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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________________________________________________
Form 10-Q
_______________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
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: 001-35186
_______________________________________________________________________
SPIRIT AIRLINES, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
Delaware38-1747023
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2800 Executive WayMiramarFlorida33025
(Address of principal executive offices)(Zip Code)

(954) 447-7920
(Registrant’s telephone number, including area code) 
____________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each className of exchange on which registeredTrading Symbol
Common Stock, $0.0001 par valueNew York Stock ExchangeSAVE

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 and posted on its corporate Web site, if any, 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 files).    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. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
(Do not check if a 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 is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on April 14, 2021:
Class Number of Shares
Common Stock, $0.0001 par value 97,806,430

1


Table of Contents
INDEX
 
 Page No.

2


PART I. Financial Information
ITEM 1.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Spirit Airlines, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
 
 Three Months Ended March 31,
20212020
Operating revenues:
Passenger$450,335 $753,550 
Other10,944 17,531 
Total operating revenues461,279 771,081 
Operating expenses:
Salaries, wages and benefits
245,692 240,480 
Aircraft fuel142,930 213,208 
Depreciation and amortization74,312 65,991 
Landing fees and other rents72,108 67,121 
Aircraft rent54,782 45,146 
Maintenance, materials and repairs29,903 34,076 
Distribution23,642 33,743 
Loss on disposal of assets1,117  
Special credits(176,938) 
Other operating96,261 129,308 
Total operating expenses563,809 829,073 
Operating income (loss)(102,530)(57,992)
Other (income) expense:
Interest expense44,806 23,878 
Capitalized interest(4,732)(3,664)
Interest income(4,371)(3,593)
Other (income) expense(52)(19)
Total other (income) expense35,651 16,602 
Income (loss) before income taxes(138,181)(74,594)
Provision (benefit) for income taxes(25,860)(46,766)
Net income (loss)$(112,321)$(27,828)
Basic earnings (loss) per share$(1.15)$(0.41)
Diluted earnings (loss) per share$(1.15)$(0.41)
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
1



Spirit Airlines, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in thousands)

Three Months Ended March 31,
20212020
Net income (loss)$(112,321)$(27,828)
Unrealized gain on short-term investment securities and cash and cash equivalents, net of deferred taxes of $2 and $54
7 185 
Interest rate derivative loss reclassified into earnings, net of taxes of $13 and $24
45 41 
Other comprehensive income (loss)$52 $226 
Comprehensive income (loss)$(112,269)$(27,602)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

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Spirit Airlines, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
March 31, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,774,471 $1,789,723 
Restricted cash64,000 71,401 
Short-term investment securities106,376 106,339 
Accounts receivable, net100,366 42,940 
Aircraft maintenance deposits, net72,281 73,134 
Income tax receivable37,472 147,460 
Prepaid expenses and other current assets121,127 124,983 
Total current assets2,276,093 2,355,980 
Property and equipment:
Flight equipment4,207,088 4,177,631 
Ground property and equipment341,050 334,167 
Less accumulated depreciation(731,308)(680,230)
3,816,830 3,831,568 
Operating lease right-of-use assets1,461,743 1,417,823 
Pre-delivery deposits on flight equipment412,682 356,262 
Long-term aircraft maintenance deposits50,431 53,158 
Deferred heavy maintenance, net334,508 347,907 
Other long-term assets35,448 36,127 
Total assets$8,387,735 $8,398,825 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable$33,199 $28,454 
Air traffic liability509,172 401,966 
Current maturities of long-term debt and finance leases356,623 384,197 
Current maturities of operating leases135,260 133,791 
Other current liabilities473,826 393,614 
Total current liabilities1,508,080 1,342,022 
Long-term debt and finance leases, less current maturities3,048,378 3,066,635 
Operating leases, less current maturities1,290,800 1,248,519 
Deferred income taxes398,097 439,894 
Deferred gains and other long-term liabilities49,391 52,060 
Shareholders’ equity:
Common stock10 10 
Additional paid-in-capital750,359 799,549 
Treasury stock, at cost(75,431)(74,124)
Retained earnings1,418,617 1,524,878 
Accumulated other comprehensive income (loss)(566)(618)
Total shareholders’ equity2,092,989 2,249,695 
Total liabilities and shareholders’ equity$8,387,735 $8,398,825 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
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Spirit Airlines, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands) 
 Three Months Ended March 31,
20212020
Operating activities:
Net income (loss)$(112,321)$(27,828)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Losses reclassified from other comprehensive income 58 65 
Share-based compensation 4,254 3,790 
Allowance for doubtful accounts (recoveries)(170) 
Amortization of debt issuance costs3,509 2,106 
Depreciation and amortization74,312 65,991 
Accretion of 8.00% senior secured notes
434  
Deferred income tax expense (benefit)(26,869)36,367 
Loss on disposal of assets1,117  
Changes in operating assets and liabilities:
Accounts receivable, net(57,256)39,910 
Aircraft maintenance deposits, net1,755 (1,330)
Long-term deposits and other assets4,998 (666)
Prepaid income taxes(303) 
Deferred heavy maintenance, net(10,466)(35,564)
Income tax receivable109,988 (83,213)
Accounts payable3,202 14,854 
Air traffic liability107,206 95,876 
Other liabilities83,042 (75,541)
Other158 (235)
Net cash provided by operating activities186,648 34,582 
Investing activities:
Purchase of available-for-sale investment securities(20,692)(24,036)
Proceeds from the maturity and sale of available-for-sale investment securities20,500 23,600 
Pre-delivery deposits on flight equipment, net of refunds(52,738)(123,044)
Capitalized interest(4,342)(2,860)
Assets under construction for others(797)(2,057)
Purchase of property and equipment(39,437)(195,371)
Net cash used in investing activities(97,506)(323,768)
Financing activities:
Proceeds from issuance of long-term debt25,338 168,981 
Proceeds from issuance of warrants2,146  
Proceeds from stock options exercised 16 
Payments on debt obligations(135,925)(42,561)
Payments on finance lease obligations(189)(24,846)
Reimbursement for assets under construction for others586 2,095 
Repurchase of common stock(1,307)(1,536)
Debt issuance costs(2,444)(3,695)
Net cash provided (used) by financing activities(111,795)98,454 
Net increase (decrease) in cash, cash equivalents, and restricted cash(22,653)(190,732)
Cash, cash equivalents, and restricted cash at beginning of period (1)1,861,124 978,957 
Cash, cash equivalents, and restricted cash at end of period (1) $1,838,471 $788,225 
Supplemental disclosures
Cash payments for:
Interest, net of capitalized interest$40,206 $17,702 
Income taxes paid (received), net$(109,056)$(1,497)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$61,378 $50,805 
Financing cash flows for finance leases $24 $113 
Non-cash transactions:
Capital expenditures funded by operating lease borrowings $82,745 $85,787 
(1) The sum of cash and cash equivalents and restricted cash on our condensed consolidated balance sheets equals cash, cash equivalents, and restricted cash in our statement of cash flows.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
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Spirit Airlines, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited, in thousands)
Three Months Ended March 31, 2020
Common StockAdditional Paid-In-CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance at December 31, 2019$7 $379,380 $(72,455)$1,955,187 $(787)$2,261,332 
Effect of ASU No. 2016-13 implementation
— — — (1,609)— (1,609)
Share-based compensation— 3,790 — — 3,790 
Repurchase of common stock— — (1,536)— — (1,536)
Proceeds from options exercised— 16 — — — 16 
Changes in comprehensive income— — — — 226 226 
Net loss— — — (27,828)— (27,828)
Balance at March 31, 2020$7 $383,186 $(73,991)$1,925,750 $(561)$2,234,391 

Three Months Ended March 31, 2021
Common StockAdditional Paid-In-CapitalTreasury StockRetained Earnings Accumulated Other Comprehensive Income (Loss)Total
Balance at December 31, 2020$10 $799,549 $(74,124)$1,524,878 $(618)$2,249,695 
Effect of ASU No. 2020-06 implementation (refer to Note 3)
— (55,590)— 6,060 — (49,530)
Share-based compensation— 4,254 — — — 4,254 
Repurchase of common stock— — (1,307)— — (1,307)
Changes in comprehensive income— — — — 52 52 
Issuance of warrants— 2,146 — — — 2,146 
Net loss— — — (112,321)— (112,321)
Balance at March 31, 2021$10 $750,359 $(75,431)$1,418,617 $(566)$2,092,989 
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
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Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Spirit Airlines, Inc. (“Spirit”) and its consolidated subsidiaries (the "Company"). In August 2020, Spirit formed several new subsidiaries; Spirit Finance Cayman 1 Ltd. (“HoldCo 1”), Spirit Finance Cayman 2 Ltd. (“HoldCo 2”), Spirit IP Cayman Ltd. (“Spirit IP”) and Spirit Loyalty Cayman Ltd. (“Spirit Loyalty”). Each are Cayman Islands exempted companies incorporated with limited liability. Spirit IP and Spirit Loyalty are wholly-owned subsidiaries of HoldCo 2 (other than the special share issued to the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes (as defined herein)). HoldCo 1 and HoldCo 2 are special purpose holding companies. HoldCo 2 is a wholly-owned direct subsidiary of HoldCo 1 (other than the special share issued to the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes). HoldCo 1 is a wholly-owned subsidiary of Spirit (other than the special share issued to the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes). As a result, our financial statements are presented on a consolidated basis.
These unaudited condensed consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the audited annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on February 10, 2021.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect both the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.
The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations as demand is generally greater in the second and third quarters of each year. The air transportation business is also volatile and highly affected by economic cycles and trends. In addition, the Company experienced significant impacts from the global coronavirus ("COVID-19") pandemic during the year ended December 31, 2020 and has continued to experience a significant impact through the three months ended March 31, 2021.
2. Impact of COVID-19

Since its initial onset in early 2020, the impact of the COVID-19 pandemic has evolved and continues to be fluid. As a result, 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 adjust its mitigation and operational strategies accordingly in order to protect the long-term sustainability and growth of the Company.

Capacity Reductions

At the onset of the COVID-19 pandemic in March 2020, in response to government restrictions on travel and drastically reduced consumer demand, the Company began to significantly reduce capacity each month with the largest capacity reduction in May 2020 at approximately 94%, year over year, and smaller capacity reductions of 20.8% and 20.1% in the holiday months of November and December, respectively. Through the first quarter of 2021, the Company continued to operate at reduced capacity levels although to a lesser extent than noted at the height of the pandemic during mid 2020. For the first quarter of 2021, the Company had a 26.9% decrease in capacity as compared to the prior year period.

The COVID-19 pandemic and its effects continue to evolve, with developments including fluctuations in the rate of infections during 2021, the emergency use authorization issued by the U.S. Food and Drug Administration for COVID-19 vaccines, the requirement, effective January 26, 2021, that all U.S. inbound international travelers provide a negative COVID-19 test prior to flying and recent increases in the availability of COVID-19 vaccines resulting in expanded eligibility to more groups of people to receive the vaccine. While the Company currently estimates that air travel demand will continue to be
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volatile and will fluctuate in the upcoming months as the lingering effects of COVID-19 continue to develop, it expects that air travel demand will continue to gradually recover in 2021. However, the situation continues to be fluid and actual capacity adjustments may be different than what the Company currently expects. Refer to Note 4, Revenue, for discussion of the impact of COVID-19 on the Company's air traffic liability, credit shells and refunds.

COVID-19 Legislation

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act was a relief package intended to assist many aspects of the American economy, including providing the airline industry with up to $25 billion in grants to be used for employee salaries, wages and benefits and up to $25 billion in secured loans.

On April 20, 2020, the Company entered into a Payroll Support Program ("PSP") Agreement with the United States Department of the Treasury ("Treasury"), pursuant to which the Company received a total of $344.4 million, used exclusively to pay for salaries, wages and benefits for the Company’s Team Members through September 30, 2020. Of that amount, $73.3 million is in the form of a low-interest 10-year loan. In addition, in connection with its participation in the PSP, the Company issued to Treasury warrants pursuant to a warrant agreement to purchase up to 520,797 shares of the Company’s common stock at a strike price of $14.08 per share (the closing price for the shares of the Company's common stock on April 9, 2020) with a fair value of $3.9 million. The Company registered the resale of the warrants pursuant to the warrant agreement with Treasury in September and October 2020. The remaining amount of $267.2 million is in the form of a grant and was recognized in special credits in the Company's condensed consolidated statement of operations.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law which extended the PSP portion of the CARES Act through March 31, 2021 ("PSP2") and provided an additional $15 billion to fund the PSP2 for employees of passenger air carriers. The Company entered into a new payroll support program agreement with the Treasury on January 15, 2021. During the first quarter of 2021, the Company received a total of $184.5 million through the PSP2, used exclusively to pay for salaries, wages and benefits for the Company’s Team Members through March 31, 2021. Of that amount, $25.3 million is in the form of a low-interest 10-year loan. In addition, in connection with its participation in the PSP2, the Company issued to Treasury warrants pursuant to a warrant agreement to purchase up to 103,761 shares of the Company’s common stock at a strike price of $24.42 per share (the closing price for the shares of the Company's common stock on December 24, 2020) with a fair value of $2.1 million. The remaining amount of $156.5 million, net of related costs, is in the form of a grant and was recognized in special credits in the Company's condensed consolidated statement of operations. Total warrants issued in connection with the PSP and PSP2 represent less than 1% of the outstanding shares of the Company's common stock as of March 31, 2021.

In connection with the Company's participation in the PSP2, the Company is subject to certain restrictions and limitations, including, but not limited to:

Restrictions on payment of dividends and stock buybacks through March 31, 2022;

Limits on executive compensation through October 1, 2022;

Restrictions from conducting involuntary furloughs or reducing pay rates and benefits until March 31, 2021;

Requirements to maintain certain levels of scheduled services through March 1, 2022;

Reporting requirements; and

A recall of all employees that were involuntarily furloughed or terminated between October 1, 2020 and the date the carrier enters into the new payroll support agreement with the Treasury. Such employees, if returning to work, must be compensated for lost pay and benefits between December 1, 2020 and the date of such new payroll support agreement.
The CARES Act also provided an employee retention credit (“CARES Employee Retention credit”) which was a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages through year end. The Company qualified for the credit beginning on April 1, 2020 and received additional credits for qualified wages through December 31, 2020.

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The Consolidated Appropriations Act extended and expanded the availability of the CARES Employee Retention credit through June 30, 2021. Subsequently, the American Rescue Plan Act of 2021 ("ARP"), enacted on March 11, 2021, extended and expanded the availability of the CARES Employee Retention credit through December 31, 2021, however, certain provisions apply only after December 31, 2020. This new legislation amended the employee retention credit to be equal to 70% of qualified wages paid to employees after December 31, 2020, and before January 1, 2022. During calendar year 2021, a maximum of $10,000 in qualified wages for each employee per qualifying calendar quarter may be counted in determining the 70% credit. Therefore, the maximum tax credit that can be claimed by an eligible employer is $7,000 per employee per qualifying calendar quarter of 2021. The Company will qualify for the employee retention credit for quarters that experience a significant decline in gross receipts defined as quarterly gross receipts that are less than 80 percent of its gross receipts for the same calendar quarter in 2019. During the three months ended March 31, 2021, the Company recorded $21.3 million related to the CARES Employee Retention credit within special credits on the Company’s condensed consolidated statements of operations and within accounts receivable, net on the Company's condensed consolidated balance sheet. Refer to Note 5, Special Credits, for additional information.

ARP also authorized Treasury to provide additional assistance to passenger air carriers that received financial assistance under PSP2 ("PSP3"). Under the ARP, Treasury will provide up to $14 billion to fund the PSP3 for employees of passenger air carriers. In April 2021, the Company was notified that, subject to final execution of an agreement with Treasury, it will receive an approximate $197.9 million under the PSP3 and an additional $27.7 million under the PSP2.

In connection with the Company's participation in the PSP3, the Company will be subject to certain restrictions and limitations, including, but not limited to:

Restrictions on payment of dividends and stock buybacks through September 30, 2022;

Limits on executive compensation through April 1, 2023;

Restrictions from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2021, or the date on which all PSP funding has been expended; and

Reporting requirements.

Finally, the CARES Act also provided for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. As of March 31, 2021, the Company had deferred $23.2 million in social security tax payments. The deferred amounts are recorded within other current liabilities and within deferred gains and other long-term liabilities on the Company’s condensed consolidated balance sheet.

Income Taxes
The Company's effective tax rate for the three months ended March 31, 2021 was 18.7% compared to 62.7% for the three months ended March 31, 2020. The decrease in tax rate, as compared to the prior year period, is primarily due to a $31.1 million discrete federal tax benefit recorded during the three months ended March 31, 2020 related to the passage of the CARES Act. The CARES Act allows for carryback of net operating losses generated at a 21% tax rate to recover taxes paid at a 35% tax rate. While the Company expects its tax rate to be fairly consistent in the near term, it will tend to vary depending on recurring items such as the amount of income we earn in each state and the state tax rate applicable to such income. Discrete items particular to a given year may also affect our effective tax rates.

Balance Sheet, Cash Flow and Liquidity

Since the onset of the COVID-19 pandemic in the U.S. in the first quarter of 2020, the Company has taken several actions to increase liquidity and strengthen its financial position. These actions include the private offering of $850 million of the 8.00% senior secured notes, the public offering of $175.0 million in convertible notes, the public offering of 20,125,000 shares of the Company's voting common stock for which it received net proceeds of $192.4 million, the issuance and sale of 9,000,000 shares of the Company's voting common stock through its ATM Program for which it received net proceeds of $156.7 million and the execution of a revolving credit facility with a total commitment of $180.0 million as of December 31, 2020. During the first quarter of 2021, the Company entered into an amendment to this revolving credit facility which extended the maturity to March 30, 2024 and increased the commitment amount to $240.0 million. The additional $60.0 million was undrawn and available as of March 31, 2021. Refer to Note 12, Debt and Other Obligations for additional information. As a result of these
8


actions, as of March 31, 2021, the Company had $1,940.8 million of liquidity comprised of unrestricted cash and cash equivalents, short-term investment securities and funds available under its revolving credit facility due in 2024.

For purposes of assessing its liquidity needs, the Company estimates that demand will continue to recover in 2021. The Company believes the actions taken since the onset of the COVID-19 pandemic address its future liquidity needs, yet anticipates it may implement further discretionary changes and other cost reduction and liquidity preservation and/or enhancement 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.

Workforce Actions

In 2020, in response to the COVID-19 pandemic, the Company worked with unionized employees and the related unions to create voluntary leave programs for pilots, flight attendants and other unionized employee groups. The Company also created voluntary leave programs for certain non-unionized employee groups. Due to the high level of support and acceptance of the voluntary programs offered, the total number of Team Members involuntarily terminated in 2020 was reduced by more than 95%. As required by the PSP2, during the first quarter of 2021, the Company offered to rehire all eligible Team Members who were involuntarily terminated during 2020. For the three months ended March 31, 2021, the Company recorded $0.8 million in special charges within special credits on the Company’s condensed consolidated statement of operations related to the rehiring of Team Members under its involuntary employee separation program. In addition, in response to increased air travel demand, during the first quarter of 2021, the Company requested the voluntary return to work of certain Team Members on leave under the Company's voluntary leave programs. As of March 31, 2021, 12% of Team Members previously on voluntary leave had returned to work. Expenses related to voluntary leave programs were recorded within salaries, wages and benefits on the Company’s condensed consolidated statement of operations. As the Company continues to monitor the impacts of the pandemic on its operations and financial condition, it will consider and evaluate the need for any additional workforce actions in future periods.
3. Recent Accounting Developments

Recently Adopted Accounting Pronouncements

Convertible Instruments and Contracts

In August 2020, the FASB issued ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." This new standard simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments. It eliminates the treasury stock method for convertible instruments and requires application of the “if-converted” method for certain agreements. In addition, the standard eliminates the beneficial conversion and cash conversion accounting models that require separate accounting for embedded conversion features and the recognition of a debt discount and related amortization to interest expense of those embedded features.

The Company elected to early adopt this standard effective January 1, 2021 using the modified retrospective approach transition method. Therefore, the condensed consolidated financial statements for the three months ended March 31, 2021 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company's historical accounting policy.

In connection with the adoption of this standard, the Company recognized a cumulative effect adjustment, net of tax, of $6.1 million to retained earnings on the Company's condensed consolidated balance sheet as of January 1, 2021. This adjustment was primarily driven by the derecognition of interest expense related to the accretion of the debt discount associated with the embedded conversion option recorded in the prior period as required under the legacy guidance. In addition, the Company reclassified $75.6 million, less related tax of $17.1 million and issuance costs of $2.9 million, from additional paid-in-capital ("APIC") to long-term debt and finance leases on the Company's condensed consolidated balance sheet as of January 1, 2021. The reclassification was recorded in order to combine the two legacy units of account into a single instrument classified as a liability since bifurcation of the instrument into two units of account is no longer required under the new standard. Under this new guidance, the Company will no longer incur interest expense related to the accretion of the debt discount associated with the embedded conversion option.

Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), "Simplifying the Accounting for Income Taxes." This new standard simplifies various aspects related to the accounting for income taxes. The standard removes certain exceptions to the general principles in Topic 740 and also clarifies and modifies existing guidance to improve consistent
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application of Topic 740. The Company adopted this standard effective January 1, 2021 with no material impact to its condensed consolidated financial statements.

4. Revenue
    Operating revenues is comprised of passenger revenues, which includes fare and non-fare revenues, and other revenues. The following table shows disaggregated operating revenues for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
20212020
(in thousands)
Operating revenues:
Fare$174,287 $321,447 
Non-fare276,048 432,103 
Total passenger revenues450,335 753,550 
Other10,944 17,531 
Total operating revenues$461,279 $771,081 

The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by geographic region as defined by the Department of Transportation ("DOT") are summarized below:
Three Months Ended March 31,
20212020
(in thousands)
DOT—Domestic$408,693 $697,828 
DOT—Latin America52,586 73,253 
Total$461,279 $771,081 
The Company defers the amount for award travel obligation as part of loyalty deferred revenue within air traffic liability ("ATL") on the Company's condensed consolidated balance sheets and recognizes loyalty travel awards in passenger revenues as points are used for travel or expire unused.
As a result of the COVID-19 pandemic, the Company experienced significantly increased customer requests for credit shells, or customer travel funds held by the Company that can be redeemed for future travel, and refunds beginning in the second half of March 2020 and continuing to varying degrees through the first quarter of 2021 primarily due to flight cancellations and a change in the Company's flight cancellation and refund policy. The total value of refunds issued during the three months ended March 31, 2021 and 2020 were $31.9 million and $43.7 million, respectively.
The Company expects that the level of requests for credit shells and refunds in the upcoming months will continue to decrease with some fluctuation as the effects of COVID-19 continue to evolve. In addition, in response to COVID-19, during 2020 and early 2021, the Company increased the expiration period on some of its credit shells from 60 days to up to 12 months or longer and waived change and cancellation fees for Guests who booked travel through the first quarter of 2021. As a result, the outstanding balance of the unused credit shells (which is recorded within ATL on the Company's condensed consolidated balance sheets), as of March 31, 2021, significantly exceeds the balance in the prior year period. As of March 31, 2021 and December 31, 2020, the Company had ATL balances of $509.2 million and $402.0 million, respectively. Substantially all of the Company's ATL, including the balance of credit shells, is expected to be recognized within 12 months of the respective balance sheet date.

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For credit shells that the Company estimates are not likely to be used prior to expiration (“breakage”), the Company recognizes the associated value proportionally during the period over which the remaining credit shells may be used. Breakage estimates are based on the Company's historical information about customer behavior as well as assumptions about customers' future travel behavior. Assumptions used to generate breakage estimates can be impacted by several factors including, but not limited to, changes to the Company's ticketing policies, changes to the Company’s refund, exchange, and credit shell policies, and economic or governmental regulation factors. Given the unprecedented amount of cancellations in the past year and the related increase in credit shells provided, the Company expects additional variability in the amount of breakage revenue recorded in future periods, as the estimates of the portion of those funds that will expire unused may differ from historical experience.

Loyalty Programs

The Company operates the Free Spirit loyalty program, which attracts members and partners and builds customer loyalty for the Company by offering a variety of awards, benefits and services. Free Spirit loyalty program members earn and accrue points for dollars spent on Spirit for flights and other non-fare services as well as services from non-air partners such as retail merchants, hotels or car rental companies or by making purchases with credit cards issued by partner banks and financial services providers. Points earned and accrued by Free Spirit loyalty program members can be redeemed for travel awards such as free (other than taxes and government-imposed fees), discounted or upgraded travel. In January 2021, the Company launched a new, more expansive frequent flyer program, “Free Spirit Program”, with extended point expiration, additional benefits based on status tiers, and other changes.

The Company operates the Spirit Saver$ ClubTM (the "Spirit Saver$ ClubTM" formerly known as the $9 Fare ClubTM), which is a subscription-based loyalty program that allows members access to unpublished, extra-low fares as well as discounted prices on bags, exclusive offers on hotels, rental cars and other travel necessities. Also in January 2021, the benefits of the Spirit Saver$ ClubTM were expanded to include discounts on seats, shortcut boarding and security, and "Flight Flex" flight modification product.

The Company's frequent flyer program generates customer loyalty by rewarding customers with points to travel on Spirit. Customers earn redeemable points for every dollar spent on Spirit. Customers can also earn points through participating companies such as the co-branded Spirit credit card. Points are redeemable by customers in future periods for air travel on Spirit.

To reflect the points earned, the program includes two types of transactions that are considered revenue arrangements with multiple performance obligations: (1) points earned with travel and (2) points sold to co-branded credit card partner. Passenger ticket sales earning points provide customers with points earned and air transportation. The Company values each performance obligation on a standalone basis.

The Company defers revenue for the points when earned and recognizes loyalty travel awards in passenger revenue as the points are redeemed and services are provided. The Company records the air transportation portion of the passenger ticket sales in air traffic liability and recognizes passenger revenue when transportation is provided or if the ticket goes unused, at the date of scheduled travel.

Customers may earn points based on their spending with the Company's co-branded credit card company with which the Company has an agreement to sell points. The contract to sell points under this agreement has multiple performance obligations, as discussed below.

The Company's co-branded credit card agreement provides for joint marketing where cardholders earn points for making purchases using co-branded cards. During 2020, the Company extended its agreement with the administrator of the FREE SPIRIT affinity credit card program to extend through March 31, 2024. The Company accounts for this agreement consistently with the accounting method that allocates the consideration received to the individual products and services delivered. The value is allocated based on the relative selling prices of those products and services, which generally consists of (i) points to be awarded, (ii) licensing of brand and access to member lists and (iii) advertising and marketing efforts. The Company determined the best estimate of the selling prices by considering discounted cash flow analysis using multiple inputs and assumptions, including: (1) the expected number of points awarded and number of points redeemed, (2) the estimated stand-alone selling price of the award travel obligation, (3) licensing of brand and access to member lists and (4) advertising and marketing efforts. Based on the terms of the new program, the Company updated its estimates of the allocation of future revenues to the performance obligations described above. The Company defers the amount for award travel obligation as part of loyalty deferred revenue within air traffic liability on the consolidated balance sheet and
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recognizes loyalty travel awards in passenger revenue as the points are used for travel. Revenue allocated to the remaining performance obligations, primarily marketing components, is recorded in other revenue over time as points are delivered.

5. Special Credits

During the three months ended March 31, 2021, the Company recorded $156.5 million, net of related costs, within special credits on the Company’s condensed consolidated statements of operations related to the grant component of the PSP2 agreement with the Treasury. These funds were used exclusively to pay for salaries, wages and benefits for the Company's Team Members through March 31, 2021.

In addition, during the three months ended March 31, 2021, the Company recorded $21.3 million related to the CARES Act Employee Retention credit within special credits on the Company’s condensed consolidated statements of operation. These special credits were partially offset by $0.8 million in special charges recorded during the three months ended March 31, 2021. The $0.8 million was related to salaries, wages and benefits paid to rehired employees, previously terminated with the Company's involuntary employee separation program, in compliance with the restrictions of PSP2. Refer to Note 2, Impact of COVID-19, for further information on the CARES Act and the Company 's workforce actions.

During the three months ended March 31, 2020, the Company had no special credits in the condensed consolidated statement of operations.

6. Earnings (Loss) per Share
The following table sets forth the computation of basic and diluted earnings (loss) per common share:
 
 Three Months Ended March 31,
 20212020
(in thousands, except per-share amounts)
Numerator
Net income (loss)$(112,321)$(27,828)
Denominator
Weighted-average shares outstanding, basic97,775 68,521 
Effect of dilutive stock awards  
Adjusted weighted-average shares outstanding, diluted97,775 68,521 
Earnings (loss) per share
Basic earnings (loss) per common share$(1.15)$(0.41)
Diluted earnings (loss) per common share$(1.15)$(0.41)


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7. Short-term Investment Securities

The Company's short-term investment securities are classified as available-for-sale and generally consist of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. These securities are stated at fair value within current assets on the Company's condensed consolidated balance sheets. Realized gains and losses on sales of investments, if any, are reflected in non-operating income (expense) in the condensed consolidated statements of operations.

As of March 31, 2021 and December 31, 2020, the Company had $106.4 million and $106.3 million in short-term available-for-sale investment securities, respectively. During the three months ended March 31, 2021, these investments earned interest income at a weighted-average fixed rate of approximately 0.1%. For the three months ended March 31, 2021, an unrealized gain of $7 thousand, net of deferred taxes of $2 thousand was recorded within accumulated other comprehensive income ("AOCI") related to these investment securities. For the three months ended March 31, 2020, an unrealized gain of $321 thousand, net of deferred taxes of $94 thousand, was recorded within AOCI related to these investment securities. For the three months ended March 31, 2021 and March 31, 2020, the Company had no realized gains or losses as the Company did not sell any of these securities during these periods. As of March 31, 2021 and December 31, 2020, $38 thousand and $31 thousand, net of tax, respectively, remained in AOCI, related to these instruments.

8. Accrued Liabilities
Other current liabilities as of March 31, 2021 and December 31, 2020 consist of the following:
March 31, 2021December 31, 2020
(in thousands)
Salaries, wages and benefits$119,842 $112,838 
Federal excise and other passenger taxes and fees payable102,661 36,884 
Airport obligations71,933 68,677 
Aircraft and facility lease obligations59,575 67,374 
Interest payable33,301 37,202 
Aircraft maintenance30,857 27,466 
Fuel21,493 11,704 
Other34,164 31,469 
Other current liabilities$473,826 $393,614 


9.Leases
The Company leases aircraft, engines, airport terminals, maintenance and training facilities, aircraft hangars, commercial real estate, and office and computer equipment, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, enplaned passengers, and airports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's condensed consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 8 years to 18 years for aircraft and up to 99 years for other leased equipment and property.
As of March 31, 2021, the Company had a fleet consisting of 159 A320 family aircraft. As of March 31, 2021, the Company had 56 aircraft financed under operating leases with lease term expirations between 2023 and 2039. In addition, the Company owned 103 aircraft of which 31 were purchased off lease and were unencumbered as of March 31, 2021. As of March 31, 2021, the Company also had 8 spare engines financed under operating leases with lease term expiration dates ranging from 2023 to 2033 and owned 16 spare engines, all of which, as of March 31, 2021, were pledged as collateral under the Company's revolving credit facility maturing in 2024.
Some of the Company’s aircraft and engine master lease agreements provide that the Company pays maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles, while some maintenance reserve payments are fixed, time-based contractual amounts. Maintenance reserve payments that are probable of being recovered when the Company performs qualifying maintenance are recorded in aircraft maintenance deposits on the Company's condensed consolidated balance sheets. Fixed maintenance reserve payments that are not probable of being recovered are considered lease payments and are included in the right-of-use asset and lease liability. Maintenance reserve payments that are based on a utilization measure and are not probable of being recovered are considered variable lease
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payments that are recognized when they are probable of being incurred and are not included in the right-of-use asset and lease liability.
Some of the master lease agreements do not require that the Company pay maintenance reserves so long as the Company's cash balance does not fall below a certain level. As of March 31, 2021, the Company was in full compliance with those requirements and does not anticipate having to pay reserves related to these master leases in the future.
Aircraft rent expense consists of monthly lease rents for aircraft and spare engines under the terms of the Company's aircraft and spare engine lease agreements recognized on a straight-line basis. Aircraft rent expense also includes maintenance reserves paid to aircraft lessors in advance of the performance of major maintenance activities that are not probable of being reimbursed and probable lease return condition obligations.
Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition) when it is probable that such amounts will be incurred. When determining probability and estimated cost of lease return obligations, there are various other factors that need to be considered such as the contractual terms of the lease, the ability to swap engines or other aircraft components, current condition of the aircraft, the age of the aircraft at lease expiration, utilization of engines and other components, the extent of repairs needed at return, return locations, current configuration of the aircraft and cost of repairs and materials at the time of return. Management assesses the factors listed above and the need to accrue lease return costs throughout the lease as facts and circumstances warrant an assessment. As a result of COVID-19, the Company is currently operating its aircraft at lower utilization levels. If the Company continues flying its aircraft at lower utilization levels beyond its current projections, the timing of future maintenance events may change such that the Company will be required to accrue lease return costs and/or record reserves against its maintenance deposits earlier than it would have expected and such amounts could be significant. The Company expects lease return costs and unrecoverable maintenance deposits will increase as individual aircraft lease agreements approach their respective termination dates and the Company begins to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.
During the three months ended March 31, 2021, the Company took delivery of two aircraft under operating leases and purchased two previously leased aircraft.
As of March 31, 2021, the Company's finance lease obligations primarily relate to the lease of computer equipment used by the Company's flight crew and office equipment. Payments under these finance lease agreements are fixed for terms ranging from 4 to 5 years. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within long-term debt and finance leases in the Company's condensed consolidated balance sheets.
The following table provides details of the Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company's condensed consolidated balance sheets as of March 31, 2021. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
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Finance LeasesOperating Leases
Aircraft and Spare Engine LeasesProperty Facility LeasesTotal
Operating and Finance Lease Obligations
(in thousands)
remainder of 2021 (1) $564 $179,092 $3,704 $183,360 
2022725 212,304 4,671 217,700 
2023349 204,097 3,983 208,429 
202497 182,035 2,819 184,951 
2025 160,411 1,060 161,471 
2026 and thereafter 1,072,555 143,093 1,215,648 
Total minimum lease payments$1,735 $2,010,494 $159,330 $2,171,559 
Less amount representing interest113 589,617 134,283 724,013 
Present value of minimum lease payments$1,622 $1,420,877 $25,047 $1,447,546 
Less current portion673 131,744 3,516 135,933 
Long-term portion$949 $1,289,133 $21,531 $1,311,613 
(1) Includes $19.9 million of aircraft and spare engine rent payment deferrals due to COVID-19 which are recorded in other current liabilities within the Company's condensed consolidated balance sheets.
Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's condensed consolidated balance sheets are expected to be $2.2 million for the remainder of 2021 and none for 2022 and beyond. During 2020, the Company entered into agreements to defer payments in 2020 and early 2021 related to facility rents and other airport service contracts at certain locations. Also during 2020, the Company entered into agreements to defer payments in 2020 and early 2021 related to certain aircraft and engine leases. The Company elected to apply the practical expedient issued by the Financial Accounting Standards Board in April 2020 which allows companies to treat a lease concession related to COVID-19 as though enforceable rights and obligations for the concessions existed regardless of whether those enforceable rights and obligations explicitly exist in the lease agreement. Amounts deferred as of March 31, 2021 are recorded in accrued rent within other current liabilities on the Company's condensed consolidated balance sheet.
The table below presents information for lease costs related to the Company's finance and operating leases:
Three Months Ended March 31,
20212020
(in thousands)
Finance lease cost
Amortization of leased assets$168 $135 
Interest of lease liabilities24 113 
Operating lease cost
Operating lease cost (1)
52,141 47,217 
Short-term lease cost (1)
7,015 3,823 
Variable lease cost (1)
38,149 32,706 
Total lease cost$97,497 $83,994 
(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's condensed consolidated statements of operations.
The table below presents lease terms and discount rates related to the Company's finance and operating leases:
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March 31, 2021March 31, 2020
Weighted-average remaining lease term
Operating leases13.2 years13.1 years
Finance leases2.4 years3.0 years
Weighted-average discount rate
Operating leases6.06 %6.04 %
Finance leases5.52 %6.16 %


10. Commitments and Contingencies
Aircraft-Related Commitments and Financing Arrangements
The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. As of March 31, 2021, the Company's total firm aircraft orders consisted of 126 A320 family aircraft with Airbus, including A319neos, A320neos and A321neos, with deliveries expected through 2027. Out of these 126 aircraft, the Company has 6 aircraft scheduled for delivery in the remainder of 2021 and 17 aircraft scheduled for delivery in 2022. In addition, as of March 31, 2021, the Company has financing agreements in place for 8 direct leases for A320neos with third-party lessors with deliveries scheduled in the remainder of 2021.

The Company also has one spare engine order for a V2500 SelectTwo engine with International Aero Engines ("IAE") and two spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2021 through 2023. As of March 31, 2021, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $380.3 million for the remainder of 2021, $884.5 million in 2022, $908.3 million in 2023, $980.0 million in 2024, $1,066.6 million in 2025, and $2,248.4 million in 2026 and beyond. During the third quarter of 2019, the United States announced its decision to levy tariffs on certain imports from the European Union, including commercial aircraft and related parts. These tariffs include aircraft and other parts that the Company is already contractually obligated to purchase including those reflected above. In February 2020, the rate of this tariff was increased from 10% to 15%. The imposition of these tariffs may substantially increase the cost of new Airbus aircraft and parts required to service the Company's Airbus fleet.

As of March 31, 2021, the Company did not have financing commitments in place for the remaining 126 Airbus aircraft on firm order through 2027. However, the Company has a financing letter of agreement with Airbus which provides backstop financing for a majority of the aircraft included in the A320 NEO Family Purchase Agreement signed in the fourth quarter of 2019. The agreement provides a standby credit facility in the form of senior secured mortgage debt financing.
As of March 31, 2021, aircraft rent commitments for future aircraft deliveries to be financed under direct leases from third-party lessors are expected to be approximately $13.7 million for the remainder of 2021, $29.2 million in 2022, $29.2 million in 2023, $29.2 million in 2024, $29.2 million in 2025, and $220.3 million in 2026 and beyond.
Interest commitments related to the secured debt financing of 72 delivered aircraft as of March 31, 2021 are $59.4 million for the remainder of 2021, $71.7 million in 2022, $61.0 million in 2023, $49.8 million in 2024, $42.4 million in 2025, and $96.1 million in 2026 and beyond. As of March 31, 2021, interest commitments related to the Company's 8.00% senior secured notes, convertible debt financing, unsecured term loans and revolving credit facility are $60.1 million for the remainder of 2021, $77.3 million in 2022, $77.3 million in 2023, $77.3 million in 2024, $68.2 million in 2025, and $11.8 million in 2026 and beyond. For principal commitments related to the Company's debt financing, refer to Note 12, Debt and Other Obligations.
The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system and other miscellaneous subscriptions and services as of March 31, 2021: $20.7 million for the remainder of 2021, $21.4 million in 2022, $18.9 million in 2023, $16.1 million in 2024, $16.7 million in 2025, and $35.6 million in 2026 and thereafter. During the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in 2028.
 
Litigation
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The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations.
Credit Card Processing Arrangements
The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage charges, and other ancillary services by customers. As is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations.
The Company's credit card processors do not require the Company to maintain cash collateral provided that the Company satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to place a holdback resulting in a commensurate reduction of unrestricted cash. As of March 31, 2021 and December 31, 2020, the Company's credit card processors were holding back no remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and Spirit Saver$ ClubTM memberships as of March 31, 2021 and December 31, 2020, was $600.9 million and $423.7 million, respectively.
Employees
The Company has 5 union-represented employee groups that together represented approximately 82% of all employees as of March 31, 2021. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of March 31, 2021.
Employee GroupsRepresentativeAmendable DatePercentage of Workforce
PilotsAir Line Pilots Association, International ("ALPA")February 202329%
Flight AttendantsAssociation of Flight Attendants ("AFA-CWA")September 202146%
DispatchersProfessional Airline Flight Control Association ("PAFCA")October 20231%
Ramp Service AgentsInternational Association of Machinists and Aerospace Workers ("IAMAW")June 20203%
Passenger Service AgentsTransport Workers Union of America ("TWU")NA3%

In February 2020, the IAMAW notified the Company, as required by the Railway Labor Act, that it intends to submit proposed changes to the collective bargaining agreement covering the Company's ramp service agents which became amendable in June 2020. The parties expect to schedule meeting dates for negotiations soon.
    
The Company's passenger service agents are represented by the TWU, but the representation applies only to the Company's Fort Lauderdale station where the Company has direct employees in the passenger service classification. The Company and the TWU began meeting in late October 2018 to negotiate an initial collective bargaining agreement. As of March 31, 2021, the Company continued to negotiate with the TWU.

In February 2021, the Company entered into a Letter of Agreement with the AFA-CWA to change the amendable date of the collective bargaining agreement from May 4, 2021 to September 1, 2021. All other terms of the collective bargaining agreement remain the same.

11.Fair Value Measurements
Under ASC 820, "Fair Value Measurements and Disclosures," disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
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Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities.
Long-Term Debt
The estimated fair value of the Company's secured notes, term loan debt agreements and revolving credit facilities have been determined to be Level 3 as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes a discounted cash flow method to estimate the fair value of the Level 3 long-term debt. The estimated fair value of the Company's publicly and non-publicly held EETC debt agreements and the Company's convertible notes has been determined to be Level 2 as the Company utilizes quoted market prices in markets with low trading volumes to estimate the fair value of its Level 2 long-term debt.
    The carrying amounts and estimated fair values of the Company's long-term debt at March 31, 2021 and December 31, 2020 were as follows:
March 31, 2021December 31, 2020Fair Value Level Hierarchy
 Carrying ValueEstimated Fair ValueCarrying ValueEstimated Fair Value
(in millions)
8.00% senior secured notes
$850.0 $881.8 $850.0 $886.0 Level 3
Fixed-rate term loans1,272.9 1,303.2 1,301.9 1,362.9 Level 3
Unsecured term loans98.7 105.5 73.3 83.1 Level 3
2015-1 EETC Class A 322.6 323.4 322.6 323.4 Level 2
2015-1 EETC Class B 64.0 63.8 64.0 62.5 Level 2
2015-1 EETC Class C86.6 81.7 86.6 77.8 Level 2
2017-1 EETC Class AA207.3 207.9 214.4 207.4 Level 2
2017-1 EETC Class A69.1 67.2 71.5 68.8 Level 2
2017-1 EETC Class B58.2 56.2 60.6 56.2 Level 2
2017-1 EETC Class C85.5 79.9 85.5 76.3 Level 2
Convertible debt175.0 538.2 175.0 380.3 Level 2
Revolving credit facilities180.0 180.0 275.1 275.1 Level 3
Total long-term debt$3,469.9 $3,888.8 $3,580.5 $3,859.9 

Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2021 and December 31, 2020 are comprised of liquid money market funds and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions.
Restricted Cash

Restricted cash is comprised of cash held in account subject to account control agreements or otherwise pledged as collateral against the Company's letters of credit and is categorized as a Level 1 instrument. As of March 31, 2021, the Company had a $30.0 million standby letter of credit secured by restricted cash, of which $24.4 million had been drawn upon for issued letters of credit. In addition, the Company had $34.0 million of restricted cash held in accounts subject to control agreements to be used for the payment of interest and fees on the 8.00% senior secured notes.
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Short-term Investment Securities

Short-term investment securities at March 31, 2021 and December 31, 2020 are classified as available-for-sale and generally consist of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. The Company's short-term investment securities are categorized as Level 1 instruments, as the Company uses quoted market prices in active markets when determining the fair value of these securities. For additional information, refer to Note 7, Short-term Investment Securities.

Assets Held for Sale

The Company's assets held for sale consist of rotable aircraft parts. When long-lived assets are identified as held for sale and the required criteria are met, the Company reclassifies the assets from property and equipment to prepaid expenses and other current assets on the Company's condensed consolidated balance sheets and discontinues depreciation. The assets are measured at the lower of the carrying amount or fair value less cost to sell and a loss is recognized for any initial adjustment of the asset’s carrying amount to fair value less cost to sell. Such valuations include estimations of fair values and incremental direct costs to transact a sale. The fair value measurements for the Company's held-for-sale assets were based on Level 3 inputs, which include information obtained from third-party valuation sources. As of March 31, 2021 and December 31, 2020, the Company had $2.3 million in assets held for sale recorded within prepaid expenses and other current assets in the Company's condensed consolidated balance sheets. The balance of the Company's held-for-sale assets remained the same during the three months ended March 31, 2021, as the Company had no purchases, sales nor realized and unrealized losses or gains related to these assets during this period.
    Assets and liabilities measured at gross fair value on a recurring basis are summarized below:
 Fair Value Measurements as of March 31, 2021
 TotalLevel
1
Level
2
Level
3
(in millions)
Cash and cash equivalents$1,774.5 $1,774.5 $ $ 
Restricted cash64.0 64.0   
Short-term investment securities106.4 106.4   
Assets held for sale2.3   2.3 
Total assets$1,947.2 $1,944.9 $ $2.3 
Total liabilities$ $ $ $ 

 Fair Value Measurements as of December 31, 2020
 TotalLevel
1
Level
2
Level
3
(in millions)
Cash and cash equivalents$1,789.7 $1,789.7 $ $ 
Restricted cash71.4 71.4   
Short-term investment securities106.3 106.3