Harbor Diversified, Inc. (“Harbor”) is a non-operating holding company that is the parent of a consolidated group of wholly-owned subsidiaries, including AWAC Aviation, Inc. (“AWAC”), which is the sole member of Air Wisconsin Airlines LLC (“Air Wisconsin”), which has historically operated as a regional air carrier. Harbor is also the direct parent of three other subsidiaries: (1) Lotus Aviation Leasing, LLC (“Lotus”), which leases flight equipment to Air Wisconsin, (2) Air Wisconsin Funding LLC, which provides flight equipment financing to Air Wisconsin, and (3) Harbor Therapeutics, Inc. ("Therapeutics"), which is a non-operating entity with no material assets.

The accompanying condensed consolidated financial statements include the accounts of Harbor and its consolidated subsidiaries, which are collectively referred to in these condensed notes as the “Company”. The condensed consolidated financial statements have been prepared, without audit, in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly, in all material respects, the financial condition and results of operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise disclosed. All of the dollar and share amounts set forth in these condensed notes to condensed consolidated financial statements are presented in thousands except share amounts and per share values.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Harbor’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on October 24, 2024 (the “2023 Annual Report”). As a result of numerous factors, including those discussed throughout this Quarterly Report, the results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any other reporting period.

During the periods presented in this Quarterly Report, the Company had principal lines of business focused on (1) providing regional and other air services through Air Wisconsin (airline business), (2) acquiring flight equipment for the purpose of leasing the equipment to Air Wisconsin, and (3) providing flight equipment financing to Air Wisconsin. Air Wisconsin has also explored aircraft leasing opportunities and entered into its first short-term aircraft lease in September 2022. This lease was subsequently renegotiated into a sales-type lease in December 2023. For additional information, please refer to Note 8, Sales-type Lease.

The airline business is operated entirely through Air Wisconsin. For the three months ended March 31, 2024, Air Wisconsin was engaged in the business of providing scheduled passenger service for American Airlines, Inc. ("American") under a capacity purchase agreement ("American capacity purchase agreement") which was entered into in August 2022. As of March 31, 2024, Air Wisconsin had 45 aircraft in service under the American capacity purchase agreement.

Prior to early June 2023, Air Wisconsin was also engaged in the business of providing scheduled passenger service for United Airlines, Inc. (“United”) under a capacity purchase agreement (“United capacity purchase agreement”), which was entered into in February 2017 and which terminated in early June 2023. Air Wisconsin commenced providing scheduled passenger service for American in March 2023, and American became Air Wisconsin’s sole airline partner when all its aircraft were removed from United’s flying operations in early June 2023. However, on January 3, 2025, American delivered notice to Air Wisconsin of its intent to terminate the American capacity purchase agreement effective April 3,

For the three months ended March 31, 2024, approximately 100.0% of the Company’s operating revenues were derived from operations associated with the American capacity purchase agreement. For the three months ended March 31, 2023, approximately 5.3% of the Company's operating revenues were derived from operations associated with the American capacity purchase agreement and approximately 94.6% of the Company's operating revenues were derived from operations associated with the United capacity purchase agreement.

In performing an analysis of the American capacity purchase agreement, as amended, and previously the United capacity purchase agreement, as amended, within the framework of Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASC 842”) and Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company determined that a portion of the payments it receives under the agreements that is designed to reimburse Air Wisconsin for use of a certain number of aircraft, which is referred to as “right of use,” is considered lease revenue. All other revenue received by Air Wisconsin under the capacity purchase agreements is considered non-lease revenue. After consideration of the lease and non-lease components, within the context of ASC 842, the Company determined the non-lease component to be the predominant component of each capacity purchase agreement and elected a practical expedient to not separate the lease and non-lease components. Therefore, all compensation received by Air Wisconsin pursuant to the American capacity purchase agreement, and previously pursuant to the United capacity purchase agreement, has been accounted for under ASC 606.

Because Air Wisconsin's flights are distinct services that have the same pattern of transfer to the customer, and are satisfied over time with the measure of progress for each flight deemed to be substantially the same, the flight services promised pursuant to the American capacity purchase agreement, and previously pursuant to the United capacity purchase agreement, represent a series of services that are accounted for as a single performance obligation. Therefore, contract revenues are recognized when service is provided and the performance obligation is met on a per completed flight basis. The performance obligation of each completed flight is measured using departures.

The United capacity purchase agreement terminated in early June 2023 and no contract revenues have been recorded under that agreement since then. In March 2023, Air Wisconsin commenced flying operations for American under the American capacity purchase agreement, at which time Air Wisconsin began recording contract revenues under that agreement. Under the United capacity purchase agreement, Air Wisconsin was entitled to receive a fixed rate for each departure and block hour, and a fixed amount per covered aircraft per day, in each case subject to annual increases during the term of the agreement. Air Wisconsin’s performance obligation was met and revenue was recognized over time, which was then reflected in contract revenues. The United capacity purchase agreement also provided for the reimbursement to Air Wisconsin of certain direct operating expenses, such as certain insurance premiums and property taxes. Air Wisconsin was also eligible to receive bonus compensation, or was required to pay penalties, based on the achievement, or failure to achieve, certain pre-established performance criteria.

Under the American capacity purchase agreement, Air Wisconsin is entitled to receive from American a fixed daily amount for each aircraft covered under the agreement (subject to Air Wisconsin’s ability to meet certain block hour utilization thresholds), a fixed payment for each departure, and a fixed payment for each block hour flown, in each case subject to annual increases during the term of the agreement. The American capacity purchase agreement also provides for the reimbursement to Air Wisconsin of certain direct operating expenses, such as certain insurance premiums and property taxes. Air Wisconsin is also eligible to receive bonus compensation, and may be required to pay rebates, upon the achievement of, or failure to achieve, certain pre-established performance criteria.

Prior to the termination of the United capacity purchase agreement in early June 2023, Air Wisconsin was eligible to receive incentive payments, or was required to pay penalties, upon the achievement of, or failure to achieve, certain performance criteria primarily based on flight completion, on-time performance, and customer satisfaction ratings. The incentives were defined in the agreement, and performance was measured on a monthly basis. At the end of each month during the term of the agreement, Air Wisconsin calculated the incentives achieved, or penalties payable, during that period and recognized revenue accordingly, subject to the variable constraint guidance under ASC 606. Air Wisconsin did not receive incentive payments or pay any penalties related to the United capacity purchase agreement during the three months ended March 31, 2024. Air Wisconsin received net incentive payments of $1,027 from United during the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, Air Wisconsin had no amounts recorded as part of Receivables, net, in the condensed consolidated balance sheets related to net incentive payments from United.

Air Wisconsin is eligible under the American capacity purchase agreement to receive bonus payments, and may be required to pay rebates, upon the achievement of, or failure to achieve, certain performance criteria primarily based on flight completion, on-time performance, and customer satisfaction ratings. At the end of each month or quarter, Air Wisconsin will calculate the bonus amounts achieved, or rebates payable, during that period and recognize revenue accordingly, subject to the variable constraint guidance under ASC 606. For the three months ended March 31, 2024, Air Wisconsin recorded $48 in net rebate amounts payable under the American capacity purchase agreement. Air Wisconsin was not eligible for bonus payments, nor required to pay rebates, during the three month period ended March 31, 2023.

Under the United capacity purchase agreement, Air Wisconsin was entitled to receive a fixed amount per aircraft per day for each month during the term of the agreement. In accordance with GAAP, the Company recognized revenue related to the fixed payments on a proportional basis taking into account the number of flights actually completed in that period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Air Wisconsin deferred fixed revenues between April 2020 and June 2021 due to the significant decrease in its completed flights as a result of the COVID-19 pandemic. Beginning in July 2021, due to an increase in completed flights and based on projected future completed flight activity, Air Wisconsin began reversing this deferral of fixed revenues, and it continued to do so until the termination of the agreement in early June 2023. Since the United capacity purchase agreement ended in early June 2023, during the three months ended March 31, 2024, Air Wisconsin did not recognize any fixed revenues under the agreement that were previously deferred, compared to recognizing $7,919 of fixed revenues under the agreement that were previously deferred for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, there were no deferred fixed revenues related to the United capacity purchase agreement.

Under the United capacity purchase agreement, Air Wisconsin also recognized decreased non-refundable upfront fee revenues and increased fulfillment costs, both of which were amortized over the remaining term of the United capacity purchase agreement in proportion to the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods. Since the United capacity purchase agreement ended in early June 2023, during the three months ended March 31, 2024, Air Wisconsin recorded no revenue from upfront fees, and no fulfillment costs under the United capacity purchase agreement, compared to recognizing $925 in revenue from upfront fees and $99 of fulfillment costs under the agreement for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, there was no deferred non-refundable upfront fee revenue or fulfillment costs under the United capacity purchase agreement.

Under the American capacity purchase agreement, Air Wisconsin is entitled to receive from American a fixed daily amount for each aircraft covered under the agreement (which, during the three months ended March 31, 2024, was subject to Air Wisconsin's ability to meet certain block hour utilization thresholds). Because the fixed daily amounts for each aircraft covered under the agreement are specifically related to the performance obligation completed during the period, they are recognized in contract revenues in the period in which the applicable flights are completed. During the three months ended March 31, 2024, Air Wisconsin recorded $20,590 of fixed daily revenues under the American capacity purchase agreement which are included as part of Contract revenues in the condensed consolidated statements of operations, compared to $1,421 of fixed daily revenues recorded under the agreement for the three months ended March 31, 2023.

estimates that it will incur an additional $602 in reimbursable costs over the term of the agreement. In accordance with GAAP, the Company recognizes revenue related to the total estimated non-refundable upfront fee revenue of $4,600 on a proportional basis taking into account the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Accordingly, during the three months ended March 31, 2024, Air Wisconsin recognized $161 of non-refundable upfront fee revenues that were previously deferred compared to $10 received and recognized for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, Air Wisconsin deferred $3,332, and $3,493, respectively, in non-refundable upfront fee revenues under the American capacity purchase agreement. Air Wisconsin’s deferred revenues related to the non-refundable upfront fee revenues under the American capacity purchase agreement will adjust over the remaining contract term, based on the actual expenses incurred that will be reimbursed and recognized based on the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. As of March 31, 2024 and December 31, 2023, deferred non-refundable upfront fee revenues in the amount of $698 and $662, respectively, were netted as part of short-term Contract liabilities, net, and $2,633 and $2,831, respectively, were recorded as part of Long-term contract liabilities, net in the condensed consolidated balance sheets.

Under the American capacity purchase agreement, Air Wisconsin will also receive a monthly support fee and is reimbursed for heavy maintenance expenses based on the fixed covered per aircraft per day rate over the term of the agreement. In addition, amendments to the American capacity purchase agreement entered into in February 2023 and November 2023 ("Amendment No. 1" and "Amendment No. 3", respectively) provided for a one-time payment, as well as revised compensation rates, to assist Air Wisconsin with pilot compensation and retention. In accordance with GAAP, the Company recognizes revenue related to the monthly support fee, heavy maintenance revenue, and one-time pilot compensation assistance payment on a proportional basis taking into account the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Accordingly, during the three months ended March 31, 2024, Air Wisconsin recognized $1,920 of revenue related to these amounts compared to $114 for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023 revenues related to the anticipated heavy maintenance reimbursements and one-time pilot compensation assistance payment in the amounts of $367 and $562, respectively, were netted as part of short-term Contract liabilities, net, and revenues related to the monthly support fee in the amounts of $226 and $152, respectively, were recorded in Long-term contract liabilities, net in the condensed consolidated balance sheets. Air Wisconsin’s Contract liabilities, net and Long-term contract liabilities, net related to the one-time pilot compensation assistance payment, estimated monthly support fee and heavy maintenance revenue will adjust over the remaining contract term, based on the actual reimbursement of the monthly support fee and heavy maintenance revenue and on the number of flights actually completed in each reporting period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement.

As part of an October 2020 amendment to the United capacity purchase agreement (“United Amendment”), United made a cash settlement payment of $670 and issued a note receivable to Air Wisconsin in the amount of $11,048, of which $4,410 was deferred as of December 31, 2020, with the remaining portion recognized in proportion to the number of flights completed in subsequent periods through the end of the term of the agreement. In October 2021, in accordance with the United Amendment, Air Wisconsin received $294 for the opening of a crew base, of which $73 was deferred as of December 31, 2021, with the remaining portion recognized in proportion to the number of flights completed in subsequent periods through the end of the term of the agreement. Due to the termination of the United capacity purchase agreement in early June 2023, for the three months ended March 31, 2024, Air Wisconsin did not record any revenue related to these items compared to $450 that was previously deferred for the three months ended March 31, 2023. As of March 31, 2024 and December 31, 2023, there were no deferred revenues under the United capacity purchase agreement related to these items in the condensed consolidated balance sheets.

The timing of the recognition under the American capacity purchase agreement of non-refundable upfront fee revenue, fulfillment costs, monthly support fee revenues, heavy check maintenance revenues and one-time support fee revenues in future periods is subject to considerable uncertainty due to a number of factors, including the estimated revenue amounts to be received and the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement.

The Company monitors publicly available credit ratings for entities for which the Company has a significant credit balance. The Company determined that its receivables are primarily the result of its current relationship with American (and prior relationship with United), insurance-related receivables and income tax refunds. These receivables are payable by governmental entities or companies the Company believes to be creditworthy. Accordingly, the Company has not recorded an allowance for credit losses related to these receivables.

The Company’s equity security investments, consisting of exchange-traded funds and mutual funds, are recorded at fair value based on quoted market prices (Level 1) in Marketable securities and Long-term restricted investments (SESP) in the condensed consolidated balance sheets, in accordance with the guidance in Accounting Standards Codification Topic 321, Investments-Equity Securities, with the change in fair value during the three months ended March 31, 2024 included in the condensed consolidated statements of operations. For additional information, please refer to Note 1, Fair Value of Financial Instruments, in this Quarterly Report.

Long-term restricted investments (SESP) reflects the assets held in the supplemental executive savings plan (the “SESP”). The value of assets and liabilities associated with the SESP was added to the consolidated financial statements as of December 31, 2023 and thus was not included in the comparative results for the three months ended March 31, 2023. For additional information, please refer to Note 1, Supplemental Executive Savings Plan ("SESP"), in this Quarterly Report.

Spare parts and supplies include an inventory of expendable parts and miscellaneous aircraft supplies stated at average cost less an obsolescence allowance. The Company provides for an allowance for obsolescence after considering a number of factors, including the useful life of the aircraft fleet, the estimated cost of expendable parts expected to be on hand at the end of the useful life and the estimated salvage value of the parts. This allowance is based on management estimates and is subject to change. Expendable parts are charged to expense at average cost when used. Expendable parts that are repairable are returned to inventory at the average cost of comparable parts, less a reserve for scrap. Supplies are stated at average cost. The inventory allowance was $17,143 and $17,146 as of March 31, 2024 and December 31, 2023, respectively.

The Company does, from time to time, consign certain of its spare parts and supplies to third parties for sale. Title of any such parts or supplies remains with the Company until a sale is made. To the extent the Company does consign any such spare parts and supplies, it is not material to its inventory. The Company views the net carrying value of any consigned spare parts and supplies to be $0 for all periods presented due to its obsolescence reserve.

Air Wisconsin incurred certain contract costs ("fulfillment costs") prior to the start of flying operations for American on March 1, 2023. These costs included changes to the livery, fuel costs, and certain training expenses. The total fulfillment costs incurred as of March 31, 2024 and December 31, 2023 were $774. The fulfillment costs incurred are included in Prepaid expenses and other in the Cash Flows from Operating Activities section in our condensed consolidated statements of cash flows. These costs will be amortized on a proportional basis taking into account the number of flights actually completed in the period relative to the number of flights expected to be completed in subsequent periods during the remaining term of the agreement. Those contract costs expected to be amortized over the next one-year period are included in Contract costs in the condensed consolidated balance sheets while those contract costs expected to be amortized in periods beyond one-year are included in Long-term contract costs in the condensed consolidated balance sheets.

For the three months ended March 31, 2024 and March 31, 2023, Air Wisconsin recorded $27 and $2, respectively, of amortization expense related to fulfillment costs, which is included in Depreciation, amortization, and obsolescence allowance in the Cash Flows from Operating Activities section of the condensed consolidated statements of cash flows. As of March 31, 2024, Contract costs and Long-term contract costs were $118 and $544, respectively, in the condensed consolidated balance sheets and incurred under the American capacity purchase agreement. As of December 31, 2023, Contract costs and Long-term contract costs were $111 and $578, respectively, in the condensed consolidated balance sheets and incurred under the American capacity purchase agreement.

Contract assets and liabilities expected to be settled within the next one-year period are netted in the condensed consolidated balance sheets and included either in Contract assets, net or Contract liabilities, net. Contract assets and liabilities expected to be settled more than a year in the future are netted and included either in Long-term contract assets, net or Long-term contract liabilities, net in the condensed consolidated balance sheets. As of March 31, 2024, the Company recorded Contract liabilities, net of $331 and Long-term contract liabilities, net of $2,859 related to the American capacity


	Current		Non-current
Balance as of December 31, 2022(1)	$	13,586	$	—
Amounts received, excluding amounts recognized as revenue	511		398
Revenues recognized included in opening contract balance	(9,295)		—
Balance as of March 31, 2023(2)	$	4,802	$	398

Balance as of December 31, 2023	$	100	$	2,984
Amounts received, excluding amounts recognized as revenue	195		72
Revenues recognized included in opening contract balance	(161)		—
Reclassification between current and non-current	197		(197)
Balance as of March 31, 2024	$	331	$	2,859


	March 31, 2024				December 31, 2023
Assets	Original Cost		Accumulated Depreciation/ Amortization		Original Cost		Accumulated Depreciation/ Amortization
Aircraft	$	67,459	$	50,317	$	67,459	$	48,011
Spare engines	160,694		124,028		160,694		119,575
Rotable parts	28,847		18,664		28,335		18,512
Ground equipment	2,912		2,330		2,912		2,277
Office equipment	4,776		4,481		4,757		4,391
Leasehold improvements	1,123		797		1,123		691
Total	$	265,811	$	200,617	$	265,280	$	193,457

As of March 31, 2024, Air Wisconsin owned 63 CRJ-200 regional jets. The Company operates its aircraft under a continuous inspection and maintenance program. Generally, the normal cost of recurring maintenance is expensed when incurred. However, the Company uses the deferral method of accounting for Air Wisconsin’s planned major maintenance activities for engines pursuant to which the capitalized engine overhaul costs are amortized over the estimated useful life measured in engine cycles remaining until the next scheduled major maintenance activity. Lotus’ engine maintenance costs are expensed.

Depreciation expense during the three months ended March 31, 2024 and March 31, 2023 was $6,328 and $6,256, respectively, and is included in Depreciation, amortization and obsolescence in the condensed consolidated statements of operations. Gains and losses from the disposals of fixed assets for the three months ended March 31, 2024 and March 31, 2023 were a gain of $4 and a loss of $92, respectively, and are included in Purchased services and other in the condensed consolidated statements of operations.

When considering whether an impairment of long-lived assets exists, the Company is required to group similar assets together at the lowest level for which identifiable cash flows for such assets are largely independent of the cash flows of other assets and liabilities. The Company determined that because there is only one operating segment, one revenue contract, and one aircraft type, the asset group was at the enterprise level and as such, included an assessment of all assets and liabilities of the entity.

The Company determined that the same indicators of impairment that existed during the twelve months ended December 31, 2023 continued to exist with respect to its long-lived assets during the three months ended March 31, 2024, requiring the Company to perform a quantitative test for impairment. The accounting guidance provides examples of events that may indicate a long-lived asset group may not be recoverable. The relevant examples include a significant adverse change in the extent or manner in which a long-lived asset is used, a significant adverse change in the business climate that could affect the value of a long-lived asset group, or a current period operating or cash flow loss. The Company determined these indicators of impairment continued to be applicable due to the operating loss and operating cash flow losses over the three months ended March 31, 2024, combined with lower usage rates for the aircraft as a result of the pilot shortage, resulting in lower block hours and lower cash flows generated by the long-lived assets, continuing the trends which existed as of December 31, 2023. Based on an analysis of the fair market value of its assets, the Company determined that an impairment charge was not required as of March 31, 2024.

The Company further concluded that its indefinite lived intangible assets continue to be indefinite lived intangible assets as of March 31, 2024 and that its intangible assets should be evaluated as one unit of account for determining impairment. Although indicators of impairment existed as of March 31, 2024 with respect to the intangible assets, the Company concluded, based on a qualitative assessment weighing the positive and negative evidence, that the significant inputs used to determine the fair value of the indefinite-lived intangible assets were not materially changed as of March 31, 2024. As a result, the Company determined that the indefinite-lived intangible assets were not impaired.

The Company maintains the SESP for the benefit of certain executives. The SESP offers deferred compensation retirement benefits that would otherwise be subject to the compensation limits imposed by the Internal Revenue Code on Company contributions to the Air Wisconsin Airlines Savings Plan. At the end of each year, the Company accrues a long-term deferred compensation liability for contributions earned during that year that are contributed to the SESP in January of the successive year. Assets acquired within the plan are recorded as Long-term restricted investments (SESP) and an offsetting liability is recorded as Long-term deferred compensation (SESP) in the condensed consolidated balance sheets. Any increases or decreases in plan assets due to changes in market value are recorded as a Gain on Marketable securities and Long-term restricted investments (SESP), with an offsetting entry made to Payroll and related costs in the condensed consolidated statements of operations. This results in no impact on net income before taxes. The values of Long-term restricted investments (SESP) and Long-term deferred compensation (SESP) liability associated with the SESP are adjusted quarterly to reflect the changes in market value.

During the three months ended March 31, 2024, the Company made a contribution to the SESP in the amount of $22 compared to a contribution of $27 during the three months ended March 31, 2023. For the three months ended March 31, 2024 the Company recorded $260 in Gain on Marketable securities and Long-term restricted investments (SESP) and $5 of interest and dividend income, with an offsetting entry made to Payroll and related costs. As of March 31, 2024 and December 31, 2023, Long-term restricted investments (SESP) were $3,480 and $3,194, respectively, and Long-term deferred compensation (SESP) was $3,480 and $3,216, respectively, in the condensed consolidated balance sheets. The value of assets and liabilities associated with the SESP was added to the consolidated financial statements as of December 31, 2023 and thus was not included in the comparative results for the three months ended March 31, 2023.

The Company records investment income earned on its cash equivalents and marketable securities, consisting primarily of interest and dividends, in Interest and dividend income in the condensed consolidated statements of operations. For the three months ended March 31, 2024, interest and dividend income amounted to $71 and $684, respectively. For the three months ended March 31, 2023, interest and dividend income amounted to $63 and $1,087, respectively.

The Company utilizes the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based upon the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities, as measured by the current applicable tax rates. Deferred tax expense represents the result of changes in deferred tax assets and liabilities. Determining whether deferred tax assets are impaired requires significant judgement, including but not limited to, forecasting the reversal of temporary differences due to these basis differences. A valuation allowance is provided for those deferred tax assets for which the Company cannot conclude that it is more likely than not that such deferred tax assets will be realized. In determining the amount of any valuation allowance, in addition to the reversal of temporary differences, estimated future taxable income as well as feasible tax planning strategies for each taxing jurisdiction, are considered. Each fiscal quarter the Company reevaluates its tax provision and reconsiders the estimates and assumptions related to specific tax assets and liabilities, making adjustments as circumstances change.

As required by the uncertain tax position guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company has applied the uncertain tax position guidance to all tax positions for which the statute of limitations remains open.

The Company is subject to federal, state and local income taxes in the United States. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant judgment. The Company is no longer subject to U.S. federal income tax examinations for the years prior to 2020. With a few exceptions, the Company is no longer subject to state or local income tax examinations for years prior to 2019. As of March 31, 2024, the Company had no outstanding tax examinations.

Significant customers are those which represent more than 10% of the Company’s total revenue or Receivables, net balance at each respective balance sheet date. Air Wisconsin entered into the American capacity purchase agreement in August 2022 and commenced flying operations for American in March 2023. American became Air Wisconsin’s sole airline partner once all aircraft were removed from United’s flying operations in early June 2023, at which point substantially all of the Company’s revenues were derived from the American capacity purchase agreement. Prior to April 2023 substantially all of the Company's revenues were derived from the United capacity purchase agreement.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, long-lived assets, and income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience, existing and known circumstances, authoritative accounting guidance, and other factors management believes to be reasonable, including an assessment of current and anticipated future macroeconomic conditions, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements. Actual results could differ from these estimates, which may result in material effects on the Company’s financial condition, results of operations and liquidity. To the extent there are differences between these estimates and actual results, the Company’s consolidated financial statements may be materially impacted.

The Company’s financial instruments include cash and cash equivalents, restricted cash, marketable securities, receivables, net, long-term investments, accounts payable, and long-term debt. The Company believes the carrying amounts of these financial instruments, with the exception of marketable securities, are a reasonable estimate of their fair value because of the short-term nature of such instruments, or, in the case of long-term debt, because of fixed interest rates on such debt. Marketable securities are reported at fair value based on quoted market prices. Long-term investments are held-to-maturity debt securities and are reported at amortized cost.

In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2023-07, Segment Reporting (ASC Topic 280) – Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU also expands disclosure requirements to enable users of financial statements to better understand the entity’s measurement and assessment of segment performance and resource allocation. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. While the Company does not expect to adopt the accounting standard early, it continues to evaluate the potential impact of adopting this new guidance on the condensed consolidated financial statements and related disclosures. The Company does expect expanded disclosures in the future as a result of the pronouncement.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (ASC Topic740) – Improvements to Income Tax Disclosures ("ASC 740"), which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. While the Company does not expect to adopt the accounting standard early, it continues to evaluate the potential impact of adopting this new guidance on the condensed consolidated financial statements and related disclosures. The Company does expect expanded disclosures in the future as a result of the pronouncement.

In March 2024, the SEC adopted final rules requiring public entities to provide certain climate-related disclosures, including estimates of greenhouse gas emissions, in their registration statements and annual reports. As part of the disclosures, entities will be required to quantify effects of severe weather events and other natural conditions in notes to their audited financial statements. On April 4, 2024, the SEC paused the implementation of the final rules pending judicial review and as of the date of this Quarterly Report the judicial review is still in process. Assuming the implementation timelines for the rules remain the same, the Company would begin to adopt the rules for its 2025 fiscal year ending December 31, 2025. The Company is currently evaluating the impact of the new rules on its financial statements and disclosures.