Leases, Commitments, Guarantees and Contingencies

3 Months Ended

Mar. 31, 2024

Leases, Commitments, Guarantees and Contingencies

Leases, Commitments, Guarantees and Contingencies

(7) Leases, Commitments, Guarantees and Contingencies

The Company leases property and equipment under operating leases. For leases with durations longer than 12 months, the Company recorded the related operating lease right-of-use asset and operating lease liability at the present value of lease payments over the term. The Company used its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Aircraft

As of March 31, 2024, excluding aircraft financed by the Company’s major airline partners that the Company operates for them under contract, the Company leased eight aircraft under long-term lease agreements with remaining terms ranging from five to six years.

Airport facilities

The Company has operating leases for facility space including airport terminals, office space, cargo warehouses and maintenance facilities. The Company generally leases this space from government agencies that control the use of the various airports. The remaining lease terms for facility space vary from one month to 32 years. The Company’s operating leases with lease rates that are variable based on airport operating costs, use of the facilities or other variable factors are excluded from the Company’s right-of-use assets and operating lease liabilities in accordance with accounting guidance.

Leases

As of March 31, 2024, the Company’s right-of-use assets were $85.9 million, the Company’s current maturities of operating lease liabilities were $19.7 million, and the Company’s noncurrent lease liabilities were $66.2 million. During the three months ended March 31, 2024, the Company paid $5.7 million under operating leases reflected as a reduction from operating cash flows.

The table below presents lease related terms and discount rates as of March 31, 2024:

Weighted-average remaining lease term for operating leases	11.4 years
Weighted-average discount rate for operating leases	6.2%

The Company’s lease costs for the three months ended March 31, 2024 and 2023 included the following components (in thousands):

	For the three months ended March 31,
	2024		2023
Operating lease cost	$	7,259	$	24,948
Variable and short-term lease cost		1,033		803
Sublease income		(1,246)		(1,350)
Total lease cost	$	7,046	$	24,401

As of March 31, 2024, the Company leased aircraft, airport facilities, office space and other property and equipment under non-cancelable operating leases, which are generally on a long-term, triple-net lease basis pursuant to which the Company pays taxes, maintenance, insurance and certain other operating expenses applicable to the leased property. The Company expects that, in the normal course of business, such operating leases that expire will be renewed or replaced by other leases. The following table summarizes future minimum rental payments required under operating leases that had initial or remaining non-cancelable lease terms as of March 31, 2024 (in thousands):

April 2024 through December 2024	$	15,726
2025		17,974
2026		14,910
2027		12,983
2028		9,976
Thereafter		56,592
Total future minimum operating lease payments	$	128,161

As of March 31, 2024, the Company had a firm purchase commitment for 21 E175 aircraft from Embraer with anticipated delivery dates through 2026.

The following table summarizes the Company’s commitments and obligations as noted for each of the next five years and thereafter (in thousands):

	Total		Apr - Dec 2024		2025		2026		2027		2028		Thereafter
Operating lease payments for aircraft and facility obligations	$	128,161	$	15,726	$	17,974	$	14,910	$	12,983	$	9,976	$	56,592
Firm aircraft and spare engine commitments		610,945		143,810		230,725		236,410		—		—		—
Interest commitments (1)		442,822		84,964		97,933		78,149		56,289		40,947		84,540
Principal maturities on long-term debt		2,918,971		339,156		532,255		510,598		464,289		292,862		779,811
Total commitments and obligations	$	4,100,899	$	583,656	$	878,887	$	840,067	$	533,561	$	343,785	$	920,943

(1) At March 31, 2024, the Company’s long-term debt had fixed interest rates.

Guarantees

In 2022, the Company agreed to guarantee $19.8 million of debt for a 14 CFR Part 135 air carrier. The debt is secured by the Part 135 air carrier’s aircraft and engines and has a five-year term. In exchange for providing the guarantee, the Company received 6.5% of the guaranteed amount as consideration, payable in the estimated value of common stock of the Part 135 air carrier, all of which was sold in 2023. The balance of the debt under the guarantee was $16.1 million as of March 31, 2024.

In 2023, the Company agreed to guarantee up to $12.0 million of debt for an aviation school. The debt is secured by the school’s aircraft and engines and has a five-year term. In exchange for providing the guarantee, the

Company receives 2.0% annually of the guaranteed amount as consideration in cash. The balance of the debt under the guarantee was $7.2 million as of March 31, 2024.

The purpose of these guarantees is to help reduce the financing costs of aircraft for the third-parties in an effort to increase the potential number of commercial pilots in the Company’s hiring pipeline. The Company also recorded the estimated credit loss associated with the guarantees based on publicly available historical default rates issued by a third party for companies with similar credit ratings, factoring the collateral and guarantee term.