Leases

12 Months Ended

Dec. 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 leases 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 consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 4 to 18 years for aircraft and spare engines and up to 99 years for other leased equipment and property.

The filing of the Chapter 11 Cases on August 29, 2025 may have triggered an event of default under certain lease agreements of the Company, subject to the automatic stay resulting from the Chapter 11 Cases and other applicable provisions of the Bankruptcy Code. For additional information on the Company's 2025 Bankruptcy proceedings and its related automatic stay and other protections, refer to Note 3, 2025 Chapter 11 Bankruptcy Proceedings.

During the Successor Period, the Company took delivery of one aircraft under sale leaseback transaction and one under direct operating lease. During the Current Predecessor Period, the Company took delivery of two aircraft under sale leaseback transaction. In addition, earlier in the third quarter of 2025, the Company completed sale leaseback transactions involving 14 previously owned spare engines, which resulted in operating leases.

As of December 31, 2025, the Company had a fleet consisting of 131 A320 family aircraft. As of December 31, 2025, the Company had 70 aircraft financed under operating leases with lease term expirations between 2026 and 2043. In addition, the Company owned 48 aircraft, of which none were unencumbered, as of December 31, 2025. The Company also had 13 aircraft that would have been deemed finance leases resulting in failed sale leaseback transactions. The related finance obligation is recorded within liabilities subject to compromise in the Company's consolidated balance sheets. Refer to Note 14, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment in the Company's consolidated balance sheets. As of December 31, 2025, the Company also had 16 spare engines financed under operating leases with lease term expiration dates ranging from 2031 to 2037 and owned 18 spare engines, all of which are encumbered, as of December 31, 2025.

As of December 31, 2025, as part of the 2025 Chapter 11 Cases, the Company had rejected the lease agreements related to 83 aircraft and 3 engines. Refer to Note 1, Summary of Significant Accounting Policies for additional information on the aircraft lease agreements rejected during the Successor Period.

As of December 31, 2025, as part of the 2025 Chapter 11 Cases, all aircraft and spare engine leases arising from lease contracts entered into prior to the Petition Date have been classified as liabilities subject to compromise, regardless of whether such leases have been assumed, or are subject to agreements under Section 1110(a) or 1110(b) of the Bankruptcy Code. Accordingly, as of December 31, 2025, the related operating lease liabilities have been reclassified to liabilities subject to compromise on the Company’s consolidated balance sheets, as appropriate under the 2025 Bankruptcy proceedings. Refer to Note 1, Summary of Significant Accounting Policies and Note 3, 2025 Chapter 11 Bankruptcy Proceedings, for additional information.

Total rent expense for the Successor Period and Current Predecessor Period was $652.6 million and $180.4 million, respectively. Total rent expense for the years ended 2024 and 2023 was $855.5 million and $673.2 million, respectively.

Total rent expense for aircraft and engine operating leases for the Successor Period and Current Predecessor Period was $428.3 million and $120.2 million, respectively. Total rent expense for aircraft and engine operating leases for the years ended December 31, 2024 and 2023 was $541.9 million and $381.2 million, respectively.

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.

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, lease return costs adjustments for aircraft and engines purchased off lease or lease extensions or amendments. The Company expensed $17.2 million, $7.7 million, $36.2 million and $14.0 million of supplemental rent recorded within aircraft rent during the Successor Period, the Current Predecessor Period, 2024 and 2023, respectively.

Under Topic 842, gains and losses on sale leaseback transactions, subject to adjustment for off-market terms, are recognized immediately and recorded within loss (gain) on disposal of assets on the Company's consolidated statements of operations. Refer to Note 7, Loss (Gain) on Disposal of Assets for additional information on the losses (gains) recorded related to the sale leaseback transactions entered into during the Successor Period, the Current Predecessor Period, 2024 and 2023.

As of December 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 within liabilities subject to compromise in the Company's consolidated balance sheets. Lease liabilities and operating lease liabilities related to pre-petition obligations which may be an allowed claim are recorded within liabilities subject to compromise.

The Company has a 99-year lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where the Company built its new headquarters campus and a 200-unit residential building. This operating lease is recorded within right-of-use assets and the related liability within liabilities subject to compromise on the Company's consolidated balance sheets. Operating lease commitments related to this lease are included in the table below within property facility leases.

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 consolidated balance sheets as of December 31, 2025. The table does not include commitments that are contingent on events or other factors that are currently uncertain and unknown.

	Finance Leases		Operating Leases				Total Operating and Finance Lease Obligations
			Aircraft and Spare Engine Leases		Property Facility Leases
	(in thousands)
2026	$	141	$	266,608	$	4,894	$	271,643
2027	93		250,552		4,140		254,785
2028	67		231,639		2,757		234,463
2029	5		226,356		2,132		228,493
2030	—		214,366		1,513		215,879
2031 and thereafter	—		2,168,914		140,124		2,309,038
Total minimum lease payments	$	306	$	3,358,435	$	155,560	$	3,514,301
Less amount representing interest	26		1,385,410		133,651		1,519,087
Present value of minimum lease payments	$	280	$	1,973,025	$	21,909	$	1,995,214
Less current portion (1)	127		118,273		4,282		122,682
Long-term portion (1)	$	153	$	1,854,752	$	17,627	$	1,872,532

(1) Certain of the Company's lease obligations are included within liabilities subject to compromise on the Company's consolidated balance sheets and may be settled at an amount lower than the contractually future minimum lease payments; therefore, operating lease liability balances included within this table will differ from the operating lease liability balances included within the Company's consolidated balance sheets.

Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's consolidated balance sheets are expected to be $2.5 million for 2026 and none for 2027 and beyond.

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

	Successor		Predecessor
	Period from March 13, 2025 through December 31, 2025		Period from January 1, 2025 through March 12, 2025		Twelve Months Ended December 31, 2024
	(in thousands)
Finance lease cost
Amortization of leased assets	$	183	$	38	$	277
Interest of lease liabilities	19		5		33
Operating lease cost
Operating lease cost (1)	423,031		114,508		517,016
Short-term lease cost (1)	22,789		5,574		37,294
Variable lease cost (1)	189,232		55,750		272,087
Total lease cost	$	635,254	$	175,875	$	826,707

(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's consolidated statements of operations.

The table below presents lease-related terms and discount rates as of December 31, 2025:

	Successor		Predecessor
	December 31, 2025		December 31, 2024
Weighted-average remaining lease term
Operating leases	21.0 years		15.1 years
Finance leases	2.4 years		2.9 years
Weighted-average discount rate
Operating leases	7.81	%	7.11	%
Finance leases	6.64	%	5.91	%

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 leases 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 consolidated balance sheets as a right-of-use asset and lease liability. Lease terms are generally 4 to 18 years for aircraft and spare engines and up to 99 years for other leased equipment and property.

The filing of the Chapter 11 Cases on August 29, 2025 may have triggered an event of default under certain lease agreements of the Company, subject to the automatic stay resulting from the Chapter 11 Cases and other applicable provisions of the Bankruptcy Code. For additional information on the Company's 2025 Bankruptcy proceedings and its related automatic stay and other protections, refer to Note 3, 2025 Chapter 11 Bankruptcy Proceedings.

During the Successor Period, the Company took delivery of one aircraft under sale leaseback transaction and one under direct operating lease. During the Current Predecessor Period, the Company took delivery of two aircraft under sale leaseback transaction. In addition, earlier in the third quarter of 2025, the Company completed sale leaseback transactions involving 14 previously owned spare engines, which resulted in operating leases.

As of December 31, 2025, the Company had a fleet consisting of 131 A320 family aircraft. As of December 31, 2025, the Company had 70 aircraft financed under operating leases with lease term expirations between 2026 and 2043. In addition, the Company owned 48 aircraft, of which none were unencumbered, as of December 31, 2025. The Company also had 13 aircraft that would have been deemed finance leases resulting in failed sale leaseback transactions. The related finance obligation is recorded within liabilities subject to compromise in the Company's consolidated balance sheets. Refer to Note 14, Debt and Other Obligations for additional information. The related asset is recorded within flight equipment in the Company's consolidated balance sheets. As of December 31, 2025, the Company also had 16 spare engines financed under operating leases with lease term expiration dates ranging from 2031 to 2037 and owned 18 spare engines, all of which are encumbered, as of December 31, 2025.

As of December 31, 2025, as part of the 2025 Chapter 11 Cases, the Company had rejected the lease agreements related to 83 aircraft and 3 engines. Refer to Note 1, Summary of Significant Accounting Policies for additional information on the aircraft lease agreements rejected during the Successor Period.

As of December 31, 2025, as part of the 2025 Chapter 11 Cases, all aircraft and spare engine leases arising from lease contracts entered into prior to the Petition Date have been classified as liabilities subject to compromise, regardless of whether such leases have been assumed, or are subject to agreements under Section 1110(a) or 1110(b) of the Bankruptcy Code. Accordingly, as of December 31, 2025, the related operating lease liabilities have been reclassified to liabilities subject to compromise on the Company’s consolidated balance sheets, as appropriate under the 2025 Bankruptcy proceedings. Refer to Note 1, Summary of Significant Accounting Policies and Note 3, 2025 Chapter 11 Bankruptcy Proceedings, for additional information.

Total rent expense for the Successor Period and Current Predecessor Period was $652.6 million and $180.4 million, respectively. Total rent expense for the years ended 2024 and 2023 was $855.5 million and $673.2 million, respectively.

Total rent expense for aircraft and engine operating leases for the Successor Period and Current Predecessor Period was $428.3 million and $120.2 million, respectively. Total rent expense for aircraft and engine operating leases for the years ended December 31, 2024 and 2023 was $541.9 million and $381.2 million, respectively.

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.

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, lease return costs adjustments for aircraft and engines purchased off lease or lease extensions or amendments. The Company expensed $17.2 million, $7.7 million, $36.2 million and $14.0 million of supplemental rent recorded within aircraft rent during the Successor Period, the Current Predecessor Period, 2024 and 2023, respectively.

Under Topic 842, gains and losses on sale leaseback transactions, subject to adjustment for off-market terms, are recognized immediately and recorded within loss (gain) on disposal of assets on the Company's consolidated statements of operations. Refer to Note 7, Loss (Gain) on Disposal of Assets for additional information on the losses (gains) recorded related to the sale leaseback transactions entered into during the Successor Period, the Current Predecessor Period, 2024 and 2023.

As of December 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 within liabilities subject to compromise in the Company's consolidated balance sheets. Lease liabilities and operating lease liabilities related to pre-petition obligations which may be an allowed claim are recorded within liabilities subject to compromise.

The Company has a 99-year lease agreement for the lease of a 2.6-acre parcel of land, in Dania Beach, Florida, where the Company built its new headquarters campus and a 200-unit residential building. This operating lease is recorded within right-of-use assets and the related liability within liabilities subject to compromise on the Company's consolidated balance sheets. Operating lease commitments related to this lease are included in the table below within property facility leases.

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 consolidated balance sheets as of December 31, 2025. The table does not include commitments that are contingent on events or other factors that are currently uncertain and unknown.

	Finance Leases		Operating Leases				Total Operating and Finance Lease Obligations
			Aircraft and Spare Engine Leases		Property Facility Leases
	(in thousands)
2026	$	141	$	266,608	$	4,894	$	271,643
2027	93		250,552		4,140		254,785
2028	67		231,639		2,757		234,463
2029	5		226,356		2,132		228,493
2030	—		214,366		1,513		215,879
2031 and thereafter	—		2,168,914		140,124		2,309,038
Total minimum lease payments	$	306	$	3,358,435	$	155,560	$	3,514,301
Less amount representing interest	26		1,385,410		133,651		1,519,087
Present value of minimum lease payments	$	280	$	1,973,025	$	21,909	$	1,995,214
Less current portion (1)	127		118,273		4,282		122,682
Long-term portion (1)	$	153	$	1,854,752	$	17,627	$	1,872,532

(1) Certain of the Company's lease obligations are included within liabilities subject to compromise on the Company's consolidated balance sheets and may be settled at an amount lower than the contractually future minimum lease payments; therefore, operating lease liability balances included within this table will differ from the operating lease liability balances included within the Company's consolidated balance sheets.

Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's consolidated balance sheets are expected to be $2.5 million for 2026 and none for 2027 and beyond.

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

	Successor		Predecessor
	Period from March 13, 2025 through December 31, 2025		Period from January 1, 2025 through March 12, 2025		Twelve Months Ended December 31, 2024
	(in thousands)
Finance lease cost
Amortization of leased assets	$	183	$	38	$	277
Interest of lease liabilities	19		5		33
Operating lease cost
Operating lease cost (1)	423,031		114,508		517,016
Short-term lease cost (1)	22,789		5,574		37,294
Variable lease cost (1)	189,232		55,750		272,087
Total lease cost	$	635,254	$	175,875	$	826,707

(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's consolidated statements of operations.

The table below presents lease-related terms and discount rates as of December 31, 2025:

	Successor		Predecessor
	December 31, 2025		December 31, 2024
Weighted-average remaining lease term
Operating leases	21.0 years		15.1 years
Finance leases	2.4 years		2.9 years
Weighted-average discount rate
Operating leases	7.81	%	7.11	%
Finance leases	6.64	%	5.91	%