Debt and Other Obligations

9 Months Ended

Sep. 30, 2022

As of September 30, 2022, the Company had outstanding public and non-public debt instruments.

Revolving credit facility due in 2024

As of September 30, 2022 and December 31, 2021, the Company had a $240.0 million revolving credit facility which was undrawn and available. Any amounts drawn on this facility are included in long-term debt and finance leases, less current maturities on the Company's condensed consolidated balance sheets. This facility matures on March 30, 2024.

Convertible senior notes due 2025

On May 12, 2020, the Company completed the public offering of $175.0 million aggregate principal amount of 4.75% convertible senior notes due 2025 ("convertible notes due 2025").

Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; and (4) at any time from, and including, February 18, 2025 until the close of business on the second scheduled trading day immediately before the maturity date. As of September 30, 2022, the notes may be converted by noteholders through December 31, 2022.

Based on the terms of the indenture, upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election. However, based on the terms of the Frontier Merger Agreement executed on February 5, 2022 (the Frontier Merger Agreement date), upon conversion of any convertible notes due 2025 through the closing or termination of the Frontier Merger, the conversion value, including the principal amount, were to be paid all in shares of the Company's common stock. On July 27, 2022, the Frontier Merger Agreement was terminated; however, on July 28, 2022, the Company entered into the Merger Agreement with JetBlue. Based on the terms of the Merger Agreement with JetBlue, upon conversion of any convertible notes due 2025 through the closing or termination of the Merger Agreement with JetBlue, the conversion value, including the principal amount, will be paid all in shares of the Company's common stock. The initial conversion rate is 78.4314 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to an initial conversion price of approximately $12.75 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

During the second quarter of 2022, $2.8 million of the Company's convertible notes due 2025 were converted to 217,226 shares of the Company's voting common stock. As of September 30, 2022, the Company had recorded $2.7 million, net of issuance costs and common stock, in additional paid-in-capital on its condensed consolidated balance sheets as of September 30, 2022 related to the conversion of these notes. Since the notes are currently convertible in accordance with the terms of the indenture governing such notes, the Company had $25.4 million recorded within current maturities of long-term debt and finance leases on its condensed consolidated balance sheets as of September 30, 2022 related to its convertible notes due 2025. As of September 30, 2022, the if-converted value exceeds the principal amount of the convertible notes due 2025 by $21.4 million and $20.1 million using the average stock price for the three and nine months ended September 30, 2022, respectively.

Convertible senior notes due 2026

On April 30, 2021, the Company completed the public offering of $500.0 million aggregate principal amount of 1.00% convertible senior notes due 2026 ("convertible notes due 2026").

Noteholders may convert their notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (4) if the Company calls such notes for redemption; and (5) at any time from, and including, February 17, 2026 until the close of business on the second scheduled trading day immediately before the maturity date. As of September 30, 2022, the notes did not qualify for conversion by noteholders through December 31, 2022.

Based on the terms of the indenture, the Company will have the right to elect to settle conversions in cash, shares of the Company’s common stock or a combination of cash and shares of common stock. Upon conversion of any notes, the Company will pay the conversion value in cash up to at least the principal amount of the notes being converted. However, based on the terms of the Frontier Merger Agreement executed on February 5, 2022 (the Frontier Merger Agreement date), upon conversion of any convertible notes due 2026 through the closing or termination of the Frontier Merger, the conversion value, including the principal amount, were to be paid all in cash. On July 27, 2022, the Frontier Merger Agreement was terminated; however, on July 28, 2022, the Company entered into the Merger Agreement with JetBlue. Based on the terms of the Merger Agreement with JetBlue, upon conversion of any convertible notes due 2026 through the closing or termination of the Merger Agreement with JetBlue, the conversion value, including the principal amount, will be paid all in cash. The conversion value will be determined over an observation period consisting of 40 trading days. The initial conversion rate is 20.3791 shares of voting common stock per $1,000 principal amount of convertible notes (equivalent to an initial conversion price of approximately $49.07 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

The notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after May 15, 2024 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price for a specified period of time. However, the Company may not redeem less than all of the outstanding notes unless at least $150.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice.

The Frontier Merger Agreement and the Merger Agreement with JetBlue include settlement terms for any conversion of the convertible notes due 2026, as described above, that cause the conversion option, which is an embedded derivative, not to qualify for the derivative accounting scope exception provided under ASC 815. As such, the Company bifurcated the fair value of the conversion option of the convertible senior notes due 2026 as a derivative liability with subsequent changes in fair value recorded in earnings. As of February 5, 2022, which is the date the terms of the convertible notes were modified by the Frontier Merger Agreement, the Company recorded the fair value of the embedded derivative of $49.5 million as a derivative liability within deferred gains and other long-term liabilities and a debt discount within long-term debt and finance leases, less current maturities on its condensed consolidated balance sheets. The debt discount will continue to be amortized through interest expense, using the effective interest rate method, over the remaining life of the instrument. The fair value of the conversion

option did not materially change upon the termination of the Frontier Merger Agreement on July 27, 2022 and the execution of the Merger Agreement with JetBlue on July 28, 2022.

Since the notes are currently not convertible in accordance with the terms of the indenture governing such notes, the Company had $460.7 million, net of the related unamortized debt discount of $39.3 million, recorded within long-term debt and finance leases, less current maturities on the Company's condensed consolidated balance sheets as of September 30, 2022 related to its convertible notes due 2026. For additional information, refer to Note 11, Fair Value Measurements.

Long-term debt is comprised of the following:


	As of				As of
	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
	(in millions)				(weighted-average interest rates)
8.00% senior secured notes due 2025	$	510.0	$	510.0	8.00	%	8.00	%
Fixed-rate loans due through 2039 (1)	1,127.3		1,223.5		3.52	%	3.52	%
Unsecured term loans due in 2031	136.3		136.3		1.00	%	1.00	%
Fixed-rate class A 2015-1 EETC due through 2028	289.6		300.6		4.10	%	4.10	%
Fixed-rate class B 2015-1 EETC due through 2024	52.0		56.0		4.45	%	4.45	%
Fixed-rate class C 2015-1 EETC due through 2023	69.5		75.2		4.93	%	4.93	%
Fixed-rate class AA 2017-1 EETC due through 2030	186.3		200.3		3.38	%	3.38	%
Fixed-rate class A 2017-1 EETC due through 2030	62.1		66.8		3.65	%	3.65	%
Fixed-rate class B 2017-1 EETC due through 2026	51.7		55.8		3.80	%	3.80	%
Fixed-rate class C 2017-1 EETC due through 2023	85.5		85.5		5.11	%	5.11	%
Convertible notes due 2025	25.4		28.2		4.75	%	4.75	%
Convertible notes due 2026	500.0		500.0		1.00	%	1.00	%


Long-term debt	$	3,095.7	$	3,238.2
Less current maturities	353.4		208.2
Less unamortized discounts, net	84.7		54.9
Total	$	2,657.6	$	2,975.1

(1) Includes obligations related to one aircraft recorded as a failed sale leaseback. Refer to Note 9, Leases for additional information.

During the three and nine months ended September 30, 2022, the Company made scheduled principal payments of $43.0 million and $139.8 million, respectively, on its outstanding debt obligations. During the three and nine months ended September 30, 2021, the Company made scheduled principal payments of $45.6 million and $416.3 million, respectively, on its outstanding debt obligations.

At September 30, 2022, long-term debt principal payments for the next five years and thereafter were as follows:


	September 30, 2022
	(in millions)
remainder of 2022	$	53.4
2023	336.6
2024	222.1
2025	723.8
2026	731.1
2027 and beyond	1,028.7
Total debt principal payments	$	3,095.7

Interest Expense

Interest expense related to long-term debt and finance leases consists of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
8.00% senior secured notes (1)	$	10,461	$	10,461	31,382		$	41,436
Fixed-rate term loans	10,273		10,522		31,442		32,171
Unsecured term loans	344		344		1,020		824
Class A 2015-1 EETC	2,985		3,212		8,986		9,665
Class B 2015-1 EETC	581		671		1,772		2,039
Class C 2015-1 EETC	856		997		2,629		3,051
Class AA 2017-1 EETC	1,615		1,734		4,893		5,248
Class A 2017-1 EETC	582		625		1,764		1,892
Class B 2017-1 EETC	503		546		1,525		1,659
Class C 2017-1 EETC	1,104		1,104		3,275		3,275
Convertible notes (2)	(9,641)		1,585		(9,442)		5,412
Revolving credit facilities	—		—		—		1,733
Finance leases	13		23		47		72
Commitment and other fees	830		612		1,785		1,644
Amortization of deferred financing costs	3,202		3,273		10,634		10,056

Total	$	23,708	$	35,709	$	91,712	$	120,177

(1) Includes $0.3 million and $0.8 million of accretion and $10.2 million and $30.6 million of interest expense for the three and nine months ended September 30, 2022, respectively. Includes $0.3 million and $1.0 million of accretion and $10.2 million and $40.4 million of interest expense for the three and nine months ended September 30, 2021, respectively.

(2) Includes $3.8 million and $10.2 million of amortization of the discount for the convertible notes due 2026, $1.6 million and $4.7 million of interest expense for the convertible notes due 2025 and 2026 offset by $15.0 million and $24.3 million of favorable mark to market adjustments for the convertible notes due 2026 for the three and nine months ended September 30, 2022, respectively. Includes $1.6 million and $5.4 million of interest expense for the convertible notes due 2025 and 2026 for the three and nine months ended September 30, 2021, respectively.