Capacity Purchase Agreements with United and American

9 Months Ended

Sep. 30, 2023

Extractive Industries [Abstract]

Capacity Purchase Agreements with United and American

Capacity Purchase Agreements with United and American

In February 2017, Air Wisconsin entered into the United capacity purchase agreement. That agreement terminated and Air Wisconsin ceased flying for United in early June 2023. Although the agreement has terminated, a dispute exists under the agreement. Air Wisconsin has claimed that United owes it certain amounts under the capacity purchase agreement. United has denied that it owes those amounts and has claimed that Air Wisconsin improperly terminated the agreement and that Air Wisconsin owes it certain amounts for the alleged wrongful termination. In October 2022, United initiated arbitration under the agreement. An arbitration hearing commenced in July 2023 before three arbitrators. Air Wisconsin expects the arbitrators will issue their decision and award in the first quarter of 2024. Since the arbitration decision has not yet been issued, Air Wisconsin cannot reasonably estimate the likely outcome of the arbitration including any potential award of the disputed amounts. Air Wisconsin, however, maintains that it has a strong position, that it was entitled to terminate the agreement and that it is entitled to the disputed amounts, including the amounts recorded in the condensed consolidated balance sheets, under the terms of the agreement. For additional information, refer to Note 1, Summary of Significant Accounting Policies—Contract Revenues and Note 8, Commitments and Contingencies, in this Quarterly Report.

In August 2022, Air Wisconsin entered into the American capacity purchase agreement, pursuant to which Air Wisconsin agreed to provide up to 60 CRJ-200 regional jet aircraft for regional airline services for American. Air Wisconsin commenced flying operations for American in March 2023. American became Air Wisconsin’s sole airline partner when the last remaining aircraft covered by the United capacity purchase agreement were removed from United’s flying operations in early June 2023. In February 2023 and November 2023, American and Air Wisconsin entered into Amendment No. 1 and Amendment No. 3, respectively, to the American capacity purchase agreement which, among other things, provided for a one-time payment to assist with increased costs related to pilot compensation and revised compensation rates for 2023 through 2028 and obligated American to make a payment to assist Air Wisconsin with current pilot compensation and retention. For additional information regarding Amendment No. 3, refer to Note 14, Subsequent Events, and Part II, Item 5, Other Information, in this Quarterly Report.