Subsequent Events

12 Months Ended

Dec. 31, 2019

COVID-19 Pandemic Update

As the COVID-19 pandemic evolves, the Company's financial and operational outlook remains subject to change. The Company continues to monitor the impacts of the pandemic on its operations and financial condition, and to implement mitigation strategies while working to preserve cash and protect the long-term sustainability of the Company. As of March 31, 2020, the Company had unrestricted cash and short-term investment securities of approximately $894 million.

In response to government restrictions on travel and drastically reduced consumer demand, the Company reduced capacity from its original plan in April by approximately 80% and expects to reduce capacity by approximately 75% in May. The Company currently estimates that air travel demand after May will gradually recover through early 2021. However, the situation is fluid and actual capacity adjustments may be different than what the Company currently expects.

In addition, the Company has taken, or intends to take, additional action, including:


•	Pursuing additional financing secured by the Company's unencumbered assets, including the Revolving Credit Facility (defined below);


•	Suspending $50 million to $75 million of planned capital spending related to certain non-aircraft capital projects;


•	Reducing planned non-fuel operating costs by $20 million to $30 million, excluding savings related to reduced capacity;


•	Freezing hiring across the Company except to fill essential roles;


•	Engaging in discussions with the Company's significant stakeholders and vendors regarding financial support or contract adjustments during this transition period;


•	Evaluating the additional support in the CARES Act, approved on March 27, 2020, to protect the U.S. airline industry, its employees and many other stakeholders. The Company has applied for the payroll protection support and expects to receive approximately $330 million.

Additionally, Ted Christie, the Company's Chief Executive Officer and President has temporarily reduced his base salary by 30%. All Senior and Executive Vice Presidents and members of the Board of Directors have temporarily reduced their compensation as well. The Company anticipates it may implement further discretionary changes and other cost reduction and liquidity preservation measures as needed to address the volatility and quickly-changing dynamics of passenger demand and the impact of revenue changes, regulatory and public health directives and prevailing government policy and financial market conditions.

Revolving Credit Facility

On March 30, 2020, the Company entered into a senior secured revolving credit facility (the “Revolving Credit Facility”) with the lenders party thereto and Citibank, N.A. acting as the administrative agent, and Wilmington Trust, National Association, acting as the collateral agent, for an initial commitment amount of $110 million (with an option to increase the overall commitment amount up to $350 million with the consent of any increasing lenders), subject to borrowing base availability.

The Revolving Credit Facility will mature on March 30, 2022. Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the London interbank offering rate, known as LIBOR, plus a margin of 2.00% per annum, or another rate (at the Company’s election) based on certain market interest rates, plus a margin of 1.00% per annum, in each case with a floor of 0%. The Company has not made any drawings under the Revolving Credit Facility as of the date hereof.

The Company may pledge the following types of assets as collateral (“Collateral”) to secure its obligations under the Revolving Credit Facility: (i) certain take-off and landing rights of the Company at LaGuardia Airport (the “Pledged Slots”), (ii) certain eligible aircraft spare parts and ground support equipment, (iii) aircraft, spare engines (the “Pledged Engines”) and flight simulators, (v) real property assets and (vi) cash and cash equivalents.

Preferred Stock and Material Modifications to Rights of Security Holders

On March 29, 2020, the Board of Directors of the Company declared a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of common stock of the Company. The dividend is payable on April 9, 2020 (the “Record Date”) to holders of record as of the close of business on that date. The description and terms of the Rights are set forth in a

Rights Agreement (the “Rights Agreement”) between the Company and Equiniti Trust Company, as Rights Agent (the “Rights Agent”).

The Board of Directors has adopted the Rights Agreement to reduce the likelihood that a potential acquirer would gain (or seek to influence or change) control of the Company by open market accumulation or other tactics without paying an appropriate premium for the Company’s shares. In general terms and subject to certain exceptions, it works by imposing a significant penalty upon any person or group (including a group of persons that are acting in concert with each other) that acquires 10% or more of the outstanding common stock of the Company without the approval of the Board of Directors.

The Board of Directors authorized the issuance of a Right with respect to each outstanding share of common stock of the Company on the Record Date. The Rights will initially trade with, and will be inseparable from, the common stock of the Company, and the registered holders of the Company’s common stock will be deemed to be the registered holders of the Rights. Issuances of new shares of common stock of the Company after the Record Date but before the Distribution Date will be accompanied by new Rights. The Distribution Date generally means the earlier of (i) the close of business on the 10^th business day after the date of the first public announcement that a person or any of its affiliates and associates has become an Acquiring Person and (ii) the close of business on the 10th business day (or such later day as may be designated by the Board of Directors before any person has become an Acquiring Person) after the date of the commencement of a tender or exchange offer by any person which would, if consummated, result in such person becoming an Acquiring Person. An Acquiring Person is a person who or which, together with all affiliates and associates of such person obtains beneficial ownership of 10% or more shares of the Company’s common stock, with certain exceptions. The Rights Agreement also provides that any person that would otherwise be deemed an Acquiring Person as of the date of the adoption of the Rights Agreement will be exempted but only for so long as it does not acquire, without the prior approval of the Board, beneficial ownership of any additional common stock of the Company following the adoption of the Rights Agreement.

The Rights will not be exercisable until after the Distribution Date. After the Distribution Date, each Right will be exercisable to purchase, for $60.00 (the “Purchase Price”), one one-thousandth of a share of Series A Participating Cumulative Preferred Stock, par value $0.0001 per share (the “Preferred Stock”). This portion of a share of Preferred Stock will give the stockholder approximately the same dividend, voting or liquidation rights as would one share of the Company’s common stock. Prior to exercise, Rights holders in their capacity as such have no rights as a stockholder of the Company, including the right to vote and to receive dividends.

The Rights will expire on March 29, 2021, unless earlier exercised, exchanged, amended or redeemed. In the event that any applicable United States government agency determines that the dividend of the Rights constitutes a dividend or capital distribution covered by Title IV (including Section 4003 or Section 4114) of the CARES Act, then the Rights will be null and void and will be treated as though no dividend or capital distribution had been paid or made.

Consequences of a Person or Group Becoming an Acquiring Person

Flip in. Subject to the Company’s exchange rights, described below, at any time after any person has become an Acquiring Person, each holder of a Right (other than an Acquiring Person, its affiliates and associates) will be entitled to purchase for each Right held, at the Purchase Price, a number of shares of common stock of the Company having a market value of twice the Purchase Price.

Exchange. At any time on or after any person has become an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the outstanding shares of the Company’s common stock or the occurrence of any of the events described in the next paragraph), the Board of Directors may exchange all or part of the Rights (other than Rights beneficially owned by an Acquiring Person, its affiliates and associates) for shares of the Company’s common stock at an exchange ratio of one share of the Company’s common stock per Right.

Flip over. If, after any person has become an Acquiring Person, (1) the Company is involved in a merger or other business combination in which the Company is not the surviving corporation or its common stock is exchanged for other securities or assets or (2) the Company and/or one or more of its subsidiaries sell or otherwise transfer assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries, taken as a whole, then each Right (other than Rights beneficially owned by an Acquiring Person, its affiliates and associates) will entitle the holder to purchase for each Right held, for the Purchase Price, a number of shares of common stock of the other party to such business combination or sale (or in certain circumstances, an affiliate) having a market value of twice the Purchase Price.