As filed with the Securities and Exchange Commission on March 8, 2021.

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

Frontier Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	4512	46-3681866
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

4545 Airport Way

Denver, CO 80239

(720) 374-4200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Barry L. Biffle

President and Chief Executive Officer

Frontier Group Holdings, Inc.

4545 Airport Way

Denver, CO 80239

(720) 374-4200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Anthony J. Richmond Miles P. Jennings Brian D. Paulson Latham & Watkins LLP 140 Scott Drive Menlo Park, CA 94025 Telephone: (650) 328-4600 Facsimile: (650) 463-2600 Howard M. Diamond Senior Vice President, General Counsel & Secretary Frontier Group Holdings, Inc. 4545 Airport Way Denver, CO 80239 Telephone: (720) 374-4200 Alan F. Denenberg Stephen Salmon Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, CA 94025 Telephone: (650) 752-2000 Facsimile: (650) 752-2115

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	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 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED	PROPOSED MAXIMUM AGGREGATE OFFERING PRICE(1)	AMOUNT OF REGISTRATION FEE(2)(3)
Common Stock, $0.001 par value per share	$100,000,000	$10,910

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.

(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

(3) On March 31, 2017, the Registrant filed a registration statement on Form S-1 (File No. 333-217078), as amended (the “Prior Registration Statement”), and paid a registration fee of $11,590. The Prior Registration Statement was withdrawn by filing a Form RW on July 24, 2020. In accordance with Rule 457(p) under the Securities Act, the Registrant is offsetting the registration fee for this registration statement against the fees previously paid in connection with the Prior Registration Statement.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 8, 2021.

            Shares

Frontier Group Holdings, Inc.

Common Stock

This is the initial public offering of shares of our common stock. We are offering            shares of our common stock. The selling stockholder identified in this prospectus is offering             shares of our common stock. We will not receive any of the proceeds from the sale of any shares by the selling stockholder.

It is currently estimated that the public offering price per share will be between $            and $            . Currently, no public market exists for our shares. We have applied to have our common stock listed on the Nasdaq Global Select Market under the symbol “FRNT.”

Investing in our common stock involves risks that are described in the “Risk Factors” section beginning on page 23.

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions(1)
Proceeds to us (before expenses)
Proceeds to the selling stockholder

(1) See the “Underwriting” section beginning on page 189 for additional information regarding underwriting compensation.

The selling stockholder named herein has granted the underwriters an option to purchase up to            additional shares of common stock, at the initial public offering price, less the underwriting discount, for 30 days from the date of this prospectus. We will not receive any of the proceeds from the sale of shares by the selling stockholder upon any such exercise.

The underwriters expect to deliver the shares to purchasers on or about                    , 2021.

Citigroup Barclays Deutsche Bank Securities Morgan Stanley Evercore ISI

BofA Securities	Goldman Sachs & Co. LLC	J.P. Morgan	Nomura	UBS Investment Bank
Cowen		Raymond James

            , 2021

CONTENTS

	Page
SUMMARY		2
THE OFFERING		12
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA		14
OPERATING STATISTICS		19
GLOSSARY OF AIRLINE TERMS		20
RISK FACTORS		23
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		59
USE OF PROCEEDS		61
DIVIDEND POLICY		62
CAPITALIZATION		63
DILUTION		65
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA		67
OPERATING STATISTICS		71
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		72
INDUSTRY BACKGROUND		101
BUSINESS		104
MANAGEMENT		129
EXECUTIVE COMPENSATION		138
DIRECTOR COMPENSATION		162
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		164
PRINCIPAL AND SELLING STOCKHOLDER		166
DESCRIPTION OF PRINCIPAL INDEBTEDNESS		168
DESCRIPTION OF CAPITAL STOCK		174
SHARES ELIGIBLE FOR FUTURE SALE		181
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS		184
UNDERWRITING		188
LEGAL MATTERS		196
EXPERTS		196
WHERE YOU CAN FIND MORE INFORMATION		196
INDEX TO FINANCIAL STATEMENTS		F-1

We are responsible for the information contained in this prospectus or contained in any free writing prospectus prepared by or on behalf of us to which we have referred you. Neither we, the underwriters, nor the selling stockholder have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission and we take no responsibility for any other information that others may give you. We and the selling stockholder are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, operating results or financial condition may have changed since such date.

Until            , 2021 (25 days after the date of this prospectus), all dealers that buy, sell, or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

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TRADEMARKS, TRADE NAMES, AND SERVICE MARKS

We use various trademarks, trade names and service marks in our business, including “Frontier Airlines,” “Frontier,” “Low Fares Done Right,” “LFDR,” “FlyFrontier.com,” “EarlyReturns,” “Frontier Miles,” “Discount Den,” “Stretch,” “The Works” and “The Perks,” as well as the Frontier Flying F logo. This prospectus contains references to our trademarks, trade names and service marks. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

INDUSTRY AND MARKET DATA

We include in this prospectus statements regarding our industry, our competitors and factors that have impacted our and our customers’ industries. Such statements are statements of belief and are based on industry data and forecasts that we have obtained from industry publications and surveys, including those published by the United States Department of Transportation, as well as internal company sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. In addition, while we believe that the industry information included herein is generally reliable, such information is inherently imprecise. Certain statements regarding our competitors are based on publicly available information, including filings with the Securities and Exchange Commission and United States Department of Transportation by such competitors, published industry sources and management estimates. While we are not aware of any misstatements regarding the industry, competitor and market data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption “Risk Factors” in this prospectus.

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SUMMARY

This summary highlights selected information about us and the common stock being offered by us and the selling stockholder. It may not contain all of the information that is important to you. Before investing in our common stock, you should read this entire prospectus carefully for a more complete understanding of our business and this offering, including our consolidated financial statements and the accompanying notes and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Overview

Frontier Airlines is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right^®. We offer flights throughout the United States and to select near international destinations in the Americas. Our unique strategy is underpinned by our low-cost structure and superior low-fare brand. As of December 31, 2020, we had a fleet of 104 narrow-body Airbus A320 family aircraft, and a commitment to purchase 156 A320neo (New Engine Option) family aircraft by the end of 2028. During the years ended December 31, 2019 and 2020, we served approximately 23 million and 11 million passengers, respectively, across a network of approximately 110 airports.

In December 2013, we were acquired by an investment fund managed by Indigo Denver Management Company, LLC, (“Indigo”), an affiliate of Indigo Partners, LLC, (“Indigo Partners”), an experienced and successful global investor in ultra low-cost carriers, (“ULCCs”). Following the acquisition, Indigo reshaped our management team to include experienced veterans of the airline industry with a significant history operating ULCCs. Working with Indigo and supported by a highly productive workforce, our management team developed and implemented our unique Low Fares Done Right strategy, which significantly reduced our unit costs, introduced low fares, provided the choice of optional services to our customers, enhanced our operational performance and improved the customer experience. Through the implementation of our new operating model, we have positioned our brand as a leading low-fare airline and had seen a dramatic improvement to our profitability prior to the coronavirus, (“COVID-19”), pandemic.

The implementation of Low Fares Done Right has significantly reduced our cost base by increasing aircraft utilization (prior to the COVID-19 pandemic), transitioning our fleet to larger aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, replacing our reservation system, enhancing our website, boosting employee productivity and contracting with third-party specialists to provide us with select operating and other services. As a result of these and other initiatives, we were able to reduce our CASM (excluding fuel) from 7.89¢ for the year ended December 31, 2013 to 5.55¢ for the year ended December 31, 2019, and our Adjusted CASM (excluding fuel) from 7.89¢ for the year ended December 31, 2013 to 5.44¢ for the year ended December 31, 2019, an improvement of 30% and 31%, respectively. For the year ended December 31, 2020, our CASM (excluding fuel) was 7.53¢ and our Adjusted CASM (excluding fuel) was 8.63¢, which was principally a result of reduced aircraft utilization as a result of the COVID-19 pandemic. For a discussion and reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Glossary of Airline Terms” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

The COVID-19 pandemic has presented significant challenges to the global airline industry since February 2020. We have experienced a significant decline in demand related to the COVID-pandemic, which has caused a material decline in our revenues and negatively impacted our business, operating results, financial condition and liquidity, with approximately $2 million per day on average of cash burn during the year ended December 31, 2020. We have worked diligently to navigate such challenges by implementing disciplined capacity deployment and taking steps to protect liquidity and cash flow and towards being an industry leader with respect to the implementation of new health and safety initiatives. Due to such efforts, we believe we are

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well positioned to take advantage of the anticipated demand recovery as vaccine distribution continues. As an example, throughout the pandemic, the U.S. airline industry has seen stronger domestic demand than international demand, and the segments of domestic travel that have recovered fastest have been VFR (visiting friends or relatives) and vacation travel (which together we refer to as leisure travel) in contrast to business travel, both of which are trends that we believe position us to outperform the airline industry as a whole. According to the Airlines Reporting Corporation, for the week ended February 21, 2021, the number of tickets purchased as a percentage of the same time period in 2019 was 54% for online travel agencies with a primary focus on leisure travel, 32% for traditional leisure/other agencies with a primary focus on leisure travel, and 15% for corporate agencies whose primary business model is managed corporate or government travel. We design our route network to capture low fare demand among leisure travelers and our three largest bases are Denver, Orlando and Las Vegas, which draw a significant proportion of leisure travelers. In the seven months ending February 29, 2020, according to a post-travel survey we conducted, 89% of our customers were leisure travelers. We believe the restrictions and health concerns that have depressed demand during the pandemic are also likely to lead to increased levels of pent-up demand for leisure travel once the effects of the pandemic decrease. As a result, we expect to see a significant recovery in our performance as the U.S. market recovers. Within our current network of approximately 110 airports served, we plan to strategically deploy our capacity where demand is highest during the recovery in order to more quickly return to normal capacity levels. More broadly, after being restricted from travel, we believe many customers will take advantage of the opportunity to travel more in the coming years. We also believe new working patterns and the increasing growth of work from home will lead to increasing numbers of employees choosing to live remotely from their office location. We believe this trend will lead to an increased number of shorter leisure trips by Americans. We believe our low fares, supported by our low cost structure, will enable us to grow our network and take advantage of new demand patterns as they arise. We also believe that we will expand our relative unit cost advantage as compared to those airlines which borrowed more heavily through the pandemic. As a result of COVID-19, we incurred approximately one dollar per passenger of debt related costs as compared to an average of seventeen dollars per passenger for other U.S. airlines of significant size for debt issued since the start of the pandemic through September 30, 2020, based on publicly available data. Furthermore, we believe that low-cost airlines have historically recovered more quickly than the airline industry overall following past crises, including the 1991 Gulf War, the 2001 Terrorist Attacks and the late-2000s Financial Crisis. In the wake of these crises, low-cost airlines further expanded the magnitude of their superior margin profile and profitability relative to the airline industry as a whole.

In addition to low unit costs and our focus on leisure travel, a key component of our Low Fares Done Right model has been to attract customers with low fares and garner repeat business by delivering a high value, family-friendly customer experience with a more upscale look and feel than historically experienced on ULCCs globally. For instance, we currently offer flexible optional services through both unbundled and bundled service options. Our bundled options include The Works, a hassle-free option that includes a guaranteed seat assignment, carry-on and checked baggage, ticket refundability and changes, and priority boarding, all at an attractive low price and available only on our website, and The Perks, which enables customers to book the same amenities included in The Works, excluding refundability and ticket changes. We operate a customer-friendly digital platform that includes our website and mobile app, which makes booking and travel easier for our customers. We also promote and sell products in-flight to enhance the customer experience. Our brand and product are family-friendly, featuring popular animals on our aircraft tails, novelty cards for children and we provide certain offers tailored for families, including our Kids Fly Free program. We reward our repeat customers through our Frontier Miles (formerly EarlyReturns) frequent flyer program, and we also offer our Discount Den membership program, which provides subscribers with exclusive access to some of our lowest fares. In addition to enhancing the customer experience, these offerings have helped us to increase our ancillary revenues from $12.80 per passenger in 2013 to $57.11 per passenger in 2019 and $62.45 per passenger in 2020.

Low Fares Done Right differentiates Frontier from the historical ULCC model by providing a more dependable and higher quality customer service experience than traditionally offered by such carriers. We

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pioneered this concept in the United States through our disciplined approach to operational integrity and by using a modern fleet with comfortable cabin seating and other amenities, including extra seat padding and our Stretch extra space seating option on all of our flights. Our commitment to operational integrity is reflected in our approach to recruiting, workforce training and employee engagement, which we believe enables us to offer a standardized and predictable travel experience. We believe the association of our brand with our ability to achieve a high level of operational performance will continue to differentiate us from the other U.S. ULCCs and enable us to generate greater customer loyalty.

The combination of low unit costs, high quality service and dependability that makes Low Fares Done Right successful has enabled us to successfully diversify our network across a wide range of leisure destinations as well as implement a network strategy that primarily targets markets where our low fares stimulate demand. Our current network is geographically diversified across the United States and our top five cities for the year ended December 31, 2020 were Denver (20% of departures), Orlando (11%), Las Vegas (8%), Philadelphia (4%), and Phoenix (3%). As a leisure focused airline, the preferences of our customers allow us to fly a low average frequency to and from individual destinations, as our customers are generally not focused on frequency but instead on getting the best value for travel. Our schedule of flights available for sale as of February 2021 included 335 nonstop routes across a network of approximately 110 airports, at an average frequency of 0.6 flights per day, as compared to an average frequency of 1.8 flights per day for all U.S. carriers of significant size based on publicly available information, with each route, on average, representing less than 0.3% of our total capacity.

We believe that using low fares to stimulate demand positions us to benefit from significant growth opportunities, including as the U.S. market recovers from the COVID-19 pandemic. On the 111 routes where we began nonstop service during the second or third quarter of 2017 or the second or third quarter of 2018, and continued to serve for at least three of the six months preceding September in the year following our market entry, DOT data indicates passenger volume grew by approximately 41% in total, as measured by comparing passenger volume in the six months ending September 30th in the year prior to our entry (2016 or 2017, respectively) compared to passenger volume in the six months ending September 30th in the year after our entry (2018 or 2019, respectively). At the end of those periods, our market share of passenger volumes on such routes was approximately 24%, which represented approximately 34% of passenger volumes on such routes during the six month period prior to our entry into the market. We believe our entry into new markets stimulates substantial passenger volume growth because of our ability to offer significantly lower fares than other airlines. On the same 111 routes noted above, DOT data indicates our average gross fare, including most taxes and fees, was approximately $67, as compared to an average gross fare of approximately $148 on all other U.S. airlines of significant size, for the six months ending September 30th of the year following our entry.

Based upon our analysis of the most recently available annual DOT data, during the year ended December 31, 2019, passengers on over 273 million U.S. domestic routes paid a fare that was at least 30% above our cost basis per passenger during the same period for the stage length associated with such fares. Such domestic routes were operated by non-ULCCs, are within the range of A320 family aircraft and exclude routes arriving or departing from federally slot-controlled airports, routes operating entirely within the state of Hawaii and routes with a market size of less than 100 passengers per day each way. As a result, and assuming the continued recovery of the U.S. market from the COVID-19 pandemic, we believe that there are a significant number of markets in which we could operate profitably with our low fares, and we believe our entry into such markets could drive substantial passenger growth in those markets.

We believe we are also in a better position than the other U.S. ULCCs to capitalize on this market stimulation opportunity because of our strong presence in high-demand markets and underserved markets, including mid-sized cities. We believe we have an opportunity to provide service on approximately 518 additional domestic routes between airports within our existing network that are not currently served by a ULCC, while Spirit Airlines (“Spirit”) has the opportunity to serve up to approximately 214 additional domestic routes,

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and Allegiant Travel Company (“Allegiant”) has the opportunity to serve up to approximately 152 additional domestic routes using the same criteria. Average industry-wide daily passenger volumes on these opportunity routes for the year ended December 31, 2019 were approximately 308,000, 149,000 and 84,000, respectively, based on the most recent available annual DOT data. Such domestic routes are currently not operated by ULCCs, are within the range of A320 family aircraft, and exclude routes arriving or departing from federally slot-controlled airports, and routes with a market size of less than 100 passengers per day each way.

According to the DOT, there were approximately 590 million domestic passenger journeys in the United States during the year ended December 31, 2019, and the five-year (year ended December 31, 2014 to December 31, 2019) compound annual growth rate for domestic passenger journeys was approximately 5.5%. Based upon the foregoing, and subject to the U.S. market fully recovering from the COVID-19 pandemic, we believe that over the next 10 years there is an opportunity for U.S. ULCCs to stimulate demand of approximately 159 million incremental annual domestic passengers, as compared to the year ended December 31, 2019, when U.S. ULCCs flew approximately 69 million passengers. For the year ended December 31, 2019, 96% of our passengers traveled on domestic flights.

The ULCC operating strategy is more mature in Europe than it is in the United States. For example, at the time that Spirit adopted a ULCC model in 2007, three European ULCCs, EasyJet, Ryanair and Wizz Air, already had more than 4.5 times the number of aircraft in operation as domestic competitors Allegiant and Spirit. The size of the European ULCCs’ operations is evidence of the substantial increases in passenger volumes they have been able to drive since their adoption of ULCC operating models, which first started in the mid-1990s. Over the 15-year period from the end of 2004 to 2019, according to World Bank and public filings of other carriers, total passenger volume in Europe had a compound annual growth rate of approximately 4.8%, of which approximately 76% was attributable to ULCC growth and market stimulation. During the same 15-year period, Europe’s three largest consolidated airline groups (International Consolidated Airlines Group (“IAG”), Lufthansa Group and Air France-KLM) and the three European ULCCs grew passengers at a compound annual growth rate of approximately 4.7% and 12.4%, respectively. Prior to the COVID-19 pandemic, over the last ten years, this passenger growth has coincided with a period of stability and expanding profitability margins for both the consolidated groups and the ULCCs. According to historic schedule data, the three European ULCCs grew their intra-Europe, excluding Turkey and Russia, market share as measured by seat capacity from approximately 15% in the year ended December 31, 2007 to 24% in the year ended December 31, 2014 and to 30% in the year ended December 31, 2019. In the United States, at the time of Spirit’s conversion to the ULCC model in 2007, ULCCs held an approximately 1% domestic United States market share as measured by seat capacity for the year ended December 31, 2007, which, including the conversion of Frontier to the ULCC model in 2014, grew to approximately 4% for the year ended December 31, 2014 and to approximately 8% for the year ended December 31, 2019, which remains significantly below the level of European ULCCs. In addition, according to each airline’s most recent fiscal year public filings, European ULCCs, including Ryanair, EasyJet and Wizz Air, had 938 aircraft in operation in 2020, and have had a 9.2% compound annual growth rate in the number of aircraft since 2007. By comparison, U.S. ULCCs had 356 aircraft in 2020 and have had a compound annual growth rate in the number of aircraft of 7.9% since 2007 on a fleet that is less than 40% the size of the European ULCC fleet.

Our Competitive Strengths

Our competitive strengths include:

Our Low-Cost Structure. Our low-cost structure, built around low aircraft ownership cost, fuel efficiency and low operational costs, is our key strategic advantage. Our unit costs, measured by Adjusted CASM including net interest, were among the lowest in the industry for the year ended December 31, 2020. For a discussion and reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Glossary of Airline Terms” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” Our Adjusted CASM including net interest, stage length adjusted

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to 1,000 miles, for the year ended December 31, 2020 was 10.30¢, compared to an average of 16.52¢ for the airlines we refer to as the “Big Four” carriers (American Airlines, Delta Air Lines, Southwest Airlines and United Airlines), an average of 16.25¢ for the airlines we refer to as the “Middle Three” carriers (Alaska Airlines, Hawaiian Airlines and JetBlue Airways), 8.35¢ for Allegiant and 10.00¢ for Spirit, respectively. Comparatively, for the year ended December 31, 2019 prior to the impacts of the pandemic, our Adjusted CASM including net interest, stage length adjusted to 1,000 miles was 7.84¢, compared to an average of 11.70¢ for the Big Four carriers, an average of 11.70¢ for the Middle Three carriers, 8.79¢ for Allegiant and 8.09¢ for Spirit, respectively. Our low-cost structure is driven by several factors:

• High Aircraft Utilization. Prior to the COVID-19 pandemic, we operated with high aircraft utilization, averaging 12.2 hours per day during the year ended December 31, 2019. This compares to the domestic mainline utilization average of 10.4 hours per day for the Big Four carriers, an average of 10.6 hours per day for Middle Three carriers, and an average of 12.3 and 8.0 hours per day for Spirit and Allegiant, respectively, in each case, as measured for the year ended December 31, 2019. For the year ended December 31, 2020, our aircraft utilization decreased to 8.0 hours per day due to the impacts of the COVID-19 pandemic including significantly reduced capacity and the related grounding of many of our aircraft.

• Modern Fleet and Attractive Order Book. We operate a modern fleet comprised solely of Airbus A320 family aircraft, which are recognized as having high reliability and low operating costs. Operating a single family of aircraft provides us with several operational and cost advantages, including the ability to optimize crew scheduling, training and maintenance. Since 2013, we have steadily reduced the number of A319ceo aircraft (150 seats) in our fleet, replacing them with larger and more fuel-efficient A320ceo aircraft, A320neo aircraft (180 to 186 seats) and A321ceo aircraft (230 seats) and, commencing in 2022, A321neo aircraft (up to 240 seats). As of December 31, 2020, the average age of our fleet was approximately four years and we have taken delivery of 87 new aircraft since the start of 2015. In addition, we have an attractive order book of 156 new, fuel-efficient A320neo family aircraft. As of December 31, 2019, we maintained the youngest average fleet age of any U.S. airline of significant size based on the latest public reports of each carrier and our present fleet plan contemplates maintaining an average fleet age of approximately four years through December 31, 2024. As of December 31, 2019, we believe we had the highest adoption rate of new engine technology aircraft (consisting of the A220, A320neo family, A330neo, A350 and similar aircraft from other manufacturers) (as a percentage of total fleet) among U.S. airlines. Based on currently announced fleet plans, we expect to maintain the highest adoption rate of new engine technology aircraft of any U.S. ULCC in the near term.

• Fuel-Efficient Fleet. In 2019, we had the most fuel-efficient fleet of all U.S. carriers of significant size when measured by ASMs per fuel gallon consumed. For the year ended December 31, 2019, our ASMs per fuel gallon consumed were 97.5 as compared to the weighted industry average of 68.1 based on public reports of each carrier. The A320neo family aircraft that we continue to place in service are expected to continue delivering approximately 15% improved fuel efficiency compared to the prior generation of A320ceo family aircraft. Additionally, as of December 31, 2019, 52% of our fleet is powered by new engine technology and by 2025, 87% of the fleet is planned to powered by new engine technology. For the year ended December 31, 2020, our ASMs per fuel gallon consumed increased to 104.5, as a result of grounding our least fuel-efficient aircraft due to the COVID-19 pandemic.

• High Capacity Fleet. We increased the seat density on our A319ceo aircraft from 138 seats to 150 seats and the seat density on our prior generation of A320ceo aircraft from 168 seats to 180 seats during 2015. Across our entire fleet, we have increased our average seats per departure from 145 seats in 2013 to 191 seats during the year ended December 31, 2020, a 32% increase. Our entire fleet features new and lightweight slim-line seats, which eliminate excess weight and reduce fuel consumption per seat. As of January 2021, we had the highest seat density per A320ceo/neo and A321ceo aircraft operated by any U.S. airline.

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• Low-Cost Distribution Model. For the years ended December 31, 2018, 2019 and 2020, approximately 71%, 73% and 76%, respectively, of our tickets were sold directly to customers through our direct distribution channels, including our website and mobile app, our low cost distribution channels. We also reduced our distribution costs per passenger following the renegotiation of the majority of our distribution agreements in 2020.

• Highly Productive Workforce and Third Party Specialist Providers. Prior to the COVID-19 pandemic, we had a highly productive workforce which delivered and maintained a high quality of service to our customers, with 4,625 passengers supported per full time equivalent employee for the year ended December 31, 2019. In 2019, we also entered into new collective bargaining agreements with several of our union-represented employee groups. For the year ended December 31, 2020, we had 2,259 passengers supported per full time equivalent employee.

• Outsourcing Model. We outsource our non-core functions, including customer call centers, lost bag services, ground handling services and catering services. The outsourcing model not only enables us to provide high quality services at low costs, but also provides flexibility for us to align our costs with capacity and demand.

Our Brand. We believe establishing our brand as a leading low-fare airline enhances our ability to generate customer loyalty. The strength of our brand is demonstrated by our significant number of repeat customers. According to a January 2019 survey we conducted with respect to recent customers who had flown with us at least once, 91% of survey respondents were repeat customers and 69% had flown with us two or more times during the previous 12 months. The key features of our brand include:

• Significant customer value delivered through low fares with the choice of reasonably priced unbundled and bundled options, including The Works and The Perks.

• Family-friendly elements that appeal to a large audience, such as an attentive staff, popular animals on our aircraft tails, novelty cards for children and certain offers tailored for families including our Kids Fly Free program.

• A commitment to sustainability and environmental responsibility, including our position as “America’s Greenest Airline” as measured by fuel efficiency in 2019. Our 2019 fuel savings of 125 million gallons, as compared to the average of other U.S. airlines, per information included in the public reports of each carrier, is equivalent to flying the distance of 130 missions to the moon and back at our 2019 average fuel burn rate, or in carbon savings, equivalent to eliminating 18.6 billion plastic bottles, eliminating 438 billion plastic straws, or the benefiting of growing 18 million trees for a decade. In 2017, we moved our headquarters to a LEED Certified building, which was designed to achieve energy savings, water efficiency and lower CO2 emissions.

• Industry leading healthy travel initiatives, including being the only U.S. airline conducting temperature screenings for all passengers and crew prior to boarding.

• A carefully curated aesthetic for our livery, our website and mobile app, uniforms, seat design and on-board products, which are designed to look and feel more upscale than traditional ULCCs.

• A strong online presence with a customer-friendly digital platform that includes our passenger reservation system, improved website and mobile app.

• Our modern fleet with amenities such as extra seat padding and our Stretch seating option, which provides a comfortable 33-inch seat pitch.

• An enhanced frequent flyer program, Frontier Miles, and Discount Den membership program.

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Our Network Management. We plan our route network and airport footprint to focus on profitable existing routes and new routes where we believe our business model will stimulate demand and growth, including those where we expect demand to be highest during the U.S. recovery from the COVID-19 pandemic. This strategy enabled us to reduce the seasonality of our revenue, improve utilization, lower unit costs, increase revenues and enhance profitability from 2013 through 2019. The key features of our network include:

• A broad geographic footprint, which enables us to service a wide range of VFR and vacation destinations.

• A strong presence in high-demand markets and underserved markets, including mid-sized cities.

• A disciplined and methodical approach to both route selection and the removal of underperforming routes.

• An operational platform that includes nationwide crew and maintenance bases, creating access to lower-risk growth opportunities while maintaining high operational standards and enabling high utilization.

• A codeshare arrangement with Volaris, a ULCC based in Mexico and an affiliate of Indigo Partners, which enables both carriers to sell tickets and connecting itineraries on select routes within the airlines’ combined networks. We believe this is the world’s first ULCC codeshare arrangement.

Our Talented ULCC Leadership Team. Our management team has extensive day-to-day experience operating ULCCs and other airlines.

• Barry L. Biffle, our President and Chief Executive Officer, previously served as Chief Executive Officer of VivaColombia, Executive Vice President for Spirit and held various management roles with US Airways and American Eagle Airlines, a regional airline subsidiary of American Airlines.

• James G. Dempsey, our Executive Vice President and Chief Financial Officer, previously served as Treasurer and Head of Investor Relations for Ryanair after serving in management roles within the advisory practice of PricewaterhouseCoopers.

• Daniel M. Shurz, our Senior Vice President, Commercial, previously served in various roles with United Airlines and Air Canada.

• Howard M. Diamond, our Senior Vice President, General Counsel and Corporate Secretary, previously served as Vice President, General Counsel and Corporate Secretary for Thales USA.

• Jake F. Filene, our Senior Vice President, Customers, previously served as our Deputy Chief Operating Officer and as Vice President, Airport Services and Corporate Real Estate for Spirit Airlines.

• Trevor J. Stedke, our Senior Vice President, Operations, previously served as Vice President, Aircraft Technical Operations for Southwest Airlines.

Low Fares Done Right—Our Business Strategy

Our goal is to offer the most attractive option for air travel with a compelling combination of value, product and service, and, in so doing, to grow profitably and enhance our position among airlines in the United States. Through the key elements of our business strategy, we seek to achieve:

Low Unit Costs. We intend to strengthen and maintain our low unit costs, including by:

• Maintaining high utilization levels once the U.S. market recovers from the COVID-19 pandemic.

• Utilizing new generation, fuel-efficient aircraft that deliver lower operating costs compared to prior generation aircraft.

• Increasing the average size and seat capacity of the aircraft in our fleet through the continued introduction and operation of new 186-seat A320neo and up to 240-seat A321neo aircraft, and the exit of A319ceo aircraft.

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• Taking a disciplined approach to our operational performance in order to reduce disruption.

A Superior Low-Fare Brand. In order to enhance our brand and drive revenue growth, we intend to continue to deliver a higher-quality flight experience than historically offered by ULCCs globally and generate customer loyalty by:

• Continuing to offer attractive low fares.

• Expanding our marketing efforts, including through the addition of new animals for each of our new aircraft, particularly highlighting endangered species on our signature animal tails, to continue to position our brand as a family- and environmentally-friendly ULCC.

• Continuing to improve penetration of our bundle options, including The Works and The Perks.

• Further enhancing our Frontier Miles offering to improve reward opportunities for our branded credit card customers.

• Providing our customers a dependable, reliable, on-time and friendly travel experience.

Strong Growth Driven by an Expanding and Efficient Network. We believe that our cost structure enables us to fly to more places profitably than any other U.S. airline, and we strategically focus on routes that we believe are the most profitable. We intend to continue to utilize our disciplined and methodical approach to expand our network in an efficient manner, including by:

• Strategically deploying our capacity where demand is highest during the recovery from the COVID-19 pandemic.

• Continuing to take advantage of opportunities in overpriced and/or underserved markets across the U.S. and select international destinations in the Americas.

• Leveraging our diverse geographic footprint and existing crew and maintenance base infrastructure to take advantage of lower-risk network growth opportunities while maintaining high operational standards.

• Utilizing our low-cost structure to offer low fares which organically drive growth through market stimulation.

• Continuing to rebalance our network to mitigate seasonal fluctuations in our results.

• Focusing on what we believe are the most profitable opportunities where our cost differential drives the largest competitive advantage.

Strong Liquidity and Capital Structure. We intend to maintain our strong capital structure, which enables us to obtain financing for our aircraft pursuant to attractive operating leases, in order to support our growth strategies and the expansion of our fleet and network.

Our largest sources of liquidity as of December 31, 2020 totaled $963 million and were comprised of:

• Our cash, cash equivalents and restricted cash, of which we had a balance of $378 million as of December 31, 2020.

• $424 million available to borrow under the loan we received from the United States Department of the Treasury (the “Treasury Loan”) as of December 31, 2020. The Treasury Loan has a five-year term ending September 28, 2025, is collateralized by our co-branded credit card arrangement and bears an annual interest rate based on adjusted LIBOR plus 2.5%. We may borrow additional amounts in up to two subsequent borrowings until May 28, 2021, subject to satisfaction of certain conditions precedent in the Treasury Loan Agreement, including maintenance of a collateral coverage ratio of 2.0 to 1.0 and compliance with the relevant provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). See “Description of Principal Indebtedness—Treasury Loan Agreement.”

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• $161 million of income tax receivables expected to be collected in 2021, primarily resulting from the net operating losses generated in 2020 and permitted under the CARES Act to be carried back to 2015 and 2016 tax years (pre-Tax Cuts and Jobs Act) in which a federal 35% tax rate applied.

Additionally, subsequent to December 31, 2020, we entered into the Payroll Support Program Extension Agreement (the “PSP2 Agreement”), which provided us with at least an incremental $140 million in liquidity. We received the first installment in the amount of $70 million on January 15, 2021.

As of December 31, 2020, our capital structure was comprised of the following (please refer to “Notes to Consolidated Financial Statements - 9. Debt”):

• $141 million of the available $150 million under the secured, revolving line of credit from our PDP Financing Facility.

• $15 million from our pre-purchased miles facility. The facility cannot be extended above $15 million until full extinguishment of the Treasury Loan pursuant to the CARES Act. Upon full extinguishment of the Treasury Loan, the pre-purchased miles facility amount is to be reset annually based on the aggregate amount of fees payable to us by Barclays on a calendar year basis, up to an aggregate maximum facility amount of $200 million.

• $183 million in loans from the CARES Act, comprised of $150 million under the Treasury Loan, and $33 million under the PSP Promissory Note.

• $18 million under the floating rate building note.

Our Relationship with Indigo Partners

Indigo Partners, our principal stockholder, is an established and successful investor in ULCCs around the world. Indigo Partners has previously invested in several ULCC airlines, including Spirit, Tigerair (formerly Tiger Airways), Volaris and Wizz Air, each of which completed initial public offerings following the successful implementation of a ULCC strategy under the guidance of Indigo Partners and while Indigo Partners was a significant investor. In addition, Indigo Partners has current investments in other ULCC airlines, including JetSMART based in Chile.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors” following this prospectus summary, that represent challenges we face in connection with the successful implementation of our strategy and the growth of our business. We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance. Such factors include:

• the impact the COVID-19 pandemic and measures to reduce its spread continue to have on our business, results of operations and financial condition and the timing and nature of the related recovery of the airline industry;

• certain restrictions on our business in connection with accepting financing under the CARES Act and related legislation;

• the ability to operate in an exceedingly competitive industry against legacy network airlines, low-cost carriers and other ultra low-cost carriers;

• the price and availability of aircraft fuel;

• any restrictions on or increased taxes applicable to charges for non-fare products and services paid by airline passengers and burdensome consumer protection regulations or laws;

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• changes in economic conditions;

• competition from air travel substitutes;

• threatened or actual terrorist attacks or security concerns;

• factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, aircraft and engine defects, adverse weather conditions, increased security measures, new travel-related taxes or outbreak of disease;

• our presence in international emerging markets that may experience political or economic instability;

• increase in insurance costs or inability to secure adequate insurance coverage;

• decline or suspension in funding or operations of the U.S. federal government or its agencies;

• our failure to implement our business strategy successfully;

• our ability to control our costs;

• our ability to grow or maintain our unit revenues or maintain our non-fare revenues;

• any increased labor costs, union disputes and other labor-related disruptions;

• our inability to expand or operate reliably and efficiently out of airports where we maintain a large presence;

• our reputation and business being adversely affected in the event of an emergency, accident, or similar public incident involving our aircraft or personnel;

• any negative publicity regarding our customer service;

• our inability to maintain a high daily aircraft utilization rate;

• any changes in governmental regulation;

• our ability to obtain financing or access capital markets;

• the long-term nature of our fleet order book and the unproven new engine technology utilized by the aircraft in our order book;

• our maintenance obligations;

• aircraft-related fixed obligations that could impair our liquidity; or

• our reliance on third-party specialists and other commercial partners to perform functions integral to our operations.

Our History

Our indirect, wholly-owned subsidiary, Frontier Airlines, Inc. (“Frontier”) was incorporated in 1994 to operate as an airline based in Denver, Colorado. In April 2008, Frontier filed for protection under the federal bankruptcy laws and ultimately emerged from bankruptcy in October 2009 through the acquisition of Frontier by a subsidiary of Republic Airways Holdings, Inc. (“Republic”). We were incorporated in September 2013 as a newly-formed corporation initially wholly-owned by an investment fund managed by Indigo to facilitate the acquisition of Frontier from Republic. That acquisition was completed on December 3, 2013.

Corporate Information

Our principal executive offices are located at 4545 Airport Way, Denver, Colorado 80239. Our general telephone number is (720) 374-4200 and our website address is www.FlyFrontier.com. We have not incorporated by reference into this prospectus any of the information on our website and you should not consider our website to be a part of this document. Our website address is included in this document for reference only.

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THE OFFERING

Common stock offered by us             shares

Common stock offered by the selling stockholder             shares

Common stock to be outstanding after the offering             shares

Underwriters’ option to purchase additional shares The selling stockholder may sell up to             additional shares if the underwriters exercise their option to purchase additional shares.

Use of proceeds We estimate that we will receive net proceeds from this offering of approximately $             million based on an assumed initial public offering price of $             per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and estimated expenses of this offering payable by us.

We intend to use the net proceeds to be received by us from this offering for general corporate purposes, including cash reserves, working capital, capital expenditures, including flight equipment acquisitions, sales and marketing activities and general and administrative matters and for possible debt repayment. Please see “Use of Proceeds.”

An investment fund managed by Indigo is our controlling stockholder and the selling stockholder in this offering. We will not receive any of the proceeds from the sale of any shares by the selling

Risk factors Please see “Risk Factors” beginning on page 23 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Proposed Nasdaq Global Select Market symbol “FRNT”

The number of shares of our common stock outstanding after this offering is based on 5,248,371 shares outstanding as of December 31, 2020, and excludes:

• an aggregate of 259,980 shares of common stock issuable upon the exercise of outstanding stock options as of December 31, 2020, having a weighted average exercise price of $73.42 per share;

• an aggregate of 50,559 shares of common stock issuable upon the vesting of outstanding restricted stock units (“RSUs”) as of December 31, 2020;

• an aggregate of 13,752 shares of common stock issuable upon the exercise of warrants issued pursuant to the Payroll Support Program Agreement with the United States Department of the Treasury (the

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“Treasury”), with respect to the Payroll Support Program (“PSP”) established under Subtitle B of Title IV of Division A of the CARES Act (the “PSP Warrants”), having an exercise price of $241.72 per share;

• an aggregate of 62,055 shares of common stock issuable upon the exercise of warrants issued pursuant to the Treasury Warrant Agreement (the “Treasury Warrant Agreement”) with the Treasury related to the Treasury Loan (the “Treasury Warrants”) having an exercise price of $241.72 per share;

• an aggregate of 2,711 shares of common stock issuable upon the exercise of warrants to be issued pursuant to the PSP2 Agreement with the Treasury, based on the $140 million of funding, with respect to the Payroll Support Program (“PSP2”) established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (the “PSP2 Warrants”), having an exercise price of $442.69 per share;

• an aggregate of 641,090 shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Plan as of December 31, 2020, which will become available for issuance under our 2021 Equity Incentive Award Plan after consummation of this offering; and

• an aggregate of shares of common stock reserved for issuance pursuant to future awards under our 2021 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

Except as otherwise indicated, information in this prospectus reflects or assumes the following:

• a            -for-             split of our outstanding common stock, which will occur prior to the effectiveness of the registration statement of which this prospectus is a part;

• the filing and effectiveness of our amended and restated certificate of incorporation in Delaware and the adoption of our amended and restated bylaws, each of which will occur immediately prior to the consummation of this offering;

• no exercise of outstanding stock options or warrants and no vesting RSUs subsequent to December 31, 2020; and

• no exercise of the underwriters’ option to purchase up to             additional shares of our common stock from the selling stockholder.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

The following tables summarize the financial and operating data for our business for the periods presented. You should read this summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, all included elsewhere in this prospectus.

We derived the summary consolidated statements of operations data for the years ended December 31, 2018, 2019 and 2020 and the selected consolidated balance sheet data as of December 31, 2020 from our audited consolidated financial statements included in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and our results for the year ended December 31, 2020 have been materially affected by the COVID-19 pandemic.

	Year Ended December 31,
	2018			2019			2020
	(in millions, except share and per share data)
Consolidated Statements of Operations Data:
Operating revenues:
Passenger	$	2,102		$	2,445		$	1,207
Other		54			63			43
Total operating revenues		2,156			2,508			1,250
Operating expenses:
Aircraft fuel		589			640			338
Salaries, wages and benefits		441			529			533
Aircraft rent(1)		277			368			396
Station operations		323			336			257
Sales and marketing		110			130			78
Maintenance materials and repairs		75			86			83
Depreciation and amortization		78			46			33
CARES Act credits		—			—			(193	)
Other operating expenses(1)		171			64			90
Total operating expenses		2,064			2,199			1,615
Operating income (loss)		92			309			(365	)
Other income (expense):
Interest expense		(13	)		(11	)		(18	)
Capitalized interest		9			11			6
Interest income and other		17			16			5
Total other income (expense)		13			16			(7	)
Income (loss) before income taxes		105			325			(372	)
Income tax expense (benefit)		25			74			(147	)
Net income (loss)	$	80		$	251		$	(225	)

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	Year Ended December 31,
	2018		2019		2020
	(in millions, except share and per share data)
Earnings (loss) per share:
Basic		13.95		45.21		(42.91	)
Diluted		13.83		45.10		(42.91	)
Weighted average shares outstanding:
Basic		5,238,618		5,240,555		5,243,695
Diluted		5,287,484		5,252,450		5,243,695
Unaudited Pro Forma Data:
Pro forma earnings (loss) per share:
Basic
Diluted
Pro forma weighted average shares outstanding:
Basic
Diluted

(1) Prior to January 1, 2019 and our adoption of ASU 2016-02, Leases (“ASU 2016-02”), any gains on completed sale-leaseback transactions were deferred and recognized as a reduction to aircraft rent expense over the lease term for each aircraft or engine. Due to the adoption of ASU 2016-02 on January 1, 2019, gains from sale-leaseback transactions are now recognized in full immediately upon sale as a reduction to other operating expense within the consolidated statements of operations, and are therefore no longer amortized over the life of the lease. During the year ended December 31, 2019 and 2020, the gain on sale-leaseback transactions, net was $107 million and $48 million, respectively.

	Year Ended December 31,
	2018		2019		2020
	(in millions)
Non-GAAP financial data (unaudited):
Adjusted net income (loss)(1)(1)	$	183	$	276	$	(301	)
EBITDA(1)		170		355		(332	)
Adjusted EBITDA(1)		305		387		(466	)
Adjusted EBITDAR(2)		582		755		(70	)

(1) Adjusted net income, EBITDA and Adjusted EBITDA are included as supplemental disclosures because we believe they are useful indicators of our operating performance. Derivations of net income and EBITDA are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry.

Adjusted net income, EBITDA and Adjusted EBITDA have limitations as analytical tools. Some of the limitations applicable to these measures include: Adjusted net income, EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; Adjusted net income, EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; EBITDA, and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness or possible cash requirements related to our warrants; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and other companies in our industry may calculate Adjusted net income, EBITDA and Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted net income, EBITDA and Adjusted EBITDA should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP. In addition, because derivations of Adjusted net income, EBITDA and Adjusted EBITDA are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result,

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derivations of Net income and EBITDA, including Adjusted Net Income and Adjusted EBITDA, as presented may not be directly comparable to similarly titled measures presented by other companies.

For the foregoing reasons, each of Adjusted Net Income, EBITDA and Adjusted EBITDA has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.

(2) Adjusted EBITDAR is included as a supplemental disclosure because we believe it is useful solely as a valuation metric for airlines as its calculation isolates the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by capital lease or by operating lease, each of which is presented differently for accounting purposes), and income taxes, which may vary significantly between periods and for different airlines for reasons unrelated to the underlying value of a particular airline. However, Adjusted EBITDAR is not determined in accordance with GAAP, is susceptible to varying calculations and not all companies calculate the measure in the same manner. As a result, Adjusted EBITDAR, as presented, may not be directly comparable to similarly titled measures presented by other companies. In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance since it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. Accordingly, you are cautioned not to place undue reliance on this information.

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The following table presents the reconciliation of Net income (loss) to Adjusted net income, EBITDA, Adjusted EBITDA, and Adjusted EBITDAR for the periods presented below.

	Year Ended December 31,
	2018			2019			2020
	(in millions)
Adjusted net income (loss) reconciliation (unaudited):
Net income (loss)	$	80		$	251		$	(225	)
Derivative de-designation and mark to market adjustment(a)		—			—			52
Pilot phantom equity(b)		22			5			—
Collective bargaining contract ratification(c)		88			22			—
Loss on sale of owned aircraft(d)		25			—			—
Flight attendant early out program(e)		—			5			—
CARES Act – grant recognition and employee retention credits(f)		—			—			(193	)
Write-off of deferred registration statement costs due to significant market uncertainty(g)		—			—			7
CARES Act – mark to market impact for warrants(h)		—			—			9
Adjusted net income (loss) before income taxes		215			283			(350	)
Tax benefit (expense) related to underlying adjustments		(32	)		(7	)		49
Adjusted net income (loss)	$	183		$	276		$	(301	)
EBITDA, Adjusted EBITDA and Adjusted EBITDAR reconciliation (unaudited):
Net income (loss)	$	80		$	251		$	(225	)
Plus (minus):
Interest expense		13			11			18
Capitalized interest		(9	)		(11	)		(6	)
Interest income and other		(17	)		(16	)		(5	)
Income tax expense		25			74			(147	)
Depreciation and amortization		78			46			33
EBITDA		170			355			(332	)
Plus (minus):
Derivative de-designation and mark to market adjustment(a)		—			—			52
Pilot phantom equity(b)		22			5			—
Collective bargaining contract ratification(c)		88			22			—
Loss on sale of owned aircraft(d)		25			—			—
Flight attendant early out program(e)		—			5			—
CARES Act – grant recognition and employee retention credits(f)		—			—			(193	)
Write-off of deferred registration statement costs due to significant market uncertainty(g)		—			—			7
Adjusted EBITDA		305			387			(466	)
Plus: Aircraft rent(i)		277			368			396
Adjusted EBITDAR	$	582		$	755		$	(70	)

(a) Due to the significant reduction in demand resulting from the COVID-19 pandemic, our future anticipated consumption of fuel dropped significantly and we therefore de-designated hedge accounting in March 2020 on the derivative positions where the future consumption was not deemed probable, which primarily related to our written put options on our costless collars. The $52 million charge is the result of the de-designation and the resulting mark to market impact on the quantities where fuel consumption was not deemed probable.

(b) Represents the impact of the change in value of phantom equity units pursuant to the Pilot Phantom Equity Plan. In accordance with the amended and restated phantom equity agreement, the remaining phantom equity obligation became fixed as of December 31, 2019 and is no longer subject to valuation adjustments. See “Executive Compensation—Equity Compensation Plans—Pilot Phantom Equity Plan.”

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(c) Represents (i) $75 million of costs related to a one-time contract ratification incentive, plus payroll-related taxes and certain other compensation and benefits-related accruals earned through December 31, 2018 and committed to by us as part of a tentative agreement with the union representing our pilots that was reached in December 2018 and was ratified by the pilots in January 2019 and (ii) $15 million of costs related to a one-time contract ratification incentive, plus payroll-related taxes and certain other compensation and benefits-related accruals earned through March 31, 2019 and committed to by us as part of a tentative agreement with the union representing our flight attendants that was reached in March 2019 for a contract that was ratified and became effective in May 2019, in addition to $4 million in pilot vacation accrual adjustments during the fourth quarter of 2019 as a result of the ratified agreement with the union representing our pilots specifically tied to the implementation of a preferred bidding system.

(d) Represents losses incurred on the sale of our six owned aircraft in December 2018, which enabled us to accelerate a critical part of our fleet plan by shortening our time with certain of our older less fuel-efficient aircraft. The loss was measured as the excess of the net book value of the aircraft over the sale price at the date of sale and was recognized within other operating expenses in the consolidated statements of operations. All aircraft were held for use through the date of sale.

(e) Represents expenses associated with an early out program agreed to in 2019 with our flight attendants, payable throughout 2019, 2020 and 2021.

(f) Represents the recognition of the $178 million grant received from the U.S. government for payroll support from April 2020 through September 2020 as part of the PSP under the CARES Act net of $1 million of deferred financing costs, along with $16 million of employee retention credits we qualified for under the CARES Act.

(g) Represents the write-off of our deferred initial public offering preparation costs during the first quarter of 2020 due to the impact of the COVID-19 pandemic and the resulting uncertainty in our ability to access the capital markets.

(h) Represents the mark to market adjustment to the value of the warrants issued as part of the funding provided by the U.S. Treasury under the CARES Act. This amount is a component of interest expense.

(i) Represents aircraft rent expense included in Adjusted EBITDA. See footnote (1) above under the caption “Summary Historical Consolidated Financial and Operating Data” with respect to the effect of our adoption of ASU 2016-02 on January 1, 2019.

The following table presents our historical consolidated balance sheet data as of December 31, 2020, and on a pro forma as adjusted basis to give effect to this offering and the application of the net proceeds received by us.

	As of December 31, 2020
	Actual		Pro forma As Adjusted(1)(2)
			unaudited
	(in millions)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	378
Total assets		3,554
Long-term debt, including current portion		348
Stockholders’ equity		310

(1) The unaudited adjusted pro forma consolidated balance sheet gives effect to the receipt of the estimated net proceeds by us from the sale of shares of our common stock offered by us (based on an assumed initial public offering price of $             per share, the midpoint of the price range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds received by us.

(2) Each $1.00 increase or decrease in the assumed initial public offering price of $        per share would increase or decrease, respectively, the amount of pro forma as adjusted cash, cash equivalents and restricted cash, total assets and stockholders’ equity by $        million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease, respectively, the amount of pro forma as adjusted cash, cash equivalents and restricted cash, assets and stockholders’ equity by approximately $        million (based on an assumed initial public offering price of $         per share, the midpoint of the price range as set forth on the cover of this prospectus). The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

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OPERATING STATISTICS

	Year Ended December 31,
	2018			2019			2020
Operating statistics (unaudited)(a)
Available seat miles (ASMs) (millions)		24,629			28,120			16,955
Departures		122,784			138,570			88,642
Average stage length (statute miles)		1,052			1,051			999
Block hours		341,528			389,476			235,974
Average aircraft in service		76			88			81
Aircraft - end of period		84			98			104
Average daily aircraft utilization (hours)		12.3			12.2			8.0
Passengers (thousands)		19,843			22,823			11,238
Average seats per departure		190			192			191
Revenue passenger miles (RPMs) (millions)		20,920			24,203			11,443
Load factor (%)		84.9	%		86.1	%		67.5	%
Fare revenue per passenger ($)		54.72			52.80			48.78
Non-fare passenger revenue per passenger ($)		51.20			54.33			58.66
Other revenue per passenger ($)		2.73			2.78			3.79
Total revenue per passenger ($)		108.65			109.91			111.23
Total revenue per available seat mile (RASM) (¢)		8.75			8.92			7.37
Cost per available seat mile (CASM) (¢)		8.38			7.82			9.53
CASM (excluding fuel) (¢)		5.99			5.55			7.53
CASM + net interest (¢) (b)		8.33			7.76			9.57
Adjusted CASM (¢)(b)		7.83			7.71			10.32
Adjusted CASM (excluding fuel) (¢) (b)		5.44			5.44			8.63
Adjusted CASM + net interest (¢) (b)		7.78			7.65			10.31
Fuel cost per gallon ($)		2.25			2.22			2.08
Fuel gallons consumed (thousands)		261,179			288,510			162,241
Employees (FTE)		3,978			4,935			4,974

(a) See “Glossary of Airline Terms” for definitions of terms used in this table.

(b) For a reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

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GLOSSARY OF AIRLINE TERMS

Set forth below is a glossary of industry terms used in this prospectus:

“A320 family” means, collectively, the Airbus series of single-aisle aircraft, including the A319ceo, A320ceo, A320neo, A321ceo and A321neo aircraft.

“A320neo family” means, collectively, the Airbus series of single-aisle aircraft that feature the new engine option, including the A320neo and A321neo aircraft.

“Adjusted CASM” means operating expenses, excluding special items, divided by ASMs. For a discussion of such special items and a reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

“Adjusted CASM including net interest” or “Adjusted CASM + net interest” means the sum of Adjusted CASM and Net interest expense (income) excluding special items divided by ASMs. For a discussion of such special items and a reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

“Adjusted CASM (excluding fuel)” means operating expenses less aircraft fuel expense and excluding special items, divided by ASMs. For a discussion of such special items and a reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

“Air traffic liability” or “ATL” means the value of tickets and other related fees sold in advance of travel.

“Available seat miles” or “ASMs” means the number of seats available for passengers multiplied by the number of miles the seats are flown.

“Average aircraft in service” means the average number of aircraft used in flight operations, as calculated on a daily basis.

“Average daily aircraft utilization” means block hours divided by number of days in the period divided by average aircraft.

“Average stage length” means the average number of statute miles flown per flight segment.

“Block hours” means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.

“Cash burn” means change in cash and cash equivalents during the period ($390 million decrease during 2020) adjusted to exclude (i) cash from CARES Act related debt ($183 million in 2020), payroll support grant ($178 million in 2020) and employee retention credit funding ($6 million in 2020), (ii) cash paid for ineffective derivatives ($52 million in 2020) caused by the pandemic, and (iii) pilot phantom equity settlement ($111 million in 2020) divided by days in the period. We believe that cash burn is a useful measure of liquidity consumed by our business. Our definition of cash burn may not be calculated in the same manner as similarly labeled statistics used by other airlines.

“CASM” or “unit costs” means operating expenses divided by ASMs.

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“CASM including net interest” means the sum of CASM and Net interest expense (income) divided by ASMs.

“CBA” means a collective bargaining agreement.

“DOT” means the United States Department of Transportation.

“EPA” means the United States Environmental Protection Agency.

“FAA” means the United States Federal Aviation Administration.

“Fare revenue” consists of base fares for air travel, including mileage credits redeemed under our frequent flyer program, unused and expired passenger credits, other redeemed or expired travel credits and revenue derived from charter flights.

“Fare revenue per passenger” means fare revenue divided by passengers.

“FTE” means full-time equivalent employee.

“GDS” means a Global Distribution System such as Amadeus, Sabre and Travelport, used by travel agencies and corporations to purchase tickets on participating airlines.

“LCC” means low-cost carrier.

“Load factor” means the percentage of aircraft seat miles actually occupied on a flight (RPMs divided by ASMs).

“Net interest expenses (income)” means interest expense, capitalized interest, interest income and other.

“NMB” means the National Mediation Board.

“Non-fare passenger revenue” consists of fees related to certain ancillary items such as baggage, service fees, seat selection, and other passenger-related revenue that is not included as part of base fares for travel.

“Non-fare passenger revenue per passenger” means non-fare passenger revenue divided by passengers.

“Operating revenue per ASM,” “RASM” or “unit revenue” means total operating revenue divided by ASMs.

“Other revenue” consists primarily of services not directly related to providing transportation, such as the advertising, marketing and brand elements of the Frontier Miles (formerly EarlyReturns) affinity credit card program and commissions revenue from the sale of items such as rental cars and hotels.

“Other revenue per passenger” means other revenue divided by passengers.

“Passengers” means the total number of passengers flown on all flight segments.

“Passenger revenue” consists of fare revenue and non-fare passenger revenue.

“PDP” means pre-delivery deposit payments, which are payments required by aircraft manufacturers in advance of delivery of the aircraft.

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“RASM” means total revenue divided by ASMs.

“Revenue passenger miles” or “RPMs” means the number of miles flown by passengers.

“RLA” means the United States Railway Labor Act.

“Stage-length adjustment” refers to an adjustment that can be utilized to compare CASM and RASM across airlines with varying stage lengths. All other things being equal, the same airline will have lower CASM and RASM as stage length increases since fixed and departure related costs are spread over increasingly longer average flight lengths. Therefore, as one method to facilitate comparison of these quantities across airlines (or even across the same airline for two different periods if the airline’s average stage length has changed significantly), it is common in the airline industry to settle on a common assumed stage length and then to adjust CASM and RASM appropriately. Stage-length adjusted comparisons are achieved by multiplying base CASM or RASM by a quotient, the numerator of which is the square root of the carrier’s stage length and the denominator of which is the square root of the common stage length. Stage-length adjustment techniques require judgment and different observers may use different techniques. For stage-length adjusted CASM and RASM comparisons in this prospectus, the stage length being utilized is the aircraft stage length.

“Total Revenue per passenger” means the sum of fare revenue, non-fare passenger revenue, and other revenue (collectively, “Total Revenue”) divided by passengers.

“TSA” means the United States Transportation Security Administration.

“Treasury” means the United States Department of the Treasury.

“ULCC” means ultra low-cost carrier.

“VFR” means visiting friends and relatives.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face, and many of such risks have been and will be exacerbated by the coronavirus (“COVID-19”) pandemic. If any of these risks should occur, our business, results of operations, financial condition or growth prospects could be adversely affected. In those cases, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Industry

The COVID-19 pandemic and measures to reduce its spread have had, and are expected to continue to have, a material adverse impact on our business, results of operations and financial condition.

In December 2019, a novel strain of coronavirus was reported in Wuhan, China. COVID-19 has since spread to almost every country in the world, including the United States. The World Health Organization has declared COVID-19 a pandemic. The outbreak of COVID-19 and the implementation of measures to reduce its spread have adversely impacted our business and continue to adversely impact our business in a number of ways. Multiple governments in countries we serve, principally the United States, have responded to the virus with air travel restrictions and closures or recommendations against air travel, the implementation of mandatory quarantine periods after travel, and certain countries we serve have required airlines to limit or completely stop operations. In response to the COVID-19 pandemic, we have significantly reduced capacity from our original plan and will continue to evaluate the need for further flight schedule adjustments. While we experienced a modest uptick in demand during the latter half of the second quarter and continuing into the third and fourth quarters of 2020, demand was negatively impacted by a resurgence of COVID-19 cases in certain domestic markets. The length and severity of the decline in demand due to the impacts of the COVID-19 pandemic is uncertain and, as such, we expect the adverse impact to persist in 2021. Although we have seen early signs of recovery in airline travel, there is no assurance that it will continue or the pace at which it will recover, and the recovery we anticipate may not materialize in a timely manner or at all.

In response to the impacts of the COVID-19 pandemic, beginning in March 2020, we have taken measures to address the significant cash outflows resulting from the sharp decline in demand and we continue to evaluate options should the lack of demand for air travel continue beyond the near term. During 2020, we also reduced our flight schedule to match demand levels and implemented various other initiatives to reduce costs and manage liquidity including, but not limited to:

• reducing planned headcount increases;

• reducing employee related costs, including:

• salary reductions and/or deferrals for our officers and board members;

• suspension of merit salary increases for 2020; and

• voluntary paid and unpaid leave of absence programs for employees not covered under labor arrangements, as well as certain employees covered under such arrangements, including pilots and flight attendants, that range from one month to six months;

• deferring aircraft deliveries;

• reducing discretionary expenses;

• reaching agreements with major vendors, which are primarily related to many of our aircraft and engine leases as well as airports, for deferral of payments and deliveries until later in 2020 and into 2021;

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• delaying non-essential maintenance projects and reducing or suspending other discretionary spending;

• reducing non-essential capital projects;

• securing current funding and future liquidity from the CARES Act, PSP, PSP2 and other financing sources; and

• amending certain debt covenant metrics to align with current and expected demand.

Additionally, we also outsource certain critical business activities to third parties, including our dependence on a limited number of suppliers for our aircraft and engines. As a result, we have increased our reliance on the successful implementation and execution of the business continuity planning of such third-party service providers in the current environment. If one or more of such third parties experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure event, it may have a material adverse impact on our business, results of operations and financial condition.

The extent of the impact of the COVID-19 pandemic on our business, results of operations and financial condition will depend on future developments, including the currently unknowable duration of the COVID-19 pandemic; the efficacy of COVID-19 vaccines; impact of existing and future governmental regulations, travel advisories, testing regimes, and restrictions that are imposed in response to the COVID-19 pandemic; additional reductions to our flight capacity, or a voluntary temporary cessation of all flights, that we implement in response to the COVID-19 pandemic; and the impact of the COVID-19 pandemic on consumer behavior, such as a reduction in the demand for air travel, especially in our destination cities. The potential economic impact brought on by the COVID-19 pandemic is difficult to assess or predict, and it has already caused, and is likely to result in further, significant disruptions of global economies and financial markets, which may reduce our ability to access capital on favorable terms or at all, and increase the cost of capital. In addition, a recession, depression or other sustained adverse economic event resulting from the spread of COVID-19 would materially adversely impact our business and the value of our common stock. The COVID-19 pandemic makes it more challenging for management to estimate future performance of our business, particularly over the near to medium term. A further significant decline in demand for our flights could have a materially adverse impact on our business, results of operations and financial condition.

We are depending upon a successful COVID-19 vaccine, including an efficient distribution and sufficient supply, and significant uptake by the general public in order to normalize economic conditions, the airline industry and our business operations and to realize our growth plans and business strategy. The potential efficacy and availability of a COVID-19 vaccine and the extent to which a vaccine is widely accepted is highly uncertain, and we cannot predict if or when we will be able to resume full normal operations. The failure of a vaccine, including to the extent it is not effective against any COVID-19 variants, significant unplanned adverse reactions to the vaccine, politicization of the vaccine or general public distrust of the vaccine could have an adverse effect on our business, results of operations and financial condition.

On March 27, 2020, the CARES Act was signed into law. On April 30, 2020 we entered into a Payroll Support Program Agreement with the Treasury (the “PSP Agreement”) to receive funding through the PSP over the second and third quarters of 2020. On September 28, 2020, we entered into an agreement with the Treasury for a term loan facility (“Treasury Loan”) and on January 15, 2021, we entered into an agreement with the Treasury for additional funding under the PSP2 Agreement. The funding we received is subject to significant restrictions and limitations. See “—We have agreed to certain restrictions on our business by accepting financing under the PSP and PSP2.”

The COVID-19 pandemic may also exacerbate other risks described in this “Risk Factors” section, including, but not limited to, our competitiveness, demand for our services, shifting consumer preferences and our substantial amount of outstanding indebtedness.

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We have agreed to certain restrictions on our business by accepting financing under the CARES Act.

On March 27, 2020, the CARES Act was signed into law. The CARES Act provided liquidity in the form of loans, loan guarantees, and other investments to air carriers, such as us, that incurred, or are expected to incur, covered losses such that the continued operations of the business are jeopardized, as determined by the Treasury.

On April 30, 2020, we reached an agreement with the U.S. government under which we would receive $205 million of installment funding comprised of a $174 million grant (“PSP Grant”) for payroll support for the period from April 2020 through September 30, 2020, and a $31 million unsecured 10-year, low interest loan (“PSP Promissory Note”). In addition, on September 30, 2020, the Treasury provided us with an additional disbursement under the PSP of $6 million, comprised of an additional $4 million toward the PSP Grant, and $2 million toward the PSP Promissory Note. In connection with our participation in the PSP, we also issued to the Treasury warrants pursuant to a warrant agreement to purchase up to 13,752 shares of our common stock, par value $0.001 per share, with an exercise price of $241.72 per share (the value of a share of common stock on April 9, 2020 as determined by a third-party valuation).

On September 28, 2020, we entered into a $574 million secured term loan facility with the Treasury, of which we borrowed $150 million. As of December 31, 2020, we have issued 62,055 Treasury Warrants in conjunction with the first draw on the loan. The Treasury Warrants expire in five years from the date of issuance, are transferable, have no voting rights and contain customary terms regarding anti-dilution. If the Treasury or any subsequent warrant holder exercises the Treasury Warrants, the interest of our holders of common stock would be diluted and we would be partially owned by the U.S. government, which could have a negative impact on our common stock price, and which could require increased resources and attention by our management.

On January 15, 2021, we entered into the PSP2 Agreement with the Treasury for at least an additional $140 million of payroll support funding (of which $70 million was paid on that date).

In connection with our participation in the PSP, PSP2, and the Treasury Loan, we are, and continue to be, subject to certain restrictions and limitations, including, but not limited to:

• Restrictions on repurchases of equity securities listed on a national securities exchange or payment of dividends until the later of March 31, 2022 or one year after the Treasury Loan facility is repaid;

• Requirements to maintain certain levels of scheduled services (including to destinations where there may currently be significantly reduced or no demand);

• A prohibition on involuntary terminations or furloughs of employees (except for health, disability, cause, or certain disciplinary reasons) through March 31, 2021 and the requirements to recall employees involuntarily terminated or furloughed after September 30, 2020;

• A prohibition on reducing the salary, wages, or benefits of our employees (other than our executive officers or independent contractors, or as otherwise permitted under the terms of the PSP and PSP2) through March 31, 2021;

• Limits on certain executive compensation including limiting pay increases and severance pay or other benefits upon terminations, until the later of October 1, 2022 or one year after the Treasury Loan facility is repaid;

• Limitations on the use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits; and

• Additional reporting and recordkeeping requirements relating to the PSP and PSP2 funds.

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These restrictions and requirements could materially adversely impact our business, results of operations and financial condition by, among other things, requiring us to change certain of our business practices and to maintain or increase cost levels to maintain scheduled service and employment with little or no offsetting revenue, affecting retention of key personnel and limiting our ability to effectively compete with others in our industry who may not be receiving funding and may not be subject to similar limitations.

We cannot predict whether the assistance from the Treasury through the PSP and PSP2 will be adequate to continue to pay our employees for the duration of the COVID-19 pandemic or whether additional assistance will be required or available in the future. There can be no assurance that loans or other assistance will be available through the CARES Act or any future legislation, or whether we will be eligible to receive any additional assistance, if needed.

Further, the Treasury Loan Agreement includes affirmative and negative covenants that restrict our ability to, among other things, dispose of certain assets, merge, consolidate or sell assets, incur certain additional indebtedness or pay certain dividends. In addition, we are required to maintain unrestricted cash and cash equivalents and unused commitments available under all revolving credit facilities aggregating not less than $250 million and to maintain a minimum ratio of the borrowing base of the collateral. If we do not meet the minimum collateral coverage ratio, we must either provide additional collateral to secure our obligations under the Treasury Loan Agreement or repay the loans by an amount necessary to maintain compliance with the collateral coverage ratio.

The airline industry is exceedingly competitive, and we compete against legacy network airlines, low-cost carriers and other ultra low-cost carriers; if we are not able to compete successfully in our markets, our business will be materially adversely affected.

We face significant competition with respect to routes, fares and services. Within the airline industry, we compete with legacy network carriers, low-cost carriers (“LCCs”), and ULCCs. There are presently three very large legacy network carriers in the United States, American Airlines, Delta Air Lines and United Airlines, which together with Southwest Airlines, which classifies itself as an LCC, are commonly referred to as the “Big Four” carriers. There are presently two additional legacy network carriers in the United States, Alaska Airlines and Hawaiian Airlines, which together with JetBlue Airways, which classifies itself as an LCC, are commonly referred to as the “Middle Three” carriers. Finally, there are presently three ULCCs in the United States, Frontier, Allegiant and Spirit. Competition on most of the routes we presently serve is intense, due to the large number of carriers in those markets. Furthermore, other airlines may begin service or increase existing service on routes where we currently face no or little competition. In almost all instances, our competitors are larger than us and possess significantly greater financial and other resources than we do.

The airline industry is particularly susceptible to price discounting because, once a flight is scheduled, airlines incur only nominal additional costs to provide service to passengers occupying otherwise unsold seats. Increased fare or other price competition could adversely affect our operations. Airlines typically use discount fares and other promotions to stimulate traffic during normally slower travel periods to generate cash flow and to increase revenue per available seat mile. The prevalence of discount fares can be particularly acute when a competitor has excess capacity to sell. Given the high levels of excess capacity among U.S. airlines generally as a result of the COVID-19 pandemic, we expect to face significant discounted fare competition as the U.S. market recovers. Moreover, many other airlines have unbundled their services, at least in part, by charging separately for services such as baggage and advance seat selection which previously were offered as a component of base fares. This unbundling and other cost-reducing measures could enable competitor airlines to reduce fares on routes that we serve.

In addition, airlines increase or decrease capacity in markets based on perceived profitability. If our competitors increase overall industry capacity, or capacity dedicated to a particular domestic or foreign region, market or route that we serve, it could have a material adverse impact on our business. For instance, in 2017

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there was widespread capacity growth across the United States, including in many of the markets in which we operate. In particular, during 2017, both Southwest Airlines and United Airlines increased their capacity in Denver. The domestic airline industry has often been the source of fare wars undertaken to grow market share or for other reasons, including, for example, actions by American Airlines in 2015 and United Airlines in 2017 to match fares offered in many of its markets by ULCCs, with resulting material adverse effects on the revenues of the airlines involved. The increased capacity across the United States in 2017 exacerbated the competitive pricing environment, particularly beginning in the second quarter of 2017, and this activity continued throughout 2018 and the first half of 2019. Given the decreased demand resulting from the COVID-19 pandemic, we expect significant competition, including price competition, at least in the short-term and as the U.S. market recovers. If we continue to experience increased competition our business could be materially adversely affected.

We also expect new work patterns and the increased growth of work from home will lead to increasing number of employees choosing to live remotely from their office location, which could significantly alter the historical demand levels on the routes we serve. While we believe our low fares and low costs will enable us to grow our network in new markets profitably to take advantage of new demand patterns as they arise, there can be no assurance that we will be successful in doing so or that we will be able to successfully compete with other U.S. airlines on such routes. If we fail to establish ourselves in such new markets our business could be materially adversely affected.

Our growth and the success of our ULCC business model could stimulate competition in our markets through our competitors’ development of their own ULCC strategies or new market entrants, including several potential new entrants that have announced the intention to commence operations in the relatively near future. For example, certain legacy network airlines have further segmented the cabins of their aircraft in order to enable them to offer a new tier of reduced base fares designed to be competitive with those offered by us and other ULCCs. We expect the legacy airlines to continue to match low-cost carrier and ULCC pricing on portions of their network. A competitor adopting a ULCC strategy may have greater financial resources and access to lower cost sources of capital than we do, which could enable them to execute a ULCC strategy with a lower cost structure than we can. If these competitors adopt and successfully execute a ULCC business model, our business, results of operations and financial condition could be materially adversely affected.

There has been significant consolidation within the airline industry, including, for example, the combinations of American Airlines and US Airways, Delta Air Lines and Northwest Airlines, United Airlines and Continental Airlines, Southwest Airlines and AirTran Airways, and Alaska Airlines and Virgin America. In the future, there may be additional consolidation in the airline industry. Business combinations could significantly alter industry conditions and competition within the airline industry and could enable our competitors to reduce their fares.

The extremely competitive nature of the airline industry could prevent us from attaining the level of passenger traffic or maintaining the level of fares or revenues related to non-fare services required to achieve and sustain profitable operations in new and existing markets and could impede our growth strategy, which could harm our operating results. Due to our relatively small size, we are susceptible to a fare war or other competitive activities in one or more of the markets we serve, which could have a material adverse effect on our business, results of operations and financial condition.

Our business has been and may in the future be materially adversely affected by the price and availability of aircraft fuel. Unexpected pricing of aircraft fuel or a shortage or disruption in the supply of aircraft fuel could have a material adverse effect on our business, results of operations and financial condition.

The cost of aircraft fuel is highly volatile and in recent years has generally been one of our largest individual operating expenses, accounting for 29%, 29% and 21% of our operating expenses for the years ended December 31, 2018, 2019 and 2020, respectively. High fuel prices or increases in fuel costs (or in the price of crude oil) could result in increased levels of expense, and we may not be able to increase ticket prices sufficiently

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to cover such increased fuel costs, particularly when fuel prices rise quickly. We also sell a significant number of tickets to passengers well in advance of travel, and, as a result, fares sold for future travel may not reflect such increased fuel costs. In addition, our ability to increase ticket prices to offset an increase in fuel costs is limited by the competitive nature of the airline industry and the price sensitivity associated with air travel, particularly leisure travel, and any increases in fares may reduce the general demand. Conversely, prolonged low fuel prices could limit our ability to differentiate our product and low fares from those of the legacy network airlines and LCCs, as prolonged low fuel prices could enable such carriers to, among other things, substantially decrease their costs, fly longer stages or utilize older aircraft. In addition, prolonged low fuel prices could also reduce the benefit we expect to receive from the new technology, more fuel-efficient A320neo family aircraft we operate and have on order. See also “Risks Related to Our Business—We may be subject to competitive risks due to the long-term nature of our fleet order book and the unproven new engine technology utilized by the aircraft in our order book.” Aircraft fuel expense per gallon decreased 6% in the year ended December 31, 2020 to 2.08 compared to 2019, resulting from lower demand as a result of the COVID-19 pandemic partly offset by losses on fuel hedges during 2020. Any future fluctuations in aircraft fuel prices or sustained high or low prices could have a material adverse effect on our business, results of operations and financial condition.

Our business is also dependent on the availability of aircraft fuel (or crude oil), which is not predictable. Weather-related events, natural disasters, terrorism, wars, political disruption or instability involving oil-producing countries, changes in governmental or cartel policy concerning crude oil or aircraft fuel production, labor strikes or other events affecting refinery production, transportation, taxes, marketing, environmental concerns, market manipulation, price speculation and other unpredictable events may drive actual or perceived fuel supply shortages. Shortages in the availability of, or increases in demand for, crude oil in general, other crude oil-based fuel derivatives and aircraft fuel in particular could result in increased fuel prices and could have a material adverse effect on our business, results of operations and financial condition.

As of December 31, 2020, we had no fuel cash flow hedges for future fuel consumption. Our results for the year ended December 31, 2020 include operating expenses of $52 million relating to the de-designation of fuel hedges resulting from the COVID-19 pandemic on the quantities where consumption was not deemed probable. During 2020 our hedges consisted of call options and collar structures, although we have in the past and may in the future use other instruments such as swaps on jet fuel or highly correlated commodities and fixed forward price contracts (“FFPs”) which allow us to lock in the price of jet fuel for specified quantities and at specified locations in future periods. We cannot assure you our fuel hedging program will be effective or that we will maintain a fuel hedging program. Even if we are able to hedge portions of our future fuel requirements, we cannot guarantee that our hedge contracts will provide an adequate level of protection against increased fuel costs or that the counterparties to our hedge contracts will be able to perform. Our fuel hedge contracts may contain margin funding requirements that could require us to post collateral to counterparties in the event of a significant drop in fuel prices in the future. Additionally, our ability to realize the benefit of declining fuel prices may be delayed by the impact of any fuel hedges in place, and we may record significant losses on fuel hedges during periods of declining prices. A failure of our fuel hedging strategy, significant margin funding requirements, overpaying for fuel through the use of hedging arrangements or our failure to maintain a fuel hedging program could prevent us from adequately mitigating the risk of fuel price increases and could have a material adverse effect on our business, results of operations and financial condition.

Restrictions on or increased taxes applicable to charges for non-fare products and services paid by airline passengers and burdensome consumer protection regulations or laws could harm our business, results of operations and financial condition.

For the years ended December 31, 2018, 2019 and 2020, we generated non-fare passenger revenues of $1,016 million, $1,240 million and $659 million, respectively. Our non-fare passenger revenue consists primarily of revenue generated from air travel-related services such as baggage fees, service fees, seat selection fees and other passenger-related revenue and are a component of our passenger revenue within the consolidated statements of operations. The Department of Transportation (“DOT”) has rules governing many facets of the

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airline-consumer relationship, including, for instance, consumer notice requirements, handling of consumer complaints, price advertising, lengthy tarmac delays, oversales and denied boarding process/compensation, ticket refunds, liability for loss, delay or damage to baggage, customer service commitments, contracts of carriage, consumer disclosures and the transportation of passengers with disabilities. The DOT periodically audits airlines to determine whether such airlines have violated any of the DOT rules. The DOT has conducted audits of our business and routine post-audit investigations of our business are ongoing. If the DOT determines that we are not, or have not been, in compliance with these rules or if we are unable to remain compliant, the DOT may subject us to fines or other enforcement action. For instance, in 2017 we were fined $0.4 million by the DOT for certain infractions relating to oversales, passengers with disabilities, and customer service plan rules, $40,000 for certain infractions relating to oversales disclosure and notice requirements, the domestic baggage liability limit rule, and customer service plan rules; and $1.5 million by the DOT relating to lengthy tarmac delays, which was offset by a $0.9 million credit for compensation provided to passengers on the affected flights and other delayed flights.

The DOT may also impose additional consumer protection requirements, including adding requirements to modify our websites and computer reservations system, which could have a material adverse effect on our business, results of operations and financial condition. The FAA Reauthorization Act of 2018 provided for several new requirements and rulemakings related to airlines, including but not limited to: (i) prohibition on voice communication cell phone use during certain flights, (ii) insecticide use disclosures, (iii) new training policy best practices for training regarding racial, ethnic, and religious non-discrimination, (iv) training on human trafficking for certain staff, (v) departure gate stroller check-in, (vi) the protection of pets on airplanes and service animal standards, (vii) requirements to refund promptly to passengers any ancillary fees paid for services not received, (viii) consumer complaint process improvements, (ix) pregnant passenger assistance, (x) restrictions on the ability to deny a revenue passenger permission to board or involuntarily remove such passenger from the aircraft, (xi) minimum customer service standards for large ticket agents, (xii) information publishing requirements for widespread disruptions and passenger rights, (xiii) submission of plans pertaining to employee and contractor training consistent with the Airline Passengers with Disabilities Bill of Rights, (xiv) ensuring assistance for passengers with disabilities, (xv) flight attendant duty period limitations and rest requirements, including submission of a fatigue risk management plan, (xvi) submission of policy concerning passenger sexual misconduct, (xvii) development of Employee Assault Prevention and Response Plan related to the customer service agents, (xviii) increased penalties available related to harm to passengers with disabilities or damage to wheelchairs or other mobility aids and (xix) minimum dimensions for passenger seats. The DOT also published a Notice of Proposed Rulemaking in January 2020 regarding the accessibility features of lavatories and onboard wheelchair requirements on certain single-aisle aircraft with an FAA certificated maximum capacity of 125 seats or more, training flight attendants to proficiency on an annual basis to provide assistance in transporting qualified individuals with disabilities to and from the lavatory from the aircraft seat, and providing certain information on request to qualified individuals with a disability or persons inquiring on their behalf, on the carrier’s website, and in printed or electronic form on the aircraft concerning the accessibility of aircraft lavatories. The DOT also recently published Final Rules regarding traveling by air with service animals and defining unfair or deceptive practices. The DOT also recently published a Final Rule clarifying that the maximum amount of denied boarding compensation that a carrier may provide to a passenger denied boarding involuntarily is not limited, prohibiting airlines from involuntarily denying boarding to a passenger after the passenger’s boarding pass has been collected or scanned and the passenger has boarded (subject to safety and security exceptions), raising the liability limits for denied boarding compensation, and raising the liability limit for mishandled baggage in domestic air transportation. The U.S. Congress and the DOT have examined the increasingly common airline industry practice of unbundling the pricing of certain products and ancillary services, a practice that is a core component of our business strategy. If new laws or regulations are adopted that make unbundling of airline products and services impermissible, or more cumbersome or expensive, or if new taxes are imposed on non-fare passenger revenues, our business, results of operations and financial condition could be harmed. Congressional, Federal agency and other government scrutiny may also change industry practice or the public’s willingness to pay for non-fare ancillary services. See also “—We are subject to extensive and increasing regulation by the Federal Aviation Administration, the Department of Transportation, the Transportation Security Administration, U.S. Customs and Border Protection and other U.S. and foreign governmental agencies, compliance with which could cause us to incur increased costs and adversely affect our business and financial results.”

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The demand for airline services is highly sensitive to changes in economic conditions, and another recession or similar economic downturn in the United States or globally would further weaken demand for our services and have a material adverse effect on our business, results of operations and financial condition, particularly since a substantial portion of our customers travel for leisure or other non-essential purposes.

The demand for travel services is affected by U.S. and global economic conditions. Unfavorable economic conditions, such as those resulting from reaction to the COVID-19 pandemic, have historically reduced airline travel spending. For most cost-conscious leisure travelers, travel is a discretionary expense, and though we believe ULCCs are best suited to attract travelers during periods of unfavorable economic conditions as a result of such carriers’ low base fares, travelers have often elected to replace air travel at such times with various other forms of ground transportation or have opted not to travel at all. Likewise, during periods of unfavorable economic conditions, businesses have deferred air travel or forgone it altogether. Travelers have also reduced spending by purchasing fewer non-fare services, which can result in a decrease in average revenue per passenger. Because airlines typically have relatively high fixed costs as a percentage of total costs, much of which cannot be mitigated during periods of lower demand for air travel, the airline business is particularly sensitive to changes in U.S. and global economic conditions. A reduction in the demand for air travel due to unfavorable economic conditions also limits our ability to raise fares to counteract increased fuel, labor and other costs. If U.S. or global economic conditions are unfavorable or uncertain for an extended period of time, it would have a material adverse effect on our business, results of operations and financial condition. In particular, the ongoing COVID-19 pandemic and associated decline in economic activity and increase in unemployment levels are expected to have a severe and prolonged effect on the global economy generally and, in turn, is expected to depress demand for air travel into the foreseeable future. Due to the uncertainty surrounding the duration and severity of the COVID-19 pandemic, we can provide no assurance as to when and at what pace demand for air travel will return to pre-pandemic levels, if at all.

We face competition from air travel substitutes.

In addition to airline competition from legacy network airlines, LCCs and other ULCCs, we also face competition from air travel substitutes, partially as a result of the COVID-19 pandemic. On our domestic routes, particularly those with shorter stage lengths, we face competition from some other transportation alternatives, such as bus, train or automobile. In addition, technology advancements may limit the demand for air travel. For example, video teleconferencing, virtual and augmented reality and other methods of electronic communication may reduce the need for in-person communication and add a new dimension of competition to the industry as travelers seek lower-cost substitutes for air travel. If we are unable to stimulate demand for air travel with our low base fares or if we are unable to adjust rapidly in the event the basis of competition in our markets changes, it could have a material adverse effect on our business, results of operations and financial condition.

Threatened or actual terrorist attacks or security concerns, particularly involving airlines, could have a material adverse effect on our business, results of operations and financial condition.

Past terrorist attacks or attempted attacks, particularly those against airlines, have caused substantial revenue losses and increased security costs, and any actual or threatened terrorist attack or security breach, even if not directly against an airline, could have a material adverse effect on our business, results of operations and financial condition. For instance, enhanced passenger screening, increased regulation governing carry-on baggage and other similar restrictions on passenger travel may further increase passenger inconvenience and reduce the demand for air travel. In addition, increased or enhanced security measures have tended to result in higher governmental fees imposed on airlines, resulting in higher operating costs for airlines, which we may not be able to pass on to consumers in the form of higher prices. Terrorist attacks made directly on an airline, particularly in the U.S., or the fear of such attacks or other hostilities (including elevated national threat warnings or selective cancellation or redirection of flights due to terror threats), would have a negative impact on the airline industry and have a material adverse effect on our business, results of operations and financial condition.

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Airlines are often affected by factors beyond their control, including: air traffic congestion at airports; air traffic control inefficiencies; government shutdowns; major construction or improvements at airports; aircraft and engine defects; FAA grounding of aircraft; adverse weather conditions; increased security measures; new travel-related taxes; or the outbreak of disease, any of which could have a material adverse effect on our business, results of operations and financial condition.

Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, major construction or improvements at airports at which we operate, increased security measures, new travel-related identification requirements, taxes and fees, adverse weather conditions, natural disasters and the outbreak of disease. Flight delays caused by these factors may frustrate passengers and may increase costs and decrease revenues, which in turn could adversely affect profitability. The federal government controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The federal government also controls airport security. The air traffic control system, which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. and foreign air-traffic controllers often rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect routes resulting in delays. In addition, federal government slow-downs or shutdowns may further impact the availability of federal resources, such as air traffic controllers and security personnel, necessary to provide air traffic control and airport security, which may cause delays or cancellations of flights or may impact our ability to take delivery of aircraft or expand our route network or airport footprint. Further, implementation of the Next Generation Air Transport System, or NextGen, by the FAA could result in changes to aircraft routings and flight paths that could lead to increased noise complaints and other lawsuits, resulting in increased costs. The U.S. Congress could enact legislation that could impose a wide range of consumer protection requirements, which could increase our costs of doing business.

In addition, airlines may also experience disruptions to their operations as a result of the aircraft and engines they operate, such as manufacturing defects, spare part shortages and other factors beyond their control. For example, regulators ordered the grounding of the entire worldwide 737 MAX fleet in March 2019. While such order did not have a direct impact on our fleet, which is comprised entirely of Airbus A320 family aircraft, any similar or other disruption to our operations could have a material adverse effect on our business, results of operations and financial condition.

Adverse weather conditions and natural disasters, such as hurricanes, thunderstorms, blizzards, snowstorms or earthquakes, can cause flight cancellations or significant delays. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than other larger airlines that may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers. Because of our high utilization, point-to-point network, operational disruptions can have a disproportionate impact on our ability to recover. In addition, many airlines re-accommodate their disrupted passengers on other airlines at prearranged rates under flight interruption manifest agreements. We have been unsuccessful in procuring any of these agreements with our peers, which makes our recovery from disruption more challenging than for larger airlines that have these agreements in place. Similarly, outbreaks of contagious diseases, such as COVID-19, ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu, pertussis (whooping cough) and zika virus, have in the past and may in the future result in significant decreases in passenger traffic and the imposition of government restrictions in service, resulting in a material adverse impact on the airline industry. New identification requirements, such as the implementation of rules under the REAL ID Act of 2005, and increased travel taxes, such as those provided in the Travel Promotion Act, enacted in March 2010, which charges visitors from certain countries a $10 fee every two years to travel into the United States to subsidize certain travel promotion efforts, could also result in decreases in passenger traffic. Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations and financial condition.

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Risks associated with our presence in international emerging markets, including political or economic instability, and failure to adequately comply with existing legal requirements, may materially adversely affect us.

Some of our target growth markets include countries with less developed economies, legal systems, financial markets and business and political environments are vulnerable to economic and political disruptions, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets served by us now or in the future and the resulting instability may have a material adverse effect on our business, results of operations and financial condition.

We emphasize compliance with all applicable laws and regulations and have implemented and continue to implement and refresh policies, procedures and certain ongoing training of our employees, third-party specialists and partners with regard to business ethics and key legal requirements; however, we cannot assure you that our employees, third-party specialists or partners will adhere to our code of ethics, other policies or other legal requirements. If we fail to enforce our policies and procedures properly or maintain adequate recordkeeping and internal accounting practices to record our transactions accurately, we may be subject to sanctions. In the event we believe or have reason to believe our employees, third-party specialists or partners have or may have violated applicable laws or regulations, we may incur investigation costs, potential penalties and other related costs which in turn may have a material adverse effect on our reputation, business, results of operations and financial condition.

Increases in insurance costs or reductions in insurance coverage may have a material adverse effect on our business, results of operations and financial condition.

If any of our aircraft were to be involved in a significant accident or if our property or operations were to be affected by a significant natural catastrophe or other event, we could be exposed to material liability or loss. If we are unable to obtain sufficient insurance (including aviation hull and liability insurance and property and business interruption coverage) to cover such liabilities or losses, whether due to insurance market conditions or otherwise, our business, results of operations and financial condition could be materially adversely affected.

We currently obtain third-party war risk (terrorism) insurance as part of our commercial aviation hull and liability policy and additional third-party war risk (terrorism) insurance through a separate policy with a different private insurance company. Our current third-party war risk (terrorism) insurance from commercial underwriters excludes nuclear, radiological and certain other events. If we are unable to obtain adequate war risk insurance or if an event not covered by the insurance we maintain were to take place, our business, results of operations and financial condition could be materially adversely affected.

A decline in or temporary suspension of the funding or operations of the U.S. federal government or its agencies may adversely affect our future operating results or negatively impact the timing and implementation of our growth prospects.

The success of our operations and our future growth is dependent on a number of federal agencies, specifically the FAA, DOT and TSA. In the event of a slowdown or shutdown of the federal government, such as those experienced in October 2013 and December 2018 through January 2019, certain functions of these and other federal agencies may be significantly diminished or completely suspended for an indefinite period of time, the conclusion of which is outside of our control. During such periods, it may not be possible for us to obtain the operational approvals and certifications required for events that are critical to the successful execution of our operational strategy, such as the delivery of new aircraft or the implementation of new routes. Additionally, there may be an impact to critical airport operations, particularly security, air traffic control and other functions that could cause airport delays, flight cancellations and negatively impact consumer demand for air travel.

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Furthermore, once a period of slowdown or government shutdown has concluded, there will likely be an operational backlog within the federal agencies, that may extend the length of time that such events continue to negatively impact our business, results of operations and financial condition beyond the end of such period.

Risks Related to Our Business

If we fail to implement our business strategy successfully, our business, results of operations and financial condition will be materially adversely affected.

Our growth strategy includes significantly expanding our fleet and expanding the number of markets we serve. We select target markets and routes where we believe we can achieve profitability within a reasonable timeframe, and we only continue operating on routes where we believe we can achieve and maintain our desired level of profitability. When developing our route network, we focus on gaining market share on routes that have been underserved or are served primarily by higher cost airlines where we believe we have a competitive cost advantage. Effectively implementing our growth strategy is critical for our business to achieve economies of scale and to sustain or increase our profitability. We face numerous challenges in implementing our growth strategy, including our ability to:

• sustain our relatively low unit operating costs;

• continue to realize attractive revenue performance;

• achieve and maintain profitability;

• maintain a high level of aircraft utilization; and

• access airports located in our targeted geographic markets where we can operate routes in a manner that is consistent with our cost strategy.

In addition, in order to successfully implement our growth strategy, which includes the planned growth of our fleet from 104 aircraft as of December 31, 2020 to a fleet of 165 by the end of 2025, we will require access to a large number of gates and other services at airports we currently serve or may seek to serve. We believe there are currently significant restraints on gates and related ground facilities at many of the most heavily utilized airports in the United States, in addition to the fact that three major domestic airports (JFK and LaGuardia in New York and Reagan National in Washington, D.C.) require government-controlled take-off or landing “slots” to operate at those airports. As a result, if we are unable to obtain access to a sufficient number of slots, gates or related ground facilities at desirable airports to accommodate our growing fleet, we may be unable to compete in those markets, our aircraft utilization rate could decrease, and we could suffer a material adverse effect on our business, results of operations and financial condition.

Our growth is also dependent upon our ability to maintain a safe and secure operation, including enhanced safety procedures as a result of the COVID-19 pandemic, and will require additional personnel, equipment and facilities as we continue to induct new aircraft and continue to execute our growth plan. In addition, we will require additional third-party personnel for services we do not undertake ourselves. An inability to hire and retain personnel, secure the required equipment and facilities in a cost-effective and timely manner, efficiently operate our expanded facilities or obtain the necessary regulatory approvals may adversely affect our ability to achieve our growth strategy, which could harm our business. Furthermore, expansion to new markets may have other risks due to factors specific to those markets. We may be unable to foresee all of the existing risks upon entering certain new markets or respond adequately to these risks, and our growth strategy and our business may suffer as a result. In addition, our competitors may reduce their fares and/or offer special promotions following our entry into a new market. We cannot assure you that we will be able to profitably expand our existing markets or establish new markets.

Some of our target growth markets outside of the United States include countries with less developed economies that may be vulnerable to unstable economic and political conditions, such as significant fluctuations

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in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets served by us and the resulting instability may adversely affect our ability to implement our growth strategy.

Our low-cost structure is one of our primary competitive advantages, and many factors could affect our ability to control our costs.

Our low-cost structure is one of our primary competitive advantages. However, we have limited control over some of our costs. For example, we have limited control over the price and availability of aircraft fuel, aviation insurance, the acquisition and cost of aircraft, airport and related infrastructure costs, taxes, the cost of meeting changing regulatory requirements and our cost to access capital or financing. In addition, the compensation and benefit costs applicable to a significant portion of our employees are established by the terms of collective bargaining agreements, which could result in increased labor costs. See “— Increased labor costs, union disputes, employee strikes and other labor-related disruption may adversely affect our business, results of operations and financial condition.” We cannot guarantee we will be able to maintain our relatively low costs. If our costs increase and we are no longer able to maintain a competitive cost structure, it could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to grow or maintain our unit revenues or maintain our non-fare revenues.

A key component of our Low Fares Done Right strategy is attracting customers with low fares and garnering repeat business by delivering a high-quality, family-friendly customer experience with a more upscale look and feel than traditionally experienced on ULCCs in the United States. We intend to continue to differentiate our brand and product in order to expand our loyal customer base and grow or maintain our unit revenues and maintain our non-fare revenues. The rising cost of aircraft and engine maintenance may impair our ability to offer low-cost fares resulting in reduced revenues. Differentiating our brand and product has required and will continue to require significant investment, and we cannot assure you that the initiatives we have implemented will continue to be successful or that the initiatives we intend to implement will be successful. If we are unable to maintain or further differentiate our brand and product from the other U.S. ULCCs, our market share could decline, which could have a material adverse effect on our business, results of operations and financial condition. We may also not be successful in leveraging our brand and product to stimulate new demand with low base fares or gain market share from the legacy airlines, particularly if the significant excess capacity caused by the COVID-19 pandemic persists.

In addition, our business strategy includes maintaining our portfolio of desirable, value-oriented, non-fare products and services. However, we cannot assure you that passengers will continue to perceive value in the non-fare products and services we currently offer and regulatory initiatives could adversely affect non-fare revenue opportunities. Failure to maintain our non-fare revenues would have a material adverse effect on our business, results of operations and financial condition. Furthermore, if we are unable to maintain our non-fare revenues, we may not be able to execute our strategy to continue to lower base fares in order to stimulate demand for air travel.

Increased labor costs, union disputes, employee strikes and other labor-related disruption, may adversely affect our business, results of operations and financial condition.

Our business is labor intensive, with labor costs representing approximately 21%, 24% and 33% of our total operating costs for the years ended December 31, 2018, 2019 and 2020, respectively. As of December 31, 2020, approximately 88% of our workforce was represented by labor unions. We have recently ratified labor agreements with several of the labor unions representing our employees and in March 2019 we reached a tentative agreement with the union representing our flight attendants, which was ratified on May 15, 2019. See

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“Business—Employees.” We cannot assure you that our labor costs going forward will remain competitive or that any new agreements into which we enter will not have terms with higher labor costs or that the negotiations of such labor agreements will not result in any work stoppages.

Relations between air carriers and labor unions in the United States are governed by the RLA. Under the RLA, collective bargaining agreements generally contain “amendable dates” rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the NMB. This process continues until either the parties have reached agreement on a new collective bargaining agreement, or the parties have been released to “self-help” by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.

From June to November 2018, we experienced disruptions to our flight operations during our labor negotiations with the union representing our pilots, Air Line Pilots Association (“ALPA”), which materially impacted our business and results of operations for the period. Upon reaching a tentative agreement with ALPA in December 2018, our flight operations returned to normal. However, we are unable to determine the extent to which this period of prolonged disruption may have harmed our reputation or the length of time it may take for our business to recover from such harm, if ever. In addition, the agreement, which became effective in January 2019, included a significant increase in the annual compensation of our pilots as well as a one-time ratification incentive payment to our pilots of $75 million, plus payroll related taxes. We can provide no assurance that we will not experience another operational disruption resulting from any future negotiations or disagreements with our pilots, nor can we provide assurance that we will not experience an operational disruption as a result of negotiations or disagreements with any of our other union-represented employee groups. In addition, we cannot provide any estimate with regard to the amount or probability of future compensation increases, ratification incentives or other costs that may come as a result of future negotiations with our pilots or our other union represented groups. Future operational disruptions or other costs related to labor negotiations, including reputational harm that may come as a result of such disruptions, if any, may have a material adverse impact on our business, results of operations and financial condition.

In addition, the terms and conditions of our future collective bargaining agreements may be affected by the results of collective bargaining negotiations at other airlines that may have a greater ability, due to larger scale, greater efficiency, superior profitability or other factors, to bear higher costs than we can. One or more of our competitors may also significantly reduce their labor costs, thereby providing them with a competitive advantage over us. Our labor costs may also increase in connection with our growth and we could also become subject to additional collective bargaining agreements in the future as non-unionized workers may unionize. The occurrence of any such event may have a material adverse impact on our business, results of operations and financial condition.

Our inability to expand or operate reliably or efficiently out of airports where we maintain a large presence could have a material adverse effect on our business, results of operations and financial condition.

We are highly dependent on markets served from airports that are significant to our business, including Denver, Orlando and Las Vegas, as well as high-traffic locations, such as Philadelphia, Cleveland, Tampa, Chicago, Fort Myers and Atlanta. Our results of operations may be affected by actions taken by governmental or other agencies or authorities having jurisdiction over our operations at these and other airports, including, but not limited to:

• increases in airport rates and charges;

• limitations on take-off and landing slots, airport gate capacity or other use of airport facilities;

• termination of our airport use agreements, some of which can be terminated by airport authorities with little notice to us;

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• increases in airport capacity that could facilitate increased competition;

• international travel regulations such as customs and immigration;

• increases in taxes;

• changes in the law that affect the services that can be offered by airlines, in general and in particular markets or at particular airports;

• restrictions on competitive practices;

• the adoption of statutes or regulations that impact or impose additional customer service standards and requirements, including security standards and requirements; and

• the adoption of more restrictive locally imposed noise regulations or curfews.

Our existing lease at Denver International Airport expires in December 2021 with an option to extend for two additional one-year periods. We cannot assure you that renewal of the lease will occur on acceptable terms or at all, or that the new lease will not include additional or increased fees. In general, any changes in airport operations could have a material adverse effect on our business, results of operations and financial condition.

Our reputation and business could be adversely affected in the event of an emergency, accident or similar public incident involving our aircraft or personnel.

We are exposed to potential significant losses and adverse publicity in the event that any of our aircraft or personnel is involved in an emergency, accident, terrorist incident or other similar public incident, which could expose us to significant reputational harm and potential legal liability. In addition, we could face significant costs or lost revenues related to repairs or replacement of a damaged aircraft and its temporary or permanent loss from service. We cannot assure you that we will not be affected by such events or that the amount of our insurance coverage will be adequate in the event such circumstances arise, and any such event could cause a substantial increase in our insurance premiums. In addition, any future emergency, accident or similar incident involving our aircraft or personnel, even if fully covered by insurance or even if it does not involve our airline, may create an adverse public perception about our airline or that the equipment we fly is less safe or reliable than other transportation alternatives, or, in the case of our aircraft, could cause us to perform time-consuming and costly inspections on our aircraft or engines, any of which could have a material adverse effect on our business, results of operations and financial condition.

Negative publicity regarding our customer service could have a material adverse effect on our business, results of operations and financial condition.

Our business strategy includes the differentiation of our brand and product from the other U.S. airlines, including other ULCCs, in order to increase customer loyalty and drive future ticket sales. We intend to accomplish this by continuing to offer passengers dependable customer service. However, in the past, we have experienced a relatively high number of customer complaints related to, among other things, our customer service and reservations and ticketing systems, including related to our COVID-19 related refund policy. Passenger complaints, together with reports of lost baggage, delayed and cancelled flights, and other service issues, are reported to the public by the DOT. In addition, we could become subject to complaints about our booking practices. For instance, in 2017 we were fined $0.4 million by the DOT for certain infractions relating to oversales, rules related to passengers with disabilities, customer service plan rules, $40,000 for certain infractions relating to oversales disclosure and notice requirements, domestic baggage liability limit rule, and customer service plan rules; and $1.5 million by the DOT relating to length tarmac delays, which was offset by a $0.9 million credit for compensation provided to passengers on the affected flights and other delayed flights. If we do not meet our customers’ expectations with respect to reliability and service, our brand and product could be negatively impacted, which could result in customers deciding not to fly with us and adversely affect our business and reputation.

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We rely on maintaining a high daily aircraft utilization rate to implement our low-cost structure, which makes us especially vulnerable to flight delays, flight cancellations, aircraft unavailability or unplanned reductions in demand such as has been caused by the COVID-19 pandemic.

We have maintained a high daily aircraft utilization rate prior to the COVID pandemic and expect our utilization rate to increase as the U.S. market begins to recover from the pandemic. Our average daily aircraft utilization was 12.3 hours, 12.2 hours and 8.0 hours for the years ended December 31, 2018, 2019, and 2020, respectively. Aircraft utilization is the average amount of time per day that our aircraft spend carrying passengers. Part of our business strategy is to maximize revenue per aircraft through high daily aircraft utilization, which is achieved, in part, by quick turnaround times at airports so we can fly more hours on average in a day. Aircraft utilization is reduced by delays and cancellations caused by various factors, many of which are beyond our control, including air traffic congestion at airports or other air traffic control problems or outages, labor availability, adverse weather conditions, increased security measures or breaches in security, international or domestic conflicts, terrorist activity, or other changes in business conditions. A significant portion of our operations are concentrated in markets such as Denver, the Northeast and northern Midwest regions of the United States, which are particularly vulnerable to weather, airport traffic constraints and other delays, particularly in the winter months. In addition, pulling aircraft out of service for unscheduled and scheduled maintenance may materially reduce our average fleet utilization and require that we re-accommodate passengers or seek short-term substitute capacity at increased costs. Further, an unplanned reduction in demand such as has been caused by the COVID-19 pandemic reduces the utilization of our fleet and result in a related increase in unit costs, which may be material. Due to the relatively small size of our fleet, our point-to-point network and high daily aircraft utilization rate, the unexpected unavailability of one or more aircraft and resulting reduced capacity or even a modest decrease in demand could have a material adverse effect on our business, results of operations and financial condition.

It has only been a limited period since our current business and operating strategy has been implemented.

Following our acquisition by an investment fund managed by Indigo, an affiliate of Indigo Partners, in 2013 and the implementation of our current business and operating strategy in 2014, we recorded net income of $80 million and $251 million for the years ended December 31, 2018 and 2019, and net loss of $225 million for the year ended December 31, 2020, respectively, which, with respect to 2018 and 2019, are higher levels of net income than we had achieved prior to our acquisition. While we recorded an annual profit for the years ended December 31, 2018 and 2019, we recorded a net loss for the year ended December 31, 2020 and we cannot assure you that we will be able to sustain or increase profitability on a quarterly or an annual basis in future periods. In turn, this may cause the trading price of our common stock to decline and may materially adversely affect our business.

We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.

We are subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise, including those relating to emissions to the air, discharges (including storm water discharges) to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. We are or may be subject to new or proposed laws and regulations that may have a direct effect (or indirect effect through our third-party specialists or airport facilities at which we operate) on our operations. In addition, U.S. airport authorities are exploring ways to limit de-icing fluid discharges. Any such existing, future, new or potential laws and regulations could have an adverse impact on our business, results of operations and financial condition.

Similarly, we are subject to environmental laws and regulations that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation

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costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of wastes directly attributable to us.

In addition, the International Civil Aviation Organization (“ICAO”) and jurisdictions around the world have adopted noise regulations that require all aircraft to comply with noise level standards, and governmental authorities in several U.S. and foreign cities are considering or have already implemented aircraft noise reduction programs, including the imposition of overnight curfews and limitations on daytime take-offs and landings. Compliance with existing and future environmental laws and regulations, including emissions limitations and more restrictive or widespread noise regulations, that may be applicable to us could require significant expenditures, increase our cost base and have a material adverse effect on our business, results of operations and financial condition, and violations thereof can lead to significant fines and penalties, among other sanctions.

We generally participate with other airlines in fuel consortia and fuel committees at our airports, which agreements generally include cost-sharing provisions and environmental indemnities that are generally joint and several among the participating airlines. Any costs (including remediation and spill response costs) incurred by such fuel consortia could also have an adverse impact on our business, results of operations and financial condition.

We are subject to risks associated with climate change, including increased regulation of our CO₂ emissions, changing consumer preferences and the potential increased impacts of severe weather events on our operations and infrastructure.

Efforts to transition to a low-carbon future have increased the focus by global, regional and national regulators on climate change and greenhouse gas (“GHG”) emissions, including CO2 emissions. In particular, ICAO has adopted rules to implement the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) which will require us to address the growth in CO2 emissions of a significant majority of our international flights. For more information on CORSIA, see “Business—Government Regulation—Environmental Regulation.”

At this time, the costs of complying with our future obligations under CORSIA are uncertain, primarily because it is difficult to estimate the return of demand for international air travel during and in the recovery from the COVID-19 pandemic. There is also significant uncertainty with respect to the future supply and price of carbon offset credits and sustainable or lower carbon aircraft fuels that could allow us to reduce our emissions of CO2. In addition, we will not directly control our CORSIA compliance costs through 2029 because those obligations are based on the growth in emissions of the global aviation sector and begin to incorporate a factor for individual airline operator emissions growth beginning in 2030. Due to the competitive nature of the airline industry and unpredictability of the market for air travel, we can offer no assurance that we may be able to increase our fares, impose surcharges or otherwise increase revenues or decrease other operating costs sufficiently to offset our costs of meeting obligations under CORSIA.

In the event that CORSIA does not come into force as expected, we and other airlines could become subject to an unpredictable and inconsistent array of national or regional emissions restrictions, creating a patchwork of complex regulatory requirements that could affect global competitors differently without offering meaningful aviation environmental improvements. Concerns over climate change are likely to result in continued attempts by municipal, state, regional, and federal agencies to adopt requirements or change business environments related to aviation that, if successful, may result in increased costs to the airline industry and us. In addition, several countries and U.S. states have adopted or are considering adopting programs, including new taxes, to regulate domestic GHG emissions. Finally, certain airports have adopted, and others could in the future adopt, GHG emission or climate-related goals that could impact our operations or require us to make changes or investments in our infrastructure.

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All such climate change-related regulatory activity and developments may adversely affect our business and financial results by requiring us to reduce our emissions, make capital investments to purchase specific types of equipment or technologies, purchase carbon offset credits, or otherwise incur additional costs related to our emissions. Such activity may also impact us indirectly by increasing our operating costs, including fuel costs.

In addition, in January 2021, the EPA finalized GHG emission standards for new aircraft engines designed to implement the ICAO standards on the same timeframe contemplated by ICAO. Like the ICAO standards, the final EPA standards would not apply to engines on in-service aircraft. The final standards have been challenged by several states and environmental groups, and the Biden administration has announced plans to review these final standards along with others issued by the prior administration. The outcome of the legal challenge and administrative review cannot be predicted at this time.

Growing recognition among consumers of the dangers of climate change may mean some customers choose to fly less frequently or fly on an airline they perceive as operating in a manner that is more sustainable to the climate. Business customers may choose to use alternatives to travel, such as virtual meetings and workspaces. Greater development of high-speed rail in markets now served by short-haul flights could provide passengers with lower-carbon alternatives to flying with us. Our collateral to secure loans, in the form of aircraft, spare parts and airport slots, could lose value as customer demand shifts and economies move to low-carbon alternatives, which may increase our financing cost.

Finally, the potential acute and chronic physical effects of climate change, such as increased frequency and severity of storms, floods, fires, sea-level rise, excessive heat, longer-term changes in weather patterns and other climate-related events, could affect our operations, infrastructure and financial results. Operational impacts, such as the canceling of flights, could result in loss of revenue. We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to predict accurately the materiality of any potential losses or costs associated with the physical effects of climate change.

We are highly dependent upon our cash balances and operating cash flows.

As of December 31, 2020, we had $963 million of total available liquidity, including $378 million of cash and cash equivalents, $424 million available to borrow under the Treasury Loan facility, and a $161 million income tax receivable, primarily resulting from our net operating losses generated in 2020 and expected to be collected in 2021. Furthermore, we have access to a facility to finance a portion of certain aircraft PDPs from which we had drawn $141 million as of December 31, 2020. As of December 31, 2020, our PDP Financing Facility enables us to borrow up to an aggregate of $150 million under a secured, revolving line of credit. In addition, we have a pre-purchased miles facility from which we had drawn $15 million on as of December 31, 2020 and, based on our agreement under the Treasury Loan facility, we are restricted from accessing additional amounts until full repayment and cancellation of the Treasury Loan. Following such date, the amount available under the pre-purchased miles facility will be based on the aggregate amount of fees payable by Barclays to us for pre-purchased miles on a calendar year basis, up to an aggregate maximum amount of $200 million. These facilities are not adequate to finance our operations, and thus we will continue to be dependent on our operating cash flows (if any) and cash balances to fund our operations, provide capital reserves and to make scheduled payments on our aircraft-related fixed obligations, including substantial PDPs related to the aircraft we have on order. In addition, we have sought, and may continue to seek, financing from other available sources to fund our operations in order to mitigate the impact of the COVID-19 pandemic on our financial position and operations, including through the payroll support program or loan program with the Treasury.

Subsequent to December 31, 2020, we entered into the PSP2 Agreement, which is expected to provide us with an incremental $140 million in liquidity. We received the first installment in the amount of $70 million on January 15, 2021.

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During the fourth quarter of 2020, we amended our pre-delivery credit facility to provide for a deferral of the fixed charge coverage ratio requirement (the “FCCR Test”) until the first quarter of 2022. If the FCCR Test is not maintained, we are required to test the loan to collateral ratio for the underlying aircraft in the credit facility that are subject to financing (the “LTV Test”) and make any pre-payments or post additional collateral required in order to reduce the loan to value on each aircraft in the credit facility that are subject to financing below a ratio threshold. The LTV Test is largely dependent on the appraised fair value of the underlying aircraft subject to financing. If the LTV Test was required to be performed, we do not expect that there would be any material required pre-payment of the pre delivery credit facility or posting of additional collateral. Additionally, we have also obtained a waiver of relief for the covenant provisions through the first quarter of 2021 related to one of our credit card processors that represents less than 10% of total revenues, which may require future waivers or an amendment to existing covenants to reflect the downturn due to the COVID-19 pandemic. We expect to seek an amendment or waiver, refinance the indebtedness subject to covenants or take other mitigating actions prior to any potential breaches that are not expected to have a material impact to our liquidity and financial position.

As of December 31, 2020, we were not subject to any credit card holdbacks, although if we fail to maintain certain liquidity and other financial covenants, our credit card processors have the right to hold back credit card remittances to cover our obligations to them, which would result in a reduction of unrestricted cash that could be material. In addition, while we recently have been able to arrange aircraft lease financing that does not require that we maintain a maintenance reserve account, we are required by some of our aircraft leases, and could in the future be required, to fund reserves in cash in advance for scheduled maintenance to act as collateral for the benefit of lessors. In those circumstances, a portion of our cash is therefore unavailable until after we have completed the scheduled maintenance in accordance with the terms of the operating leases. Based on the age of our fleet and our growth strategy, we expect these maintenance deposits to decrease as we enter into operating leases for newly-acquired aircraft that do not require reserves. If we fail to generate sufficient funds from operations to meet our operating cash requirements or do not obtain a line of credit, other borrowing facility or equity financing, we could default on our operating lease and fixed obligations. Our inability to meet our obligations as they become due would have a material adverse effect on our business, results of operations and financial condition.

Our ability to obtain financing or access capital markets may be limited.

We have significant obligations to purchase aircraft and spare engines that we have on order from Airbus, CFM International, an affiliate of General Electric Company, and Pratt & Whitney. As of December 31, 2020, we had an obligation to purchase 156 A320neo family aircraft by the end of 2028, one of which had a committed operating lease. We intend to evaluate financing options for the remaining aircraft. There are a number of factors that may affect our ability to raise financing or access the capital markets in the future, including our liquidity and credit status, our operating cash flows, market conditions in the airline industry, U.S. and global economic conditions, the general state of the capital markets and the financial position of the major providers of commercial aircraft financing. We cannot assure you that we will be able to source external financing for our planned aircraft acquisitions or for other significant capital needs, and if we are unable to source financing on acceptable terms, or unable to source financing at all, our business could be materially adversely affected. To the extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our business strategy or otherwise constrain our growth and operations.

We may be subject to competitive risks due to the long-term nature of our fleet order book and the unproven new engine technology utilized by the aircraft in our order book.

At present, we have existing aircraft purchase commitments through 2028, all of which are for Airbus A320neo family aircraft. In response to the COVID-19 pandemic, we came to an agreement with Airbus to defer four deliveries into 2021 and took nine less deliveries during the year ended December 31, 2020 as compared to the prior year period. In addition, of the 156 A320neo family aircraft we have committed to purchase by 2028, 22 will be equipped with the LEAP engine manufactured by CFM International, an affiliate of General Electric Company. The remaining 134 aircraft on our order book will be equipped with Pratt & Whitney GTF engines.

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The A320neo family includes next generation engine technology as well as aerodynamic refinements, large curved sharklets, weight savings, a new aircraft cabin with larger hand luggage spaces and an improved air purification system. While the A320neo family represents the latest step in the modernization of the A320 family of aircraft, the aircraft only entered commercial service in January 2016, and we are one of the first airlines to utilize the A320neo and LEAP engine. As a result, we are subject to those risks commonly associated with the initial introduction of a new aircraft type, including with respect to the A320neo’s actual, sustained fuel efficiency and other projected cost savings, which may not be realized, as well as the reliability and maintenance costs associated with a new aircraft and engine. In addition, it could take several years to determine whether the reliability and maintenance costs associated with a new aircraft and engine would have a significant impact on our operations. If we are unable to realize the potential competitive advantages we expect to achieve through the implementation of the A320neo aircraft and LEAP engines into our fleet or if we experience unexpected costs or delays in our operations as a result of such implementation, our business, results of operations and financial condition could be materially adversely affected. Furthermore, as technological evolution occurs in our industry, through the use of composites and other innovations, we may be competitively disadvantaged because we have existing extensive fleet commitments that would prohibit us from adopting new technologies on an expedited basis.

In addition, while our operation of a single family of aircraft provides us with several operational and cost advantages, any FAA directive or other mandatory order relating to our aircraft or engines, including the grounding of any of our aircraft for any reason, could potentially apply to all or substantially all of our fleet, which could materially disrupt our operations and negatively affect our business, results of operations and financial condition.

Our maintenance costs will increase over the near term, we will periodically incur substantial maintenance costs due to the maintenance schedules of our aircraft fleet and obligations to the lessors and we could incur significant maintenance expenses outside of such maintenance schedules in the future.

As of December 31, 2020, the operating leases for seven, four, six, four and eight aircraft in our fleet were scheduled to terminate during the remainder of 2021, 2022, 2023, 2024 and 2025, respectively. In certain circumstances, such operating leases may be extended. Prior to such aircraft being returned, we will incur costs to restore these aircraft to the condition required by the terms of the underlying operating leases. The amount and timing of these so-called “return conditions” costs can prove unpredictable due to uncertainty regarding the maintenance status of each particular aircraft at the time it is to be returned and it is not unusual for disagreements to ensue between the airline and the leasing company as to the required maintenance on a given aircraft or engine.

In addition, we currently have an obligation to purchase 156 A320neo family aircraft by the end of 2028. We expect that these new aircraft will require less maintenance when they are first placed in service (sometimes called a “maintenance holiday”) because the aircraft will benefit from manufacturer warranties and also will be able to operate for a significant period of time, generally measured in years, before the most expensive scheduled maintenance obligations, known as heavy maintenance, are first required. Following these new initial maintenance holiday periods, the new aircraft we have an obligation to acquire will require more maintenance as they age and our maintenance and repair expenses for each newly purchased aircraft will be incurred at approximately the same intervals. Moreover, because a large portion of our future fleet will be acquired over a relatively short period, significant maintenance to be scheduled on each of these planes may occur concurrently with other aircraft acquired around the same time, meaning we may incur our heavy maintenance obligations across large portions of our fleet around the same time. These more significant maintenance activities result in out-of-service periods during which our aircraft are dedicated to maintenance activities and unavailable to fly revenue service.

Outside of scheduled maintenance, we incur from time to time unscheduled maintenance which is not forecast in our operating plan or financial forecasts, and which can impose material unplanned costs and the loss

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of flight equipment from revenue service for a significant period of time. For example, a single unplanned engine event can require a shop visit costing several million dollars and cause the engine to be out of service for a number of months.

Furthermore, the terms of some of our lease agreements require us to pay maintenance reserves to the lessor in advance of the performance of major maintenance, resulting in our recording significant prepaid deposits on our consolidated balance sheet. In addition, the terms of any lease agreements that we enter into in the future could also require maintenance reserves in excess of our current requirements. We expect scheduled and unscheduled aircraft maintenance expenses to increase over the next several years. Any significant increase in maintenance and repair expenses would have a material adverse effect on our business, results of operations and financial condition. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Aircraft Maintenance.”

We have a significant amount of aircraft-related fixed obligations that could impair our liquidity and thereby harm our business, results of operations and financial condition.

The airline business is capital intensive and, as a result, many airline companies are highly leveraged. As of December 31, 2020, all 104 aircraft in our fleet were financed under operating leases. For the years ended December 31, 2018, 2019 and 2020, we incurred aircraft rent of $277 million, $368 million and $396 million, respectively, and paid maintenance deposits of $28 million, $18 million and $15 million, respectively. For the year ended December 31, 2020, aircraft rent of $396 million did not include $31 million of aircraft rent related to 2020 that was deferred to 2021 as a result of deferral arrangements agreed to with our lessors due to the COVID-19 pandemic. As of December 31, 2020, we had future operating lease obligations of approximately $2,264 million and future principal debt obligations of $357 million. For the years ended December 31, 2018, 2019 and 2020, we made cash payments for interest related to debt of $11 million, $10 million and $7 million, respectively. In addition, we have significant obligations for aircraft and spare engines that we have ordered from Airbus and CFM International for delivery over the next several years. Also, in April 2020, we entered into an agreement with the Treasury for which we received $211 million in funding through the payroll support program, in the form of a grant and a low-interest 10-year note, and in September 2020 we entered into a $574 million secured term loan facility with the Treasury, of which we borrowed $150 million as of December 31, 2020. In January, we entered into an agreement with the Treasury for at least another $140 million in payroll support funding under the PSP2 Agreement. We received the first installment in the amount of $70 million on January 15, 2021. The funding from the Treasury subjected us to certain restrictions and limitations. Our ability to pay the fixed costs associated with our contractual obligations will depend on our operating performance, cash flow and our ability to secure adequate financing, which will in turn depend on, among other things, the success of our current business strategy, fuel price volatility, any significant weakening or improving in the U.S. economy, availability and cost of financing, as well as general economic and political conditions and other factors that are, to some extent, beyond our control. The amount of our aircraft related fixed obligations and our obligations under our other debt arrangements could have a material adverse effect on our business, results of operations and financial condition and could:

• require a substantial portion of cash flow from operations be used for operating lease and maintenance deposit payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

• limit our ability to make required PDPs, including those payable to our aircraft and engine manufacturers for our aircraft and spare engines on order;

• limit our ability to obtain additional financing to support our expansion plans and for working capital and other purposes on acceptable terms or at all;

• make it more difficult for us to pay our other obligations as they become due during adverse general economic and market industry conditions because any related decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled payments;

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• reduce our flexibility in planning for, or reacting to, changes in our business and the airline industry and, consequently, place us at a competitive disadvantage to our competitors with lower fixed payment obligations; and

• cause us to lose access to one or more aircraft and forfeit our maintenance and other deposits if we are unable to make our required aircraft lease rental payments and our lessors exercise their remedies under the lease agreement including cross default provisions in certain of our leases.

A failure to pay our operating lease, debt, fixed cost, and other obligations or a breach of our contractual obligations could result in a variety of adverse consequences, including the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that we would be able to cure our breach, fulfill our obligations, make required lease payments or otherwise cover our fixed costs, which would have a material adverse effect on our business, results of operations and financial condition.

We rely on third-party specialists and other commercial partners to perform functions integral to our operations.

We have historically entered into agreements with third-party specialists to furnish certain facilities and services required for our operations, including ground handling, catering, passenger handling, engineering, maintenance, refueling, reservations and airport facilities as well as administrative and support services. In response to the COVID-19 pandemic, we have increased our reliance on such third-parties. In addition, as the U.S. market begins to recover from the pandemic, we are likely to enter into similar service agreements in new markets we decide to enter, and we cannot assure you that we will be able to obtain the necessary services at acceptable rates.

Although we seek to monitor the performance of third parties that furnish certain facilities or provide us with our ground handling, catering, passenger handling, engineering, maintenance, refueling, reservations and airport facilities, the efficiency, timeliness and quality of contract performance by third-party specialists are often beyond our control, and any failure by our third-party specialists to perform up to our expectations may have an adverse impact on our business, reputation with customers, our brand and our operations. In addition, we could experience a significant business disruption if we were to change vendors or if an existing provider ceased to be able to serve us. We expect to be dependent on such third-party arrangements for the foreseeable future.

We rely on third-party distribution channels to distribute a portion of our airline tickets.

We rely on third-party distribution channels, including those provided by or through GDSs conventional travel agents and online travel agents (“OTAs”) to distribute a portion of our airline tickets, and we expect in the future to rely on these channels to collect a portion of our non-fare revenues. These distribution channels are more expensive and at present have less functionality in respect of non-fare revenues than those we operate ourselves, such as our website. Certain of these distribution channels also effectively restrict the manner in which we distribute our products. To remain competitive, we will need to successfully manage our distribution costs and rights, and improve the functionality of third-party distribution channels, while maintaining an industry-competitive cost structure. Negotiations with key GDSs and OTAs designed to manage our costs, increase our distribution flexibility, and improve functionality could be contentious, could result in diminished or less favorable distribution of our tickets, and may not provide the functionality we require to maximize non-fare revenues. In addition, in the last several years there has been significant consolidation among GDSs and OTAs, including the acquisition by Expedia of both Orbitz and Travelocity, and the acquisition by Amadeus of Navitaire (the reservations system that we use). This consolidation and any further consolidation could affect our ability to manage our distribution costs due to a reduction in competition or other industry factors. Any inability to manage such costs, rights and functionality at a competitive level or any material diminishment in the distribution of our tickets could have a material adverse effect on our competitive position and our results of operations. Moreover, our ability to compete in the markets we serve may be threatened by changes in technology or other factors that may make our existing third-party sales channels impractical, uncompetitive or obsolete.

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We rely heavily on technology and automated systems to operate our business, and any failure of these technologies or systems or any failure on our part to implement any new technologies or systems could materially adversely affect our business.

We are highly dependent on technology and computer systems and networks to operate our business. These technologies and systems include our computerized airline reservation system provided by Navitaire, now a unit of Amadeus, flight operations systems, telecommunications systems, mobile app, airline website, maintenance systems and check-in kiosks. In order for our operations to work efficiently, our website and reservation system must be able to accommodate a high volume of traffic, maintain secure information and deliver flight information. The Navitaire reservations system, which is hosted and maintained under a long-term contract by a third-party specialist, is critical to our ability to issue, track and accept tickets, conduct check-in, board and manage our passengers through the airports we serve and provide us with access to global distribution systems, which enlarge our pool of potential passengers. There are many instances in the past where a reservations system malfunctioned, whether due to the fault of the system provider or the airline, with a highly adverse effect on the airline’s operations, and such a malfunction has in the past and could in the future occur on our system, or in connection with any system upgrade or migration in the future. We also rely on third-party specialists to maintain our flight operations systems, and if those systems are not functioning, we could experience service disruptions, which could result in the loss of important data, increase our expenses, decrease our operational performance and temporarily stall our operations.

Any failure of the technologies and systems we use could materially adversely affect our business. In particular, if our reservation system fails or experiences interruptions, and we are unable to book seats for a period of time, we could lose a significant amount of revenue as customers book seats on other airlines, and our reputation could be harmed. In addition, replacement technologies and systems for any service we currently utilize that experiences failures or interruptions may not be readily available on a timely basis, at competitive rates or at all. Furthermore, our current technologies and systems are heavily integrated with our day-to-day operations and any transition to a new technology or system could be complex and time-consuming. In the event that one or more of our primary technology or systems vendors fails to perform, and a replacement system is not available or if we fail to implement a replacement system in a timely and efficient manner, our business could be materially adversely affected.

Unauthorized use, unauthorized incursions or user exploitation of our information technology infrastructure could compromise the personally identifiable information of our passengers, prospective passengers or personnel, and other sensitive information, and expose us to liability, damage our reputation and have a material adverse effect on our business, results of operations and financial condition.

In the processing of our customer transactions and as part of our ordinary business operations, we and certain of our third-party specialists collect, process, transmit and store a large volume of personally identifiable information of our passengers, prospective passengers or personnel, including email addresses and home addresses and financial data such as credit and debit card information and other sensitive information. The security of the systems and network where we and our third-party specialists store this data is a critical element of our business, and these systems and our network may be vulnerable to cyberattacks and other security issues. . Threats to cyber security have increased with the sophistication of malicious actors, and we must manage those evolving risks. We have been the target of cybersecurity attacks in the past and expect that we will continue to be in the future. Recently, several high-profile consumer-oriented companies have experienced significant data breaches, which have caused those companies to suffer substantial financial and reputational harm. Failure to appropriately address these issues could also give rise to potentially material legal risks and liabilities.

A significant cybersecurity incident could result in a range of potentially material negative consequences for us, including lost revenue; unauthorized access to, disclosure, modification, misuse, loss or destruction of company systems or data; theft of sensitive, regulated or confidential data, such as personal identifying information or our intellectual property; the loss of functionality of critical systems through ransomware, denial of service or other attacks; and business delays, service or system disruptions, damage to equipment and injury to persons or property. The costs and operational consequences of defending against, preparing for, responding to

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and remediating an incident may be substantial. Further, we could be exposed to litigation, regulatory enforcement or other legal action as a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, as well injunctive relief requiring costly compliance measures. A cybersecurity incident could also impact our brand, harm our reputation and adversely impact our relationship with our customers, employees and stockholders. Additionally, any material failure by us or our third-party specialists to maintain compliance with the Payment Card Industry security requirements or to rectify a data security issue may result in fines and restrictions on our ability to accept credit and debit cards as a form of payment. While we have taken precautions to avoid an unauthorized incursion of our computer systems, we cannot assure you that our precautions are either adequate or implemented properly to prevent and detect a data breach or other cybersecurity incident and its adverse financial and reputational consequences to our business. We are also subject to increasing legislative, regulatory and customer focus on privacy issues and data security in the United States and abroad. The compromise of our technology systems resulting in the loss, disclosure, misappropriation of or access to the personally identifiable information of our passengers, prospective passengers or personnel could result in governmental investigation, civil liability or regulatory penalties under laws protecting the privacy of personal information, any or all of which could disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

In addition, a number of our commercial partners, including credit card companies, have imposed data security standards on us, and these standards continue to evolve. We will continue our efforts to meet our privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase our costs.

We depend on a sole-source supplier for our aircraft and two suppliers for our engines.

A critical cost-saving element of our business strategy is to operate a single-family aircraft fleet; however, our dependence on the Airbus A320 family aircraft for all of our aircraft and on CFM International and Pratt & Whitney for our engines makes us vulnerable to any design defects, mechanical problems or other technical or regulatory issues associated with this aircraft type or these engines. In the event of any actual or suspected design defects or mechanical problems with the Airbus A320 family aircraft or CFM International or Pratt & Whitney engines, whether involving our aircraft or that of another airline, we may choose or be required to suspend or restrict the use of our aircraft. Our business could also be materially adversely affected if the public avoids flying on our aircraft due to an adverse perception of the Airbus A320 family aircraft or CFM International or Pratt & Whitney engines, whether because of safety concerns or other problems, real or perceived, or in the event of an accident involving such aircraft or engines. Separately, if Airbus, CFM International or Pratt & Whitney becomes unable to perform its contractual obligations and we must lease or purchase aircraft from another supplier, we would incur substantial transition costs, including expenses related to acquiring new aircraft, engines, spare parts, maintenance facilities and training activities, and we would lose the cost benefits from our current single-fleet composition, any of which would have a material adverse effect on our business, results of operations and financial condition. These risks may be exacerbated by the long-term nature of our fleet and order book and the unproven new engine technology to be utilized by the aircraft in our order book. See also “—We may be subject to competitive risks due to the long-term nature of our fleet order book and the unproven new engine technology utilized by the aircraft in our order book.”

Although we have significantly reconfigured our network since 2013, our business remains dependent on the Denver market and increases in competition or congestion or a reduction in demand for air travel in this market would harm our business.

We are highly dependent on the Denver market where we maintain a large presence, with 41% of our flights during the year ended December 31, 2020 having Denver International Airport as either their origin or destination. We primarily operate out of Concourse A at Denver International Airport under an operating lease that expires in December 2021 with two one year extension options. We have experienced an increase in flight delays and cancellations at this airport due to airport congestion which has adversely affected our operating performance and results of operations. We have also experienced increased competition since 2017 from carriers

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adding flights to and from Denver. Also, flight operations in Denver can face extreme weather challenges in the winter, which, at times, has resulted in severe disruptions in our operation and the occurrence of material costs as a consequence of such disruptions. Our business could be further harmed by an increase in the amount of direct competition we face in the Denver market or by continued or increased congestion, delays or cancellations. Our business would also be harmed by any circumstances causing a reduction in demand for air transportation in the Denver area, such as adverse changes in local economic conditions, health concerns, adverse weather conditions, negative public perception of Denver, terrorist attacks or significant price or tax increases linked to increases in airport access costs and fees imposed on passengers.

We are subject to extensive regulation by the Federal Aviation Administration, the Department of Transportation, Transportation Security Administration, U.S. Customs and Border Protection and other U.S. and foreign governmental agencies, compliance with which could cause us to incur increased costs and adversely affect our business, results of operations and financial condition.

Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that involve significant costs. In the last several years, Congress has passed laws and the FAA, DOT and TSA have issued regulations, orders, rulings and guidance relating to the operation, safety, and security of airlines and consumer protections that have required significant expenditures. We expect to continue to incur expenses in connection with complying with such laws and government regulations, orders, rulings and guidance. Additional laws, regulations, taxes and increased airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising ticket prices, reducing revenue, and increasing costs. For example, the DOT has broad authority over airlines and their consumer and competitive practices, and has used this authority to issue numerous regulations and pursue enforcement actions, including rules and fines relating to the handling of lengthy tarmac delays, consumer notice and disclosure requirements, consumer complaints, price and airline advertising, oversales and involuntary denied boarding process and compensation, ticket refunds, liability for loss, delay or damage to baggage, customer service commitments, contracts of carriage and the transportation of passengers with disabilities. Among these is the series of Enhanced Airline Passenger Protection rules issued by the DOT. In addition, the FAA Reauthorization Act of 2018, signed into law on October 5, 2018, provided for several new requirements and rulemakings related to airlines, including but not limited to: (i) prohibition on voice communication cell phone use during certain flights, (ii) insecticide use disclosures, (iii) new training policy best practices for training regarding racial, ethnic, and religious non-discrimination, (iv) training on human trafficking for certain staff, (v) departure gate stroller check-in, (vi) the protection of pets on airplanes and service animal standards, (vii) requirements to refund promptly to passengers any ancillary fees paid for services not received, (viii) consumer complaint process improvements, (ix) pregnant passenger assistance, (x) restrictions on the ability to deny a revenue passenger permission to board or involuntarily remove such passenger from the aircraft, (xi) minimum customer service standards for large ticket agents, (xii) information publishing requirements for widespread disruptions and passenger rights, (xiii) submission of plans pertaining to employee and contractor training consistent with the Airline Passengers with Disabilities Bill of Rights, (xiv) ensuring assistance for passengers with disabilities, (xv) flight attendant duty period limitations and rest requirements, including submission of a fatigue risk management plan, (xvi) submission of policy concerning passenger sexual misconduct, (xvii) development of Employee Assault Prevention and Response Plan related to the customer service agents, (xviii) increased penalties available related to harm to passengers with disabilities or damage to wheelchairs or mobility aids, and (xix) minimum dimensions for passenger seats. Furthermore, in 2019, the FAA published an Advance Notice of Proposed Rulemaking regarding flight attendant duty period limitations and rest requirements. The DOT also published a Notice of Proposed Rulemaking in January 2020 regarding, for example, the accessibility features of lavatories and onboard wheelchair requirements on certain single-aisle aircraft with an FAA certificated maximum capacity of 125 seats or more, training flight attendants to proficiency on an annual basis to provide assistance in transporting qualified individuals with disabilities to and from the lavatory from the aircraft seat, and providing certain information on request to qualified individuals with a disability or persons inquiring on their behalf, on the carrier’s website, and in printed or electronic form on the aircraft concerning the accessibility of aircraft

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lavatories. The DOT also recently published Final Rules regarding traveling by air with service animals and defining unfair or deceptive practices. The DOT also recently published a Final Rule clarifying that the maximum amount of denied boarding compensation that a carrier may provide to a passenger denied boarding involuntarily is not limited, prohibiting airlines from involuntarily denying boarding to a passenger after the passenger’s boarding pass has been collected or scanned and the passenger has boarded (subject to safety and security exceptions), raising the liability limits for denied boarding compensation, and raising the liability limit for mishandled baggage in domestic air transportation. In addition, the FAA issued its final regulations governing pilot rest periods and work hours for all passenger airlines certificated under Part 121 of the Federal Aviation Regulations. The rule known as FAR Part 117, which became effective January 4, 2014, impacts the required amount and timing of rest periods for pilots between work assignments and modifies duty and rest requirements based on the time of day, number of scheduled segments, time zones and other factors. In addition, Congress enacted a law and the FAA issued regulations requiring U.S. airline pilots to have a minimum number of hours as a pilot in order to qualify for an Air Transport Pilot certificate, which all pilots on U.S. airlines must obtain. Compliance with these rules may increase our costs, while failure to remain in full compliance with these rules may subject us to fines or other enforcement action. FAR Part 117 and the minimum pilot hour requirements may also reduce our ability to meet flight crew staffing requirements. We cannot assure you that compliance with these and other laws, regulations, orders, rulings and guidance will not have a material adverse effect on our business, results of operations and financial condition.

In addition, the TSA mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines, some of which is funded by a security fee imposed on passengers and collected by airlines. We cannot forecast what additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be associated with complying with such requirements.

Our ability to operate as an airline is dependent on our obtaining and maintaining authorizations issued to us by the DOT and the FAA. The FAA from time to time issues directives and other mandatory orders relating to, among other things, operating aircraft, the grounding of aircraft, maintenance and inspection of aircraft, installation of new safety-related items, and removal and replacement of aircraft parts that have failed or may fail in the future. These requirements can be issued with little or no notice, can impact our ability to efficiently or fully utilize our aircraft, and could result in the temporary grounding of aircraft types altogether, such as the March 2019 grounding of the Boeing 737 MAX fleet. A decision by the FAA to ground, or require time-consuming inspections of or maintenance on, our aircraft, for any reason, could negatively affect our business, results of operations and financial condition. Federal law requires that air carriers operating scheduled service be continuously “fit, willing and able” to provide the services for which they are licensed. Our “fitness” is monitored by the DOT, which considers managerial competence, operations, finances, and compliance record. In addition, under federal law, we must be a U.S. citizen (as determined under applicable law). Please see “Business—Foreign Ownership.” While the DOT has seldom revoked a carrier’s certification for lack of fitness, such an occurrence would render it impossible for us to continue operating as an airline. The DOT may also institute investigations or administrative proceedings against airlines for violations of regulations. For instance, in 2017 we were fined $0.4 million by the DOT for certain infractions relating to oversales, rules related to passengers with disabilities, customer service plan rules, $40,000 for certain infractions relating to oversales disclosure and notice requirements, the domestic baggage liability limit rule, and $1.5 million by the DOT relating to lengthy tarmac delays, which was offset by a $0.9 million credit for compensation provided to passengers on the affected flights and other delayed flights.

International routes are regulated by air transport agreements and related agreements between the United States and foreign governments. Our ability to operate international routes is subject to change, as the applicable agreements between the United States and foreign governments may be amended from time to time. Our access to new international markets may be limited by the applicable air transport agreements between the U.S. and foreign governments and our ability to obtain the necessary authority from the U.S. and foreign governments to fly the international routes. In addition, our operations in foreign countries are subject to regulation by foreign

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governments and our business may be affected by changes in law and future actions taken by such governments, including granting or withdrawal of government approvals, airport slots and restrictions on competitive practices. We are subject to numerous foreign regulations in the countries outside the United States where we currently provide service. If we are not able to comply with this complex regulatory regime, our business could be significantly harmed. Please see “Business—Government Regulation.”

Changes in legislation, regulation and government policy have affected, and may in the future have a material adverse effect on our business.

Changes in, and uncertainty with respect to, legislation, regulation and government policy at the local, state or federal level have affected, and may in the future significantly impact, our business and the airline industry. Specific legislative and regulatory proposals that could have a material impact on us in the future include, but are not limited to, infrastructure renewal programs; changes to operating and maintenance requirements and immigration and security policy and requirements; modifications to international trade policy, including withdrawing from trade agreements and imposing tariffs; changes to consumer protection laws; public company reporting requirements; environmental regulation; tax legislation and antitrust enforcement. Any such changes may make it more difficult and/or more expensive for us to obtain new aircraft or engines and parts to maintain existing aircraft or engines or make it less profitable or prevent us from flying to or from some of the destinations we currently serve. To the extent that any such changes have a negative impact on us or the airline industry in general, including as a result of related uncertainty, these changes may materially impact our business, financial condition, results of operations and cash flows.

Any tariffs imposed on commercial aircraft and related parts imported from outside the United States may have a material adverse effect on our fleet, business, results of operations and financial condition.

Certain of the products and services that we purchase, including our aircraft and related parts, are sourced from suppliers located in foreign countries, and the imposition of new tariffs, or any increase in existing tariffs, by the U.S. government on the importation of such products or services could materially increase the amounts we pay for them. In early October 2019, the World Trade Organization ruled that the United States could impose $7.5 billion in retaliatory tariffs in response to illegal European Union subsidies to Airbus. On October 18, 2019, the United States imposed these tariffs on certain imports from the European Union, including a 10% tariff on new commercial aircraft. In February 2020, the United States announced an increase to this tariff from 10% to 15%. These tariffs apply to aircraft that we are already contractually obligated to purchase. These tariffs are under continuing review and at any time could be increased, decreased, eliminated or applied to a broader range of products we use. While we have recently accepted deliveries of Airbus aircraft principally from the Airbus Mobile, Alabama facility, which has enabled us to avoid the imposition of tariffs on such aircraft, there can be no assurance that we will continue to be able to do so. Any imposition of these tariffs could substantially increase the cost of, among other things, imported new Airbus aircraft and parts required to service our Airbus fleet, which in turn could have a material adverse effect on our business, financial condition and/or results of operations. We may also seek to postpone or cancel delivery of certain aircraft currently scheduled for delivery, and we may choose not to purchase as many aircraft as we intended in the future. Any such action could have a material adverse effect on the size of our fleet, business, results of operations and financial condition.

If we are unable to attract and retain qualified personnel at reasonable costs or fail to maintain our company culture, our business could be harmed.

Our business is labor intensive. We require large numbers of pilots, flight attendants, maintenance technicians and other personnel. We compete against other U.S. airlines for pilots, mechanics and other skilled labor and certain U.S. airlines offer wage and benefit packages exceeding ours. The airline industry has from time to time experienced a shortage of qualified personnel. In particular, as more pilots in the industry approach mandatory retirement age, the U.S. airline industry is being affected by a pilot shortage. As is common with most of our competitors, we have faced considerable turnover of our employees. As a result of the foregoing, there can be no assurance that we will be able to attract or retain qualified personnel or may be required to increase wages

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and/or benefits in order to do so. In addition, we may lose personnel due to the impact of the COVID-19 pandemic on air travel and we may lose executives as a result of compensation restrictions imposed under the CARES Act. Such restrictions may present retention challenges in the case of executives presented with alternative, non-airline opportunities or with opportunities from airlines that are not subject to such restrictions because they never entered into such Treasury loans or have repaid their Treasury loans prior to us. If we are unable to hire, train and retain qualified employees, our business could be harmed and we may be unable to implement our growth plans.

In addition, as we hire more people and grow, we believe it may be increasingly challenging to continue to hire people who will maintain our company culture. Our company culture, which we believe is one of our competitive strengths, is important to providing dependable customer service and having a productive, accountable workforce that helps keep our costs low. As we continue to grow, we may be unable to identify, hire or retain enough people who meet the above criteria, including those in management or other key positions. Our company culture could otherwise be adversely affected by our growing operations and geographic diversity. If we fail to maintain the strength of our company culture, our competitive ability and our business, results of operations and financial condition could be harmed.

Our business could be materially adversely affected if we lose the services of our key personnel.

Our success depends to a significant extent upon the efforts and abilities of our senior management team and key financial and operating personnel. In particular, we depend on the services of our senior management team, particularly Barry L. Biffle, our President and Chief Executive Officer, and James G. Dempsey, our Executive Vice President and Chief Financial Officer. Competition for highly qualified personnel is intense, and the loss of any executive officer, senior manager, or other key employee without adequate replacement or the inability to attract new qualified personnel could have a material adverse effect on our business, results of operations and financial condition. We do not maintain key-man life insurance on our management team.

We rely on our private equity sponsor.

Our majority stockholder is presently an investment fund managed by Indigo, an affiliate of Indigo Partners, a private equity fund with significant expertise in the ultra low-cost airline space. This expertise has been available to us through the representatives Indigo has on our board of directors and through a Professional Services Agreement that was put in place in connection with the 2013 acquisition from Republic and pursuant to which we pay Indigo Partners a fee of approximately $375,000 per quarter, plus expenses. Several members of our board of directors are also affiliated with Indigo Partners and we pay each of them an annual fee as compensation. Our engagement of Indigo Partners pursuant to the Professional Services Agreement will continue until the date that Indigo Partners and its affiliates own less than 10% of the 5.2 million shares of our common stock acquired by an affiliate of Indigo Partners in December 2013. After this offering, Indigo Partners may nonetheless elect to reduce its ownership in our company or reduce its involvement on our board of directors, which could reduce or eliminate the benefits we have historically achieved through our relationship with Indigo Partners such as management expertise, industry knowledge and volume purchasing. For a further description of our Professional Services Agreement, please see “Certain Relationships and Related Party Transactions—Management Services.” See also “—Risks Related to Owning Our Common Stock—Indigo’s current control of the Company severely limits the ability of our stockholders to influence matters requiring stockholder approval and could adversely affect our other stockholders and the interests of Indigo could conflict with the interests of other stockholders.”

Our quarterly results of operations fluctuate due to a number of factors, including seasonality.

We expect our quarterly results of operations to continue to fluctuate due to a number of factors, including actions by our competitors, price changes in aircraft fuel and the timing and amount of maintenance expenses, as

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well as the impacts of the COVID-19 pandemic. As a result of these and other factors, quarter-to-quarter comparisons of our results of operations and month-to-month comparisons of our key operating statistics may not be reliable indicators of our future performance. In addition, seasonality may cause our quarterly and monthly results to fluctuate since passengers tend to fly more during the summer months and less in the winter months, apart from the holiday season. We cannot assure you that we will find profitable markets in which to operate during the winter season. Such periods of low demand for air travel during the winter months could have a material adverse effect on our business, results of operations and financial condition.

Our lack of membership in a marketing alliance or codeshare arrangements (other than with Volaris) could harm our business and competitive position.

Many airlines, including the domestic legacy network airlines (American, Delta and United), have marketing alliances with other airlines, under which they market and advertise their status as marketing alliance partners. These alliances, such as oneworld, SkyTeam, and Star Alliance, generally provide for codesharing, frequent flyer program reciprocity, coordinated scheduling of flights to permit convenient connections and other joint marketing activities. In addition, certain of these alliances involve highly integrated antitrust immunized joint ventures. Such arrangements permit an airline to market flights operated by other alliance members as its own. This increases the destinations, connections and frequencies offered by the airline and provides an opportunity to increase traffic on that airline’s segment of flights connecting with alliance partners. We currently do not have any marketing alliances or codeshare arrangements with U.S. or foreign airlines, other than the codeshare arrangement we entered into with Volaris in 2018. Our lack of membership in any other marketing alliances and codeshare arrangements puts us at a competitive disadvantage to traditional network carriers who are able to attract passengers through more widespread alliances, particularly on international routes, and that disadvantage may result in a material adverse effect on our business, results of operations and financial condition.

Risks Related to Owning Our Common Stock

The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline.

Prior to this offering, there has been no public market for shares of our common stock, and an active public market for these shares may not develop or be sustained after this offering. We and the representatives of the underwriters determined the initial public offering price of our common stock through negotiation. This price does not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, the market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including:

• announcements concerning our competitors, the airline industry or the economy in general;

• developments with respect to the COVID-19 pandemic, and government restrictions related thereto;

• strategic actions by us or our competitors, such as acquisitions or restructurings;

• media reports and publications about the safety of our aircraft or the aircraft type we operate;

• new regulatory pronouncements and changes in regulatory guidelines;

• changes in the price of aircraft fuel;

• announcements concerning the availability of the type of aircraft we use;

• general and industry-specific economic conditions;

• changes in financial estimates or recommendations by securities analysts or failure to meet analysts’ performance expectations;

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• sales of our common stock or other actions by investors with significant shareholdings, including sales by our principal stockholders;

• trading strategies related to changes in fuel or oil prices; and

• general market, political and other economic conditions.

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. Broad market fluctuations may materially adversely affect the trading price of our common stock.

In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management’s attention and resources and have a material adverse effect on our business, results of operations and financial condition.

If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities and industry analysts may publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, the trading price of our common stock would likely decline. If one or more of these analysts ceases to cover our company or fails to publish reports on us regularly, demand for our stock could decrease, which may cause the trading price of our common stock and the trading volume of our common stock to decline.

Purchasers of our common stock in this offering will experience immediate and substantial dilution in the tangible net book value of their investment.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $            in net tangible book value per share from the price you paid. In addition, as of December 31, 2020, we had outstanding options to purchase 259,980 shares of our common stock, 50,559 shares of common stock issuable upon the vesting of outstanding restricted stock units, an aggregate of 641,090 shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Plan, an aggregate of              shares of common stock reserved for issuance pursuant to future awards under our 2021 Equity Incentive Award Plan. The exercise of these outstanding options or the issuance of such reserved shares will result in further dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution” elsewhere in this prospectus.

The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, or the exercise of the PSP Warrants, PSP2 Warrants or Treasury Warrants issued to the Treasury, could depress the trading price of our common stock.

We may conduct future offerings of our common stock, preferred stock or other securities that are convertible into or exercisable for our common stock to finance our operations or fund acquisitions, or for other purposes. In connection with our participation in the PSP, we issued warrants to the Treasury, which are exercisable for up to approximately 13,752 shares of our common stock. Furthermore, in the first quarter of 2021 we will issue an additional 2,711 warrants in connection with our participation in the PSP2 based on the $140 million of funding. In connection with the initial $150 million borrowing the secured loan provided under the Loan and Guarantee Agreement the “Treasury Loan Agreement”) we entered into with the Treasury pursuant to the CARES Act, we issued warrants to the Treasury which are exercisable for up to approximately 62,055 shares of our common stock. Moreover, we may issue additional warrants to the Treasury exercisable for up to

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175,410 shares of our common stock, assuming we draw the full $424 million remaining under the Treasury Loan Agreement. See “—We have agreed to certain restrictions on our business by accepting financing under the CARES Act.” Further, we reserve shares of our common stock for future issuance under our equity incentive plans, which shares are eligible for sale in the public market to the extent permitted by the provisions of various agreements and, to the extent held by affiliates, the volume and manner of sale restrictions of Rule 144. If these additional shares are sold, or if it is perceived that they will be sold, into the public market, the price of our common stock could decline substantially. If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock may significantly decline. In addition, our issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholders.

The value of our common stock may be materially adversely affected by additional issuances of common stock or preferred stock by us or sales by our principal stockholder.

Any future issuances or sales of our common stock by us will be dilutive to our existing common stockholders. We had 5,248,371 shares of common stock outstanding as of December 31, 2020. All of the shares of common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act. The holders of substantially all of the outstanding shares of our common stock have signed lock-up agreements with the underwriters of this offering, under which they have agreed, subject to certain exceptions, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, without the prior written consent of certain of the underwriters, for a period of 180 days after the date of this prospectus. After this offering, an investment fund managed by Indigo, the holder of approximately 5.2 million shares of our common stock as of December 31, 2020, will be entitled to rights with respect to registration of such shares under the Securities Act pursuant to a registration rights agreement. Please see “Certain Relationships and Related Transactions—Registration Rights” elsewhere in this prospectus. Sales of substantial amounts of our common stock in the public or private market, a perception in the market that such sales could occur, or the issuance of securities exercisable or convertible into our common stock, could adversely affect the prevailing price of our common stock.

Indigo’s current control of the Company severely limits the ability of our stockholders to influence matters requiring stockholder approval and could adversely affect our other stockholders and the interests of Indigo could conflict with the interests of other stockholders.

When this offering is completed, an investment fund managed by Indigo will beneficially own approximately     % of our outstanding common stock, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock from Indigo as the selling stockholder.

As a result, Indigo will be able to exert a significant degree of influence or actual control over our management and affairs and over matters requiring stockholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets and other significant business or corporate transactions.

Until such time as Indigo and its affiliates beneficially own shares of our common stock representing less than a majority of the voting rights of our common stock, Indigo will have the ability to take stockholder action by written consent without calling a stockholder meeting and to approve amendments to our amended and restated certificate of incorporation and amended and restated bylaws and to take other actions without the vote of any other stockholder. Investors in this offering will not be able to affect the outcome of any stockholder vote during such time. As a result, Indigo will have the ability to control all such matters affecting us, including:

• the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies;

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• our acquisition or disposition of assets;

• our financing activities, including the issuance of additional equity securities;

• any determinations with respect to mergers, acquisitions and other business combinations;

• corporate opportunities that may be suitable for us and Indigo;

• the payment of dividends on our common stock; and

• the number of shares available for issuance under our stock plans for our existing and prospective employees.

This concentrated control will limit the ability of other stockholders to influence corporate matters and, as a result, we may take actions that our other stockholders do not view as beneficial. Indigo’s voting control may also discourage or block transactions involving a change of control of the Company, including transactions in which you, as a stockholder, might otherwise receive a premium for your shares over the then-current market price. For example, this concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their common stock. Moreover, Indigo is not prohibited from selling a controlling interest in us to a third party and may do so without your approval and without providing for a purchase of your shares of common stock. Accordingly, your shares of common stock may be worth less than they would be if Indigo did not maintain voting control over us.

In addition, the interests of Indigo could conflict with the interests of other stockholders. According to a Schedule 13D filed with the SEC in February 2021, investment funds managed by Indigo Partners holds approximately 18% of the total outstanding Common Stock shares of Volaris, and two of our directors, William A. Franke and Brian H. Franke, are members of the board of directors of Volaris, with Brian H. Franke serving as chair since April 2020. We entered into a codeshare arrangement with Volaris in January 2018. As of December 31, 2020, we did not compete directly with Volaris on any of our routes other than one route that we currently operate during different months of the year. However, there can be no assurances that we will not compete directly with Volaris in the future. Furthermore, neither Indigo Partners, its portfolio companies, funds or other affiliates, nor any of their officers, directors, agents, stockholders, members or current or future partners will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate. See “—Our certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.”

For additional information about our relationship with Indigo and Indigo Partners, please see “Certain Relationships and Related Party Transactions” and “Principal and Selling Stockholder” elsewhere in this prospectus.

Our anti-takeover provisions may delay or prevent a change of control, which could adversely affect the price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws to be in effect immediately prior to the consummation of this offering contain provisions that may make it difficult to remove our board of directors and management and may discourage or delay “change of control” transactions, which could adversely affect the price of our common stock. These provisions include, among others:

• our board of directors is divided into three classes, with each class serving for a staggered three-year term, which prevents stockholders from electing an entirely new board of directors at an annual meeting;

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• no cumulative voting in the election of directors, which prevents the minority stockholders from electing director candidates;

• the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• from and after such time as Indigo and its affiliates no longer hold a majority of the voting rights of our common stock, actions to be taken by our stockholders may only be effected at an annual or special meeting of our stockholders and not by written consent;

• from and after such time as Indigo and its affiliates no longer hold a majority of the voting rights of our common stock, special meetings of our stockholders can be called only by the Chairman of the Board or by our corporate secretary at the direction of our board of directors;

• advance notice procedures that stockholders, other than Indigo for so long as it and its affiliates hold a majority of the voting rights of our common stock, must comply with in order to nominate candidates to our board of directors and propose matters to be brought before an annual meeting of our stockholders may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company;

• from and after such time as Indigo and its affiliates hold less than a majority of the voting rights of our common stock, a majority stockholder vote is required for removal of a director only for cause (and a director may only be removed for cause), and a 66²⁄₃% stockholder vote is required for the amendment, repeal or modification of certain provisions of our certificate of incorporation and bylaws; and

• our board of directors may, without stockholder approval, issue series of preferred stock, or rights to acquire preferred stock, that could dilute the interest of, or impair the voting power of, holders of our common stock or could also be used as a method of discouraging, delaying or preventing a change of control.

Certain anti-takeover provisions under Delaware law also apply to our company. While we have elected not to be subject to the provisions of Section 203 of the DGCL in our amended and restated certificate of incorporation to be in effect immediately prior to the consummation of this offering, such certificate of incorporation will provide that in the event Indigo Partners and its affiliates cease to beneficially own at least 15% of the then outstanding shares of our voting common stock, we will automatically become subject to Section 203 of the DGCL to the extent applicable. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its voting stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.

Our certificate of incorporation and bylaws currently provide, and our amended and restated certificate of incorporation and amended and restated bylaws will provide, for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, and that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933.

Our certificate of incorporation and bylaws currently provide, and our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to the completion of this offering, will provide, that: (i) unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for: (A) any derivative action or proceeding brought on behalf of the company, (B) any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former director, officer, other employee, agent or stockholder to the company or our stockholders, including without limitation a claim alleging the aiding and abetting of such a breach of fiduciary duty, (C) any action asserting a

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claim against the company or any of our current or former director, officer, employee, agent or stockholder arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws or as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (D) any action asserting a claim related to or involving the company that is governed by the internal affairs doctrine; (ii) unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder, including all causes of action asserted against any defendant to such complaint; (iii) any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the company will be deemed to have notice of and consented to these provisions; and (iv) failure to enforce the foregoing provisions would cause us irreparable harm, and we will be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. This exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Nothing in our current certificate of incorporation or bylaws or our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from bringing such claims in federal court to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.

We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. If a court were to find the choice of forum provision that is contained in our current certificate of incorporation or bylaws or will be contained in our amended and restated certificate of incorporation or amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, results of operations, and financial condition. For example, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former director, officer, other employee, agent, or stockholder to the company, which may discourage such claims against us or any of our current or former director, officer, other employee, agent, or stockholder to the company and result in increased costs for investors to bring a claim.

Our certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.

Our certificate of incorporation will provide for the allocation of certain corporate opportunities between us and Indigo. Under these provisions, neither Indigo, its portfolio companies, funds or other affiliates, nor any of their agents, stockholders, members, partners, officers, directors and employees will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate. For instance, a director of our company who also serves as a stockholder, member, partner, officer, director or employee of Indigo or any of its portfolio companies, funds or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisitions or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, results of operations or financial condition, if attractive corporate opportunities are allocated by Indigo to itself or its portfolio companies, funds or other affiliates instead of to us. The terms of our certificate of incorporation are more fully described in “Description of Capital Stock.”

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Our corporate charter and bylaws include provisions limiting ownership and voting by non-U.S. citizens.

To comply with restrictions imposed by federal law on foreign ownership and control of U.S. airlines, our amended and restated certificate of incorporation and amended and restated bylaws to be in effect immediately prior to the consummation of this offering restrict ownership, voting and control of shares of our common stock by non-U.S. citizens. The restrictions imposed by federal law and DOT policy require that we must be owned and controlled by U.S. citizens, that no more than 25.0% of our voting stock be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens, as defined 49 U.S.C. § 40102(a)(15), that no more than 49.0% of our stock be owned or controlled, directly or indirectly, by persons or entities who are not U.S. citizens and are from countries that have entered into “open skies” air transport agreements with the U.S., that our president and at least two-thirds of the members of our board of directors and other managing officers be U.S. citizens, and that we be under the actual control of U.S. citizens. Our amended and restated certificate of incorporation and bylaws to be in effect immediately prior to the consummation of this offering provide that the failure of non-U.S. citizens to register their shares on a separate stock record, which we refer to as the “foreign stock record,” would result in a loss of their voting rights in the event and to the extent that the aggregate foreign ownership of the outstanding common stock exceeds the foreign ownership restrictions imposed by federal law. Our amended and restated bylaws further provide that no shares of our common stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. If it is determined that the amount registered in the foreign stock record exceeds the foreign ownership restrictions imposed by federal law, shares will be removed from the foreign stock record, resulting in the loss of voting rights, in reverse chronological order based on the date of registration therein, until the number of shares registered therein does not exceed the foreign ownership restrictions imposed by federal law. We are currently in compliance with these ownership restrictions. See “Business—Foreign Ownership” and “Description of Capital Stock—Anti-Takeover Provisions of Our Certificate of Incorporation and Bylaws—Limited Ownership and Voting by Foreign Owners.”

We expect to be a “controlled company” within the meaning of the Nasdaq Stock Market rules, and, as a result, expect to qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Following the consummation of this offering, we expect that Indigo will continue to control approximately     % of our outstanding common stock. As a result, we expect to be a “controlled company” within the meaning of the Nasdaq Stock Market rules and exempt from the obligation to comply with certain corporate governance requirements, including the requirements that a majority of our board of directors consists of “independent directors,” as defined under the rules of the Nasdaq Stock Market, and that we have a compensation committee and a nominating and corporate governance committee that are composed entirely of independent directors. These exemptions do not modify the requirement for a fully independent audit committee, which is permitted to be phased-in as follows: (1) one independent committee member at the time of our initial public offering; (2) a majority of independent committee members within 90 days of our initial public offering; and (3) all independent committee members within one year of our initial public offering. Similarly, once we are no longer a “controlled company,” we must comply with the independent board committee requirements as they relate to the compensation committee and the nominating and corporate governance committee, on the same phase-in schedule as set forth above, with the trigger date being the date we are no longer a “controlled company” as opposed to our initial public offering date. Additionally, we will have 12 months from the date we cease to be a “controlled company” to have a majority of independent directors on our board of directors.

If we utilize the “controlled company” exemption, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq Stock Market. Our status as a controlled company could make our common stock less attractive to some investors or otherwise adversely affect its trading price.

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We are a holding company and rely on dividends, distributions, and other payments, advances, and transfers of funds from our subsidiaries to meet our obligations.

We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and distributions and other transfers, including for payments in respect of indebtedness, at the holding company level from our subsidiaries to meet our obligations. The agreements governing the indebtedness, of our subsidiaries, including the CARES Act, impose restrictions on our subsidiaries’ ability to pay dividend distributions or other transfers to us. Each of our subsidiaries is a distinct legal entity, and under certain circumstances legal and contractual restrictions may limit our ability to obtain cash from them. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.

As of the date of this prospectus, we are prohibited from making repurchases of our common stock and paying dividends on our common stock by operation of restrictions imposed by the CARES Act and the PSP Extension Law. Following the end of those restrictions, we cannot guarantee that we will repurchase shares of our common stock or pay dividends on our common stock, or that our capital deployment program will enhance long-term stockholder value. Our capital deployment program could increase the volatility of the price of our common stock and diminish our cash reserves.

In connection with our receipt of payroll support under the PSP and PSP2 and acceptance of the Treasury Loan Agreement, we agreed not to repurchase shares of our common stock until the later of March 31, 2022 or one year after the Treasury Loan facility loan is repaid. In addition, we are prohibited from paying dividends on common stock until the later of March 31, 2022 or one year after the Treasury Loan facility loan is repaid. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements, restrictions contained in current or future financing instruments, business prospects and such other factors as our board of directors deems relevant.

General Risk Factors

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members or executive officers.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act of 2002, as amended, the Dodd-Frank Wall Street Reform and Consumer Protection Act, related rules implemented or to be implemented by the Securities and Exchange Commission (“SEC”) and the listing rules of the Nasdaq Stock Market. In recent years, the expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations could also make it more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as our executive officers and may divert management’s attention. Furthermore, if we are unable to satisfy our obligations as a public company, our common stock could be delisted, which could restrict our access to capital, and we could be subject to fines, sanctions and other regulatory action and potentially civil litigation.

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We will be required to assess our internal control over financial reporting on an annual basis, and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports, result in significant expenses to remediate any internal control deficiencies and have a material adverse effect on our business, results of operations and financial condition.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and beginning with our Annual Report on Form 10-K for the year ending December 31, 2022, our management will be required to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. The rules governing management’s assessment of our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. We are currently in the process of reviewing, documenting and testing our internal control over financial reporting. We may encounter problems or delays in completing the implementation of any changes necessary to make a favorable assessment of our internal control over financial reporting. In connection with the attestation process by our independent registered public accounting firm, we may encounter problems or delays in implementing any requested improvements and receiving a favorable attestation. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the Nasdaq Stock Market, regulatory investigations, civil or criminal sanctions and litigation, any of which would have a material adverse effect on our business, results of operations and financial condition.

We may become involved in litigation that may have a material adverse effect on our business, results of operations and financial condition.

From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including patent, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. In particular, in recent years, there has been significant litigation in the United States and abroad involving patents and other intellectual property rights. We have in the past faced, and may face in the future, claims by third parties that we infringe upon their intellectual property rights. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability and/or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, results of operations and financial condition.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

• the impact of the continuing COVID-19 pandemic;

• the competitive environment in our industry and on the routes and cities we serve;

• changes in our fuel cost;

• changes in restrictions on, or increased taxes applicable to charges for, non-fare products and services;

• the impact of U.S. and global economic conditions;

• air travel substitutes;

• threatened or actual terrorist attacks, global instability and potential U.S. military actions or activities;

• factors beyond our control, including air traffic congestion, aircraft and engine defects, adverse weather, federal government shutdowns, security measures, travel-related identification requirements and taxes and outbreak of disease such as the COVID-19 pandemic;

• our presence in international emerging markets;

• insurance costs;

• temporary suspensions of the funding or operations of the U.S. federal government;

• our ability to implement our business strategy successfully;

• our ability to keep costs low;

• our ability to grow or maintain our unit revenues or maintain our non-fare revenues;

• increased labor costs, union disputes, employee strikes and other labor-related disruptions;

• our inability to expand or operate reliably and efficiently out of airports where we maintain a large presence;

• negative publicity regarding our customer service;

• our inability to maintain a high daily aircraft utilization rate;

• environmental and noise laws and regulations;

• our reputation and business being adversely affected in the event of an emergency, accident or similar public incident involving our aircraft or personnel;

• our liquidity and dependence on cash balances and operating cash flows;

• our ability to obtain financing or access capital markets;

• the long-term nature of our fleet order book and the unproven new engine technology utilized by the aircraft in our order book;

• our maintenance and lease return obligations;

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• aircraft-related fixed obligations that could impair our liquidity;

• the expected increase in fuel efficiency in the new family of aircraft we have ordered

• our reliance on third-party specialists and other commercial partners to perform functions integral to our operations;

• our reliance on automated systems and the risks associated with changes made to those systems;

• use of personal data;

• our sole-source supplier for our aircraft and engines;

• our reliance on the Denver market;

• governmental regulation;

• our ability to attract and retain qualified personnel;

• loss of key personnel;

• reliance on private equity sponsor;

• operational disruptions;

• lack of marketing alliances and codeshare arrangements; and

• other risk factors included under “Risk Factors” in this prospectus.

In addition, in this prospectus, the words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to our company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this prospectus. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $             million, based on an assumed initial public offering price of $             per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from any sale of shares in this offering by the selling stockholder, whether in the firm offering or upon any exercise of the underwriters’ option to purchase additional shares. Each $1.00 increase (decrease) in the assumed public offering price of $             per share would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $             million. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $             million, assuming that the assumed offering price stays the same. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital.

We currently expect to use the net proceeds from this offering for general corporate purposes, including cash reserves, working capital, capital expenditures, including flight equipment acquisitions, sales and marketing activities, general and administrative matters and for possible debt repayment.

Our expected use of the net proceeds to us from this offering represents our current intentions based upon our present plans and business condition. As such, our management will retain discretion over the use of the net proceeds from this offering.

Pending the use of the proceeds to be received by us from this offering, we intend to invest the net proceeds in interest-bearing, investment-grade securities, certificates of deposit or government securities.

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DIVIDEND POLICY

In September 2018 and February 2019, we declared cash dividends with respect to our common stock in the amounts of $38.47 and $28.85 per share, respectively (representing aggregate obligations of $221 million and $166 million, respectively, after giving effect to related adjustments for the benefit of holders of stock options and phantom equity units).

In connection with our receipt of financial assistance under the PSP and PSP2 and acceptance of the Treasury Loan Agreement, we agreed not to make dividend payments in respect of our common stock until the later of March 31, 2022 or one year after the Treasury Loan facility loan is repaid. We also entered into the Treasury Loan Agreement and, as a result, we are prohibited from paying dividends on our common stock through the date that is one year after the secured loan provided under the Treasury Loan Agreement is fully repaid. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

As a holding company, our ability to pay dividends also depends on our receipt of cash dividends, distributions or other payments from our subsidiaries. Our ability to pay dividends will therefore be restricted as a result of restrictions on its ability to pay dividends to us under the CARES Act and may be restricted under future indebtedness that we or they may incur. See “Risk Factors—Risks Related to Owning Our Common Stock.”

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and restricted cash, current maturities of long-term debt, net and capitalization as of December 31, 2020:

• on an actual basis; and

• on an as adjusted basis to give effect to this offering and the application of the net proceeds to be received by us.

Also, as of December 31, 2020, we had $424 million available to borrow from our Treasury Loan.

You should read this capitalization table together with our financial statements and the related notes appearing at the end of this prospectus, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, and other financial information included in this prospectus.

	As of December 31, 2020
	Actual			As Adjusted(1)(2)
	(in millions)			(unaudited)
Cash, cash equivalents and restricted cash	$	378
Current maturities of long-term debt, net	$	101
Long-term debt, less current maturities	$	247
Stockholders’ equity:
Common stock (voting), $0.001 par value, 12,000,000 shares of common stock (voting) authorized, 5,248,371 shares issued and outstanding as of December 31, 2020;     shares authorized,      as adjusted	$	—
Common stock (non-voting), $0.001 par value, 2,000,000 shares of common stock (non-voting) authorized, no shares issued and outstanding;     shares authorized,     issued and outstanding as adjusted		—
Preferred stock, $0.001 par value, 1,000,000 shares of preferred stock authorized, no shares issued and outstanding;     shares authorized, no shares issued and as adjusted		—
Additional paid-in capital		60
Retained earnings		261
Accumulated other comprehensive loss		(11	)
Total stockholders’ equity	$	310
Total capitalization	$	658

(1) The unaudited adjusted pro forma capitalization table gives effect to the receipt of the estimated net proceeds by us from the sale of shares of our common stock offered by us (based on an assumed initial public offering price of $    per share, the midpoint of the price range set forth on the cover of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds received by us.

(2) Each $1.00 increase or decrease in the assumed initial public offering price of $    per share would increase or decrease, respectively, the amount of cash, cash equivalents and restricted cash, additional paid-in capital, total stockholders’ equity and total capitalization by $    million (assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease, respectively, the amount of cash, cash equivalents and restricted cash, stockholders’ equity and total capitalization by approximately $     million (based on an assumed initial public offering price of $    per share, the midpoint of the price range as set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and

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estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

The number of shares of our common stock outstanding after this offering is based on 5,248,371 shares outstanding as of December 31, 2020, and excludes:

• an aggregate of 259,980 shares of common stock issuable upon the exercise of outstanding stock options as of December 31, 2020, having a weighted average exercise price of $73.42 per share;

• an aggregate of 50,559 shares of common stock issuable upon the vesting of outstanding RSUs as of December 31, 2020;

• an aggregate of 13,752 shares of common stock issuable upon the exercise of warrants issued pursuant to the PSP Agreement with the Treasury, with respect to PSP established under Subtitle B of Title IV of Division A of the CARES Act (the “PSP Warrants”), having an exercise price of $241.72 per share;

• an aggregate of 62,055 shares of common stock issuable upon the exercise of warrants issued pursuant to the Treasury Warrant Agreement with the Treasury related to the Treasury Loan (the “Treasury Warrants”) having an exercise price of $241.72 per share;

• an aggregate of 2,711 shares of common stock issuable upon the exercise of warrants to be issued pursuant to the PSP2 Agreement with the Treasury, based on the $140 million of funding, with respect to PSP2 established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (the “PSP2 Warrants”), having an exercise price of $442.69 per share;

• an aggregate of 641,090 shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Plan as of December 31, 2020, which will become available for issuance under our 2021 Equity Incentive Award Plan after consummation of this offering; and

• an aggregate of     shares of common stock reserved for issuance pursuant to future awards under our 2021 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

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DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock immediately after the offering.

The historical net tangible book value of our common stock as of December 31, 2020 was $     million, or $     per share. Historical net tangible book value per share is determined by dividing the net tangible book value by the number of shares of outstanding common stock. If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock.

After giving effect to our issuance of      shares of common stock at an assumed initial public offering price of $     per share of common stock, the mid-point of the range of the estimated initial offering price of between $     and $     as set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and estimated offering expenses payable by us, our pro forma net tangible book value as adjusted as of December 31, 2020 would have been approximately $     million, or approximately $     per pro forma share of common stock. This represents an immediate increase in pro forma net tangible book value of $     per share to our existing stockholders and an immediate dilution of $     per share to new investors in this offering.

The following table illustrates this dilution on a per share basis to new investors:

Assumed initial public offering price		$
Historical net tangible book value per share as of December 31, 2020	$
Pro forma decrease in net tangible book value per share
Pro forma net tangible book value per share as of December 31, 2020
Increase in pro forma net tangible book value per share attributable to this offering
Pro forma net tangible book value per share, as adjusted(1)
Dilution in pro forma net tangible book value per share to new investors in this offering		$

(1) Pro forma net tangible book value per share, as adjusted, gives effect to this offering (based on the assumed initial public offering price of $             per share, the mid-point of the price range set forth on the cover page of this prospectus).

Each $1.00 increase or decrease in the assumed public offering price of $     per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase or decrease, respectively, our pro forma net tangible book value, as adjusted to give effect to this offering, by $     million, or $     per share, and the dilution per share to investors participating in this offering by $     per share (assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. At the assumed public offering price per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, an increase of 1,000,000 in the number of shares we are offering would increase our pro forma net tangible book value, as adjusted to give effect to this offering, by approximately $     million, or $     per share, and decrease the dilution per share to investors participating in this offering by $     per share, and a decrease of 1,000,000 in the number of shares we are offering would decrease our pro forma net tangible book value, as adjusted to give effect to this offering, by approximately $     million, or $     per share, and increase the dilution per share to investors participating in this offering by $     per share. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. We will not receive any of the proceeds from any sale of shares of our common stock in this offering by the selling stockholder, including if the underwriters exercise their option to purchase

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additional shares of our common stock from the selling stockholder; accordingly, there is no dilutive impact as a result of these sales.

The table below summarizes as of December 31, 2020, on a pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by existing stockholders, and (ii) to be paid by new investors purchasing our common stock in this offering at an assumed initial public offering price of $    per share (in thousands except per share and percentage data).

	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent
Existing Stockholders					$				$
New investors					$				$
Total			100	%	$		100	%

The number of shares of our common stock outstanding after this offering is based on 5,248,371 shares outstanding as of December 31, 2020, and excludes:

• an aggregate of 259,980 shares of common stock issuable upon the exercise of outstanding stock options as of December 31, 2020, having a weighted average exercise price of $73.42 per share;

• an aggregate of 50,559 shares of common stock issuable upon the vesting of outstanding RSUs as of December 31, 2020;

• an aggregate of 13,752 shares of common stock issuable upon the exercise warrants issued pursuant to the PSP Agreement with the Treasury, with respect to PSP established under Subtitle B of Title IV of Division A of the CARES Act (the “PSP Warrants”), having an exercise price of $241.72 per share;

• an aggregate of 62,055 shares of common stock issuable upon the exercise of warrants issued pursuant to the Treasury Warrant Agreement (the “Treasury Warrant Agreement”) with the Treasury related to the Treasury Loan (the “Treasury Warrants”) having an exercise price of $241.72 per share;

• an aggregate of 2,711 shares of common stock issuable upon the exercise of warrants to be issued pursuant to the PSP2 Agreement with the Treasury, based on the $140 million of funding, with respect to the Payroll Support Program (“PSP2”) established under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (the “PSP2 Warrants”), having an exercise price of $442.69 per share;

• an aggregate of 641,090 shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Plan as of December 31, 2020, which will become available for issuance under our 2021 Equity Incentive Award Plan after consummation of this offering; and

• an aggregate of     shares of common stock reserved for issuance pursuant to future awards under our 2021 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

If the underwriters exercise in full their option to purchase additional shares of our common stock from the selling stockholder, our existing stockholders would own     % and our new investors would own     % of the total number of shares of our common stock outstanding upon completion of this offering. The total consideration paid by our existing stockholders would be approximately $    million, or     %, and the total consideration paid by investors purchasing shares in this offering would be $    million, or     %.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

You should read the following selected consolidated historical financial and operating data below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, related notes and other financial information included in this prospectus. The selected consolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the financial statements and related notes included in this prospectus.

We derived the selected consolidated statements of operations data for the years ended December 31, 2018, 2019 and 2020 and the selected consolidated balance sheet data as of December 31, 2019 and 2020 from our audited consolidated financial statements included in this prospectus. We derived the selected consolidated statements of operations data for the years ended December 31, 2016 and 2017 and the selected consolidated balance sheet data as of December 31, 2016, 2017 and 2018 from our audited consolidated financial statements not included in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and our results for the year ended December 31, 2020 have been materially affected by the COVID-19 pandemic.

	Year Ended December 31,
	2016			2017			2018			2019			2020
	(in millions, except for share and per share data)
Consolidated Statements of Operations Data:
Operating revenues:
Passenger	$	1,678		$	1,880		$	2,102		$	2,445		$	1,207
Other		36			38			54			63			43
Total operating revenues		1,714			1,918			2,156			2,508			1,250
Operating expenses:
Aircraft fuel		343			456			589			640			338
Salaries, wages and benefits		287			362			441			529			533
Aircraft rent(1)		209			257			277			368			396
Station operations		233			237			323			336			257
Sales and marketing		83			94			110			130			78
Maintenance materials and repairs		59			79			75			86			83
Depreciation and amortization		75			65			78			46			33
CARES Act credits		—			—			—			—			(193	)
Other operating expenses(1)		108			123			171			64			90
Total operating expenses		1,397			1,673			2,064			2,199			1,615
Operating income (loss)		317			245			92			309			(365	)
Other income (expense):
Interest expense		(9	)		(10	)		(13	)		(11	)		(18	)
Capitalized interest		6			6			9			11			6
Interest income and other		2			7			17			16			5
Total other income (expense)		(1	)		3			13			16			(7	)
Income (loss) before income taxes		316			248			105			325			(372	)
Income tax expense (benefit)		116			86			25			74			(147	)
Net income (loss)	$	200		$	162		$	80		$	251		$	(225	)

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	Year Ended December 31,
	2016		2017		2018		2019		2020
	(in millions, except for share and per share data)
Earnings (loss) per share:
Basic	$	36.66	$	30.32	$	13.95	$	45.21	$	(42.91	)
Diluted	$	36.14	$	29.64	$	13.83	$	45.10	$	(42.91	)
Weighted-average shares outstanding:
Basic		5,236,978		5,237,034		5,238,618		5,240,555		5,243,695
Diluted		5,315,653		5,450,945		5,287,484		5,252,450		5,243,695

(1) Prior to January 1, 2019 and our adoption of ASU 2016-02, Leases, (“ASU 2016-02”) any gains on completed sale-leaseback transactions were deferred and recognized as a reduction to aircraft rent expense over the lease term for each aircraft or engine. Due to the adoption of ASU 2016-02 on January 1, 2019, gains from sale-leaseback transactions are now recognized in full immediately upon sale as a reduction to other operating expense within the consolidated statements of operations, and are therefore no longer amortized over the life of the lease. During the year ended December 31, 2019 and 2020, the gain on sale-leaseback transactions, net was $107 million and $48 million, respectively.

	Year Ended December 31,
	2016		2017		2018		2019		2020
	(in millions)
Non-GAAP financial data (unaudited):
Adjusted net income (loss)(1)	$	236	$	206	$	183	$	276	$	(301	)
EBITDA(1)		392		310		170		355		(332	)
Adjusted EBITDA(1)		436		376		305		387		(466	)
Adjusted EBITDAR(2)		641		635		582		755		(70	)

(1) Adjusted net income, EBITDA and Adjusted EBITDA are included as supplemental disclosures because we believe they are useful indicators of our operating performance. Derivations of net income and EBITDA are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in our industry.

Adjusted net income, EBITDA and Adjusted EBITDA have limitations as analytical tools. Some of the limitations applicable to these measures include: Adjusted net income, EBITDA and Adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; Adjusted net income, EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; EBITDA, and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness or possible cash requirements related to our warrants; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and other companies in our industry may calculate Adjusted net income, EBITDA and Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted net income, EBITDA and Adjusted EBITDA should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP. In addition, because derivations of Adjusted net income, EBITDA and Adjusted EBITDA are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of Net income and EBITDA, including Adjusted Net Income and Adjusted EBITDA, as presented may not be directly comparable to similarly titled measures presented by other companies.

For the foregoing reasons, each of Adjusted Net Income, EBITDA and Adjusted EBITDA has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.

(2) Adjusted EBITDAR is included as a supplemental disclosure because we believe it is useful solely as a valuation metric for airlines as its calculation isolates the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by capital lease or by

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operating lease, each of which is presented differently for accounting purposes), and income taxes, which may vary significantly between periods and for different airlines for reasons unrelated to the underlying value of a particular airline. However, Adjusted EBITDAR is not determined in accordance with GAAP, is susceptible to varying calculations and not all companies calculate the measure in the same manner. As a result, Adjusted EBITDAR, as presented, may not be directly comparable to similarly titled measures presented by other companies. In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance since it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. Accordingly, you are cautioned not to place undue reliance on this information.

The following table presents the reconciliation of Net income (loss) to Adjusted net income, EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented below.

	Year Ended December 31,
	2016			2017			2018			2019			2020
	(in millions)
Adjusted net income (loss) reconciliation (unaudited):
Net income (loss)	$	200		$	162		$	80		$	251		$	(225	)
Derivative de-designation and mark to market adjustment(a)		—			—			—			—			52
Lease Modification Program(b)		16			(2	)		—			—			—
Pilot phantom equity(c)		40			19			22			5			—
Collective bargaining contract ratification(d)		—			—			88			22			—
Loss on sale of owned aircraft(e)		—			—			25			—			—
Flight attendant settlement and early out program(f)		—			49			—			5			—
CARES Act – grant recognition and employee retention credits(g)		—			—			—			—			(193	)
Write-off of deferred registration statement costs due to significant market uncertainty(h)		—			—			—			—			7
CARES Act – mark to market impact for warrants(i)		—			—			—			—			9
Adjusted net income (loss) before income taxes		256			228			215			283			(350	)
Tax benefit (expense) related to underlying adjustments		(20	)		(22	)		(32	)		(7	)		49
Adjusted net income (loss)	$	236		$	206		$	183		$	276		$	(301	)
EBITDA, Adjusted EBITDA and Adjusted EBITDAR reconciliation (unaudited):
Net income (loss)	$	200		$	162		$	80		$	251		$	(225	)
Plus (minus):
Interest expense		9			10			13			11			18
Capitalized interest		(6	)		(6	)		(9	)		(11	)		(6	)
Interest income and other		(2	)		(7	)		(17	)		(16	)		(5	)
Income tax expense		116			86			25			74			(147	)
Depreciation and amortization		75			65			78			46			33
EBITDA		392			310			170			355			(332	)
Plus (minus):
Derivative de-designation and mark to market adjustment(a)		—			—			—			—			52
Lease Modification Program(b)		4			(2	)		—			—			—
Pilot phantom equity(c)		40			19			22			5			—
Collective bargaining contract ratification(d)		—			—			88			22			—
Loss on sale of owned aircraft(e)		—			—			25			—			—
Flight attendant settlement and early out program(f)		—			49			—			5			—
CARES Act – grant recognition and employee retention credits(g)		—			—			—			—			(193	)
Write-off of deferred registration statement costs due to significant market uncertainty(h)		—			—			—			—			7
Adjusted EBITDA		436			376			305			387			(466	)
Plus: Aircraft Rent(j)		205			259			277			368			396
Adjusted EBITDAR	$	641		$	635		$	582		$	755		$	(70	)

(a) Due to the significant reduction in demand resulting from the COVID-19 pandemic, our future anticipated consumption of fuel dropped significantly and we therefore de-designated hedge accounting in March 2020 on the derivative positions

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and quantities where the future consumption was not deemed probable, which primarily related to our written put options on our costless collars. The $52 million charge is the result of the de-designation and the resulting mark to market impact on the quantities where fuel consumption was not deemed probable.

(b) Represents accelerated depreciation of $12 million and aircraft rent of $4 million for the year ended December 31, 2016 as a result of significantly shortened lease terms for ten of our A319ceo aircraft. During 2017, a $2 million benefit was recognized as a result of costs associated with returning the aircraft to the lessor being lower than previously estimated.

(c) Represents the impact of the change in value of phantom equity units pursuant to the Pilot Phantom Equity Plan. In accordance with the amended and restated phantom equity agreement, the remaining phantom equity obligation became fixed as of December 31, 2019 and is no longer subject to valuation adjustments. See “Executive Compensation—Equity Compensation Plans—Pilot Phantom Equity Plan.”

(d) Represents (i) $75 million of costs related to a one-time contract ratification incentive, plus payroll-related taxes and certain other compensation and benefits-related accruals earned through December 31, 2018 and committed to by us as part of a tentative agreement with the union representing our pilots that was reached in December 2018 and was ratified by the pilots in January 2019 and (ii) $15 million of costs related to a one-time contract ratification incentive, plus payroll-related taxes and certain other compensation and benefits-related accruals earned through March 31, 2019 and committed to by us as part of a tentative agreement with the union representing our flight attendants that was reached in March 2019 for a contract that was ratified and became effective in May 2019, in addition to $4 million in pilot vacation accrual adjustments during the fourth quarter of 2019 as a result of the ratified agreement with the union representing our pilots specifically tied to the implementation of a preferred bidding system.

(e) Represents losses incurred on the sale of our six owned aircraft in December 2018, which enabled us to accelerate a critical part of our fleet plan by shortening our time with certain of our older less fuel-efficient aircraft. The loss was measured as the excess of the net book value of the aircraft over the sale price at the date of sale and was recognized within other operating expenses in the consolidated statements of operations. All aircraft were held for use through the date of sale.

(f) Represents the $40 million settlement and $3 million of payroll taxes relating to the Letter of Agreement entered into with the union representing our flight attendants (AFA-CWA) on March 15, 2017. Additionally, includes expenses associated with an early out program for our flight attendants during 2017 and 2019 and ratification of our aircraft technicians and material specialists collective bargaining agreements during 2017.

(g) Represents the recognition of the $178 million grant received from the U.S. government for payroll support from April 2020 through September 2020 as part of the PSP under the CARES Act net of $1 million of deferred financing costs along with $16 million of employee retention credits we qualified for under the CARES Act.

(h) Represents the write-off of our deferred initial public offering preparation costs during the first quarter of 2020 due to the impact of the COVID-19 pandemic and the resulting uncertainty in our ability to access the capital markets.

(i) Represents the mark to market adjustment to the value of the warrants issued as part of the funding provided by the U.S. Treasury under the CARES Act. This amount is a component of interest expense.

(j) Represents aircraft rent expense included in Adjusted EBITDA. Excludes aircraft rent expense (benefit) of $4 million and $(2) million for the years ended 2016 and 2017, respectively, included in Lease Modification Program (excluding depreciation). See footnote (1) above under the caption “Selected Consolidated Financial and Operating Data” with respect to the effect of our adoption of ASU 2016-02 on January 1, 2019.

The following table presents our historical consolidated balance sheet data as of the dates presented.

	As of December 31,
	2016		2017		2018		2019		2020
					(in millions)
Consolidated Balance Sheet Data:
Cash, cash equivalents and restricted cash	$	618	$	717	$	698	$	768	$	378
Total assets		1,341		1,569		1,514		3,864		3,554
Long-term debt, including current portion		237		303		214		245		348
Stockholders’ equity		423		429		280		542		310

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OPERATING STATISTICS

	Year Ended December 31,
	2016			2017			2018			2019			2020
Operating statistics (unaudited)(a)
Available seat miles (ASMs) (millions)		18,366			22,049			24,629			28,120			16,955
Departures		99,369			107,387			122,784			138,570			88,642
Average stage length (statute miles)		1,060			1,104			1,052			1,051			999
Block hours		279,347			308,860			341,528			389,476			235,974
Average aircraft in service		61			68			76			88			81
Aircraft - end of period		66			78			84			98			104
Average daily aircraft utilization (hours)		12.6			12.4			12.3			12.2			8.0
Passengers (thousands)		14,937			17,008			19,843			22,823			11,238
Average seats per departure		173			184			190			192			191
Revenue passenger miles (RPMs) (millions)		16,015			18,907			20,920			24,203			11,443
Load factor (%)		87.2	%		85.8	%		84.9	%		86.1	%		67.5	%
Fare revenue per passenger ($)		66.15			59.88			54.72			52.80			48.78
Non-fare passenger revenue per passenger ($)		46.22			50.67			51.20			54.33			58.66
Other revenue per passenger ($)		2.33			2.19			2.73			2.78			3.79
Total revenue per passenger ($)		114.70			112.74			108.65			109.91			111.23
Total revenue per available seat mile (RASM) (¢)		9.33			8.70			8.75			8.92			7.37
Cost per available seat mile (CASM) (¢)		7.61			7.59			8.38			7.82			9.53
CASM (excluding fuel) (¢)		5.74			5.52			5.99			5.55			7.53
CASM + net interest (¢)(b)		7.62			7.57			8.33			7.76			9.57
Adjusted CASM (¢)(b)		7.30			7.29			7.83			7.71			10.32
Adjusted CASM (excluding fuel) (¢)(b)		5.43			5.22			5.44			5.44			8.63
Adjusted CASM + net interest (¢)(b)		7.31			7.27			7.78			7.65			10.31
Fuel cost per gallon ($)		1.59			1.88			2.25			2.22			2.08
Fuel gallons consumed (thousands)		215,830			241,879			261,179			288,510			162,241
Employees (FTE)		3,163			3,584			3,978			4,935			4,974

(a) See “Glossary of Airline Terms” for definitions of terms used in this table.

(b) For a reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”

Overview

Frontier Airlines is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right®. We offer flights throughout the United States and to select near international destinations in the Americas. Our unique strategy is underpinned by our low-cost structure and superior low-fare brand. As of December 31, 2020, we had a fleet of 104 narrow-body Airbus A320 family aircraft, and a commitment to purchase 156 A320neo (New Engine Option) family aircraft by the end of 2028. During the years ended December 31, 2019 and 2020, we served approximately 23 million and 11 million passengers, respectively, across a network of approximately 110 airports.

In December 2013, we were acquired by an investment fund managed by Indigo, an affiliate of Indigo Partners, an experienced and successful global investor in ULCCs. Following the acquisition, Indigo reshaped our management team to include experienced veterans of the airline industry with a significant history operating ULCCs. Working with Indigo and supported by a highly productive workforce, our management team developed and implemented our unique Low Fares Done Right strategy, which significantly reduced our unit costs, introduced low fares, provided the choice of optional services to our customers, enhanced our operational performance and improved the customer experience. Through the implementation of our new operating model, we have positioned our brand as a leading low-fare airline and had seen a dramatic improvement to our profitability prior to COVID-19.

The implementation of Low Fares Done Right has significantly reduced our cost base by increasing aircraft utilization (prior to the COVID-19 pandemic), transitioning our fleet to larger aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, replacing our reservation system, enhancing our website, boosting employee productivity and contracting with third-party specialists to provide us with select operating and other services. As a result of these and other initiatives, we were able to reduce our CASM (excluding fuel) from 7.89¢ for the year ended December 31, 2013 to 5.55¢ for the year ended December 31, 2019, and our Adjusted CASM (excluding fuel) from 7.89¢ for the year ended December 31, 2013 to 5.44¢ for the year ended December 31, 2019, an improvement of 30% and 31%, respectively. For the year ended December 31, 2020, our CASM (excluding fuel) was 7.53¢ and our Adjusted CASM (excluding fuel) was 8.63¢, which was principally a result of a reduced aircraft utilization as a result of the COVID-19 pandemic. For a discussion and reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Glossary of Airline Terms” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”

The COVID-19 pandemic has presented significant challenges to the global airline industry since February 2020. We have experienced a significant decline in demand related to the COVID-pandemic, which has caused a material decline in our revenues and negatively impacted our business, operating results, financial condition and liquidity, with approximately $2 million per day on average of cash burn during the year ended December 31, 2020. We have worked diligently to navigate such challenges by implementing disciplined capacity deployment and taking steps to protect liquidity and cash flow, and towards being an industry leader with respect to the implementation of new health and safety initiatives. Due to such efforts, we believe we are well positioned to take advantage of the anticipated demand recovery as vaccine distribution continues. As an example, throughout

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the pandemic, the U.S. airline industry has seen stronger domestic demand than international demand, and the segments of domestic travel that have recovered fastest have been VFR (visiting friends or relatives) and vacation travel (which together we refer to as leisure travel) in contrast to business travel, both of which are trends that we believe position us to outperform the airline industry as a whole. According to the Airlines Reporting Corporation, for the week ended February 21, 2021, the number of tickets purchased as a percentage of the same time period in 2019 was 54% for online travel agencies with a primary focus on leisure travel, 32% for traditional leisure/other agencies with a primary focus on leisure travel, and 15% for corporate agencies whose primary business model is managed corporate or government travel. We design our route network to capture low fare demand among leisure travelers and our three largest bases are Denver, Orlando and Las Vegas, which draw a significant proportion of leisure travelers. In the seven months ending February 29, 2020, according to a post-travel survey we conducted, 89% of our customers were leisure travelers. We believe the restrictions and health concerns that have depressed demand during the pandemic are also likely to lead to increased levels of pent-up demand for leisure travel once the effects of the pandemic decrease. As a result, we expect to see a significant recovery in our performance as the U.S. market recovers. Within our current network of approximately 110 airports served, we plan to strategically deploy our capacity where demand is highest during the recovery in order to more quickly return to normal capacity levels. More broadly, after being restricted from travel, we believe many customers will take advantage of the opportunity to travel more in the coming years. We also believe new working patterns and the increasing growth of work from home will lead to increasing numbers of employees choosing to live remotely from their office location. We believe this trend will lead to an increased number of shorter leisure trips by Americans. We believe our low fares, supported by our low cost structure, will enable us to grow our network and take advantage of new demand patterns as they arise. We also believe that we will expand our relative unit cost advantage as compared to those airlines which borrowed more heavily through the pandemic. Furthermore, we believe that low-cost airlines have historically recovered more quickly than the airline industry overall following past crises, including the 1991 Gulf War, the 2001 Terrorist Attacks, and the late-2000s Financial Crisis. In the wake of these crises, low-cost airlines further expanded the magnitude of their superior margin profile and profitability relative to the airline industry as a whole.

Impact of the COVID-19 Pandemic

In December 2019, a novel strain of coronavirus was reported in Wuhan, China, and on March 11, 2020, the World Health Organization classified the virus as a pandemic. The rapid spread of this pandemic, or fear of such an event, along with government mandated restrictions on travel, required stay-in-place orders, and other social distancing measures resulted in a drastic decline in near-term air travel demand beginning in the United States in March 2020, causing sharp reductions in revenues and income levels as compared to prior period performance. The decline in demand for air travel has and will continue to have a material adverse effect on our business and results of operations in 2020 and during 2021.

While we experienced a modest uptick in demand during the latter half of the second quarter and continuing into the third and fourth quarters of 2020, demand was negatively impacted by a resurgence of COVID-19 cases in certain domestic markets. The length and severity of the decline in demand due to the impacts of the COVID-19 pandemic is uncertain given the impact of the pandemic on the overall U.S. and global economy. Additionally, we are unable to predict the future spread of COVID-19 and resulting measures that may be introduced by governments or other parties and what impact they may have on the demand for air travel. As such, we expect the adverse impact to persist during 2021.

In December 2020, the FDA issued emergency use authorizations for the Pfizer and BioNTech vaccine and for the Moderna vaccine for the prevention of COVID-19. On February 4, 2021, Johnson & Johnson submitted a request for an emergency use authorization for its vaccine for the prevention of COVID-19. While it will take time for vaccines to be widely distributed, we expect confidence in travel to increase as vaccine distribution occurs, particularly in the domestic leisure market on which our business is focused.

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In response to the impact of the COVID-19 pandemic, in March 2020 we began taking measures to address the significant cash outflows resulting from the sharp decline in demand and we continue to evaluate options should the lack of demand for air travel continue beyond the near term. Also during 2020, we reduced our flight schedule to match demand levels and implemented various other initiatives to reduce costs and manage liquidity, including, but not limited to:

• reducing planned headcount increases;

• reducing employee related costs, including:

• salary reductions and/or deferrals for our officers and board members;

• suspension of merit salary increases for 2020; and

• voluntary paid and unpaid leave of absence programs for employees not covered under labor arrangements, as well as certain employees covered under such arrangements, including pilots and flight attendants, that range from one month to six months;

• deferring aircraft deliveries;

• reducing discretionary expenses;

• reaching agreements with major vendors, which are primarily related to many of our aircraft and engine leases as well as airports, for deferral of payments and deliveries until late in 2020 and into 2021;

• delaying non-essential maintenance projects and reducing or suspending other discretionary spending

• reducing non-essential capital projects;

• securing current funding and future liquidity from the CARES Act, PSP, PSP2 and other financing sources; and

• amending certain debt covenant metrics to align with current and expected demand.

As a result of the measures to reduce costs and manage liquidity as outlined above, we believe our financial position and available liquidity as of the date of this prospectus, after giving effect to this offering, will allow us to continue to navigate through any short-term demand declines and that we are well positioned to recover once the demand for air travel increases. As of December 31, 2020, we had $963 million of total available liquidity, including $378 million of cash and cash equivalents, $424 million available to borrow under the Treasury Loan facility, and a $161 million income tax receivable, primarily resulting from our net operating losses generated in 2020 and expected to be collected in 2021. Additionally, subsequent to December 31, 2020, we entered into the PSP2 Agreement, which provided us with at least an incremental $140 million in liquidity. We received the first installment in the amount of $70 million on January 15, 2021. During the year ended December 31, 2020, our cash burn was approximately $2 million per day on average. We continue to monitor the impacts of the pandemic on our operations and financial condition and believe that our plans intended to mitigate these conditions and events will help alleviate liquidity risks presented.

Fleet Plan

As of December 31, 2020, we had a fleet of 104 narrow-body Airbus A320 family aircraft, and a commitment to purchase 156 A320neo (New Engine Option) family aircraft by the end of 2028. We began operating the A320neo family aircraft in October 2016. For the year ended December 31, 2019, we had the most fuel-efficient fleet of all U.S. carriers of significant size when measured by ASMs per fuel gallon consumed. The A320neo family aircraft that we continue to place in service are expected to continue delivering approximately 15% improved fuel efficiency compared to the prior generation of A320ceo family aircraft. As of December 31, 2020, we had an obligation to purchase 156 A320neo family aircraft by the end of 2028, one of which had a

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committed operating lease. We are evaluating financing options for the remaining aircraft. All of the aircraft in our fleet are financed with operating leases, the last of which is scheduled to expire by the end of 2032. As of December 31, 2020, the operating leases for seven aircraft in our fleet are scheduled to expire during 2021. As of December 31, 2020 leases for eight of our aircraft could generally be renewed at rates based on fair market value at the end of the lease term for four years. Our fleet plan will result in the retirement of all remaining A319ceo aircraft (150 seats), which we expect to replace with larger new A320neo aircraft (186 seats) and A321neo aircraft (up to 240 seats). In December 2018, we accelerated a component of this plan by completing the sale-leaseback of our six owned aircraft, which included four A319ceo aircraft and two A320ceo aircraft. Once the four A319ceo leases expire in December 2021, we expect that we will no longer operate any A319ceo aircraft and will exclusively operate A320ceo, A320neo, A321ceo and, commencing in 2022, A321neo aircraft moving forward.

During 2018, 2019 and 2020, we executed sale-leaseback transactions with third-party lessors for deliveries of new Airbus A320 family aircraft, with 16 delivered in 2018, 18 delivered in 2019 and nine delivered in 2020. We also completed sale-leaseback transactions on two engines in both 2018 and 2019, and one engine in 2020. Prior to January 1, 2019 and our adoption of the Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases, (“ASU 2016-02”), any gains on completed sale-leaseback transactions were deferred and recognized as a reduction to aircraft rent expense over the lease term for each aircraft or engine. Due to the adoption of ASU 2016-02 on January 1, 2019, gains from sale-leaseback transactions are now recognized in full immediately upon sale as a reduction to other operating expense within the consolidated statements of operations, and are therefore no longer amortized over the life of the lease. As such, commencing in 2019 our earnings in a particular year became significantly more sensitive to the number of aircraft delivered and the terms of the related sale-leaseback financing than under the prior method which deferred any gains over the lease term.

Operating Revenues

Our operating revenue consists of passenger and other revenues.

Passenger Revenues. Passenger revenue consists of base fares for air travel, including mileage credits redeemed under our frequent flyer program, unused and expired passenger credits, and other redeemed or expired travel credits. In addition, passenger revenue also includes non-fare revenues generated from air travel-related services such as baggage fees, itinerary service fees, seat selection fees, change and cancellation fees, booking fees and other passenger related revenue.

As a result of the reduction in demand resulting from the COVID-19 pandemic which has persisted into 2021, beginning in March 2020, we extended the expiration dates of mileage credits issued under our frequent flyer program, waived cancellation and change fees for customers for most of 2020 after the start of the pandemic and extended the expiration of credits for future travel to 12 months in the fourth quarter of 2020. Our decision to waive cancellation and change fees may reduce future revenues and the extension of expiration of mileage credits and credits for future travel may delay the recognition of future revenues. Additionally, the CARES Act, which became law on March 27, 2020 and includes various provisions to protect the U.S. airline industry, its employees, and many other stakeholders, provided a tax holiday through December 31, 2020 for excise taxes related to airline fares which favorably impacted our results and is not expected to extend into future years.

Other Revenues. Other revenue primarily consists of services not directly related to providing transportation, such as the advertising, marketing and brand elements of the Frontier Miles (formerly EarlyReturns) affinity credit card program and commissions revenue from the sale of items such as rental cars and hotels.

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Operating Expenses

Our operating expenses consist of the following items:

Aircraft Fuel. Aircraft fuel expense is one of our largest operating expenses. It includes jet fuel and associated into-plane costs, federal and state taxes, and gains and losses associated with fuel hedge contracts. During the year ended December 31, 2020, aircraft fuel included $82 million in losses associated with fuel hedges primarily as a result of the precipitous decline in jet fuel prices caused by the COVID-19 pandemic, which created a significant liability position at the settlement of our collar trades. The CARES Act, which became law on March 27, 2020, provided a tax holiday through December 31, 2020 for excise taxes on jet fuel purchases which favorably impacted our results of operations during the year ended December 31, 2020 and is not expected to extend into future years.

Salaries, Wages and Benefits. Salaries, wages and benefits expense includes salaries, hourly wages, bonuses, equity-based compensation and profit sharing paid to employees for their services, as well as related expenses associated with employee benefit plans, including health care costs, employer payroll taxes and other employee-related costs. During the first and second quarters of 2019, we entered into new collective bargaining agreements with our pilot and flight attendant labor unions, which become amendable in 2024 and which provide for increases in salaries, wages and benefits during the five-year contract term. As a result of COVID-19, we received installment funding under the PSP, which is part of the CARES Act, including a $178 million grant (“PSP Grant”) for payroll support for the period from April 2020 through September 30, 2020. The PSP contained certain conditions impacting salaries, wages and benefits including, among others, that there were to be no involuntary furloughs or pay and benefit reductions through September 30, 2020. We expect to receive further funding during the first quarter of 2021 under a second Payroll Support Program, including a $128 million grant (“PSP2 Grant”) for the continuation of payroll support through March 31, 2021. The PSP and PSP2 funding is and will continue to be recognized net of deferred financing costs over the periods intended to support payroll, within CARES Act credits in our consolidated statements of operations. See the “CARES Act Credits” discussion below for more details. Similar to the PSP, PSP2 requires that there are to be no involuntary furloughs or pay and benefit reductions through March 31, 2021. The CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, which have been accrued as of December 31, 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. We offered voluntary leave of absence programs to pilots and flight attendants in increments of one or three-month time frames through March 31, 2021 in anticipation of the lapse of the original PSP to help defray costs in the low demand environment. As a result of the subsequent PSP2 Agreement, we increased the minimum pay provided under these programs, while maintaining no requirement to work.

Aircraft Rent. Aircraft rent expense consists of monthly lease charges for aircraft and spare engines under the terms of the related operating leases and is recognized on a straight-line basis. Aircraft rent expense also includes that portion of maintenance reserves, also referred to as supplemental rent, which is paid monthly to aircraft lessors for the cost of future heavy maintenance events and which is not probable of being reimbursed to us by the lessor during the lease term, as well as lease return costs, which consist of all costs that would be incurred at the return of the aircraft, including costs incurred to return the airframe and engines to the condition required by the lease. Prior to January 1, 2019 and our adoption of ASU 2016-02, aircraft rent expense was generally recognized net of any amortization of deferred gains on sale-leaseback transactions on our flight equipment. Due to the adoption of ASU 2016-02 on January 1, 2019, gains from sale-leaseback transactions are now recognized in full immediately upon sale as a reduction to other operating expense within the consolidated statements of operations and are therefore no longer amortized over the life of the lease. As of December 31, 2020, all of our 104 aircraft and 16 spare engines were financed under operating leases.

In response to the COVID-19 pandemic, beginning in March 2020, we were granted payment deferrals on leases included in our right-of-use assets for certain aircraft and engines from lessors along with airport facilities and other vendors that are not included in our right-of-use assets, which generally span two to seven months. On March 10, 2020, the FASB released Topic 842 and 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (“FASB Q&A”) and we elected to account for lease concessions as though

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enforceable rights and obligations for those concessions existed at lease inception and to account for the concessions as if no changes to the lease contract were made as all deferrals resulted in substantially the same total payments as required by the original contract. We have elected to account for deferred payments as variable lease payments where the deferral payments are not recognized in our consolidated statements of operations until the payment is made. As such, $33 million of rent related to 2020 was deferred to 2021, favorably impacting our cash flows and results of operations for the year ended December 31, 2020, with $31 million and $2 million relating to aircraft rent expense and station operations expense, respectively.

Station Operations. Station operations expense includes the fixed and variable fees charged by airports for the use or lease of airport facilities and fees charged by third-party vendors for ground handling, interrupted trip expenses and other related services. Station operations expense also includes the impact of the payment deferrals on certain leases associated with our airport facilities, with a favorable impact of $2 million reflected for the year ended December 31, 2020, in rent payments related to 2020 being deferred to 2021.

Sales and Marketing. Sales and marketing expense includes credit card processing fees, travel agent commissions and related global distribution systems fees, advertising, sponsorship and distribution costs such as the costs of our call center and costs associated with our frequent flyer program.

Maintenance Materials and Repairs. Aircraft maintenance expense includes the cost of all parts, materials and fees for repairs performed by us and our third-party vendors to maintain our fleet, excluding capitalized heavy maintenance events. It excludes direct labor cost related to our own mechanics, which are included within salaries, wages and benefits in the consolidated statements of operations.

Depreciation and Amortization. Depreciation and amortization expense includes depreciation of fixed assets we own and depreciation of leasehold improvements and finite-lived intangible assets. It also includes the amortization of heavy maintenance expenses that we defer under the deferral method of accounting for heavy maintenance events and recognize as expense on a straight-line basis until the earlier of the next estimated heavy maintenance event or the remaining lease term.

CARES Act Credits. The CARES Act became law on March 27, 2020 and includes various provisions to protect the U.S. airline industry, its employees, and many other stakeholders. On April 30, 2020, we entered into an agreement with the Treasury under which we received $211 million of installment funding comprised of a $178 million PSP Grant for payroll support for the period from April 2020 through September 30, 2020, and a $33 million unsecured 10-year, low interest loan (“PSP Promissory Note”) and we granted the Treasury warrants to purchase 13,752 shares of our common stock, which have a five-year term and are settled in cash, or shares upon an IPO at our option, upon notice from the Treasury. On January 15, 2021, the Company entered into an agreement with the Treasury for a minimum of $140 million of additional installment funding under the PSP2 Agreement, comprised of a $128 million PSP2 Grant for the continuation of payroll support through March 31, 2021, and a $12 million unsecured 10-year low interest loan (“PSP2 Promissory Note”) and expect to issue 2,711 additional warrants.

The PSP and PSP2 funding contains certain conditions, that if not met, may require payroll assistance funds to be paid back to the U.S. government. The primary conditions include, but are not limited to:

• no involuntary furloughs or pay and benefit reductions through March 31, 2021;

• no repurchases of equity securities listed on a national securities exchange or payment of dividends are permitted through March 31, 2022;

• maintain a certain level of scheduled air transportation as deemed necessary by the Department of Transportation to ensure that all routes we had scheduled air travel to before the downturn due to the COVID-19 pandemic are still served between May and September 2020, and between January and March 2021; and

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• put in place certain limits on the compensation and termination benefits of all non-union employees who made in excess of $425,000 in 2019, through October 1, 2022

As of December 31, 2020, we had received the full $178 million under the PSP, which was recognized net of $1 million in deferred financing costs over the periods it was intended to support payroll within CARES Act Credits in our consolidated statements of operations.

The CARES Act also provides an employee retention credit (“CARES Employee Retention Credit”), which is 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. We qualified for the credit beginning on April 1, 2020 and received credits for qualified wages through December 31, 2020. During the year ended December 31, 2020, we recognized $16 million related to the CARES Employee Retention Credit within CARES Act Credits in our consolidated statements of operations and other current assets in our consolidated balance sheet.

As a result of the extension of the CARES Act benefits in December 2020, the CARES Employee Retention Credit program was extended and enhanced. The updated program, effective as of January 1, 2021, was extended through June 30, 2021 and increased the credit to be equal to 70% of qualified wages paid to employees during a quarter and increased the cap from $10,000 of qualified wages for the entire period to $10,000 per quarter. However, we also expect headwinds in our financial results related to the December 31, 2020 expiration of certain tax holidays created by the CARES Act.

Other Operating Expenses. Other operating expenses include crew and other employee travel, information technology, outside services, property taxes and all insurance, including hull liability insurance, supplies, legal and other professional fees, facilities and all other administrative and operational overhead expenses. In addition, other operating expenses includes the quarterly fee of $375,000 as well as other expenses that we pay to Indigo Partners on a quarterly basis pursuant to the Professional Services Agreement. Beginning in 2019, as a result of the adoption of ASU 2016-02, other operating expenses also includes gains recognized in full immediately upon the completion of sale-leaseback transactions.

Other Income (Expense)

Interest Expense. Interest expense is related to our PDP Financing Facility, our floating rate building note, our unsecured debt and the PSP Promissory Note and Treasury Loan. As part of the PSP Promissory Note and the Treasury Loan, we issued to the Treasury warrants to acquire shares of our common stock, which have a five-year term and are settled in cash, or shares upon an IPO at our option, upon notice from the Treasury. The warrants issued in conjunction with the CARES Act financing have been classified as liability-based awards within other current liabilities within the consolidated balance sheet. Given the liability-based classification, at the end of each period the warrant liability is adjusted to its fair market value, calculated utilizing the Black Scholes option pricing model, with the corresponding fair market value adjustment classified as interest expense.

Capitalized Interest. We capitalize interest attributable to pre-delivery payments as an additional cost of the related asset beginning when activities necessary to get the asset ready for its intended use commence. We capitalize interest at our weighted average interest rate on long-term debt or, where applicable, the interest rate related to specific borrowings.

Interest Income and Other. Interest income and other includes interest income on our cash and cash equivalent balances, as well as activity not classified in any other area of the consolidated statements of operations.

Trends and Uncertainties Affecting Our Business

We believe our operating and business performance is driven by various factors that typically affect airlines and their markets, including trends which affect the broader travel industry, as well as trends which affect the specific markets and customer base that we target. The following key factors may affect our future performance:

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Competition. The airline industry is highly competitive. The principal competitive factors in the airline industry are the fare and total price, flight schedules, number of routes served from a city, frequent flyer programs, product and passenger amenities, customer service, fleet type and reputation. The airline industry is particularly susceptible to price discounting as, once a flight is scheduled, airlines incur only nominal incremental costs to provide service to passengers occupying otherwise unsold seats. Price competition occurs on a market-by-market basis through price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Airlines typically use discount fares and other promotions to stimulate traffic during normally slower travel periods to generate cash flow and to maximize RASM. The prevalence of discount fares can be particularly acute when a competitor has excess capacity that it is under financial pressure to sell. A key element of our competitive strategy is to maintain very low unit costs in order to permit us to compete successfully in price-sensitive markets. In addition, some of the legacy network carriers match low-cost carrier and ULCC pricing on portions of their network. We believe that fare discounts have and will continue to stimulate demand for Frontier due to our Low Fares Done Right strategy.

Our Low Fares Done Right strategy is underpinned by our low-cost structure, and has significantly reduced our cost base by increasing aircraft utilization (prior to the COVID-19 pandemic), transitioning to larger and more fuel-efficient aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, replacing our call center, enhancing our website and mobile app, boosting employee productivity and contracting with leading specialists to provide us with select operating and other services. As a result of these and other initiatives, prior to the impact of the COVID-19 pandemic, our unit operating costs, as measured by our CASM (excluding fuel), declined 30% from 7.89¢ for the year ended December 31, 2013 to 5.55¢ for the year ended December 31, 2019, and our Adjusted CASM (excluding fuel) declined 31% from 7.89¢ for the year ended December 31, 2013 to 5.44¢ for the year ended December 31, 2019. For a reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, see “Glossary of Airline Terms” and “—Results of Operations.”

During 2019, we had the lowest Adjusted CASM including net interest of any airline of significant size in the United States. Due to the impact of the COVID-19 pandemic, for the year ended December 31, 2020, our Adjusted CASM including net interest was 10.31¢ as compared to 7.65¢ for the year ended December 31, 2019. The increase in Adjusted CASM including net interest versus the levels achieved during 2019 was driven by the decrease in capacity as measured by available seat miles (ASMs) due to the impact of the COVID-19 pandemic combined with the fixed nature of aircraft rent net of the impact of any related lease deferrals achieved to manage liquidity. For a discussion and reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest, please see “Glossary of Airline Terms” and “—Results of Operations.”

Our cost structure has generally allowed us to achieve strong results from operations relative to the rest of the industry during periods of competitive pricing and price discounts and has helped our ability to manage through the COVID-19 pandemic. While we have already completed the substantial majority of strategic initiatives to reduce our unit operating costs, we believe that we are well positioned to maintain our low unit operating costs relative to our competitors through on-going strategic initiatives, including continuing our cost optimization efforts and further realizing economies of scale. To the extent that we are unable to maintain our low-cost structure, our ability to compete effectively may be impaired, even if demand does return to pre-pandemic levels. In addition, if our competitors engage in fare wars or similar behavior, our financial performance could be adversely impacted.

Aircraft Fuel. Fuel expense represents one of the single largest operating expense for most airlines, including ours. Jet fuel prices and availability are subject to market fluctuations, refining capacity, periods of market surplus and shortage and demand for heating oil, gasoline and other petroleum products, as well as meteorological, economic and political factors and events occurring throughout the world, which we can neither control nor accurately predict. The future cost and availability of jet fuel cannot be predicted with any degree of certainty.

We have historically hedged our exposure to jet fuel prices using call options and collar structures, although we have in the past and may in the future utilize other instruments such as swaps on jet fuel or highly

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correlated commodities and FFPs, which allow us to lock in the price of jet fuel for specific quantities and at specified locations in future periods.

Although the use of collar structures and swap agreements can reduce the overall cost of hedging, these instruments carry more risk than call options in that we could end up in a liability position when the collar structure or swap agreement settles. Our fuel hedging policy considers many factors, including our assessment of market conditions for fuel, competitor hedging activity, our access to the capital necessary to purchase coverage and support margin requirements, the pricing of hedges and other derivative products in the market and applicable regulatory policies. As of December 31, 2020, we had no fuel cash flow hedges for future fuel consumption.

Volatility. The air transportation business is volatile and highly affected by economic cycles and trends. Global pandemics and related health scares, consumer confidence and discretionary spending, fear of terrorism or war, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions, changes in governmental regulations on taxes and fees, weather and other factors have resulted in significant fluctuations in revenue and results of operations in the past.

Seasonality. Our results of operations for any interim period are not necessarily indicative of those for the entire year because the air transportation business and our route network are subject to seasonal fluctuations. We generally expect demand to be greater in the calendar second and third quarters compared to the rest of the year. While we have, over recent years, reduced our concentration in Denver to decrease the impact of seasonality in our business, 41% of our flights during the year ended December 31, 2020 had Denver International Airport as either their origin or destination.

Labor. The airline industry is heavily unionized. The wages, benefits and work rules of unionized airline industry employees are determined by CBAs. Relations between air carriers and labor unions in the United States are governed by the RLA. Under the RLA, CBAs generally contain “amendable dates” rather than expiration dates and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the NMB. This process continues until either the parties have reached agreement on a new CBA or the parties have been released to “self-help” by the NMB. In most circumstances, the RLA prohibits strikes. However, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes. From June until November 2018, we experienced disruption to our flight operations during our labor negotiations with ALPA, which materially impacted on our business and results of operations for the period.

We have seven union-represented employee groups comprising approximately 88% of our employees as of December 31, 2020. Our pilots are represented by ALPA; our flight attendants are represented by the Association of Flight Attendants (“AFA-CWA”); our aircraft technicians, aircraft appearance agents, material specialists and maintenance control employees are all represented by the International Brotherhood of Teamsters (“IBT”); and our dispatchers are represented by the Transport Workers Union, (“TWU”). Conflicts between airlines and their unions can lead to work stoppages. During the fourth quarter of 2016, a new five-year collective bargaining agreement was reached with the dispatchers. In February 2017 and March 2017, the aircraft technicians and material specialists contracts were ratified to include new amendable dates of February 2022 and March 2022, respectively. In October 2018, new five-year collective bargaining agreements were reached with the aircraft appearance agents and maintenance controllers. In March 2016 and July 2015, our collective bargaining agreements with our pilots, represented by ALPA, and our flight attendants, represented by AFA, respectively, became amendable. In December 2018, we and the pilots, represented by ALPA, reached a tentative agreement, which was approved by the pilots and became effective in January 2019. The agreement has a term of five years and includes a significant increase in the annual compensation for the pilots as well as a one-time ratification incentive payment to our pilots of $75 million plus payroll related taxes. The one-time ratification incentive and related taxes were recognized as an expense in the fourth quarter of 2018 as the obligation committed to as part of the tentative agreement was probable as of December 31, 2018 and was substantially paid during the first

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quarter of 2019. In March 2019, a new five-year collective bargaining agreement was reached with our aircraft technicians.

We reached a tentative agreement with the union representing our flight attendants, AFA-CWA, in March 2019, which was ratified by the flight attendants and became effective in May 2019. The new agreement provides for a one-time ratification incentive payment to our flight attendants of $15 million, plus payroll-related taxes. The one-time ratification incentive and related taxes were recognized as an expense in the first quarter of 2019 as the obligation committed to as part of the tentative agreement was probable as of March 31, 2019. The one-time ratification incentive was substantially paid during the second quarter of 2019.

During 2019, we entered into an agreement with the flight attendants which outlined terms of an early out program offered to flight attendants meeting certain employment status and seniority requirements, payable to participating flight attendants throughout the fourth quarter of 2019, 2020 and 2021. The $5 million to be paid under the program, including related payroll taxes, is reflected within salaries, wages and benefits in the consolidated statements of operations for the year ended December 31, 2019. During the year ended December 31, 2020, $2 million was paid to participating flight attendants, and the remaining $3 million to be paid under the program is accrued for within other current liabilities in the consolidated balance sheet as of December 31, 2020. The remaining obligation is expected to be settled during the year ending December 31, 2021.

During September 2020, and in anticipation of the lapse of the provisions set forth in the PSP under the CARES Act as described below, we reached agreement with the labor unions for our pilots and flight attendants to provide for voluntary paid leave of absence programs. Under the arrangements, the pilots and flight attendants were granted paid leave of absence periods of either one, three or six-month time frames. In exchange for accepting a voluntary leave of absence, the pilots and flight attendants receive minimum monthly pay and continue to accrue certain benefits with no requirement to work. We can require pilots and flight attendants to return to service and forego any remaining leave of absence if demand increases. These temporary programs have helped to defray our employee costs during the downturn caused by the pandemic, but should enable us to scale operations back up quickly as demand returns. As employees covered under such paid voluntary programs are still considered active employees, the costs of such programs are recognized as period expenses.

As a result of the PSP2 Agreement, the Company altered its voluntary leave of absence programs with pilots and flight attendants, which are offered in increments of one or three-month time frames through March 31, 2021. While the Company continues to offer these programs to help defray costs as a result of the downturn caused by the pandemic, the Company increased the minimum pay provided while maintaining no requirement to work.

Maintenance Materials and Repairs. The amount of total maintenance costs and related depreciation of heavy maintenance expense is subject to variables such as estimated usage, government regulations, the size, age and makeup of the fleet in future periods, and the level of unscheduled maintenance events and their actual costs. Accordingly, we cannot reliably quantify future maintenance-related expenses for any significant period of time.

As of December 31, 2020, the average age of our aircraft was approximately four years and we had taken delivery of 87 new aircraft since the start of 2015. All of the aircraft in our fleet are financed with operating leases, the last of which is scheduled to expire by the end of 2032. As of December 31, 2020, the operating leases for seven aircraft in our fleet were scheduled to expire during 2021. In certain circumstances, such operating leases may be extended. We currently have an obligation to purchase 156 aircraft by the end of 2028. We expect that these new aircraft will require less maintenance when they are first placed in service (sometimes called a “maintenance holiday”) because the aircraft will benefit from manufacturer warranties and also will be able to operate for a significant period of time, generally measured in years, before the most expensive scheduled maintenance obligations, known as heavy maintenance, are required. Once these maintenance holidays expire, these aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals. When these more significant maintenance activities

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occur, this will result in out-of-service periods during which our aircraft are dedicated to maintenance activities and unavailable to generate revenue.

We account for heavy maintenance events under the deferral method. Accordingly, heavy maintenance is depreciated over the shorter of either the remaining lease term or the period until the next estimated heavy maintenance event. As a result, maintenance events occurring closer to the end of the lease term will generally have shorter depreciation periods than those occurring earlier in the lease term. This will create higher depreciation expense specific to any aircraft related to heavy maintenance during the final years of the lease as compared to earlier periods. Please see “—Critical Accounting Estimates—Aircraft Maintenance.”

Maintenance Reserve Obligations. The terms of certain of our aircraft lease agreements require us to post deposits for future maintenance, also known as maintenance reserves, to the lessor in advance of and as collateral for the performance of heavy maintenance events, resulting in us recording significant prepaid deposits on our consolidated balance sheet. As a result, for leases requiring maintenance reserves, the cash costs of scheduled heavy maintenance events are paid in advance of the recognition of the maintenance event in our results of operations. Please see “—Critical Accounting Estimates—Aircraft Maintenance.”

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In doing so, we make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting estimates, which we discuss below. For a detailed discussion

of our significant accounting policies, please refer to “Notes to Consolidated Financial Statements - 1. Summary of Significant Accounting Policies.”

Frequent Flyer Program

Our Frontier Miles (formerly EarlyReturns) frequent flyer program provides frequent flyer travel awards to program members based on accumulated mileage credits. Mileage credits are accumulated as a result of travel, purchases using the co-branded credit card and purchases from other participating partners.

The contract to sell mileage credits under the co-branded credit card partnership has multiple performance obligations. The agreement provides for joint marketing and we account for this agreement consistently with the accounting method that allocates the consideration received to the individual products and services delivered. Total consideration is allocated to each performance obligation, which generally consists of (i) mileage credits to be awarded, (ii) brand licensing and (iii) access to member lists and advertising and marketing efforts based on each relative standalone selling price and are recognized over time as mileage credits are delivered. We 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 miles awarded and number of miles redeemed, (2) equivalent ticket value (“ETV”) for the award travel obligation, (3) licensing of brand and access to member lists and (4) advertising and marketing efforts.

We defer the amount for mileage credits under the co-branded credit card partnership as part of the frequent flyer liability on the balance sheet and recognize loyalty travel awards in passenger revenue as the mileage credits are used for travel. Revenue allocated to the remaining performance obligations, primarily marketing components, is recorded in other revenue as miles are delivered. We estimate breakage (mileage credits not utilized) based on statistical models derived from historical redemption patterns. Breakage assumptions, including the period over which mileage credits are expected to be redeemed, the actual redemption activity for mileage credits, the impact of the COVID-19 pandemic, or the estimated fair value of mileage credits expected to be redeemed, could have an impact on revenues in the year in which the change occurs and in future years.

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Aircraft Maintenance

Under our aircraft operating lease agreements and FAA regulations, we are obligated to perform all required maintenance activities on our fleet, including component repairs, scheduled air frame checks and major engine restoration events. We account for heavy maintenance and major overhauls under the deferral method, whereby the cost of heavy maintenance and major overhauls is deferred and recorded as a component of property and equipment, net and depreciated over the lesser of the remaining lease term or the period until the next scheduled heavy maintenance event.

Maintenance Reserves

Certain of our aircraft and spare engine lease agreements provide that we pay maintenance reserves to aircraft lessors to be held as collateral in advance of our required performance of heavy maintenance events. Maintenance reserve payments are reflected as aircraft maintenance deposits in the accompanying balance sheets.

We make certain assumptions at the inception of the lease and at each balance sheet date to determine the recoverability of maintenance deposits, including estimated time between the maintenance events, the cost of such maintenance events, the date the aircraft is due to be returned to the lessor and the number of flight hours and cycles the aircraft is estimated to be utilized before it is returned to the lessor. Changes in estimates are accounted for on a cumulative catch-up basis. On a regular basis, the credit worthiness of our lessors is assessed to ensure deposits are collectible. We continue to evaluate the creditworthiness of our lessors as a result of COVID-19 downturns and specifically whether any credit losses existed for aircraft maintenance deposits and determined no allowance was necessary as of December 31, 2020.

Certain of our lease agreements also provide that some or all of the maintenance reserves held by the lessor at the expiration of the lease are nonrefundable to us and will be retained by the lessor. Consequently, we have determined that any usage-based maintenance reserve payments after the last major maintenance event are not substantively related to the maintenance of the leased asset and, therefore, are accounted for as supplemental rent.

Leased Aircraft Return Costs

Our aircraft lease agreements often require us to return aircraft airframes and engines to the lessor in a certain condition or pay an amount to the lessor based on the airframe and engine’s actual return condition. Lease return costs are recognized beginning when it is probable that such costs will be incurred and they can be estimated. When costs become both probable and estimable, they are accrued as a component of supplemental rent through the remaining lease term.

When determining the need to accrue lease return costs, there are various factors which need to be considered such as the contractual terms of the lease agreement, current condition of the aircraft, the age of the aircraft at lease expiration, projected number of hours run on the engine at the time of return, and the number of projected cycles run on the airframe at the time of return, among others.

Income Tax Valuation Allowance

We periodically assess whether it is more likely than not that sufficient taxable income will be generated to realize deferred income tax assets, and a valuation allowance is established if it is not likely that deferred income tax assets will be realized. All available positive and negative evidence is evaluated and certain assumptions are applied to make this determination. Projected future taxable income, scheduled reversals of deferred tax liabilities, the general business environment, historical financial results and tax planning strategies are considered. Significant factors that are considered include 1) our recent history of profitability, 2) growth in the U.S. and global economies, 3) forecast of airline revenue trends, and 4) future impact of taxable temporary differences.

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At December 31, 2020 our net deferred tax liability balance was $9 million, including $9 million of deferred tax assets related to state net operating losses. Although we are not currently in a three-year cumulative loss position as of December 31, 2020, we may be in a three-year cumulative loss position during the 2021 tax year. We have a recent history of significant earnings prior to the onset of the COVID-19 pandemic. We expect to return to profitability as the effects of the pandemic subside and to generate sufficient taxable income to utilize our federal net operating loss carryforwards before any expire. Under current tax law, federal net operating losses generated in 2020 do not expire and most state net operating losses can also be carried forward indefinitely or at a minimum expire after five years.

Therefore, we have not recorded a valuation allowance on our deferred tax assets as we expect they will be fully utilized within the expiration periods. There can be no assurance that an additional valuation allowance on our net deferred tax assets will not be required. Such valuation allowance could be material.

CARES Act Warrants

As a result of the funding received under the Treasury Loan and the PSP Promissory Note, we issued 75,807 of warrants to the US Treasury, which are outstanding as of December 31, 2020. The warrants issued have a five-year term and are settled upon notice from the Treasury in cash, or shares (at our option) if we become publicly traded. The warrants issued in conjunction with the CARES Act financing have been classified as liability-based awards within other current liabilities. Given the liability-based classification, at the end of each reporting period the warrant liability is adjusted to its fair market value, calculated utilizing the Black-Scholes option pricing model, with the corresponding fair market value adjustment classified as interest expense within our consolidated statement of operations. The subsequent fair value measurement of the warrants and the resulting impact to interest expense are largely driven by several key assumptions, namely our determination of the fair value of our common stock, expected share price volatility and the estimated term that the warrants are expected to be outstanding.

The value of our common stock was determined by our board of directors based, in part, on the most recent third-party valuation report obtained by our board of directors as of December 31, 2020. There are significant judgments and estimates inherent in these valuations, which include assumptions regarding our future operating performance, the time to complete an initial public offering or other liquidity event and the determinations of the appropriate valuation methods. Our valuation methods include using market multiples and a discounted cash flow analysis based on plans and estimates used by management to manage the business and included evaluation of comparable publicly-traded companies in the airline industry. Additionally, our determination of the expected volatility of our share price is based primarily on the historical volatility of a group of peer entities within the same industry. The estimated term that our warrants are expected to be outstanding is based on a simplified method, which is the midpoint between the date the warrants were issued, as there are no vesting periods, and the contractual term.

The determination of the fair value of our non-public common stock is based on estimates and forecasts described above that may not reflect actual market results. The determination of our common stock fair value, share price volatility and estimated time the warrants will be outstanding utilize estimates and forecasts that require us to make judgments that are highly complex and subjective. Additionally, these valuations rely on reference to other companies for the determination of certain inputs.

Results of Operations

Year ended December 31, 2020 Compared to Year ended December 31, 2019

Our capacity, as measured by ASMs, decreased by 40% during the year ended December 31, 2020, as compared to the corresponding prior year period, due to the COVID-19 pandemic. As a result, our total operating revenue decreased by $1,258 million, or 50%, during the year ended December 31, 2020 as compared to the

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corresponding prior year period, and our total revenue per available seat mile decreased by 17% from 8.92¢ to 7.37¢ over the same period. Fuel expense was 47% lower during the year ended December 31, 2020 as compared to the corresponding prior year period, as fuel consumption decreased 44% as a result of lower capacity, and fuel cost per gallon decreased 6% due to reduced fuel rates which were offset by losses from fuel hedging. Although our non-fuel expenses decreased by 18%, our CASM (excluding fuel) increased from 5.55¢ to 7.53¢ from the year ended December 31, 2019 to the year ended December 31, 2020 driven by lower aircraft utilization and the fixed nature of aircraft rent coupled with additional aircraft and related crew costs, noting that as part of our participation in the PSP there were no involuntary furloughs or pay and benefit reductions through September 30, 2020, which cost was partly offset by the benefit from the CARES Act credits from our PSP and employee retention credits, as well as the favorable impact of lease deferrals agreed to with our vendors to manage our liquidity, resulting in $33 million of aircraft and station rent related to 2020 being deferred to 2021. Our Adjusted CASM (excluding fuel), which excludes the impact of the CARES Act credits, increased from 5.44¢ to 8.63¢ from the year ended December 31, 2019 to the year ended December 31, 2020.

We generated a net loss of $225 million during the year ended December 31, 2020 as compared to net income of $251 million during the year ended December 31, 2019, as a result of the significant reduction in demand caused by the COVID-19 pandemic. Our results for the year ended December 31, 2019 include certain charges that increased our operating expenses by $32 million and include $22 million of contract ratification costs primarily related to the new collective bargaining agreement ratified with our flight attendants during the year ended December 31, 2019, $5 million in expenses associated with an early out program agreed to in 2019 with our flight attendants, and $5 million in operating expenses associated with the mark to market of our pilot phantom equity obligation, which became fixed as of December 31, 2019 and is no longer subject to valuation adjustments in accordance with the amended and restated phantom equity agreement. Our results for the year ended December 31, 2020 include certain items that reduced our operating expenses by $134 million and include $193 million related to PSP Grant credits and employee retention credits partly offset by $52 million in expenses resulting from the de-designation of certain derivative contracts as a result of the estimated future fuel consumption for gallons subjected to fuel hedges no longer deemed probable due to the decline in demand from the impact of the COVID-19 pandemic and the subsequent mark to market adjustments, and $7 million relating to a one-time write-off of deferred registration statement costs due to the uncertainty in the capital markets caused by the pandemic. Additionally, our total other expense for the year ended December 31, 2020 was negatively impacted by $9 million of mark to market adjustments due to the warrants issued as part of the CARES Loan and PSP Promissory Note. Excluding these credits and charges, our adjusted net loss was $301 million for the year ended December 31, 2020 as compared to adjusted net income of $276 million for the comparable prior year period.

Operating Revenues

	Year Ended December 31,
	2019			2020			Change
Operating revenues ($ in millions):
Passenger	$	2,445		$	1,207		$	(1,238	)	(51	)%
Other		63			43			(20	)	(32	)%
Total operating revenues	$	2,508		$	1,250		$	(1,258	)	(50	)%
Operating statistics:
Available seat miles (ASMs) (millions)		28,120			16,955			(11,165	)	(40	)%
Revenue passenger miles (millions)		24,203			11,443			(12,760	)	(53	)%
Average stage length (statute miles)		1,051			999			(52	)	(5	)%
Load factor (%)		86.1	%		67.5	%		(18.6	) pts	N/A
Total revenue per available seat mile (RASM) (¢)		8.92	¢		7.37	¢		(1.55	)¢	(17	)%
Total revenue per passenger ($)	$	109.91		$	111.23		$	1.32		1	%
Passengers (thousands)		22,823			11,238			(11,585	)	(51	)%

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Total operating revenue decreased $1,258 million, or 50%, during the year ended December 31, 2020 as compared to the corresponding prior year period due to the impact of the COVID-19 pandemic, including a 40% decline in ASMs as well as a 17% decrease in our RASM to 7.37¢ for the year ended December 31, 2020 primarily due to a 18.6 point reduction in our load factor to 67.5%, which was partly offset by a slight increase in our total revenue per passenger of 1%.

Operating Expenses

	Year Ended December 31,											Cost per ASM
	2019			2020			Change					2019			2020			Change
Operating expenses ($ in millions):
Aircraft fuel	$	640		$	338		$	(302	)	(47	)%		2.27	¢		2.00	¢		(12	)%
Salaries, wages and benefits		529			533			4		1	%		1.88			3.14			67	%
Aircraft rent		368			396			28		8	%		1.31			2.34			79	%
Station operations		336			257			(79	)	(24	)%		1.19			1.52			28	%
Sales and marketing		130			78			(52	)	(40	)%		0.46			0.46			—	%
Maintenance materials and repairs		86			83			(3	)	(3	)%		0.31			0.49			58	%
Depreciation and amortization		46			33			(13	)	(28	)%		0.16			0.19			19	%
CARES Act credits		—			(193	)		(193	)	N	/A		—			(1.14	)		N	/A
Other operating expenses		64			90			26		41	%		0.24			0.53			121	%
Total operating expenses	$	2,199		$	1,615		$	(584	)	(27	)%		7.82	¢		9.53	¢		22	%
Operating statistics:
Available seat miles (ASMs) (millions)		28,120			16,955			(11,165	)	(40	)%
Average stage length (statute miles)		1,051			999			(52	)	(5	)%
Departures		138,570			88,642			(49,928	)	(36	)%
CASM (excluding fuel)		5.55	¢		7.53	¢		1.98	¢	36	%
Adjusted CASM (excluding fuel)		5.44	¢		8.63	¢		3.19	¢	59	%
Fuel cost per gallon	$	2.22		$	2.08		$	(0.14	)	(6	)%
Fuel gallons consumed (thousands)		288,510			162,241			(126,269	)	(44	)%

Reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest:

	Year Ended December 31,
	2019						2020
	(in millions)			Per ASM			(in millions)			Per ASM
CASM					7.82	¢					9.53	¢
Aircraft fuel	$	(640	)		(2.27	)	$	(338	)		(2.00	)
CASM (excluding fuel)					5.55	¢					7.53	¢
Pilot phantom equity(a)		(5	)		(0.02	)		—			—
Collective bargaining contract ratification(b)		(22	)		(0.07	)		—			—
Flight attendant early out program(c)		(5	)		(0.02	)		—			—
CARES Act - grant amortization and employee credits(d)		—			—			193			1.14
Write-off of deferred registration statement costs due to significant market uncertainty(e)		—			—			(7	)		(0.04	)
Adjusted CASM (excluding fuel)					5.44	¢					8.63	¢

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	Year Ended December 31,
	2019						2020
	(in millions)			Per ASM			(in millions)			Per ASM
Adjusted CASM (excluding fuel)					5.44	¢					8.63	¢
Aircraft fuel		640			2.27			338			2.00
Derivative de-designation and mark to market adjustment(f)		—			—			(52	)		(0.31	)
Adjusted CASM					7.71	¢					10.32	¢
Net interest expense (income)		(16	)		(0.06	)		7			0.04
CARES Act – mark to market impact for warrants(g)		—			—			(9	)		(0.05	)
Adjusted CASM + net interest(h)					7.65	¢					10.31	¢
CASM					7.82						9.53
Net interest expense (income)		(16	)		(0.06	)		7			0.04
CASM + net interest					7.76	¢					9.57	¢

(a) Represents the impact of the change in value of phantom equity units pursuant to the Pilot Phantom Equity Plan. In accordance with the amended and restated phantom equity agreement, the remaining phantom equity obligation became fixed as of December 31, 2019 and is no longer subject to valuation adjustments. See “Executive Compensation—Equity Compensation Plans—Pilot Phantom Equity Plan.”

(b) Represents $15 million of costs related to a one-time contract ratification incentive, plus payroll-related taxes and certain other compensation and benefits-related accruals earned through March 31, 2019 and committed to by us as part of a tentative agreement with the union representing our flight attendants that was reached in March 2019 for a contract that was ratified and became effective in May 2019, in addition to $4 million in pilot vacation accrual adjustments during the fourth quarter of 2019 as a result of the ratified agreement with the union representing our pilots specifically tied to the implementation of a preferred bidding system.

(c) Represents expenses associated with an early out program agreed to in 2019 with our flight attendants, payable throughout 2019, 2020 and 2021.

(d) Represents the recognition of the $178 million grant received from the U.S. government for payroll support from April 2020 through September 2020 as part of the PSP under the CARES Act net of $1 million of deferred financing costs along with $16 million of employee retention credits we qualified for under the CARES Act.

(e) Represents the write-off of our deferred initial public offering preparation costs during the first quarter of 2020 due to the impact of the COVID-19 pandemic and the resulting uncertainty on our ability to access the capital markets.

(f) Due to the significant reduction in demand resulting from the COVID-19 pandemic, our future anticipated consumption of fuel dropped significantly and we therefore de-designated hedge accounting in March 2020 on the derivative positions where the future consumption was not deemed probable, which primarily related to our written put options on our costless collars. The $52 million charge is the result of the de-designation and the resulting mark to market impact on the quantities where consumption was not deemed probable.

(g) Represents the mark to market adjustment to the value of the warrants issued as part of the funding provided under the CARES Act. This amount is a component of interest expense.

(h) Adjusted CASM including net interest reflects the sum of Adjusted CASM and Net interest expense (income) excluding special items per ASM. Adjusted CASM including net interest is included as a supplemental disclosure because we believe it is a useful metric to properly compare our cost management and performance to other peers that may have different capital structures and financing strategies particularly as it relates to financing primary operating assets such as aircraft and engines. Additionally, we believe this metric is a useful comparator because it removes certain items that may not be indicative of base operating performance or future results. Adjusted CASM including net interest is not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

Aircraft Fuel. Aircraft fuel expense decreased by $302 million, or 47%, during the year ended December 31, 2020, as compared to the corresponding prior year period. The decrease was primarily due to the 44% decrease in fuel gallons consumed due to the lower capacity as a result of COVID-19. In addition fuel rates decreased by 6%, offset by $52 million of expenses during the year ended December 31, 2020 resulting from the de-designation of certain derivative contracts as a result of the estimated consumption for gallons subjected to fuel hedges no longer deemed probable due to the decline in demand from the impact of the COVID-19 pandemic and the subsequent mark to market adjustments.

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Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $4 million, or 1%, during the year ended December 31, 2020, as compared to the corresponding prior year period driven primarily by the growth in our crew base to support our increased fleet size and the impact of the pilot and flight attendant contracts ratified in 2019, partly offset by employee participation in voluntary leave of absence programs, which primarily were implemented in the fourth quarter of 2020 after the lapse of provisions under the PSP and the impact of $32 million in costs incurred in 2019 which did not repeat in 2020. These included $22 million of contract ratification costs primarily related to the new collective bargaining agreement ratified with our flight attendants during the year ended December 31, 2019, $5 million in expenses associated with an early out program agreed to in 2019 with our flight attendants, and $5 million in non-cash compensation expense related to the increased value of our pilot phantom equity obligation, which became fixed as of December 31, 2019 and is no longer subject to valuation adjustments in accordance with the amended and restated phantom equity agreement. As part of our participation in the PSP under the CARES Act, we agreed to not involuntarily terminate or reduce pay or benefits of our employee base from enactment of the CARES Act through September 30, 2020 and are prohibited from doing so as a result of the PSP2 Agreement reached and effective from January 2021 until March 31, 2021.

Aircraft Rent. Aircraft rent expense increased by $28 million, or 8%, during the year ended December 31, 2020, as compared to the corresponding prior period primarily due to the full year 2020 rent impact of the 18 aircraft delivered throughout 2019, an increase of six aircraft in our fleet from December 31, 2019 to December 31, 2020 and due to higher costs associated with anticipated lease returns, partly offset by the favorable impact of lease deferrals negotiated with our vendors to manage liquidity during the COVID-19 pandemic, resulting in $31 million of aircraft rent related to 2020 being deferred to 2021. Our fleet is comprised of 60 A320neos, 19 A320ceos, 21 A321ceos, and four A319ceos as of December 31, 2020.

Station Operations. Station operations expense decreased by $79 million or 24% during the year ended December 31, 2020, as compared to the corresponding prior year period, due to a 36% decrease in departures as a result of the COVID-19 pandemic, partly offset by the fixed nature of certain rent and other station related costs paid under our airport lease arrangements.

Sales and Marketing. Sales and marketing expense decreased by $52 million, or 40%, during the year ended December 31, 2020, as compared to the corresponding prior year period due to lower credit card fees resulting from the 50% reduction in revenue, lower distribution fees due to lower bookings from a reduction in demand resulting from the COVID-19 pandemic and lower distribution fees due to a focus on our internal distribution channels, and lower paid media advertising to manage liquidity during the pandemic. The following table presents our distribution channel mix:

	Year Ended December 31,
Distribution Channel	2019			2020			Change
Our website, mobile app and other direct channels		73	%		76	%		3	pt
Third-party channels		27	%		24	%		(3	)pt

Maintenance Materials and Repairs. Maintenance materials and repair costs decreased $3 million, or 3%, during the year ended December 31, 2020, as compared to the corresponding prior year period, primarily due to lower operating volumes and the grounding of a large portion of our fleet due to the COVID-19 pandemic, partially offset by increases relating to the timing and mix of maintenance events.

Depreciation and Amortization. Depreciation and amortization expense decreased by $13 million, or 28%, during the year ended December 31, 2020, as compared to the corresponding prior year period. The decrease was primarily due to reduced heavy maintenance activity as a result of the decrease of capacity and the replacement of older aircraft in our fleet with new aircraft, which do not require as much heavy maintenance early in their life cycles.

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CARES Act Credits. The $193 million of CARES Act Credits relates to both (i) the recognition of the $177 million payroll support grant received from the U.S. government for payroll support for the period from April 2020 through September 30, 2020 as part of the Payroll Support Program under the Cares Act, which is net of $1 million in deferred financing costs associated with the program, and (ii) $16 million in Employee Retention Credits we qualified for under the CARES Act. The PSP and PSP2 funding contains certain conditions that must be met, including, among other things, no involuntary furloughs or pay and benefit reductions to March 31, 2021 and the requirement to recall, effective December 1, 2020, any employees involuntarily terminated or furloughed after September 30, 2020.

Other Operating Expenses. Other operating expenses increased by $26 million, or 41%, during the year ended December 31, 2020, as compared to the prior year period. The increase was driven primarily by a $59 million decrease in the gains from sale-leaseback transactions as we took fewer deliveries during the year ended December 31, 2020 as compared to the prior year period as a result of our agreement with Airbus to defer four deliveries into 2021. Additionally, other operating expenses increased during the year ended December 31, 2020 due to the $7 million write off of our deferred registration costs partly offset by a $32 million decrease in travel expenses relating to less crew accommodations resulting from the decrease in flight activity due to the COVID-19 pandemic and declines in other operating expenses due to lower capacity in 2020.

Other Income (Expense). Other income decreased by $23 million, from $16 million of income during the year ended December 31, 2019 to a $7 million expense during the year ended December 31, 2020 primarily due to $12 million of lower interest income from a lower average cash balance and lower interest rates due to the COVID-19 pandemic, in addition to $9 million in interest expenses due to the issuance and subsequent mark to market adjustments of warrants issued in conjunction with the CARES Act Grant and Treasury Loan.

Income Taxes. Our effective tax rate reflected a 39.5% income tax benefit during the year ended December 31, 2020, as compared to 22.8% of income tax expense during the corresponding prior year period. The favorability in the effective tax rate was driven by our ability under the CARES Act to carry the current year net operating losses back five years and obtain the benefit of a 14% higher federal rate on the losses generated. The effective tax rate for the year ended December 31, 2020 was also favorably impacted by the current year tax deduction for payments made in March 2020 to substantially settle our pilot phantom equity obligation, as described further in Note 11 to our consolidated financial statements.

Year ended December 31, 2019 Compared to Year ended December 31, 2018

Our capacity, as measured by ASMs, increased by 14% during the year ended December 31, 2019, as compared to the prior year, as a result of our continued shift toward larger and more fuel-efficient aircraft in our fleet, with an increase in the average number of aircraft in service from 76 during the year ended December 31, 2018 to 88 during the year ended December 31, 2019. We increased our total revenue by $352 million, or 16%, during the year ended December 31, 2019 as compared to the prior year, with our total revenue per available seat mile increasing from 8.75¢ to 8.92¢. Fuel costs increased by $51 million, or 9%, during the year ended December 31, 2019, as compared to the prior year primarily due to a 10% increase in fuel gallons consumed, which was less than our 14% increase in ASMs, due to the benefit of our newer and more fuel-efficient aircraft. Our CASM (excluding fuel) decreased from 5.99¢ to 5.55¢ and our Adjusted CASM (excluding fuel) of 5.44¢ from the year ended December 31, 2019 was in line with the 5.44¢ from the comparable prior year period.

We generated net income of $251 million during the year ended December 31, 2019 as compared to $80 million for the year ended December 31, 2018. Our results for the years ended December 31, 2018 and 2019 included $22 million and $5 million, respectively, in non-cash compensation expense related to the increased value of our pilot phantom equity obligation. In addition, during the year ended December 31, 2018, we incurred $88 million of costs related to a one-time contract ratification incentive and payroll-related taxes, plus certain other compensation and benefits-related accruals earned through December 31, 2018 and committed to by us as part of a tentative agreement with ALPA that was reached in December 2018 and was ratified by the pilots in January 2019. We incurred $22 million of contract ratification costs primarily related to the new collective bargaining agreement

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ratified with our flight attendants during the year ended December 31, 2019, and $5 million in expenses associated with an early out program agreed to in 2019 with our flight attendants, payable throughout 2019, 2020 and 2021. In addition, we completed the sale-leaseback of our six owned aircraft in December 2018, which enabled us to accelerate the elimination of the A319ceo aircraft in our fleet to ultimately replace them with larger, more efficient A320neo family aircraft, resulting in a loss of $25 million for the year ended December 31, 2018. Our adjusted net income was $183 million and $276 million for the year ended December 31, 2018 and 2019, respectively.

Operating Revenues

	Year Ended December 31,
	2018			2019			Change
Operating revenues ($ in millions):
Passenger	$	2,102		$	2,445		$	343		16	%
Other		54			63			9		17	%
Total operating revenues	$	2,156		$	2,508		$	352		16	%
Operating statistics:
Available seat miles (ASMs) (millions)		24,629			28,120			3,491		14	%
Revenue passenger miles (RPMs) (millions)		20,920			24,203			3,283		16	%
Average stage length (statute miles)		1,052			1,051			(1	)	—	%
Load factor (%)		84.9	%		86.1	%		(12	) pts	N/	A
Total revenue per available seat mile (RASM) (¢)		8.75	¢		8.92	¢		0.17	¢	2	%
Total revenue per passenger ($)	$	108.65		$	109.91		$	1.26		1	%
Passengers (thousands)		19,843			22,823			2,980		15	%

Total revenue increased $352 million, or 16%, for the year ended December 31, 2019 as compared to the prior year. This increase was due to a $343 million, or 16%, increase in passenger revenue and a $9 million, or 17%, increase in other revenue for the year ended December 31, 2019 as compared to the prior year. Total revenue per available seat mile increased 2% as a result of revenue growth slightly exceeding capacity growth. Our fare passenger revenues increased by 11% and our non-fare passenger revenues increased by 22% during the period.

Operating Expenses

	Year Ended December 31,											Cost per ASM
	2018			2019			Change					2018			2019			Change
Operating expenses ($ in millions):
Aircraft fuel	$	589		$	640		$	51		9	%		2.39	¢		2.27	¢		(5	)%
Salaries, wages and benefits		441			529			88		20	%		1.79			1.88			5	%
Aircraft rent		277			368			91		33	%		1.12			1.31			17	%
Station operations		323			336			13		4	%		1.31			1.19			(9	)%
Sales and marketing		110			130			20		18	%		0.45			0.46			2	%
Maintenance materials and repairs		75			86			11		15	%		0.30			0.31			3	%
Depreciation and amortization		78			46			(32	)	(41	)%		0.32			0.16			(50	)%
Other operating expenses		171			64			(107	)	(63	)%		0.70			0.24			(66	)%
Total operating expenses	$	2,064		$	2,199		$	135		7	%		8.38	¢		7.82	¢		(7	)%
Operating statistics:
Available seat miles (ASMs) (millions)		24,629			28,120			3,491		14	%
Average stage length (statute miles)		1,052			1,051			(1	)	—	%
Departures		122,784			138,570			15,786		13	%
CASM (excluding fuel)		5.99	¢		5.55	¢		(0.44	)¢	(7	)%
Adjusted CASM (excluding fuel)		5.44	¢		5.44	¢		—	¢	—	%
Fuel cost per gallon	$	2.25		$	2.22		$	(0.03	)	(1	)%
Fuel gallons consumed (thousands)		261,179			288,510			27,331		10	%

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Reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest:

	Year Ended December 31,
	2018						2019
	(in millions)			Per ASM			(in millions)			Per ASM
CASM					8.38	¢					7.82	¢
Aircraft fuel	$	(589	)		(2.39	)	$	(640	)		(2.27	)
CASM (excluding fuel)					5.99	¢					5.55	¢
Pilot phantom equity(a)		(22	)		(0.09	)		(5	)		(0.02	)
Collective bargaining contract ratification(b)		(88	)		(0.36	)		(22	)		(0.07	)
Flight attendant early out program(c)		—			—			(5	)		(0.02	)
Loss on sale of aircraft(d)		(25	)		(0.10	)		—			—
Adjusted CASM (excluding fuel)					5.44	¢					5.44	¢
Aircraft fuel		589			2.39			640			2.27