Allegiant Travel CO 10-K for FY2023
Allegiant Travel CO (ALGT)
10-K
2024-02-29
For: 2023-12-31
View Original
Added on
April 07, 2026
About this 10-K
Allegiant Travel CO filed this 10-K on February 29, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.51B
- up 9.0% from $2.3B a year earlier
- Net income
- $117.6M
- up 4617.0% from net income of $2.49M a year earlier
- Diluted EPS
- $6.29
- up 4392.9% from $0.14 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the fiscal year ended | ||||||||
| Or | ||||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For the transition period from ____ to ____
Commission File Number 001-33166
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s Telephone Number, Including Area Code: (702 ) 851-7300
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such fi les). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,”and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common equity held by non-affiliates of the registrant was approximately $1.9 billion computed by reference to the closing sale price of the common stock on the Nasdaq Global Select Market on June 30, 2023, the last trading day of the registrant’s most recently completed second fiscal quarter.
The number of shares of the registrant’s common stock outstanding as of the close of business on February 23, 2024 was 18,286,324 .
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be used in connection with the solicitation of proxies to be voted at the registrant’s annual meeting to be held on June 26, 2024, and to be filed with the Commission subsequent to the date hereof, are incorporated by reference into Part III of this Report on Form 10-K.
Allegiant Travel Company
Form 10-K
For the Year Ended December 31, 2023
Table of Contents
| PART I | ||||||||
| ITEM 1. | ||||||||
| ITEM 1A. | ||||||||
| ITEM 1B. | ||||||||
| ITEM 1C. | ||||||||
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| PART II | ||||||||
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| ITEM 7. | ||||||||
| ITEM 7A. | ||||||||
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| ITEM 9. | ||||||||
| ITEM 9A. | ||||||||
| ITEM 9B. | ||||||||
| ITEM 9C. | ||||||||
| PART III | ||||||||
| ITEM 10. | ||||||||
| ITEM 11. | ||||||||
| ITEM 12. | ||||||||
| ITEM 13. | ||||||||
| ITEM 14. | ||||||||
| PART IV | ||||||||
| ITEM 15. | ||||||||
| ITEM 16. | ||||||||
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PART I
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this annual report on Form 10-K, and in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions, and on information currently available to our management. Forward-looking statements include our statements regarding future expenses, revenues, earnings, available seat mile (ASM) growth, fuel cost and consumption, expected capital expenditures, number of contracted aircraft to be placed in service in the future, our ability to consummate announced aircraft transactions, timing of aircraft deliveries and retirements, number of possible future markets that may be served, the implementation of a joint alliance with VivaAerobus, the operation of our Sunseeker Resort, as well as other information concerning future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "anticipate," "intend," "plan," "estimate," “project,” “hope” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports and registration statements filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the impact of regulatory reviews of Boeing on its aircraft delivery schedule, an accident involving, or problems with, our aircraft, public perception of our safety, our reliance on our automated systems, our reliance on Boeing and third parties to deliver aircraft under contract to us on a timely basis, risk of breach of security of personal data, volatility of fuel costs, labor issues and costs, the ability to obtain regulatory approvals as needed, the effect of economic conditions on leisure travel, debt covenants and balances, the impact of governmental regulations on the airline industry, the ability to finance aircraft to be acquired, the ability to obtain necessary government approvals to implement the announced alliance with VivaAerobus and to otherwise prepare to offer international service, terrorist attacks, risks inherent to airlines, our competitive environment, our reliance on third parties who provide facilities or services to us, the possible loss of key personnel, economic and other conditions in markets in which we operate, the ability to successfully operate Sunseeker Resort at Charlotte Harbor, increases in maintenance costs and availability of outside maintenance contractors to perform needed work on our aircraft on a timely basis and at acceptable rates, cyclical and seasonal fluctuations in our operating results, and the perceived acceptability of our environmental, social and governance efforts.
Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.
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Item 1. Business
Overview
We are a leisure travel company focused on providing travel and leisure services and products to residents of under-served cities in the United States. We were founded in 1997 and, in conjunction with our initial public offering in 2006, we incorporated in the state of Nevada. Our unique business model provides diversified revenue streams from various travel services and product offerings which distinguish us from other travel companies. We operate a low-cost, low utilization passenger airline marketed primarily to leisure travelers in under-served cities, allowing us to sell air transportation both on a stand-alone basis and bundled with the sale of air-related and third party services and products. In addition, we provide air transportation under fixed fee flight arrangements. Our developed nation-wide route network, pricing philosophy, direct distribution, award-winning loyalty programs, advertising, and product offerings built around relationships with premier leisure companies, are all intended to appeal to leisure travelers and make it attractive for them to purchase air travel and related services and products from us.
In connection with our leisure travel focus, we opened Sunseeker Resort Charlotte Harbor on December 15, 2023. The resort has 785 guestrooms (including suites) and 20 curated food and beverage outlets.
Below is a brief description of the travel services and products we provide to our airline customers:
Scheduled service air transportation. We provide scheduled air transportation on limited-frequency, nonstop flights predominantly between under-served cities and popular leisure destinations. As of February 1, 2024, our operating fleet consisted of 126 Airbus A320 series aircraft. As of that date, we were selling travel on 555 routes to 124 cities. Of these routes, 428 of them are unique routes which do not have any current nonstop competition. In this document, references to "Airbus A320 series aircraft" are intended to describe both Airbus A319 and A320 aircraft.
Ancillary air-related products and services. We provide unbundled air-related services and products in conjunction with air transportation for an additional cost to customers. These optional air-related services and products include baggage fees, advance seat assignments, our own travel protection product, change fees, use of our call center for purchases, priority boarding, a customer convenience fee, food and beverage purchases on board, and other air-related services. The revenue for ancillary air-related products and services is reflected in the passenger revenue income statement line item, along with scheduled service air transportation revenue and travel point redemptions from our co-brand Allegiant credit card and our non-card loyalty program.
Third party products and services. We offer third party travel products such as hotel rooms and ground transportation (rental cars and hotel shuttle products) for sale to our passengers. The marketing component of revenue related to our co-brand credit card is also included in this category.
Fixed fee contract air transportation. We provide air transportation through fixed fee agreements and charter service on a year-round and ad-hoc basis.
Allegiant 2.0
We continue to sharpen our focus on offerings to meet more of the travel and leisure needs of our customers. We have coined this next stage of our Company strategy as "Allegiant 2.0" which includes the following Company goals:
•maintaining our foundation of providing affordably accessible all-nonstop air travel while refining and strengthening our air travel product;
•expanding our already broad domestic network as we have identified more than 1,400 incremental routes of which approximately 77 percent currently have no nonstop service;
•expanding our travel company focus and offerings with the operation of Sunseeker Resort at Charlotte Harbor (the "Resort" or "Sunseeker Resort");
•seeking to offer (subject to government approval) transborder international scheduled service to premier beach destinations in Mexico through our partnership with VivaAerobus;
•utilizing our customer data to capture accretive, asset-light direct-to-consumer revenue opportunities by offering vacation packages that include hotel stay and car rental;
•transforming our eCommerce strategy to create a frictionless experience for our customers and drive increased air ancillary and third party revenue generation;
•expanding our award-winning co-brand credit card program and our non-card loyalty program;
•maximizing return from our marketing investment dollars by entering into dynamic agreements, such as the naming rights agreement with the Raiders of the National Football League for Allegiant Stadium in Las Vegas
Our principal executive offices are located at 1201 N. Town Center Drive, Las Vegas, Nevada 89144. Our telephone number is (702) 851-7300. Our website address is http://www.allegiant.com. We have not incorporated by reference into this annual report the information on our website and investors should not consider it to be a part of this document. Our website address is included in this document for reference only. Our annual report, quarterly reports, current reports and amendments to those reports are
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made available free of charge through the investor relations section on our website as soon as reasonably practicable after electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).
Unique Business Model
We have developed a unique business model that primarily focuses on leisure travelers in under-served cities. The business model has evolved as our experienced management team has looked differently at the traditional way business has been conducted in the airline and travel industries. Our focus on the leisure customer allows us to eliminate the significant costs associated with serving a wide variety of customers and to concentrate our product appeal on a customer base which is under-served by traditional airlines. We have consciously developed a business model which distinguishes us from the traditional airline approach:
| Traditional Airline Approach | Allegiant Approach | |||||||||||||
| Customer Base: | Business and leisure | Leisure | ||||||||||||
| Network: | Primarily large and mid-sized markets | Primarily small/medium-sized under-served markets | ||||||||||||
| Flight Connections: | Nonstop or connect through hubs | All nonstop | ||||||||||||
| Competition: | High | Low | ||||||||||||
| Schedule: | Uniform throughout the week | Low frequency/variable capacity | ||||||||||||
| Distribution: | Sell through various intermediaries | Sell only directly to travelers | ||||||||||||
| Fare Strategy: | High base fares/low ancillary revenue | Low base fares/high ancillary revenue | ||||||||||||
By separating base airfare from our air-related services and products such as baggage fees, advance seat assignments, travel protection, change fees, priority boarding, and food and beverage purchases, we are able to lower our airfares and target leisure travelers who are more concerned with price and the ability to customize their experience with us by only purchasing the additional conveniences they value. This strategy allows us to generate additional passenger revenues from our customers' decisions to purchase these ancillary products.
We have established a broad route network with a national footprint. As of February 1, 2024, we serve 543 active routes between 90 origination cities and 33 leisure destinations in 42 states, and as of that date, we had announced 12 new routes scheduled to begin service in 2024. In most of these cities, we provide service to more than one of our leisure destinations which are offered either on a year-round or seasonal basis. Our vast network footprint, coupled with our low frequency scheduling, provides us with a diversified, resilient network. We operate to more cities than any non-legacy U.S. carrier, protecting us against overexposure to any one geographic location. Our 24 bases spread throughout the country provide us the flexibility to redeploy capacity to best match demand trends around the country.
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The geographic diversity of our route network protects us from regional variations in the economy and helps insulate us from competitive actions, as it would be difficult for a competitor to materially impact our business by targeting one city or region. Our widespread route network also contributes to the continued growth of our customer base. The below map illustrates our route network as of February 1, 2024, including service announcements as of that date. The orange dots represent leisure destinations and the blue dots represent origination cities.
We have identified more than 1,400 additional domestic routes which we could target in the future to further expand our network.
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In developing a unique business model, our ancillary offerings (ancillary air-related items included in passenger revenue as well as the sale of third party products and services) have been a significant source of our revenue growth. We have increased revenue related to these ancillary items from $5.87 per passenger in 2004 to $72.90 per passenger in 2023. We own and manage our own eCommerce platform, which gives us the ability to modify our system to enhance third party product offerings based on specific needs. We believe the control of our automation systems has allowed us to be innovators in the industry by providing our customers with a variety of different travel services and products, and allowing us to seek to increase revenues through testing of alternative revenue management approaches.
We believe the following strengths from our unique business model allow us to maintain a competitive advantage in the markets we serve:
Focus on leisure traffic from under-served cities
We believe small and medium-sized cities represent a large, under-served market, especially for leisure travel. Prior to the initiation of our service, leisure travelers from these markets had limited desirable options to reach leisure destinations because existing carriers are generally focused on connecting business customers through their hub-and-spoke networks.
We believe our low fare, nonstop service, along with our leisure company relationships, make it attractive for leisure travelers to purchase airfare and travel-related products from us. The size of the markets we serve, and our focus on the leisure customer, allow us to adequately serve these markets with less frequency, and to vary our air transportation capacity to match seasonal and day-of-the-week demand patterns.
By focusing primarily on under-served cities and routes, we believe we avoid the intense competition in high traffic domestic air corridors. In most of our markets, travelers previously faced high airfares and cumbersome connections, or long drives, to major airports in order to reach our leisure destinations. Based on published data from the U.S. Department of Transportation (“DOT”), we believe the initiation of our service stimulates demand, as we have typically seen a substantial increase in traffic subsequent to new service beginning. Our market strategy is neither hostile to legacy carriers, whose historical focus has been connecting small cities to business markets with regional jets, nor to traditional low cost or ultra-low cost carriers generally focused on larger markets. Additionally, major carriers have reduced service to medium-sized cities which we believe they no longer consider to be core hubs.
Capacity management
We actively manage our seat capacity to match leisure demand patterns. This is enabled by our highly variable cost structure which allows us to increase capacity in high demand periods. This has resulted in our being able to generate a disporportionate portion of our operating income in the peak periods including March, summer (June and July) and the holiday seasons.
Our core business model manages seat capacity by increased utilization of our aircraft during periods of high leisure demand and decreased utilization in low leisure demand periods. By way of illustration, in 2023, during our peak demand period in July, we averaged 7.4 system block hours per aircraft per day while in September, our lowest month for demand, we averaged only 4.5 system block hours per aircraft per day, which is almost 40 percent less than the average system block hours in July.
Our management of seat capacity also includes changes in weekly frequency of certain markets based on identified peak and off-peak travel demand throughout the year. Unlike other carriers which typically provide a fairly consistent number of flights every day of the week, we manage our capacity with a goal of being profitable on each route. We do this by flying only on days with sufficient market demand. In 2023, we were able to profitably fly a disproportionately low 11 percent of our scheduled ASMs on off-peak days (Tuesdays and Wednesdays).
To effectively hedge against fuel cost increases, during periods of high fuel cost we will often pull back capacity, particularly in off peak periods, and focus our flying in peak periods which drives higher fares to offset the fuel cost increases. Conversely, during periods of lower fuel costs, we will increase flying in off peak periods as marginally profitable flights will become more profitable with lower fuel costs.
Our strong revenue production from ancillary items, coupled with our ability to rapidly adjust capacity, has allowed us to consistently operate profitably and in many cases, produce among the industry leading margins in challenging macro environments, including periods of high fuel prices, economic recession and a pandemic.
Low cost structure
We believe a low cost structure is essential to competitive success in the airline industry, particularly as a solely leisure focused carrier. In evaluating our cost performance, our management team typically compares to the following other publicly held domestic airlines: Delta Air Lines, American Airlines, United Airlines, Southwest Airlines, JetBlue Airways, Alaska Airlines, Hawaiian Airlines, Spirit Airlines, Frontier Airlines and Sun Country Airlines (which we refer to as the "Industry"). Our airline operating CASM, excluding fuel, special charges, and Sunseeker Resort) was 8.12 ¢ in 2023, which we believe is significantly lower than the Industry average.
We continue to focus on maintaining low operating costs through the following tactics and strategies:
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Low aircraft ownership costs. We achieve low aircraft ownership costs by opportunistically acquiring aircraft and by primarily owning our aircraft. As of February 1, 2024, we own or finance lease all but 17 of the aircraft in our operating fleet. In addition, we believe that we properly balance lower aircraft acquisition costs and operating costs to minimize our total costs.
Throughout our history, we have primarily purchased used aircraft with meaningful remaining useful lives, at reduced prices. As of February 1, 2024, our operating fleet consists of 126 Airbus A320 series aircraft, of which 113 were acquired used and 13 were acquired new.
In December 2021, we opportunistically negotiated an agreement with The Boeing Company to purchase 50 newly manufactured 737MAX aircraft with options to purchase additional 737MAX aircraft. We amended this agreement in 2023 with revised terms that now provide us with options to purchase up to an additional 80 737MAX aircraft. Under our contract with Boeing, deliveries of the initial 50 aircraft are expected between 2024 and 2025, but will likely be impacted by recent events affecting Boeing quality assurance and the certification process for the 737MAX-7 aircraft. See Item 1A – Risk Factors - "Regulatory review of Boeing's operations could delay its production schedule, which could impact us as any delivery delays may result in lower profitability than expected and delayed growth as well as bad publicity and other consequences." We believe this new aircraft purchase will be complementary with our low cost strategy. Our intent to retain ownership of the aircraft, coupled with the longer useful life for depreciation purposes should result in similar ownership expense when compared with a used aircraft in our fleet. In addition, the expected fuel savings, improved operational reliability, and other savings expected from the use of these new aircraft should aid in improving our overall low cost structure, and the lower cost of operating this aircraft is expected to allow us to profitably add new service or routes.
We expect to continue to acquire used aircraft as necessary to support planned growth and aircraft retirements.
Low distribution costs. Our nontraditional marketing approach reduces distribution costs. We do not sell our product through outside sales channels, thus avoiding the fees charged by travel websites (Expedia, Orbitz or Travelocity) and traditional global distribution systems (“GDS”) (Sabre or Worldspan). Our customers can only purchase air travel at our airport ticket counters or, for a fee, on our website or through our telephone reservation center. The purchase of air travel through our website is the least expensive form of distribution for us and accounted for 95.8 percent of our scheduled service revenue during 2023.
Data driven. As an organization, we strive to always use data to make informed, fact-based decisions. We are continuing to focus on capturing data to identify trends and patterns in an effort to gain efficiencies and decrease costs. For example, we utilize predictive maintenance to identify necessary aircraft maintenance before a problem arises, thereby avoiding unscheduled maintenance events which are costly and disruptive to our schedule. In addition, our direct to consumer distribution method results in enhanced data which helps us deepen our relationship with our customers and increase sales.
Simple product. We believe offering a simple product is critical to achieving low operating costs. As such, we sell only nonstop flights; we do not currently code-share or interline with other carriers; we have a single class cabin; we do not provide any free catered items - everything on board is for sale; we do not provide cargo or mail services; and we do not offer other perks such as airport lounges.
Under-served market airports. Our business model focuses on residents of under-served cities in the United States. Typically, the airports in these cities have lower operating costs than airports in larger cities. These lower costs are driven by less expensive passenger facilities, landing, and ground service charges. In addition to inexpensive airport costs, many of our airports provide marketing support.
Cost-driven schedule. We aim to build our scheduled service so that substantially all of our crews and aircraft return to base each night. This allows us to maximize crew efficiency, and more cost-effectively manage maintenance, spare aircraft and spare parts. Additionally, this structure allows us to add or subtract markets served by a base without incremental costs. We believe leisure travelers are generally less concerned about departure and arrival times than business travelers, so we are able to schedule flights at times that enable us to reduce costs while remaining desirable to our leisure customers.
Ancillary product offerings
We believe leisure travelers are generally more price-sensitive than other travelers. As such, we offer the unbundling of the air transportation product by charging fees for services many U.S. airlines have historically only bundled in their base fare. This pricing structure allows us to target travelers who are most concerned with low fare travel while also allowing travelers to customize their experience with us by purchasing only the additional conveniences they value. For example, we do not offer complimentary advance seat assignments; however, customers who value this product can purchase advance seat assignments for a small incremental cost. In addition, snacks and beverages are sold individually on the aircraft, allowing passengers to purchase only items they value. Our direct to consumer distribution method enables a variety of added revenue opportunities with direct “one-stop” shopping solutions and managed product offerings.
We offer various bundled ancillary products whereby customers can elect to purchase multiple ancillary products at a discount.
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Revenue from ancillary items will continue to be a key component in our total average fare as we believe leisure travelers are less sensitive to ancillary fees than the base fare.
Our third party product offerings give our customers the opportunity to purchase hotel rooms, rental cars and airport shuttle service. Our third party offerings are available to customers based on our agreements with various travel and leisure companies. For example, we have partnered exclusively with Enterprise Holdings Inc. for the sale of rental cars packaged with air travel. The pricing of each product and our margin can be adjusted based on customer demand because our customers purchase travel directly through our booking engine.
Financial position
As of December 31, 2023, we had $870.7 million of unrestricted cash, cash equivalents and investment securities, and total debt and finance lease obligations (net of related costs) of $2.26 billion. We had net debt (total debt and finance lease obligations less cash, cash equivalents and investment securities) of $1.39 billion as of December 31, 2023. As of February 1, 2024, we have $275.0 million of undrawn capacity under revolving credit facilities plus another $25.1 million of undrawn capacity under our PDP (pre-delivery payments) facilities.
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Routes and schedules
Our current scheduled air service (including seasonal service) predominantly consists of limited frequency, nonstop flights into leisure destinations from under-served cities across the continental United States. The scheduled service routes as of February 1, 2024 are summarized below (includes 543 active routes, and 12 newly announced routes as of February 1, 2024, which will begin service in 2024):
Routes to Orlando (MCO & SFB) | 72 | |||||||
| Routes to Las Vegas | 61 | |||||||
| Routes to Tampa/St. Petersburg | 59 | |||||||
| Routes to Punta Gorda | 49 | |||||||
Routes to Phoenix (AZA & PHX) | 46 | |||||||
| Routes to Destin | 31 | |||||||
| Routes to Sarasota | 26 | |||||||
| Other routes | 211 | |||||||
| Total routes | 555 | |||||||
The number of routes served varies from time to time as some routes are offered seasonally or on a temporary basis.
Marketing and Distribution
Core to Allegiant’s business model is our direct-to-customer distribution. In lieu of the Global Distribution System (GDS) distribution points used by most airlines, allegiant.com is our primary distribution method. This low-cost strategy results in significant cost savings by avoiding fees associated with GDS. It also enables a variety of added revenue opportunities with direct “one-stop” shopping solutions and managed product offerings.
Automation is key to this strategy as we continue to enhance our capabilities. Our website and mobile app streamline the booking process and strengthen our ability to sell air ancillary and third-party products. Additionally, we expect other automation enhancements will create additional revenue opportunities by allowing us to capitalize on customer loyalty with additional product offerings.
Our direct-to-customer distribution method also enables us to gather valuable customer data. In addition to helping us better understand our customers, we utilize data such as customer email to market our products and services in a cost-effective way. Database marketing opportunities span the full customer journey including the time of travel purchase, between purchase and travel, and after travel is complete. To this end, we are working to strengthen customer engagement, while affording a more elastic, reliable information technology infrastructure with significant development advantages for marketing as well as for other business units across the company.
Beyond allegiant.com, we market our products and services through a combination of traditional advertising, including radio, television as well as digital advertising. Enhanced data and analytics are being streamlined into our digital advertising system to build more targeted campaigns driving efficiency in our digital media spend. We can more surgically match our digital advertising dollars and the impressions they drive with the web users who are most likely to book their travel for the routes, to better optimize load and yield.
Whether introducing new service to a community or promoting existing routes, our advertising is often supported by cooperative marketing funding from airport authorities and destination marketing organizations. We continue to see benefit from these cooperative marketing campaigns, as well as from high-profile sponsorships like Allegiant Stadium. Underpinning our advertising efforts, high-profile sponsorships add credibility to our brand, drive new customer acquisition and enhance our national profile.
Our co-brand credit card incentivizes customers who fly more often to maximize their benefits with members-only promotions and travel perks like complimentary priority boarding. Cardholders are among our most engaged customers and book air ancillary and third-party products at a higher rate than other customers. As of December 31, 2023, we had more than 485 thousand co-brand cardholders. For five years in a row, Allegiant's co-brand credit card has been voted as the No. 1 Best Airline Credit Card and our non-card loyalty program Allways Rewards® was recently rated as the number two Best Frequent Flyer Program in USA Today's 10 Best Loyalty/Rewards Readers' Choice Awards. Allways Rewards®, with more than 17 million members at December 31, 2023, allows us to develop and maintain direct, long-term relationships with our customers. Similar to our cardholder program, we provide greater value to our Allways members through personalized promotions and targeted communications which we expect will result in customer loyalty and increased revenues over time.
We believe our co-brand credit card and non-card loyalty program may be particularly attractive to our customers in the small to mid-sized cities served by us as there are few other airlines that operate service from those cities and as a result, our loyalty programs offer rewards these customers may highly value. In addition, our co-brand credit card is designed for the less frequent leisure traveler, with status benefits – such as priority check-in, priority boarding and a free drink onboard – from day one of having the card.
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Competition
The airline industry is highly competitive. Passenger demand and fare levels have historically been influenced by, among other things, the general state of the economy, international events, fuel prices, industry capacity, and pricing actions taken by other airlines. The principal competitive factors in the airline industry are price, nonstop flights, schedule, customer service, routes served, types of aircraft, safety record and reputation, code-sharing relationships, and frequent flyer or loyalty programs.
Our competitors include legacy airlines, low cost carriers ("LCCs"), ultra-low cost carriers ("ULCC"), regional airlines, new entrant airlines, and to a much lesser extent, other forms of transportation. The legacy airlines are larger, have significantly greater financial resources, are better known, and have more established reputations than us. In a limited number of cases, following our entry into a market, competitors have chosen to add service, reduce their fares, or both. Competitors may also choose to enter after we have developed a market.
We believe our under-served city strategy and less than daily service has reduced the intensity of competition we might otherwise face. As of February 1, 2024, we are the only mainline domestic scheduled carrier operating out of the Orlando Sanford International Airport and at 12 other airports in our network. We and Sun Country Airlines are the only mainline domestic scheduled carriers serving Phoenix Mesa Gateway Airport, Punta Gorda Airport, and St. Petersburg-Clearwater International Airport. Although no other mainline domestic scheduled carriers operate in these airports, most U.S. airlines serve the major airport for Orlando, Phoenix, Fort Myers, and Tampa. In addition, many U.S. airlines serve our other leisure destinations. As a result, there is potential for increased competition on our routes.
As of December 31, 2023, we face mainline non-stop competition on approximately 23 percent of our operating and announced routes. We overlap with Southwest Airlines on 77 routes, Spirit Airlines on 34 routes, Frontier Airlines on 33 routes, American Airlines on 17 routes, Breeze Airways on 17 routes, Delta Airlines on 16 routes, United Airlines on nine routes, JetBlue Airways on seven routes, Sun Country Airlines on five routes and Alaska Airlines on three routes. In many cases, we face competition from more than one other airline on the same route, resulting in a total of 127 competitive routes as of that date and 428 routes with no current nonstop competition. We may also experience additional competition based on recent route announcements of other airlines.
Indirectly, we compete with various carriers that provide nonstop service to our leisure destinations from airports near our cities. We also face indirect competition from legacy carriers offering hub-and-spoke connecting flights to our markets, although these fares tend to be substantially higher, with much longer elapsed travel times. Several airlines also offer competitive one-stop service from the cities we serve.
In our fixed fee operations, we compete with other scheduled airlines in addition to independent passenger charter airlines. We also compete with aircraft owned or controlled by large tour companies. The basis of competition in the fixed fee market is cost, equipment capabilities, service, reputation, and schedule flexibility.
Environmental, Social and Governance (ESG)
As an integrated travel company with an expanding airline business, we believe that solidifying our commitment to ESG efforts is a natural integration into our long-term corporate strategy and will enable us to better serve our stakeholders. In 2022, we entered a 3-year partnership with Schneider Electric to develop a comprehensive ESG program including:
•Identify and prioritize relevant ESG topics through a materiality assessment. These topics are included in our ESG reports.
•Publish ESG reports referencing the Global Reporting Initiative (GRI).
•Provide ongoing carbon emissions reporting of Scope 1, 2 and 3 greenhouse gas (GHG) emissions.
•Establish ESG targets and environmental target achievement plans, which we published in our 2022 ESG report.
In 2023, we issued our second annual ESG report. This comprehensive report outlines our disclosures pertaining to material topics identified by key stakeholders and establishes the following ESG Goals:
•Environmental: Emissions - Reduce tank-to-wake GHG emissions by 10 percent per revenue ton kilometer (RTK) by the end of 2030 from 2023 base year.
•Social: (1) Safety - Earn the IATA Operational Safety Audit (IOSA) certification by the end of 2026. (2) Diversity and Inclusion - Over the years, we have attracted and cultivated top talent that has led to our ability to consistently achieve industry-leading financial metrics. We will continue to hire, develop and support the best team members by fostering a transparent, diverse and inclusive company culture.
•Governance: (1) Customer Engagement - Maintain a controllable completion of at least 99.5 percent annually. (2) Procurement - Adopt a responsible sourcing policy and embed the policy into existing governance and procurement management systems by the end of 2025
To determine material topics, a materiality assessment was conducted. This assessment benchmarked material ESG topics across our industry, global reporting frameworks and third-party rating and ranking methodologies. We then engaged with more than 400 stakeholders including customers, employees, suppliers, shareholders and community partners. Based on survey and interview results, we identified the following topics as material to Allegiant:
•Environmental - Emissions, Energy, Waste and Hazardous Materials
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•Social - Product Quality and Safety, Accident and Safety Management, Human Rights, Benefits and Work-Life Balance, Non-Discrimination, Employee Health and Safety, Employment, Diversity, Equity and Inclusion, Employee Training and Development, Labor Management, Local Job Creation
•Governance - Business Ethics and Integrity, Anti-Corruption, Competitive Behavior, Data Security, Customer Privacy
These material topics will continue to guide the development of our annual ESG reports.
In addition, we made recent investments in several ESG areas that will enable us to build a more resilient business, drive greater efficiencies and give back to our communities. These include the following:
Environmental: Agreed to purchase 50 Boeing 737MAX aircraft, which are expected to burn up to 20 percent less fuel on a per passenger basis compared to certain of the older Airbus A320 Series aircraft in our fleet, with the option to purchase an additional 80 Boeing 737MAX aircraft.
Social: Provided in-kind travel for Make-A-Wish kids and their families, including our 2000th wish kid in the beginning of 2023. Continued offering free office space in our Las Vegas headquarters to the Make-A-Wish Southern Nevada Chapter. Pledged $1.0 million to Boys & Girls Clubs of America as discussed under "Community Involvement" below. Gifted over $40,000 of flight vouchers to local elementary and high school teachers in partnership with The Smith Center for the Performing Arts’ The Heart of Education Awards program.
Governance: In 2022, we began efforts to implement multiple systems – including SAP Ariba, Trax and Fuel Plus – to manage and enhance our supply chain. All three systems are procurement platforms that will enable better tracking of our supplier spend
and demographics to help us account for the items or services we procure. In 2023, we launched SAP Ariba and Fuel Plus for enterprise-wide use. We expect to launch Trax in 2024.
Environment
The aviation industry accounts for roughly two percent of global greenhouse gas emissions, almost all of which is attributable to aircraft fuel. Back in 2013, we began the process of transitioning our fleet from a mixture of MD-80 aircraft and Boeing 757 aircraft to an all-Airbus fleet with the transition concluding in November 2018. During this period, we saw significant improvement in fuel efficiency. During 2023, we consumed 225 million gallons of fuel averaging 83.4 ASMs per gallon of fuel, a 32 percent improvement when compared to 2012. Our agreement with Boeing and CFM International to purchase 50 Boeing 737 MAX aircraft powered by LEAP 1-B engines, with deliveries beginning in 2024, will provide us with new aircraft and more environmentally friendly engines. This aircraft is expected to burn up to 20 percent less fuel on a per passenger basis as compared to certain of the older Airbus A320 aircraft in our fleet.
As of December 31, 2023, the composition of our fleet included a mix of A319 and A320 aircraft with seat configurations ranging from 156 to 186 seats, some of which are fitted with fuel-efficient Sharklets. We expect to see further fuel efficiency once the 737 MAX aircraft are added to our fleet.
Despite the significant fuel efficiencies gained over the past decade, we recognize we have a responsibility to do more, and one of our ESG goals is to reduce emissions through the end of this decade. We have an internal Fuel Steering Committee that meets monthly to discuss various alternatives to conserve fuel. Building on the dedicated efforts and teamwork of our pilots, dispatchers, and station personnel, we are actively advancing our fuel conservation practices across all flights, which include the following:
•Single engine taxi in and out, as time permits
•Constant descent angle approach, as permitted by air traffic
•Flaps 3 for landing, an Airbus green procedure creating less drag during the landing process, conditions permitting
•Idle thrust reverse for landing, conditions permitting
•Auxiliary power unit fuel optimization
•Route optimization
•Data collection by aircraft to identify performance deterioration and rectify where necessary
•Optimization of the amount of contingency and dispatch fuel
•Deployment of process to find optimal winds aloft while inflight
In addition to the initiatives above, we are currently assessing sustainable aviation fuels as part of our sustainability strategy for reaching our emissions intensity reduction goal by the end of 2030 and offsetting requirements under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
Unlike many air carriers focused on business travel, our strategy is to provide access to affordable travel for leisure travelers who highly value their vacations and are likely to take vacations in any economic environment. We are a low utilization air carrier focusing on leisure travel. We seek to closely match our available capacity with demand trends in providing only nonstop service from under-served cities to leisure destinations. For example, in 2023 during our peak demand period in July, we averaged 7.4 system block hours per aircraft per day while in September, we averaged only 4.5 system block hours per aircraft per day when leisure demand is seasonally lower. This practice of significantly reduced flying during the off-peak periods leads to consistently high load factors, and further enhances fuel efficiency. We offer all nonstop flights, directly from 123 cities as of February 1, 2024, providing service in many markets abandoned or under-served by larger carriers. If not for Allegiant, many of the customers we serve would not have access to direct flights by virtue of either geography or price point. Prior to our initiation of service on these routes, many of these passengers either traveled by car, which is significantly less fuel efficient than air travel, or traveled by car to larger airports to fly, where higher cost connecting flights were the only option. As fuel consumption is greatest during take-off,
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the ability to travel to the destination with a single take-off, as opposed to at least two take-offs on connecting flights, is more fuel efficient.
Aircraft Fuel
The cost of fuel is volatile, as it is subject to many economic and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could materially affect our operating results and profitability. We do not use financial derivative products to hedge our exposure to fuel price volatility, nor do we have any plans to do so in the future. Our largely variable cost structure allows us to adjust capacity accordingly based on the fuel environment.
Data Security
We continue to invest heavily in cybersecurity, cyber risk, vendor risk, and privacy initiatives. We employ experienced staff dedicated to cybersecurity and cyber risk analysis, process, and technology. We continue to evaluate and proactively implement new preventive and detective processes and technologies including forward looking threat intelligence and data centric security measures.
One of our current and ongoing data security initiatives is the migration of critical business applications into the cloud infrastructure, which will allow us to take advantage of analytics and automation functionality. These improvements also provide further opportunities to increase business intelligence and flexibility, improve business continuity, and mitigate disaster scenarios. Protecting business data and our customers’ privacy is critical to our continued operations and we intend to continue investing resources in cyber security accordingly.
For further information on our cybersecurity practices, see Item 1C - Cybersecurity.
Employees
As of December 31, 2023, the airline employed 5,643 full-time equivalent employees. Full-time equivalent employees consisted of approximately 1,200 pilots, 1,550 flight attendants, 650 airport operations personnel, 750 maintenance personnel, 200 reservation agents, 50 flight dispatchers, and 1,200 management and other personnel. Additionally, we employed 1,043 full-time equivalent employees at our newly opened Sunseeker Resort as of the same date.
Four groups of our employees – pilots, flight attendants, dispatchers, and maintenance technicians – are represented by labor organizations pursuant to the Railway Labor Act (“RLA”). Those unions have negotiated separate collective bargaining agreements (“CBAs”) with us covering the rates of pay, rules, and working conditions that apply to those employees.
The CBAs covering our dispatchers and maintenance technicians do not become amendable until 2026 and 2028, respectively. The CBAs covering our pilots and flight attendants became amendable in 2021 and 2022, respectively, and we are currently engaged in collective bargaining with the respective representatives of those employees for successor agreements.
Under the RLA, if direct negotiations do not result in an agreement, either party may request the National Mediation Board ("NMB") to appoint a federal mediator to assist the parties with their negotiations. If no agreement is reached in these mediated discussions, the NMB must proffer binding arbitration to the parties. If either party rejects binding arbitration, the RLA imposes a “cooling off” period and allows for the President of the United States to create an emergency board to investigate the dispute and issue recommendations for reaching a settlement. Only after this process has been exhausted may either party resort to self-help, such as a work stoppage by the union and its members.
In 2023, we and the union that represents our pilots jointly requested the appointment of a mediator through the NMB. The NMB has appointed a mediator and the parties continue to participate in mediated negotiations.
In May 2023, we reached a tentative agreement with the union representing our flight attendants, but the proposed agreement was rejected by this work group. The parties have now resumed negotiations on the terms of a new contract.
To date, we have not experienced any work interruptions or stoppages from our non-unionized or unionized employee groups.
System Implementations
Beginning in 2021, we have made significant investments to replace certain core proprietary systems with more advanced and integrated third party software solutions. We have selected SAP as our accounting system, Trax as our Maintenance, Repair, and Overhaul (MRO) system, and Navitaire as our passenger service system. We are transitioning to new systems in other areas as well.
SAP's accounting system is expected to simplify our financial operations, enabling real-time data access and improved financial reporting. Trax's MRO system is expected to provide enhanced maintenance, repair, and overhaul operations, streamlining aircraft maintenance schedules and reducing associated costs. Navitaire’ s passenger service system is expected to improve the way the airline manages customer interactions, reservations, and allows for dynamically priced ancillary products. Navitaire is also expected to facilitate the initiation and operation of our planned joint alliance with VivaAerobus. We successfully switched over to SAP and Navitaire in 2023, with the Trax cutover projected in 2024.
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Human Capital
As part of our human capital resource objectives, we seek to recruit, retain, and develop our existing and future workforce. We strive to build and maintain a diverse environment that people want to join, and where team members want to stay to build their careers. Our total rewards philosophies support these objectives. Above all else, safety is our number one core value, along with achievement, flexibility, innovation, bias for action, teamwork, transparency and accountability, and outcome-based values that define our human capital mission.
We have long supported Diversity, Equity and Inclusion and operate a Diversity & Inclusivity Council made up of company leadership, and facilitate more than ten company-wide network groups to inspire a more inclusive culture while giving a dedicated focus to our recruiting processes to continue driving diverse hiring.
Our total rewards philosophy is based around building a culture of high performance. We utilize competitive base salaries, discretionary performance-based bonuses, spot rewards, profit sharing, and equity as attraction and retention tools for our team members.
As of December 31, 2023, the airline had approximately 6,060 team members (including both full-time and part-time employees), of whom approximately 73 percent are in front line positions such as flight crew, mechanics or airport personnel. Additionally, we had over 1,100 full-time and part-time newly added Sunseeker Resort employees as of same date.
The safety and well-being of our team members is a top priority, and we believe each and every team member plays an essential role in creating a safe and healthy workplace. Our health and safety policies and practices are intended to protect not only our team members, but also our customers in all things we do.
Our human capital focus has been externally recognized through Allegiant’s placement on Newsweek's America's Greatest Workplaces for Diversity 2024 and Most Responsible Companies 2024. In addition, we received recognition in 2023 from VETS Indexes as a 4-Star Employer for Military hiring, Yello's Top 100 Internship Programs, and honored among Newsweek's America's Greatest Workplaces, Greatest Workplaces for Diversity, and Greatest Workplaces for Women, all for 2023. We were also recognized in 2023 as one of Forbes Best Mid-Size Employers and Fortune's Most Innovative Companies.
Community Involvement
We have worked with the Make-A-Wish® Foundation since 2012 by flying "wish kids" and their families to their desired destinations, at no cost, and donating a portion of proceeds from our in-flight Wingz Kids Snack Pack to the organization. To kick off 2023, we celebrated a special milestone welcoming our 2000th wish kid on board an Allegiant flight. This in-kind flight program provides Make-A-Wish with a valuable service at no cost to the organization or the wish families. Additionally, we donate the use of 7,500 square feet of office space at our headquarters campus to the Southern Nevada chapter of Make-A-Wish, providing a home for the nonprofit organization's administrative office at no cost. The site also serves as the host location for volunteer training, meetings and a place of support for families of children receiving wishes. We are considered a Wish Champion by Make-A-Wish America, recognizing more than $1 million in annual contributions.
In May 2023, we pledged $1 million to Boys & Girls Clubs of America to develop and launch a new program seeking to inspire children to choose future careers in aviation. The gift also includes a fundraising campaign to match donations made by individuals who make a new monthly pledge or increase their current amount. The program launched with a tour of our West Coast training center and allowed Club youth to fly an Airbus simulator, learn about the features of an aircraft and ask pilots about their careers.
We have also been a national partner with The Arc, a nonprofit organization dedicated to advocacy on behalf of people with intellectual and developmental disabilities. We partner with the organization to offer “Wings for All” educational programs in communities we serve, helping make travel accessible for individuals with autism and other developmental disabilities.
We support Science, Technology, Engineering and Mathematics ("STEM") education programs that provide access to careers in aeronautical sciences in under-served communities. We have partnered with local high schools and with Embry-Riddle Aeronautical University to offer Allegiant Careers in Aviation Scholarships, assisting students pursuing careers in the aviation industry.
We also partner with the American Red Cross, supporting disaster preparedness, relief and recovery efforts in communities we serve. In this effort, we have provided no-cost supply flights and volunteer transport to support Red Cross hurricane recovery efforts in Florida and Puerto Rico in recent years. In the wake of Hurricane Ian in 2022, we made a $100,000 donation to the organization to help restore critical resources in the community and we sponsored a month-long nationwide blood drive to further support relief efforts.
Periodically, we provide additional support in our home community of Las Vegas, donating surplus in-flight food and beverage items such as juices, sodas and snacks to a local community food bank for distribution to families in need. We also provide $40,000 worth of flight vouchers on an annual basis to hundreds of local elementary and high school teachers as part of The Smith Center for the Performing Arts’ Heart of Education Awards program.
Aircraft Maintenance
We have a Federal Aviation Administration ("FAA") approved maintenance program, which is administered by our maintenance department headquartered in Las Vegas. Technicians employed by us have appropriate experience and hold required licenses
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issued by the FAA. We provide them with comprehensive training and maintain our aircraft in accordance with FAA regulations. The maintenance performed on our aircraft can be divided into three general categories: line maintenance, major maintenance, and component and engine overhaul and repair. Line maintenance is generally performed by our personnel in certain cities of our network and by contractors elsewhere. We contract with FAA-approved outside organizations to provide major maintenance and component and engine overhaul and repair. We have chosen not to invest in facilities or equipment to perform our own major maintenance, engine overhaul or component work. Our management supervises all maintenance functions performed by our personnel and contractors employed by us, and by outside organizations.
VivaAerobus Alliance
In December 2021, we announced plans for a fully-integrated commercial alliance agreement with VivaAerobus, designed to expand options for nonstop leisure air travel between our markets in the United States and Mexico. We and VivaAerobus have submitted a joint application to the DOT requesting approval of and antitrust immunity for the alliance. We believe this alliance is consistent with the DOT's goal of providing maximum benefits to the public, as the alliance is expected to increase competition, reduce transborder fares and provide increased nonstop service for our consumers traveling between the U.S. and Mexico.
The alliance is anticipated to add new transborder routes and nonstop competition where currently only connecting service is available. More than 250 new potential nonstop route opportunities have been identified as part of the DOT application, though specific routes targeted for service wilI be announced at a later date, following the application's approval. We and VivaAerobus expect to offer flights under the alliance after governmental approval of the applications. The DOT process has progressed substantially, but review is currently suspended pending the outcome of diplomatic engagement on broader treaty issues.
In addition, we have made an investment of $50.0 million in VivaAerobus.
Non-Airline Initiatives
Sunseeker Resort
Sunseeker Resort at Charlotte Harbor opened in December 2023, culminating a multi-year vision of the company. In 2017, we purchased more than 20 acres of land to build the Resort and announced our initial plans for the Resort. We then hired experienced industry executives in 2018 and 2019 to plan for the operation of the Resort. Construction began in March 2019.
Construction was delayed as a result of the pandemic, supply chain difficulties and then Hurricane Ian in 2022 and Hurricane Idalia in 2023. Damage from the storms and other insured events exceeded $78 million and a portion of the insurance claims remains outstanding.
Construction was substantially completed in December 2023, and the Resort opened. Certain assets did not open to the public from the beginning as two restaurants, one of the suite towers, the rooftop pool and certain retail establishments did not open until first quarter 2024.
The Resort consists of more than 500 hotel rooms, 189 one-, two- and three-bedroom suites with full kitchens and washer-dryers, 20 restaurants, including seven stand-alone restaurants, a food hall with 11 food and beverage concepts and two other poolside options. The two-bedroom suites can be separately locked allowing for up to 785 keys on the property.
The Resort has 60,000 square feet of convention and meeting space which can accommodate up to 1,200 attendees. The convention area includes innovative technology and features two waterfront ballrooms. Accompanying the ballrooms are two executive boardrooms, 12 meeting rooms, and an ideation suite with separate breakout rooms. We are actively selling to groups. During the 2024 period ended February 15, 2024, we have hosted 16 groups.
The Resort also offers a state-of-the-art 7,100-square-foot fitness center and a full-service spa and salon as well as two pools including a 21,000-square-foot rooftop facility and a 117,000-square-foot ground-level experience.
In addition, the Aileron Golf Course is within a short distance from the Resort. The golf course was renovated simultaneously with the construction of the Resort and features a more than 7,000-yard championship course. The golf course is available only to guests at Sunseeker and through limited memberships. The clubhouse was renovated at the same time and the 10,800 square foot facility offers a restaurant, bar, pro shop and event facilities.
During the construction of our Sunseeker Resort in Charlotte Harbor, Florida, we implemented design features and strategies to promote environmental efficiency and resilience. We intend to keep ESG embedded within day-to-day operations and the guest experience.
As of February 1, 2024, the Resort and Aileron Golf Course employ more than 1,200 employees, making it one of the largest employers in Southwest Florida.
Other travel and leisure initiatives
Consistent with our travel and leisure company focus, we may pursue other travel and leisure initiatives from time to time in the future.
Insurance
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We maintain insurance policies we believe are of types customary in the airline industry and as required by the DOT, and are in amounts we believe to be adequate to protect us against material loss. The policies principally provide coverage for public liability, war-risk, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment, directors and officers insurance and workers’ compensation. We also maintain what we believe to be customary insurance on Sunseeker Resort and as required by the terms of our construction loan. There is no assurance, however, that the amount of insurance we carry will be sufficient to protect us from material loss in all cases. Available commercial insurance in the future could be more expensive, could have material differences in coverage than is currently provided, and may not be adequate to protect us from risk of loss.
Government Regulation
We are subject to federal, state and local laws affecting the airline industry and to extensive regulation by the DOT, the FAA, and other governmental agencies.
DOT. The DOT primarily regulates economic issues affecting air transportation such as certification and fitness of carriers, consumer protection, competitive practices, insurance requirements, and statistical reporting. The DOT also regulates requirements for accommodation of passengers with disabilities, including those using service animals. The DOT monitors the continuing fitness of carriers and has the authority to promulgate regulations and to investigate (including by on-site inspections) and institute proceedings to enforce its regulations and related federal statutes, and may assess civil penalties, suspend or revoke operating authority, and seek criminal sanctions. The DOT also has authority to restrict or prohibit a carrier’s cessation of service to certain communities if such cessation would leave the community without scheduled airline service.
In addition, the DOT has authority to approve alliance or partnership agreements under which two or more air carriers collaborate and to grant immunity from U.S. antitrust laws for the provision of such collaboration. In December 2021, we (i.e., our airline subsidiary) and Aeroenlaces Nacionales, S.A. de C.V. doing business as VivaAerobus (“Viva”), a Mexican airline, submitted to DOT a joint application requesting approval of and antitrust immunity for a comprehensive alliance agreement applicable to all routes we and/or Viva may operate between points in the United States and points in Mexico. The joint application explains how the proposed Allegiant-Viva alliance is expected to benefit the traveling public (as well as Allegiant, Viva, and their respective employees) by bringing significant new competition and service options, including lower fares, additional capacity on existing routes, and increased overall transborder capacity in the form of nonstop flights on routes now served only via connecting service. Over a period of 20 months the DOT’s review and analysis progressed substantially, but on July 31, 2023, the DOT suspended processing of the joint application pending resolution of an aviation trade dispute between the governments of Mexico and the United States that arose earlier in 2023. The dispute remains unresolved and there is no assurance when or whether the DOT will ultimately approve the agreement and grant antitrust immunity.
We hold DOT certificates of public convenience and necessity authorizing us to engage in scheduled air transportation of passengers, property and mail within the United States, its territories and possessions, and between the United States and all countries that maintain a liberal aviation trade relationship with the United States (known as “open skies” countries). We also hold DOT authority to engage in scheduled air transportation of passengers, property and mail between the United States and Mexico. We hold DOT authority to engage in charter air transportation of passengers, property, and mail on a domestic and international basis.
FAA. The FAA primarily regulates flight operations and safety, including matters such as airworthiness and maintenance requirements for aircraft, pilot, mechanic, dispatcher and flight attendant training and certification, flight and duty time limitations, and air traffic control. The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. This certificate, in combination with operation specifications issued to the airline by the FAA, authorizes the airline to operate at specific airports using aircraft certificated by the FAA. We have and maintain in effect FAA certificates of airworthiness for all our aircraft, and we hold the necessary FAA authority to fly to all the cities we currently serve. Like all U.S. certificated carriers, our provision of scheduled service to certain destinations may require specific governmental authorization. The FAA has the authority to investigate all matters within its purview, to modify, suspend or revoke our authority to provide air transportation, to approve or disapprove the addition of aircraft to our operation specifications, and to modify, suspend or revoke FAA licenses issued to individual personnel, for failure to comply with FAA regulations. The FAA can assess civil penalties for such failures and institute proceedings for the collection of monetary fines after notice and hearing. The FAA also has authority to seek criminal sanctions. The FAA can suspend or revoke our authority to provide air transportation on an emergency basis, without notice and hearing, if, in the FAA’s judgment, safety requires such action. A legal right to an independent, expedited review of such FAA action exists. Emergency suspensions or revocations have been upheld with few exceptions. The FAA monitors our compliance with maintenance, flight operations and safety regulations on an ongoing basis, maintains a continuous working relationship with our operations and maintenance management personnel, and performs pre-scheduled inspections as well as frequent spot inspections of our aircraft, employees and records.
The FAA also has the authority to promulgate rules and regulations and issue maintenance directives and other mandatory orders relating to, among other things, inspection, repair and modification of aircraft and engines, safety management systems, aircraft equipment requirements, noise abatement, mandatory removal and replacement of aircraft parts and components, mandatory retirement of aircraft, operational requirements and procedures, and employee drug and alcohol testing. Such rules, regulations and directives are normally issued after an opportunity for public comment; however, they may be issued without advance notice or opportunity for comment if, in the FAA’s judgment, safety requires such action. We believe we are operating in compliance with applicable DOT and FAA regulations, interpretations and policies and we hold all necessary operating and airworthiness authorizations, certificates and licenses.
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The FAA periodically conducts extensive or targeted audits of our operations. We have satisfactorily responded to all findings on all Certificate Holder Evaluation Process and other inspections conducted.
Security. Within the United States, civil aviation security functions, including review and approval of the content and implementation of air carriers’ security programs, passenger and baggage screening, cargo security measures, airport security, assessment and distribution of intelligence, threat response, and security research and development are the responsibility of the Transportation Security Administration (“TSA”) of the Department of Homeland Security. The TSA has enforcement powers similar to the DOT’s and FAA’s described above. It also has the authority to issue regulations, including in cases of emergency, the authority to do so without advance notice, including issuance of a grounding order as occurred on September 11, 2001.
Aviation Taxes and Fees. The authority of the federal government to collect most types of aviation taxes, which are used, in part, to finance the nation’s airport and air traffic control systems, and the authority of the FAA to expend those funds must be periodically reauthorized by the U.S. Congress. A five-year reauthorization extending certain commercial aviation taxes (known generally as Federal Excise Taxes or "FET") expired September 30, 2023; a short-term extension is in effect through March 31, 2024. Legislation to reauthorize the FAA through September 30, 2028 is pending in the U.S. Congress. All carriers are required to collect these taxes from passengers and pass them through to the federal government. In addition to FET, there are federal fees related to services provided by the TSA, and, in the case of international flights, U.S. Customs and Border Protection ("CBP"), U.S. Citizenship and Immigration Services (“CIS”), and the U.S. Department of Agriculture's Animal and Plant Health Inspection Service ("APHIS"). There are also FAA-approved Passenger Facility Charges ("PFCs") imposed by most of the airports we serve. Like FET, air carriers are required to collect these fees from passengers and pass them through to the respective federal agency or airport authority. These fees do not need to be reauthorized, although their amounts may be revised periodically.
In 2024 or thereafter, Congress may consider legislation that could increase the amount of FET and/or one or more of the other federally imposed or approved fees identified above. Increasing the overall price charged to passengers could lessen demand for air travel. Additionally, federal funding to airports and/or airport bond financing could be affected through legislation, which could result in higher fees, rates, and charges at many of the airports we serve.
Environmental. We are subject to various federal, state and local laws and regulations relating to the protection of the environment and affecting matters such as aircraft engine emissions, aircraft noise emissions, and the discharge or disposal of materials and chemicals, which laws and regulations are administered by numerous state and federal agencies. These agencies have enforcement powers similar to the DOT’s and FAA’s described above. In addition, we may be required to conduct an environmental review of the effects projected from the addition of our service at airports.
In 2016 the U.S. Environmental Protection Agency (“EPA”) formally concluded that current and projected concentrations of greenhouse gases ("GHG") emitted by various aircraft, including all the aircraft we and other air carriers operate, threaten public health and welfare. This finding may be a precursor to increased EPA regulation of commercial aircraft emissions in the United States, as has taken effect for operations within the European Union under EU legislation. In January 2021 the EPA adopted regulations setting emissions standards for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028. Similarly, in December 2022, the EPA adopted particulate matter emission standards and test procedures for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028. In February 2024, the FAA adopted regulations implementing these EPA requirements. These new EPA and FAA standards and procedures harmonize with International Civil Aviation Organization ("ICAO") requirements. The aircraft we currently operate are not affected by these standards, and those we have on order would be affected only if manufactured after December 31, 2027.
In response to growing concerns over GHG emissions from the aviation sector, particularly carbon emissions and their role in climate change, the ICAO introduced a market-based mechanism, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), in 2016. CORSIA aims to stabilize carbon emissions from international flights, setting a target for carbon-neutral growth starting in 2021. Airlines are expected to offset any growth in emissions beyond the set baseline through approved carbon-offsetting practices or by using sustainable aviation fuels (SAF). The initial CORSIA baseline was determined by the average emissions from 2019 and 2020. However, the COVID-19 pandemic's dramatic effect on international travel led to a recalibration in June 2020, eliminating 2020 from the baseline calculation for CORSIA's initial phase (2021-2023). A revised baseline pegged at 85% of 2019's emissions levels, was introduced in 2022 for application from 2024 to 2035. CORSIA is being implemented in stages, beginning with a pilot phase that ran from 2021 through 2023. The pilot phase was followed by a first phase of the program, which began January 1, 2024. The second phase of the program will begin in 2027. While participation in the early and pilot stages is optional, the second phase mandates involvement from certain countries, including the U.S. However, U.S. legislation mandating participation in CORSIA is not yet in effect and is pending.
We anticipate that in 2024 and thereafter, legislative and regulatory concern with the environmental impacts of the air transportation industry will increase, and that the longer-term effects on our fleet and operating costs may be substantial.
According to a September 2021 White House announcement, civil aviation accounts for 11 percent of emissions by the U.S. transportation sector as a whole. The FAA has announced a U.S. aviation sector goal of net-zero GHG emissions by 2050, consistent with the broader federal objective of achieving net-zero GHG emissions economy-wide by 2050. We cannot predict whether these or similar initiatives will lead to legislation that will pass the Congress or, if enacted into law, how it ultimately would apply to our operations or the airline industry.
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. These restrictions can include limiting nighttime operations, directing specific aircraft operational procedures during takeoff and initial climb, and limiting the overall number of flights at an airport. Few of the airports we serve currently impose such restrictions on the number of flights or hours of operation that have a meaningful impact on our operations. It is possible one or more such airports or others may impose additional or future restrictions with or without advance notice, which may impact our operations.
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Foreign Ownership. To maintain our DOT and FAA certificates, our airline operating subsidiary and we (as the airline’s holding company) must qualify continuously as citizens of the United States within the meaning of U.S. aeronautical laws and regulations. This means we must be under the actual control of U.S. citizens and we must satisfy certain other requirements, including that our president and at least two-thirds of our board of directors and other managing officers are U.S. citizens, and that not more than 25 percent of our voting stock is owned or controlled by non-U.S. citizens. The amount of non-voting stock that may be owned or controlled by non-U.S. citizens is strictly limited as well. We believe we are in compliance with these ownership and control criteria.
Other Regulations. Air carriers are subject to certain provisions of federal laws and regulations governing communications because of their extensive use of radio and other communication facilities, and are required to obtain an aeronautical radio license from the Federal Communications Commission (“FCC”). To the extent we are subject to FCC requirements, we intend to continue to comply with those requirements.
The quality of water used for drinking and hand-washing aboard aircraft is subject to regulation by the EPA. To the extent we are subject to EPA requirements, we intend to continue to comply with those requirements.
Working conditions of cabin crew members while onboard aircraft are subject to regulation by the Occupational Safety and Health Administration ("OSHA") of the Department of Labor. To the extent we are subject to OSHA requirements, we intend to continue to comply with those requirements.
Our operations may become subject to additional federal requirements in the future under certain circumstances. During a period of past fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by the Department of Energy. Changes to the federal excise tax and other government fees imposed on air transportation have been proposed and implemented from time to time and may result in an increased tax burden for airlines and their passengers.
We are also subject to state and local laws, regulations, and ordinances at locations where we operate and to the rules and regulations of various local authorities that operate the airports we serve. Of the more than 120 airports we serve, not more than 20 percent have curfews or gate limitations that meaningfully impact our operations at those airports. Also, some airports we serve have short runways that require us to operate some flights at less than full capacity.
International air transportation, whether provided on a scheduled or charter basis, is subject to the laws, rules, regulations, and licensing requirements of the foreign countries to, from, and over which the international flights operate. Foreign laws, rules, regulations and licensing requirements governing air transportation are generally similar, in principle, to the regulatory scheme of the United States as described above, although in some cases foreign requirements are comparatively less onerous and in others, more onerous. We must comply with the laws, rules and regulations of each country to, from, or over which we operate. Our proposed U.S.-Mexico alliance with Viva, described above, received approval by Mexico’s Federal Economic Competition Commission (COFECE) in October 2022; however, that approval will require renewal (which is not assured) in view of the suspension of DOT processing described above. International flights are also subject to U.S. Customs and Border Protection, Immigration and Agriculture requirements and the requirements of equivalent foreign governmental agencies.
Future Laws and Regulations. Congress, the DOT, the FAA, the TSA, and other governmental agencies have under consideration, and in the future may consider and adopt, new laws, regulations, interpretations and policies regarding a wide variety of matters that could affect, directly or indirectly, our operations, ownership, and profitability. We cannot predict what other matters might be considered in the future by the FAA, the DOT, the TSA, other agencies, or Congress, nor can we judge what impact, if any, the implementation of any of these proposals or changes might have on our business.
Civil Reserve Air Fleet. We are a participant in the Civil Reserve Air Fleet (“CRAF”) Program which affords the U.S. Department of Defense the right to charter our aircraft during national emergencies when the need for military airlift exceeds the capability of available military resources. During the Persian Gulf War of 1990-91 and on other occasions, CRAF carriers were required to permit the military to use their aircraft in this manner. As a result of our CRAF participation, we are eligible to bid on and be awarded peacetime airlift contracts with the military on a preferential basis.
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Item 1A. Risk Factors
Readers should carefully consider the risks described below before making an investment decision. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment.
Risks Related to Allegiant
Regulatory review of Boeing’s operations could delay its production schedule, which could impact us as any delivery delays may result in lower profitability than expected and delayed growth as well as bad publicity and other consequences.
We are relying on Boeing to deliver our new 737 MAX aircraft to support airline growth and to replace aircraft we have designated for retirement.
The FAA is working with Boeing to address quality control procedures at Boeing and its suppliers in the aftermath of the recent emergency landing of an Alaska Airlines Boeing 737 MAX 9 aircraft and subsequent temporary grounding of all 737 MAX 9 aircraft pending inspections of the door plug which was the source of the issue. As part of the focused attention on Boeing’s production, inspection and quality assurance processes, the FAA has indicated that aircraft production rates will be capped until they are fully satisfied with Boeing's quality practices. These factors could delay deliveries to us. Delays in delivery will likely delay our ability to capitalize on the expected profitability from the addition of these aircraft to our fleet and increase our interest costs for funds borrowed for pre-delivery deposits. In addition, our inability to add these aircraft to our operating fleet as planned may adversely impact our unit costs as fewer available seat miles will be produced without these aircraft in our operating fleet and given our announced plan to retire certain of our Airbus aircraft. We are also counting on the timely addition of our firm 737 MAX order to meet environmental goals we have published in our 2022 sustainability report.
Any subsequent FAA action or any future adverse 737 MAX events or safety concerns might disproportionately impact us as we rely on these new aircraft to augment our fleet as well as to replace aircraft to be retired.
Our firm order with Boeing calls for the delivery of a mix of 737 MAX-8200 aircraft and 737 MAX-7 aircraft. The -7 version has yet to be certificated by the FAA. These recent events will likely impact the timing of the -7 certification, which could affect our order.
As more than 1,100 737 MAX aircraft remain in service throughout the world and FAA oversight and Boeing process improvements should further assure the public regarding safety issues, we continue to believe that the addition of the 737 MAX aircraft will be safe, reliable and accretive to our profitability. However, negative publicity from these or future events could reflect poorly on our planned 737 service and our Company.
Increases in fuel prices or unavailability of fuel would harm our business and profitability.
Fuel costs constituted approximately 30.4 percent of our total operating expenses in 2023. Although average fuel cost per gallon was lower in 2023 than 2022, the price per gallon as of early 2024 remains significantly higher than in prior years. Significant increases in fuel costs have negatively affected our operating results in the past, and future fuel cost volatility could materially affect our financial condition and results of operations.
Both the cost and availability of aircraft fuel are subject to many economic and political factors and events occurring throughout the world over which we have no control. Meteorological events may also result in short-term disruptions in the fuel supply. Aircraft fuel availability is also subject to periods of market surplus and shortage, and is affected by demand for heating oil, gasoline, and other petroleum products. Due to the effect of these events on the price and availability of aircraft fuel, our ability to control this cost is limited, and the price and future availability of fuel cannot be predicted with any degree of certainty. Due to the high percentage of our operating costs represented by fuel, a relatively small increase in the price of fuel could have a significantly negative impact on our operating costs. A fuel supply shortage or higher fuel prices could result in reduction of our service during the period affected.
We have made a business decision not to purchase financial derivatives to hedge against increases in the cost of fuel. This decision may make our operating results more vulnerable to the impact of fuel price increases.
Increased labor costs could result from industry conditions and could be impacted by labor-related disruptions.
Labor costs constituted approximately 30.0 percent of our total operating costs in 2023, our second largest expense line item. Labor costs are generally rising and there is much competition for qualified candidates.
Further, we have four employee groups (pilots, flight attendants, flight dispatchers and maintenance technicians) which have elected union representation. These groups represent approximately 53.4 percent of our employees.
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In 2016, we reached a collective bargaining agreement with the International Brotherhood of Teamsters, representing our pilots. The pilot agreement is now amendable and in 2022 the parties jointly sought mediation through the National Mediation Board. Pilot pay scales have increased significantly in the industry and we expect our next contract with this work group to reflect industry competitive rates which will be significantly higher than our current pilot rates. In the meantime and in recognition of these higher prevailing pilot pay rates, in May 2023, we began to accrue a retention bonus which will become payable to our pilots who remain with us until a new collective bargaining agreement is ratified.
An agreement with the Transport Workers Union for the flight attendant group was approved in 2017 and became amendable in 2022. We reached a tentative agreement with this union, but the tentative agreement was rejected by the flight attendants in July 2023 by a 39 percent to 61 percent vote. As such, we continue to negotiate with this work group.
We also have agreements with the International Brotherhood of Teamsters for the flight dispatchers and for maintenance technicians. In 2023, we entered into agreements with both groups to increase pay rates and extend all other terms of the agreement by two years, until 2026 for our flight dispatchers and until 2028 for maintenance technicians.
Future union contracts with these, or other, work groups could put additional pressure on our labor costs.
If we are unable to reach agreement on the terms of collective bargaining agreements in the future, or we experience wide-spread employee dissatisfaction, attrition in these work groups, difficulty in hiring sufficient personnel or work slow downs or stoppages could have an adverse effect on our operations and future results.
The inability to attract and retain qualified flight crew and other airline personnel could limit our growth plans and operations and adversely affect our business and results of operations.
We compete against other U.S. airlines for pilots, aircraft maintenance technicians and other labor. Recently, there has been a scarcity of pilots for hire, more pilots in the industry are approaching mandatory retirement age and there is significant competition to hire new pilots. Attrition beyond normal levels or the inability to attract new pilots could negatively impact our growth, operations and results of operations. The scarcity of pilots and opportunities at other carriers could encourage our captains and first officers to leave our airline, exacerbating the challenge to maintain sufficient numbers of pilots to fly our published schedule and to grow our network. The lack of a new collective bargaining agreement with our pilots’ union (now in negotiation) could also contribute to attrition and serve as an impediment to our being able to hire and maintain sufficient numbers of pilots.
Additionally, the airline industry, including our third party vendors, has experienced and may continue to experience challenges in hiring and retaining other labor positions, such as aircraft maintenance technicians, ground handling and customer service agents, and flight attendants. Our and our vendors' inability to attract and retain personnel for these positions could negatively impact our results of operations and growth plans. Additionally, we may be required to increase our wage and benefit packages, or pay increased rates to our vendors, to retain these positions. This would result in increased overall costs and may adversely impact our results of operations.
Our reputation and financial results could be harmed in the event of an accident or restrictions affecting aircraft in our fleet.
As of February 1, 2024, our operating fleet consists of 126 Airbus A320 series aircraft, of which 13 were acquired new and 113 were acquired used. Our aircraft range from 5 to 26 years from their manufacture date at February 1, 2024, with an average age of 15.5 years.
An accident involving one of our aircraft, even if fully insured, could result in a public perception that we are less safe or reliable than other airlines, which would harm our business. Further, there is no assurance that the amount of insurance we carry would be sufficient to protect us from material loss. Because we are smaller than most airlines, an accident would likely adversely affect us to a greater degree than a larger, more established airline.
In-flight emergencies affecting our aircraft, and resulting media attention, could also contribute to a public perception regarding safety concerns and a loss of business.
The FAA could suspend or restrict the use of our aircraft in the event of actual or perceived mechanical problems or safety issues while it conducts its own investigation, whether involving our aircraft or another U.S. or foreign airline’s aircraft. Our business could also be significantly harmed if the public avoids flying our aircraft due to an adverse perception of the aircraft we utilize because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving these aircraft.
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A breach in the security of personal information, breach in credit card data or system disruptions caused by security breaches or cyberattacks – including attacks on those parties we do business with – could harm our ability to conduct our operations and could have a material adverse effect on our financial position or results of operations.
We receive, retain, and transmit certain personal information about our customers. Additionally, our online operations rely on the secure transmission of customer data. We use third party systems, integrated software, and advanced cyber security tools in order to protect the customer data we obtain through the course of our business. Although we use a variety of security techniques to protect customer information, a compromise of our physical or network security systems through a cyberattack would create the risk that customers’ personal information might be obtained by unauthorized persons.
In addition, such security related events could be widely publicized and could adversely affect our reputation with our customers, vendors and stockholders, could harm our competitive position particularly with respect to our ecommerce operations, and could thereby materially adversely affect our operations, revenues, results of operations and financial position. Consequences could include litigation, other legal actions against us, and/or the imposition of penalties, fines, fees or liabilities. We currently are self insured against these risks. Moreover, a security compromise or ransomware event could require us to devote significant management resources to address the problems created by the issue and to expend significant additional resources to further upgrade the security measures we employ to guard personal and confidential information against cyberattacks and other attempts to access or otherwise compromise such information and could result in a disruption of our operations, particularly our digital operations.
The way organizations handle customer data is subject to increasing legislation and regulation, typically intended to protect the privacy of customer data received, retained, and transmitted. We could be adversely affected if we fail to comply with existing rules or practices, or if legislation or regulations are expanded to require changes in our business practices. These privacy developments are difficult to anticipate and could adversely affect our business, financial condition, and results of operations.
We rely heavily on automated systems to operate our business and any failure of these systems could harm our business.
We depend on automated systems to operate our business, including our air reservation system, telecommunication systems, our website, and other automated systems. Our continuing initiatives to enhance the capabilities of our automated systems could increase the risk of automation failures. Any failure by us to handle our automation needs could negatively affect our internet sales (on which we rely heavily) and customer service, and result in lost revenues and increased costs.
Our website and reservation system must be able to accommodate a high volume of traffic and deliver necessary functionality to support our operations. Our automated systems cannot be completely protected against events that are beyond our control, such as natural disasters, telecommunications failures, malware, ransom ware, security breaches or cyber-security attacks. Although we have implemented security measures and have information systems disaster recovery plans in place, we cannot assure investors that these measures are adequate to prevent disruptions or losses. Substantial or repeated website, reservations system, or telecommunication system failures could decrease the attractiveness of our services. Any disruption to these systems could result in the loss of important data and revenue, increase in expenses, and harm to our business.
Unfavorable economic conditions may adversely affect travel from our markets to our leisure destinations.
The airline industry is particularly sensitive to changes in economic conditions. Unfavorable U.S. economic conditions have historically driven changes in travel patterns and have resulted in reduced discretionary spending for leisure travel. Unfavorable economic conditions could impact demand for airline travel in our under-served cities to our leisure destinations. During difficult economic times, we may be unable to raise prices in response to fuel cost increases, labor, or other operating costs, which could adversely affect our results of operations and financial condition.
The successful operation of our Sunseeker Resort is dependent on commercial and economic factors, some of which are beyond our control.
We opened Sunseeker Resort in Southwest Florida in December 2023. The successful operation of the project will be subject to the usual risks of any new business, including risks of gaining sufficient interest from vacationers to stay in our hotel and suites, the desirability of the project’s location, competition, retention of the management team, unfavorable weather, the ability to attract, train and retain sufficient numbers of suitable line employees and the ability to profitably operate the hotel and related offerings at the rates offered.
The success of our alliance with VivaAerobus will depend on our ability to obtain necessary government approvals and other factors.
We will be able to implement the joint alliance with VivaAerobus as planned only if the DOT grants us antitrust immunity and we receive similar approval from Mexican authorities. Although we believe we should qualify for these approvals, there can be no assurance when or if we will be able to obtain them. DOT approval has now been held up indefinitely pending the outcome of diplomatic engagement on broader treaty issues.
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Many of the U.S. airports from which we hope to offer this service do not currently qualify to offer international service. The initiation of this service from these airports will depend on the airport satisfying the requirements for international service, for which we can provide no assurance.
Prior to offering international service on our website, we will need to implement the necessary systems to accommodate international travel and to meet the various requirements imposed by the U.S. and Mexico. In 2023, we implemented many of these systems. However, there is no assurance that these requirements will be met in time for the expected launch of these services.
For Mexican routes to be operated by VivaAerobus, we will be relying on them to provide our customers with the quality flight experience our customers expect when traveling on our airline. Otherwise, the success of the joint alliance and our reputation may suffer.
Increases in taxes could impact demand for our services.
In 2024, Congress may consider legislation that could increase the amount of Federal Excise Tax (“FET”) and/or one or more of the other government fees imposed on air travel. By increasing the overall price charged to passengers, any additional taxes or fees could lessen the demand for air travel or force carriers to lower fares to maintain demand. Increased taxes and fees per passenger may impact our load factors more than other airlines as our lower fares are designed to stimulate demand for our services, and taxes and fees may represent a higher proportion of our overall price than for other airlines.
FAA limitations could impact our ability to grow in the future.
As with all scheduled airlines, the FAA must approve each aircraft we utilize and each airport we serve. Although there are no generic restrictions on growth in place at the current time, future limitations from the FAA could potentially hinder our growth.
Our indebtedness, debt service obligations and other commitments could adversely affect our business, financial condition and results of operations as well as limit our ability to react to changes in the economy or our industry and prevent us from servicing our debt and operating our business.
Our debt and finance lease obligations as of December 31, 2023 totaled $2.26 billion net of related costs. In addition, in December 2021, we entered into a purchase agreement with The Boeing Company to purchase 50 Boeing 737 MAX aircraft which are expected to deliver in 2024, 2025, and 2026. This indebtedness, the Boeing purchase agreement and other commitments with debt service and fixed charge obligations could:
•make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under agreements governing our indebtedness;
•make it more difficult to satisfy our other future obligations, including our obligations to pay the purchase price in respect of current and future aircraft purchase contracts;
•require us to dedicate a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available to fund internal growth through working capital, capital expenditures, and for other purposes;
•limit our flexibility in planning for, or reacting to, changes in our business, the competitive environment, legislation and our industry;
•make us more vulnerable to adverse changes in our business, economic, industry, market or competitive conditions and adverse changes in government regulation;
•expose us to interest rate and pricing increases on indebtedness and financing arrangements as general interest rates rise;
•restrict us from pursuing strategic acquisitions or exploiting certain business opportunities;
•subject us to a greater risk of non-compliance with financial and other restrictive covenants in financing arrangements;
•limit, among other things, our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, execution of our business strategy and other purposes or raise equity capital in the future and increasing the costs of such additional financings; and
•place us at a competitive disadvantage compared to our competitors who may not be as highly leveraged or who have less debt in relation to cash flow.
In addition, our ability to service our indebtedness will depend on our future performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors. Many of these factors are beyond our control and could materially adversely affect our business, results of operations, cash flows and financial condition.
At maturity, or in the event of an acceleration of payment obligations, we may be unable to pay our outstanding indebtedness with our cash and cash equivalents then on hand. In such event, we would be required to seek alternative sources of funding, which may not be available on commercially reasonable terms, terms as favorable as our current agreements, or at all. If we are unable to refinance our indebtedness or find alternative means of financing our operations, we may be required to take actions that are inconsistent with our current business practices or strategy.
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Covenants in our senior secured notes, revolving credit facility and construction loan could limit how we conduct our business, which could affect our long-term growth potential.
As of December 31, 2023, the principal balance of our Senior Secured Notes due 2027 (the "Senior Secured Notes") was $550.0 million and the principal balance of our Sunseeker construction loan was $350.0 million. These loan agreements as well as one of our revolving credit facilities contain covenants limiting our ability to, among other things, make certain types of restricted payments, including paying dividends, incur debt or liens, merge or consolidate with others, dispose of assets, enter into certain transactions with affiliates, engage in certain business activities or make certain investments. In addition, the loan agreements contain financial covenants, including requiring us, at the end of each calendar quarter, to maintain a maximum total leverage ratio and to maintain a minimum aggregate amount of liquidity of $300.0 million. We have pledged our assets to secure the Senior Secured Notes and revolving credit facility with the exceptions of aircraft and aircraft engines, the Sunseeker Resort and certain other exceptions. The Sunseeker Resort is pledged to secure the $350.0 million construction loan agreement to finance the construction of the Resort. This will limit our ability to obtain debt secured by these pledged assets while these loans are outstanding.
These loan agreements contain various events of default (including failure to comply with the covenants under the loan agreements), and upon an event of default the lenders may, subject to various cure rights, require the immediate payment of all amounts outstanding under the these loans.
As a result of these restrictive covenants, we may be limited in how we conduct business, and we may be unable to raise additional debt or equity financing to operate during difficult times or to take advantage of new business opportunities.
Any inability to obtain financing for aircraft under contract could harm our fleet growth plan.
We typically finance our aircraft through debt financing after purchase. Although we have entered into agreements which had undrawn financing commitments of $25.1 million for our Boeing order at February 1, 2024, we have secured revolving lines of credit for up to $275.0 million to offset the risk that financing may not be available on acceptable terms when needed and while we believe debt financing will be available for the aircraft we will acquire, we cannot provide assurance that we will be able to secure such financing on terms attractive to us or at all. To the extent we cannot secure such financing on acceptable terms or at all, we may be required to modify our aircraft acquisition plans, incur higher than anticipated financing costs, or use more of our cash balances for aircraft acquisitions than we currently expect.
Our maintenance costs may increase as our fleet ages.
The average age of our aircraft as of February 1, 2024, is 15.5 years, which is older than the fleets of many other carriers. In general, the cost to maintain aircraft increases as they age, and exceeds the cost to maintain newer aircraft. FAA regulations, including aging aircraft airworthiness directives, require additional and enhanced maintenance inspections for older aircraft. These regulations can directly impact the frequency of inspections as an aircraft ages, and vary by aircraft or engine type, depending on the unique characteristics of each aircraft and/or engine.
In addition, we may be required to comply with any future law changes, regulations, or airworthiness directives. We cannot assure investors our maintenance costs will not exceed our expectations.
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We rely on third parties to provide us with aircraft, facilities and services that are integral to our business.
We rely on Boeing and the owners of used aircraft under contract to be able to deliver aircraft in accordance with the terms of executed agreements in a timely manner. Delivery schedules for newly built aircraft frequently slip which could delay deliveries to us. Our planned initiation of service with these aircraft in the future could be adversely affected if Boeing or other third parties fail to perform as contractually obligated. See also Risk Factors - Regulatory review of Boeing’s operations could delay its production schedule, which could impact us as any delivery delays may result in lower profitability than expected and delayed growth as well as bad publicity and other consequences.
We have entered into agreements with third party contractors to provide certain facilities and services required for our operations, such as aircraft maintenance, ground handling, baggage services, and ticket counter space. Our reliance on others to provide essential services on our behalf gives us less control over costs and the efficiency, timeliness and quality of contract services.
As our aircraft age and as we add a new aircraft type, we will need to rely further on outside MRO (maintenance, repair, overhaul) facilities to complete the necessary work. Currently, there is a concern about whether the capacity of the MRO’s we use is sufficient to handle all of our needed maintenance as well as their other business. If not, the cost of our maintenance events may increase and delays may occur in servicing our aircraft which could result in fewer aircraft available for our scheduled service.
We may not be able to maintain or grow our ancillary revenues.
Our business strategy includes expanding our ancillary products and services. We cannot ensure that passengers will pay for additional ancillary products and services we offer in the future, or that they will continue to pay for the ancillary products and services we currently offer. Regulatory changes could also adversely affect our ancillary revenue opportunities. Failure to maintain our ancillary revenues could have a material adverse effect on our results of operations, financial condition and stock price. If we are unable to maintain and grow these revenues, we may be unable to execute our strategy to continue to offer low base fares in order to stimulate demand.
Our business could be harmed if we lose the services of key personnel.
Our business depends upon the efforts of our chief executive officer, Maury Gallagher, president, Gregory Anderson, and a small number of executive management and operating personnel. We do not currently maintain key-man life insurance on Mr. Gallagher, Mr. Anderson or any other executives. We may have difficulty replacing management or other key personnel who leave and, therefore, the loss of the services of any of these individuals could harm our business.
Our reputation and brand could be harmed if various stakeholders are not satisfied with our ESG disclosures, goals and progress.
We operate in a public-facing industry dependent on fossil fuels to a large extent. ESG (environmental, social and governance) has become a more prominent focus for public companies and the SEC has proposed rules which will mandate certain ESG disclosures. Although we are working with a recognized consultant in this area and we intend to comply with any SEC requirements, our brand and reputation may suffer if our stakeholders are not satisfied with our ESG disclosures, the goals we have set in that area or our progress toward meeting those goals.
Failure to achieve our environmental, social and governance goals and public pressure from investors or policy groups' perception of the environmental impact of air travel could also adversely impact our reputation and brand. Our ability to meet our environmental goal depends on various actions from third parties outside of our control. These include policy changes from federal and state governments, significant capital investment from third parties and research and development from manufacturers and other stakeholders, all to support or incentivize pursuit of commercially viable sustainable fuel alternatives or new technologies to support the industry's achievement of its carbon abatement goals. Additionally, meeting our environmental goal will require the adoption of sustainable aviation fuels (SAF), the supply of which currently falls short of the aviation industry requirements and would likely be commercially viable only with the support and incentives from governmental initiatives.
Risks Associated with the Airline and Travel Industry
Our operating results could be affected by outbreaks of communicable diseases.
As has resulted from the COVID-19 pandemic, contagious illness and fear of contagion could have a material adverse impact on the airline industry. Any general reduction in airline passenger traffic as a result of an outbreak of disease or other travel advisories could dampen demand for our services even if not applicable to our markets. Resulting decreases in passenger volume would harm our load factors, could increase our cost per passenger and adversely affect our operating results.
The extent of impact of any future pandemic or contagion on our business and our financial and operational performance will depend on the duration, spread, severity and recurrences of the disease; the possible imposition of testing requirements before domestic travel; the duration and scope of any federal, state and local government restrictions; the availability and effectiveness
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of vaccines; the extent of the impact of the outbreak on overall demand for air travel; and our access to capital during the affected periods, all of which could be highly uncertain and cannot be predicted.
Future pandemics or contagions may cause public health officials to recommend precautions to mitigate the spread of the disease. During the COVID-19 pandemic, these resulted in federal, state and local authorities instituting measures such as imposing self-quarantine requirements, requiring testing before entry into certain states; issuing directives forcing businesses to temporarily close, restricting air travel and issuing shelter-in-place and similar orders limiting the movement of individuals. To the extent in effect to address communicable diseases in the future, such measures could depress demand for air travel, disrupt our operations, and materially adversely affect our business.
Moreover, the ability to attract and retain passengers depends, in part, upon the perception and reputation of our company and the public’s concerns regarding the health and safety of air travel generally. Actual or perceived risk of infection could have a material adverse effect on the public's comfort with air travel, in general or on our flights, which could harm our reputation and business.
The airline industry is highly competitive and future competition in our under-served markets could harm our business.
The airline industry is highly competitive. The under-served cities we serve on a scheduled basis have traditionally attracted considerably less attention from our potential competitors than larger markets, and in most of our small city markets, we are the only provider of nonstop service to our leisure destinations. If other airlines or new airline start-ups begin to provide nonstop services to and from these or similar markets, or otherwise target these or similar markets, the increase in the amount of direct or indirect competition could cause us to reconsider service to affected markets, could impact our margins or could impact our future planned service.
A future act of terrorism, the threat of such acts, or escalation of U.S. military involvement overseas could adversely affect our industry.
Even if not directed at the airline industry, a future act of terrorism, the threat of such acts, or escalation of U.S. military involvement overseas could have an adverse effect on the airline industry. In the event of a terrorist attack, the industry would likely experience significantly reduced demand for travel services. These actions, or consequences resulting from these actions, would likely harm our business and the airline and travel industry. If we are called on to provide aircraft in the event of national emergencies as a result of our participation in the CRAF program, our operations would be disrupted.
Changes in government laws and regulations imposing additional requirements and restrictions on our operations could increase our operating costs.
Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that involve significant costs. In the last several years, the FAA has issued a number of directives and other regulations relating to the maintenance and operation of aircraft that have required us to incur significant expenditures. FAA requirements cover, among other things, retirement of older aircraft, fleet integration of newer aircraft, safety management systems, collision avoidance systems, airborne windshear avoidance systems, noise abatement, aircraft weight and payload limits, assumed average passenger weight, employee drug and alcohol testing, pilot and flight attendant duty time limitations, and increased inspection and maintenance procedures to be conducted on aging aircraft. The future cost of complying with these and other laws, rules and regulations, including new federal legislative and DOT regulatory requirements in the consumer-protection area, cannot be predicted and could significantly increase our costs of doing business.
Over the past 15 years the DOT has adopted revisions and expansions to a variety of its consumer protection regulations and policies. Additional expanded regulations have been proposed by DOT and may take effect in 2024 or thereafter, as may new consumer protection legislation proposed in Congress. We are not able to predict the impact of new consumer protection rules on our business, though we monitor the progress of potential laws and rulings. We are subject to fines or other enforcement actions if the DOT believes we are not in compliance with these or other rules or regulations or with the federal consumer protection laws administered by the DOT. Even if our actions or practices are found to be compliant, we could incur substantial costs defending our actions or practices.
Federal funding to airports and/or airport bond financing could be affected through future deficit reduction legislation, which could result in higher fees, rates, and charges at many of the airports we serve. Additionally, from time to time legislative proposals have been made to re-regulate the airline industry in varying degrees - for example, to specify minimum seat-size and legroom requirements - which if adopted could affect our costs materially. Such legislation may be proposed and could be adopted in 2024, particularly in the course of FAA reauthorization. Proposed consumer-protection enhancements in reauthorization legislation include a requirement for fee-free family seating, a mandatory five-year validity of airline vouchers and credits, and substantially increased civil penalties for noncompliance by airlines with consumer-protection and other regulatory requirements.
We (i.e., our airline subsidiary) and VivaAerobus, a Mexican airline, submitted to DOT in December 2021 a joint application requesting approval of and antitrust immunity for a comprehensive alliance agreement applicable to all routes we and/or Viva may operate between points in the United States and points in Mexico. Over a period of 20 months, the DOT’s review and
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analysis progressed substantially, but on July 31, 2023, the DOT suspended processing of the joint application pending resolution of an aviation trade dispute between the governments of Mexico and the United States that arose earlier in 2023. The dispute remains unresolved and there is no assurance when or whether DOT will ultimately approve the agreement and grant antitrust immunity. While Mexican regulatory approval was issued in late 2022, that approval will require renewal (which is not assured) and both parties have stated they do not intend to proceed under the agreement in the absence of antitrust immunity issued by DOT. In addition, full performance under the agreement is contingent upon Mexico retaining Category 1 status under the FAA’s International Aviation Safety Assessment (“IASA”) program. The FAA found Mexico to be noncompliant from May 2021 until September 2023, when Mexico’s IASA Category 1 status was reinstated. An adverse outcome in one or more of these respects would likely thwart our plans to enter the U.S.-Mexico market for a number of years, despite the significant effort and expense we have incurred and continue to incur on the project.
We anticipate that in 2024 and thereafter, legislative and regulatory concern with the environmental impacts of the air transportation industry will increase, and that the longer-term effects on our fleet and operating costs may be substantial. In the past, legislation to address climate change issues as they relate to the transportation industry has been introduced in the U.S. Congress, including a proposal to require transportation fuel producers and importers to acquire market-based allowances to offset the emissions resulting from combustion of their fuels. Similarly, as recently as February 2021, legislation was introduced in the U.S. Congress to incentivize the production of sustainable aviation fuel (also known as biofuel) and to assist the aviation industry in reducing emissions. According to a September 2021 White House announcement, civil aviation accounts for 11 percent of emissions by the U.S. transportation sector as a whole. The FAA has announced a U.S. aviation sector goal of net-zero greenhouse gas (“GHG”) emissions by 2050, consistent with the broader federal objective of achieving net-zero GHG emissions economy-wide by 2050. We cannot predict whether legislation to implement these goals will pass the Congress or, if enacted into law, how it ultimately would apply to our operations or the airline industry.
In addition, the EPA concluded in 2016 that current and projected concentrations of GHG emitted by various aircraft, including all of the aircraft we and other carriers operate, threaten public health and welfare. This finding may be a precursor to increased EPA regulation of commercial aircraft emissions in the United States, as has taken effect for operations within the European Union under EU legislation. Binding international measures adopted under the auspices of the International Civil Aviation Organization (“ICAO”), a specialized agency of the United Nations, are scheduled to become effective over the next several years, with the pilot phase having begun in 2021. In January 2021 the EPA adopted regulations setting emissions standards equivalent to ICAO’s for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028. Similarly, in December 2022, the EPA adopted particulate matter emission standards and test procedures for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028. In February 2024, the FAA adopted regulations implementing these EPA requirements. These new EPA and FAA standards and procedures harmonize with ICAO requirements. The aircraft we currently operate are not affected by these standards, and those we have on order would be affected only if manufactured after December 31, 2027. As noted, however, we anticipate an ever-increasing legislative and regulatory focus on aviation’s impacts on the environment. These developments and any additional legislation or regulations addressing climate change are likely to increase our costs of doing business in the future and the increases could be material.
With respect to aircraft weight and balance, consumer protection, climate change, taxation, and other matters affecting the airline industry, whether the source of new requirements is legislative or regulatory, increased costs will adversely affect our profitability if we are unable to pass the costs on to our customers or adjust our operations to offset the new costs.
Existing and proposed state-specific labor laws could affect our ability to schedule and operate flights efficiently, and as a result could increase our operating costs and liability exposure.
Various states and localities across the country are attempting to impose requirements, such as wage and hour requirements, meal and rest break and sick leave laws, on flight attendants and pilots (“flight crew”) who spend the vast majority of their working hours in the air and in various states and jurisdictions on a daily basis. These requirements would create significant operational challenges for air carriers by creating a patchwork of state and local laws which undermine the federal deregulation of the airline industry and, in theory, could require airlines to simultaneously comply with rules which conflict with those of other jurisdictions, federal regulations, and the provisions of labor agreements. Courts continue to remain divided on whether federal deregulation preempts these state laws and Congress has not addressed the issue. The impact on flight crew staffing, pay and scheduling technology may potentially increase our costs of doing business and could make certain routes cost prohibitive. Flight crews have filed class action lawsuits against air carriers in a number of states with varied results and, in many cases, the results have been appealed. Such suits are costly to defend and could result in sizeable liability exposure for any air carrier.
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Airlines are often affected by factors beyond their control, including air traffic congestion, weather conditions, increased security measures, and a reduction in demand to any particular market, any of which could harm our operating results and financial condition.
Like other airlines, we are subject to delays caused by factors beyond our control, including air traffic congestion at airports and en route, adverse weather conditions, increased security measures, and the outbreak of disease. Delays frustrate passengers and increase costs, which in turn could affect profitability. During periods of fog, snow, rain, storms or other adverse weather conditions, flights may be canceled or significantly delayed. Cancellations or delays due to weather conditions, traffic control problems, and breaches in security could harm our operating results and financial condition.
A substantial proportion of our scheduled flights have Las Vegas, Orlando, Phoenix, Tampa/St. Petersburg, Punta Gorda, Destin or Sarasota as either their destination or origin. Our business could be harmed by any circumstances causing a reduction in demand for air transportation to one or more of these markets, or our other leisure destinations, such as adverse changes in local economic conditions, negative public perception of the particular city, significant price increases, or the impact of future terrorist attacks or natural disasters.
Risks Related to Our Stock Price
The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline.
The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including:
•the impact of pandemics and other communicable diseases on air travel and any related government restrictions impacting air travel
•fuel price volatility, and the effect of economic and geopolitical factors and worldwide oil supply and consumption on fuel availability
•announcements concerning our competitors, new market entrants, the airline industry, or the economy in general
•strategic actions by us or our competitors, such as acquisitions or restructurings
•media reports and publications about the safety of our aircraft or the aircraft types we operate
•new regulatory pronouncements and changes in regulatory guidelines
•announcements concerning our business strategy
•our ability to grow service in the future as rapidly as the market anticipates
•general and industry-specific economic conditions
•changes in financial estimates or recommendations by securities analysts
•substantial sales of our common stock or other actions by investors with significant shareholdings
•additional issuances of our common stock
•labor costs or work actions
•general market conditions
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect the trading price of our common stock.
In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Although we have insurance to cover these claims up to policy limits, these lawsuits or similar litigation could result in substantial costs, divert management’s attention and resources, and harm our business or results of operations.
Other companies may be deterred from attempting to acquire us or our stock, even at prices in excess of current market prices, due to the effects of Nevada statutes.
We are subject to a Nevada statute (NRS 78.411 through 78.444) that prohibits us from engaging in certain “combinations,” including mergers, consolidations, sales and leases of assets, issuances of securities and similar transactions, with a stockholder who is the beneficial owner of 10 percent or more of our stock (an “interested stockholder”), for a period of up to four years after the date that person became an interested stockholder, unless either our board of directors approves, in advance, the transaction by which the person became an interested stockholder, or such combination is approved at a meeting by at least 60 percent of voting power of our stock that is not beneficially owned by the interested stockholder, or its affiliates or associates. Between two and four years after the date the person first became an interested stockholder, a combination may also be permitted if the interested stockholder satisfies certain requirements with respect to the aggregate consideration to be received by holders of outstanding shares in the combination.
In addition, another Nevada statute (NRS 78.378 through 78.3793) may eliminate the voting rights of shares of our stock to the extent the shares are acquired by a holder in connection with, or within 90 days prior to, an acquisition of a “controlling interest”
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that causes such holder to exceed certain thresholds (one-fifth, one-third and a majority or more) of the total voting power of our stock. In such event, the holder will only obtain such voting rights in the “control shares” so acquired as may be approved by a resolution of our stockholders of the corporation at a special or annual meeting. The statute also provides a mechanism for us to force the redemption of the control shares at the average price paid therefor. Our board of directors may, however, exempt any acquisition of a controlling interest by certain existing or future stockholders by amending the corporation’s bylaws (or articles of incorporation) within 10 days following such acquisition.
These Nevada statutes could discourage or make more difficult a takeover attempt that certain stockholders may consider in their best interests. These provisions may also adversely affect prevailing market prices for our common stock. We have not opted out of either of these statutes.
Our corporate charter and bylaws include provisions limiting voting by non-U.S. citizens.
To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our articles of incorporation and bylaws restrict voting of shares of our capital stock by non-U.S. citizens. The restrictions imposed by federal law currently require no more than 25 percent of our stock be voted, directly or indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of the members of our board of directors be U.S. citizens. Our bylaws provide no shares of our capital stock may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which we refer to as the foreign stock record. Our bylaws further provide no shares of our capital stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. Registration on the foreign stock record is made in chronological order based on the date we receive a written request for registration. Non-U.S. citizens will be able to own and vote shares of our common stock only if the combined ownership by all non-U.S. citizens does not violate these requirements.
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Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
As a critical infrastructure company, we regularly face cybersecurity threats from malicious third parties that could obtain unauthorized access to our internal systems, networks and data. It is virtually impossible for us to entirely mitigate the risk of these and other security threats we face. The security, performance, and reliability of our network may in the future be disrupted by third parties, including nation-states, competitors, hackers, disgruntled employees, former employees, or contractors. While we have implemented security measures internally and have integrated security measures into our systems, network, and products, these measures have not always functioned as expected and have not always detected or prevented all unauthorized activity, prevented all security breaches or incidents, mitigated all security breaches or incidents, or protected against all attacks or incidents.
We have implemented processes and procedures for the assessment, identification, and management of material risks from cybersecurity threats. These processes implement both qualitative and quantitative measurements that have been agreed upon with our third-party consultants, our auditors, and integrated into our overall risk management process.
Our process includes assessing, mitigating, and managing risk in three categories: cybersecurity or technical risk, vendor risk, and compliance and regulatory risk. To support those risk management categories, we partner with third parties in the implementation of tooling to help us decrease cyber risks and ensure compliance within Allegiant and with third parties. We verify third-party compliance, such as suppliers and business partners, by aligning with several standards. For example, we subject our IT suppliers to the Sarbanes-Oxley (SOX) and payment card industry (PCI) compliance standards where applicable.
To certify our policies and processes to International Standards Organization (ISO)/ International Electrotechnical Commission (IEC) 27001, we are engaging a third-party consulting firm to conduct a gap analysis on our cybersecurity compliance. After achieving compliance, we expect to engage a third-party auditor to ensure we are compliant on an annual basis. Achieving compliance with any cybersecurity standard does not guarantee that controls cannot be broken, bypassed, or circumvented by zero-day vulnerabilities, or malicious threat actors.
Our overall approach to cybersecurity risk management includes the following key elements:
•Multi-layered defenses, coupled with in-depth and continuous monitoring – We utilize data analytics to detect anomalies and search for cybersecurity threats. From time to time, we engage third party consultants or other advisors to assist in assessing, identifying and managing cybersecurity threats. We also periodically use our internal audit function to conduct additional assessments and reviews.
•Insider Threats – We maintain an insider threat program, designed to identify, assess, and address potential risks from within Allegiant. Our program evaluates potential risks consistent with industry best practices, customer requirements and applicable law, including privacy and other considerations.
•Information Sharing and Collaboration – We work with government, customer, industry and supplier partners including government-industry partnerships and critical infrastructure threat intelligence sharing platforms. These relationships enable the rapid sharing of threat intelligence and vulnerability mitigation across the industry and the defense industrial base and supply chain.
•Third Party Risk Assessments – We conduct information security assessments before sharing or allowing the hosting of sensitive information in our computing environments, and those managed by third parties. Our standard terms and conditions with third parties include contractual provisions requiring certain security protections.
•Training and Awareness – We seek to create a culture of security. We provide training to our employees to help identify, avoid, and mitigate cybersecurity threats. Our employees are required to participate in cybersecurity training at least annually and our training includes spear phishing and other awareness training. We regularly remind our employees and partners of the importance of handling and protecting customer and employee data, including through annual privacy and security training. We also host periodic tabletop exercises and drills with management and other employees to practice rapid response to cyber incidents.
•Supplier Engagement – We require our suppliers to comply with our standard information security terms and conditions and require them to complete information security questionnaires to enable us to review and assess any potential cyber-related risks depending on the nature of the services provided.
•Scalability – We continue to invest directly in our cybersecurity program, as well as augmentation of those cybersecurity services through managed services and third parties, depending on the maturity and risk of the operating model of the business unit.
Disclosure of Identified Risks:
As of the date of this report, we have not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the organization. Although we have not experienced cybersecurity incidents that are individually, or in the aggregate, material, we have experienced cyberattacks in the past, which we believe have thus far been largely mitigated by preventative, detective and responsive measures implemented by us. For a detailed discussion of our cybersecurity related risks, see Item 1A Risk Factors – “A breach in the security of personal information, breach in credit card data or system disruptions caused by security breaches or cyberattacks – including attacks on those parties we do business with
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– could harm our ability to conduct our operations and could have a material adverse effect on our financial position or results of operations.”
Board Oversight of Cybersecurity Risks:
Our board is responsible for overseeing our enterprise risk management activities in general, the appropriate committees assist the board in the role of risk oversight. Our chief information security officer (CISO) presents a quarterly update to the full board, including an update on our risk management process and risk trends related to cybersecurity.
Management’s role in Managing Cybersecurity Risks:
We have a dedicated cybersecurity team, composed of individuals with a diverse set of information security, cybersecurity, and governance, risk and compliance backgrounds, collectively giving our cybersecurity program significant experience. Our CISO leads our day-to-day data security and customer privacy efforts — overseeing operations, cybersecurity, privacy risk and compliance. The CISO, who has more than 30 years of experience reports daily to our chief information officer (CIO), monthly to the risk and compliance committee (consisting of the president and executive leadership) and quarterly to our board.
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Item 2. Properties
Aircraft
The following table summarizes our total in-service aircraft as of December 31, 2023:
| Aircraft Type | Number of In-Service Aircraft | Seating Capacity (per aircraft) | Age Range (years) | Average Age in Years | ||||||||||||||||||||||
| Airbus A319 | 34 | 156 | 17-20 | 18.4 | ||||||||||||||||||||||
| Airbus A320 | 92 | 177/180/186 | 5-26 | 14.4 | ||||||||||||||||||||||
| Total aircraft | 126 | |||||||||||||||||||||||||
Ground Facilities
We lease facilities at the majority of our leisure destinations and several other airports we serve. Our leases for terminal passenger service facilities (which include ticket counter and gate space, and operations support areas) generally have a term ranging from month-to-month to several years, and may typically be terminated with a 30 to 90 day notice. We have also entered into use agreements at each of the airports we serve which provide for non-exclusive use of runways, taxiways, and other facilities. Landing fees under these agreements are based on the number of landings and weight of the aircraft.
The following details the airport locations we utilize as operational bases as of February 1, 2024:
| Airport | Location | |||||||
| Asheville Regional Airport | Fletcher, North Carolina | |||||||
| Appleton International Airport | Appleton, Wisconsin | |||||||
| Austin-Bergstrom International Airport | Austin, Texas | |||||||
| Bellingham International Airport | Bellingham, Washington | |||||||
| Cincinnati/Northern Kentucky International Airport | Hebron, Kentucky | |||||||
| Des Moines International Airport | Des Moines, Iowa | |||||||
| Flint Bishop International Airport | Flint, Michigan | |||||||
| Destin-Fort Walton Beach Airport | Destin, Florida | |||||||
| Ft. Lauderdale-Hollywood International Airport | Ft. Lauderdale, Florida | |||||||
| Gerald R. Ford International Airport | Grand Rapids, Michigan | |||||||
| Indianapolis International Airport | Indianapolis, Indiana | |||||||
| Lehigh Valley International Airport | Allentown, Pennsylvania | |||||||
| Los Angeles International Airport | Los Angeles, California | |||||||
| Harry Reid International Airport | Las Vegas, Nevada | |||||||
| McGhee Tyson Airport | Knoxville, Tennessee | |||||||
| Nashville International Airport | Nashville, Tennessee | |||||||
| Orlando Sanford International Airport | Sanford, Florida | |||||||
| Phoenix-Mesa Gateway Airport | Mesa, Arizona | |||||||
| Pittsburgh International Airport | Pittsburgh, Pennsylvania | |||||||
| Provo Airport | Provo, Utah | |||||||
| Punta Gorda Airport | Punta Gorda, Florida | |||||||
| Sarasota Bradenton International Airport | Sarasota, Florida | |||||||
| Savannah/Hilton Head International Airport | Savannah, Georgia | |||||||
| St. Petersburg-Clearwater International Airport | St. Petersburg, Florida | |||||||
We believe we have sufficient access to gate space for current and presently contemplated future operations at all airports we serve.
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We use leased facilities at our operational bases to perform line maintenance, overnight parking of aircraft, and other operations' support. We lease additional space in cargo areas at Harry Reid International Airport (Las Vegas), Nashville International Airport, Orlando Sanford International Airport, Phoenix-Mesa Gateway Airport, Punta Gorda Airport, Sarasota Manatee Airport, Savannah/Hilton Head International Airport, Cincinnati/Northern Kentucky International Airport, and St. Petersburg-Clearwater International Airport for our primary line maintenance operations. We also lease or own warehouse space in Las Vegas, Orlando Sanford, St. Petersburg-Clearwater, Punta Gorda, and Phoenix-Mesa for aircraft spare parts and supplies.
Our primary corporate offices are located in Las Vegas, where we own approximately 11 acres of property containing approximately 211,000 square feet of office space.
We also lease and/or own other facilities in Las Vegas and Florida, with approximately 350,000 square feet of space used for training and other corporate purposes. These leases expire between 2024 and 2048.
Sunseeker Resort
We own approximately 28 acres on the harbor in Port Charlotte, Florida where Sunseeker Resort - Charlotte Harbor is located which includes additional property available for related purposes and for possible future expansion. We also own an office building in Lake Suzy, Florida for Sunseeker administration. Additionally, we own a golf course (Aileron Golf Course) consisting of 156 acres in Lake Suzy, Florida, which serves as an amenity to the Resort.
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Item 3. Legal Proceedings
We are subject to certain legal and administrative actions we consider routine to our business activities. We believe the ultimate outcome of any pending legal or administrative matters will not have a material adverse effect on our financial position, liquidity, or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Market for our common stock
Our common stock is quoted on the Nasdaq Global Select Market (symbol: ALGT). On February 1, 2024, the last sale price of our common stock was $79.92 per share. The following table sets forth the range of high and low sale prices for our common stock for the periods indicated.
| Period | High | Low | ||||||||||||
| 2023 | ||||||||||||||
| 1st Quarter | $ | 105.51 | $ | 68.31 | ||||||||||
| 2nd Quarter | 129.00 | 86.91 | ||||||||||||
| 3rd Quarter | 130.93 | 73.96 | ||||||||||||
| 4th Quarter | 85.91 | 54.87 | ||||||||||||
| 2022 | ||||||||||||||
| 1st Quarter | $ | 195.66 | $ | 132.03 | ||||||||||
| 2nd Quarter | 176.56 | 109.82 | ||||||||||||
| 3rd Quarter | 122.36 | 72.97 | ||||||||||||
| 4th Quarter | 84.89 | 62.94 | ||||||||||||
As of February 23, 2024, there were approximately 200 holders of record of our common stock. Because many of our shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of beneficial holders.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information regarding options, warrants and other rights to acquire equity securities under our equity compensation plans as of December 31, 2023:
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(2) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans(3) | ||||||||||||||||||
Equity compensation plans approved by security holders(1) | 28,000 | $ | 245.54 | 485,686 | ||||||||||||||||
(1)There are no securities to be issued under any equity compensation plans not approved by our security holders.
(2)The shares shown as to be issued under equity compensation plans exclude 573,560 shares of unvested restricted stock awards as all restricted stock awards are deemed to have been issued.
(3)Our 2022 Long-Term Incentive Plan applies a fungible ratio such that a full-value award, such as a restricted stock grant or restricted stock unit grant, will be counted at two times its number for purposes of the plan limit. As a result, a maximum of 242,843 shares of restricted stock are remaining for future issuance under the 2022 Long-Term Incentive Plan.
Dividend Policy
We paid a quarterly dividend from 2015 through first quarter 2020 when we suspended all cash dividends upon the onset of the pandemic. In addition, in connection with the Payroll Support Program Agreements we entered into with the U.S. Department of Treasury, repurchases of common stock and the payment of cash dividends were prohibited through September 30, 2022.
In 2023, we recommenced the payment of cash dividends. Our board established the annual dividend rate at $2.40 per share and dividends of $0.60 per share per quarter were declared, and paid, in the third and fourth quarters, bringing total regular cash dividends declared, and paid, in 2023 to $1.20 per share.
Certain of our credit agreements limit the amount of dividends we may pay. The most restrictive agreement provides that absent an event of default, regularly scheduled dividends in any four-quarter period may be paid up to the lesser of $75.0 million or 20 percent of our consolidated EBITDA (as defined in the agreement) for the previous four-quarter period. Absent an event of default, this restriction does not constrain the continued payment of a quarterly dividend at the current level.
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Our Repurchases of Equity Securities
The following table reflects repurchases of our common stock during the fourth quarter of 2023:
| Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of our Publicly Announced Plan | Approximate Dollar Value of Shares that May yet be Purchased Under the Plans or Programs (in thousands) (2) | ||||||||||||||||||||||
| October | 9,196 | $ | 73.92 | None | ||||||||||||||||||||||
| November | 181,693 | 64.98 | 162,115 | |||||||||||||||||||||||
| December | 10,427 | 70.95 | 29,386 | |||||||||||||||||||||||
| Total | 201,316 | $ | 65.70 | 191,501 | $ | 75,697 | ||||||||||||||||||||
(1)Includes shares repurchased from employees who vested a portion of their restricted stock grants. These share repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted a portion of vested shares necessary to satisfy income tax withholding requirements.
(2)Represents the remaining dollar amount of open market purchases of our common stock which has been authorized by our board under a share repurchase program.
Stock Price Performance Graph
The following graph compares the cumulative total shareholder return on our common stock with the cumulative total return on the Nasdaq Composite Index and the NYSE ARCA Airline Index since December 31, 2018. The graph assumes that the value of the investment in our common stock and each index was $100 on December 31, 2018 and that all dividends are reinvested. Stock price performance for the historical periods presented is not necessarily indicative of future results.
The stock price performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
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Item 6. (Reserved)
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis presents factors that had a material effect on our results of operations during the years ended December 31, 2023 and 2022. Unless otherwise expressly stated, for discussion and analysis of 2022 and a comparison of our 2022 results to 2021 results, please refer to our Annual Report on Form 10-K for the year ended December 31, 2022, under Part II Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Also discussed is our financial position as of December 31, 2023 and 2022. Investors should read this discussion in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this annual report. This discussion and analysis contains forward-looking statements. Please refer to the section entitled “Disclosure Regarding Forward-Looking Statements” at the beginning of this annual report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.
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2023 Highlights
•Total operating revenue was a company record of $2.5 billion, up 9.0 percent as compared to 2022, on a total system capacity increase of 1.9 percent.
•Full-year TRASM was 13.38 cents, a record annual TRASM, up 7.0 percent as compared to 2022 on scheduled service capacity increases of 1.7 percent.
•Average total fare was $142.15, up 5.6 percent compared to 2022, including total average ancillary revenue of $72.90, up 7.6 percent from 2022.
•Recorded highest fixed fee revenue in company history of $68.5 million.
•Extended the collective bargaining agreement for flight dispatchers through May 2026 and the collective bargaining agreement for maintenance technicians through October 2028.
•Opened Sunseeker Resort at Charlotte Harbor on December 15, 2023.
•Ranked number 3 amongst major US carriers in the Wall Street Journal's "The Best and Worst Airlines of 2023".
•Made great progress to strengthen our system and operations by:
◦Adding more than 1,300 full-time equivalent employees, including approximately 1,000 newly hired Sunseeker Resort team members
◦Investing in the systems implementations discussed in the Business section.
◦Planning to induct our new Boeing aircraft
•Acquired over 140 thousand new Allegiant co-brand credit card holders during the year, with over 485 thousand active cardholders at year end.
•Received $119.6 million in total co-brand credit card remuneration from Bank of America, up 18 percent from 2022
•Added 2.1 million Allegiant Allways Rewards® members during 2023, with more than 17 million total members at year end, a 13 percent increase over the year-end 2022 number.
•Allegiant co-brand credit card and Allegiant Allways Rewards® were voted as the No. 1 Best Airline Credit Card and No. 2 Best Frequent Flyer Program in USA Today's 10 Best 2023 Loyalty/Rewards Readers' Choice Awards. Allegiant's co-brand credit card was named the best airline co-brand credit card for the fifth consecutive year.
•Published the company's second annual ESG report, which includes five company-wide targets, including an emissions intensity reduction goal.
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AIRCRAFT
Operating Fleet
The following table sets forth the number and type of aircraft in service and operated by us as of the dates indicated. All of the aircraft in our fleet as of December 31, 2023 are owned by us except as indicated in the footnotes to the table:
| As of December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
A320(1)(2) | 92 | 86 | 73 | ||||||||||||||
A319(3) | 34 | 35 | 35 | ||||||||||||||
| Total | 126 | 121 | 108 | ||||||||||||||
(1)Does not include one aircraft of which we have taken delivery as of December 31, 2023 and which was not in service as of that date.
(2)Includes 23 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2023, 20 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2022, and 11 aircraft under finance lease and 11 aircraft under operating lease as of December 31, 2021.
(3)Includes four aircraft under operating lease as of December 31, 2023, December 31, 2022, and December 31, 2021.
As of December 31, 2023, we are party to forward purchase agreements for 51 aircraft with 13 deliveries expected in 2024, approximately 24 in 2025 and the remainder thereafter. The timing of these deliveries is based on management's best estimates and differs from the contract in place. Refer to Part I - Item 2. Properties for further detail regarding our aircraft fleet.
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NETWORK
We manage capacity and route expansion through optimization of our flight schedule to, among other things, better match demand in certain markets. We continually adjust our network through the addition of new markets and routes, adjusting the frequencies into existing markets, and exiting under-performing markets, as we seek to achieve and maintain profitability on each route we serve.
As of February 1, 2024, and including service announcements through that date, we were selling seats on 555 routes serving 124 cities in 42 states.
The following table shows the number of leisure destinations and cities served as of the dates indicated (includes cities served seasonally):
| As of December 31, | |||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||
| Leisure destinations | 33 | 32 | 33 | ||||||||||||||||||||
| Origination cities | 91 | 93 | 99 | ||||||||||||||||||||
| Total cities | 124 | 125 | 132 | ||||||||||||||||||||
| Total routes | 544 | 572 | 595 | ||||||||||||||||||||
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TRENDS
Strong Demand Momentum
While demand has normalized since the post-pandemic period, peak period demand remains at or near all-time highs. Demand continues to compare favorably to 2019 as scheduled service load factors and total revenue per available seat mile ("TRASM") in 2023 were above 2019 and 2022 levels.
Aircraft Fuel
The cost of fuel is volatile, as it is subject to many economic and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could materially affect our operating results and profitability. We have not sought to use financial derivative products to hedge our exposure to fuel price volatility, nor do we have any plans to do so in the future.
The cost per gallon of fuel began to increase significantly in 2021, and the increases were exacerbated by the geopolitical impact of the war in Ukraine. Increases in refinery costs also added to our fuel cost. Although the average fuel cost per gallon declined in 2023 when compared to 2022, the average fuel cost per gallon in 2023 remained 43.7 percent higher than in 2021. We expect high fuel costs will continue to impact our total costs and operating results.
Boeing Agreement
Since December 2021, we have signed an agreement and multiple amendments with The Boeing Company to purchase 50 newly manufactured 737 MAX aircraft with options to purchase an additional 80 737MAX aircraft. We believe this new aircraft purchase is complementary with our low cost strategy based on our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, expected fuel savings and operational reliability from the use of these new aircraft.
In the interest of increased quality control at Boeing and its suppliers, the FAA has indicated that aircraft production rates will be capped until they are fully satisfied with Boeing's quality practices. These factors could delay deliveries to us.
Union Negotiations
The collective bargaining agreement with our pilots is currently amendable and the parties have jointly requested the involvement of the National Mediation Board ("NMB") to assist with the negotiations. The mediation process with the NMB began in early 2023 and is continuing. Separately from the ongoing collective bargaining agreement negotiations, and in an attempt to begin to address pilot pay issues, effective in May 2023, we are recognizing a retention bonus for pilots who continue employment with us until a new labor agreement is approved. The amount being accrued is 35 percent of current pay for a minimum of 85 pay credit hours per month except for first year first officers for whom the percentage is 82 percent.
We are also in the process of negotiating a new contract with the union representing our flight attendants after a tentative agreement negotiated with the union was rejected by the work group.
The terms of any new collective bargaining agreement will increase our costs over the term of the contract. Until new agreements are in place, attrition and difficulty hiring sufficient personnel in the affected work groups could have an adverse effect on our operations and growth.
Pilot Scarcity
The supply of pilots necessary for airline industry growth may be a limiting factor. The ability to hire and retain pilots will be critical to our and the industry’s growth.
Network Expansion
We have identified more than 1,400 incremental routes as opportunities for future network growth, with approximately 77 percent of these additional routes having no current nonstop service. Our ability to add significant numbers of new routes has been temporarily stymied by flight crew staffing, high fuel costs, economic conditions and other factors. Once these conditions allow, we should be able to achieve meaningful growth with greater utilization of our fleet (and, in particular, during peak demand periods), and with projected growth of the fleet.
Establishment of ESG Goals
In our 2022 sustainability report, we established ESG goals in the areas of environmental, social and governance. We will be reporting annually on our progress toward meeting those goals.
VivaAerobus Alliance
In December 2021, we announced plans for a fully-integrated commercial alliance agreement with VivaAerobus, designed to expand options for nonstop leisure air travel between our markets in the United States and Mexico. We and VivaAerobus have submitted a joint application to the DOT requesting approval of and antitrust immunity for the alliance. Although the DOT process has progressed substantially, their review of our application is currently suspended pending the outcome of diplomatic
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engagement on broader treaty issues and, as a result, the timing of commencement of this service is uncertain as it will depend on when or if the DOT will ultimately approve the grant of antitrust immunity.
Sunseeker Resort
Sunseeker Resort at Charlotte Harbor opened in December 2023. Its success will depend on our ability to attract sufficient hotel occupancy through groups and transient bookings at acceptable daily rates and to profitably operate our food and beverage options.
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Our Operating Expenses
A brief description of the items included in our operating expense line items follows.
Aircraft fuel expense includes the cost of aircraft fuel, fuel taxes, into plane fees and airport fuel flowage, storage or through-put fees.
Salaries and benefits expense includes wages, salaries, and employee bonuses, sales commissions for in-flight personnel and Sunseeker Resort personnel, as well as expenses associated with employee benefit plans, stock compensation expense related to equity grants, and employer payroll taxes. The CARES Act employee retention tax credit was recorded as an offset to salaries and benefits expense in both 2021 and 2022.
Station operations expense includes the fees charged by airports for the use or lease of airport facilities and fees charged by third party vendors for ground handling services, commissary expenses, and other related services. Station operations expense also includes most of our irregular operations costs.
Depreciation and amortization expense includes the depreciation of all owned fixed assets, including aircraft and engines, Sunseeker Resort assets, and assets recorded in connection with finance leases. Also included is the amortization of major maintenance expenses on our aircraft and engines, which are capitalized under the deferral method of accounting and amortized as a component of depreciation and amortization expense over the estimated period until the next scheduled major maintenance event.
Maintenance and repairs expense includes all parts, materials and spares required to maintain our aircraft. Also included are fees for repairs performed by third party vendors.
Sales and marketing expense includes all advertising, promotional expenses, sponsorships, travel agent commissions, debit and credit card processing fees associated with the sale of scheduled service and air-related ancillary charges, costs related to advertising and marketing for the Sunseeker Resort, and credit card processing fees for Resort bookings.
Aircraft lease rentals expense consists of the cost of leasing aircraft under operating leases with third parties as well as the cost for sub-service which may be utilized in order to accommodate passengers in the event of operational disruption.
Other expense includes travel and training expenses for crews and ground personnel, facility lease expenses, professional fees, personal property taxes, information technology consulting, other expenses for non-airline initiatives (including Sunseeker Resort, and the now discontinued Allegiant Nonstop family entertainment centers and Teesnap), the cost of passenger liability insurance, aircraft hull insurance and all other insurance policies, excluding employee welfare insurance. Additionally, this expense includes gain and loss on disposals of aircraft and other equipment disposals, and all other administrative and operational overhead expenses not included in other line items above.
Special charges include charges taken in 2023 for accelerated retirements of 21 airframes for early retirement to coincide with planned 737 MAX aircraft deliveries. Other special charges in 2023 and the special charges in 2022 relate to the estimated loss incurred by Sunseeker from the impact of Hurricane Ian and Hurricane Idalia and subsequent insured losses. The amounts of the Sunseeker special charges are offset by amounts recovered under our insurance policies.
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RESULTS OF OPERATIONS
2023 compared to 2022
Operating Revenue
Passenger revenue. Passenger revenue increased 8.7 percent in 2023 compared with 2022 as scheduled service passengers increased by 3.1 percent on a 1.7 percent increase in departures. In addition, stronger passenger demand resulted in a 3.5 percent increase in scheduled service base fares in 2023 compared to 2022. Ancillary air-related revenues also increased by 10.9 percent in 2023 over 2022.
Third party products revenue. Third party products revenue for 2023 increased 11.5 percent over 2022. The increase was primarily the result of an increase in marketing revenue from our co-brand credit card program, offset by a 4.8 percent decrease in rental car days sold and an 11.6 percent decrease in hotel room nights sold.
Fixed fee contract revenue. Fixed fee contract revenue for 2023 increased 12.5 percent compared with 2022 as a result of a 19.8 percent increase in fixed fee departures.
Operating Expenses
The following table presents operating unit costs on a per ASM basis, defined as Operating CASM, for the indicated periods. Excluding fuel on a per ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control. Excluding special charges and Sunseeker operating costs allows management and investors to better compare our airline unit costs with those of other airlines.
| Year Ended December 31, | Percent Change | ||||||||||||||||||||||||||||
| Unitized costs (in cents) | 2023 | 2022 | YoY | ||||||||||||||||||||||||||
| Aircraft fuel | 3.71 | ¢ | 4.42 | ¢ | (16.1) | % | |||||||||||||||||||||||
| Salaries and benefits | 3.66 | 3.00 | 22.0 | ||||||||||||||||||||||||||
| Station operations | 1.37 | 1.39 | (1.4) | ||||||||||||||||||||||||||
| Maintenance and repairs | 0.66 | 0.64 | 3.1 | ||||||||||||||||||||||||||
| Depreciation and amortization | 1.19 | 1.07 | 11.2 | ||||||||||||||||||||||||||
| Sales and marketing | 0.61 | 0.55 | 10.9 | ||||||||||||||||||||||||||
| Aircraft lease rentals | 0.13 | 0.13 | — | ||||||||||||||||||||||||||
| Other | 0.71 | 0.61 | 16.4 | ||||||||||||||||||||||||||
| Special charges, net of insurance recoveries | 0.15 | 0.19 | (21.1) | ||||||||||||||||||||||||||
| CASM | 12.19 | ¢ | 12.00 | ¢ | 1.6 | ||||||||||||||||||||||||
| Operating CASM, excluding fuel | 8.49 | ¢ | 7.58 | ¢ | 12.0 | ||||||||||||||||||||||||
| Airline special charges CASM | 0.19 | — | NM | ||||||||||||||||||||||||||
| Sunseeker Resort CASM | 0.18 | 0.25 | (28.0) | ||||||||||||||||||||||||||
| Airline operating CASM, excluding fuel and Sunseeker Resort activity | 8.12 | ¢ | 7.33 | ¢ | 10.8 | ||||||||||||||||||||||||
NM Not meaningful
Aircraft fuel expense. Aircraft fuel expense decreased $118.9 million, or 14.6 percent, in 2023 compared to 2022. This was primarily driven by a 17.2 percent decrease in average fuel cost per gallon offset by a 2.9 percent increase in gallons consumed on a 1.9 percent increase in ASMs.
Salaries and benefits expense. Salaries and benefits expense increased $135.4 million, or 24.5 percent, in 2023 compared to 2022. The increase is largely due to pilot retention bonuses that we began to accrue in May 2023 and other increases in crew pay, a 6.4 percent year-over-year increase in the number of full-time equivalent airline employees, and Sunseeker pre-opening expenses attributable to the hiring of more than 1,000 team members for its opening in December 2023.
Station operations expense. Station operations expense during 2023 increased $1.4 million or 0.5 percent over 2022 due to increased costs associated with airport and landing fees and a 2.1 percent increase in departures, which were offset by a decrease in costs associated with irregular operations.
Depreciation and amortization expense. Depreciation and amortization expense during 2023 increased $25.6 million or 13.0 percent including an $11.7 million increase in amortization of deferred heavy maintenance as compared to 2022 and an increase of 3.8 percent in the average number of aircraft owned and in service. Capitalized software development costs related to the
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implementations of SAP and Navitaire and the opening of Sunseeker Resort also contributed to higher depreciation and amortization expense as these assets were placed in service during the year.
Maintenance and repairs expense. Maintenance and repairs expense during 2023 increased by $6.0 million or 5.1 percent compared to 2022. This was primarily due to a 9.6 percent increase in the average number of aircraft in service.
Sales and marketing expense. Sales and marketing expense during 2023 increased 13.8 percent compared to 2022, primarily due to an increase in net credit card fees in 2023 as a result of an 8.7 percent increase in passenger revenue year-over-year, and due to a one-time fee to transition, and an associated relaunch campaign for our co-brand credit card. In addition, Sunseeker advertising in connection with the Resort opening in December 2023 contributed to the increase.
Other operating expense. Other expense increased by $20.0 million or 17.6 percent year-over-year, due in part to incremental increases in outsourced labor and software support associated with ongoing IT initiatives and flight crew training needed to support the onboarding of the Boeing fleet. Other expense also includes preopening expenses of $14.8 million related to Sunseeker Resort.
Special charges. Special charges of $28.6 million were recorded within operating expenses during 2023 compared to $34.6 million in 2022. The special charges in 2022 include estimated loss from property damage to Sunseeker Resort related to Hurricane Ian and two subsequent insurance events in 2022, offset by amounts recovered under the company's insurance policies. The special charges in 2023 are attributable to accelerated depreciation from the planned early retirement of 21 airframes per our revised fleet plan, which was offset by $6.4 million of net insurance recoveries (that is, insurance recoveries in excess of new losses related to the 2023 Hurricane Idalia and revised damages on Hurricane Ian and its related insurance events) on Sunseeker damages in 2023.
Income tax expense. We recorded a $41.5 million tax expense compared to a $2.5 million tax expense during 2023 and 2022 respectively. The effective tax rates for 2023 and 2022 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of ASU 2016-09 related to share-based payments.
2022 compared to 2021
The comparison of our 2022 results to 2021 results is included in our Annual Report on Form 10-K for the year ended December 31, 2022, under Part II Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.
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For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
Airline operating statistics (unaudited): | 2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||
| Total system statistics: | |||||||||||||||||||||||||||||||||||||||||||||||
| Passengers | 17,342,236 | 16,796,544 | 13,637,405 | 8,623,984 | 15,012,149 | ||||||||||||||||||||||||||||||||||||||||||
| Available seat miles (ASMs) (thousands) | 18,772,110 | 18,419,045 | 17,490,571 | 13,125,533 | 16,174,240 | ||||||||||||||||||||||||||||||||||||||||||
Airline operating expense per ASM (CASM) (cents) | 12.02 | ¢ | 11.75 | ¢ | 8.21 | ¢ | 8.56 | ¢ | 9.08 | ¢ | |||||||||||||||||||||||||||||||||||||
| Fuel expense per ASM (cents) | 3.71 | ¢ | 4.42 | ¢ | 2.52 | ¢ | 1.69 | ¢ | 2.65 | ¢ | |||||||||||||||||||||||||||||||||||||
Airline operating CASM, excluding fuel (cents) | 8.31 | ¢ | 7.33 | ¢ | 5.69 | ¢ | 6.87 | ¢ | 6.43 | ¢ | |||||||||||||||||||||||||||||||||||||
| Departures | 120,525 | 118,069 | 117,047 | 87,955 | 110,542 | ||||||||||||||||||||||||||||||||||||||||||
| Block hours | 285,453 | 278,792 | 264,628 | 196,849 | 248,513 | ||||||||||||||||||||||||||||||||||||||||||
| Average stage length (miles) | 882 | 884 | 856 | 862 | 855 | ||||||||||||||||||||||||||||||||||||||||||
| Average number of operating aircraft during period | 125.2 | 114.2 | 103.0 | 97.4 | 85.6 | ||||||||||||||||||||||||||||||||||||||||||
| Average block hours per aircraft per day | 6.2 | 6.7 | 7.0 | 5.9 | 8.0 | ||||||||||||||||||||||||||||||||||||||||||
| Full-time equivalent employees at end of period | 5,643 | 5,306 | 4,432 | 3,819 | 4,130 | ||||||||||||||||||||||||||||||||||||||||||
| Fuel gallons consumed (thousands) | 224,996 | 218,606 | 204,689 | 149,479 | 196,442 | ||||||||||||||||||||||||||||||||||||||||||
| ASMs per gallon of fuel | 83.4 | 84.3 | 85.4 | 87.8 | 82.3 | ||||||||||||||||||||||||||||||||||||||||||
| Average fuel cost per gallon | $ | 3.09 | $ | 3.73 | $ | 2.15 | $ | 1.48 | $ | 2.18 | |||||||||||||||||||||||||||||||||||||
| Scheduled service statistics: | |||||||||||||||||||||||||||||||||||||||||||||||
| Passengers | 17,143,870 | 16,630,138 | 13,509,544 | 8,553,623 | 14,823,267 | ||||||||||||||||||||||||||||||||||||||||||
| Revenue passenger miles (RPMs) (thousands) | 15,639,329 | 15,224,346 | 11,963,715 | 7,626,470 | 13,038,003 | ||||||||||||||||||||||||||||||||||||||||||
| Available seat miles (ASMs) (thousands) | 18,208,820 | 17,909,190 | 17,027,902 | 12,814,080 | 15,545,818 | ||||||||||||||||||||||||||||||||||||||||||
| Load factor | 85.9 | % | 85.0 | % | 70.3 | % | 59.5 | % | 83.9 | % | |||||||||||||||||||||||||||||||||||||
| Departures | 116,044 | 114,066 | 113,121 | 85,276 | 105,690 | ||||||||||||||||||||||||||||||||||||||||||
| Block hours | 276,313 | 270,516 | 256,991 | 191,732 | 238,361 | ||||||||||||||||||||||||||||||||||||||||||
| Average seats per departure | 176.3 | 175.7 | 174.2 | 172.8 | 171.1 | ||||||||||||||||||||||||||||||||||||||||||
Yield (cents)(1) | 7.59 | ¢ | 7.31 | ¢ | 6.61 | ¢ | 5.88 | ¢ | 7.00 | ¢ | |||||||||||||||||||||||||||||||||||||
Total passenger revenue per ASM (TRASM) (cents)(2) | 13.38 | ¢ | 12.50 | ¢ | 9.78 | ¢ | 7.40 | ¢ | 11.28 | ¢ | |||||||||||||||||||||||||||||||||||||
Average fare - scheduled service(3) | $ | 69.25 | $ | 66.88 | $ | 58.50 | $ | 52.45 | $ | 61.58 | |||||||||||||||||||||||||||||||||||||
Average fare - air-related charges(3) | $ | 66.33 | $ | 61.67 | $ | 58.33 | $ | 53.02 | $ | 51.96 | |||||||||||||||||||||||||||||||||||||
| Average fare - third party products | $ | 6.57 | $ | 6.07 | $ | 6.40 | $ | 5.43 | $ | 4.72 | |||||||||||||||||||||||||||||||||||||
| Average fare - total | $ | 142.15 | $ | 134.62 | $ | 123.24 | $ | 110.91 | $ | 118.26 | |||||||||||||||||||||||||||||||||||||
| Average stage length (miles) | 888 | 890 | 862 | 867 | 859 | ||||||||||||||||||||||||||||||||||||||||||
| Fuel gallons consumed (thousands) | 218,129 | 212,466 | 198,891 | 145,528 | 188,596 | ||||||||||||||||||||||||||||||||||||||||||
| Average fuel cost per gallon | $ | 3.09 | $ | 3.72 | $ | 2.13 | $ | 1.48 | $ | 2.18 | |||||||||||||||||||||||||||||||||||||
| Percent of sales through website during period | 95.8 | % | 96.0 | % | 94.7 | % | 93.1 | % | 93.3 | % | |||||||||||||||||||||||||||||||||||||
Other Data: | |||||||||||||||||||||||||||||||||||||||||||||||
| Rental car days sold | 1,377,710 | 1,447,708 | 1,361,123 | 1,132,173 | 1,921,930 | ||||||||||||||||||||||||||||||||||||||||||
| Hotel room nights sold | 249,933 | 282,854 | 261,158 | 199,059 | 415,593 | ||||||||||||||||||||||||||||||||||||||||||
(1)Defined as scheduled service revenue divided by revenue passenger miles
(2)Various components of this measure do not have a direct correlation to ASMs. These figures are provided on a per ASM basis so as to facilitate comparisons with airlines reporting revenues on a per ASM basis.
(3)Reflects division of passenger revenue between scheduled service and air-related charges in our booking path.
The following terms used in this section and elsewhere in this annual report have the meanings indicated below:
“Available seat miles” or “ASMs” represents the number of seats available for passengers multiplied by the number of miles the seats are flown.
“Average fuel cost per gallon” represents total aircraft fuel expense for our total system divided by the total number of fuel gallons consumed in our total system.
“Average stage length” represents the average number of miles flown per flight.
“Block hours” represents the number of hours during which the aircraft is in revenue service, measured from the time of gate departure until the time of gate arrival at the destination.
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“Load factor” represents the percentage of aircraft seating capacity utilized (revenue passenger miles divided by available seat miles).
“Airline operating expense per ASM” or “CASM” represents airline only operating expenses excluding Sunseeker divided by total system available seat miles.
“Airline operating CASM, excluding fuel” represents airline only operating expenses excluding Sunseeker, less aircraft fuel expense, divided by total system available seat miles. This statistic provides management and investors the ability to measure and monitor our airline cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors and therefore are beyond our control.
“Passengers” represents the total number of passengers flown on all flight segments.
“Revenue passenger miles” or “RPMs” represents the number of miles flown by revenue passengers.
“Total passenger revenue per ASM” or “TRASM” represents total passenger revenue divided by scheduled service available seat miles.
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LIQUIDITY AND CAPITAL RESOURCES
Current liquidity
Cash, cash equivalents and investment securities (short-term and long-term) decreased to $870.7 million at December 31, 2023, from $1,018.4 million at December 31, 2022. Investment securities represent highly liquid marketable securities which are available-for-sale.
As of February 1, 2024, we have $275.0 million of undrawn capacity under revolving credit facilities plus another $25.1 million of undrawn capacity under a PDP financing facility and $215.7 million under a prearranged aircraft financing facility.
Restricted cash represents escrowed funds under fixed fee contracts, escrowed project funds and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability until the flight is completed.
We suspended share repurchases and our quarterly cash dividend in first quarter 2020, as part of cash conservation efforts in response to the effects of COVID-19 on our business. In connection with our receipt of financial support under the payroll support programs, we agreed not to repurchase shares or pay cash dividends through September 30, 2022. We resumed our share repurchases in fourth quarter 2022 and have $75.7 million of unused authority at December 31, 2023.
We reinstituted a regular cash dividend in third quarter 2023 at an annual rate of $2.40 per share, payable quarterly.
We believe we have more than adequate liquidity resources through our cash, cash equivalent and short term investment balances, our undrawn capacity under existing credit facilities, operating cash flows and anticipated access to liquidity, to meet our current contractual obligations and remain in compliance with the debt covenants in our existing financing agreements for the next 12 months. We will continue to consider raising funds through debt financing to finance aircraft purchases and also on an opportunistic basis.
Debt
Our debt and finance lease obligations balance, without reduction for related issuance costs, increased from $2.12 billion as of December 31, 2022 to $2.28 billion as of December 31, 2023. During 2023, we borrowed $642.6 million including $352.1 million of fixed rate debt and $290.5 million related to pre-delivery deposits. During 2023, we made principal payments of $480.9 million, including a $150.0 million voluntary prepayment of our senior secured note maturing in 2024 and $171.5 million voluntary prepayment of debt secured by aircraft, of which $60.0 million was due in 2024. We also entered into a revolving credit facility in 2023 to borrow up to $100.0 million, which remains undrawn. Including this revolving credit facility, we had $275.0 million undrawn and available under our revolving credit facilities as of December 31, 2023.
Sources and Uses of Cash
Operating Activities. Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers. During 2023, our operating activities provided $423.1 million of cash compared to $303.1 million during 2022. This change was primarily attributable to a $115.1 million increase in net income compared to 2022 with offsets for changes in individual current asset and liability items.
Investing Activities. Cash used for investing activities was $721.9 million during 2023 compared to $491.4 million in 2022. During 2023, there was a $339.3 million increase in purchases of property and equipment, which includes a $245.6 million increase related to aircraft pre-delivery deposits. This increase was offset by a $51.9 million increase in proceeds from maturities of investment securities, net of purchases, and a $30.3 million increase in insurance proceeds from damages at the Sunseeker Resort.
Financing Activities. Cash provided by financing activities for 2023 was $212.9 million, compared to $33.1 million in 2022. The change was the result of a $220.8 million decrease in principal payments on long term debt and finance lease obligations and $102.3 million of cash disbursed to us from funds held in a construction loan deposit trust account during 2023, compared to $92.7 million of funds deposited into the construction deposit trust account (which are considered to be both cash proceeds from the issuance of debt and cash outflows to the deposit trust account) in 2022. The funds in the construction deposit trust account consisted of proceeds of the Sunseeker construction loan and insurance recoveries and were disbursed to us on approval of construction expenses submitted to the trustee. The increase in cash provided by these factors in 2023 was offset by a $213.9 million decrease in proceeds from the issuance of debt and finance lease obligations, net of issuance costs, and $22.1 million used to pay cash dividends in 2023, compared to none in the prior year.
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OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTRACTUAL OBLIGATIONS
The following table discloses aggregate information about our contractual cash obligations and off-balance sheet arrangements as of December 31, 2023 and the periods in which payments are due:
| Contractual obligations (in thousands) | Less than 1 year | 2-3 years | 4-5 years | More than 5 years | Total | |||||||||||||||||||||||||||
Long-term debt obligations(1) | $ | 545,598 | $ | 478,024 | $ | 1,059,107 | $ | 143,782 | $ | 2,226,511 | ||||||||||||||||||||||
| Finance lease obligations | 51,408 | 102,516 | 117,016 | 336,168 | 607,108 | |||||||||||||||||||||||||||
| Operating lease obligations | 25,912 | 37,746 | 21,686 | 42,615 | 127,959 | |||||||||||||||||||||||||||
Aircraft acquisition obligations(2) | 866,545 | 833,291 | — | — | 1,699,836 | |||||||||||||||||||||||||||
| Total future payments under contractual obligations | $ | 1,489,463 | $ | 1,451,577 | $ | 1,197,809 | $ | 522,565 | $ | 4,661,414 | ||||||||||||||||||||||
(1)Long-term debt obligations (including variable interest entities) include scheduled interest payments, using applicable reference rates as of December 31, 2023, and excludes debt issuance costs.
(2)Includes aircraft and engine acquisition obligations under existing purchase agreements. These amounts are not reflected on our balance sheet.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements based on events and transactions occurring during the periods reported. Note 2 to our Consolidated Financial Statements provides a detailed discussion of our significant accounting policies.
Critical accounting policies are defined as those policies that reflect significant judgments about matters that are inherently uncertain. Our actual results may differ from these estimates under different assumptions or conditions. We believe our critical accounting policies are limited to those described below.
Allways Rewards® Credit Card Program
Under the Allegiant co-brand credit card arrangement, points are sold and consideration is received under an agreement which expires in 2031. Under this arrangement, we identified the following deliverables: travel points to be awarded (the travel component), use of our brand and access to our member lists, and certain other advertising and marketing elements (collectively the marketing component). Each of these deliverables is accounted for separately and allocation of the consideration from the agreement is determined based on the relative selling price of each deliverable. We applied a level of management judgment and estimation in determining the best estimate of selling price for each deliverable by considering multiple inputs and methods including, but not limited to, the redemption value of points awarded, discounted cash flows, brand value, volume discounts, published selling prices, number of points to be awarded and number of points expected to be redeemed.
Revenue from the travel component is deferred based on its relative selling price and is recognized into revenue when the points are redeemed by cardholders and the related service is provided. Revenue from the marketing component is considered earned in the period in which points are sold and is therefore recognized into third party products revenue in the same period.
Accounting for Long-Lived Assets
We record impairment losses on long-lived assets used in operations, consisting principally of property and equipment, when events or changes in circumstances indicate, in management’s judgment, that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In making these determinations, we utilize certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated future cash flows expected to be generated by those assets which are based on additional assumptions such as (but not limited to) asset utilization, average fare, block hours, fuel costs, length of service the asset will be used in operations, and estimated salvage values.
In estimating the useful lives and residual values of our aircraft, we have primarily relied upon actual experience with the same or similar aircraft types, current and projected future market information, and input from other industry sources. Subsequent revisions to these estimates could be caused by changing market prices of our aircraft, changes in utilization of the aircraft, and other fleet events.
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RECENT ACCOUNTING PRONOUNCEMENTS
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are subject to certain market risks, including changes in interest rates and commodity prices (specifically, aircraft fuel). The adverse effects of changes in markets could pose potential loss, as discussed below. The sensitivity analysis does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.
Aircraft Fuel
Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel expense during 2023 represented 30.4 percent of our total operating expenses. Increases in fuel prices, or a shortage of supply, could have a material impact on our operations and operating results. Based on our fuel consumption during 2023, a hypothetical ten percent increase in the average price per gallon of fuel would have increased fuel expense by approximately $69.1 million. We have not hedged fuel price risk for many years.
Interest Rates
As of December 31, 2023, we had $429.6 million of variable-rate debt, including current maturities and without reduction for $4.7 million in related costs. A hypothetical 100 basis point change in interest rates would have affected interest expense on variable rate debt by approximately $3.9 million during 2023.
52
Item 8. Financial Statements and Supplementary Data
53
Index to Consolidated Financial Statements
| Title | Page No. | |||||||
54
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Allegiant Travel Company:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Allegiant Travel Company and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 29, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Estimated Loss associated with Sunseeker Resort
As discussed in Note 3 to the consolidated financial statements, the Sunseeker Resort at Charlotte Harbor (Sunseeker Resort) was damaged during 2023 as a result of Hurricane Idalia. Based on the Company’s assessment of the damage and the anticipated future restoration costs, which approximate the carrying amount of the portion of the assets that were damaged, an estimated $23.6 million loss was recorded as a reduction to the carrying amount of the Sunseeker Resort during the year ended December 31, 2023.
We identified the evaluation of the estimated loss associated with the Sunseeker Resort as a critical audit matter. Subjective auditor judgment was required to evaluate the estimated loss and the assumption that the future restoration costs approximate the carrying amount of the damaged assets.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s property loss estimation process, including a control related to determining the assumption that the future restoration costs approximate the carrying amount of the damaged assets. We evaluated the reasonableness of the estimated loss by obtaining a confirmation of the anticipated restoration costs estimated by the Company’s insurance- claim adjustor directly from that adjustor. We compared the confirmation of the future restoration costs from the insurance claim adjustor to the
55
estimated loss recorded by the Company. We evaluated certain publicly available costing indices to assess the Company’s assumption that the future restoration costs approximate the carrying amount of the damaged assets.
/s/ KPMG LLP
We have served as the Company’s auditor since 2016.
Dallas, Texas
February 29, 2024
56
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
| December 31, 2023 | December 31, 2022 | ||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Short-term investments | |||||||||||
| Accounts receivable | |||||||||||
Expendable parts, supplies and fuel, net of reserve of $ | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| TOTAL CURRENT ASSETS | |||||||||||
Property and equipment (including $ | |||||||||||
| Long-term investments | |||||||||||
Deferred major maintenance, net of accumulated amortization of $ | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
| Deposits and other assets | $ | ||||||||||
| TOTAL ASSETS: | $ | $ | |||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Current operating lease liabilities | |||||||||||
| Air traffic liability | |||||||||||
| Current loyalty program liability | |||||||||||
Current maturities of long-term debt and finance lease obligations (including $ | |||||||||||
| TOTAL CURRENT LIABILITIES | |||||||||||
| LONG-TERM DEBT AND OTHER NONCURRENT LIABILITIES | |||||||||||
Long-term debt and finance lease obligations (including $ | |||||||||||
| Deferred income taxes | |||||||||||
| Noncurrent operating lease liabilities | |||||||||||
| Noncurrent loyalty program liability | |||||||||||
| Other noncurrent liabilities | |||||||||||
| TOTAL LIABILITIES: | $ | $ | |||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 13) | |||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||
Common stock, par value $ | |||||||||||
Treasury shares, at cost, | ( | ( | |||||||||
| Additional paid in capital | |||||||||||
| Accumulated other comprehensive income, net | |||||||||||
| Retained earnings | |||||||||||
| TOTAL EQUITY: | $ | $ | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| OPERATING REVENUES: | |||||||||||||||||
| Passenger | $ | $ | $ | ||||||||||||||
| Third party products | |||||||||||||||||
| Fixed fee contracts | |||||||||||||||||
| Other | |||||||||||||||||
| Total operating revenues | |||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||
| Aircraft fuel | |||||||||||||||||
| Salaries and benefits | |||||||||||||||||
| Station operations | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Maintenance and repairs | |||||||||||||||||
| Sales and marketing | |||||||||||||||||
| Aircraft lease rentals | |||||||||||||||||
| Other | |||||||||||||||||
| Payroll Support Programs grant recognition | ( | ||||||||||||||||
| Special charges, net of recoveries | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| OPERATING INCOME | |||||||||||||||||
| OTHER (INCOME) EXPENSES: | |||||||||||||||||
| Interest income | ( | ( | ( | ||||||||||||||
| Interest expense | |||||||||||||||||
| Capitalized interest | ( | ( | |||||||||||||||
| Other, net | ( | ||||||||||||||||
| Total other expenses | |||||||||||||||||
| INCOME BEFORE INCOME TAXES | |||||||||||||||||
| INCOME TAX PROVISION | |||||||||||||||||
| NET INCOME | $ | $ | $ | ||||||||||||||
| Earnings per share to common shareholders: | |||||||||||||||||
| Basic | $ | $ | $ | ||||||||||||||
| Diluted | $ | $ | $ | ||||||||||||||
| Shares used for computation: | |||||||||||||||||
| Basic | |||||||||||||||||
| Diluted | |||||||||||||||||
| Cash dividends declared per share: | $ | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
58
ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| NET INCOME | $ | $ | $ | ||||||||||||||
| Other comprehensive income: | |||||||||||||||||
| Change in available for sale securities, net of tax | ( | ||||||||||||||||
| TOTAL COMPREHENSIVE INCOME | $ | $ | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share amounts)
| Accumulated | |||||||||||||||||||||||||||||||||||||||||
| Common | Additional | other | Total | ||||||||||||||||||||||||||||||||||||||
| stock | Par | paid-in | comprehensive | Retained | Treasury | shareholders' | |||||||||||||||||||||||||||||||||||
| outstanding | value | capital | income (loss) | earnings | shares | equity | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of forfeitures | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Payroll Support Programs warrant issuance | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | $ | — | $ | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | ( | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock issued under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Cash dividends, $ | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||
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ALLEGIANT TRAVEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| OPERATING ACTIVITIES: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| (Gain) loss on aircraft and other equipment disposals | ( | ||||||||||||||||
| Special charges, net of recoveries | |||||||||||||||||
| Share-based compensation expense | |||||||||||||||||
| Deferred income taxes | |||||||||||||||||
| Other adjustments | ( | ||||||||||||||||
| Changes in certain assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ( | |||||||||||||||
| Tax receivable | |||||||||||||||||
| Prepaid expenses | ( | ( | ( | ||||||||||||||
| Accounts payable | ( | ||||||||||||||||
| Accrued liabilities | |||||||||||||||||
| Air traffic liability | ( | ( | |||||||||||||||
| Deferred major maintenance | ( | ( | ( | ||||||||||||||
| Other assets/liabilities | ( | ( | ( | ||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| INVESTING ACTIVITIES: | |||||||||||||||||
| Purchase of investment securities | ( | ( | ( | ||||||||||||||
| Proceeds from maturities of investment securities | |||||||||||||||||
| Aircraft pre-delivery deposits | ( | ( | ( | ||||||||||||||
| Purchase of property and equipment, including capitalized interest | ( | ( | ( | ||||||||||||||
| Purchase of note receivable | ( | ||||||||||||||||
| Insurance proceeds from damage to property & equipment | |||||||||||||||||
| Other investing activities | |||||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| FINANCING ACTIVITIES: | |||||||||||||||||
| Proceeds from issuance of common stock | |||||||||||||||||
| Cash dividends paid to shareholders | ( | ||||||||||||||||
| Proceeds from the issuance of debt and finance lease obligations | |||||||||||||||||
| Repurchase of common stock | ( | ( | |||||||||||||||
| Principal payments on debt and finance lease obligations | ( | ( | ( | ||||||||||||||
| Debt issuance costs | ( | ( | ( | ||||||||||||||
| Sunseeker construction financing disbursements (deposits) | ( | ( | |||||||||||||||
| Other financing activities | |||||||||||||||||
| Net cash provided by financing activities | |||||||||||||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ( | |||||||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | |||||||||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | $ | $ | ||||||||||||||
| CASH PAYMENTS/(RECEIPTS) FOR: | |||||||||||||||||
| Interest paid, net of amount capitalized | $ | $ | $ | ||||||||||||||
| Income tax paid (refunds) | ( | ||||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS | |||||||||||||||||
| Right-of-use (ROU) assets acquired | $ | $ | $ | ||||||||||||||
| Purchases of property and equipment in accrued liabilities | $ | $ | $ | ||||||||||||||
| Flight equipment acquired under finance leases | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
61
ALLEGIANT TRAVEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023, 2022 and 2021
Note 1 — Organization and Business of Company
Allegiant Travel Company (the “Company”) is a leisure travel company focused on providing travel services and products to residents of under-served cities in the United States. The Company operates a low-cost, low utilization passenger airline which sells air transportation both on a stand-alone basis and bundled with the sale of ancillary air-related and third party services and products. The Company also provides air transportation under fixed fee flying arrangements, generates other ancillary revenues, and owns and operates the Sunseeker Resort and Aileron, the related golf course.
Scheduled service and fixed fee air transportation services have similar operating margins, economic characteristics, and production processes (check-in, baggage handling and flight services) which target the same class of customers, and are subject to the same regulatory environment. As a result, the Company believes its airline activities operate under one reportable segment and does not separately track expenses for scheduled service and fixed fee air transportation services. The Company's Sunseeker Resort represents a separate reportable segment. Refer to Note 14 for additional information.
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Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Allegiant Travel Company and its majority-owned operating subsidiaries. The Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method. All intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments and interest bearing instruments with original maturities of three months or less when purchased. Such investments are carried at cost which approximates fair value.
Restricted Cash
Accounts Receivable
Accounts receivable are recorded at invoiced amount which approximates fair value. In addition to income tax receivables, the accounts receivable consist primarily of amounts due from credit card companies associated with the sale of tickets for future travel. These receivables are short-term and generally settle within a few days of sale. There are also receivables related to commission amounts due from Enterprise Holdings Inc. based on terms in the rental car provider agreement and amounts due related to fixed fee charter agreements. If deemed necessary, the Company records charges to its allowance for doubtful accounts for amounts not expected to be collected, for which the balance was immaterial for all years presented.
Short-term and Long-term Investments
The Company’s investments in marketable securities are classified as available-for-sale and are reported at fair value with the net unrealized gain or (loss) reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. For investments in an unrealized loss position, the Company determines whether a credit loss exists by considering information about the collectability of the instrument and current market conditions. There have been no credit losses in the years presented. Investment securities with original maturities of three months or less are classified as cash equivalents. Investment securities with original maturities greater than three months are classified as either short-term investments or long-term investments based on the maturity date in relation to the balance sheet date. Short-term investments have a maturity date less than or equal to one year from the balance sheet date, and long-term investments have a maturity date greater than one year from the balance sheet date.
The amortized cost of investment securities sold is determined by the specific identification method with any realized gains or losses reflected in other (income) expense. The Company had minimal realized losses during the years ended December 31, 2023, 2022, and 2021. The Company believes unrealized losses related to debt securities are not other-than-temporary and does not intend to sell these securities prior to amortized cost recoverability.
The Company attempts to minimize its concentration risk with regard to its cash, cash equivalents, and investment portfolio. This is accomplished by diversifying and limiting amounts among different counterparties, the type of investment, and the amount invested in any individual security, commercial paper, or money market fund.
Expendable Parts, Supplies and Fuel, Net
Expendable parts, supplies and fuel inventories are valued at cost using the first-in, first-out method. Such expendable parts, supplies and fuel are charged to expense as they are used in operations. An obsolescence allowance for expendable parts and supplies is based on salvage values and the average remaining useful life of the fleet. The obsolescence allowance for expendable parts and supplies was $10.3 million and $8.1 million at December 31, 2023 and 2022, respectively.
Deposits and Other Assets
Deposits and Other Assets consist primarily of airport deposits, aircraft lease deposits, deposits as required by the construction loan agreement for the Sunseeker Resort and a note receivable from the counter-party in the Company’s joint venture alliance.
63
Operating Lease Right-of-Use Asset and Liability
The Company determines if an arrangement is a lease at inception and has lease agreements for aircraft, office facilities, office equipment, certain airport and terminal facilities, and other space and assets with non-cancelable lease terms. Certain real estate and property leases, aircraft leases, and various other operating leases are measured on the balance sheet with a lease liability and right-of-use ("ROU") asset. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore excluded from consideration.
ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. At lease commencement, the present value of lease payments is calculated using the rate implicit in the lease, if known, or an estimated incremental borrowing rate which takes into consideration recent debt issuances as well as other applicable market data available.
Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the Accounting Standards (ASU) 2016-02, Leases (Topic 842). Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components.
Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the balance sheet. Additionally, lease and non-lease components are accounted for as a single lease component for real estate agreements.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives less any estimated salvage value. Property under finance leases and related obligations are initially recorded at an amount equal to the present value of future minimum lease payments computed using the rate implicit in the lease, if known, or on the basis of the Company’s estimated incremental borrowing rate, and depreciation is recorded on a straight-line basis and is included within depreciation and amortization expense. The estimated useful lives of the principal asset classes are shown below.
| Aircraft, engines and related rotable parts | - | ||||||||||
| Buildings and leasehold improvements | - | ||||||||||
| Equipment | - | ||||||||||
| Computer hardware and software | - | ||||||||||
In estimating the useful lives and residual values of aircraft, the Company primarily relies upon actual experience with the same or similar aircraft types, current and projected future market information, and input from other industry sources. Subsequent revisions to these estimates could be caused by changing market prices of the Company’s aircraft, changes in utilization of the aircraft, and other fleet events. Changes in the estimate for useful lives or residual values of the Company’s property and equipment could result in changes in depreciation expense.
The Company is required to make pre-delivery payments ("PDPs") towards the purchase price of new aircraft and engines prior to delivery. These deposits are included in flight equipment on the Company's consolidated balance sheets.
Interest is capitalized by applying a capitalization rate to the weighted-average carrying amount of expenditures for qualifying assets over the period and depreciated over the estimated useful life of the related asset(s) acquired/developed.
Software Capitalization
The Company capitalizes certain internal and external costs related to the acquisition and development of computer software during the application development stage of projects. The Company amortizes these capitalized costs using the straight-line method over the estimated useful life of the software, which typically ranges from to fifteen years . The Company had unamortized computer software development costs of $139.1 million and $80.2 million as of December 31, 2023 and 2022, respectively. Amortization expense related to computer software was $12.4 million, $15.2 million and $10.6 million for the years ended December 31, 2023, 2022 and 2021 respectively. Costs incurred during the preliminary and post-implementation stages are expensed as incurred.
64
Aircraft Maintenance and Repair Costs
The Company accounts for all non-major maintenance and repair costs incurred for its fleet under the direct expense method. Under this method, maintenance and repair costs for aircraft are charged to maintenance and repair expenses as incurred. Maintenance and repair costs include all parts, materials, and line maintenance activities required to maintain the Company's fleet.
Amortization expense related to major maintenance costs was $55.5 million, $43.8 million, and $42.1 million for the years ended December 31, 2023, 2022, and 2021 respectively.
Measurement of Impairment of Long-Lived Assets
The Company records impairment losses on long-lived assets used in operations, consisting principally of property and equipment, when events or changes in circumstances indicate, in management’s judgment, that the assets might be impaired, and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In making these determinations, the Company utilizes certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service for which the asset will be used in operations, and estimated salvage values.
Revenue Recognition
Passenger revenue
Passenger revenue includes scheduled service revenue, ancillary air-related charges, and travel point redemptions from the co-brand Allegiant credit card and the Company's non-card loyalty program. Revenue from travel point redemptions from the co-brand credit card and the loyalty program are described in the Allways Rewards® Credit Card Program and Allways Rewards® Loyalty Program sections below.
Scheduled service revenue consists of ticket revenue generated from nonstop flights in the Company’s route network, recognized either when the transportation is provided, or when ticket voucher breakage occurs. Nonrefundable scheduled itineraries expire on the date of the intended flight, unless the date is extended by notification from the customer in advance. Itineraries sold for transportation not yet used, as well as unexpired vouchers, are included in air traffic liability.
Ancillary air-related charges include various services and products related to the flight such as baggage fees, the use of the Company’s website to purchase scheduled service transportation, advance seat assignments, and other services which are not included in the base ticket price. Revenues from air-related charges are recognized when the transportation is provided. If a customer cancels a flight, a voucher may be issued for a future flight, at which time the associated revenue is recognized in scheduled service revenue upon completion of the future flight. Additionally, the Company estimates the value of vouchers that will expire unused and recognizes such revenue at the time of issuance.
Various taxes and fees, assessed on the sale of tickets to customers, are collected by the Company serving as an agent, and remitted to taxing authorities. These taxes and fees are not included as revenue in the Company’s consolidated statements of income and are recorded as a liability until remitted to the appropriate taxing authority.
Third party products revenue
Ancillary third party products revenue is generated from the sale of hotel rooms, rental cars and ticket attractions, as well as marketing revenue associated with the co-brand credit card. Revenue from the sale of third party products is recognized at the time the product is utilized, such as the time a purchased hotel room is occupied. Revenue from the sale of third party products is recorded net of amounts paid to wholesale providers, travel agent commissions, and transaction costs.
Revenue from travel point redemptions from the co-brand credit card and the loyalty program are described in the Allways Rewards® Credit Card Program and Allways Rewards® Loyalty Program sections below.
Fixed fee contract revenue
65
Fixed fee contract revenue consists of fees under agreements to provide charter service on a year-round and ad hoc basis. Fixed fee contract revenue is recognized when the transportation is provided.
Sunseeker Resort
Sunseeker Resort's revenue from contracts with customers primarily consists of sales of rooms, food and beverage, golf, retail and other goods and services. As compensation for such goods and services, the Company is typically entitled to a fixed nightly fee for an agreed upon period and additional fixed fees for any ancillary services purchased. These fees are generally payable at the time the hotel guest checks out of the hotel. The Company generally satisfies the performance obligations over time, and the Company recognizes the revenue from room sales and from other ancillary guest services on a daily basis, as the rooms are occupied and the Company has rendered the services. Sunseeker Resort revenues are included in other revenue in the consolidated statements of income.
Allways Rewards® Credit Card Program
Under the Allegiant co-brand credit card arrangement, points are sold and consideration is received under an agreement with the issuer bank that expires in 2031. Under this arrangement, the Company identified the following deliverables: travel points to be awarded (the travel component), use of the Company’s brand and access to its member lists, and certain other advertising and marketing elements (collectively the marketing component). Each of these deliverables is accounted for separately and allocation of the consideration from the agreement is determined based on the relative selling price of each deliverable. The Company applied a level of management judgment and estimation in determining the best estimate of selling price for each deliverable by considering multiple inputs and methods including, but not limited to, the redemption value of points awarded, discounted cash flows, brand value, volume discounts, published selling prices, number of points to be awarded and number of points expected to be redeemed.
Revenue from the travel component is deferred based on its relative selling price and is recognized into passenger revenue when the points are redeemed by cardholders and the underlying service is provided. Revenue from the marketing component is considered earned in the period in which points are sold and is therefore recognized into third party products revenue in the same period.
Allways Rewards® Loyalty Program
Allegiant’s Allways Rewards® Loyalty Program enables program members to earn points for every dollar they spend on the Company’s website. Under the program, which launched in August 2021, members continue to accumulate points until the time they decide to redeem them. In addition to opportunities to redeem points for flights, lodging, rental cars, and at the Sunseeker Resort, the program leverages Allegiant's partnerships to offer additional rewards to members, including sports tickets and exclusive experiences. Members can also earn points by using their Allegiant co-brand credit card.
Under Allways Rewards®, members receive one point for every dollar spent at Allegiant.com, and two points per $1 for spending over $500 (excluding taxes and fees). The Company utilizes the deferred revenue method of accounting for points earned through the program based on the stand-alone selling price and revenue is recognized when points are redeemed and the underlying service has been provided. The stand-alone selling price of points is adjusted for an estimate of points that will not be redeemed (“breakage”) using a statistical model based on historical redemption patterns to develop an estimate of the likelihood of future redemption.
Advertising Costs
Preopening expenses
Preopening expenses represent personnel, advertising, and other costs incurred prior to the opening of Sunseeker Resort and are expensed as incurred. During the year ended December 31, 2023, the Company incurred $26.5 million of preopening expenses related to the opening of the Resort, which is included in salaries and benefits expense, sales and marketing expense, and other expense in the consolidated statements of income.
Earnings per Share
Basic and diluted earnings per share are computed using the two-class method. Under the two-class method, the Company attributes net income to two classes, common stock and unvested restricted stock awards. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities because they receive non-forfeitable rights to cash dividends at the same rate as common stock.
Diluted net income per share is calculated using the more dilutive of two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs as described below:
1.Assume vesting of restricted stock using the treasury stock method.
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2.Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.
For the years ended December 31, 2023, 2022 and 2021, the second method above was used in the computation because it was more dilutive than the first method. The following table sets forth the computation of net income per share on a basic and diluted basis for the periods indicated:
| Year ended December 31, | |||||||||||||||||||||||||||||
| (in thousands, except per share data) | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||
| Basic: | |||||||||||||||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||||||||||||||
| Less income allocated to participating securities | ( | ( | ( | ||||||||||||||||||||||||||
| Net income attributable to common stock | $ | $ | $ | ||||||||||||||||||||||||||
| Earnings per share, basic | $ | $ | $ | ||||||||||||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||||||||
| Diluted: | |||||||||||||||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||||||||||||||
| Less income allocated to participating securities | ( | ( | ( | ||||||||||||||||||||||||||
| Net income attributable to common stock | $ | $ | $ | ||||||||||||||||||||||||||
| Earnings per share, diluted | $ | $ | $ | ||||||||||||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||||||||
| Dilutive effect of stock options and restricted stock | |||||||||||||||||||||||||||||
| Adjusted weighted-average shares outstanding under treasury stock method | |||||||||||||||||||||||||||||
| Participating securities excluded under two-class method | ( | ( | ( | ||||||||||||||||||||||||||
| Adjusted weighted-average shares outstanding under two-class method | |||||||||||||||||||||||||||||
Stock awards outstanding of 81,748 , 79,644 , and 815 shares (not in thousands) as of December 31, 2023, 2022, and 2021, respectively, were excluded from the computation of diluted earnings per share as they were antidilutive.
Share-Based Compensation
The Company accounts for share-based compensation in accordance with accounting standards which require the compensation cost related to share-based payment transactions be recognized in the Company’s consolidated statements of income. The share-based compensation cost is measured based on grant date fair value. The Company’s share-based employee compensation plan is more fully discussed in Note 12.
Income Taxes
The Company recognizes deferred income taxes based on the asset and liability method required by accounting standards. Deferred tax assets and liabilities are determined based on the timing differences between book basis for financial reporting purposes and tax basis of the assets and liabilities and measured using the enacted tax rates and provisions of the enacted tax law. A valuation allowance for deferred tax assets is recorded if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company determines the net non-current deferred tax assets or liabilities separately for federal, state, foreign and other local jurisdictions.
The Company’s income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the jurisdictions where the Company operates. The Company assesses potentially unfavorable outcomes of such examinations based on the criteria set forth in uncertain tax position accounting standards. The accounting standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
Accounting standards for income taxes utilize a two-step approach for evaluating tax positions. Recognition (Step I) occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step II) is only addressed if the position is deemed to be more likely than not to be sustained. Under Step II, the tax benefit is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.
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Recent Accounting Pronouncements
In October 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-06, Disclosure Improvements to align the requirements in the FASB Accounting Standards Codification with the SEC's regulations in response to the SEC's August 2018 final rule that updated and simplified certain disclosure requirements. Each amendment in the ASU will only be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. The Company is currently evaluating the potential impact that the standard will have on its financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company's annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures." The new standard requires expanded income tax disclosure of specific categories in the rate reconciliation and income taxes paid, disaggregated by jurisdiction. ASU 2023-09 is effective for the Company's annual periods beginning January 1, 2025, with early adoption and retrospective application permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
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Note 3 — Special Charges
As a result of Hurricane Ian's direct hit on the southwest coast of Florida on September 28, 2022, the construction site of Sunseeker Resort at Charlotte Harbor (the "Resort" or "Sunseeker Resort") was damaged. Additionally in the fourth quarter of 2022, there was another weather-related event and a fire that caused additional damage. Based on the Company’s assessment of these damages and the anticipated future restoration costs, an estimated loss of $52.1 million was recorded as a special charge in 2022, which was offset by $18.1 million of recorded insurance recoveries during 2022. In 2023, an additional $2.4 million of loss was recorded as a result of updated damage assessments by the Company and the insurance providers.
During third quarter 2023, the Sunseeker Resort construction site incurred additional damages related to Hurricane Idalia. Based on the Company’s assessment of these damages and the anticipated future restoration costs, an estimated loss of $23.6 million was recorded as a special charge in 2023. The estimate is preliminary and subject to change as the damage assessment by the Company and the insurance providers continues.
During the years ended December 31, 2023 and December 31, 2022, the Company recorded losses of $26.0 million and $52.1 million, respectively, which were offset by $32.5 million and $18.1 million of insurance recoveries, respectively. To date, the Company has recorded insurance recoveries of $1.0 million and $49.5 million, respectively, related to the 2023 and 2022 hurricanes and related weather events. The Company anticipates that additional insurance recoveries related to the losses incurred in 2023 and 2022 will be recorded in future periods.
Due to the heavy maintenance needs on certain aging Airbus airframes and capacity constraints at the Company's maintenance, repair, and overhaul contractors, the Company reevaluated its fleet plan and identified 21 airframes for early retirement to coincide with 737 MAX aircraft deliveries as scheduled under an amendment to the Company's agreement with The Boeing Company signed in September 2023. Two airframes were fully retired in 2023 and the remaining airframes are scheduled to be retired between January 2024 and September 2025. The accelerated depreciation on these airframes resulting from a change in the estimated useful life is recorded as a special charge of $35.1 million for the year ended December 31, 2023.
Special charges in 2021 were incurred due to the impacts of the COVID-19 pandemic. The charges were related to accelerated depreciation on aircraft identified for early retirement, impairment loss on a building related to a discontinued business unit, and acceleration of certain stock awards. A portion of the special charge recorded in 2022 relates to accelerated depreciation on the last of the COVID-19 aircraft identified for early retirement, which amount is separate from the $35.1 million described above.
Special Charges
The table below summarizes special charges recorded during the years ended December 31, 2023, 2022, and 2021.
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| Sunseeker weather and related events | $ | $ | $ | ||||||||||||||||||||||||||||||||
Sunseeker weather and related events, insurance recoveries(1) | ( | ( | |||||||||||||||||||||||||||||||||
| Accelerated depreciation on airframes identified for early retirement | |||||||||||||||||||||||||||||||||||
| COVID-19 and related charges | |||||||||||||||||||||||||||||||||||
| Total special charges | $ | $ | $ | ||||||||||||||||||||||||||||||||
(1) Includes $8.3 million of business interruption insurance proceeds for the year ended December 31, 2023. No business interruption insurance recoveries were received for the years ended December 31, 2022 or December 31, 2021.
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Note 4 — Revenue Recognition
Passenger revenue
Passenger revenue is the most significant category in the Company's reported operating revenues, as outlined below:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Scheduled service | $ | $ | $ | ||||||||||||||
| Ancillary air-related charges | |||||||||||||||||
| Loyalty redemptions | |||||||||||||||||
| Total passenger revenue | $ | $ | $ | ||||||||||||||
Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided. As of December 31, 2023, the air traffic liability balance was $353.5 million, of which approximately $303.6 million was related to forward bookings, with the remaining $49.9 million related to credit vouchers for future travel.
The normal contract term of passenger tickets is 12 months and passenger revenue associated with future travel will principally be recognized within this time frame. Of the $379.5 million that was recorded in the air traffic liability balance at December 31, 2022, substantially all was recognized into passenger revenue during the 12 months ended December 31, 2023.
In 2020, the Company announced that credit vouchers issued for canceled travel beginning in January 2020 would have an extended expiration date of two years from the original booking date. This policy continued for credit vouchers issued through June 30, 2021. Estimates of passenger revenue to be recognized from air traffic liability for credit voucher breakage during this period may be subject to variability and differ from historical experience due to the change in contract duration and uncertainty regarding demand for future air travel. Effective July 1, 2021, vouchers issued have an expiration date of one year from the original booking date.
The Company periodically evaluates the estimated amount of credit vouchers expected to expire unused and any adjustment is removed from air traffic liability and included in passenger revenue in the period in which the evaluation is complete.
Loyalty redemptions
The following table presents the activity of the co-brand credit card and the loyalty program as of the dates indicated:
| Year Ended December 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Balance at January 1 | $ | $ | |||||||||
| Points awarded | |||||||||||
| Points redeemed | ( | ( | |||||||||
| Balance at December 31 | $ | $ | |||||||||
The current portion of the loyalty program liability represents the estimate of revenue to be recognized in the next 12 months based on historical trends, with the remaining balance reflected in other noncurrent liabilities and expected to be recognized into revenue in periods thereafter.
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Note 5 — Property and Equipment
Property and equipment consisted of the following:
| As of December 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Airline | |||||||||||
| Flight equipment | $ | $ | |||||||||
| Computer hardware and software | |||||||||||
| Land and buildings/leasehold improvements | |||||||||||
| Other property and equipment | |||||||||||
| Sunseeker Resort | |||||||||||
| Land and buildings/leasehold improvements | |||||||||||
| Other property and equipment | |||||||||||
| Construction in progress | |||||||||||
| Total property and equipment | |||||||||||
| Less accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
As of December 31, 2023, the Company had firm commitments to purchase 51 aircraft which are expected to be delivered between 2024 and 2026.
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Note 6 — Long-Term Debt
Long-term debt consisted of the following:
| As of December 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Fixed-rate debt and finance lease obligations due through 2032 | $ | $ | |||||||||
| Variable-rate debt due through 2029 | |||||||||||
| Total long-term debt and finance lease obligations, net of related costs | |||||||||||
| Less current maturities, net of related costs | |||||||||||
| Long-term debt and finance lease obligations, net of current maturities and related costs | $ | $ | |||||||||
| Weighted average fixed-interest rate on debt | % | % | |||||||||
| Weighted average variable-interest rate on debt | % | % | |||||||||
| Interest Rate(s) Per Annum at | As of December 31, | ||||||||||||||||||||||||||||||||||
| (in thousands) | Maturity Dates | December 31, 2023 | 2023 | 2022 | |||||||||||||||||||||||||||||||
| Senior secured notes | 2027 | $ | $ | ||||||||||||||||||||||||||||||||
| Consolidated variable interest entities | 2024 | — | 2029 | % | — | ||||||||||||||||||||||||||||||
| Revolving credit facilities | 2024 | — | 2027 | ||||||||||||||||||||||||||||||||
| Debt secured by aircraft, engines, other equipment and real estate | 2025 | — | 2031 | % | — | ||||||||||||||||||||||||||||||
| 2028 | — | 2032 | % | — | |||||||||||||||||||||||||||||||
| Construction loan agreement | 2028 | ||||||||||||||||||||||||||||||||||
| Total debt | $ | $ | |||||||||||||||||||||||||||||||||
| Related costs | ( | ( | |||||||||||||||||||||||||||||||||
| Total debt net of related costs | $ | $ | |||||||||||||||||||||||||||||||||
Maturities of long-term debt as of December 31, 2023, for the next five years and thereafter, in the aggregate, are:
| (in thousands) | As of December 31, 2023 | ||||
2024(1) | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total debt and finance lease obligations, net of related costs | $ | ||||
(1) Includes pre-delivery deposit financing which is due upon delivery of each respective aircraft
Senior Secured Notes
In August, 2022, the Company issued $550.0 million in aggregate principal amount of its 7.250 % Senior Secured Notes due 2027 (the “2027 Notes”) pursuant to an Indenture, dated as of August 17, 2022. The 2027 Notes are secured by first priority security interests in, subject to permitted liens, substantially all of the property and assets of the Company and its subsidiaries (other than Sunseeker Resort and its subsidiaries), except that the collateral package excludes aircraft, aircraft engines, real property and certain other assets. The collateral also secures the Company’s $75.0 million revolving credit facility (described below), on a pari passu basis. The 2027 Notes bear interest at a fixed rate of 7.25 percent per annum, payable in cash on February 15 and August 15 of each year. The 2027 Notes will mature on August 15, 2027.
The 2027 Notes contain certain covenants that limit the ability of the Company to, among other things: (i) make restricted payments; (ii) incur indebtedness or issue preferred stock; (iii) create or incur certain liens; (iv) dispose of loyalty program or
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brand intellectual property collateral; (v) merge, consolidate or sell all or substantially all assets and (vi) enter into certain transactions with affiliates.
The 2027 Notes also require the Company to comply with certain affirmative covenants, including to maintain a minimum aggregate amount of liquidity of $300.0 million. If the Company fails to satisfy the minimum liquidity requirement, then the Company will be required to pay additional interest on all outstanding 2027 Notes in an amount equal to 2.0 % per annum of the principal amount of such 2027 Notes until the Company demonstrates compliance with the liquidity requirement.
In November 2023, the Company prepaid the entirety of the $150.0 million outstanding on its 8.500 % Senior Secured Notes issued in October 2020 and originally due February 2024.
Consolidated Variable Interest Entities
The Company evaluates ownership, contractual lease arrangements and other interests in entities to determine if they are variable interest entities ("VIEs") based on the nature and extent of those interests. The Company consolidates a VIE when, among other criteria, it has the power to direct the activities that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or the right to receive benefits of the VIE, thus making the Company the primary beneficiary of the VIE.
During 2023, the Company, through a wholly owned subsidiary, entered into similarly structured agreements with trusts to borrow $63.0 million collateralized by aircraft and engines. The trusts were funded at inception. The borrowings bear interest at fixed rates and are payable in monthly installments through October 2028 and February 2029, at which time the Company will have purchase options at fixed amounts. As these transactions are common control transactions, the Company, as the primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were $51.6 million and $63.0 million respectively, at the time of borrowing.
Revolving Credit Facilities
In August 2022, the Company entered into a credit agreement under which the Company is entitled to borrow up to $100.0 million. In October 2023, the Company extended the term of this agreement to August 2025 with all other terms to remain the same. The borrowing ability of the facility is based on the value of aircraft and engines placed into the collateral pool. The notes under the facility will bear interest at a floating rate based on SOFR. As of December 31, 2023, the facility remains undrawn.
In August 2022, the Company entered into a credit agreement that provides a senior secured revolving loan facility of $75.0 million. The facility is secured by the same collateral that secures the 2027 Notes, has a term of 57 months and notes under the facility bear interest at a floating rate based on SOFR. As of December 31, 2023, the facility remains undrawn.
In September 2022, the Company entered into a credit agreement under which the Company is entitled to borrow up to $200.0 million. The revolving credit facility has a term of 24 months and the borrowing ability is based on the amount of pre-delivery deposits paid on certain 737 MAX aircraft, the purchase rights for which the Company may choose to place in the collateral pool. The facility is secured by the purchase rights for the applicable aircraft. Any notes under the facility bear interest at a floating rate based on SOFR and all borrowings are due no later than December 31, 2024 or upon delivery of the applicable aircraft. As of December 31, 2023, the Company has fully drawn all $200.0 million under this facility.
In March 2021, the Company entered into a revolving credit facility, under which it is entitled to borrow up to $50.0 million. In February, 2023, the Company extended the term of this agreement to March 2026 and upsized the capacity to $100.0 million. The borrowing ability is based on the value of the aircraft and engines placed into the collateral pool. The notes for amounts borrowed under the facility will bear interest at a floating rate based on SOFR. As of December 31, 2023, the facility remains undrawn.
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Other Secured Debt
The Company is party to financing agreements under which aircraft, other equipment or other assets serve as collateral. Below are described those debt transactions entered into during 2023.
In November 2023, the Company entered into a pre-delivery deposit financing facility to borrow up to $158.0 million secured by the Company's purchase rights for certain Boeing 737 MAX aircraft. The facility bears a floating interest rate based on SOFR and is due upon delivery of each aircraft or no later than June 30, 2025. As of December 31, 2023, the Company has drawn $113.9 million under the facility.
In September 2023, the Company entered into a credit agreement under which the Company is entitled to borrow up to $412.1 million. In September 2023, the Company received funding of $196.4 million under the facility, which is collateralized by aircraft. The proceeds were used in part to pay off existing debt collateralized by aircraft. The outstanding balance bears interest at a fixed rate, to be paid in quarterly installments of principal and interest, and matures in September 2031. The remaining undrawn balance of the facility will be funded upon delivery of, and collateralized by, Boeing 737 MAX aircraft currently on order from Boeing. Future draws collateralized by 737 MAX aircraft will bear interest at a rate determined at the time of drawdown and will have a term of twelve years.
In May 2023, the Company borrowed $92.7 million under a loan agreement secured by aircraft. The notes bear interest at a fixed rate, payable in quarterly installments maturing in May 2028.
During the year ended December 31, 2023, the Company made a total of $207.8 million in payments to extinguish six variable rate facilities secured by aircraft.
Construction Loan Agreement
In October 2021, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Credit Agreement pursuant to which SFI borrowed $350.0 million to fund the remaining construction of the initial phases of Sunseeker Resort. The loan is secured by the Resort. All of the shares in SFI are also pledged to secure the loan. The loan bears interest at 5.75 percent per annum payable semi-annually, provides for semi-annual principal payments of $26.0 million beginning in 2025 and matures in October 2028. The credit agreement includes covenants similar to the covenants in the Company’s 2027 Notes. To support the credit, the Company has guaranteed the full amount of the debt. As of December 31, 2023, the entirety of the borrowed funds have been released from the construction disbursement account.
Finance Leases
The Company has finance lease obligations related to 23 aircraft, which impacted the Company's recognized assets and liabilities as of December 31, 2023. See Note 7 for more information on finance lease obligations.
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Note 7 — Leases
The Company had 23 aircraft under finance leases and 17 aircraft under operating leases as of December 31, 2023 with remaining terms through 2032.
Lease Costs
The components of lease costs recognized on the statements of income were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | Classification on the Statements of Income | 2023 | 2022 | 2021 | ||||||||||||||||
| Finance lease costs: | ||||||||||||||||||||
| Amortization of assets | Depreciation and amortization | $ | $ | $ | ||||||||||||||||
| Interest on lease liabilities | Interest expense | |||||||||||||||||||
| Operating lease cost | Aircraft lease rentals; Station operations; Maintenance and repairs; Other operating expense | |||||||||||||||||||
| Variable lease cost | Station operations; Maintenance and repairs; Other operating expense | |||||||||||||||||||
| Total lease cost | $ | $ | $ | |||||||||||||||||
Lease position as of December 31, 2023
The table below presents the lease-related assets and liabilities recorded on the balance sheet.
| As of December 31, | ||||||||||||||
| (in thousands) | Classification on the Balance Sheet | 2023 | 2022 | |||||||||||
| Assets | ||||||||||||||
| Operating lease assets | Operating lease right-of-use assets, net | $ | $ | |||||||||||
| Property and equipment, net of accumulated depreciation | ||||||||||||||
| Total lease assets | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||
| Current | ||||||||||||||
| Operating | Current operating lease liabilities | $ | $ | |||||||||||
| Finance | Current maturities of long-term debt and finance lease obligations | |||||||||||||
| Noncurrent | ||||||||||||||
| Operating | Noncurrent operating lease liabilities | |||||||||||||
| Finance | Long-term debt and finance lease obligations | |||||||||||||
| Total lease liabilities | $ | $ | ||||||||||||
| Weighted-average remaining lease term | ||||||||||||||
| Operating leases | ||||||||||||||
| Finance leases | ||||||||||||||
| Weighted-average discount rate | ||||||||||||||
| Operating leases | % | % | ||||||||||||
| Finance leases | % | % | ||||||||||||
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Other Information
The table below presents supplemental cash flow information related to leases during the years ended December 31, 2023 and 2022.
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | |||||||||||||||||
| Operating cash flows for operating leases | $ | $ | $ | ||||||||||||||
| Operating cash flows for finance leases | |||||||||||||||||
| Financing cash flows for finance leases | |||||||||||||||||
Maturities of Lease Liabilities
The table below indicates the future minimum payments of lease liabilities as of December 31, 2023.
| (in thousands) | Operating Leases | Finance Leases | |||||||||
| 2024 | $ | $ | |||||||||
| 2025 | |||||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less imputed interest | ( | ( | |||||||||
| Less current obligations | ( | ( | |||||||||
| Long-term lease obligations | $ | $ | |||||||||
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Note 8 — Shareholders’ Equity
The Company is authorized by its board of directors to acquire the Company’s stock through open market purchases under its share repurchase program. As repurchase authority is exhausted, the board of directors has, to date, authorized additional expenditures for share repurchases. The Company suspended stock repurchases upon the onset of the pandemic and as part of accepting benefits from the U.S. Treasury under the Payroll Support Programs, the Company agreed not to repurchase stock through September 30, 2022. The Company recommenced repurchasing shares in the fourth quarter 2022 after those restrictions expired.
Share repurchases consisted of the following during the periods indicated:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
Shares repurchased(1) | |||||||||||||||||
| Average price per share | $ | $ | $ | ||||||||||||||
| Total (in thousands) | $ | $ | $ | ||||||||||||||
(1)Share amounts shown above include only open market repurchases and do not include shares withheld from employees for tax withholding obligations related to restricted stock vestings, which were 65,284 , 1,423 , and zero shares (not in thousands) for 2023, 2022, and 2021 respectively.
Cash dividends declared by the Board and paid by the Company consisted of the following during the periods indicated:
| Year Ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Total quarterly cash dividends declared, per share | $ | $ | $ | ||||||||||||||
| Total cash dividends paid (in thousands) | |||||||||||||||||
The Company suspended payment of cash dividends upon the onset of the pandemic, and as part of accepting benefits from the U.S. Treasury under the Payroll Support Programs, the Company agreed not to pay cash dividends through September 30, 2022.
The Company recommenced payment of cash dividends in the second half of 2023.
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Note 9 — Fair Value Measurements
Investments
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities
Level 2 - Defined as inputs other than Level 1 inputs that are either directly or indirectly observable
Level 3 - Defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions
The Company uses the market approach valuation technique to determine fair value for investment securities. The assets classified as Level 1 consist of money market funds for which original cost approximates fair value. The assets classified as Level 2 consist of commercial paper, municipal debt securities, federal agency debt securities, U.S. treasury bonds and corporate debt securities, which are valued using quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs. The Company has no investment securities classified as Level 3.
For those assets classified as Level 2 that are not in active markets, the Company obtains fair value from pricing sources using quoted market prices for identical or comparable instruments, and uses pricing models which include all significant observable inputs: maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers and other market related data. These inputs are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset.
Financial instruments measured at fair value on a recurring basis:
| As of December 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||||||
| (in thousands) | Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | ||||||||||||||||||||||||||||||||
| Cash equivalents | ||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||||||||||||||
| Municipal debt securities | ||||||||||||||||||||||||||||||||||||||
| Federal agency debt securities | ||||||||||||||||||||||||||||||||||||||
| US Treasury bonds | ||||||||||||||||||||||||||||||||||||||
| Total cash equivalents | ||||||||||||||||||||||||||||||||||||||
| Short-term | ||||||||||||||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||||||||||||||
| Federal agency debt securities | ||||||||||||||||||||||||||||||||||||||
| US Treasury Bonds | ||||||||||||||||||||||||||||||||||||||
| Municipal debt securities | ||||||||||||||||||||||||||||||||||||||
| Total short-term | ||||||||||||||||||||||||||||||||||||||
| Long-term | ||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | ||||||||||||||||||||||||||||||||||||||
| Federal agency debt securities | ||||||||||||||||||||||||||||||||||||||
| Municipal debt securities | ||||||||||||||||||||||||||||||||||||||
| Total long-term | ||||||||||||||||||||||||||||||||||||||
| Total financial instruments | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
There were no significant transfers between Level 1 and Level 2 assets for the years ended December 31, 2023 or 2022.
78
Long-term Debt
None of the Company's long-term debt is publicly traded. The Company has determined the estimated fair value of all of this debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs.The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt.
Carrying value and estimated fair value of long-term debt, including current maturities and without reduction for related costs:
| As of December 31, 2023 | As of December 31, 2022 | |||||||||||||||||||||||||||||||
| (in thousands) | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | Fair Value Level | |||||||||||||||||||||||||||
| Non-publicly held debt | $ | $ | $ | $ | 3 | |||||||||||||||||||||||||||
Other
Due to the short term nature, carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value.
79
Note 10 — Income Taxes
The Company is subject to income taxation in the United States and various state jurisdictions in which it operates. In accordance with income tax accounting standards, the Company recognizes tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities. The entirety of the Company's income before taxes are from its domestic operations.
Income Tax Provision/(Benefit)
The provision (benefit) for income taxes is composed of the following:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | $ | $ | ( | |||||||||||||
| State | |||||||||||||||||
| Foreign | ( | ||||||||||||||||
| Total current | |||||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | |||||||||||||||||
| State | |||||||||||||||||
| Total deferred | |||||||||||||||||
| Total income tax provision | $ | $ | $ | ||||||||||||||
Reconciliation of Effective Tax Rate
The effective tax rate on income before income taxes differed from the federal statutory income tax rate as follows:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Income tax expense at federal statutory rate | $ | $ | $ | ||||||||||||||
| State income taxes, net of federal income tax benefit | |||||||||||||||||
| Foreign income tax expense | ( | ||||||||||||||||
| Executive compensation | |||||||||||||||||
| Federal tax credits | ( | ( | ( | ||||||||||||||
| Stock compensation | ( | ||||||||||||||||
| Other | ( | ||||||||||||||||
| Total income tax expense | $ | $ | $ | ||||||||||||||
80
Deferred Taxes
The major components of the Company’s net deferred tax assets and liabilities are as follows:
| As of December 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Deferred tax assets: | |||||||||||
| Employee benefits | $ | $ | |||||||||
| Net operating loss | |||||||||||
| Tax credits | |||||||||||
Other(1) | |||||||||||
| Less: valuation allowance | |||||||||||
| Total deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Prepaid expenses | |||||||||||
| Depreciation | |||||||||||
| Other | |||||||||||
| Total deferred tax liabilities | |||||||||||
| Net deferred tax liabilities | $ | $ | |||||||||
(1)Other deferred tax assets consists of interest expense and research and development expenses.
Net Operating Loss and Tax Credit Carryforwards
81
Note 11— Related Party Transactions
82
Note 12 — Employee Benefit Plans
401(k) Plan
The Company has a defined contribution plan covering all eligible employees. Under the plan, employees may contribute up to 90 percent of their eligible annual compensation with the Company making matching contributions on employee deferrals of up to 5 percent of eligible employee wages.
The Company recognized expense under this plan of $25.5 million, $24.0 million, and $21.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Share-based employee compensation
The Company reserved 2,000,000 shares of common stock for the Company to grant stock options, restricted stock, cash-settled stock appreciation rights ("SARs") and other stock-based awards to certain officers, directors and employees of the Company under the 2022 Long-Term Incentive Plan (the "2022 Plan"). The 2022 Plan is administered by the compensation committee of the board of directors.
Employee Stock Purchase Plan
The Company reserved 1,000,000 shares of common stock for employee purchases under the 2014 Employee Stock Purchase Plan ("ESPP"). Shares are purchased semi-annually, at a discount, based on the market value at period-end. Employees may contribute up to 25 percent of their base pay per offering period, not to exceed $25,000 each calendar year, for the purchase of common stock. The ESPP is a compensatory plan under applicable accounting guidance and results in the recognition of compensation expense.
The following table provides information about the Company’s ESPP activity during 2023, 2022, and 2021:
| Year Ended | Total number of shares purchased in year | Average price paid per share | Weighted-average fair value of discount under the ESPP (1) | |||||||||||||||||
| December 31, 2021 | $ | $ | ||||||||||||||||||
| December 31, 2022 | $ | $ | ||||||||||||||||||
| December 31, 2023 | $ | $ | ||||||||||||||||||
Compensation expense
For the years ended December 31, 2023, 2022 and 2021, the Company recorded compensation expense of $31.5 million, $16.3 million and $17.2 million, respectively, related to restricted stock, stock options and the ESPP. Forfeiture rates are estimated at the time of grant based on historical actuals for similar grants and are matched to actuals over the vesting period.
The unrecognized compensation cost was $39.7 million as of December 31, 2023 for unvested restricted stock expected to be recognized over a weighted-average period of 2.69 years. As of December 31, 2023, there was $0.1 million unrecognized compensation cost related to stock options.
Restricted stock awards
The closing price of the Company's stock on the date of grant is used as the fair value for the issuance of restricted stock. Most of the Company's unvested restricted stock awards, subject generally to the individual's continued employment or service, vest over a three year period or longer for certain of the Company's executive officers. A summary of the status of non-vested restricted stock grants during the y ears ended December 31, 2023, 2022 and 2021 is presented below:
| Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| Non-vested at December 31, 2020 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Non-vested at December 31, 2021 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Non-vested at December 31, 2022 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Non-vested at December 31, 2023 | $ | ||||||||||
The total grant date fair value of restricted stock that vested during the years ended December 31, 2023, 2022 and 2021 was $28.3 million, $13.4 million and $27.0 million, respectively.
83
Note 13 — Commitments and Contingencies
The Company leases assets including aircraft, office facilities, office equipment, certain airport and terminal facilities, and other space. These commitments have remaining non-cancelable lease terms, which range from 2024 to 2048. Refer to Note 7 for more information on the Company's lease agreements.
The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as follows:
| (in thousands) | As of December 31, 2023 | ||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| Total purchase commitments | $ | ||||
Aircraft Commitments
As of December 31, 2023, the Company had entered into purchase agreements for 51 aircraft which are expected to deliver from 2024 through 2026.
Contingencies
The Company is party to collective bargaining agreements with the employee groups listed below. As of December 31, 2023, the percentage of full-time equivalent employees for each of these pay groups was as follows:
| As of December 31, 2023 | |||||
| Pilots | % | ||||
| Flight Attendants | |||||
| Maintenance Technicians | |||||
| Flight Dispatchers | |||||
| Total | % | ||||
See Item I - Business, for further discussion on the status of each group which has elected union representation.
The Company is subject to certain other legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations.
84
Note 14 — Segments
Operating segments are components of a company for which separate financial and operating information is regularly evaluated and reported to the Chief Operating Decision Maker ("CODM"), and is used to allocate resources and analyze performance. The Company's CODM is the executive leadership team, which reviews information about the Company's two operating segments: Airline and Sunseeker Resort.
Airline Segment
The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results.
Sunseeker Resort Segment
The Sunseeker Resort segment operates as a single business unit and includes hotel rooms and suites for occupancy, group meeting facilities, food and beverage options, the Aileron Golf Course and other Resort amenities. The Resort opened on December 15, 2023. The CODM evaluation includes, but is not limited to, demand for hospitality offerings, occupancy rates, room pricing, food and beverage offerings, other charge points at the Resort and competitive information when making resource allocations with the goal of optimizing consolidated financial results.
For the year ended December 31, 2023, the Company recorded $26.5 million of preopening expenses related to the opening of the Resort, which is included in salaries and benefits expense, sales and marketing expense, and other expense in the consolidated statements of income.
85
Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows:
| (in thousands) | Airline | Sunseeker Resort | Consolidated | ||||||||||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Passenger | $ | $ | $ | ||||||||||||||||||||
| Third party products | |||||||||||||||||||||||
| Fixed fee contract | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Operating income (loss) | ( | ||||||||||||||||||||||
| Interest income | ( | ( | |||||||||||||||||||||
Interest expense (1) | |||||||||||||||||||||||
| Capitalized interest | ( | ( | ( | ||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Capital expenditures | |||||||||||||||||||||||
| Year Ended December 31, 2022 | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Passenger | $ | $ | $ | ||||||||||||||||||||
| Third party products | |||||||||||||||||||||||
| Fixed fee contract | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Operating income (loss) | ( | ||||||||||||||||||||||
| Interest income | ( | ( | |||||||||||||||||||||
Interest expense (1) | |||||||||||||||||||||||
| Capitalized interest | ( | ( | ( | ||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Capital expenditures | |||||||||||||||||||||||
| Year Ended December 31, 2021 | |||||||||||||||||||||||
| Operating revenue: | |||||||||||||||||||||||
| Passenger | $ | $ | $ | ||||||||||||||||||||
| Third party products | |||||||||||||||||||||||
| Fixed fee contract | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Operating income (loss) | ( | ||||||||||||||||||||||
| Interest income | ( | ( | |||||||||||||||||||||
Interest expense (1) | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Capital expenditures | |||||||||||||||||||||||
(1)Excludes losses on debt extinguishment.
Total assets were as follows as of the dates indicated:
| (in thousands) | As of December 31, 2023 | As of December 31, 2022 | |||||||||
| Airline | $ | $ | |||||||||
| Sunseeker Resort | |||||||||||
| Consolidated | $ | $ | |||||||||
86
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, under the supervision and with the participation of our management, including our CEO and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”). Based on that evaluation, management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal controls. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fourth quarter of our year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting. Management, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control - Integrated Framework (2013 Framework). Based on the assessment, management has concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. As such, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting on a regular basis, to improve these controls and procedures over time, and to correct any deficiencies that may be discovered. Future events affecting our business may cause us to modify our controls and procedures.
Our independent registered public accounting firm has issued an attestation report regarding its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023.
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
87
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Allegiant Travel Company:
Opinion on Internal Control Over Financial Reporting
We have audited Allegiant Travel Company and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 29, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Dallas, Texas
February 29, 2024
88
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required by this Item is incorporated herein by reference to the data under the headings “ELECTION OF DIRECTORS,” “EXECUTIVE OFFICERS” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held June 26, 2024, which Proxy Statement is to be filed with the Commission.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the data under the headings “EXECUTIVE COMPENSATION” and “REPORT OF THE COMPENSATION COMMITTEE” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held June 26, 2024, which Proxy Statement is to be filed with the Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the data under the heading “STOCK OWNERSHIP” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held June 26, 2024, which Proxy Statement is to be filed with the Commission. The information required by this item with respect to securities authorized for issuance under our equity compensation plans is included in Part II, Item 5 of this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the data under the heading “RELATED PARTY TRANSACTIONS” and “Director Independence” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held June 26, 2024, which Proxy Statement is to be filed with the Commission.
Item 14. Principal Accountant Fees and Services
Our Independent registered public accounting firm is KPMG LLP , Dallas, TX , Auditor Firm ID: 185
The information required by this Item is incorporated herein by reference to the data under the heading “PRINCIPAL ACCOUNTANT FEES AND SERVICES” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of shareholders to be held June 26, 2024, which Proxy Statement is to be filed with the Commission.
89
PART IV
Item 15. Exhibits and Financial Statement Schedules
| — | Financial Statements and Supplementary Data. The financial statements included in Item 8 - Financial Statements and Supplementary Data above are filed as part of this annual report. | ||||
| — | Financial Statement Schedules. Schedules are not submitted because they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. | ||||
| — | Exhibits. The Exhibits listed below are filed or incorporated by reference as part of this Form 10-K. Where so indicated, exhibits which were previously filed are incorporated by reference. | ||||
| Exhibit Number | Description | ||||||||||
| 3.1 | |||||||||||
| 3.2 | |||||||||||
| 3.3 | |||||||||||
| 4.1 | |||||||||||
| 4.2 | |||||||||||
| 4.3 | |||||||||||
| 4.4 | |||||||||||
| 4.5 | |||||||||||
| 4.6 | |||||||||||
| 4.7 | |||||||||||
| 10.1 | |||||||||||
| 10.2 | |||||||||||
| 10.3 | |||||||||||
| 10.4 | |||||||||||
| 10.5 | |||||||||||
| 10.6 | |||||||||||
| 10.7 | |||||||||||
| 10.8 | |||||||||||
| 10.9 | |||||||||||
| 10.10 | |||||||||||
90
91
| 10.33 | |||||||||||
| 10.34 | |||||||||||
| 10.35 | |||||||||||
| 10.36 | |||||||||||
| 10.37 | |||||||||||
| 10.38 | |||||||||||
| 10.39 | |||||||||||
| 10.40 | |||||||||||
| 10.41 | |||||||||||
| 10.42 | |||||||||||
| 10.43 | |||||||||||
| 10.44 | |||||||||||
| 10.45 | |||||||||||
| 10.46 | |||||||||||
| 10.47 | |||||||||||
| 10.48 | |||||||||||
| 10.49 | |||||||||||
| 10.50 | |||||||||||
| 10.51 | |||||||||||
| 10.52 | |||||||||||
| 10.53 | |||||||||||
| 10.54 | |||||||||||
| 10.55 | |||||||||||
92
| 10.56 | |||||||||||
| 10.57 | |||||||||||
| 10.58 | |||||||||||
| 10.59 | |||||||||||
| 10.60 | |||||||||||
| 10.61 | |||||||||||
| 10.62 | |||||||||||
| 10.63 | |||||||||||
| 10.64 | |||||||||||
| 10.65 | |||||||||||
| 10.66 | |||||||||||
| 10.67 | |||||||||||
| 10.68 | |||||||||||
| 10.69 | |||||||||||
| 10.70 | |||||||||||
| 10.71 | |||||||||||
| 10.72 | |||||||||||
| 10.73 | |||||||||||
| 10.74 | |||||||||||
| 10.75 | |||||||||||
| 10.76 | |||||||||||
93
94
| 10.98 | |||||||||||
| 10.99 | |||||||||||
| 10.100 | |||||||||||
| 10.101 | |||||||||||
| 10.102 | |||||||||||
| 21 | |||||||||||
| 23.1 | |||||||||||
| 31.1 | |||||||||||
| 31.2 | |||||||||||
| 32 | |||||||||||
| 101 | The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024, formatted in XBRL includes (i) Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 (ii) Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 (iv) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2023, 2022 and 2021 (v) Consolidated Cash Flow Statements for the years ended December 31, 2023, 2022 and 2021 (vi) the Notes to the Consolidated Financial Statements. (3) | ||||||||||
(1)Management contract or compensation plan or agreement required to be filed as an Exhibit to this Report on Form 10-K pursuant to Item 15(b) of Form 10-K.
(2)Certain confidential information in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.
(3)Pursuant to Rule 406 of Regulation S-T, the XBRL related information in Exhibit 101 to this annual report on Form 10-K shall be deemed to be not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
95
Item 16. Form 10-K Summary
None
96
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Las Vegas, State of Nevada on February 29, 2024.
| Allegiant Travel Company | ||||||||
| By: | /s/ Gregory Anderson | |||||||
| Gregory Anderson, as duly authorized officer of the Company (President) | ||||||||
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory Anderson and Robert Neal, and each of them acting alone, as his or her true and lawful attorneys-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.
97
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||||||||||||
| /s/ Maurice J. Gallagher, Jr. | Chief Executive Officer and Director | February 29, 2024 | ||||||||||||
| Maurice J. Gallagher, Jr. | (Principal Executive Officer and Chairman of the Board) | |||||||||||||
| /s/ Robert Neal | Chief Financial Officer | February 29, 2024 | ||||||||||||
| Robert Neal | (Principal Financial Officer) | |||||||||||||
| /s/ Rebecca Aretos | Chief Accounting Officer | February 29, 2024 | ||||||||||||
| Rebecca Aretos | (Principal Accounting Officer) | |||||||||||||
| /s/ Montie Brewer | Director | February 29, 2024 | ||||||||||||
| Montie Brewer | ||||||||||||||
| /s/ Gary Ellmer | Director | February 29, 2024 | ||||||||||||
| Gary Ellmer | ||||||||||||||
| /s/ Ponder Harrison | Director | February 29, 2024 | ||||||||||||
| M. Ponder Harrison | ||||||||||||||
| /s/ Linda Marvin | Director | February 29, 2024 | ||||||||||||
| Linda Marvin | ||||||||||||||
| /s/ Sandra D. Morgan | Director | February 29, 2024 | ||||||||||||
| Sandra D. Morgan | ||||||||||||||
| /s/ Charles W. Pollard | Director | February 29, 2024 | ||||||||||||
| Charles W. Pollard | ||||||||||||||
98
Exhibit 4.7
DESCRIPTION OF CAPITAL STOCK
Authorized Capitalization
Our capital structure consists of 100,000,000 authorized shares of common stock and 5,000,000 shares of undesignated preferred stock. As of February 23, 2024, there were 18,286,324 shares of common stock outstanding and no shares of preferred stock were issued and outstanding.
Common Stock
The holders of our common stock are entitled to dividends as our board of directors may declare from time to time from legally available funds subject to the preferential rights of the holders of any shares of our preferred stock that we may issue in the future. The holders of our common stock are entitled to one vote per share on any matter to be voted upon by stockholders, subject to the restrictions described below under the caption “Anti-Takeover Effects of Certain Provisions of Nevada Law and Our Articles of Incorporation and Bylaws-Limited Voting by Foreign Owners”.
Our articles of incorporation do not provide for cumulative voting in connection with the election of directors. Our bylaws provide that in an uncontested election, directors are elected by majority vote. In the event of any contested election, directors will be elected by a plurality of the shares voting once a quorum is present. No holder of our common stock will have any preemptive right to subscribe for any shares of capital stock issued in the future.
Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of our common stock are entitled to share, on a pro rata basis, all assets remaining after payment to creditors and subject to prior distribution rights of any shares of preferred stock that we may issue in the future. All of the outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
As of February 23, 2024, no shares of our preferred stock are outstanding. Under our articles of incorporation, our board of directors, without further action by our stockholders, will be authorized to issue shares of preferred stock in one or more classes or series. The board may fix the rights, preferences and privileges of the preferred stock, along with any limitations or restrictions, including:
•the number of shares of the series, which number may thereafter be increased or decreased by our board of directors (but not below the number of shares of that series then outstanding);
•whether dividends, if any, will be cumulative or noncumulative and the dividend rate of the series;
•the conditions under which and the dates upon which dividends will be payable, and the relation which those dividends will bear to the dividends payable on any other class or classes of stock;
•the redemption rights and price or prices, if any, for shares of the series;
•the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series;
•the amounts payable on and the preferences of shares of the series, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of our company;
•whether the shares of the series will be convertible into shares of any other class or series, or any other security, of our company or any other corporation, and, if so, the specification of that other class or series or that other security, the conversion price or prices or rate or rates, any adjustments to that price or those prices or that rate or those rates, the date or dates as of which those shares will be convertible and all other terms and conditions upon which the conversion may be made;
•restrictions on the issuance of shares of the same series or of any other class or series;
•the voting rights, if any, of the holders of shares of that series.
The preferred stock could have voting or conversion rights that could adversely affect the voting power or other rights of holders of our common stock. The issuance of preferred stock could also have the effect, under certain circumstances, of delaying, deferring or preventing a change of control of our company. We currently have no plans to issue any shares of preferred stock.
We believe the ability of our board of directors to issue one or more series of preferred stock will provide us with flexibility in structuring possible future financings and in meeting other corporate needs that might arise. Our authorized shares of preferred stock will be available for issuance without further action by our stockholders, unless that action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. The Nasdaq Global Select Market currently requires stockholder approval as a prerequisite to listing shares in several instances, including sales or issuances of common stock or securities
convertible into, or exercisable for, common stock equal to or in excess of 20% or more of the outstanding stock determined before the proposed issuance.
Although our board of directors has no intention at the present time of doing so, it could issue a series of preferred stock that could, depending on the terms of that series, impede the completion of a merger, tender offer or other takeover attempt. Our board of directors may decide to issue those shares based on its judgment as to the best interests of our company and our stockholders. Our board of directors, in so acting, could issue preferred stock having terms that could discourage a potential acquiror from making an unsolicited and unwanted acquisition attempt through which that acquiror may be able to change the composition of our board of directors, including a tender offer or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then current market price of that stock.
Anti-Takeover Effects of Certain Provisions of Nevada Law and Our Articles of Incorporation and Bylaws
Effect of Nevada Anti-takeover Statutes. We are subject to anti-takeover provisions of the Nevada Revised Statutes (“NRS”), including NRS 78.411 through 78.444, inclusive (the “Business Combination Statute”) with respect to combinations with interested stockholders, and NRS 78.378 through 78.3793 (the “Control Share Statute”), with respect to the acquisition of a controlling interest in certain corporations doing business in the state.
Business Combinations. In general, the Business Combination Statute prohibits a publicly-traded Nevada corporation from engaging in any certain business “combinations” with any “interested stockholder” for a period of up to four years following the date that the stockholder became an interested stockholder, unless the combination meets all of the requirements of the articles of incorporation of the Nevada corporation and either: (i) the board of directors of the corporation approved, before the person first became an interested stockholder, the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; or (ii) the combination is approved by the corporation’s board of directors and stockholders owning at least 60% of the voting power not owned by the interested stockholder or its affiliates. After the two-year period following the date that the stockholder becomes an interested stockholder, business combinations may also be permitted if approved by a majority of the stockholders other than the interested stockholder and its affiliates or associates, or if the consideration to be received by stockholders of the corporation (other than the interested stockholder) meet the criteria set forth in the statute. The Business Combination Statute does not apply to combinations with an interested stockholder after the expiration of four years from the date the person first became an interested stockholder.
The NRS defines a “combination” subject to the statute to include the following:
•any merger or consolidation involving the corporation or a subsidiary thereof and the interested stockholder or any other entity which is, or after and as a result of the transaction would be, an affiliate or associate of the interested stockholder;
•any sale, lease, exchange, mortgage, pledge, transfer or other disposition of the assets of the corporation to or with the interested stockholder or any affiliate or associate thereof if the assets transferred have a market value equal to more than 5% of all of the assets of the corporation or more than 5% of the value of the outstanding voting shares of the corporation, or represent more than 10% of the earning power or net income of the corporation;
•subject to certain exceptions, the issuance or transfer by the corporation or a subsidiary to the interested stockholder or an affiliate or associate thereof n of any stock of the corporation or a subsidiary with a market value of 5% or more of the aggregate market value of the outstanding voting shares of the corporation;
•the adoption of a plan or proposal for the liquidation or dissolution of the corporation under any arrangement with the interested stockholder or any affiliate or associate thereof;
•subject to certain exceptions, any reclassification of securities, recapitalization, merger or consolidation, or other transaction under any agreement, arrangement or understanding with the interested stockholder, or an affiliate or associate, that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder or any affiliate or associate; or
•the receipt, directly or indirectly, by the interested stockholder or any affiliate or associate thereof, except proportionately as a stockholder of the corporation, of the benefit of any loan, advance, guarantee, pledge or other financial assistance or tax credit or other tax advantage provided by or through the corporation.
In general, the Business Combination Statute defines an interested stockholder as any entity or person beneficially owning, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding stock of the corporation or any affiliate or associate of the corporation that, within two years prior to the date in question was, directly or indirectly, beneficial owner of 10% or more of the voting power of the corporation’s outstanding stock. An affiliate is a person that directly or indirectly through one or more intermediaries, is controlled by, or is under common control with, another specified person. An associate includes any corporation or organization of which the person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of voting shares, and certain other trusts and family members.
We have not opted out of the Business Combination Statute in our Articles of Incorporation, so the law may have the effect of discouraging certain transactions with a persons who became an interested stockholder in a transaction not approved in advance by our board of directors, including certain takeover attempts that could represent a premium over the market price for the shares of our common stock.
Control Share Acquisitions. The Control Share Statute may eliminate the voting rights of certain acquired shares in a corporation. The provisions apply to any acquisition of outstanding voting securities of a Nevada corporation that has 200 or more stockholders of record, at least 100 of which have addresses in Nevada, and conducts business in Nevada directly or through an affiliate (an “issuing corporation”). An “acquiring person” and those acting in association with such person will, unless the Control Share Statute otherwise permits, be prohibited from voting such person’s “control shares” acquired in connection with, or up to 90 days before, an acquisition of voting shares representing one of the following proportions of the outstanding voting power exceeding one of the following thresholds: (i) one-fifth or more but less than one-third; (ii) one-third or more but less than a majority; or (iii) a majority or more. Control shares are entitled only to such voting rights as are conferred by resolution of a majority of the voting power of the other stockholders adopted at a meeting. If an issuing corporation's articles of incorporation or bylaws in effect by the tenth day following the acquisition so provide, the voting securities acquired may be redeemed, at the average price paid for the control shares, by an issuing corporation if (i) the acquiring person has not given a timely information statement to an issuing corporation or (ii) the control shares are not granted full voting rights by the stockholders. If the acquiring person obtains a majority voting interest and the security holders accord voting rights to such acquiring person, a stockholder who did not vote in favor of the voting rights may assert rights as a dissenter to demand payment of the fair value of such stockholder’s shares.
We may amend our articles of incorporation or by-laws, up to ten days after a relevant acquisition, to specify types of existing or future stockholders, whether or not identified, to whom the Control Share Statute shall not apply, but we have not, to date, done so for any stockholder or acquisition.
Articles of Incorporation and Bylaw Provisions. Our articles of incorporation and bylaws include provisions that may have the effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by stockholders. These provisions are summarized in the following paragraphs.
Authorized but Unissued or Undesignated Capital Stock. Our authorized capital stock consists of 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. No preferred stock has yet to be designated. As of February 23, 2024, we had outstanding 18,286,324 shares of common stock. The authorized but unissued (and in the case of preferred stock, undesignated) stock may be issued by the board of directors in one or more transactions. In this regard, our articles of incorporation grant the board of directors broad power to establish the rights and preferences of authorized and unissued preferred stock. The issuance of shares of preferred stock pursuant to the board's authority described above could decrease the amount of earnings and assets available for distribution to holders of common stock and adversely affect the rights and powers, including voting rights, of such holders and may have the effect of delaying, deferring or preventing a change in control. The board of directors does not currently intend to seek stockholder approval prior to any issuance of preferred stock, unless otherwise required by law.
Special Meetings of Stockholders. Our bylaws provide that special meetings of our stockholders may be called only by our board of directors, by our chairman of the board of directors, by our chief executive officer or by stockholders owning at least 25% of our stock (subject to providing certain information specified in our by-laws).
Notice Procedures. Our bylaws establish advance notice procedures with regard to all stockholder proposals to be brought before meetings of our stockholders, including proposals relating to the nomination of candidates for election as directors, the removal of directors and amendments to our articles of incorporation or bylaws. These procedures provide that notice of such stockholder proposals must be timely given in writing to our secretary prior to the meeting. Generally, to be timely, notice must be received by our secretary not less than 120 days prior to the meeting. The notice must contain certain information specified in the bylaws.
Other Anti-Takeover Provisions. Certain provisions of our long-term incentive plan may have the effect of discouraging, delaying or preventing a change in control or unsolicited acquisition proposals as vesting of stock grants may accelerate upon a change of control.
Limitation of Director Liability. Our articles of incorporation limit the liability of our directors to the fullest extent permitted by Nevada law. Under our articles of incorporation and Nevada law, our directors and officers will not be individually liable for damages to us, our stockholders or our creditors as a result of any act or failure to act in such director’s or officer’s capacity as such unless:
a.the presumption that the director or officer acted in good faith, on an informed basis and with a view to the interests of the corporation is rebutted;
b.it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and
c.it is proven that such breach involved intentional misconduct, fraud or a knowing violation of law.
Indemnification Arrangements. Our bylaws provide that our directors and officers shall be indemnified and provide for the advancement to them of expenses in connection with actual or threatened proceedings and claims arising out of their status as such to the fullest extent permitted by the Nevada Revised Statutes. We have entered into indemnification agreements with each of our directors and executive officers that provide them with rights to indemnification and expense advancement to the fullest extent permitted under the Nevada Revised Statutes.
Limited Voting by Foreign Owners. To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our articles of incorporation and bylaws restrict voting of shares of our capital stock by non-U.S. citizens. The restrictions imposed by federal law currently require that no more than 25% of our voting stock be voted, directly or indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of the members of our board of directors be U.S. citizens. Our articles of incorporation provide that no shares of our capital stock may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which we refer to as the foreign stock record. Our bylaws further provide that no shares of our capital stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law.
Listing
Our common stock is traded on the Nasdaq Global Select Market under the symbol “ALGT.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Broadridge Financial Solutions, Inc. Its address is 51 Mercedes Way, Edgewood, New York 11711.
Exhibit 10.100
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
Execution Version
| November 1, 2023 | |||||||||||
SUN TAIL PDP LLC AS BORROWER CARLYLE AVIATION MANAGEMENT LIMITED AS AGENT RUNWAY SEVEN LENDER LLC AS SECURITY TRUSTEE AND RUNWAY SEVEN LENDER LLC AS LENDER | |||||||||||
PDP FACILITY AGREEMENT IN RESPECT OF UP TO EIGHT (8) BOEING 737 MAX AIRCRAFT | |||||||||||
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Contents | |||||
Clause | Page | ||||
| 1 | Definitions and Interpretation | |||||||||||||
| 2 | The Facility | |||||||||||||
| 3 | Purpose | |||||||||||||
| 4 | Conditions of Utilization | |||||||||||||
| 5 | Utilization | |||||||||||||
| 6 | [***] | |||||||||||||
| 7 | Repayment | |||||||||||||
| 8 | Prepayment and Cancellation | |||||||||||||
| 9 | Interest | |||||||||||||
| 10 | Interest Periods | |||||||||||||
| 11 | Changes to the Calculation of Interest | |||||||||||||
| 12 | Fees | |||||||||||||
| 13 | Tax Gross-Up and Indemnities | |||||||||||||
| 14 | Increased Costs | |||||||||||||
| 15 | Mitigation | |||||||||||||
| 16 | Other Indemnities | |||||||||||||
| 17 | Costs and Expenses | |||||||||||||
| 18 | Representations | |||||||||||||
| 19 | Information Undertakings | |||||||||||||
| 20 | General Undertakings | |||||||||||||
| 21 | Events of Default | |||||||||||||
| 22 | Changes to the Lender | |||||||||||||
| 23 | Changes to the Borrower | |||||||||||||
| 24 | The Finance Parties | |||||||||||||
| 25 | Payment Mechanics | |||||||||||||
| 26 | Turnover of Receipts; Application of Proceeds | |||||||||||||
| 27 | Release of security | |||||||||||||
| 28 | Set-off | |||||||||||||
| 29 | Notices | |||||||||||||
| 30 | Calculations and Certificates | |||||||||||||
| 31 | Partial Invalidity | |||||||||||||
| 32 | Remedies and Waivers | |||||||||||||
| 33 | Amendments and Waivers | |||||||||||||
| 34 | Confidentiality | |||||||||||||
| 35 | Counterparts | |||||||||||||
| 36 | Governing Law | |||||||||||||
| 37 | Enforcement | |||||||||||||
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| 38 | Usa Patriot Act; Compliance with Applicable Anti-Terrorism and Anti-Money Laundering Regulations | |||||||||||||
| 39 | Certain Erisa Matters | |||||||||||||
| 40 | [***] | |||||||||||||
| Schedule 1 | The Original Lender | |||||||||||||
| Schedule 2 | Conditions Precedent | |||||||||||||
| Schedule 3 | Form of Utilization Request | |||||||||||||
| Schedule 4 | The Initial Aircraft and PDP Amounts | |||||||||||||
| Schedule 5 | Changes to the Lender | |||||||||||||
| Schedule 6 | The Representatives | |||||||||||||
| Schedule 7 | Timetables | |||||||||||||
| Schedule 8 | Form of Tax Certificate Tax Certificate (For Non-U.S. Lenders that are not Partnerships for U.S. Federal Income Tax Purposes) | |||||||||||||
| Schedule 9 | Tax Certificate (For Non-U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes) | |||||||||||||
| Schedule 10 | Tax Certificate (For Non-U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes) | |||||||||||||
| Schedule 11 | Tax Certificate (For Non-U.S. Lenders that are Partnerships for U.S. Federal Income Tax Purposes) | |||||||||||||
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#4858-0589-9649v12
THIS PDP FACILITY AGREEMENT (this "Agreement") is dated November 1, 2023 and made
BETWEEN:
(1)Sun Tail PDP LLC, a limited liability company formed under the laws of the State of Delaware, having its principal office at c/o Wilmington Trust Company, 1100 North Market Street, New Castle County, Delaware, 19890-1605 (the "Borrower");
(2)Carlyle Aviation Management Limited, a company incorporated under the laws of Bermuda, having an external company branch established in Ireland with registered number 905713 and an office address at Connaught House, 1 Burlington Road, Dublin 4, Ireland, in its capacity as agent of the Lender (the "Agent");
(3)Runway Seven Lender LLC, a limited liability company formed under the laws of the State of Delaware, having its principal office at 848 Brickell Avenue, Suite 500, Miami, FL 33131, USA in its capacity as security trustee for and on behalf of the Finance Parties (the "Security Trustee"); and
(4)Runway Seven Lender LLC, a limited liability company formed under the laws of the State of Delaware, having its principal office at 848 Brickell Avenue, Suite 500, Miami, FL 33131, USA (the "Lender").
IT IS AGREED as follows:
1.DEFINITIONS AND INTERPRETATION
1.1Definitions
In this Agreement:
[***]
"Affiliate" means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
"Agent" means Carlyle Aviation Management Limited.
"Aircraft" means each of the Initial Aircraft [***] or any of them, as the context requires, including the Airframe, the Engines, the Parts and the Manuals and Technical Records relating thereto.
"Aircraft Specific Collateral" means, in respect of an Aircraft, such Aircraft and Collateral specifically relating to such Aircraft.
"Airframe" means, in relation to an Aircraft, such Aircraft (excluding the Engines), together with all Parts relating thereto.
"Anti-Corruption Laws" means any and all laws, rules and regulations [***]
"Anti-Money Laundering Laws" means any and all laws, rules and regulations [***].
"Assigned Purchase Agreement" means, in respect of an Aircraft, the Purchase Agreement as assigned by the PAA.
"Assignment Amount" means, in relation to an Aircraft, an amount equal to [***].
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"Assignor" means Allegiant Air, LLC.
"Authorization" means an authorization, consent, approval, resolution, license, exemption, filing, notarization or registration.
"Available Tenor" means, as of any date of determination and with respect to the then-current Benchmark, as applicable, if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of "Interest Period" pursuant to Clause 11.
"Basel II" means the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement but excluding any amendment contained in Basel III.s
"Basel III" means:
(a)the agreements on capital requirements, a leverage ratio and liquidity standards contained in "Basel III: A global regulatory framework for more resilient banks and banking systems", "Basel III: International framework for liquidity risk measurement, standards and monitoring" and "Guidance for national authorities operating the countercyclical capital buffer" published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;
(b)the rules for global systemically important banks contained in "Global systemically important banks: assessment methodology and the additional loss absorbency requirement - Rules text" published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and
(c)any further guidance or standards published by the Basel Committee on Banking Supervision relating to "Basel III".
"Benchmark" means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then "Benchmark" means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Clause 11.
"Benchmark Replacement" means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has been selected by the Agent, the Borrower and the Guarantors giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Transaction Documents.
"Benchmark Replacement Adjustment" means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining
#4858-0589-9649v12
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such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities at such time.
"Benchmark Replacement Date" means a date and time determined by the Agent, which date shall be no later than the earliest to occur of the following events with respect to the then-current Benchmark:
(a)in the case of clause (a) or (b) of the definition of "Benchmark Transition Event," the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark (or such component thereof); or
(b)in the case of clause (c) of the definition of "Benchmark Transition Event," the first date on which all Available Tenors of such Benchmark (or the published component used in the calculation thereof) has been or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) have been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, if such Benchmark is a term rate, the "Benchmark Replacement Date" will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to the one-month tenor of such Benchmark (or the published component used in the calculation thereof).
"Benchmark Transition Event" means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a)a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark (or such component thereof);
(b)a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will
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continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark (or such component thereof); or
(c)a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such Benchmark (or such component thereof) or, if such Benchmark is a term rate, the one-month tenor of such Benchmark is not, or as of a specified future date will not be, representative.
For the avoidance of doubt, if such Benchmark is a term rate, a "Benchmark Transition Event" will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to the one-month tenor of such Benchmark (or the published component used in the calculation thereof).
"Benchmark Transition Start Date" means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
"Benchmark Unavailability Period" means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Transaction Document in accordance with Clause 11 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Transaction Document in accordance with Clause 11.
"Benefit Plan" means any of (a) an "employee benefit plan" (as defined in ERISA) that is subject to Title I of ERISA, (b) a "plan" as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such "employee benefit plan" or "plan".
"BIS" means the Bureau of Industry and Security of the U.S. Department of Commerce.
"Boeing" or "Airframe Manufacturer" means The Boeing Company.
"Borrower" means Sun Tail PDP LLC, a limited liability company formed under the laws of the State of Delaware.
"Borrower Collateral" means all of the property, rights, title, benefits, interests, assets, property, accounts and proceeds which are subject, or expressed or intended to be subject, to the Security Interests created, or expressed or intended to be created, by the Borrower pursuant to the Security Documents.
"Borrower Parent" means Sun Tail PDP Trust.
"Borrower Pledge Agreement" means the pledge agreement [***].
"Borrower Reimbursable PDP Payments" means, [***].
"Borrower Security Documents" means the Borrower Pledge Agreement and each Security Document to which the Borrower is a party.
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"Break Costs" means amounts payable by the Borrower pursuant to Clause 16.3.
"Business Day" means:
(a)for any purpose, a day (other than a Saturday, Sunday or a public holiday) on which banks are generally open for business in Dublin, Ireland, New York, New York, Las Vegas, Nevada and which is a U.S. Government Securities Business Day; and
(b)in addition, in respect of any Subsequent Utilization Date, a day (other than a Saturday, Sunday or a public holiday) on which banks are generally open for business in Seattle, Washington.
"Capital Stock" means, with respect to any person, any and all shares of stock, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated, whether voting or nonvoting), such person's equity including any preferred stock, but excluding any debt securities convertible into or exchangeable for such equity.
"Change in Law" means, in each case after the date of this Agreement, with respect to any Lender, any change after the date hereof in federal, state, foreign or supranational law or regulations or the adoption or making after such date of any interpretation, directive or request applying to a class of banks, including such Lender, of or under any federal, state, foreign or supranational law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. For the avoidance of doubt, Change in Law will not include the implementation of directives promulgated under Basel II, but will be deemed to include the implementation of the bank regulatory framework commonly known as Basel III, the bank regulatory framework commonly known as Basel IV and the Dodd-Frank Wall Street Reform and Consumer Protection Act (except to the extent that any specific laws or regulations implementing portions of Basel III, Basel IV or the Dodd-Frank Wall Street Reform and Consumer Protection Act are required as matter of law to be complied with by banks generally in the applicable jurisdiction as of the date hereof (or, in the case of a Lender that acquires its Commitments or its Loans after the date hereof, having the force of law as of the date such Lender acquires its Commitments and/or Loans)).
"Change of Control" means:
(a)[***]
(b)[***]
"Change of Control Event" means that (a) a Change of Control has occurred with respect to either Guarantor and (b) the affected Guarantor (or resulting entity as applicable) has a tangible net worth less than did the affected Guarantor immediately prior to such Change of Control.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Collateral" means all of the property, rights, title, benefits, interests, assets, property, accounts and proceeds which are subject, or expressed or intended to be subject, to the Security Interests created, or expressed or intended to be created, by the Borrower or any other Obligor or the Borrower Parent pursuant to the Security Documents.
"Commitment" means:
(a)in relation to the Lender party hereto on the date of signing, the amount set out opposite its name under the heading "Commitment" in Schedule 1 (The Original Lender) and the amount of any other Commitment transferred to it hereunder;
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(b)in relation to any other Lender, the amount of any Commitment transferred to it hereunder;
[***].
"Commitment Termination Date" means in respect of the[***].
"Conforming Changes" means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of "Business Day," the definition of "U.S. Government Securities Business Day," the definition of "Interest Period" or any similar or analogous definition (or the addition of a concept of "interest period"), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions and other technical, administrative or operational matters) that the Agent decides, in consultation with the Borrower and the Guarantors, may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Agent, in consultation with the Borrower and the Guarantors, decides is reasonably necessary in connection with the administration of this Agreement and the other Transaction Documents).
"Consent and Agreement" means, in respect of an Aircraft, the Boeing consent to collateral assignment of purchase agreement rights dated on or about the date of this Agreement between, amongst others, Boeing, the Borrower, and the Security Trustee relating, amongst other things, to the assignment by the Borrower of certain of its rights under the Assigned Purchase Agreement.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
"Default" means an Event of Default or any event or circumstance which would (with the expiry of a grace period, the giving of notice, the making of any determination, the satisfaction of any condition or any combination of the foregoing) be an Event of Default.
"Defaulting Lender" means, subject to Clause 40 (Defaulting Lenders), any Lender that (a) has failed to (i) fund all or any portion of its Loans on the Utilization Date such Loans were required to be funded hereunder, or (ii) pay to the Agent, any other Lender any other amount required to be paid by it hereunder on the date when due, (b) has notified the Borrower and the Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect, (c) has failed, within [***] Business Days after written request by the Agent or the Borrower to confirm in writing to the Agent or the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Agent or the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar person charged with reorganization or liquidation of its business or assets, including any other state or federal regulatory authority acting in such a capacity. Any determination by the Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Clause 40 (Defaulting Lenders)) upon delivery of written notice of such determination to the Borrower and each Lender.
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"Delivery" means, in respect of an Aircraft, the time when the Airframe Manufacturer conveys title to such Aircraft to either Assignor or Borrower or their relevant assignee or designee (as applicable), pursuant to the Assigned Purchase Agreement.
"Delivery Date" means, in respect of an Aircraft, the date on which the Delivery of that Aircraft occurs.
"Designated Parties List" means any list of specifically designated individuals, entities or vessels, including aircraft, maintained under Export Controls or Sanctions and published by any Export Controls Authority or Sanctions Authority, including, without limitation, the Entity List maintained by BIS and the Specifically Designated Nationals and Blocked Persons list maintained by OFAC.
"Designated Party" means any individual or entity: (a) identified on any Designated Parties List; (b) organized, domiciled or resident in, or any governmental authority, department or instrumentality of, a Sanctioned Country; or (c) [***] or more directly or indirectly owned by, or controlled by, or acting for or on behalf of, any Person or Persons described in the foregoing clause (a) or (b).
"Enforcement Action" means:
(a)the taking of any steps to enforce or require the enforcement of any of the Collateral;
(b)the making of any demand against any Obligor or the Borrower Parent in relation to any guarantee, indemnity or other assurance against loss in respect of any of the Secured Obligations or exercising any right to require any Obligor or the Borrower Parent to acquire any of the Secured Obligations;
(c)the exercise of any right of set-off against any Obligor or the Borrower Parent in respect of any of the Secured Obligations;
(d)the suing for, commencing or joining of any legal or arbitration proceedings against any Obligor or the Borrower Parent to recover or in respect of any of the Secured Obligations;
(e)the entering into of any composition, assignment or arrangement with any Obligor or the Borrower Parent; or
(f)the petitioning, applying or voting for, or the taking of any steps (including the appointment of any liquidator, receiver, administrator or similar officer) in relation to, the winding up, examinership, dissolution, administration, reorganization of any Obligor or the Borrower Parent or any suspension of payments or moratorium of any indebtedness of any Obligor or the Borrower Parent, or any analogous procedure or step in any jurisdiction.
"Engine Letter Agreement" means the CFM engine benefits agreement dated on or about the date of this Agreement among the Assignor, the Security Trustee and the Engine Manufacturer.
"Engine Manufacturer" means CFM International, Inc.
"Engines" means CFM LEAP-1B27 engines which are to be installed on such Initial Aircraft and which are subject to the GTA; and any and all Parts intended to be incorporated or installed in or attached to the engines on the relevant Delivery Date.
"Environmental Law" means any and all applicable laws, rules, orders, regulations, statutes, ordinances, codes or decrees (including, without limitation, common law) of any international authority, federal government, or any state, provincial, local, municipal or other Government Entity, regulating, relating to or imposing liability or standards of conduct concerning protection of the environment.
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"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code or Section 302 of ERISA).
"ERISA Event" means (a) a "reportable event" (as defined in Section 4043 of ERISA) with respect to a Pension Plan; (b) a withdrawal by Borrower or any of its ERISA Affiliates from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as a termination under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any of its ERISA Affiliates from a Multiemployer Plan, written notification of Borrower or any of its ERISA Affiliates concerning the imposition of "withdrawal liability" (as defined in Section 4201 et. seq. of ERISA) or written notification that a Multiemployer Plan is insolvent (within the meaning of Section 4245 of ERISA) or in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA); (d) the filing under Section 4041(c) of ERISA of a notice of intent to terminate a Pension Plan, the treatment of a Pension Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) the imposition of any liability under Title IV of ERISA, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any of its ERISA Affiliates; (f) the failure to satisfy the minimum funding standards (within the meaning of Section 412 or 430 of the Code or Section 302 of ERISA) with respect to any Pension Plan, or a failure of Borrower or any of its respective ERISA Affiliates to make any required contribution to a Multiemployer Plan; (g) the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Pension Plan; or (h) the imposition of a lien under Section 303(k) of ERISA with respect to any Pension Plan; (i) a determination that any Pension Plan is in "at risk" status (within the meaning of Section 303 of ERISA or Section 430 of the Code).
"Erroneous Payment" has the meaning assigned to it in paragraph 1.26.1 of Schedule 6 (The Representatives).
"Event of Default" means any event or circumstance specified as such in Clause 21 (Events of Default).
"Exchange Act" means the U.S. Exchange Act of 1934, as amended.
"Excluded Tax" means any of the following Taxes imposed on or with respect to the relevant Finance Party or required to be withheld or deducted from or with respect to a payment to the relevant Finance Party or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder:
[***].
"Expenses" means:
(a)the costs and expenses referred to in Clause 17 (Costs and Expenses);
(b)the costs and expenses described in Clause 22.2.11 for which the Borrower is liable;
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(c)in relation to the Security Documents, the costs and expenses referred to in Clause 17 (Costs and Expenses) for which the Borrower is liable.
"Export Controls" means any and all laws, rules and regulations controlling the transfer, export or reexport of any goods, technology, data or services imposed, administered or enforced by any Export Controls Authority [***].
"Export Controls Authority" means: [***].
"Facility" means the Initial Facility[***].
"Facility Office" means the office or offices notified by the Lender to the Agent in writing on or before the date it becomes the Lender (or, following that date, by not less than [***] Business Days' written notice) as the office or offices through which it will perform its obligations hereunder.
"FATCA" means:
(a)sections 1471 to 1474 of the Code (or any amended or successor version that is substantively comparable) or any associated current or future regulations;
(b)any treaty, law or regulation of any other jurisdiction, any agreements entered into pursuant to section 1471(b)(1) of the Code or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or
(c)any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraph (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
"FATCA Application Date" means:
(a)in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014; or
(b)in relation to a "pass thru payment" described in section 1471(d)(7) of the Code not falling within paragraph (a) above, the first date from which such payment may become subject to a deduction or withholding required by FATCA.
"FATCA Deduction" means a deduction or withholding from a payment under a Transaction Document required by FATCA.
"FATCA Exempt Party" means a Party that is entitled to receive payments free from any FATCA Deduction.
[***]
"Federal Reserve Board" means the Board of Governors of the Federal Reserve System of the United States.
"Fee Letter" means any letter between any of the Agent, the Security Trustee and/or the Lender, on the one hand, and the Borrower and acknowledged by the Guarantors, on the other hand, which is expressed by the terms thereof to be a "Fee Letter" for the purposes of the Transaction Documents.
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"Finance Parties" means, together, the Lender, the Security Trustee and the Agent (and "Finance Party" means any of them).
"Floating Rate" means in respect of an Interest Period for a SOFR Loan, the percentage rate per annum which is [***].
"Floor" means a rate of interest equal to 0%.
"Foreign Lender" means a Lender that is not a U.S. Person.
"Government Entity" means:
(a)any national government, political subdivision thereof, or local jurisdiction therein;
(b)any instrumentality, board, commission, court, or agency of any of the above, however constituted; or
(c)any other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
"GTA" means the General Terms Agreement No. [***] between the Engine Manufacturer and the Assignor; and
"Guarantee" means the guarantee entered into among the Guarantors and the Security Trustee, in respect of the Aircraft.
"Guarantors" means each of Allegiant Air, LLC and Allegiant Travel Company.
"Holding Company" means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
"Increased Costs" means:
(a)a reduction in the amount of any sum received or receivable by the relevant Lender; or
(b)an additional or increased cost which is not otherwise contemplated or provided for under the Transaction Documents and which does not constitute ordinary and usual overhead expenses of the relevant Lender; or
(c)which is incurred or suffered by a Lender to the extent that it is attributable to that Lender having entered into its Commitment or funding or performing its obligations under any Transaction Document.
"Indebtedness for Borrowed Money" means any indebtedness for or in respect of:
[***]
"Initial Aircraft" means each of the Aircraft identified in Schedule 4 (The Initial Aircraft and PDP Amounts), as the context requires.
"Initial Facility" means the dollar term loan facility made available hereunder in respect of the Initial Aircraft as described in Clause 2.1 (The Facility).
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"Initial Facility Loan" means, with respect to each Initial Aircraft, each disbursement made or to be made under the Initial Facility with respect to such Initial Aircraft or, as the context may require, the principal amount outstanding for the time being of all such disbursements for such Initial Aircraft and
"Initial Facility Loans" shall mean the Initial Facility Loan for each the Initial Aircraft and, as the context may require, the principal amount outstanding for the time being of all such loans.
"Initial Utilization" means, in respect of Initial Facility Loans [***], the first utilization of either the Initial Facility Loans [***] to occur pursuant to the terms hereof and "Initial Utilizations" shall be construed accordingly.
"Initial Utilization Date" means, in respect of either the Initial Facility Loans [***], the date upon which the relevant Initial Utilization is, or is to be, made and "Initial Utilization Dates" shall be construed accordingly.
"Initial Utilization Request" means, in respect of an Initial Utilization, the notice substantially in the form set out in Schedule 3 (Form of Utilization Request) and "Initial Utilization Requests" shall be construed accordingly.
"Interest Payment Date" means, in relation to each Loan [***], provided that if any such date is not a Business Day the relevant Interest Payment Date shall be the next succeeding Business Day unless such next succeeding Business Day falls in the next succeeding calendar month, in which case such Interest Payment Date shall be the immediately preceding Business Day.
"Interest Period" means:
(a)in relation to each Utilization, each period determined in accordance with Clause 10.1 (Length of Interest Periods); and
(b)in relation to an Unpaid Sum hereunder, each period determined in accordance with Clause 9.3 (Default interest).
"Lender" means, in relation to this Agreement:
(a)the Lender party hereto on the date of the signing thereof; and
(b)any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 22 (Changes to the Lender),
which in each case has not ceased to be a Party to this Agreement in accordance with the terms hereof.
[***]
"Lender's Purchase Price" means, for an Aircraft, the amount payable by the Finance Parties on delivery of an Aircraft by Boeing to a Finance Party following enforcement of the Purchase Agreement Security Assignment.
"Loan" means an Initial Facility Loan[***], and "Loans" shall be construed accordingly.
"Losses" means any documented losses (excluding Taxes), costs, charges, documented and properly incurred expenses, interest (including default interest), fees (including, without limitation, legal fees),
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payments, demands, liabilities, claims, actions, proceedings, penalties, damages, adverse judgments, orders or other sanctions (and "Loss" shall be construed accordingly).
"Majority Lenders" means, as of any date of determination, (a) so long as any Commitments have not been permanently terminated, the holders of more than [***] of the sum of (i) the aggregate principal amount of the Loans then outstanding and (ii) the undrawn Commitments and (b) after the permanent termination of all Commitments, the holders of more than [***] of the aggregate principal amount of the Loans then outstanding. The Loans and Commitments of any Defaulting Lender shall be disregarded for purposes of any determination of a Majority Lenders.
"Mandatory Prepayment Event" means the occurrence of any of the events of circumstances set out in Clauses 8.1, 8.2, 8.3 or 8.4.
"Manuals and Technical Records" means, in relation to an Aircraft, the records, logs, manuals, technical data and other materials, documents and information relating to such Aircraft intended to be delivered with such Aircraft on the Delivery Date pursuant to the Assigned Purchase Agreement.
"Margin" means[***] per annum.
"Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which Borrower or any of its ERISA Affiliates makes or is obligated to make contributions, or during the preceding [***] plan years, has made or been obligated to make contributions.
"Obligors" means, collectively, the Borrower and the Guarantors, each an "Obligor".
"OFAC" means the Office of Foreign Assets Control of the U.S. Department of the Treasury.
"Option Agreement" means the option agreement entered into, or to be entered into, as the context shall require, between the Borrower and the Assignor.
"Original Lender" means Runway Seven Lender LLC.
"Other Connection Taxes" means, with respect to any Finance Party, [***].
"Other Taxes" means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Transaction Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Clause 15).
"PAA" means the aircraft purchase agreement assignment relating to the assignment to the Borrower of the Assignor's rights to purchase the Aircraft under the Purchase Agreement entered into between the Assignor, as assignor, and the Borrower, as assignee.
"PAA Consent" means the written consent of Boeing, dated on or about the date of the PAA, relating to the assignment contemplated by the PAA.
"Partial Prepayment Trigger Date" has the meaning given to such term in Clause 8.4 (Partial Prepayment).
"Parts" means, in relation to an Aircraft, any applicable part, instrument, appurtenance, accessory, furnishing or other item of equipment of whatever nature (other than an Engine) which are intended to be incorporated or installed in or attached to the relevant Aircraft on the relevant Delivery Date.
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"Party" means, in the context of any Transaction Document, the persons who are signatories to such Transaction Document (or who have otherwise become party to such Transaction Document by, succession, transfer, assignment, novation or similar in accordance with such Transaction Document).
"PDP Equity Amount" means, in respect of an Aircraft, the amount set out in the column captioned "PDP Equity Amount" for such Aircraft in Schedule 4 (The Initial Aircraft and PDP Amounts).
"PDP Payments" means, in respect of an Aircraft, all payments made or to be made by the Borrower or the Assignor to Boeing in respect of such Aircraft prior to the Delivery Date thereof pursuant to the Purchase Agreement or the Assigned Purchase Agreement, as more particularly set out in Schedule 4 (The Initial Aircraft and PDP Amounts).
"Pension Plan" means any employee pension benefit plan (but excluding a Multiemployer Plan) that is maintained or is contributed to by Borrower or any of its ERISA Affiliates and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.
"Periodic Term SOFR Determination Day" has the meaning specified in the definition of Term SOFR.
[***]
"Proceeds" means any:
(a)amounts received by any Finance Party under the Transaction Documents (other than pursuant to Clause 26.2 (Application of Proceeds)); and
(b)other proceeds of enforcement of the Collateral.
"PTE" means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
"Purchase Agreement" means the Purchase Agreement [***] dated as of December 31, 2021 between Boeing and the Assignor, inclusive of the Aircraft General Terms Agreement dated as of December 31, 2021 between Boeing and the Assignor.
"Purchase Agreement Security Assignment" means the security assignment relating to the Borrower's rights under the Assigned Purchase Agreement entered into, or to be entered into, as the context shall require, between the Borrower, as assignor, and the Security Trustee, as assignee (together with the Consent and Agreement relating thereto).
"Purchase Agreement Termination Event" means any event or circumstance which results in the termination or cancellation of all or any part of the Assigned Purchase Agreement in accordance with the provisions thereof.
"Receiver" means any receiver appointed under the terms of any Security Document.
"Register" has the meaning given to such term in Clause 22.4.
"Relevant Event" has the meaning given to such term in Clause 8.1.
"Relevant Governmental Body" means the Federal Reserve Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board or the Federal Reserve Bank of New York, or any successor thereto.
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"Relevant Purchase Agreement Event" means:
[***].
"Repayment Date" has, in respect of a Loan, the meaning given to such term in Clause 7.1 (Repayment of Loans).
"Representatives" means each of the Agent and the Security Trustee.
"Sale Arrangements" has the meaning given to such term in Clause 18.16.
"Sanctioned Country" means any country, region or territory that is the subject of comprehensive Sanctions [***].
"Sanctions" means any economic or financial sanctions or trade embargoes enacted, administered, imposed or enforced by any Sanctions Authority.
"Sanctions Authority" means: [***].
"Scheduled Delivery Month" means, in respect of an Initial Aircraft, the Scheduled Delivery Month identified for such Initial Aircraft in Schedule 4 (The Initial Aircraft and PDP Amounts), as may be delayed in accordance with the Purchase Agreement.
"Secured Obligations" means any and all moneys, liabilities and obligations (whether actual or contingent, whether now existing or hereafter arising, whether or not for the payment of money and including, without limitation, any obligation or liability to pay damages) from time to time owing to any of the Finance Parties by any Obligor pursuant to any Transaction Document.
"Secured Obligations Discharge Date" means the date of receipt by either the Security Trustee or the Agent of repayment in full of the Loans, together with all other amounts then due and payable to the Finance Parties under the Transaction Documents.
"Security Documents" means (i) the Borrower Pledge Agreement and the Purchase Agreement Security Assignment, (ii) any other document, instrument or agreement which is agreed in writing by the Borrower, the Guarantors and the Security Trustee to be a "Security Document" related to the Facility and (iii) each and every notice, acknowledgement, certificate or document delivered or required to be delivered under any of the foregoing (and "Security Document" means any of them).
"Security Interest" means any mortgage, charge, pledge, lien, encumbrance, assignment, hypothecation, right of detention, right of set-off or any other agreement or arrangement having the effect of conferring security.
"Security Period" means the period commencing on the first Initial Utilization Date and expiring on the date on which the Security Interests constituted by the Security Documents are required to be released, discharged and/or re-assigned pursuant to Clause 27 (Release of security).
"Security Trustee" means Runway Seven Lender LLC.
"SOFR" means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
"SOFR Administrator" means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
"SOFR Loan" means a Loan bearing interest at a rate based on Term SOFR.
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"Subordinated Loan Agreement" means the subordinated loan agreement entered into or to be entered into as the case may be between [***] in respect of the Aircraft, as may be amended, modified, restated or supplemented from time to time.
"Subordinated Parties" means collectively the Guarantors, the Assignor and any other person designated as a Subordinated Party in a Transaction Document.
"Subsequent Utilization" means, in respect of Initial Facility Loans [***], each utilization of either the Initial Facility Loans[***] to occur pursuant to the terms hereof which is not an Initial Utilization and "Subsequent Utilizations" shall be construed accordingly.
"Subsequent Utilization Date" means, in respect of either the Initial Facility Loans [***], each date upon which each relevant Subsequent Utilization is, or is to be, made and "Subsequent Utilization Dates" shall be construed accordingly.
"Subsequent Utilization Request" means, in respect of a Subsequent Utilization, the notice substantially in the form set out in Schedule 3 (Form of Utilization Request) and "Subsequent Utilization Requests" shall be construed accordingly.
"Subsidiary" means in relation to any company or corporation, a company or corporation:
(a)which is controlled, directly or indirectly, by the first mentioned company or corporation; and/or
(b)more than half the issued share capital of which is beneficially owned, directly or indirectly by the first mentioned company or corporation; and/or
(c)which is a Subsidiary of another Subsidiary of the first mentioned company or corporation,
and for this purpose, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to (x) direct (whether by ownership, voting or other contractual arrangement, operation of law or otherwise) its day to day affairs and/or operations, and/or (y) control the composition of its board of directors or equivalent body.
"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) imposed by any Governmental Entity.
"Tax Credit" means a credit against, relief or remission for, or repayment of any Tax.
"Tax Deduction" means a deduction or withholding for or on account of Tax from a payment under any Transaction Document, [***].
"Tax Payment" means (i) the increase in a payment made to a Finance Party under Clause 13.1 (Tax gross-up) or (ii) a payment under Clause 13.2 (Tax indemnity).
"Taxing Authority" means any governmental, quasi-governmental or international authority asserting power to impose any Tax, whether or not such authority has such power.
"Term SOFR" means the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the "Periodic Term SOFR Determination Day") that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the
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applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day; provided that if Term SOFR determined as provided shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.
"Term SOFR Administrator" means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Agent in its reasonable discretion).
"Term SOFR Reference Rate" means the forward-looking term rate based on SOFR.
"Transaction Documents" means (i) the Guarantee, each PAA, each PAA Consent, this Agreement, the Assigned Purchase Agreement, each Consent and Agreement, the Engine Letter Agreement, the Subordinated Loan Agreement, the Option Agreement, each Fee Letter, the Security Documents[***] and (ii) any other document, instrument or agreement which is agreed in writing by the Borrower, the Guarantors and the Agent to be a Transaction Document and "Transaction Document" means any of them.
"Transfer Certificate" means a certificate substantially in the form set out in Part II (Form of Transfer Certificate) of Schedule 5 (Changes to the Lender) or any other form agreed among the Agent (acting on behalf of the Lender), the Guarantors and the Borrower.
"Transfer Date" means, in relation to a transfer, the later of:
(a)the proposed Transfer Date specified in the relevant Transfer Certificate; and
(b)the date on which the Agent executes the relevant Transfer Certificate.
"U.S. Government Securities Business Day" means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
"U.S. Person" means any Person that is a "United States Person" as defined in Section 7701(a)(30) of the Code.
"UCC" means the Uniform Commercial Code as enacted in the State of New York or, if the laws of another state of the United States so provide, as enacted in such state.
"Unpaid Sum" means in respect of the Loan and this Agreement, any sum due and payable to any Finance Party but unpaid by the Borrower under the Transaction Documents.
"Utilization" means, in respect of a Loan, an Initial Utilization or a Subsequent Utilization, and "Utilizations" shall be construed accordingly.
"Utilization Date" means an Initial Utilization Date or a Subsequent Utilization Date and "Utilization Dates" shall be construed accordingly.
"Utilization Request" means any Initial Utilization Request and any Subsequent Utilization Request and "Utilization Requests" shall be construed accordingly.
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"VAT" means any value added Tax, goods and services Tax or similar Tax.
"Voting Stock" means, with respect to any person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such person.
1.2Interpretation
1.2.1Unless a contrary indication appears any reference to:
(a)the "Agent", the "Borrower", the "Borrower Parent", a "Guarantor", the "Assignor", any "Finance Party", the "Lender", any "Obligor", any "Party" or the "Security Trustee" shall be construed so as to include its successors in title, permitted assigns and permitted transferees;
(b)"gross negligence" of a person refers to any action or omission of the person concerned, which is taken or made by that person, with reckless disregard for the consequences and/or knowing that the loss or damage sustained would probably result;
(c)"indebtedness" includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(d)"willful misconduct" or "willful default" of a person means circumstances where that person concerned has deliberately breached its obligations under the Transaction Documents (whether by act or omission) with actual knowledge that (i) its conduct was in breach of those obligations; and (ii) the loss arising would probably be caused as a direct result;
(e)a "Transaction Document" or "Security Document" or any other agreement or instrument is a reference to that Transaction Document, Security Document or other agreement or instrument as amended, supplemented, restated or novated;
(f)a "person" includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing;
(g)a "law" or "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organization;
(h)a provision of law is a reference to that provision as amended or re-enacted; and
(i)a reference to "applicable law" includes the Uniform Commercial Code as in effect in any jurisdiction of the United States of America.
1.2.2Section, Clause, Part and Schedule headings contained in any Transaction Document are for ease of reference only.
1.2.3Words importing the plural shall also include the singular and vice versa.
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1.2.4A Default or an Event of Default is "continuing" if it has not been remedied or permanently waived in writing.
1.2.5"$", "dollars" and "Dollars" denote lawful currency of the United States of America.
2.THE FACILITY
2.1 The Facility
Subject to the terms of this Agreement, the Lender shall make available to the Borrower a dollar term loan facility which shall not in aggregate exceed the Commitment.
2.2 Finance Parties' rights and obligations
2.2.1 The obligations of each Finance Party under the Transaction Documents are several. Failure by a Finance Party to perform its obligations under the Transaction Documents does not affect the obligations of any other Party or any other person under the Transaction Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Transaction Documents.
2.2.2 The rights of each Finance Party under or in connection with the Transaction Documents are separate and independent rights and any debt arising under the Transaction Documents to a Finance Party from an Obligor is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with Clause 2.2.3 below. The rights of each Finance Party include any debt owing to that Finance Party under the Transaction Documents and, for the avoidance of doubt, any part of any Loan or any other amount owed by an Obligor which relates to a Finance Party's participation in a Facility or its role under a Transaction Document (including any such amount payable to the Agent on its behalf) is a debt owing to that Finance Party by that Obligor.
2.2.3 A Finance Party may, except as otherwise stated in the Transaction Documents (including Clause 2.2.2 above), separately protect and enforce its rights under the Transaction Documents.
2.2.4 [***]
3.PURPOSE
3.1 Purpose
3.1.1 The Borrower shall apply all amounts borrowed by it under the applicable Facility in relation to the Initial Utilization of a Loan towards payment to the Assignor of the Assignment Amount in an amount equal to the Borrower Reimbursable PDP Payments.
3.1.2 The Borrower shall apply all amounts borrowed by it under the applicable Facility in relation to all Subsequent Utilizations of a Loan towards the financing of the PDP Payments then due to Boeing under the Assigned Purchase Agreement, as set forth in Exhibit C to the Consent and Agreement; provided that, if the Lender is not provided sufficient notice to facilitate a Subsequent Utilization, the Guarantors may make such PDP Payment to Boeing and upon confirmation that Boeing has received such PDP Payment, the Lender will release the requested Subsequent Utilization allocable to such PDP Payment to the Guarantors.
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3.2 Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4.CONDITIONS OF UTILIZATION
4.1 Initial Conditions Precedent
The Lender will only be obliged to make its participation in a Loan in respect of an Aircraft available if the Agent has received (i) on the Initial Utilization Date, all of the documents and other evidence listed in Part I (Initial Conditions Precedent) of Schedule 2 (Conditions Precedent) and (ii) on each Subsequent Utilization Date, all of the documents and other evidence in respect of that Loan listed in Part II (Additional Conditions Precedent) of Schedule 2 (Conditions Precedent), in each case, in form and substance satisfactory to the Agent, acting reasonably.
4.2 [***]
4.3 Further Conditions Precedent
The Lender will only be obliged to make its participation in a Loan available if, on the proposed Utilization Date:
4.3.1 no Event of Default is continuing or would result from the proposed Utilization;
4.3.2 all the representations and warranties of each Obligor and the Borrower Parent contained in any of the Transaction Documents are true and correct in all material respects as though made on and as of such date, except to the extent such representations and warranties relate solely to an earlier date (in which case such representations and warranties are correct on and as of such earlier date);
4.3.3 the Agent and the Lender have received (or are satisfied that they will receive on the proposed Utilization Date) the fees referred to in the Fee Letters as being payable to them on or before such Utilization Date;
4.3.4 no Mandatory Prepayment Event is continuing; and
4.3.5 the Assignor shall have paid to Boeing, in respect of the Aircraft subject to such proposed Utilization, the PDP Equity Amount for such Aircraft.
4.4 Waiver
The conditions precedent set forth in Clauses 4.1 (Initial Conditions Precedent) and 4.3 (Further Conditions Precedent) are for the benefit of the Finance Parties and may be waived or deferred by the Agent in whole or in part and with or without conditions.
5.UTILIZATION
5.1 Delivery of Utilization Request
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5.1.1 The Borrower may utilize the Facility by delivery to the Agent of a duly completed Utilization Request executed by the Borrower and acknowledged by the Guarantors in respect of each Loan, not later than the time specified in Schedule 7 (Timetables).
5.1.2 Subject to Clause 5.3 (Currency and amount), in respect of each Loan, the Borrower may, acting on the instruction of the Guarantors, issue an Initial Utilization Request and, [***].
5.2 Completion of Utilization Request
A Utilization Request is irrevocable and will not be regarded as having been duly completed unless:
5.2.1 it identifies the relevant Aircraft as being subject to the Utilization and contains the wire instructions of the Assignor (for the Initial Utilization) or the Airframe Manufacturer (for the Initial Utilization and each Subsequent Utilization) or the Guarantors (for any Utilization where the Guarantors have already made the relevant PDP Payment in accordance with Clause 3.1.2);
5.2.2 the proposed Utilization Date is a Business Day which is or precedes the Commitment Termination Date for the relevant Aircraft; and
5.2.3 the currency and amount of the Utilization comply with Clause 5.3 (Currency and amount).
5.3 Currency and amount
5.3.1 The currency specified in a Utilization Request must be dollars.
5.3.2 [***]
5.3.3 [***]
5.4 Lender's Participation
In accordance with the terms of this Agreement, the Lender shall make its participation in each Loan available by the applicable Utilization Date through its Facility Office and in the amount as set forth in the applicable Utilization Request.
5.5 Commitment Termination Date
On the Commitment Termination Date for an Aircraft, to the extent not drawn down or previously cancelled in accordance with the Transaction Documents, the Commitments of the Lender for the Loan for such Aircraft shall be reduced to zero.
Amounts drawn hereunder may not be reborrowed, and Commitments may not be reinstated, [***].
6.[***]
7.REPAYMENT
7.1 Repayment of Loans
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The Borrower shall repay the Loan for each Aircraft on the earliest of [***] (iv) June 30, 2025 (such date for such Loan being the "Repayment Date" for such Loan), in an amount equal to (a) the outstanding principal amount of such Loan plus (b) accrued but unpaid interest thereon in accordance with Clause 9.2 (Payment of interest), plus (c) any applicable Break Costs, plus (d) any other amounts which are due and payable by the Borrower under the Transaction Documents.
7.2 No Re-borrowing
The Borrower may not re-borrow any part of a Loan which is repaid, [***], subject to the terms and conditions set forth in Clause 4.2.
8.PREPAYMENT AND CANCELLATION
8.1 Illegality
If, as a consequence of a Change in Law, it becomes unlawful, or it is reasonably expected that it will become unlawful, for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain all or part of its Commitment or all or part of its participation in the Loans (such an event being referred to as a "Relevant Event"):
8.1.1 such Lender shall promptly notify the Agent, the Borrower and the Guarantors upon becoming aware of that circumstance;
8.1.2 upon such Lender notifying the Agent, the Borrower and the Guarantors of the same, if the Loan has not already been advanced, then such Lender will have no obligation to advance its participation in such Loan pending compliance with Clause 15 (Mitigation) and, if no agreement is reached pursuant to that clause, the Commitment of such Lender will be immediately cancelled; and
8.1.3 subject to compliance with the requirements of Clause 15 (Mitigation), and to the implementation of any mitigation strategy agreed pursuant to that provision, the Borrower shall repay such Lender's participation in the Loans on the last day of the Interest Period immediately following the Interest Period during which such Lender notified the Borrower and the Guarantors in accordance with Clause 8.1.1 (or, if earlier, the date on which such Relevant Event takes effect).
8.2 Purchase Agreement prepayment
8.2.1 If there shall have occurred a Relevant Purchase Agreement Event which relates to all of the Aircraft, the Agent, if so instructed by the Majority Lenders, shall notify the Borrower and the Guarantors that such Relevant Purchase Agreement Event has occurred and:
(a)declare that no further Utilizations shall be made by the Borrower; and/or
(b)require the Borrower to repay the Loans in full, whereupon the Borrower shall, on the date specified in such notice (which shall be a date not less than [***] Business Days following the date of such notice), repay in full all such amounts.
8.2.2 If there shall have occurred a Relevant Purchase Agreement Event which relates to [***] of the Aircraft, the Agent, if so instructed by the Majority Lenders, shall notify the Borrower and the Guarantors that such Relevant Purchase Agreement Event has occurred and:
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(a)declare that no further Utilizations in relation to such affected Aircraft shall be made by the Borrower; and/or
(b)require the Borrower to repay the Loan in relation to such affected Aircraft in full, whereupon the Borrower shall, on the date specified in such notice (which shall be a date not less than [***] Business Days following the date of such notice), repay in full all such amounts.
8.3 Change of control, etc.
8.3.1 In the event that a Change of Control Event occurs, the Guarantors shall give the Agent prompt notice of such occurrence. The Agent, if so instructed by the Majority Lenders, shall after the Agent's receipt of such notice from the Guarantors of such Change of Control Event require the Borrower to repay the Loans in full pursuant to a notice delivered to the Borrower and the Guarantors which shall specify a date of prepayment, whereupon the Borrower shall, on the date specified in such notice (which shall be a date not less than [***] Business Days following the date of such notice), repay in full all such amounts, and the remaining Commitments shall be cancelled upon receipt of such prepayment.
8.3.2 Subject to Clause 21.9 (Repudiation), in the event that the Security Interest of the Security Trustee in the Collateral is no longer in full force and effect (a "Collateral Defect") unless either (x) such Collateral Defect has been remedied, or (y) arrangements satisfactory to the Agent (acting on the instructions of the Majority Lenders, each acting reasonably) have been put in place, the Borrower shall promptly notify the Agent upon becoming aware of that circumstance, and the Agent, if so instructed by the Majority Lenders, shall declare that no further Utilization shall be made by the Borrower and/or shall require the Borrower to repay the Loans in full, whereupon the Borrower shall, on the date specified in such notice (which shall be a date not less than[***] Business Days following the date of such notice), repay in full all such amounts.
8.4 Partial Prepayment
[***]
8.5 Voluntary Prepayment
[***]
8.6 Voluntary Cancellation
[***]
8.7 Right of repayment in certain circumstances
8.7.1 If:
[***]
8.7.2 [***]
8.8 General Conditions of Prepayment and Cancellation
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8.8.1 Any notice of cancellation or prepayment given by the Borrower (acting solely on the instructions of the Guarantors) under and pursuant to this Clause 8 shall be irrevocable and, unless a contrary indication appears in this Agreement or such notice, shall specify the reason for such notice, the date or dates upon which the relevant cancellation or prepayment is to be made in accordance with this Agreement and the amount of that cancellation or prepayment.
8.8.2 Any prepayment (whether in whole or in part) under this Agreement shall be made together with:
(a)accrued and unpaid interest on the amount prepaid plus any Break Costs in accordance with Clause 16.3 (Break Costs); and
(b)all other amounts then due and payable to the Finance Parties under this Agreement and all other Transaction Documents.
8.8.3 No amount of the Commitments cancelled under this Agreement may be subsequently reinstated.
8.8.4 The Borrower shall not repay or prepay all or any part of a Loan or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement or in any other Transaction Document to which the Agent is party.
8.9 Revised Schedules
[***]
9.INTEREST
9.1 Calculation of interest
The rate of interest on the Loans for each Interest Period shall be the Floating Rate.
9.2 Payment of interest
The Borrower shall pay accrued interest on each Loan on each Interest Payment Date for such Loan, with the final interest payment in respect of each Loan being paid on the relevant Repayment Date.
9.3 Default interest
9.3.1 If the Borrower fails to pay any amount payable by it under any Transaction Document on its due date, interest shall accrue on the overdue amount from and including the due date up to but excluding the date of actual payment (both before and after judgment) not at the Floating Rate but at a rate which, subject to Clause 9.3.2 below, is[***] per annum higher than the Floating Rate. Any interest accruing under this Clause 9.3 shall be immediately payable by the Borrower on demand by the Agent.
9.3.2 If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period:
(a)the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to such Loan; and
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(b)the rate of interest applying to the overdue amount during that first Interest Period shall be [***] per annum higher than the Floating Rate.
9.4 Notification of rates of interest; Agent limitation of liability with respect to determination of rates; Conforming Changes
9.4.1 The Agent shall promptly notify the Lender, the Guarantors and the Borrower of the determination of each rate of interest under this Agreement.
9.4.2 The Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Term SOFR Reference Rate or Term SOFR, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Term SOFR Reference Rate, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Agent and its affiliates or other related entities may engage in transactions that affect the calculation of the Term SOFR Reference Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Agent may select information sources or services in its reasonable discretion to ascertain the Term SOFR Reference Rate, Term SOFR or any other Benchmark, or any component definition thereof or rates referred to in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
9.4.3 In connection with the use or administration of Term SOFR, the Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Transaction Document. The Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.
10.INTEREST PERIODS
10.1 Length of Interest Periods
10.1.1 The initial Interest Period for each Utilization shall commence on the relevant Utilization Date and end on the immediately following Interest Payment Date and each subsequent Interest Period shall start on the last day of its preceding Interest Period and end on the immediately following Interest Payment Date.
10.1.2 The final Interest Period for a Loan shall end on the Repayment Date for such Loan.
10.2 Non-Business Days
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If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not) and the amount of interest payable shall be adjusted accordingly.
11.CHANGES TO THE CALCULATION OF INTEREST
11.1 Inability to Determine Rates
11.1.1 Subject to Clause 11.2, if, on or prior to the first day of any Interest Period for any SOFR Loan:
(a)the Agent determines (which determination shall be conclusive and binding absent manifest error) that "Term SOFR" cannot be determined pursuant to the definition thereof, or
(b)the Majority Lenders determine that for any reason in connection with any request for a SOFR Loan or a conversion thereto or a continuation thereof that Term SOFR for any requested Interest Period with respect to a proposed SOFR Loan does not adequately and fairly reflect the cost to such Lenders of making and maintaining such Loan, and the Majority Lenders have provided notice of such determination to the Agent, the Borrower and the Guarantors certifying that such inadequacy is the result of circumstances affecting the lending market generally and is not directly and solely the result of circumstances unique to such Lender or Lenders,
then, in each case, the Agent will promptly so notify the Borrower, the Guarantors and each Lender.
Upon notice thereof by the Agent to the Borrower and the Guarantors, any obligation of the Lenders to make SOFR Loans, and any right of the Borrower to continue SOFR Loans, shall be suspended (to the extent of the affected SOFR Loans or affected Interest Periods) until the Agent revokes such notice. Upon receipt of such notice, (i) the Borrower may, acting on the instructions of the Guarantors, revoke any pending request for a borrowing of or continuation of SOFR Loans (to the extent of the affected SOFR Loans or affected Interest Periods).
11.2 Benchmark Replacement
11.2.1 Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Transaction Document, upon the occurrence of a Benchmark Transition Event, the Agent and the Borrower, with the consent of the Guarantors, may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. (New York City time) on the [***] Business Day after the Agent has posted such proposed amendment to all affected Lenders and the Borrower and the Guarantors so long as the Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Clause 11.2.1 will occur prior to the applicable Benchmark Transition Start Date.
11.2.2 Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Agent
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will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Transaction Document.
11.2.3 Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower, the Guarantors and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Agent will notify the Borrower and the Guarantors of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Clause 11.2.4 and (v) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Clause 11.2, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Transaction Document, except, in each case, as expressly required pursuant to this Clause 11.2.
11.2.4 Benchmark Unavailability Period. Upon the Borrower's receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower, acting on the instruction of the Guarantors, may revoke any pending request for a Borrowing of or continuation of SOFR Loans to be made or continued during any Benchmark Unavailability Period.
12.FEES
The Borrower shall pay to the person(s) specified therein the fees in the amount and at the times agreed in a Fee Letter.
13.TAX GROSS-UP AND INDEMNITIES
13.1 Tax gross-up
13.1.1 Each Obligor shall make all payments to be made by it under the Transaction Documents without any Tax Deduction, unless a Tax Deduction is required by law.
13.1.2 Each Obligor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, the Lender shall notify the Agent on becoming so aware in respect of a payment payable to the Lender. If the Agent receives such notification from the Lender it shall promptly notify the Borrower and the Guarantors. For the avoidance of doubt, a failure of an Obligor to so notify the Agent will not prohibit the Obligor from making such a Tax Deduction it determines is required by law.
13.1.3 [***]
13.1.4 An Obligor is not required to make an increased payment under Clause 13.1.3 for a Tax Deduction on account of an Excluded Tax.
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13.1.5 If an Obligor is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
13.1.6 Within [***] days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment has been paid to the relevant Taxing Authority.
13.1.7 The Finance Parties and the Borrower shall cooperate in completing any procedural formalities, including the completion of any forms or certificates in respect of Taxes, necessary for the Borrower to obtain authorization to make that payment without a Tax Deduction or to reduce the amount of any such Tax Deduction, and any Finance Party shall deliver to the Borrower, the Guarantors and the Agent, at the time or times reasonably requested by the Borrower, any Guarantor or the Agent, such properly completed and executed documentation reasonably requested by the Borrower, any Guarantor or the Agent: [***]. Without limiting the generality of the foregoing:
[***]
13.1.8 [***]
13.1.9 Except as expressly set forth herein, it is agreed that all of the Borrower's obligations with respect to Taxes are set forth in Clause 13.2 and this Clause 13.
13.2 Tax indemnity
13.2.1 Except as provided in Clause 13.2.2, Borrower shall indemnify each Finance Party against, and within [***] Business Days of written demand by the Agent, pay or procure payment by the Guarantors to the relevant Finance Party, of an amount equal to any Taxes, other than Excluded Taxes imposed on or with respect to any payment by or on account of any obligation of the Borrower under any Transaction Document. [***]
13.2.2 Clause 13.2.1 shall not apply with respect to any Excluded Tax assessed on a Finance Party; or to the extent a Tax:
(a)has actually been indemnified pursuant to any other provision of any Transaction Document; or
(b)relates to a FATCA Deduction required to be made by a Party.
13.2.3 A Finance Party making, or intending to make, a claim under Clause 13.2.1 shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall promptly notify the Borrower.
13.2.4 A Finance Party shall, on receiving a payment from the Borrower under this Clause 13.2, notify the Agent who shall notify the Borrower that such payment has been so received.
13.3 Tax Refunds
[***]
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Payment giving rise to the refund not been required to be made by that Obligor.
13.4 Other Taxes
The Borrower shall timely pay to the relevant taxing authority in accordance with applicable law, or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.
13.5 Tax-related determinations
Unless a contrary indication appears and without prejudice to the provisions of Clause 30.2 (Certificates and Determinations), in this Clause 13 (Tax Gross-Up and Indemnities) a reference to "determines" or "determined" means a determination made in the discretion of the person making the determination in good faith.
13.6 After-Tax Basis
Other than any claims or payments (i) with respect to Taxes, which will solely be governed by Clause 13 or (ii) subject to Clause 14.1, any other non-Tax indemnity payments or reimbursement amounts to be payable by an Obligor under any Transaction Document to any Finance Party shall be made on an after-Tax basis and shall include such amount as may be necessary to indemnify and hold such Finance Party harmless on a net after-tax basis from all Taxes required to be paid by it with respect to or as a result of the payment or receipt of such sum, determined on the basis of existing rates and taking into account any deduction, Tax benefit or credit received with respect to the indemnified or reimbursed liability.
13.7 FATCA Information
13.7.1 Subject to Clause 13.7.3 below, each Party shall, within [***] Business Days of a reasonable request by another Party or any Guarantor:
(a)confirm to that other Party or such Guarantor whether it is:
(i)a FATCA Exempt Party; or
(ii)not a FATCA Exempt Party;
(b)supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA; and
(c)supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation, or exchange of information regime.
13.7.2 If a Party confirms to another Party pursuant to Clause 13.7.1(a) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
13.7.3 Clause 13.7.1(a) above shall not oblige any Finance Party to do anything, and Clause 13.7.1(a) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:
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(a)any law or regulation;
(b)any fiduciary duty; or
(c)any duty of confidentiality.
13.7.4 If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with Clauses 13.7.1(a) or 13.7.1(b) above (including, for the avoidance of doubt, where Clause 13.7.3 above applies), then such Party shall be treated for the purposes of the Transaction Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation forms, documentation or other information.
13.8 FATCA Deduction
13.8.1 Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction. For the avoidance of doubt, this Clause 13.8.1 shall also apply to a situation where the Agent or the Security Trustee is required to make a FATCA Deduction in respect of any payment to be made by it to the Lender.
13.8.2 Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction) notify the Party to whom it is making the payment and, in addition, shall notify the Borrower, the Guarantors and the Agent and the Agent shall notify the other Finance Parties.
14.INCREASED COSTS
14.1 Increased Costs
The Borrower shall, within [***] Business Days of demand by the Agent, pay for the account of a Lender the amount of any Increased Costs incurred by that Lender (or, without duplication, the bank holding company of which such Lender is a Subsidiary) in respect of its participation in the Loans hereunder as a result of any Change in Law that:
14.1.1 [***].
14.2 Exceptions
Clause 14.1 (Increased Costs) does not apply to the extent any Increased Cost is compensated for by Clause 13.2 (Tax indemnity) (or would have been compensated for under Clause 13.2 (Tax indemnity) but was not so compensated solely because it is an Excluded Tax or is otherwise excluded pursuant to Clause 13.2.2).
14.3 Increased Cost claims
[***]
15.MITIGATION
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If any circumstance contemplated in any of Clause 8.1 (Illegality), Clause 13.1 (Tax gross-up), Clause 13.2 (Tax indemnity) or Clause 14 (Increased Costs) arises then, without in any way limiting, reducing or otherwise qualifying the rights of any Party to take action under any of the Transaction Documents following completion of the mitigation process set forth in this Clause 15, and provided no Event of Default has occurred and is continuing, the Party first becoming aware of the existence of such circumstances shall promptly upon becoming aware of such circumstances notify the Agent, the Borrower and the Guarantors thereof and, in consultation in good faith, with the Agent, the Borrower and the Guarantors for a period of no less than [***] days (or such longer period as the Lender may agree, acting reasonably) to the extent that it can do so lawfully and without prejudice to its own position, any Party affected by such circumstances shall take reasonable steps (including in the case of the Lender a change of location of its Facility Office or the transfer of its rights, benefits and obligations to another financial institution acceptable to the Borrower and the Guarantors and willing to participate in the Facility) to mitigate the effects of such circumstances or to restructure the transactions contemplated by the Transaction Documents or to provide alternative security or comfort acceptable to the Finance Parties, [***]. If, following the completion of the mitigation process set out in this Clause 15, the Parties have been unable to agree a mitigation strategy and/or cure the circumstances giving rise to such mitigation process, then any Party may take such action as is permitted or contemplated by any of the Transaction Documents in accordance with the terms thereof.
16.OTHER INDEMNITIES
16.1 [***]
16.2 Other indemnities
The Borrower shall, on demand, indemnify each Finance Party against any Loss (other than any Loss which is a Tax or any Loss arising as a result of the fraud, gross negligence or willful misconduct of such Finance Party) incurred by that Finance Party as a result of:
[***]
16.3 Break Costs
In the event [***] then, in any such event, the Borrower shall compensate each Lender for any loss, cost and expense attributable to such event, including any loss, cost or expense arising from the liquidation or redeployment of funds or from any fees payable. Without limiting the effect of the preceding sentence, in the case of any prepayment or acceleration, such compensation shall not exceed [***]. The Borrower shall pay such Lender the amount shown as due on any such certificate within [***] Business Days after receipt thereof.
16.4 Indemnity to the Representatives
The Borrower shall promptly indemnify each Representative against any Losses (other than any Loss which is a Tax or any Loss arising as a result of the fraud, gross negligence or willful misconduct of such Finance Party or negligence or willful misconduct in the handling of funds by such Finance Party) incurred by such Representative (acting reasonably) as a result of acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorized and relies on in good faith.
17.COSTS AND EXPENSES
17.1 Transaction expenses
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[***]
17.2 Amendment costs
If the Guarantors, or the Borrower with the prior written consent of the Guarantors, requests an amendment, waiver or consent in connection with any Transaction Document, the Borrower shall, within [***] Business Days of written demand, pay or reimburse each Finance Party for the amount of all reasonable documented fees, costs and expenses (including, but not limited to, legal fees) incurred by such Finance Party in responding to, evaluating, negotiating or complying with that request or requirement.
17.3 Enforcement costs
Following the occurrence of [***] the Borrower shall, within [***] Business Days of demand, pay to each Finance Party the amount of all Losses properly incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Transaction Document in respect of such Default.
17.4 Security Trustee's and Agent's ongoing costs
[***]
18.REPRESENTATIONS
The Borrower makes the representations and warranties set out in this Clause 18 (Representations) to each Finance Party [***].
18.1 Status
18.1.1 It is a limited liability company, duly incorporated and validly existing under the laws of the State of Delaware.
18.1.2 It has the power to own its assets and carry on its business as it is being conducted.
18.2 Binding obligations
The obligations expressed to be assumed by it in each Transaction Document to which it is a party are, [***], legal, valid, binding and enforceable obligations except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity.
18.3 Non-conflict with other obligations
The entry into and performance by it of, and the transactions contemplated by, the Transaction Documents to which it is party do not conflict with:
18.3.1 any law or regulation applicable to it;
18.3.2 its constitutional documents; or
18.3.3 any agreement or instrument binding upon it or any of its assets.
18.4 Power and authority
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It has the power to enter into, perform and deliver, and has taken all necessary action to authorize its entry into, performance and delivery of, the Transaction Documents to which it is a party and the transactions contemplated by those Transaction Documents.
18.5 Validity and admissibility in evidence
All Authorizations required:
18.5.1 to enable it lawfully to enter into, exercise its rights, create Security Interests and comply with its obligations in the Transaction Documents to which it is a party;
18.5.2 to make the Transaction Documents to which it is a party admissible in evidence in the State of New York, United States of America; and
18.5.3 to enable it to create the Security Interests to be created by it pursuant to any Security Document to which it is a party and to ensure that such Security Interests have the priority and ranking they are expected to have,
have been obtained or effected and are in full force and effect.
18.6 Governing law and enforcement
The choice of the laws of the State of New York as the governing law of the Transaction Documents to which it is party will be recognized and enforced in the State of Delaware.
18.7 Insolvency
To the best of the Borrower's knowledge, no:
18.7.1 limited liability company action, legal proceeding or other procedure or step described in Clause 21.7 (Voluntary proceedings) has been taken in relation to the Borrower; or
18.7.2 none of the circumstances in Clause 21.6 (Involuntary proceeding) applies to the Borrower.
18.8 No Default
No Default has occurred or is continuing or might reasonably be expected to result from the making of the Loans.
18.9 Pari passu ranking
Its payment obligations under the Transaction Documents will rank at least pari passu with the claims of all its other present and future unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
18.10 No proceedings pending or threatened
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency have (to the best of its knowledge and belief) been started or threatened against it.
18.11 Security
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18.11.1 The Security Interests created by the Borrower pursuant to the Security Documents constitute first priority Security Interests in favor of the Security Trustee or (as the case may be) the Finance Parties against all persons (including, without limitation, a liquidator, receiver, administrator, examiner, administrative receiver, trustee or similar officer of, or any creditor of, the Borrower or any other person claiming through, under or in place of the Borrower) over the property mortgaged, charged or otherwise encumbered thereunder.
18.11.2 The Borrower has not prior to the date hereof assigned, charged or otherwise encumbered the Borrower Collateral or any moneys payable thereunder, and will not do so other than pursuant to the Borrower Security Documents.
18.11.3 At the time of Utilization of the Loans, there will be no restrictions on the Borrower's ability to assign all or any of its right, title and interest in the Borrower Collateral relating to each Aircraft pursuant to the Borrower Security Documents.
18.12 No Security Interests
Save for the Security Interests created pursuant to the Transaction Documents, no Security Interest exists over all or any of the present or future revenues, undertakings or assets of the Borrower.
18.13 Location
The "location" (as such term is used in Section 9-307 of the UCC) of the Borrower is Delaware.
18.14 No Employees; ERISA
It has no employees and no ERISA Event has occurred with respect to itself or the Guarantors.
18.15 Ownership
All of the membership interests of the Borrower are legally owned by the Borrower Parent.
18.16 No other agreements or business
It has not entered into any contract or agreement with any person and has not otherwise created or incurred any liability to any person other than (i) pursuant to and as permitted by the Transaction Documents, (ii) pursuant to agreements to sell the Aircraft or to assign the right to take title to the Aircraft from Boeing under the Assigned Purchase Agreement, in either case on the Delivery Date for such Aircraft upon the repayment of the related Loan pursuant to Clause 7.1, and agreements ancillary thereto (the "Sale Arrangements"), or (iii) liabilities incidental to its administration and/or continued limited liability company existence.
18.17 Anti-Money Laundering; Anti-Corruption; Export Controls; Sanctions
18.17.1 None of the Borrower nor its Subsidiaries, directors, officers, employees is a Designated Party.
18.17.2 None of the Borrower or any of its Subsidiaries: (a) has violated applicable Anti-Corruption Laws, Anti-Money Laundering Laws, Export Controls or Sanctions at any time during the past [***] years; or (b) is presently, or has been at any time during the
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past [***] years, the subject of any claim, proceeding, formal notice or investigation with respect to any actual, alleged or suspected violation by it of any Anti-Corruption Laws, Anti-Money Laundering Laws, Export Controls or Sanctions, in each case, as the same are applicable to the Borrower.
18.17.3 The Borrower is in compliance with and will comply with Anti-Corruption Laws, Anti-Money Laundering Laws, Export Controls and Sanctions, in each case of the United States and applicable to the Borrower.
18.18 Taxation
18.18.1 It has duly and punctually paid and discharged all Taxes imposed upon it or its assets within the time period allowed without incurring penalties (except to the extent that (a) the failure to pay could not have, individually or in the aggregate, a material adverse effect, or (b) (i) the payment is being contested in good faith, and (ii) it has maintained adequate reserves for those Taxes).
18.18.2 It is not overdue in the filing of any Tax returns (except to the extent that the failure to file could not have, individually or in the aggregate, a material adverse effect).
18.18.3 No claims are being asserted against it in writing with respect to Taxes asserted to be due and payable, which, if adversely determined, could reasonably be expected to have a material adverse effect.
18.19 Subsidiaries
It has no Subsidiaries.
18.20 Good title to assets
It has no assets other than its rights under the Transaction Documents to which it is a party. It has good, valid and marketable title to, or valid leases or licenses of, and all appropriate Authorizations to use, the assets necessary to carry on its business as presently conducted.
18.21 No immunity
It is subject to civil commercial law with respect to its obligations under the Transaction Documents to which it is a party and neither it nor any of its assets is entitled to any right of immunity from suit, execution, attachment or other legal process and the entry into and performance of such Transaction Documents by it constitute private and commercial acts.
18.22 Purchase Agreement, etc.
It has not granted any Security Interests over the Assigned Purchase Agreement in so far as it relates to the Aircraft, and it has not transferred or disposed of any of its rights or obligations in relation to the Assigned Purchase Agreement insofar as it relates to the Aircraft other than pursuant to the Transaction Documents.
18.23 [***]
19.INFORMATION UNDERTAKINGS
The undertakings in this Clause 19 (Information Undertakings) remain in force from the date of this Agreement until the end of the Security Period.
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19.1 Financial statements
The Borrower shall supply to the Agent in sufficient copies for the Lender (i) the annual audited financial statements of Allegiant Travel Company [***] of the end of each fiscal year of the Guarantors and (ii) quarterly financial statements of the Guarantors and the Guarantors [***] of the end of each fiscal quarter of the Guarantors; provided that the availability of the foregoing on the website (www.allegiantair.com) of Allegiant Travel Company shall satisfy the reporting requirement of this Clause 19.1.
19.2 Information: miscellaneous
The Borrower shall supply to the Agent (in sufficient copies for the Lender) and the Guarantors:
[***]
19.3 Notification of Defaults
The Borrower shall promptly notify the Agent of [***].
19.4 "Know your customer" checks and FATCA
19.4.1 The Borrower shall (and shall procure that each Obligor shall) promptly following a written request of the Agent or the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested, giving due regard to the Guarantor being a publicly traded U.S. company, by the Agent (for itself or on behalf of the Lender) or the Lender (for itself or on behalf of any prospective Lender) in order for the Agent, the Lender or any prospective Lender to carry out all necessary "know your customer" or other checks in relation to any person that it is required to carry out pursuant to the transactions contemplated in the Transaction Documents. Each of Agent and Lender shall protect and keep private any personal information supplied in respect of the foregoing in accordance with applicable laws of the United States and the European Union.
19.4.2 The Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out all necessary "know your customer" or other checks in relation to any person that it is required to carry out pursuant to the transactions contemplated in the Transaction Documents and for the Agent to determine whether or not the Lender is a FATCA Exempt Party for the purposes of payments to be made hereunder.
20.GENERAL UNDERTAKINGS
The undertakings in this Clause 20 (General Undertakings) remain in force at all times during the Security Period.
20.1 Authorizations
The Borrower shall promptly:
20.1.1 obtain, comply with and do all that is necessary to maintain in full force and effect; and
20.1.2 supply certified copies to the Agent of,
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[***].
20.2 Compliance with laws
The Borrower shall comply in all respects with all laws (including but not limited to Environmental Laws) to which it is subject, if failure so to comply would materially impair its ability to perform its obligations under the Transaction Documents.
20.3 Pari passu ranking
The Borrower shall ensure that its payment obligations under the Transaction Documents at all times rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally.
20.4 Merger
The Borrower shall not enter into any amalgamation, demerger, merger or limited liability company reconstruction other than with the prior written consent of the Agent.
20.5 No employees
The Borrower shall not have any employees.
20.6 No Subsidiaries
The Borrower shall not have any Subsidiaries.
20.7 Accounts
Save as provided for in the Transaction Documents, the Borrower shall not open or maintain any bank account without the prior written consent of the Agent.
20.8 Disposals
Save as otherwise expressly contemplated in any Transaction Document, the Borrower shall not enter into a single transaction or a series of transactions (whether related or not and whether voluntary or involuntary) to sell, lease, transfer or otherwise dispose of any of its assets.
20.9 Place of Business
20.9.1 The Borrower is and will remain a Delaware limited liability company and will maintain its registered office in c/o Wilmington Trust Company, 1100 North Market Street, New Castle County, Delaware, 19890-1605.
20.9.2 The Borrower shall not change its name or change its "location" (as such term is used in Section 9-307 of the UCC) without the prior written consent of the Agent not to be unreasonably withheld or delayed.
20.10 Negative pledge
The Borrower shall not create or permit to subsist any Security Interest over any Aircraft, the Assigned Purchase Agreement or any of the Collateral other than the Security Interests created pursuant to the Security Documents.
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20.11 Anti-Corruption; Anti-Money Laundering; Export Controls; Sanctions
20.11.1 The Borrower shall comply with all applicable Anti-Corruption Laws, Anti-Money Laundering Laws, Export Controls and Sanctions in respect of the use of the proceeds of the Loan.
20.11.2 The Borrower shall not:
(a)directly or indirectly use any part of the proceeds of the Loans: (i) in violation of applicable Anti-Corruption Laws, Anti-Money Laundering Laws or Export Controls; or (ii) in any manner that would constitute or give rise to a violation of Sanctions; or
(b)directly or indirectly use or lend, invest, contribute or otherwise make available any part of the proceeds of the Loans for any activities or dealings with or involving a Designated Party or in, with or involving a Sanctioned Country.
20.12 Taxation
The Borrower shall duly and punctually pay and discharge all Taxes imposed upon it, the Aircraft or its assets for which it is directly responsible within the time period allowed by applicable law (save to the extent that (i) the failure to pay could not have, individually or in the aggregate, a material adverse effect, or (ii) (a) payment is being contested in good faith, and (b) adequate reserves are being maintained for those Taxes).
20.13 No other business
The Borrower shall not transact or carry on any business other than as required or permitted by (or incidental to), or incur any liability other than pursuant to, permitted by, or incidental to the Transaction Documents or the Sale Arrangements or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person other than pursuant to, permitted by, or incidental to the Transaction Documents.
20.14 Dividends
The Borrower shall not pay, make or declare any dividend or other distribution to the Borrower Parent.
20.15 Further assurance
20.15.1 The Borrower shall deliver the UCC financing statements in connection with the relevant Transaction Documents and any continuation statements required with respect thereto, or similar instruments relating to the perfection of the Security Interests created or intended to be created by the Security Documents.
20.15.2 The Borrower hereby authorizes, and shall cause each Obligor and the Borrower Parent to authorize, the Security Trustee (or its designee) to file one or more UCC financing or continuation statements, and amendments thereto, or any similar document, with respect to all or any part of the Collateral granted by the Borrower or any Obligor or the Borrower Parent without the signature of the Borrower where permitted by applicable law.
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20.15.3 The Borrower shall execute, acknowledge, deliver, file and register all such additional agreements, instruments, notices, certificates, documents and assurances and perform such other acts or things as the Agent shall reasonably request to:
(a)effectuate the purposes of this Agreement and each of the other Transaction Documents or the transactions hereby or thereby contemplated or to protect the rights of the Finance Parties hereunder or thereunder; and
(b)perfect the Security Interests created or intended to be created under or evidenced by the Security Documents (which may include the execution of a mortgage, charge, assignment or other Security Interests over all or any of the assets which are, or are intended to be, the subject of the Security Documents) or by law.
20.15.4 The Borrower shall take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security Interest conferred or intended to be conferred on the Security Trustee or the Finance Parties by or pursuant to the Transaction Documents.
20.16 Amendments
The Borrower shall not, without the prior written consent of the Agent and, so long as no Event of Default has occurred and is continuing, the Guarantors:
20.16.1 cancel or terminate any Transaction Document or consent to or accept any cancellation or termination thereof; or
20.16.2 make any material amendments to its constitutional documents; or
20.16.3 do anything, and shall not take any action, which has or is reasonably likely to have the effect of prejudicing the first priority Security Interests created in favor of the Security Trustee against all persons (including, without limitation, a liquidator, receiver, administrator, examiner, administrative receiver, trustee or similar officer of, or any creditor of, the Borrower or any other person claiming through, under or in place of the Borrower) over any of the Collateral.
20.17 Actions Under Transaction Documents
20.17.1 Save as expressly set out in any Transaction Document [***], the Borrower shall exercise any right, power, authority or discretion vested in it under or in connection with any Transaction Document [***] has occurred) in accordance with any instructions given to it by the Agent (or if so instructed by the Agent, refrain from exercising any right, power, authority or discretion vested in it thereunder).
20.17.2 [***].
20.18 Maintenance of Separate Existence
The Borrower shall do all things necessary to maintain its business and limited liability company existence separate, readily identifiable and distinct from any other person and, in this regard, the Borrower shall:
20.18.1 observe all formalities necessary under applicable law to remain a legal entity separate, distinct and independent from the Guarantors and any other person;
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20.18.2 maintain its assets and liabilities separate and distinct from those of the Guarantors and any other person in such a manner that it is not difficult to segregate, identify or ascertain such assets;
20.18.3 maintain accurate records, board minutes, books and accounts separate from those of the Guarantors and any other person;
20.18.4 pay its obligations in the ordinary course of business as a legal entity separate from the Guarantors and any other person;
20.18.5 keep its funds separate and distinct from any funds of the Guarantors and any other person, and receive, deposit, withdraw and disburse such funds separately from any funds of the Guarantors and any other person;
20.18.6 not hold out that it is the same legal entity as or a division of the Guarantors or any other person or that the Guarantors or any other person is the same legal entity as it is or a division of it;
20.18.7 not agree to pay, assume, guarantee or become liable for any debt of, or otherwise pledge its assets for the benefit of the Guarantors or any other person except as contemplated in the Transaction Documents;
20.18.8 pay any Taxes required to be paid under applicable Tax law;
20.18.9 conduct its business in its own name, and not in the name of the Guarantors or any other person;
20.18.10 will not induce any third party to rely on the creditworthiness of Guarantors in order that such third party will be induced to contract with it (other than the Guarantee and any guarantee issued to the Manufacturer);
20.18.11 will have a board of directors which conducts its business separately from Guarantors and their Affiliates;
20.18.12 not enter into any transaction between itself and the Guarantors or their Affiliates that is more favorable to the Borrower or any Affiliate than transactions that could be entered into on an arm's length basis with a non-affiliated third party (other than the Transaction Documents);
20.18.13 conduct business in its own name and ensure that all formal communications are made solely in its name; and
20.18.14 not acquire the securities of the Guarantors or any Affiliate thereof.
20.19 Ownership
It shall not agree to, and shall procure that the Borrower Parent shall not agree to, any change in the status of the Borrower or ownership of the Borrower, after the date of this Agreement.
20.20 Purchase Agreement, etc.
20.20.1 The Borrower shall comply with its obligations under the Assigned Purchase Agreement in accordance with the terms thereof and comply with its obligations to pay all amounts due to be payable to Boeing under the Assigned Purchase Agreement.
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20.20.2 If Boeing is obliged by law or contract to reimburse any Obligor any PDP Payments made with respect to any Aircraft or to pay any amount to any Obligor with respect to any Aircraft under the provisions of the Assigned Purchase Agreement (other than on the Initial Utilization Date), the Borrower shall procure that each Obligor shall instruct Boeing to pay those PDP Payments and other amounts to the Security Trustee (unless the Security Trustee otherwise agrees in writing).
20.20.3 The Borrower shall promptly after becoming aware notify the Security Trustee of any change order, termination, amendment, modification, waiver or consent under the Assigned Purchase Agreement.
20.20.4 The Borrower shall not (and shall not consent to any Obligor to) without the prior written consent of the Security Trustee:
(a)[***]:
(i)[***];
(ii)[***];
(iii)[***];
(iv)materially adversely affect the rights and/or obligations of the Finance Parties pursuant to the Transaction Documents; or
(b)assign, transfer, sell or otherwise dispose of all or any part of its rights, benefits or obligations under the Assigned Purchase Agreement and the related Purchase Agreement Security Assignment and consent to any assignment or transfer by Boeing of its rights or obligations under the Assigned Purchase Agreement [***];
(c)[***]; or
(d)[***].
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21.EVENTS OF DEFAULT
Each of the events and circumstances set out under this Clause 21 (Events of Default) is an Event of Default.
21.1 Non-payment
The Borrower fails to make any payment under or pursuant to a Transaction Document at the place, in the currency and in the manner in which it is expressed to be payable within (i) [***] of its due date for payment, in the case of any scheduled payment or (ii) in respect of sums payable on demand or other unscheduled payments, withi n[***].
21.2 Certain obligations
21.2.1 The Borrower does not comply with the provisions of Clause 20.11 (Anti-Corruption; Anti-Money Laundering; Export Controls; Sanctions) or Clause 20.13 (No other business);
21.2.2 The Borrower does not comply with the provisions of Clause 20.20 (Purchase Agreement, etc.) and such non-compliance is not remedied within [***] Business Days of receipt by Borrower notice of the failure to comply.
21.2.3 [***].
21.2.4 The Guarantors do not comply with the provisions of clause [***] of the Guarantee;
21.2.5 Any Obligor or the Borrower Parent becomes a Designated Party.
21.3 Borrower Parent
[***]
21.4 Other obligations
Any Obligor fails to comply with any other provision of the Transaction Documents to which it is a party (other than those referred to in Clause 21.1 (Non-payment) or 21.2 (Certain obligations) and such failure, if capable of remedy, continues for more than [***].
21.5 Misrepresentation
Any representation or statement made or deemed to be made by an Obligor or the Borrower Parent in the Transaction Documents or any other document delivered by or on behalf of such Obligor or the Borrower Parent, as applicable, under or in connection with any Transaction Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made, provided that if:
[***]
21.6 Involuntary proceeding
An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or the Guarantors or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
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conservator or similar official for the Borrower or the Guarantors or for a substantial part of its assets, and, in any such case, [***].
21.7 Voluntary proceedings
The Borrower or the Guarantors shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Clause 21.6 (Involuntary proceeding), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or the Guarantors or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing.
21.8 ERISA Event
[***]
21.9 Repudiation
Any Obligor or the Borrower Parent repudiates in writing any Transaction Document or any Security Interest in any of the Collateral is no longer in full force and effect [***].
21.10 Business Change
[***]
21.11 Cross Default
[***]
21.12 Litigation
A final judgment for the payment of money [***] and the same remains unpaid (whether in full or in installments in accordance with the terms of the judgment) or undischarged and either (i) an enforcement proceeding has been commenced by any creditor upon such judgment and is not dismissed within [***] days following commencement of such enforcement proceedings or (ii) there is a period of [***] after such judgment becomes final during which such judgment or decree is not discharged, waived or the execution thereof stayed.
21.13 Suspension of Payments
A Guarantor announces generally or advises the Borrower or any Finance Party in writing that such Guarantor (i) [***], or (ii) [***].
21.14 Lease or financing obligations
[***]
21.15 Acceleration
21.15.1 On and at any time after the occurrence of the Event of Default pursuant to this Clause 21 (Events of Default) which is continuing the Agent may, and shall if so
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instructed by the Majority Lenders, in addition to all rights available to it under applicable law, by notice to the Borrower:
(a)cancel the Lender's Commitments whereupon they shall immediately be cancelled; and/or
(b)declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Transaction Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or
(c)declare that all or part of the Loans be payable on demand whereupon the same shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders; and/or
(d)exercise or direct the Security Trustee to exercise any or all of its rights, remedies, powers or discretions under the Security Documents and/or the other Transaction Documents.
21.15.2 Upon the occurrence of an Event of Default referred to in Clause 21.6 (Involuntary proceeding) or 21.7 (Voluntary proceedings), the Lender's Commitments shall automatically be cancelled and the aggregate principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts payable by the Borrower hereunder or under any of the Transaction Documents shall automatically become immediately due and payable without presentment, demand, protest or other formalities or notice of any kind, all of which are hereby expressly waived by the Borrower (unless, subsequent to such automatic acceleration, the same is waived by the Agent).
22.CHANGES TO THE LENDER
22.1 Assignments by the Lender
Subject to this Clause 22 (Changes to the Lender), the Lender (the "Existing Lender") may at any time:
22.1.1 assign, transfer, hypothecate or pledge all or any part of its rights and obligations hereunder and under the other Transaction Documents (other than its Commitments); or
22.1.2 sub-participate all or a portion of its interest in the Loan,
to a [***] (the "New Lender") without the consent of the Borrower or any other person.
Each Lender agrees for the benefit of the Borrower that it will not grant any participation in all or a portion of its Commitments or Loans and any amounts from time to time payable to it in respect thereof, unless all of the following conditions are satisfied: [***] Each Lender may, in connection with any participation or proposed participation, disclose to the participant or proposed participant any information relating to the Transaction Documents or to the parties thereto furnished to such Lender thereunder or in connection therewith and permitted to be disclosed by such Lender; [***].
22.2 Conditions of assignment
22.2.1 [***]
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22.2.2 [***]
22.2.3 [***]
22.2.4 An assignment will only be effective on receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender.
22.2.5 [***]
22.2.6 [***].
22.2.7 [***]
22.2.8 An assignment and assumption will only be effective if the procedure set out in Part I of Schedule 5 (Changes to the Lender) is complied with.
22.2.9 If:
(a)the Lender assigns any of its rights or obligations under the Transaction Documents or changes its Facility Office; and
(b)[***],
then, unless such assignment and assumption or change in Facility Office is made in connection with any mitigation pursuant to Clause 15 (Mitigation), the New Lender or Lender acting through its new Facility Office shall only be entitled to receive payment to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been entitled to if the assignment and assumption or change had not occurred and neither the Borrower nor any other Obligor shall be subject to any increase in or additional obligations or reduction or limitation of rights.
22.2.10 The Borrower shall reasonably cooperate with such assignment.
22.2.11 Any costs and expenses arising from such assignment and assumption or change of Facility Office, including costs of the Obligors (including, without limitation, fees of legal counsel), shall be for the account of the relevant Existing Lender, provided that such costs and expenses shall be for the account of the Borrower if [***].
22.2.12 A Transfer Certificate will become effective on the date it is recorded in the Register.
22.3 Assignment or transfer fee
22.3.1 Subject to Clause 22.3.2 below, the New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of $2,500.
22.3.2 No fee is payable pursuant to Clause 22.3.1 above if:
(a)the Agent agrees that no fee is payable; or
(b)the assignment or transfer is made by an Existing Lender to an Affiliate of that Existing Lender.
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22.4 The Register
The Agent, acting solely for these purposes as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Transfer Certificate delivered to it and a register (the "Register") for the recordation of the names and addresses of each Lender and the Commitments of and obligations (including principal and stated interest) owing to each Lender. Without limitation of any other provision of this Clause 22 (Changes to the Lender), no transfer of an interest in a Loan or Commitment hereunder shall be effective unless and until recorded in the Register. Notwithstanding anything to the contrary hereunder, including without limitation Clause 30 (Calculations and Certificates), the entries in the Register shall be conclusive absent manifest error and each Obligor, the Agent and each Lender shall treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of a Transaction Document notwithstanding any notice to the contrary. The Register shall be available for inspection by each Obligor at any reasonable time and from time to time upon reasonable prior notice.
Each Lender that grants a participation or sub-participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant's interest in the Loans or other obligations hereunder (the "Participant Register"); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant's interest in any commitments, loans, letters of credit or its other obligations under any Transaction Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as such) shall have no responsibility for maintaining a Participant Register.
22.5 Security over Lender's rights
In addition to the other rights provided to the Lender under this Clause 22, the Lender may without consulting with or obtaining consent from any Obligor or the Borrower Parent at any time charge, assign or otherwise create a Security Interest in or over (whether by way of collateral or otherwise) all or any of its rights under any Transaction Document to secure obligations of the Lender including, without limitation:
22.5.1 any charge, assignment or other Security Interest to secure obligations to a federal reserve or central bank; and
22.5.2 in the case of the Lender which is a fund, any charge, assignment or other Security Interest granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by the Lender as security for those obligations or securities,
except that no such charge, assignment or other Security Interest shall:
(a)release the Lender from any of its obligations under the Transaction Documents or substitute the beneficiary of the relevant charge, assignment or
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Security Interest for the Lender as a party to any of the Transaction Documents; or
(b)require any greater payments to be made by an Obligor, or grant to any person any more extensive rights than, those required to be made or granted to the Lender under the Transaction Documents.
23.CHANGES TO THE BORROWER
The Borrower may not assign any of its rights or delegate any of its obligations under the Transaction Documents (except to the Security Trustee pursuant to the Borrower Security Documents) without the prior written consent of the Agent and the Guarantors.
24.THE FINANCE PARTIES
The provisions of Schedule 6 (The Representatives) shall apply to this Agreement.
25.PAYMENT MECHANICS
25.1 Payments to the Agent
25.1.1 On each date on which the Borrower or the Lender is required to make a payment to a Finance Party, the Borrower or the Lender shall make the same available to the Agent (unless a contrary indication appears in any Transaction Document) for value on the due date at or before 1:00 p.m. (New York City time) and in immediately available funds. If such payment is received after 1:00 p.m. (New York City time) on the due date, the Agent may, in its discretion, deem such payment as received on the next succeeding Business Day.
25.1.2 Payment shall be made to such account with such bank as the Agent specifies, in writing no less than [***] Business Days prior to any relevant payment date.
25.2 Distributions by the Agent
Each payment received by the Agent under the Transaction Documents for another Party shall, subject to Clause 25.3 (Distributions to Borrower), Clause 25.4 (Clawback) and paragraph 1.21 (Deduction from amounts payable by the Agent) of Schedule 6 (The Representatives) be made available by the Agent promptly after receipt to the Party entitled to receive payment in accordance with Clause 26.2 (Application of Proceeds) (in the case of the Lender, for the account of its Facility Office) to such account as that Party may notify to the Agent by not less than [***] Business Days' notice with a bank in the principal financial center of the country of that currency.
25.3 Distributions to Borrower
The Agent shall apply any amount received by it for the Borrower in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Borrower under the Transaction Documents.
25.4 Clawback
[***].
25.5 No set-off by the Borrower
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All payments to be made by the Borrower under the Transaction Documents to which it is a party shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim (but without prejudice to the Borrower's rights and remedies to pursue in a court of law any claim it may have against any Finance Party or any other person).
25.6 Business Days
25.6.1 Subject as provided below, any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or, in the case of scheduled payments, the preceding Business Day, or in the case of non-scheduled payments, on the first Business Day of the next calendar month.
25.6.2 If there is any adjustment in the day on which an amount of interest is payable hereunder by reason of the operation of this Clause 25.6, the amount so payable shall be adjusted accordingly.
25.6.3 During any extension of the due date for payment of any principal or Unpaid Sum or other amount under this Agreement interest is payable on the principal or Unpaid Sum or other amount at the rate payable on the original due date.
25.7 Currency of account
25.7.1 Subject to Clauses 25.7.2 and 25.7.3, the dollar is the currency of account and payment for any sum from the Borrower under any Transaction Document.
25.7.2 Each payment in respect of costs, expenses, Losses or Taxes shall be made in the currency in which the costs, expenses, Losses or Taxes are incurred.
25.7.3 Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.
26.TURNOVER OF RECEIPTS; APPLICATION OF PROCEEDS
26.1 Turnover by the Parties
If at any time during the Security Period, any Party to this Agreement receives or recovers any amount which, under the terms of any of the Transaction Documents, should have been paid to the Security Trustee such Party shall hold that amount on trust for the Security Trustee and promptly pay that amount to the Security Trustee or, if this trust cannot be given effect to, such Party will promptly pay an amount equal to that receipt or recovery to the Security Trustee to be held on trust by the Security Trustee, in each case, for application by the Security Trustee in accordance with the provisions of Clause 26.2 (Application of Proceeds).
26.2 Application of Proceeds
All amounts payable by the Borrower to the Finance Parties pursuant to the Transaction Documents while an Event of Default is continuing and the Proceeds shall be paid to the Security Trustee to such account as the Security Trustee specifies in writing to the Borrower, and the Security Trustee shall apply such amounts, together with any amounts received or recovered by the Security Trustee from time to time in connection with the realization or enforcement of all or any part of the Collateral, in the following order of priority:
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26.2.1 firstly, in discharging all Losses and Expenses owing, without duplication, to the Agent or the Security Trustee under the Transaction Documents;
26.2.2 secondly, in payment to the Agent on behalf of the Lender for application in or towards the discharge of the Borrower's liabilities in respect of interest due and payable (including default interest) hereunder;
26.2.3 thirdly, in payment to the Agent on behalf of the Lender for application in or towards the discharge of the Borrower's liabilities in respect of principal due and payable hereunder on the Loans;
26.2.4 fourthly, without duplication of any amounts payable pursuant to sub-clauses 26.2.1 through 26.2.3 above, in payment to the Agent on behalf of the Finance Parties for application in or towards discharge of any Obligor's or the Borrower Parents’ other liabilities due and payable to the Finance Parties under any of the Transaction Documents;
26.2.5 lastly, any surplus to the Assignor or to its order and direction provided that in circumstances where there are Secured Obligations outstanding, if a Default has occurred and is continuing, the Security Trustee shall apply such monies to the payment of such outstanding Secured Obligations.
26.3 Partial Payments
If, in relation to the application of any amounts pursuant to any sub-clause of Clause 26.2 (Application of Proceeds) the amount available is insufficient to satisfy and discharge all of the amounts due and payable as referred to in such sub-clauses, the application shall be made pari passu and pro-rata as between the amounts expressed to be due and payable as referred to in such sub-clause (or in such other manner as the Parties entitled to the amounts referred to in such sub-clause may agree in writing).
27.RELEASE OF SECURITY
27.1 Release of Aircraft Specific Collateral
The Security Trustee and the other Finance Parties agree, for the benefit of each other and the Borrower and the Guarantors that, in respect of any Aircraft, upon payment to the Finance Parties of the relevant Loan relating to such Aircraft, together with all other amounts then due and payable to the Finance Parties at such time under the Transaction Documents, provided that no Event of Default has occurred and is continuing and the Borrower is not in default of any of its payment obligations under this Agreement or any other Transaction Document, such Aircraft and the related Aircraft Specific Collateral shall be released from the Security Interests constituted by the Security Documents and the Security Trustee (at the cost of the Borrower) will execute such agreements, give such notices and do such other things as are necessary or as the Borrower or the Guarantors may reasonably request, without recourse or warranty, to give effect to such release and the reassignment of the Assigned Rights (as defined in the PAA).
27.2 Release of Collateral
27.2.1 Upon the full, final and indefeasible payment and discharge in full of the Loans, together with all other amounts then due and payable to the Finance Parties under the Transaction Documents, the Collateral shall be released from the Security Interests constituted by the Security Documents. The Security Trustee (at the cost of the Borrower) will promptly execute such agreements, give such notices and do such
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other things as are necessary or as the Borrower or the Guarantors may reasonably request, without recourse or warranty, to give effect to such release and to discharge such Security Interests and the reassignment of the Assigned Rights (as defined in the PAA).
27.2.2 For the avoidance of doubt, the Secured Obligations shall be considered fully, finally and indefeasibly paid and discharged on the date of payment by the relevant Obligor of all amounts relating thereto, provided that the relevant Obligor is solvent and not subject to any bankruptcy, insolvency, examinership or analogous proceeding at such time and the Secured Obligations Discharge Date shall be construed accordingly.
27.3 [***]
28.SET-OFF
A Finance Party may set off any matured obligation due from the Borrower under the Transaction Documents to which it is a party (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to the Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
29.NOTICES
29.1 Communications in writing
Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by electronic mail or letter.
29.2 Addresses
The address and email address (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Transaction Documents is:
29.2.1 identified with its name below; or
29.2.2 specified on the Transfer Certificate to which it is a party,
or any substitute details which that Party may notify to the Security Trustee (or the Security Trustee may notify to the other Parties, if a change is made by the Security Trustee) by not less than [***] Business Days' notice and promptly upon receipt of any notification of any new or changed details, the Security Trustee shall notify the other Parties.
29.3 Delivery
29.3.1 Any communication or document made or delivered by one person to another under or in connection with the Transaction Documents will only be effective:
(a)if by way of letter, when it has been left at the relevant address provided such delivery was by way of an internationally reputable courier company which retains proof of delivery;
(b)if by way of electronic mail, when sent provided that the message is in legible form and no message is received by the sender indicating that such message
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has not been received by or delivered to the intended recipient provided, that, in the case of email notifying of an incipient or actual Event of Default such notice shall only be validly given only if such notice is followed by notice delivered by courier service dispatched promptly following delivery of such email (and dispatched not later than the next Business Day.
29.3.2 Any communication or document to be made or delivered to the Security Trustee or the Agent (as the case may be) will be effective only when actually received by the Security Trustee or the Agent (as the case may be) and then only if it is expressly marked for the attention of the department or officer identified with the Security Trustee's or the Agent's (as the case may be) signature below (or any substitute department or officer as the Security Trustee or the Agent (as the case may be) shall specify for this purpose).
29.3.3 The Finance Parties agree that all notices sent by them to the Borrower under the Transaction Documents shall be copied to the Guarantors, unless prohibited by applicable law to deliver any such notice to a Guarantor.
29.4 English language
29.4.1 Any notice given under or in connection with any Transaction Document must be in English.
29.4.2 All other documents provided under or in connection with any Transaction Document must be:
(a)in English; or
(b)if not in English, and if so required by the Security Trustee, accompanied by an English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document or unless otherwise required by law.
30.CALCULATIONS AND CERTIFICATES
30.1 Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Transaction Document, the entries made in the accounts maintained by a Finance Party in the absence of manifest error are prima facie evidence of the matters to which they relate.
30.2 Certificates and Determinations
Any certification or determination by a Finance Party of a rate or amount under any Transaction Document shall be signed by a duly authorized officer of the Finance Party and shall substantiate in sufficient detail the amount concerned and subject thereto is, in the absence of manifest error, prima facie evidence of the matters to which it relates.
30.3 Day count convention
Any interest, commission or fee accruing in favor of any Finance Party under any Transaction Document will accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a year of three hundred and sixty (360) days.
31.PARTIAL INVALIDITY
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If, at any time, any provision of the Transaction Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
32.REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Transaction Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
33.AMENDMENTS AND WAIVERS
33.1 Required Consents
33.1.1 Any term of the Transaction Documents may be amended or waived only by the Agent only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all Parties. The Obligors shall be entitled to enforce the provisions of this Clause 33.
33.1.2 The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 33 (Amendments and Waivers). The Agent shall promptly inform each Finance Party of any such amendment or waiver being agreed to or granted.
33.1.3 No amendment or waiver may be made before the date falling [***] Business Days after the terms of that amendment or waiver have been notified by the Agent to the Lender. The Agent shall notify the Lender reasonably promptly of any amendments or waivers proposed by the Borrower.
33.2 Exceptions
33.2.1 An amendment or waiver that has the effect of changing or which relates to:
(a)the definition of Majority Lenders;
(b)a change to any Obligor;
(c)any provision which expressly requires the consent of all the Lenders;
(d)Clause 2.2 (Finance Parties' rights and obligations), Clause 22 (Changes to the Lender) or this Clause 33.2 (Exceptions);
(e)release of Security Interests created by the Security Documents unless permitted under the Transaction Documents or undertaken by the Security Trustee (acting on the instructions of the Majority Lenders) following the occurrence of a Default or an Event of Default which is continuing; or
(f)any material change to any Security Document,
shall not be made without the prior consent of all of the Lenders.
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33.2.2 In addition, an amendment or waiver that has the effect of changing or which relates to:
(a)an extension to the date of payment of any amount under the Transaction Documents;
(b)a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable; or
(c)an increase in or an extension of any Commitment,
shall not be made without the prior written consent of all of the Lenders affected by such amendment or waiver.
34.CONFIDENTIALITY
At all times during the continuance of this Agreement and the other Transaction Documents and after the termination hereof (howsoever caused), each of the Parties hereto or any person who becomes a Party, whether or not any such party or person ceases to be a Party hereto, shall not, without the express prior written consent of the other Parties, issue any press release in relation to the transactions evidenced by this Agreement and the other Transaction Documents, or disclose to any other person (other than another Party to a Transaction Document), the Transaction Documents or the business, financial or other covenants and/or information contained in or supplied in connection with this Agreement or any other Transaction Document and the transactions contemplated hereby or thereby or any other agreement entered into after the date hereof by any party hereto or in connection with this Agreement or any other Transaction Document, or release synopses, summaries, explanations, copies or drafts of any such document which disclose or reveal the identity of the Parties or the terms thereof (or any of them) provided, that the Parties shall be entitled, without any such consent, to disclose (to the extent reasonably required):
34.1.1 in connection with any proceedings arising out of or in connection with this Agreement or any of the other Transaction Documents; or
34.1.2 if required to do so by an order of a court of competent jurisdiction whether in pursuance of any procedure for discovery of documents or otherwise or by an order of any arbitral tribunal; or
34.1.3 pursuant to any law or regulation having the force of law; or
34.1.4 to any fiscal, monetary, tax, regulatory, supervisory, governmental or other competent authority or any stock exchange on which its shares may be listed; or
34.1.5 to the auditors, legal, insurance or other professional advisors or insurers or underwriters of any member of the group of companies of which such party is a member and to any potential assignee or transferee, provided, that the recipient is obliged to keep the relevant information confidential; or
34.1.6 to any shareholder, officer, director, employee or Affiliate, provided that the relevant disclosing party shall procure such shareholder, officer, director, employee or Affiliate shall treat such information in accordance with the terms of this Clause 34; or
34.1.7 to any potential transferee of a Finance Party's rights and obligations under the Transaction Documents, provided that the relevant Finance Party shall procure such
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potential transferee shall treat such information in accordance with the terms of this Clause 34; or
34.1.8 if required to do so in order to obtain any permits, consents, licenses which such Party is required to obtain pursuant to, or for the purposes of the Transaction Documents; or
34.1.9 if any of the same is or shall become publicly known otherwise than as a result of a breach of such Party of this Clause 34; or
34.1.10 in any manner expressly permitted by any of the Transaction Documents.
35.COUNTERPARTS
Each Transaction Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Transaction Document.
36.GOVERNING LAW
THIS AGREEMENT AND EACH OTHER TRANSACTION DOCUMENT (UNLESS OTHERWISE STATED THEREIN) AND THE RIGHTS AND OBLIGATIONS OR ANY CLAIMS, CONTROVERSIES OR DISPUTES OF THE PARTIES RELATING TO OR ARISING UNDER IT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
37.ENFORCEMENT
37.1 Jurisdiction
Each of the parties hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of each of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in the Borough of Manhattan, New York (including its Appellate Division), and of any other appellate court in respect of the foregoing, in any action or proceeding arising out of or relating to this Agreement or any other Transaction Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State, or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Transaction Document shall affect any right that any Finance Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Transaction Document in the courts of any jurisdiction.
37.2 Waiver of venue
The Borrower hereby irrevocably waives, to the extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Transaction Document brought in the United States District Court for the Southern District of New York or in any New York State Court sitting in the Borough of Manhattan, New York, and hereby further
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irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum and any right to which it may be entitled on account of place of residence or domicile. A final judgment (in respect of which time for all appeals has elapsed) in any such suit, action or proceeding shall be conclusive and may be enforced in any court to the jurisdiction of which the Borrower is or may be subject, by suit upon judgment.
37.3 Service of process
The Borrower hereby authorizes all service of process to be served on it at its address identified in accordance with Clause 29.2.
37.4 Waiver of jury trial
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND EACH OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
37.5 Waiver of immunity
The Borrower waives generally all immunity it or its assets or revenues may otherwise have in any jurisdiction, including immunity in respect of:
37.5.1 the giving of any relief by way of injunction or order for specific performance or for the recovery of assets or revenues or other legal process; and
37.5.2 the issue of any process against its assets or revenues for the enforcement of a final judgment or, in an action in rem, for the arrest, detention or sale of any of its assets and revenues.
38.USA PATRIOT ACT; COMPLIANCE WITH APPLICABLE ANTI-TERRORISM AND ANTI-MONEY LAUNDERING REGULATIONS
In order to comply with laws, rules and regulations and executive order in effect from time to time applicable to banking institutions, including, without limitation, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA Patriot Act of the United States (the "Applicable ML Law"), the Agent and the Security Trustee may be required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Agent and the Security Trustee. Accordingly, each Party agrees to provide to the Agent and the Security Trustee upon their request from time to time such identifying information and documentation as may be available in order to enable the Agent and the Security Trustee to comply with the Applicable ML Law.
39.CERTAIN ERISA MATTERS
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[***].
40.[***]
[Signature pages follow]
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly executed as of the date set forth above.
SUN TAIL PDP LLC, as the Borrower
By: /s/ Robert P. Hines Jr.
Name: Robert P. Hines Jr.
Title: Vice President
Address:
Attention:
Email:
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RUNWAY SEVEN LENDER LLC, as the Lender
By: Carlyle Aviation Management Limited,
its Manager
By: /s/ Robert G. Korn
Name: Robert G. Korn
Title: Director
Address: c/o Carlyle Aviation Management Limited
Connaught House
1 Burlington Road
Dublin 4, Ireland
Connaught House
1 Burlington Road
Dublin 4, Ireland
Attention: Runway PDP Agent
Email: CAMLnotices@carlyle.aero
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CARLYLE AVIATION MANAGEMENT LIMITED, as the Agent
By: /s/ Robert G. Korn
Name: Robert G. Korn
Title: Director
Address: Connaught House
1 Burlington Road
Dublin 4, Ireland
1 Burlington Road
Dublin 4, Ireland
Attention: Runway PDP Agent
Email: CAMLnotices@carlyle.aero
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RUNWAY SEVEN LENDER LLC, as the Security Trustee
By: Carlyle Aviation Management Limited,
its Manager
By: /s/ Robert G. Korn
Name: Robert G. Korn
Title: Director
Address: c/o Carlyle Aviation Management Limited
Connaught House
1 Burlington Road
Dublin 4, Ireland
Connaught House
1 Burlington Road
Dublin 4, Ireland
Attention: Runway PDP Agent
Email: CAMLnotices@carlyle.aero
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Schedule 1
THE ORIGINAL LENDER
THE ORIGINAL LENDER
| Lender | Commitment | ||||
| [***] | [***] | ||||
| [***] | [***] | ||||
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Schedule 2
CONDITIONS PRECEDENT
CONDITIONS PRECEDENT
Part I
INITIAL CONDITIONS PRECEDENT
INITIAL CONDITIONS PRECEDENT
1.A certificate of an authorized signatory of each Obligor and the Borrower Parent certifying that each copy document relating to it specified in paragraphs (a), (b), and (c) below are correct, complete and in full force and effect as at the date no earlier than the date of this Agreement.
(a)A copy of the constitutional documents of such Obligor and the Borrower Parent.
(b)A copy of the resolution(s) of the board of directors or other applicable corporate or limited liability company authorization(s) of such Obligor or the Borrower Parent, as applicable:
(i)authorizing such Obligor or the Borrower Parent, as applicable to enter into the Transaction Documents to which it is a party;
(ii)(if applicable and necessary) authorizing by way of a power of attorney a specified person or persons on its behalf (and including specimen signatures for such person(s)), to execute the Transaction Documents to which it is a party and to sign and/or dispatch all documents and notices to be signed and/or dispatched by it under or in connection with the Transaction Documents to which it is a party.
(c)Copies of the powers of attorney (including those referred to in paragraph (b)(ii) above), if applicable, executed by such Obligor or the Borrower Parent, as applicable.
2.A copy of an executed counterpart of:
(i)the Fee Letter(s);
(ii)this Agreement;
(iii)[***];
(iv)[***];
(v)the PAA;
(vi)the PAA Consent;
(vii)the Assigned Purchase Agreement;
(viii)the Purchase Agreement Security Assignment;
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(ix)[***]; and
(x)each other Transaction Document.
3.UCC financing statements with respect to the relevant Security Documents, in each case, in a form acceptable to the Security Trustee, duly filed in each jurisdiction reasonably requested by the Security Trustee.
4.The legal opinions of:
(i)[***];
(ii)[***]
(iii)[***].
5.Evidence that all fees, costs and expenses (other than legal fees) stated to be payable on or before the first Initial Utilization Date pursuant to any Fee Letters have been received or will be paid on such date.
6.The Agent shall be satisfied that all filings, registrations, recordings and other actions have been or will be taken which are necessary or advisable to ensure the validity, effectiveness and enforceability of this Agreement and the other Transaction Documents and to protect the rights of the Finance Parties.
7.The Agent shall have received evidence of the release of any assignment or security interest previously granted in respect of the Purchase Agreement relating to the Initial Aircraft.
8.The Agent, at the direction of the Lender, shall be satisfied with the amount of the applicable Lender's Purchase Price in respect of the Aircraft.
9.Prior to the Initial Utilization, the conditions precedent set forth in Part II of this Schedule 2 shall have been satisfied with respect to such Initial Utilization.
Part II
CONDITIONS PRECEDENT TO INITIAL UTILIZATION AND SUBSEQUENT UTILIZATIONS
CONDITIONS PRECEDENT TO INITIAL UTILIZATION AND SUBSEQUENT UTILIZATIONS
1.A certificate of an authorized signatory of (i) the Borrower certifying that [***] and (ii) each Guarantor certifying that [***].
2.A copy of an executed counterpart of a Utilization Request no later than the time specified in Schedule 7 (Timetables).
3.Evidence that all fees, costs and expenses (other than legal fees) stated to be payable on or before such Utilization Date pursuant to any Fee Letters have been received or will be paid on such date.
4.No Default [***] shall have occurred.
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Schedule 3
FORM OF UTILIZATION REQUEST
FORM OF UTILIZATION REQUEST
To: Carlyle Aviation Management Limited (the "Agent")
Dated: [ • ]
Dear Sirs
PDP Facility Agreement dated November 1, 2023 between, inter alios, Sun Tail PDP LLC (the "Borrower"), the Agent and Runway Seven Lender LLC as lender (the "Facility Agreement")
The Borrower hereby gives notice in accordance with Clause 4 (Conditions of Utilization) of the Facility Agreement that the Borrower wishes to make the drawdown of the Loan for the [***] Aircraft with MSN [__] on [ • ] (the "Utilization Date") in the amount of [ • ] dollars ($[ • ]), subject to the conditions precedent set forth in the Facility Agreement.
Please apply [ • ] dollars ($[ • ] of the proceeds of the Utilization for the [***] Aircraft with MSN [__] in payment to the following account of the [Airframe Manufacturer] [TBC] [Assignor –Allegiant to provide account details.].
Capitalized terms used herein have the same meanings as defined in the Facility Agreement.
This is [an Initial Utilization Request / a Subsequent Utilization Request] for the [***] Aircraft with MSN [__].1
[Set forth in the Appendix to this Utilization Request is the relevant invoice from The Boeing Company, in respect of the relevant PDP Payments which are to be financed by our Utilization of the Loan described above.]
This Utilization Request is irrevocable.
This Utilization Request is governed by the laws of the State of New York.
Yours faithfully
SUN TAIL PDP LLC
By: ___________________________
Name: ___________________________
Title: ___________________________
1 Include for Utilizations after the Initial Utilization only.
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Acknowledged by:
ALLEGIANT AIR, LLC
By: ___________________________
Name: ___________________________
Title: ___________________________
ALLEGIANT TRAVEL COMPANY
By: ___________________________
Name: ___________________________
Title: ___________________________
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APPENDIX TO UTILIZATION REQUEST
[RELEVANT BOEING INVOICE TO BE INSERTED HERE]
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Schedule 4
THE INITIAL AIRCRAFT AND PDP AMOUNTS
THE INITIAL AIRCRAFT AND PDP AMOUNTS
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
| [***] | [***] | [***] | [***] | [***] | [***] | [***] | ||||||||||||||
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Schedule 5
CHANGES TO THE LENDER
CHANGES TO THE LENDER
Part I
1.Limitation of responsibility of Existing Lender
1.1 Unless expressly agreed to the contrary, the Existing Lender makes no representation or warranty and assumes no responsibility to the New Lender for:
1.1.1 the legality, validity, effectiveness, adequacy or enforceability of the Transaction Documents or any other documents;
1.1.2 the financial condition of any Obligor;
1.1.3 the performance and observance by any Obligor of its obligations under the Transaction Documents or any other documents; or
1.1.4 the accuracy of any statements (whether written or oral) made in or in connection with any Transaction Document or any other document,
and any representations or warranties implied by law are excluded.
2.Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
1.2.1 has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Transaction Document; and
1.2.2 will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Transaction Documents or any Commitment is in force.
3.Nothing in any Transaction Document obliges the Existing Lender to:
1.3.1 accept a re-transfer from a New Lender of any of the rights and obligations assigned or assumed under Clause 22 (Changes to the Lender); or
1.3.2 support any Losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Transaction Documents or otherwise.
4.Copy of Transfer Certificate to Borrower
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, send the Borrower and the Guarantors a copy of that Transfer Certificate.
5.Disclosure of information
5.1 The Lender may disclose to any of its Affiliates and any other person:
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5.1.1 to (or through) whom the Lender assigns (or may potentially assign) all or any of its rights and obligations under this Agreement;
5.1.2 with (or through) whom the Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or any Obligor; or
5.1.3 to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation,
any information about any Obligor or the Borrower Parent and the Transaction Documents as the Lender shall consider appropriate if, in relation to clauses 5.1.1 and 5.1.2 above, the person to whom the information is to be given has entered into a confidentiality undertaking in substantially the form of Clause 34 (Confidentiality).
6.Procedure for assignment and assumption
6.1 Subject to the conditions set out in Clause 22.2 (Conditions of assignment), an assignment and assumption shall become effective when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph 6.2 below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.
6.2 The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender upon its completion of all "know your customer" or other checks relating to any person that it is required to carry out in relation to the transfer to such New Lender.
6.3 On the Transfer Date:
6.3.1 to the extent that in the Transfer Certificate the Existing Lender seeks to assign its rights and obligations under the Transaction Documents the Borrower and the Existing Lender shall be released from obligations towards one another under the Transaction Documents arising after the Transfer Date and their respective rights against one another under the Transaction Documents arising after the Transfer Date shall be cancelled (being the "Discharged Rights and Obligations");
6.3.2 the Borrower and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as the Borrower and the New Lender have assumed and/or acquired the same in place of the Borrower and the Existing Lender;
6.3.3 the Agent and the New Lender shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the assignment and assumption and to that extent the Agent and the Existing Lender shall each be released from further obligations to each other under the Transaction Documents; and
6.3.4 the New Lender shall become a Party as a "Lender".
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Part II
FORM OF TRANSFER CERTIFICATE
FORM OF TRANSFER CERTIFICATE
To: Carlyle Aviation Management Limited (the "Agent")
Allegiant Air, LLC and Allegiant Travel Company (the "Guarantors")
Sun Tail PDP LLC (the "Borrower")
Sun Tail PDP LLC (the "Borrower")
From: [The Existing Lender] (the "Existing Lender") and [The New Lender] (the "New Lender")
Dated: [ • ]
PDP Facility Agreement dated November 1, 2023 between, inter alios, the Borrower, the Agent and Runway Seven Lender LLC, as lender (the "Facility Agreement")
1.We refer to the Facility Agreement. This is a Transfer Certificate. Terms defined in the Facility Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2.We refer to paragraph 6 (Procedure for assignment and assumption) of Part I of Schedule 5 (Changes to the Lender) of the Facility Agreement:
2.1.1 The Existing Lender and the New Lender agree to the Existing Lender assigning to the New Lender by way of an assignment and assumption all or part of the Existing Lender's Commitment, rights and obligations referred to in the schedule hereto (the "Schedule") in accordance with paragraph 6 (Procedure for assignment and assumption) of Part I of Schedule 5 (Changes to the Lender) of the Facility Agreement.
2.1.2 The proposed Transfer Date is [•].
2.1.3 The Facility Office and address, and attention details for notices of the New Lender for the purposes of Clause 29 (Notices) of the Facility Agreement are set out in the Schedule.
3.The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in paragraph 1 (Limitation of responsibility of Existing Lender) of Part I of Schedule 5 (Changes to the Lender) of the Facility Agreement.
4.This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
5.This Transfer Certificate shall be governed by and construed in accordance with the laws of the State of New York. The provisions of Clause 37 (Enforcement) of the Facility Agreement shall apply to this Transfer Certificate as if set out herein in full, mutatis mutandis.
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THE SCHEDULE
Commitment/rights and obligations to be transferred
[insert relevant details of Existing Lender's Commitment and/or participation in respect of each Loan]
[Facility Office address and attention details for notices and account details
for payments]
[Facility Office address and attention details for notices and account details
for payments]
[EXISTING LENDER] | [NEW LENDER] | ||||
| By: ………………………………… | By: ………………………………… | ||||
| Title: ………………………………… | Title: ………………………………… | ||||
This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as [ • ].
CARLYLE AVIATION MANAGEMENT LIMITED, as agent
By: …………………………………
Title: …………………………………
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Schedule 6
THE REPRESENTATIVES
THE REPRESENTATIVES
1.ROLE OF THE AGENT
1.1 Appointment of the Agent
1.1.1 The Lender appoints the Agent to act as its agent under and in connection with the Transaction Documents.
1.1.2 The Lender authorizes the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Transaction Documents together with any other incidental rights, powers, authorities and discretions.
1.2 Duties of the Agent
1.2.1 The Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.
1.2.2 Except where a Transaction Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
1.2.3 If the Agent receives notice in accordance with the Transaction Documents from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
1.2.4 If the Agent is aware of the non-payment of any principal, interest, or other amount payable to a Finance Party (other than the Agent) under this Agreement it shall promptly notify the other Finance Parties.
1.2.5 The Agent's duties under the Transaction Documents are solely mechanical and administrative in nature.
1.2.6 The Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Agent.
1.3 No fiduciary duties
1.3.1 Nothing in this Agreement constitutes the Agent as a trustee or fiduciary of any other person.
1.3.2 The Agent shall not be bound to account to the Lender for any sum or the profit element of any sum received by it for its own account.
1.4 Appointment of the Security Trustee
1.4.1 The Finance Parties irrevocably appoint the Security Trustee as their security trustee of the Collateral for the purpose of this Agreement and the other Transaction Documents.
1.4.2 The Security Trustee accepts such appointment and declares that it shall hold the Collateral on trust for the Finance Parties on the terms contained in this Agreement.
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1.4.3 Each of the parties to this Agreement agree that the Security Trustee shall have only those duties, obligations and responsibilities expressly specified in this Agreement or in the other Transaction Documents that it is a party to (and no others shall be implied).
1.5 Agent's Directions
Subject to the terms of this Agreement and the other Transaction Documents, the Security Trustee will take any Enforcement Action in relation to the Collateral (or refrain from doing so) as directed by the Agent (acting on the instructions of the Majority Lenders). At all times after the direction to commence Enforcement Action in relation to the Collateral has been issued and subject to the terms of this Agreement and the Transaction Documents, the Security Trustee will act on the directions of the Agent (acting on the instructions of the Majority Lenders), who shall be entitled to give directions and do any other things in relation to the enforcement of the Collateral (including in connection with but not limited to, the disposal, collection or realization of assets subject to the Collateral) that it considers appropriate including (without limitation) determining the timing and manner of any Enforcement Action against any particular person or asset provided however, that no such Enforcement Action shall be taken unless an Event of Default is continuing.
1.6 No responsibility to perfect Collateral
The Security Trustee shall not be liable for any failure to:
1.6.1 require the deposit with it of any deed or document certifying, representing or constituting the title of any Obligor or the Borrower Parent to any of the Collateral;
1.6.2 obtain any license, consent or other authority for the execution, delivery, legality, validity, enforceability or admissibility in evidence of any of the Transaction Documents or the Collateral;
1.6.3 register, file or record or otherwise protect any of the Collateral (or the priority of any of the Collateral) under any applicable laws in any jurisdiction or to give notice to any person of the execution of any of the Transaction Documents or of the Collateral;
1.6.4 take, or to require any of the Obligors or the Borrower Parent to take, any steps to perfect its title to any of the Collateral or to render the Collateral effective or to secure the creation of any ancillary security interest under the laws of any jurisdiction; or
1.6.5 require any further assurances in relation to any of the Security Documents.
1.7 Insurance by Security Trustee
The Security Trustee shall not be under any obligation to insure any of the Collateral, to require any other person to maintain any insurance or to verify any obligation to arrange or maintain insurance contained in the Transaction Documents. The Security Trustee shall not be responsible for any Loss which may be suffered by any person as a result of the lack of, avoidance of or inadequacy of any insurance.
1.8 Winding up of trust
If the Security Trustee, with the approval of the Agent (acting on the instructions of the Majority Lenders), determines that (a) all of the Secured Obligations and all other obligations secured by any of the Security Documents have been fully and finally discharged and (b)
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none of the Finance Parties is under any commitment, obligation or liability (whether actual or contingent) to make advances or provide other financial accommodation to any Obligor under the Transaction Documents, the trusts set out in this Agreement shall be wound up. At that time the Security Trustee shall release, without recourse or warranty, all of the Collateral then held by it and the rights of the Security Trustee under each of the Security Documents.
1.9 Own Funds
Nothing contained in this Agreement or the other Transaction Documents shall require the Security Trustee to expend or risk its own funds or otherwise incur any financial liability and the Security Trustee shall not be obliged to do or omit anything, including entering into any transaction or incurring any liability if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity and/or security and/or pre-funding against such risk or liability is not assured to it.
1.10 Power of Attorney
The Borrower by way of security for its obligations under this Agreement and for the Secured Obligations, irrevocably appoints the Security Trustee to be its attorney at any time whilst an Event of Default is continuing to take any and all action with respect to the Collateral which the Borrower would be entitled to do or is required to do under any Transaction Document but has failed to do within the period provided for under the relevant Transaction Document (and the Security Trustee may delegate that power on such terms as it sees fit).
1.11 Business with the Obligors
Each Representative may accept deposits from, lend money to and generally engage in any kind of business of any nature whatsoever with any Obligor or the Borrower Parent.
1.12 Rights and discretions of the Representatives
1.12.1 Each Representative may rely on:
(a)any representation, notice or document which it believes, acting reasonably, to be genuine, correct and appropriately authorized; and
(b)any statement made by a director, authorized signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.
1.12.2 Each Representative may assume (unless it has received notice to the contrary in its capacity as Agent or, as the case may be, Security Trustee for the Lender) that:
(a)no Default has occurred (unless it has actual knowledge of a Default arising by reason of non-payment of a sum due to be paid to it); and
(b)any right, power, authority or discretion vested in any Party or the Lender has not been exercised.
1.12.3 Each Representative may engage, pay for and rely on the advice or services of any lawyers, accountants, valuers, appraisers, maintenance providers, surveyors or other experts to the extent it shall, acting reasonably, deem necessary.
1.12.4 Each Representative may act in relation to the Transaction Documents through its personnel and agents.
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1.12.5 Each Representative may disclose to any other Party any information it reasonably believes it has received as Agent or, as the case may be, Security Trustee under this Agreement relating to the Transaction Documents.
1.12.6 Notwithstanding any other provision of any Transaction Document to the contrary, no Representative is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of any duty or duty of confidentiality.
1.13 Lender's instructions
1.13.1 Unless a contrary indication appears in a Transaction Document, each Representative shall (i) exercise any right, power, authority or discretion vested in it as Agent or, as the case may be, Security Trustee in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent or, as the case may be, Security Trustee) unless it has received actual notice of revocation; (ii) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders; and (iii) not be liable for any omission if it refrains from taking any action due to the absence of any instruction from the Majority Lenders.
1.13.2 Unless a contrary indication appears in a Transaction Document, any instructions given by the Majority Lenders will be binding on all the affected Finance Parties.
1.13.3 Either Representative may refrain from acting in accordance with the instructions of the Majority Lenders until it has received such security as it may require for any Loss (together with any associated VAT) which it may incur in complying with the instructions.
1.13.4 In the absence of instructions from the Majority Lenders, each Representative may act (or refrain from taking action) as it considers to be prudent.
1.13.5 Neither Representative is authorized to act on behalf of the Majority Lenders (without first obtaining the Majority Lender's consent) in any legal or arbitration proceedings relating to any Transaction Document.
1.13.6 No Finance Party shall have any independent power to enforce, or have recourse to, any of the Collateral or to exercise any rights or powers arising under the Security Documents except through the Security Trustee.
1.14 Responsibility for documentation
Neither Representative:
1.14.1 is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by either of them, an Obligor or any other person given in or in connection with any Transaction Document; or
1.14.2 is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Transaction Document.
1.15 Exclusion of liability
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1.15.1 Without limiting paragraph 1.15.2 below, neither Representative will be liable for any action taken by it under or in connection with any Transaction Document, unless directly caused by its gross negligence or willful misconduct.
1.15.2 No Party (other than either Representative) may take any proceedings against any officer, employee or agent of a Representative in respect of any claim it might have against that Representative or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Transaction Document and any officer, employee or agent of a Representative may rely on this Clause.
1.15.3 Neither Representative will be liable for any delay (or any related consequences) in crediting an account with an amount required under the Transaction Documents to be paid by that Representative if that Representative has complied with the regulations or operating procedures of any recognized clearing or settlement system used by that Representative for that purpose.
1.15.4 Nothing in this Agreement shall oblige either Representative to carry out any "know your customer" or other checks in relation to any person on behalf of the Lender and the Lender confirms to each Representative that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by that Representative.
1.15.5 The liability of a Representative under the Transaction Documents for any claim for which it is expressed to be personally liable by virtue of the provisions of the Transaction Documents shall be limited in aggregate to an amount equal to [***] of fees paid to that Representative (for its own account) under any Fee Letter.
1.16 Lender's indemnity to the Representative
The Lender shall indemnify each Representative, within [***] Business Days of demand, against any Loss incurred by that Representative (otherwise than by reason of its fraud, gross negligence or willful misconduct) in acting as Agent or, as the case may be, Security Trustee under the Transaction Documents (unless that Representative has been reimbursed by the Borrower or any other Obligor pursuant to a Transaction Document).
1.17 Resignation of a Representative
1.17.1 A Representative may resign and appoint one of its Affiliates as successor by giving notice to the other Finance Parties, the Guarantors and the Borrower.
1.17.2 Alternatively, a Representative may resign by giving notice to the other Finance Parties, the Guarantors and the Borrower, in which case the Lender may appoint a successor Representative; provided, that so long as no Event of Default has occurred and is continuing, no successor may be appointed without the consent of the Obligors, such consent not to be unreasonably withheld.
1.17.3 If the Lender has not appointed a successor Representative in accordance with paragraph 1.17.2 above within thirty (30) days after notice of resignation was given, that Representative may appoint a successor Representative provided, that so long as no Event of Default has occurred and is continuing, no successor may be appointed without the consent of the Obligors, such consent not to be unreasonably withheld.
1.17.4 The retiring Representative shall, at its own cost, make available to the successor Representative such documents and records and provide such assistance as the
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successor Representative may reasonably request for the purposes of performing its functions as Representative under the Transaction Documents.
1.17.5 A Representative's resignation notice shall only take effect upon the appointment of a successor.
1.17.6 Upon the appointment of a successor, the retiring Representative shall be discharged from any further obligation in respect of the Transaction Documents but shall remain entitled to the benefit of this paragraph 1.17. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
1.17.7 The Lender may, by notice to either Representative, require it to resign in accordance with paragraph 1.17.2 above. In this event, that Representative shall resign in accordance with paragraph 1.17.2 above.
1.17.8 A change in the identity of a Representative shall not (unless effected pursuant to a mitigation process pursuant to Clause 15 (Mitigation)) result in any Obligor having to make any increased payment or additional payment, or perform any increased obligations or additional obligations or suffering a reduction of limitation of rights under the provisions of the Transaction Documents based on circumstances existing at the time of such change in Representative.
1.17.9 A Representative shall resign in accordance with paragraph 1.17.2 above (and, to the extent applicable, shall use reasonable endeavors to appoint a successor Representative pursuant to paragraph 1.17.3 above) if on or after the date which is [***] months before the earliest FATCA Application Date relating to any payment to that Representative under the Transaction Documents, either:
(a)that Representative fails to respond to a request under Clause 13.7 (FATCA Information) and the Borrower or the Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(b)the information supplied by the Agent pursuant to Clause 13.7 (FATCA Information) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(c)the Agent notifies the Borrower and the Lender that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) the Borrower, any Guarantor or the Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and the Borrower, any Guarantor or the Lender, by notice to the Agent, requires it to resign.
1.18 Confidentiality
1.18.1 In acting as Agent or, as the case may be, Security Trustee for the Finance Parties, that Representative shall be regarded as acting only through the personnel designated as administering the transactions contemplated by the Transaction Documents in that Representative's capacity as Agent or, as the case may be, Security Trustee, and such function shall be treated as a separate entity from any other of its divisions or departments.
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1.18.2 If information is received by another division or department of that Representative or any Affiliate of that Representative or any other entity within the same corporate group as that Representative, it may be treated as confidential to that department and that Representative shall not be deemed to have notice of it. The Agent shall not be treated as having knowledge of any matter unless and until the relevant matter has been notified to a person within the agency division of the Agent who is administering the transactions contemplated by the Transaction Documents by delivery of a notice of such matter to the email address specified in Clause 29 (Notices).
1.19 Relationship with the Lender
Each Representative may treat the Lender as the Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than [***] Business Days prior notice from the Lender to the contrary in accordance with the terms of this Agreement.
1.20 Credit Appraisal by the Lender
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Transaction Document, the Lender confirms to each Representative that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Transaction Document including but not limited to:
1.20.1 the financial condition, status and nature of each Obligor;
1.20.2 the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document;
1.20.3 whether the Lender has recourse, and the nature and extent of that recourse, against any Party, any Obligor, the Borrower Parent or any of its respective assets under or in connection with any Transaction Document, the transactions contemplated by the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document; and
1.20.4 the adequacy, accuracy and/or completeness of any information provided by either Representative, any Party, any Obligor, the Borrower Parent or by any other person under or in connection with any Transaction Document, the transactions contemplated by the Transaction Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Transaction Document.
1.21 Deduction from amounts payable by the Agent
If any Lender owes an amount to either Representative under the Transaction Documents, that Representative may, after giving notice to that Lender, deduct an amount not exceeding that amount from any payment to that Lender which that Representative would otherwise be obliged to make under the Transaction Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Transaction Documents that Lender shall be regarded as having received any amount so deducted.
1.22 Erroneous Payment
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1.22.1 Each Lender hereby agrees that (i) if the Agent notifies such Lender that the Agent has determined in its sole discretion that any funds received by such Lender from the Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Lender (whether or not known to such Lender) (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, an "Erroneous Payment") and demands the return of such Erroneous Payment (or a portion thereof) (provided, that, without limiting any other rights or remedies (whether at law or in equity), the Agent may not make any such demand under this paragraph 1.22.1(i) with respect to an Erroneous Payment unless such demand is made within 10 days of the date of receipt of such Erroneous Payment by the applicable Lender, such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent in same day funds at a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect and (ii) to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Erroneous Payments received, including, without limitation, waiver of any defense based on "discharge for value" or any similar theory or doctrine. A notice of the Agent to any Lender under this paragraph 1.22.1 shall be conclusive, absent manifest error.
1.22.2 Without limiting immediately preceding paragraph 1.2.1, each Lender hereby further agrees that if it receives a payment from the Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Agent, (y) that was not preceded or accompanied by notice of payment, or (z) that such Lender otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each case, if an error has been made each such Lender is deemed to have knowledge of such error at the time of receipt of such Erroneous Payment, and to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Erroneous Payments received, including without limitation waiver of any defense based on "discharge for value" or any similar theory or doctrine. Each Lender agrees that, in each such case, it shall promptly (and, in all events, within one Business Day of its knowledge (or deemed knowledge) of such error) notify the Agent of such occurrence and, upon demand from the Agent, it shall promptly, but in all events no later than one Business Day thereafter, return to the Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent in same day funds at a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
1.22.3 The Borrower and each other Obligor hereby agrees that (x) in the event an Erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Erroneous Payment (or portion thereof) for any reason (and without limiting the Agent's rights and remedies under this paragraph 1.22), the Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an
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Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Secured Obligations owed by the Borrower or any other Obligor.
1.22.4 In addition to any rights and remedies of the Agent provided by law, Agent shall have the right, without prior notice to any Lender, any such notice being expressly waived by such Lender to the extent permitted by applicable law, with respect to any Erroneous Payment for which a demand has been made in accordance with this paragraph 1.22 and which has not been returned to the Agent, to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final but excluding trust accounts), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Agent or any of its Affiliate, branch or agency thereof to or for the credit or the account of such Lender. Agent agrees promptly to notify the Lender after any such setoff and application made by Agent; provided, that the failure to give such notice shall not affect the validity of such setoff and application.
1.22.5 Each party's obligations under this paragraph 1.22 shall survive the resignation or replacement of the Agent, the termination of the Commitments or the repayment, satisfaction or discharge of all Secured Obligations (or any portion thereof) under any Transaction Document.
2.CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
2.1.1 interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
2.1.2 oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim;
2.1.3 except with respect to any information required to be provided by a Finance Party under Clause 13 (Tax Gross-Up and Indemnities), oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax; or
2.1.4 oblige any Finance Party to take any action or other step which may or would have an adverse effect on its own commercial or business or other interests (even if such action or other step would be for the ultimate benefit of any other person).
3.SHARING AMONG THE FINANCE PARTIES
3.1 Payments to Finance Parties
If a Finance Party (a "Recovering Finance Party") receives or recovers any amount from the Borrower other than in accordance with Clause 25 (Payment Mechanics) and applies that amount to a payment due under the Transaction Documents then:
3.1.1 the Recovering Finance Party shall, within[***] Business Days, notify details of the receipt or recovery, to the Agent;
3.1.2 the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 25
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(Payment Mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
3.1.3 the Recovering Finance Party shall, within [***] Business Days of demand by the Agent, pay to the Agent an amount (the "Sharing Payment") equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 25 (Payment Mechanics).
3.2 Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by the Borrower and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 25 (Payment Mechanics).
3.3 Recovering Finance Party's rights
3.3.1 On a distribution by the Agent under paragraph 3.1 (Payments to Finance Parties) of this Schedule 6, the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.
3.3.2 If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph 3.3.1 above, the Borrower shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.
3.4 Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
3.4.1 the Lender after receiving a share of the relevant Sharing Payment pursuant to paragraph 3.1 (Payments to Finance Parties) of this Schedule 6 shall, upon request of the Agent, pay to the Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and
3.4.2 that Recovering Finance Party's rights of subrogation in respect of any reimbursement shall be cancelled and the Borrower will be liable to the reimbursing Finance Party for the amount so reimbursed.
3.5 Exceptions
3.5.1 This paragraph 3.5 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this paragraph, have a valid and enforceable claim against the Borrower.
3.5.1 A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:
(a)it notified that other Finance Party of the legal or arbitration proceedings; and
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(b)that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
4. FEES
No Finance Party shall be obliged to disclose to any other Finance Party the contents of any Fee Letter
5. TITLE OF FINANCE PARTIES
Carlyle Aviation Management Limited as Agent and arranger of the transactions contemplated by the Transaction Documents shall be entitled to grant any role or title to a Finance Party as it sees fit, provided that Carlyle Aviation Management Limited's exercise of such rights shall not result in any additional cost, expense or obligation being borne by any Obligor.
6. FATCA
The Lender shall promptly upon request of the Agent supply, or procure the supply of, such information as is reasonably requested by the Agent in order for the Agent to determine whether or not the Lender is a FATCA Exempt Party for the purposes of payments to be made hereunder.
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Schedule 7
TIMETABLES
TIMETABLES
Clause | Action | Time | ||||||
5.1.1 | Delivery of duly completed Utilization Request | U – [***] Business Days, 1:00 pm (New York time) or such later time as may be agreed by the Borrower and the Agent (provided that, and except with respect to the first Utilization Request, in the event of any change to the date on which a PDP Payment is due relating to such Utilization, the Borrower shall be required to provide at least [***] Business Days advance notice to the Agent (or promptly upon being advised of such change from the Airframe Manufacturer if within [***] Business Days of the proposed Utilization Date) and in which case, the Lender will use reasonable efforts to facilitate the Utilization to meet the revised PDP Payment date prior to the proposed Utilization Date set out in such Utilization Request). | ||||||
"U" = Proposed relevant Utilization Date.
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Schedule 8
FORM OF TAX CERTIFICATE
TAX CERTIFICATE
(FOR NON-U.S. LENDERS THAT ARE NOT PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
FORM OF TAX CERTIFICATE
TAX CERTIFICATE
(FOR NON-U.S. LENDERS THAT ARE NOT PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
Reference is made to the PDP Facility Agreement dated as of November 1, 2023, among Sun Tail PDP LLC, a limited liability company organized under the laws of Delaware (the "Borrower"), Runway Seven Lender LLC, as Lender and Security Trustee and Carlyle Aviation Management, as Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Clause 13.1.7.2.3 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any promissory note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a "ten percent shareholder" of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a "controlled foreign corporation" related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with a certificate affirming it is not a "United States person" as defined in Section 7701(a)(30) of the Code on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
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IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF NON-U.S. LENDER] | |||||
| By: | |||||
Name: | |||||
Title: | |||||
Date: _________, 20__
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Schedule 9
TAX CERTIFICATE
(FOR NON-U.S. PARTICIPANTS THAT ARE NOT PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
TAX CERTIFICATE
(FOR NON-U.S. PARTICIPANTS THAT ARE NOT PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
Reference is made to the PDP Facility Agreement dated as of November 1, 2023, among Sun Tail PDP LLC, a limited liability company organized under the laws of Delaware (the "Borrower"), Runway Seven Lender LLC, as Lender and Security Trustee and Carlyle Aviation Management, as Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Clause 13.1.7.2.4 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a "ten percent shareholder" of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a "controlled foreign corporation" related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate affirming it is not a "United States person" as defined in Section 7701(a)(30) of the Code on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
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IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF PARTICIPANT] | |||||
| By: | |||||
Name: | |||||
Title: | |||||
Date: _________, 20__
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Schedule 10
TAX CERTIFICATE
(FOR NON-U.S. PARTICIPANTS THAT ARE PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
TAX CERTIFICATE
(FOR NON-U.S. PARTICIPANTS THAT ARE PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
Reference is made to the PDP Facility Agreement dated as of November 1, 2023, among Sun Tail PDP LLC, a limited liability company organized under the laws of Delaware (the "Borrower"), Runway Seven Lender LLC, as Lender and Security Trustee and Carlyle Aviation Management, as Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Clause 13.1.7.2.4 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a "bank" extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a "ten percent shareholder" of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a "controlled foreign corporation" related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner's/member's beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
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IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF PARTICIPANT] | |||||
| By: | |||||
Name: | |||||
Title: | |||||
Date: _________, 20__
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Schedule 11
TAX CERTIFICATE
(FOR NON-U.S. LENDERS THAT ARE PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
TAX CERTIFICATE
(FOR NON-U.S. LENDERS THAT ARE PARTNERSHIPS FOR U.S. FEDERAL INCOME TAX PURPOSES)
Reference is made to the PDP Facility Agreement dated as of November 1, 2023, among Sun Tail PDP LLC, a limited liability company organized under the laws of Delaware (the "Borrower"), Runway Seven Lender LLC, as Lender and Security Trustee and Carlyle Aviation Management, as Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used herein that are not defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Clause 13.1.7.2.4 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any promissory note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any promissory note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Transaction Document, neither the undersigned nor any of its direct or indirect partners/members is a "bank" extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a "ten percent shareholder" of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a "controlled foreign corporation" related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such partner's/member's beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
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IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF NON-U.S. LENDER] | |||||
| By: | |||||
Name: | |||||
Title: | |||||
Date: _________, 20__
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Exhibit 10.101
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
Execution Version
ALLEGIANT GUARANTEE AGREEMENT
dated as of November 1, 2023
between
ALLEGIANT TRAVEL COMPANY and
ALLEGIANT AIR, LLC
as Guarantors
and
RUNWAY SEVEN LENDER LLC
as Security Trustee
___________________________________________________
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TABLE OF CONTENTS
Page
SECTION 1. THE GUARANTEE............................................................................................... 1
SECTION 2. REPRESENTATIONS AND GUARANTEES OF THE GUARANTORS........... 3
SECTION 3. COVENANTS OF THE GUARANTORS............................................................. 4
SECTION 4. MISCELLANEOUS............................................................................................... 5
SECTION 5. REORGANIZATION OF PAYMENT OBLIGATION......................................... 6
SECTION 6. NO SET-OFF.......................................................................................................... 7
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ALLEGIANT GUARANTEE AGREEMENT
ALLEGIANT GUARANTEE AGREEMENT dated as of November 1, 2023 (this “Agreement”) is between ALLEGIANT TRAVEL COMPANY, a corporation organized under the laws of the State of Nevada (“Allegiant Travel”), ALLEGIANT AIR, LLC, a limited liability company organized under the laws of the State of Nevada (“Allegiant”, and together with Allegiant Travel, the “Guarantors” and each a “Guarantor”) and RUNWAY SEVEN LENDER LLC, as Security Trustee for its benefit and the benefit of each of the Finance Parties (together with its successors and assigns, the “Security Trustee”), under that certain PDP Facility Agreement dated as of November 1, 2023 (as amended, supplemented or otherwise modified from time to time, the “Facility Agreement”) among Sun Tail PDP LLC, a limited liability company formed under the laws of the State of Delaware, as borrower (the “Borrower”), the Security Trustee, Runway Seven Lender LLC, as lender (the “Lender”) and Carlyle Aviation Management Limited, as agent of the Lender (the “Agent”). Unless otherwise defined herein, defined terms used herein shall have the meanings ascribed to such terms in the Facility Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lender, the Agent and the Security Trustee have entered or will enter into certain of the Facility Agreement and the other Transaction Documents to which each of them is or will be a party;
WHEREAS, the Guarantors wish, in furtherance of their corporate purposes and in order to induce the Lender to enter into the transaction contemplated by the Facility Agreement, to guarantee, whether scheduled or contingent, liquidated or undetermined, now or hereafter existing (including all such amounts which would become due but for the operation of the automatic stay under section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §362(a), and the operation of sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. §502(b)): (i) prompt payment by the Borrower in full when due of all amounts payable pursuant to the Facility Agreement and the other Transaction Documents and (ii) complete performance by the Borrower of its agreements in and other obligations under the Facility Agreement and the other Transaction Documents when due (all the foregoing obligations being collectively referred to herein as the “Guaranteed Obligations”) and, in order to guarantee the Guaranteed Obligations, is executing and delivering this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and in order to induce the Lender to enter into the transaction contemplated by the Facility Agreement, each Guarantor covenants and agrees with the Security Trustee, on behalf of the Lender, as follows:
Section 1.The Guarantee.
(a)Each Guarantor absolutely, irrevocably and unconditionally, jointly and severally, guarantees, as primary obligor and not merely as surety, the due and punctual payment in full, observance and performance of the Guaranteed Obligations (whether on stated due dates, by acceleration or otherwise), the foregoing guarantee (in respect of payment obligations) constituting hereby a guarantee of payment and not of collection.
(b)Each Guarantor hereby irrevocably waives (v) any right of subrogation, (w) notice of acceptance hereof, and of any action taken or omitted in reliance hereon, (x) presentment for payment, observance or performance upon the Borrower, demand of payment, observance or performance from the Borrower, protest or notice to the Borrower of failure to pay, observe or perform or notice to any Guarantor of any default in the payment,
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observance or performance by the Borrower of any Guaranteed Obligations, except as otherwise expressly stated herein, (y) any requirement of diligence or promptness on the part of the Security Trustee or the Lender in making demand, commencing suit or exercising any other right or remedy under any of the Transaction Documents and (z) any right to require the Security Trustee or the Lender to exercise any right or remedy against the Borrower or any other person or entity prior to enforcing any right of the Security Trustee or the Lender against the Guarantors hereunder.
(c)The obligations of each Guarantor hereunder shall be absolute, unconditional and continuing under any and all circumstances and shall be performed by each Guarantor regardless of (a) whether the Borrower, the Guarantors, the Lender, the Agent or the Security Trustee shall have taken or failed to take any steps to collect or enforce any obligation or liability from the Borrower, or shall have otherwise exercised or failed to exercise any rights, powers or remedies under any of the Transaction Documents against the Borrower and shall in no way be affected or impaired by (and no notice to the Guarantors shall be required in respect of) any compromise, waiver, settlement, release, extension, change in or modification of any of the Guaranteed Obligations, (b) the disaffirmance or rejection or purported disaffirmance or purported rejection of any of the Transaction Documents in any insolvency, bankruptcy or reorganization proceedings relating to the Borrower, (c) any law, regulation or decree now or hereafter in effect which might in any manner affect any of the terms or provisions of any of the Transaction Documents or any of the Security Trustee’s, the Agent’s or the Lender’s rights, powers or remedies thereunder as against the Borrower or which might cause or permit to be invoked any alteration in the time, amount, manner of payment or performance of any of the obligations and liabilities of the Borrower, (d) any failure of the Borrower to comply with the requirements of any federal, state or local law, regulation or order of any political subdivision or agency thereof, (e) the occurrence or continuance of any Default or Event of Default, (f) the merger or consolidation of the Borrower into or with any corporation or other entity or the sale by the Borrower of all or any part of its assets, (g) whether the Security Trustee, the Agent or the Lender shall have taken or failed to take any steps to mitigate damages, (h) any other circumstance which might otherwise constitute a defense available to or a discharge of the Borrower in respect of its obligations or liabilities under any of the Transaction Documents, or (i) any other act or omission to act by the Security Trustee or any other person or entity or any other circumstances whatsoever (with or without notice to or the knowledge of the Guarantors), whether similar or dissimilar to the foregoing, which may or might in any manner or to any extent vary the risk of the Guarantors, or otherwise constitute a legal or equitable discharge of a surety or the Guarantors; it being the purpose and intent of the Guarantors and the Security Trustee that this Agreement and the obligations and liabilities of the Guarantors hereunder shall be absolute, unconditional and continuing under any and all circumstances and shall not be discharged except by payment, observance and performance in full of all the Guaranteed Obligations.
(d)Each Guarantor agrees to pay all costs and expenses (including, without limitation, attorneys’ reasonable fees and expenses) incurred in connection with the enforcement of the obligations of the Borrower and in connection with the enforcement of the obligations of the Guarantors under this Agreement.
(e)If any payment of any Guaranteed Obligations is rescinded or must otherwise be returned by the Security Trustee, the Agent or the Lender as a result of any law or an order issued in a bankruptcy or insolvency proceeding relating to the Borrower or otherwise, the amount so repaid shall not be deemed to have been paid and shall be deemed to be outstanding and the guarantee of the Guarantors hereunder in respect of such payment shall be reinstated and shall remain in full force and effect.
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Section 2.Representations and Warranties of the Guarantors. Each Guarantor hereby represents and warrants to the Security Trustee that:
(a)Such Guarantor is a corporation duly organized and validly existing in good standing under the laws of the State of Nevada, is qualified to do business in each jurisdiction where the failure to be so qualified could have a materially adverse effect on such Guarantor’s business, operations or condition (financial or otherwise) or on its ability to perform its obligations hereunder, and has the corporate power and authority, and all licenses, rights, permits, certificates, franchises and other privileges, necessary to carry on its business as presently conducted and to perform its obligations under this Agreement.
(b)The execution, delivery and performance by such Guarantor of this Agreement has been duly authorized by all necessary corporate action on the part of such Guarantor, does not require any approval of the shareholders of such Guarantor, and neither the execution and delivery hereof nor the consummation of the transactions contemplated hereby nor compliance by such Guarantor with any, nor such Guarantor’s performance of all, of the terms and provisions hereof will contravene or has contravened any judgment or order applicable to or binding on it or any applicable law or conflict with, result in any breach of, or constitute any default under, its organizational documents or conflict with, result in the creation of a lien under, or require the consent of any trustee or creditor pursuant to, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, bank loan or credit agreement or other agreement or instrument to which such Guarantor is a party or by which it or any of its assets may be bound.
(c)This Agreement has been duly executed and delivered by such Guarantor, and constitutes the legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with the terms hereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(d)There are no actions, suits or proceedings pending or, to the best of such Guarantor’s knowledge after due inquiry, threatened in any court or before any regulatory commission, board or administrative or other Government Entity against or affecting such Guarantor which could have a materially adverse effect on its ability to enter into or perform its obligations under this Agreement or on the condition (financial or otherwise), operations, business or prospects of such Guarantor.
(e)Such Guarantor is in material compliance with all applicable laws in all applicable jurisdictions, the violation of which could have a material adverse effect on the properties, business, prospects, profits or condition of such Guarantor.
(f)Such Guarantor is solvent and will not be rendered insolvent by the consummation of the transactions contemplated by the Transaction Documents, including, without limitation, this Agreement; after such consummation, the capital of such Guarantor will not be unreasonably small for the conduct of the business in which such Guarantor is engaged or is about to engage; such Guarantor has no intention or belief that it is about to incur debts beyond its ability to pay as they mature; and such Guarantor’s participation in such transactions is made without any intent to hinder, delay or defraud either present or future creditors of such Guarantor, none of the transactions contemplated by the Transaction Documents to which such Guarantor is a party is void or voidable at the behest of any creditor of such Guarantor, and Guarantors have no actual knowledge that any order or resolution for any administration, receivership, suspension of payments, winding up, bankruptcy, insolvency, reorganization proceedings has been adopted or registered in relation to the Guarantors, nor have any steps been or are any steps being taken
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by or on behalf of the Guarantors to appoint a receiver, administrator, liquidator, trustee or similar insolvency proceeding under any Debtor Relief Law in respect of any of them or any of their respective assets.
(g)No ERISA Event has occurred.
(h)[***]. For the purposes of this Section 2(h), “Affiliate” means, in respect of any Guarantor, any other person directly or indirectly controlling, controlled by or under common control with such Guarantor (including, without limitation, a trust of which such person is the beneficiary or a subsidiary of such person). For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with" as applied to any person) means the power, directly or indirectly, to direct or cause the direction of the management and policies of such person whether through the ownership of voting securities or by contract or otherwise.
(i)[***]
(j)[***]
(k)[***]
(l)[***]
(m)[***]
Section 3.Covenants of the Guarantors. Each Guarantor hereby covenants in favor of the Security Trustee as follows:
(a)It shall not take any action to cause the Borrower not to comply, or to prohibit the Borrower from complying, with its covenants, agreements and undertakings set forth in the Transaction Documents to which the Borrower is or will become a party.
(b)From time to time it agrees that it will do all such acts, execute, acknowledge and deliver all such instruments and make all filings and recordings in all jurisdictions as it shall be reasonably requested by the Security Trustee to do or execute for the purpose of fully carrying out and effectuating this Agreement and the intent hereof.
(c)In the event that a Change of Control Event occurs, the Guarantors shall give the Agent prompt notice of such occurrence.
(d)Allegiant Travel shall provide to the Security Trustee (i) the annual audited financial statements of Allegiant Travel within [***] days of the end of each fiscal year of the Guarantors and (ii) quarterly financial statements of the Guarantors within [***] days of the end of each fiscal quarter of the Guarantors; provided that the availability of the foregoing on the website (www.allegiantair.com) of Allegiant Travel shall satisfy the reporting requirement of this Section 3(f).
(e)[***]
(f)[***]
(g)[***]
(h)Each Guarantor shall:
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(i)[***]
(ii)[***]
(iii)[***]
(i)Each Guarantor shall do all things necessary to maintain its business and corporate existence separate, readily identifiable and distinct from the Borrower and, in this regard, each Guarantor shall: [***].
(j)The Guarantors agree, jointly and severally, to pay or cause to be [***].
Section 4.Miscellaneous. (a) Except as expressly otherwise provided herein, all notices, requests, demands or other communications to or upon the Security Trustee, or the Guarantors shall be deemed to have been duly given or made when given pursuant to the terms of the Facility Agreement, with all notices to the Guarantors being sent to:
Address: | 1201 North Town Center Drive, Las Vegas, Nevada 89144 | ||||
Email: | DebtServicing@allegiantair.com | ||||
Attention: | Mr. Robert Neal, Sr.Vice President, Chief Financial Officer | ||||
(b) Neither the Lender, the Agent nor the Security Trustee shall by any act, delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach by the Guarantors of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Security Trustee, the Agent or the Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Security Trustee, the Agent or the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Security Trustee, the Agent or the Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. No waiver of any of the terms and conditions of this Agreement and no notice to or demand on the Guarantors or the Borrower in any case shall entitle the Guarantors or the Borrower to any other or further notice or demand in similar or other circumstances or constitute the waiver of the rights of the Security Trustee, the Agent or the Lender to any other or further action in any circumstances without notice or demand.
(c) THIS AGREEMENT SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
(d) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, the non-exclusive jurisdiction of the courts of the State of New York sitting in the City and County of New York and to the non-exclusive jurisdiction of the U.S. District Court for the Southern District of New York, in any action or proceeding arising out of or relating to this Agreement, or the transactions contemplated hereby. Each Guarantor agrees that a final
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judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement against another party or its properties in the courts of any jurisdiction.
(e) Each Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (d) of this Section 4. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(f) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(g) If any provision hereof should be held invalid, illegal, or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted by law, (i) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Security Trustee in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, each Guarantor hereby waives any provision of law which would render any provision hereof prohibited or unenforceable in any respect.
(h) No amendment, modification, waiver, termination or discharge of any provision of this Agreement, nor consent to any departure by the Guarantors therefrom, shall in any event be effective unless the same shall be in writing specifically identifying this Agreement and the provision intended to be amended, modified, waived, terminated or discharged and is signed by each of the Security Trustee (being duly authorized to bind the Lender thereto, evidence of which to be supplied by the Security Trustee upon any such execution by the Security Trustee) and the Guarantors, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific purpose for which given. No provision of this Agreement shall be varied, contradicted or explained by any oral agreement, course of dealing or performance or any other matter not set forth in an agreement in writing and signed by the Security Trustee and the Guarantors.
(i) This Agreement shall be binding upon each Guarantor, its successors and permitted assigns, and shall inure to the benefit of the Security Trustee, on behalf of the Lender, and be enforceable by the Security Trustee and its successors and assigns; provided that, no Guarantor shall assign any of its obligations hereunder without the prior written consent of the Security Trustee. This Agreement shall not be deemed to create any right in any person or entity nor be construed in any respect to be a contract in whole or in part for the benefit of any person or entity except as provided herein.
(j) [***]
(k) Each Guarantor shall procure that, until the occurrence of the Secured Obligations Discharge Date, [***]
Section 5.Reorganization of Payment Obligation. If, as a result of any insolvency, bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar
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proceeding with respect to, or affecting the status, existence, assets or obligations of the Borrower, the amount or timing of any payment, observance or performance of any Guaranteed Obligations shall be discharged, adjusted, rescheduled, rearranged or otherwise becomes payable in an amount or at a time, other than as specifically provided for in the Transaction Documents, each Guarantor specifically agrees, jointly and severally, as a primary obligation, to pay, observe and perform such Guaranteed Obligations at the time and in the amount such payment, observance or performance would have become due in accordance with the terms of the Transaction Documents if such insolvency, bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding had not occurred.
Section 6.No Set-Off. The obligations of the Guarantors hereunder shall not be released, discharged or otherwise affected by the existence of any claim, set-off, defense, or other right that any Guarantor may have at any time and from time to time against the Security Trustee, the Agent, the Lender or any other Person or entity, whether in connection herewith or with any related or unrelated transaction.
Section 7.Payments. Any and all amounts required to be paid by the Guarantors hereunder shall be paid strictly in accordance with the terms and provisions of the Transaction Documents, without set-off or counterclaim and without deduction or adjustment for and free and clear of any and all Taxes (and each Guarantor hereby agrees to comply with the provisions of Clause 13 of the Facility Agreement as if said Clause 13 referred to this Agreement and payments by such Guarantor hereunder).
* *
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IN WITNESS WHEREOF, each Guarantor and the Security Trustee has caused this Allegiant Guarantee Agreement to be duly executed and delivered by its proper and duly authorized officer as of the day and year first above written.
ALLEGIANT TRAVEL COMPANY, as Allegiant Travel By: /s/ Robert Neal Name: Robert Neal Title: CFO ALLEGIANT AIR, LLC, as Allegiant By: /s/ Robert Neal Name: Robert Neal Title: CFO | |||||
RUNWAY SEVEN LENDER LLC, as Security Trustee By: /s/ Robert G. Korn Name: Robert G. Korn Title: Manager | |||||
#4894-4211-3411v5
Exhibit 10.102
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
Execution Version
PURCHASE AGREEMENT
SECURITY ASSIGNMENT (737 MAX)
SECURITY ASSIGNMENT (737 MAX)
dated as of November 1, 2023
between
SUN TAIL PDP LLC
as Assignor
as Assignor
and
RUNWAY SEVEN LENDER LLC
as Assignee
___________________________________________
Relating to
Eight (8) Boeing 737 MAX Aircraft
___________________________________________
___________________________________________
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39958.00020
#4886-5364-9795v4
TABLE OF CONTENTS
Page
Section 1........ Definitions and Interpretation................................................................................ 1
Section 2........ Covenants............................................................................................................... 2
Section 3........ Assignment............................................................................................................. 2
Section 4........ Continuing Security..................................................................................….......... 3
Section 5........ Representations and Covenants.............................................................................. 4
Section 6........ Enforcement of Security Interest............................................................................ 5
Section 7........ Monies Received.................................................................................................... 6
Section 8........ Appointment of Attorney....................................................................................... 6
Section 9........ Miscellaneous......................................................................................................... 6
Section 10...... Successors; Assigns; Transferees........................................................................... 7
Section 11...... [***]....................................................................................................................... 7
Section 12...... Counterparts; Amendments.................................................................................... 7
Section 13...... Notices.................................................................................................................... 7
Section 14...... Governing Law and Jurisdiction............................................................................ 7
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#4886-5364-9795v4
PURCHASE AGREEMENT SECURITY ASSIGNMENT
THIS PURCHASE AGREEMENT SECURITY ASSIGNMENT dated as of November 1, 2023 (this "Assignment") is between SUN TAIL PDP LLC, a limited liability company formed under the laws of the State of Delaware, having its principal office at c/o Wilmington Trust Company, 1100 North Market Street, New Castle County, Delaware, 19890-1605 ("Assignor"), and RUNWAY SEVEN LENDER LLC, a limited liability company formed under the laws of the State of Delaware, having its principal office at 848 Brickell Avenue, Suite 500, Miami, FL 33131, USA, in its capacity as security trustee for and on behalf of the Finance Parties ("Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to the Assigned Purchase Agreement, Boeing has agreed to sell and the Assignor has agreed to purchase, the Aircraft;
WHEREAS, the Lender has agreed, pursuant to and subject to the terms and conditions of the Facility Agreement, to make available the Loans to the Assignor in respect of the Aircraft; and
WHEREAS, Assignee has requested that Assignor enter into this Assignment, and Assignor has agreed to grant, assign, convey, mortgage, pledge, hypothecate and transfer to Assignee, with the consent of Boeing, certain of its right, title and interest under the Assigned Purchase Agreement (insofar as it relates to the Aircraft) upon the terms and subject to the conditions of this Assignment.
NOW, THEREFORE, Assignor and Assignee hereby agree as follows:
Section 1.Definitions and Interpretation
1.1Except as otherwise defined herein and except where the context otherwise requires, capitalized terms used herein shall have the meanings set forth in the Facility Agreement or by reference therein to another document. In addition, the following terms shall have the following meanings:
"Allegiant" means Allegiant Air, LLC.
"Assigned Property" shall mean all of the right, title, benefit and interest (present and future, actual and contingent) of Assignor in, to and under the Assigned Purchase Agreement (other than (i) the right to acquire the Aircraft for the purchase price at which Assignor may purchase the Aircraft and any credits, refunds, rebates or other discounts available to Assignor in respect of such purchase price and (ii) any reimbursement or payment by the Manufacturer on or about the date hereof in respect of advance payments made by Allegiant prior to the date hereof and financed under the Facility Agreement).
"Assigned Purchase Agreement" means the Purchase Agreement No. [***] dated as of December 31, 2021 between Boeing and Allegiant, inclusive of the Aircraft General Terms Agreement dated as of December 31, 2021 between Boeing and Allegiant, solely as it relates to the Aircraft, and as assigned and supplemented by the Aircraft Purchase Agreement Assignment dated on or about the date hereof between Allegiant and the Assignor. For the avoidance of doubt, the Assigned Purchase Agreement shall only include such rights and obligations that are assigned to the Assignor pursuant to the Aircraft Purchase Agreement Assignment and shall not, in any circumstance, include rights with respect to any aircraft other than the Aircraft.
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"Facility Agreement" means the PDP Facility Agreement dated November 1, 2023 between the Assignor as borrower, Carlyle Aviation Management Limited as agent and the Assignee as security trustee and lender, as may be amended, modified, restated or supplemented from time to time.
"Party" shall mean a party to this Assignment.
"Secured Obligations" shall mean any and all moneys, liabilities and obligations (whether actual or contingent, whether now existing or hereafter arising, whether or not for the payment of money and including, without limitation, any obligation or liability to pay damages) from time to time owing to any of the Finance Parties by any Obligor pursuant to any Transaction Document.
"Security Period" shall mean the period commencing on the date hereof and expiring on the earlier of (i) the last Delivery Date and (ii) the date of which the Secured Obligations have been fully discharged.
1.2The words "hereof", "herein" and "hereunder" and other words of similar import used in this Assignment refer to this Assignment as a whole and not to any particular part of this Assignment.
1.3The headings of Sections of this Assignment and the Table of Contents are inserted for ease of reference only and shall not in any way affect the interpretation of this Assignment.
1.4Where the context so requires, in this Assignment, words importing the singular only shall also include the plural and vice versa.
1.5Reference herein to this Assignment or any other document, instrument or agreement (whether or not defined in this Assignment) means this Assignment or such other document, instrument or agreement as originally implemented or executed or as amended, varied, modified or supplemented in accordance with its terms from time to time.
1.6Unless otherwise specifically stated, reference to any "Section" or "Exhibit" is a reference to such Section of, or Exhibit to this Assignment.
Section 2.Covenants. Assignor hereby acknowledges to Assignee that the amount secured by this Assignment and in respect of which this Assignment and the security hereby created is enforceable is the full amount of the Secured Obligations for the time being and from time to time and hereby covenants with Assignee that the property hereby assigned is so assigned for the full payment, performance and discharge of the Secured Obligations for the time being and from time to time.
Section 3.Assignment.
3.1 In consideration of the Lender making available the Loans to the Assignor and in order to secure the full and punctual payment, performance and discharge of all of the Secured Obligations, Assignor hereby irrevocably grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to, and agrees to grant, assign, convey, mortgage, pledge, hypothecate and transfer to, Assignee a security interest in all of the Assignor's right, title and interest in, to and under the Assigned Property (whether now existing or hereinafter acquired) and all proceeds thereof, such proceeds to have the broadest meaning possible in accordance with the Uniform Commercial Code as adopted by the State of New York (as amended from time to time).
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3.2 Upon the expiration of the Security Period, this Assignment shall terminate and Assignee (i) at the request of Assignor, will execute and deliver to Assignor, at no cost to Assignee, a proper instrument or instruments acknowledging the satisfaction and termination of this Assignment (including a partial release in the form of Exhibit D to the Consent and Agreement), (ii) will duly reassign, transfer and deliver the Assigned Property and all of the rights and moneys at the time held by Assignee under this Assignment to Assignor and (iii) will execute any other instrument reasonably requested by Assignor in connection with the foregoing.
3.3 Assignor shall at all times remain liable to perform all obligations expressed to be assumed by it under or in respect of the Assigned Property and nothing herein contained and no exercise by Assignee of any rights under this Assignment shall constitute or be deemed to constitute an assumption or acceptance by Assignee of any obligation of Assignor with respect to the Assigned Property.
Section 4.Continuing Security.
4.1 The security created by this Assignment shall be held by Assignee as a continuing security for the full and punctual payment, performance and discharge of all of the Secured Obligations.
4.2 Subject to the termination and partial release associated with the delivery of an Aircraft pursuant to clause 3.4.6 of the Consent and Agreement or repayment in full of the Loan relating to an Aircraft, the security created by this Assignment shall not be considered satisfied and shall not be released or discharged by any intermediate payment, performance, discharge or satisfaction of any part of the Secured Obligations and shall be a continuing security but shall extend to cover any sum or sums of money or other liabilities and obligations which shall for the time being constitute the balance of the Secured Obligations until all of the Secured Obligations shall have been paid, performed and discharged in full.
4.3 The security created by this Assignment is in addition to and not in substitution for, and shall not in any way be prejudiced or affected by, and shall be without prejudice to, any guarantee or other security now or hereafter held by Assignee or any other person for all or any part of the Secured Obligations and may be enforced without Assignee or any other person first having recourse to any such guarantee or other security and without taking any steps or proceedings against Assignor or any other person in respect of the Secured Obligations. Without prejudice to the generality of the foregoing but except to the extent required by any applicable law, Assignee shall not need before exercising any of the rights, powers or remedies conferred upon it by this Assignment or by law (i) to take action or other steps or proceedings or obtain judgment against Assignor or any other person or any assets in any court or otherwise, (ii) to make or file a claim or proof in a winding-up, liquidation, bankruptcy, insolvency, dissolution, administration, reorganization, examinership or amalgamation of, or other analogous event of or with respect to Assignor or any other person or (iii) to enforce or seek to enforce the payment or performance of, or the recovery of, any of the moneys, obligations and liabilities hereby secured or any guarantee, or other security for all or any of the Secured Obligations.
4.4 The security created by this Assignment shall not be discharged, impaired, prejudiced or otherwise affected by:
(a)any failure by Assignee or any other person to take or enforce any guarantee or other security taken or agreed to be taken for all or any of the Secured Obligations;
(b)any time or other indulgence given or agreed to be given by Assignee or any other Person to Assignor or any other person in respect of the Secured Obligations or in
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respect of Assignor's or such other person's obligations under any guarantee, or other security relating thereto;
(c)any amendment, modification, variation, supplement, novation, restatement or replacement of all or any part of the Secured Obligations;
(d)any release or exchange of any guarantee, or other security now or hereafter held by Assignee or any other person for all or any part of the Secured Obligations; or
(e)subject to any applicable law, any other act, fact, matter, event, circumstance, omission or thing (including without limitation the invalidity, unenforceability or illegality of any of the Secured Obligations or the bankruptcy, liquidation, winding-up, insolvency, dissolution, administration, reorganization, examinership or amalgamation of, or other analogous event of or with respect to Assignor or any other person) other than the due discharge and satisfaction of the Secured Obligations which, but for this provision, might operate to prejudice, impair or discharge the rights of Assignee or any other person under this Assignment or which, but for this provision, might constitute a legal or equitable discharge of the security hereby created.
4.5 Any settlement or discharge between Assignee and Assignor and/or any other person shall be conditional upon no security or payment to Assignee by Assignor or any other person being avoided or set aside or ordered to be refunded or reduced by virtue of any provision or enactment relating to bankruptcy, liquidation, winding-up, insolvency, dissolution, administration, reorganization, examinership, amalgamation or other analogous event or proceedings for the time being in force.
Section 5.Representations and Covenants.
5.1 Assignor represents and warrants to Assignee on the date hereof that:
(a)Assignor has full power, authority and legal right to enter into, execute and deliver this Assignment and to perform its obligations hereunder; and
(b)Assignor is the sole legal and equitable owner of the Assigned Property free and clear of all Security Interests other than as constituted by this Assignment and the other Transaction Documents.
5.2 Assignor hereby covenants and undertakes with Assignee throughout the Security Period that:
(a)Assignor shall, upon written request of the Assignee, from time to time promptly sign, seal, execute, acknowledge, deliver, file and register all such additional documents, instruments, notices, agreements, certificates, consents and assurances and do all such other acts and things as may be reasonably necessary and as Assignee may reasonably request from time to time in order to perfect the security granted or intended to be granted by this Assignment or to establish, maintain, protect or preserve the rights of Assignee under this Assignment or to obtain the full benefits of this Assignment or to enable it to exercise and enforce the rights and remedies under this Assignment or in respect of the Assigned Property;
(b)except as contemplated by the Transaction Documents, Assignor shall not assign the Assigned Property and shall not create or incur, nor shall it agree to or acquiesce in the creation or incurrence by any other person of any mortgage, charge or lien in or upon the Assigned Property, and shall duly and promptly at its own cost and expense pay or cause to be
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paid all sums required to be paid and take such other action as may be necessary to discharge any such lien so created, permitted to subsist or suffered to exist by it as aforesaid;
(c)no right of set-off, counterclaim or defense with respect to this Assignment shall be exercisable by Assignor against Assignee;
(d)all cash, proceeds, checks, drafts, orders and other instruments for the payment of money received by Assignor on account of any Assigned Property shall promptly be delivered in the form received (properly endorsed, but without recourse, for collection where required) to Assignee and Assignor agrees not to commingle any such collections or proceeds with its other funds or property and agrees to hold as security the same upon trust for Assignee until delivered, provided that, so long as no Event of Default has occurred and is continuing Assignor may appropriate such collections or proceeds pursuant to and in accordance with the provisions of the Transaction Documents;
(e)so long as no Event of Default has occurred and is continuing Assignor may in the normal course of business, make, negotiate or settle any claims in respect of the Assigned Purchase Agreement with the Manufacturer pursuant to and in accordance with the provisions of the Transaction Documents; and
(f)following the occurrence of an Event of Default and while the same is continuing, Assignor shall not exercise any rights or powers conferred on it in respect of the Assigned Property unless and until requested to do so by Assignee whereupon Assignor agrees that it will do so, at its own cost; provided that Assignee shall not be liable or responsible in any way whatsoever in the event that the exercise by Assignor of any of its rights or powers under the Assigned Property be thereafter adjudged improper.
5.3 Assignor hereby specifically authorizes Assignee to execute in its name and to file any and all financing statements, continuation statements, amendments and other documents as may from time to time be necessary or reasonably advisable to perfect any security interest in favor of the Assignee granted by the Assignor now or hereafter in the Assigned Property and/or any proceeds thereof. Any execution or filing of any financing statement by Assignee pursuant to this Section 5.3 is hereby ratified and confirmed in all respects.
Section 6.Enforcement of Security Interest.
6.1 Upon the occurrence and during the continuation of an Event of Default, the Security Interest constituted by this Assignment shall become enforceable and Assignee shall be entitled:
(a)to the extent not in conflict with the terms and conditions of the Assigned Purchase Agreement, to collect, recover, compromise and give a good discharge for all claims then outstanding or thereafter arising under the Assigned Property and to take over or institute all such suits, legal actions or other proceedings in connection therewith as Assignee may consider fit;
(b)to settle, adjust, refer to arbitration, compromise or arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of Assignor having a claim which relates or is alleged to relate in any way to the Assigned Property or any part thereof;
(c)to the extent not in conflict with the terms and conditions of the Assigned Purchase Agreement, to bring, prosecute, enforce, defend and abandon all such suits, legal
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actions and other proceedings in relation to the Assigned Property or any part thereof as may seem to Assignee to be expedient; and
(d)to do all such other acts or things which Assignee may consider necessary or desirable for the realization of the Assigned Property or any part thereof or incidental or conducive to any of the matters, powers, authorities or discretions conferred on Assignee under or by virtue of this Assignment and to exercise in relation to the Assigned Property or any part thereof all such powers, authorities and discretions as Assignee would be capable of exercising if Assignee were the absolute beneficial owner of the same.
Section 7. Monies Received. All monies and proceeds received by Assignee pursuant to, or by virtue of this Assignment and forming part of the Assigned Property shall be applied by Assignee in or towards discharge of the Secured Obligations in accordance with the Transaction Documents.
Section 8.Appointment of Attorney.
8.1 Assignor hereby by way of security for the full and punctual payment, performance and discharge of the Secured Obligations, irrevocably appoints Assignee to be its true and lawful attorney (with full power of substitution and delegation) for and on behalf of Assignor and in its name or in the name of Assignee and as Assignor's act and deed (i) to sign, execute, seal, deliver, acknowledge, file and register and otherwise perfect any such assurance, document, instrument, agreement, certificate and consent and to do all such other acts and things as are mentioned in Section 5.2(a), and (ii) to sign, seal, execute, deliver, acknowledge, file and register all such assurances, documents, instruments, agreements, certificates and consents and do all such acts and things as Assignor itself may do in relation to the Assigned Property or in relation to any matters dealt with in this Assignment and which Assignee may reasonably deem to be necessary in order to give full effect to the purposes of this Assignment, provided that Assignee shall not exercise the authority conferred on it in this Section 8.1 unless an Event of Default has occurred and is continuing. The power of attorney granted by Assignor is coupled with an interest and is granted irrevocably and for value as part of the security constituted by this Assignment to secure the proprietary interests of Assignee and the performance of the Secured Obligations.
8.2 Assignee shall not have any obligation whatsoever to exercise any of the powers hereby conferred upon it or to make any demand or enquiry as to the nature or sufficiency of any payment received by it, or to present or file any claim or notice or take any other action whatsoever with respect to the Assigned Property. No action taken by or omitted to be taken by Assignee shall give rise to any defense, counterclaim or set-off in favor of Assignor or otherwise affect any of the Secured Obligations.
Section 9.Miscellaneous.
9.1 No failure to exercise or enforce and no delay in exercising or enforcing on the part of Assignee any right, remedy, power or privilege under this Assignment or otherwise shall operate as a waiver thereof, nor shall any single or partial exercise or enforcement of any such right, remedy, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, remedy, power or privilege whether hereunder or otherwise. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
9.2 Any provision of this Assignment which is or becomes invalid, illegal or unenforceable in any jurisdiction shall as to such jurisdiction be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof,
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and any such invalidity, illegality or unenforceability shall not render such provision invalid, illegal or unenforceable in any other jurisdiction.
Section 10.Successors; Assigns; Transferees. This Assignment shall be binding on and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Party may assign or purport to assign or transfer or purport to transfer any or all of its rights and/or obligations under this Assignment without the prior written consent of the other Party.
Section 11.[***]
Section 12.Counterparts; Amendments. This Assignment may be executed by the Parties in separate counterparts and any single counterpart or set of counterparts executed and delivered, in either case, by both Parties and shall constitute a full and original agreement for all purposes. This Assignment may not be amended, varied, modified, supplemented, restated, novated or replaced except by an agreement in writing signed by or on behalf of both Parties.
Section 13.Notices. The provisions of clause 29 (Notices) of the Facility Agreement shall apply to this Assignment.
Section 14.Governing Law and Jurisdiction.
14.1 THIS ASSIGNMENT AND THE RIGHTS AND OBLIGATIONS OR ANY CLAIMS, CONTROVERSIES OR DISPUTES OF THE PARTIES RELATING TO OR ARISING UNDER IT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
14.2 Each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of each of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in the Borough of Manhattan, New York (including its Appellate Division), and of any other appellate court in the State of New York, in any action or proceeding arising out of or relating to this Assignment, or for recognition or enforcement of any judgment, and each of the Parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court, or, to the extent permitted by law, in such Federal court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Assignment shall affect any right that Assignee may otherwise have to bring any action or proceeding relating to this Assignment in the courts of any other jurisdiction in accordance with local law (notwithstanding the governing law of this Assignment).
14.3 Each of the Parties hereby irrevocably waives, to the extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Assignment brought in the United States District Court for the Southern District of New York or in any New York State Court sitting in the Borough of Manhattan, New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum and any right to which it may be entitled on account of place of residence or domicile. A final judgment (in respect of which time for all appeals has elapsed) in any such suit, action or proceeding shall be conclusive and may be enforced in any court to the jurisdiction of which a Party is or may be subject, by suit upon judgment.
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14.4 Assignor agrees that the process by which any suit, action or proceeding in the State of New York begun may be served on it by being delivered to its address for notices set out in clause 29 of the Facility Agreement.
14.5 EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS ASSIGNMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS ASSIGNMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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IN WITNESS WHEREOF this Purchase Agreement Security Assignment has been executed by the parties hereto on the day and year first above written.
| ASSIGNOR | |||||
SUN TAIL PDP LLC, as Agent By: /s/ Robert P. Hines Jr. Name: Robert P. Hines Jr. Title: Vice President | |||||
| ASSIGNEE | |||||
RUNWAY SEVEN LENDER LLC By: Carlyle Aviation Management Limited, its Manager By: /s/ Robert G. Korn Name: Robert G. Korn Title: Director | |||||
[Signature Page to Purchase Agreement Security Assignment]
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Exhibit 21
| List of Subsidiaries | ||||||||
| Name of Subsidiary | Jurisdiction of Incorporation or Organization | |||||||
| Allegiant Air, LLC | Nevada, USA | |||||||
| Allegiant Vacations, LLC | Nevada, USA | |||||||
| AFH, Inc. | Nevada, USA | |||||||
| SFB Fueling, LLC (50% sub of AFH, Inc.) | Delaware, USA | |||||||
| G4 Properties, LLC | Nevada, USA | |||||||
| Sunrise Asset Management, LLC | Nevada, USA | |||||||
| Allegiant Commercial Properties Inc. | Nevada, USA | |||||||
| Sunseeker Resorts, Inc. | Nevada, USA | |||||||
| Sunseeker Florida, Inc. | Florida, USA | |||||||
| Point Charlotte, LLC | Florida, USA | |||||||
| Point Charlotte Development, LLC | Florida, USA | |||||||
| G4 Works, LLC | Nevada, USA | |||||||
| Dustland, LLC | Nevada, USA | |||||||
| Sunseeker Florida North, Inc. | Florida, USA | |||||||
| SFI Equity Holdco, Inc. | Florida, USA | |||||||
Note: In accordance with SEC rules, certain subsidiaries have been omitted which subsidiaries, in the aggregate, would not constitute a significant subsidiary as of the end of the year covered by this report.
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (No. 333-141227, 333-199734, 333-215624, 333-266515) on Form S-8 and (No.333-260062) on Form S-3 of our reports dated February 29, 2024, with respect to the consolidated financial statements of Allegiant Travel Company and the effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Dallas, Texas
February 29, 2024
Exhibit 31.1
Certifications
I, Maurice J. Gallagher, Jr., certify that:
1.I have reviewed this annual report on Form 10-K of Allegiant Travel Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | February 29, 2024 | /s/ Maurice J. Gallagher, Jr. | ||||||
| Title: Principal Executive Officer | ||||||||
Exhibit 31.2
Certifications
I, Robert Neal, certify that:
1.I have reviewed this annual report on Form 10-K of Allegiant Travel Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | February 29, 2024 | /s/ Robert J. Neal | ||||||
| Title: Principal Financial Officer | ||||||||
Exhibit 32
Allegiant Travel Company Certification under Section 906 of the Sarbanes/Oxley Act - filed as an exhibit to Form 10-K for the Year Ended December 31, 2023
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Allegiant Travel Company (the “Company”) on Form 10-K for the period ended December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Maurice J. Gallagher, Jr., Chief Executive Officer and Executive Chairman of the Company, and Robert Neal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Maurice J. Gallagher, Jr. | /s/ Robert J. Neal | |||||||
| Maurice J. Gallagher, Jr. | Robert J. Neal | |||||||
| Principal Executive Officer | Principal Financial Officer | |||||||
| February 29, 2024 | February 29, 2024 | |||||||
The foregoing Certification shall not be deemed incorporated by reference by any general statement incorporating by reference this report into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.