As further discussed in Note 1, Summary of Significant Accounting Policies, on the Petition Date, the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by the Debtors, as well as most litigation pending against the Debtors as of the Petition Date, are generally subject to an automatic stay. However, under the Bankruptcy Code, certain legal proceedings, such as those involving the assertion of a governmental entity’s police or regulatory powers, may not be subject to the automatic stay and may continue unless otherwise ordered by the Bankruptcy Court. As a result, some proceedings may continue (or certain parties may attempt to argue that such proceedings should continue) notwithstanding the automatic stay.

As of December 31, 2025, purchase commitments for the Company's engine orders, including estimated amounts for contractual price escalations and pre-delivery payments, were expected to be $3.4 million in 2026, $60.5 million in 2027, $52.5 million in 2028 and none in 2029 and beyond. These commitments primarily relate to the 10 PW1100G-JM spare engines with deliveries through 2028 from the Company's Engine Purchase Support Agreements.

The Company previously had agreements in place for 36 A320neos and A321neos to be financed through direct leases with a third-party lessor with deliveries scheduled in 2027 and 2028. However, on October 10, 2025, pursuant to the global restructuring term sheet with AerCap, these 36 direct leases were canceled, and the Company agreed to enter into 30 new post-petition leases, for which definitive agreements had not yet been executed as of December 31, 2025. Refer to Note 3, 2025 Chapter 11 Bankruptcy Proceedings for additional information. As of December 31, 2025, the Company had not executed any new lease agreements and therefore, did not have any aircraft rent commitments for future aircraft deliveries.

During the third quarter of 2021, the Company entered into an Engine Purchase Support Agreement that requires the Company to purchase a certain number of spare engines in order to maintain a contractual ratio of spare engines to aircraft in the fleet. As of December 31, 2025, the Company is committed to purchase 10 PW1100G-JM spare engines, with deliveries through 2028.

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 June 2021, the United States Trade Representative announced that the United States and European Union had agreed to suspend reciprocal tariffs on large civilian aircraft for up to five years, pending discussions to resolve their trade dispute.

Separate from that dispute, the United States imposed reciprocal tariffs on imports from many trading partners, including the European Union, in April 2025, which would have withdrawn the June 2021 suspension and reimposed higher tariffs similar to other imports on aircraft and parts from the European Union.

On August 21, 2025, the United States and the European Union agreed on the terms of a new tariff agreement, under which the United States committed, effective September 1, 2025, to apply the higher of either the United States Most Favored Nation (“MFN”) tariff rate or a tariff rate of 15%, comprised of the MFN tariff and a reciprocal tariff, on originating goods of the European Union. Under the MFN treatment, most aircraft and aircraft parts continued to be subject to a 0% tariff.

On February 20, 2026, the United States Supreme Court struck down broader tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). On the same day, the President terminated additional ad valorem duties previously imposed under Executive Order 14257, as amended, and imposed a temporary 10% import surcharge under section 122 of the Trade Act of 1974, effective February 24, 2026 through July 24, 2026. Certain qualifying civil aircraft and aircraft parts are exempt from that surcharge.

The current U.S. Administration continues to negotiate tariffs with various countries which may lead to expanding the scope of tariffs and significantly increasing the rates on goods imported into the United States. In response, foreign governments have imposed, and are expected to impose, retaliatory tariff measures against the United States. These or additional changes in U.S. or international trade policies, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions for the transportation industry, which may adversely impact the Company's operations through increased supply chain challenges, commodity price volatility and a decline in discretionary spending and consumer confidence, among others. The Company continues to monitor the situation.

Interest commitments related to the secured debt financing of 48 aircraft as of December 31, 2025 were $45.9 million in 2026, $36.9 million in 2027, $18.7 million in 2028, $9.6 million in 2029, $3.4 million in 2030 and $0.4 million in 2031 and beyond. These amounts exclude any interest commitments related to debt instruments classified as liabilities subject to compromise on the Company's consolidated balance sheets as of the Petition Date. Refer to Note 3, 2025 Chapter 11 Bankruptcy Proceedings, for additional information on the debt instruments classified as liabilities subject to compromise. For principal commitments related to the Company's debt financing, refer to Note 14, Debt and Other Obligations.

On July 25, 2023, RTX Corporation, the parent company of Pratt & Whitney, announced that it had determined that a rare condition in the powdered metal used to manufacture certain engine parts will require accelerated inspection of the PW 1100G-JM geared turbo fan (“GTF”) fleet, which powers the Company's A320neo family of aircraft. As a result, the Company removed GTF engines from service and grounded some of its A320neo aircraft for inspection requirements.

On June 4, 2025, the Company entered into the Agreement with IAE, an affiliate of Pratt & Whitney, pursuant to which IAE provided the Company with a monthly credit, subject to certain conditions, as compensation for each of the Company's aircraft unavailable for operational service due to GTF engine issues from January 1, 2025 through December 31, 2025. The credits are accounted for as vendor consideration in accordance with ASC 705-20 and are recognized as a reduction of the purchase price of the goods or services acquired from IAE during the period, which may include the purchase of maintenance, spare engines and short-term rentals of spare engines, based on an allocation that corresponds to the Company’s progress towards earning the credits.

As of December 31, 2025, Pratt & Whitney issued the Company $135.3 million in credits related to the aircraft on ground ("AOG") days through December 31, 2025. Of the total credits recognized, as of December 31, 2025, $103.7 million and $6.0 million were recorded in the Successor Period and the Current Predecessor Period, respectively, as a reduction in the cost basis of assets purchased from IAE within flight equipment and deferred heavy maintenance, net on the Company's consolidated balance sheets. In addition, during the Successor Period and the Current Predecessor Period, the Company recorded $21.0 million and $4.6 million respectively, in credits on the Company's consolidated statements of operations within maintenance, materials and repairs and aircraft rent expenses. In addition, during the Successor Period and the Current Predecessor Period, the Company recognized lower depreciation and amortization expense of $24.3 million and $6.1 million, respectively, related to credits recognized, as a reduction of the cost basis of assets purchased from IAE recorded within the Company's consolidated statements of operations.

In connection with the Company's ongoing 2025 Chapter 11 Bankruptcy Proceedings, the lease agreements related to certain aircraft subject to these inspections were rejected as part of the bankruptcy process. As a result, the Company did not subsequently receive any additional credits under this agreement.

In addition, in connection with the Chapter 11 Cases, the Company entered into a restructuring term sheet with IAE, dated December 3, 2025, and subsequently entered into a definitive agreement on February 4, 2026. Refer to Note 3, 2025 Chapter 11 Bankruptcy Proceedings, for additional information.

The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system and other miscellaneous subscriptions and services as of December 31, 2025: $42.2 million in 2026, $33.3 million in 2027, $9.2 million in 2028, $4.1 million in 2029, $3.9 million in 2030 and $2.2 million in 2031 and beyond. The Company's reservation system contract expires in 2028.

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. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings and assessments to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. These subjective determinations are based on the status of such legal or regulatory proceedings, the merits of the Company's defenses and consultation with legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company's current estimates. It is possible that the resolution of one or more of the legal matters currently pending or threatened could result in losses material to the Company's consolidated results of operations, liquidity or financial condition.

Following an audit by the Internal Revenue Service ("IRS") related to the collection of federal excise taxes on optional passenger seat selection charges covering the period of the second quarter of 2018 through the fourth quarter of 2020, on March 31, 2022, the Company was assessed $34.9 million. On July 19, 2022, the assessment was reduced to $27.5 million. The Company believes it has defenses available and has informed the IRS that it is challenging the assessment. The Company believes a loss in this matter is not probable and has not recognized a loss contingency.

On February 24, 2026, the Company received a preliminary assessment from the Transportation Security Administration (“TSA”) related to the recording, refunding, remitting, and reporting of TSA security fees for the period from October 1, 2020 through November 30, 2023. The preliminary assessment is $23.9 million and relates primarily to expired credit shells for which TSA asserts that security fees should have been remitted. The Company disputes TSA’s interpretation of the applicable regulations and believes the assessment is without merit. The Company currently has a pending case before the U.S. Court of Appeals for the Eleventh Circuit regarding this matter, with oral argument scheduled for April 7, 2026. Based on the information currently available, including the status of the appeal and the Company’s evaluation of the underlying legal position, management does not believe that a loss is probable. Accordingly, no liability has been recorded as of the date of this filing. The Company will continue to monitor developments and update its assessment as additional information becomes available.

Employee Groups

Representative

Amendable Date (1)

Percentage of Workforce

Pilots

Air Line Pilots Association, International ("ALPA") (2)

January 2028

26%

Flight Attendants

Association of Flight Attendants ("AFA-CWA")

January 2028

41%

Dispatchers

Professional Airline Flight Control Association ("PAFCA")

August 2026

Ramp Service Agents

International Association of Machinists and Aerospace Workers ("IAMAW")

November 2026

Passenger Service Agents

Transport Workers Union of America ("TWU")

February 2027

Aircraft Maintenance Technicians

Aircraft Mechanics Fraternal Association ("AMFA") (2)

N/A (2)

In August 2022, the Company's aircraft maintenance technicians ("AMTs") voted to be represented by AMFA as their collective bargaining agent. In May 2024, the parties began negotiations with a National Mediation Board ("NMB"), and those discussions are ongoing. As of December 31, 2025, the Company had approximately 455 AMTs.

As a result of the 2025 Chapter 11 Bankruptcy Proceedings, the Company engaged in concessionary negotiations with both ALPA and AFA-CWA. On November 6, 2025, the Company reached agreements in principle with each of the two unions. These agreements were ratified by union members in December 2025, approved by the Bankruptcy Court on December 29, 2025, and are amendable in January 2028. Under the pilot agreement, hourly pay will be reduced by 8% effective January 1, 2026, and employer 401(k) contributions will be reduced from 16% to 8% for 2026 and 2027. The flight attendant agreement includes a reduction in incentive overtime pay and elimination of ground holding pay in certain circumstances.

During the Current Predecessor Period, the Company furloughed approximately 200 pilots to align with its projected flight volume for 2025 and recorded $0.9 million in expenses related to these furloughs. These expenses were recorded within salaries, wages and benefits on the Company's consolidated statements of operations. In addition, as part of the Company's ongoing efforts to optimize and enhance efficiencies, it made the decision to eliminate approximately 200 positions from various departments. The Company recorded $1.8 million in expenses related to these efforts during the Current Predecessor Period. These expenses were recorded within salaries, wages and benefits on the Company’s consolidated statements of operations.

Furthermore, to continue its ongoing efforts to optimize and enhance efficiencies, in July 2025, the Company announced the downgrade of approximately 140 Captains to First Officers and the furlough of approximately 270 pilots, effective October 1, 2025 and November 1, 2025, respectively, to align with its projected flight volume for 2026. The Company recorded $7.2 million in expenses related to these actions during the Successor Period. These expenses were recorded within special charges, non-operating expense on the Company’s consolidated statements of operations. Additionally, in September 2025, the Company announced the furlough of approximately 1,800 flight attendants, effective November 1, 2025.

The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees and qualified dependent medical claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company has accrued $13.4 million and $11.6 million, for health care claims as of December 31, 2025 and 2024, respectively, recorded within other current liabilities on the Company's consolidated balance sheet.