Leases

3 Months Ended

Mar. 31, 2025

Leases [Abstract]

Leases

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.

During the three months ended March 31, 2025, the Company took delivery of 2 aircraft under sale leaseback transactions. As of March 31, 2025, the Company had a fleet consisting of 213 A320 family aircraft. As of March 31, 2025, the Company had 146 aircraft financed under operating leases with lease term expirations between 2026 and 2043. In addition, the Company owned 49 aircraft, of which none were unencumbered, as of March 31, 2025. The Company also had 18 aircraft that would have been deemed finance leases resulting in failed sale leaseback transactions. The related finance obligation is recorded within long-term debt in the Company's condensed consolidated balance sheets. Refer to Note 15, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment in the Company's condensed consolidated balance sheets. As of March 31, 2025, the Company also had 5 spare engines financed under operating leases with lease term expiration dates ranging from 2025 to 2033 and owned 32 spare engines, of which, none were unencumbered, as of March 31, 2025.

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. Supplemental rent, recorded within aircraft rent expense, is primarily made up of probable and estimable return condition obligations and lease return cost adjustments related to lease modifications and aircraft and engines purchased off lease.

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. The Company expects lease return costs 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.

As of March 31, 2025, the Company's finance lease obligations primarily related to the lease of office equipment. Payments under these finance lease agreements are generally fixed for terms of five 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 Successor'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, 2025. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

	Finance Leases		Operating Leases
			Aircraft and Spare Engine Leases		Property Facility Leases		Total Operating and Finance Lease Obligations
	(in thousands)
Remainder of 2025	$	164	$	429,375	$	3,642	$	433,181
2026	141		548,939		4,939		554,019
2027	93		532,986		4,140		537,219
2028	67		512,213		2,757		515,037
2029	5		497,001		2,132		499,138
2030 and thereafter	—		4,977,974		141,637		5,119,611
Total minimum lease payments	$	470	$	7,498,488	$	159,247	$	7,658,205
Less amount representing interest	43		3,083,794		135,243		3,219,080
Present value of minimum lease payments	$	427	$	4,414,694	$	24,004	$	4,439,125
Less current portion	196		234,560		4,125		238,881
Long-term portion	$	231	$	4,180,134	$	19,879	$	4,200,244

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 $2.5 million for the remainder of 2025 and none for 2026 and beyond.

The table below presents information for lease costs related to the Successor and Predecessor's finance and operating leases:

	Successor		Predecessor
	Period from March 13, 2025 through March 31, 2025		Period from January 1, 2025 through March 12, 2025		Three Months Ended March 31, 2024
	(in thousands)
Finance lease cost
Amortization of leased assets	$	10	$	38	$	75
Interest of lease liabilities	2		5		8
Operating lease cost
Operating lease cost (1)	29,670		114,508		117,163
Short-term lease cost (1)	1,457		5,574		10,162
Variable lease cost (1)	15,428		55,750		54,900
Total lease cost	$	46,567	$	175,875	$	182,308

(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:

	Successor		Predecessor
	March 31, 2025		March 31, 2024
Weighted-average remaining lease term
Operating leases	15.0 years		14.9 years
Finance leases	2.8 years		3.2 years
Weighted-average discount rate
Operating leases	7.55	%	6.98	%
Finance leases	6.00	%	5.49	%

Leases

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.

During the three months ended March 31, 2025, the Company took delivery of 2 aircraft under sale leaseback transactions. As of March 31, 2025, the Company had a fleet consisting of 213 A320 family aircraft. As of March 31, 2025, the Company had 146 aircraft financed under operating leases with lease term expirations between 2026 and 2043. In addition, the Company owned 49 aircraft, of which none were unencumbered, as of March 31, 2025. The Company also had 18 aircraft that would have been deemed finance leases resulting in failed sale leaseback transactions. The related finance obligation is recorded within long-term debt in the Company's condensed consolidated balance sheets. Refer to Note 15, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment in the Company's condensed consolidated balance sheets. As of March 31, 2025, the Company also had 5 spare engines financed under operating leases with lease term expiration dates ranging from 2025 to 2033 and owned 32 spare engines, of which, none were unencumbered, as of March 31, 2025.

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. Supplemental rent, recorded within aircraft rent expense, is primarily made up of probable and estimable return condition obligations and lease return cost adjustments related to lease modifications and aircraft and engines purchased off lease.

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. The Company expects lease return costs 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.

As of March 31, 2025, the Company's finance lease obligations primarily related to the lease of office equipment. Payments under these finance lease agreements are generally fixed for terms of five 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 Successor'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, 2025. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

	Finance Leases		Operating Leases
			Aircraft and Spare Engine Leases		Property Facility Leases		Total Operating and Finance Lease Obligations
	(in thousands)
Remainder of 2025	$	164	$	429,375	$	3,642	$	433,181
2026	141		548,939		4,939		554,019
2027	93		532,986		4,140		537,219
2028	67		512,213		2,757		515,037
2029	5		497,001		2,132		499,138
2030 and thereafter	—		4,977,974		141,637		5,119,611
Total minimum lease payments	$	470	$	7,498,488	$	159,247	$	7,658,205
Less amount representing interest	43		3,083,794		135,243		3,219,080
Present value of minimum lease payments	$	427	$	4,414,694	$	24,004	$	4,439,125
Less current portion	196		234,560		4,125		238,881
Long-term portion	$	231	$	4,180,134	$	19,879	$	4,200,244

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 $2.5 million for the remainder of 2025 and none for 2026 and beyond.

The table below presents information for lease costs related to the Successor and Predecessor's finance and operating leases:

	Successor		Predecessor
	Period from March 13, 2025 through March 31, 2025		Period from January 1, 2025 through March 12, 2025		Three Months Ended March 31, 2024
	(in thousands)
Finance lease cost
Amortization of leased assets	$	10	$	38	$	75
Interest of lease liabilities	2		5		8
Operating lease cost
Operating lease cost (1)	29,670		114,508		117,163
Short-term lease cost (1)	1,457		5,574		10,162
Variable lease cost (1)	15,428		55,750		54,900
Total lease cost	$	46,567	$	175,875	$	182,308

(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:

	Successor		Predecessor
	March 31, 2025		March 31, 2024
Weighted-average remaining lease term
Operating leases	15.0 years		14.9 years
Finance leases	2.8 years		3.2 years
Weighted-average discount rate
Operating leases	7.55	%	6.98	%
Finance leases	6.00	%	5.49	%