The Proposed Merger with Spirit Airlines, Inc.

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

The Proposed Merger with Spirit Airlines, Inc.

The Proposed Merger with Spirit Airlines, Inc.

On February 5, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Top Gun Acquisition Corp. (“Merger Sub”), a direct wholly-owned subsidiary of the Company, and Spirit Airlines, Inc. (“Spirit”). The Merger Agreement provided that, among other things, the Merger Sub would be merged with and into Spirit (the “Merger”), with Spirit surviving the Merger and continuing as a wholly-owned subsidiary of the Company.

During the three and six months ended June 30, 2022, the Company recorded $9 million and $20 million, respectively, of expenses related to the proposed Merger within transaction and merger-related costs in the

Company’s condensed consolidated statement of operations, which included $4 million and $12 million, respectively, related to transaction costs, which include banking, legal and accounting fees, among others, charged in connection with the Merger, and $5 million and $8 million, respectively, of retention bonus expenses. As of June 30, 2022, the Company had capitalized $2 million of costs incurred related to the proposed equity issuance as a component of other current assets on the Company’s condensed consolidated balance sheet.

On July 27, 2022, the Company and Spirit mutually terminated the Merger Agreement. As a result, the Company expects to record in the third quarter of 2022 approximately $9 million of employee retention costs, which include an acceleration of 50% of the Merger-related retention costs that are due and payable upon termination of the Merger to all eligible employees who are not impacted by CARES Act compensation restrictions, a write-off of the capitalized deferred equity issuance costs of $2 million and other legal and professional fees associated with the termination of the Merger Agreement. Further, Spirit is obligated to reimburse $25 million of the Company’s incurred Merger-related expenses. In the event that Spirit, within twelve months following the termination of the Merger Agreement, consummates an acquisition proposal with another acquiror or enters into a definitive written agreement providing for the consummation of an acquisition proposal with another acquiror which is ultimately consummated, the Company will be owed an additional $69 million, as provided for in the Merger Agreement.