(in thousands, except per share data)	2016			2015
Net income, as reported	$	81,382		$	97,114
Add: Provision for income taxes	46,581			57,251
Income before income taxes, as reported	127,963			154,365
Pre-tax margin, GAAP	20.6		%	26.9		%
Add operating special items (1)	7,778			296
Income before income taxes, non-GAAP (2)	135,741			154,661
Adjusted pre-tax margin, non-GAAP (2)	21.8		%	26.9		%
Provision for income taxes (3)	49,412			57,361
Adjusted net income, non-GAAP (2)(3)	$	86,329		$	97,300
Weighted average shares, diluted	69,808			71,884
Adjusted net income per share, diluted (2)(3)	$1.24			$1.35

Reconciliation of Adjusted Operating Income to GAAP Operating Income

(unaudited)

	Three Months Ended
	September 30,
(in thousands)	2016			2015
Operating income, as reported	$	135,216		$	157,219
Operating margin, GAAP	21.8		%	27.3		%
Add operating special items (1)	7,778			296
Adjusted operating income, non-GAAP (2)	$	142,994		$	157,515
Adjusted operating margin, non-GAAP (2)	23.0		%	27.4		%

(1) See "Special Items" for more details.

(2) Excludes operating special items.

(3) Assumes the same marginal tax rate as is applicable to GAAP net income.

11

The Company believes economic fuel expense is the best measure of the effect fuel prices are currently having on our business, because it most closely approximates the net cash outflow associated with purchasing fuel used for our operations during the period. Economic fuel expense is defined as into-plane fuel expense, realized gains or losses on derivative contracts, plus the economic premium expense related to fuel option contracts in the period the option is benefiting. The key difference between aircraft fuel expense as recorded in our statement of operations and economic fuel expense is unrealized mark-to-market changes in the value of aircraft fuel derivatives outstanding and the timing of premium gain or loss recognition on our outstanding fuel option contracts. Many industry analysts evaluate airline results using economic fuel expense, and it is used in our internal management reporting.

Reconciliation of Economic Fuel Expense to GAAP Fuel Expense

(unaudited)

	Three Months Ended
	September 30,
(in thousands, except per gallon data)	2016		2015
Fuel expense
Aircraft fuel, as reported	$	121,844	$	115,899
Less:
Unrealized losses (gains) related to fuel derivative contracts	—		82
Economic fuel expense, non-GAAP	$	121,844	$	115,817
Fuel gallons consumed	78,288		67,684
Economic fuel cost per gallon, non-GAAP	$	1.56	$	1.71

Calculation of Return on Invested Capital

(unaudited)

	Twelve Months Ended
(in thousands)	September 30, 2016
Operating Income	$	478,687
Add operating special items (1)	31,091
Adjustment for aircraft rent	203,524
Adjusted operating income (2)	713,302
Tax (36.8%) (3)	262,495
Adjusted operating income, after-tax	450,807
Invested Capital
Total debt	$	979,252
Book equity	1,344,556
Less: Unrestricted cash, cash equivalents & short-term investments	925,987
Add: Capitalized aircraft operating leases (7x Aircraft Rent)	1,424,668
Total invested capital	2,822,489
Return on invested capital (ROIC), pre-tax (2)	25.3		%
Return on invested capital (ROIC), after-tax (2)(3)	16.0		%

(1) Special items include unrealized gains or losses related to outstanding fuel derivative contracts, loss on disposal of assets, and special charges primarily related to lease termination costs.

(2) Excludes special items as described above.

(3) Assumes the same marginal tax rate as is applicable to GAAP net income for the twelve months ended September 30, 2016.

###

12