ALGT filing — read by section

Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 
 
 Selected Quarterly Financial Data (unaudited) 
 
 Quarterly results of operations for the years ended December 31, 2020 and 2019 are summarized below. Amounts are shown in thousands, except for per share amounts. 
 
 March 31 June 30 (1) 
 September 30 December 31 
 2020 
 Operating revenues $ 409,181 $ 133,347 $ 200,984 $ 246,561 
 Operating income (117,805) (113,252) (33,081) (23,648) 
 Net income (loss) (33,009) (93,103) (29,143) (28,838) 
 Earnings (loss) per share to common shareholders: 
 Basic $ (2.08) $ (5.85) $ (1.82) $ (1.79) 
 Diluted (2.08) (5.85) (1.82) (1.79) 
 2019 
 Operating revenues $ 451,622 $ 491,759 $ 436,509 $ 461,074 
 Operating income 91,078 108,105 72,116 92,652 
 Net income 57,124 70,543 43,929 60,522 
 Earnings per share to common shareholders: 
 Basic $ 3.52 $ 4.33 $ 2.70 $ 3.72 
 Diluted 3.52 4.33 2.70 3.72 

 (1) $6.8 million in special charges for Sunseeker Resort, related to expense during the first quarter 2020, were reclassified from operating special expense to non-operating special expense for the six months ended June 30, 2020. 
 
 The quarterly earnings per share amounts for a year will not add to the earnings per share for that year due to the weighting of shares used in calculating per share data. 
 
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 Report of Independent Registered Public Accounting Firm 
 
 To the Shareholders and Board of Directors 
 Allegiant Travel Company: 
 
 Opinion on the Consolidated Financial Statements 
 
 We have audited the accompanying consolidated balance sheets of Allegiant Travel Company and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. 
 
 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. 
 
 Change in Accounting Principle 
 
 As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the modified retrospective adoption of Accounting Standards Update 2016-02, Leases (Topic 842). 
 
 Basis for Opinion 
 
 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 
 
 Critical Audit Matters 
 
 The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 
 
 Impairment of Sunseeker Resort property and equipment 
 
 As discussed in Note 2 and Note 17 to the consolidated financial statements, the Company recorded an impairment charge of $128.9 million related to the property and equipment of the Sunseeker Resort (Sunseeker), the Company’s resort development in Southwest Florida. When events or circumstances are identified that indicate the assets may be impaired, the Company estimates the future undiscounted cash flows expected to be generated by Sunseeker to determine if the cash flows are less than the carrying amount of the Sunseeker property and equipment. When the undiscounted cash flows are less than the carrying amount of the assets, the Company estimates the fair value of the assets to determine if the assets are impaired by comparing the fair value to the carrying value. Due to the decreased demand and U.S. government travel restrictions and quarantine requirements caused by COVID-19, a triggering event was identified as of March 31, 2020 and the Company determined the sum of the undiscounted cash flows was less than the assets’ carrying value. As a result, management estimated the fair value of the assets related to Sunseeker and the Company recorded an impairment charge representing the difference between the carrying value of the Sunseeker property and equipment and the estimated fair value of these assets. 
 
 We identified the evaluation of impairment of Sunseeker property and equipment as a critical audit matter. Subjective auditor judgment was required to evaluate the key assumptions used to estimate the fair value of the Sunseeker 
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 property and equipment. Specifically, the market transaction assumptions used to assess the fair value of the assets were challenging to test as they represented subjective determinations of market and economic conditions. The audit effort associated with this estimate required the use of professionals with specialized skills and knowledge. 
 
 The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s property and equipment impairment process, including controls related to the evaluation of market transaction valuation assumptions. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the reasonableness of the estimate of the fair value of the Sunseeker property and equipment. The valuation professionals obtained market data for similar transactions to compare to the Company’s fair value estimate. 
 
 A mortization period of deferred engine major maintenance costs 
 
 As discussed in Note 3 to the consolidated financial statements, the Company accounts for major maintenance costs of its Airbus fleet using the deferral method. For the year ended December 31, 2020, the Company recognized $17.6 million of amortization expense for the cost of engine major maintenance as a component of depreciation and amortization. The amortization period associated with engine major maintenance costs is based on the estimated period until the next scheduled engine major maintenance event. The timing of next engine major maintenance events is based on certain assumptions, which are dependent upon expected future engine utilization levels. 
 
 We identified the evaluation of the amortization period of deferred engine major maintenance costs as a critical audit matter. A high degree of auditor judgment was required to evaluate future engine utilization levels, including the relevance of the use of historical engine utilization data used to assess the reasonableness of expected future engine utilization levels. 
 
 The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s engine major maintenance cost process, including controls over the development of the expected future engine utilization levels used in the determination of the related amortization period. We developed an estimate of the amortization period using actual engine utilization data and compared our estimate to that of the Company. We further analyzed the amortization period by performing sensitivity analyses on the expected future engine utilization levels to assess the impact on the Company’s amortization expense. 
 
 /s/ KPMG LLP 
 We have served as the Company’s auditor since 2016. 
 
 Dallas, Texas 
 March 1, 2021 
 
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 ALLEGIANT TRAVEL COMPANY 
 CONSOLIDATED BALANCE SHEETS 
 (in thousands, except share amounts) 
 
 December 31, 2020 December 31, 2019 
 CURRENT ASSETS 
 Cash and cash equivalents $ 152,764 $ 121,888 
 Restricted cash 17,555 14,897 
 Short-term investments 532,477 335,928 
 Accounts receivable 192,215 25,516 
 Expendable parts, supplies and fuel, net of reserve of $4,323 and $2,748 24,006 28,375 
 Prepaid expenses and other current assets 24,616 35,617 
 
 TOTAL CURRENT ASSETS 943,633 562,221 
 Property and equipment (including $187,166 and $195,796 from VIEs, Note 7), net of accumulated depreciation of $598,546 and $484,510 2,050,311 2,236,808 
 Long-term investments — 15,542 
 Deferred major maintenance, net of accumulated amortization of $57,022 and $34,423 127,463 129,654 
 Operating lease right-of-use assets, net 115,911 22,081 
 Deposits and other assets 21,607 44,497 
 TOTAL ASSETS: $ 3,258,925 $ 3,010,803 
 CURRENT LIABILITIES 
 Accounts payable $ 34,197 $ 27,667 
 Accrued liabilities 116,093 159,031 
 Current operating lease liabilities 14,313 2,662 
 Air traffic liability 307,508 249,950 
 Current maturities of long-term debt and finance lease obligations (including $17,610 and $17,327 from VIEs, Note 7), net of related costs of $7,527 and $5,694 217,234 173,274 
 TOTAL CURRENT LIABILITIES 689,345 612,584 
 LONG-TERM DEBT AND OTHER NONCURRENT LIABILITIES 
 Long-term debt and finance lease obligations (including $135,683 and $159,324 from VIEs, Note 7), net of current maturities and related costs of $15,926 and $17,930 1,441,777 1,248,579 
 Deferred income taxes 301,763 232,520 
 Noncurrent operating lease liabilities 102,289 21,290 
 Other noncurrent liabilities 24,388 12,279 
 TOTAL LIABILITIES: 2,559,562 2,127,252 
 COMMITMENTS AND CONTINGENCIES (NOTE 14) 
 SHAREHOLDERS' EQUITY 
 Common stock, par value $.001, 100,000,000 shares authorized; 23,097,737 and 22,835,715 shares issued; 16,405,565 and 16,303,262 shares outstanding in 2020 and 2019 respectively 23 23 
 Treasury shares, at cost, 6,692,172 and 6,532,453 shares in 2020 and 2019, respectively ( 646,008 ) ( 617,579 ) 
 Additional paid in capital 329,753 289,933 
 Accumulated other comprehensive gain (loss), net ( 27 ) 98 
 Retained earnings 1,015,622 1,211,076 
 TOTAL EQUITY: 699,363 883,551 
 
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: $ 3,258,925 $ 3,010,803 

 The accompanying notes are an integral part of these consolidated financial statements. 
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 ALLEGIANT TRAVEL COMPANY 
 CONSOLIDATED STATEMENTS OF INCOME 
 (in thousands, except per share amounts) 
 
 Year ended December 31, 
 2020 2019 2018 
 OPERATING REVENUES: 
 Passenger $ 902,187 $ 1,682,955 $ 1,533,701 
 Third party products 46,482 70,012 58,060 
 Fixed fee contract 26,865 65,057 50,286 
 Other 14,539 22,941 25,400 
 Total operating revenues 990,073 1,840,965 1,667,447 
 OPERATING EXPENSES: 
 Salary and benefits 377,825 450,448 413,892 
 Aircraft fuel 221,827 427,827 445,814 
 Depreciation and amortization 176,267 155,852 129,351 
 Station operations 144,771 171,420 161,019 
 Maintenance and repairs 63,895 91,713 99,015 
 Sales and marketing 43,517 78,910 73,514 
 Aircraft lease rentals 9,828 — 868 
 Other 79,277 100,845 100,515 
 CARES Act grant recognition ( 152,448 ) — — 
 Special charges 306,299 — — 
 Total operating expenses 1,271,058 1,477,015 1,423,988 
 OPERATING INCOME (LOSS) ( 280,985 ) 363,950 243,459 
 OTHER (INCOME) EXPENSES: 
 Interest expense 60,493 76,801 56,116 
 Interest income ( 5,509 ) ( 12,523 ) ( 9,226 ) 
 Capitalized interest ( 4,067 ) ( 4,472 ) ( 2,354 ) 
 Loss on extinguishment of debt 1,222 3,677 — 
 Special charges 26,632 — — 
 Other, net 1,311 ( 780 ) ( 395 ) 
 Total other expenses 80,082 62,703 44,141 
 INCOME (LOSS) BEFORE INCOME TAXES ( 361,067 ) 301,247 199,318 
 INCOME TAX PROVISION (BENEFIT) ( 176,974 ) 69,130 37,516 
 NET INCOME (LOSS) $ ( 184,093 ) $ 232,117 $ 161,802 
 Earnings (loss) per share to common shareholders: 
 Basic $ ( 11.53 ) $ 14.27 $ 10.02 
 Diluted $ ( 11.53 ) $ 14.26 $ 10.00 
 Shares used for computation: 
 Basic 15,992 16,027 15,941 
 Diluted 15,992 16,041 15,967 
 
 Cash dividends declared per share: $ 0.70 $ 2.80 $ 2.80 

 The accompanying notes are an integral part of these consolidated financial statements. 
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 ALLEGIANT TRAVEL COMPANY 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
 (in thousands) 
 
 Year ended December 31, 
 2020 2019 2018 
 NET INCOME (LOSS) $ ( 184,093 ) $ 232,117 $ 161,802 
 Other comprehensive income (loss): 
 Change in available for sale securities, net of tax ( 178 ) 750 ( 1,153 ) 
 Foreign currency translation adjustments 53 9 177 
 Change in derivatives, net of tax — — 3,155 
 Total other comprehensive income (loss) ( 125 ) 759 2,179 
 TOTAL COMPREHENSIVE INCOME $ ( 184,218 ) $ 232,876 $ 163,981 

 The accompanying notes are an integral part of these consolidated financial statements. 
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 ALLEGIANT TRAVEL COMPANY 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 
 (in thousands, except share amounts) 
 
 Accumulated 
 Common Additional other Total 
 stock Par paid-in comprehensive Retained Treasury shareholders' 
 outstanding value capital income (loss) earnings shares equity 
 Balance at December 31, 2017 16,066 $ 23 $ 253,840 $ ( 2,840 ) $ 907,943 $ ( 605,655 ) $ 553,311 
 Share-based compensation 107 — 17,095 — — — 17,095 
 Shares repurchased by the Company and held as treasury shares ( 23 ) — — — — ( 3,650 ) ( 3,650 ) 
 Stock issued under employee stock purchase plan 33 — — — — 4,268 4,268 
 Cash dividends declared, $2.80 per share — — — — ( 45,247 ) — ( 45,247 ) 
 Other comprehensive income — — — 2,179 563 — 2,742 
 Net income — — — — 161,802 — 161,802 
 Balance at December 31, 2018 16,183 $ 23 $ 270,935 $ ( 661 ) $ 1,025,061 $ ( 605,037 ) $ 690,321 
 Share-based compensation 213 — 18,998 — — — 18,998 
 
 Shares repurchased by the Company and held as treasury shares ( 132 ) — — — — ( 18,569 ) ( 18,569 ) 
 Stock issued under employee stock purchase plan 39 — — — — 6,027 6,027 
 Cash dividends declared, $2.80 per share — — — — ( 45,552 ) — ( 45,552 ) 
 Other comprehensive income — — — 759 — — 759 
 Net income — — — — 232,117 — 232,117 
 Cumulative effect of the New Lease Standard (see Note 8) $ ( 550 ) $ ( 550 ) 
 Balance at December 31, 2019 16,303 $ 23 $ 289,933 $ 98 $ 1,211,076 $ ( 617,579 ) $ 883,551 
 Share-based compensation 262 — 38,445 — — — 38,445 
 
 Shares repurchased by the Company and held as treasury shares ( 217 ) — — — — ( 33,773 ) ( 33,773 ) 
 Stock issued under employee stock purchase plan 57 — — — — 5,344 5,344 
 Cash dividends, $.70 per share for the year (1) 
 — — — — ( 11,361 ) — ( 11,361 ) 
 Other comprehensive income (loss) — — — ( 125 ) — — ( 125 ) 
 CARES Act warrant issuance — — 1,375 — — — 1,375 
 Net loss — — — — ( 184,093 ) — ( 184,093 ) 
 Balance at December 31, 2020 16,405 $ 23 $ 329,753 $ ( 27 ) $ 1,015,622 $ ( 646,008 ) $ 699,363 

 (1) Dividend declared and paid in the first quarter of 2020 prior to the onset of the pandemic. As a part of accepting benefits from the Treasury under PSPA and PSP2, the Company has agreed not to pay cash dividends through March 31, 2022. 
 
 The accompanying notes are an integral part of these consolidated financial statements. 
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 ALLEGIANT TRAVEL COMPANY 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (in thousands) 
 
 Year ended December 31, 
 2020 2019 2018 
 OPERATING ACTIVITIES: 
 Net income (loss) $ ( 184,093 ) $ 232,117 $ 161,802 
 Adjustments to reconcile net income to net cash provided by operating activities: 
 Depreciation and amortization 176,267 155,852 129,351 
 (Gain)/loss on aircraft and other equipment disposals ( 1,811 ) ( 8,475 ) 2,360 
 Special charges 292,790 — — 
 Share-based compensation expense 19,287 18,226 15,098 
 Deferred income taxes 69,344 68,466 38,222 
 Other adjustments 19,136 5,521 4,541 
 Changes in certain assets and liabilities: 
 Accounts receivable 4,390 10,498 35,624 
 Tax receivable ( 164,585 ) — — 
 Prepaid expenses 10,224 ( 5,483 ) ( 5,191 ) 
 Accounts payable 7,016 ( 2,103 ) 8,633 
 Accrued liabilities ( 26,386 ) 21,331 12,005 
 Air traffic liability 57,558 37,720 7,931 
 Deferred major maintenance ( 40,352 ) ( 81,133 ) ( 49,622 ) 
 Other assets/liabilities ( 4,163 ) ( 10,327 ) ( 4,142 ) 
 Net cash provided by operating activities 234,622 442,210 356,612 
 INVESTING ACTIVITIES: 
 Purchase of investment securities ( 686,600 ) ( 436,237 ) ( 371,461 ) 
 Proceeds from maturity and sale of investment securities 504,600 454,813 436,581 
 
 Purchase of property and equipment, including capitalized interest ( 281,159 ) ( 506,845 ) ( 334,774 ) 
 
 Proceeds from sale-leaseback transactions 87,580 — — 
 Other investing activities 9,888 11,806 677 
 Net cash used in investing activities ( 365,691 ) ( 476,463 ) ( 268,977 ) 
 FINANCING ACTIVITIES: 
 Cash dividends paid to shareholders (1) 
 ( 11,361 ) ( 45,552 ) ( 45,247 ) 
 
 Proceeds from the issuance of debt 427,987 874,936 211,225 
 Repurchase of common stock ( 33,773 ) ( 18,569 ) ( 3,650 ) 
 Principal payments on debt and finance lease obligations ( 217,766 ) ( 705,763 ) ( 232,227 ) 
 Debt issuance costs ( 7,203 ) ( 33,333 ) ( 1,666 ) 
 Other financing activities 6,719 3,408 9,202 
 Net cash provided by (used in) financing activities 164,603 75,127 ( 62,363 ) 
 NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 33,534 40,874 25,272 
 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 136,785 95,911 70,639 
 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 170,319 $ 136,785 $ 95,911 
 
 CASH PAYMENTS/(RECEIPTS) FOR: 
 Interest paid, net of amount capitalized $ 48,002 $ 65,152 $ 52,323 
 Income tax refunds ( 95,229 ) ( 2,157 ) ( 41,610 ) 
 SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS 
 Right-of-use (ROU) assets acquired $ 115,082 $ 2,510 $ — 
 Property capitalized under operating leases $ 19,294 $ 25,830 $ — 
 Flight equipment acquired under finance leases 27,765 — 127,625 
 
 (1) Dividend declared and paid in the first quarter of 2020 prior to the onset of the pandemic. As a part of accepting benefits from the Treasury under PSPA and PSP2, the Company has agreed not to pay cash dividends through March 31, 2022. 
 
 The accompanying notes are an integral part of these consolidated financial statements. 
 
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 ALLEGIANT TRAVEL COMPANY 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 For the years ended December 31, 2020, 2019 and 2018 
 
 Note 1 — Organization and Business of Company 
 
 Allegiant Travel Company (the “Company”) is a leisure travel company focused on providing travel services and products to residents of under-served cities in the United States. The Company operates a low-cost, low utilization passenger airline which sells air transportation both on a stand-alone basis and bundled with the sale of ancillary air-related and third party services and products. The Company also provides air transportation under fixed fee flying arrangements, generates other ancillary revenues, and operates non-airline related entities which include the development of Sunseeker Resort and related golf course, and Teesnap golf course management solution. Previously, the Company also operated Allegiant Nonstop family entertainment centers. 
 
 Scheduled service and fixed fee air transportation services have similar operating margins, economic characteristics, and production processes (check-in, baggage handling and flight services) which target the same class of customers, and are subject to the same regulatory environment. As a result, the Company believes its airline activities operate under one reportable segment and does not separately track expenses for scheduled service and fixed fee air transportation services. The Company's non-airline related entities represent separate reportable segments and include Sunseeker Resort, and other non-airline activities. Refer to Note 16 for additional information. 
 
 Note 2 — Impact of the COVID-19 Pandemic 
 
 The rapid spread of COVID-19 and the related government restrictions, social distancing measures, and consumer fears have impacted flight loads, resulted in unprecedented cancellations of bookings and substantially reduced demand for new bookings throughout the airline industry. Starting in March 2020, the Company experienced a severe reduction in air travel, which continued through the remainder of 2020. Demand in the foreseeable future will continue to be affected by fluctuations in COVID-19 cases, hospitalizations, deaths, treatment efficacy and the effectiveness and availability of vaccines. The Company is continuously reevaluating flight schedules and adjusting capacity based on demand trends. 
 
 The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted in March 2020, providing support for the airline industry and other businesses and individuals. 
 
 On April 20, 2020, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Agreement (the “PSPA”) with the U.S. Department of the Treasury ("Treasury") for an award Allegiant Air would receive under the CARES Act. Allegiant Air received a total of $ 176.9 million under the PSPA during 2020. The proceeds of the award were used exclusively for wages, salaries and benefits during the second and third quarters of 2020, in accordance with the agreement. 
 
 The $ 176.9 million received under the PSPA during the second and third quarters of 2020 includes direct grants of $ 153.8 million, a $ 23.1 million loan, and warrants to purchase 27,681 shares of the Company's common stock with a fair value of $ 1.4 million, as further discussed below. 
 
 In consideration for the grant, Allegiant Air issued to Treasury a low-interest rate, senior unsecured term promissory note (the “PSP Note”) which will mature 10 years after issuance. The principal amount of the PSP Note is $ 23.1 million. The PSP Note is guaranteed by the Company and is prepayable at any time at par (see Note 7). 
 
 Also in consideration for the grant, the Company issued warrants (the “PSP Warrants”) to Treasury to purchase 27,681 shares of common stock of the Company at a price of $ 83.33 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). The PSP Warrants expire five years after issuance, and will be exercisable either through net share settlement or cash, at the Company’s option. The PSP Warrants include customary anti-dilution provisions, do not have any voting rights and are freely transferable, with registration rights. 
 
 As indicated above, the Company made significant progress on strengthening its liquidity through efforts including suspending all stock buybacks and dividends; temporarily reducing executives salaries by 50 percent and temporarily foregoing cash compensation of Board members; enacting a hiring freeze and offering voluntary leave; eliminating cash bonuses; suspending all non-essential capital expenditures including, but not limited to, Sunseeker Resorts, Teesnap and Allegiant Nonstop family entertainment centers; and extending payment terms and renegotiating contracts with vendors. 
 
 On December 27, 2020, the Consolidated Appropriations Act, 2021 (the "Payroll Support Program Extension") was signed into law. This Payroll Support Program Extension provides an additional $ 15.0 billion in support to the airline industry. See Note 18 - Subsequent Events. 
 
 Given the above actions and the Company's assumptions about the future impact of COVID-19 on travel demand, which could be materially different due to the inherent uncertainties of the current operating environment, the Company expects to meet its cash obligations as well as remain in compliance with the debt covenants in its existing financing agreements for the next 12 
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 months based on its current level of unrestricted cash and short-term investments, its anticipated access to liquidity, and projected cash flows from operations. 
 
 Special Charges 
 
 The effects of COVID-19 triggered an impairment review, and non-cash impairment charges were recognized during the year ended December 31, 2020 (see Note 17 - Impairment for additional detail). The Company also identified expenses that were unique and specific to COVID-19. The impairment charges and other expenses that resulted from the effects of COVID-19 are recorded as special charges within both operating and non-operating expenses during the twelve months ended December 31, 2020. See the table below for a summary of operating and non-operating special charges recorded by segment during the year ended December 31, 2020. 
 
 (in thousands) Airline Sunseeker Resort Other non-airline Total 
 
 Year Ended December 31, 2020 
 Operating $ 141,713 $ 137,994 $ 26,592 $ 306,299 
 Non-operating — 26,632 — 26,632 
 Total special charges $ 141,713 $ 164,626 $ 26,592 $ 332,931 

 Additional detail for the $ 332.9 million total special charges (operating and non-operating) for the year ended December 31, 2020 appears below: 
 
 Operating 
 – $ 161.6 million in impairment charges 
 – Includes Airline - $ 5.0 million; Sunseeker Resort - $ 128.9 million; Kingsway - $ 1.1 million; Other non-airline $ 26.6 million 
 – $ 98.0 million adjustment resulting from the accelerated retirements of eight airframes and five engines, loss on sale leaseback transactions of eight aircraft, and write-offs of other aircraft related assets 
 – $ 35.1 million adjustment for additional salary and benefits expense in relation to the elimination of positions as well as other non-recurring compensation expense associated with the acceleration of certain existing stock awards 
 – Includes Airline - $ 32.1 million; Sunseeker Resort - $ 2.9 million 
 – $ 5.0 million related to suspension of construction at Sunseeker Resort 
 – $ 6.6 million write-down on various non-aircraft assets and other various expenses 
 
 Non-operating 
 – $ 26.6 million which includes termination fees and debt issuance costs related to the termination of the loan agreement with Sixth Street Partners (formerly TSSP). 
 
 Note 3 — Summary of Significant Accounting Policies 
 
 Basis of Presentation 
 
 The accompanying consolidated financial statements include the accounts of Allegiant Travel Company and its majority-owned operating subsidiaries. The Company's investments in unconsolidated affiliates, which are 50 percent or less owned, are accounted for under the equity or cost method. All intercompany balances and transactions have been eliminated. 
 
 The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates. 
 
 The Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), (the "New Lease Standard") effective January 1, 2019 using the modified retrospective transition approach. Under this method, the cumulative effect adjustment to the opening balance of retained earnings was recognized at the adoption date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on January 1, 2019. See Recent Accounting Pronouncements below for further information. 
 
 The Company adopted Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) effective January 1, 2020. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The Company adopted this accounting standard prospectively as of January 1, 2020 and it did not have a significant impact on its consolidated financial statements. 
 49 

 Cash and Cash Equivalents 
 
 Cash and cash equivalents include investments and interest bearing instruments with maturities of three months or less at the balance sheet date. Such investments are carried at cost which approximates fair value. 
 
 Restricted Cash 
 
 Restricted cash represents escrowed funds under fixed fee contracts, and cash collateral held against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties. 
 
 Accounts Receivable 
 
 Accounts receivable are carried at face amount which approximates fair value. In addition to income tax receivables, the accounts receivable consist primarily of amounts due from credit card companies associated with the sale of tickets for future travel. These receivables are short-term and generally settle within a few days of sale. There are also receivables related to commission amounts due from Enterprise Holdings Inc. based on terms in the rental car provider agreement and amounts due related to fixed fee charter agreements. If deemed necessary, the Company records charges to its allowance for doubtful accounts for amounts not expected to be collected, for which the balance was immaterial for all years presented. The Company also had outstanding receivables from a third party as of December 31, 2020 and 2019, of which $ 10.9 million and $ 11.4 million, respectively, was due more than one year after the balance sheet date and is classified with the Company's other assets. 
 
 Short-term and Long-term Investments 
 
 The Company’s investments in marketable securities are classified as available-for-sale and are reported at fair value with the net unrealized gain or (loss) reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity. For investments in an unrealized loss position, the Company determines whether a credit loss exists by considering information about the collectability of the instrument and current market conditions. There have been no credit losses. Investment securities with original maturities of three months or less are classified as cash equivalents. Investment securities with original maturities greater than three months are classified as either short-term investments or long-term investments based on the maturity date in relation to the balance sheet date. Short-term investments have a maturity date less than or equal to one year from the balance sheet date, and long-term investments have a maturity date greater than one year from the balance sheet date. As of December 31, 2019, the Company’s long-term investments consisted of corporate debt securities, federal agency debt securities, US Treasury Bonds, and municipal debt securities with contractual maturities of less than 24 months. 
 
 The amortized cost of investment securities sold is determined by the specific identification method with any realized gains or losses reflected in other (income) expense. The Company had minimal realized losses during the years ended December 31, 2020, 2019, and 2018. The Company believes unrealized losses related to debt securities are not other-than-temporary and does not intend to sell these securities prior to amortized cost recoverability. 
 
 The Company attempts to minimize its concentration risk with regard to its cash, cash equivalents, and investment portfolio. This is accomplished by diversifying and limiting amounts among different counterparties, the type of investment, and the amount invested in any individual security, commercial paper, or money market fund. 
 
 Expendable Parts, Supplies and Fuel, Net 
 
 Expendable parts, supplies and fuel inventories are valued at cost using the first-in, first-out method. Such inventories are charged to expense as they are used in operations. An obsolescence allowance for expendable parts and supplies is based on salvage values and the average remaining useful life of the Airbus fleet. The obsolescence allowance for expendable parts and supplies was $ 4.3 million and $ 2.7 million at December 31, 2020 and 2019, respectively. Rotable aircraft parts inventories are included in property and equipment. 
 
 Operating Lease Right-of-Use Asset and Liability 
 
 The Company determines if an arrangement is a lease at inception and has lease agreements for aircraft, office facilities, office equipment, certain airport and terminal facilities, and other space and assets with non-cancelable lease terms. Certain real estate and property leases, aircraft leases, and various other operating leases are measured on the balance sheet with a lease liability and right-of-use ("ROU") asset. Airport terminal leases mostly include variable lease payments outside of those based on a fixed index, and are therefore excluded from consideration. 
 
 ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make scheduled lease payments. ROU assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is calculated using the incremental borrowing rate at lease commencement, which takes into consideration recent debt issuances as well as other applicable market data available. 
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 Lease payments include fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, and others as required by the New Lease Standard. Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. 
 
 Lease terms include options to extend when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the balance sheet. Additionally, lease and non-lease components are accounted for as a single lease component for real estate agreements. 
 
 Property and Equipment 
 
 Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives less any estimated salvage value. Property under finance leases and related obligations are initially recorded at an amount equal to the present value of future minimum lease payments computed on the basis of the Company’s incremental borrowing rate, and depreciation is recorded on a straight-line basis and is included within depreciation and amortization expense. The estimated useful lives of the principal asset classes are shown below. 
 
 Aircraft, engines and related rotable parts 10-25 years 
 
 Buildings and leasehold improvements 10-25 years 
 Equipment 3-10 years 
 Computer hardware and software 3-10 years 

 In estimating the useful lives and residual values of aircraft, the Company primarily relies upon actual experience with the same or similar aircraft types, current and projected future market information, and recommendations from other industry sources. Subsequent revisions to these estimates could be caused by changing market prices of the Company’s aircraft, changes in utilization of the aircraft, and other fleet events. These estimates are evaluated each reporting period and adjusted if necessary. Changes in the estimate for useful lives or residual values of the Company’s property and equipment could result in changes in depreciation expense. 
 
 Interest is capitalized using the Company’s weighted average borrowing rate and depreciated over the estimated useful life of the related asset(s) acquired/developed. Capitalized interest for the years ended December 31, 2020, 2019 and 2018 was $ 4.1 million, $ 4.5 million and $ 2.4 million, respectively. 
 
 Software Capitalization 
 
 The Company capitalizes certain internal and external costs related to the acquisition and development of computer software during the application development stage of projects. The Company amortizes these capitalized costs using the straight-line method over the estimated useful life of the software, which typically ranges from three to ten years . The Company had unamortized computer software development costs of $ 42.3 million and $ 55.7 million as of December 31, 2020 and 2019, respectively. Amortization expense related to computer software was $ 9.6 million, $ 12.2 million and $ 14.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. Costs incurred during the preliminary and post-implementation stages are expensed as incurred. 
 
 Aircraft Maintenance and Repair Costs 
 
 The Company accounts for all non-major maintenance and repair costs incurred for its Airbus fleet under the direct expense method. Under this method, maintenance and repair costs for aircraft are charged to operating expenses as incurred. Maintenance and repair costs includes all parts, materials, and line maintenance activities required to maintain the Company's fleet. 
 
 The Company accounts for major maintenance costs of its Airbus airframes and the related CFM engines using the deferral method. Under this method, the Company capitalizes the cost of major maintenance events, which are amortized as a component of depreciation and amortization expense, over the estimated period until the next scheduled major maintenance event. During 2020 and 2019, the Company capitalized $ 12.8 million and $ 64.1 million of major maintenance costs for engines with associated amortization expense of $ 17.6 million and $ 11.1 million, respectively. During 2020 and 2019, the Company capitalized $ 22.6 million and $ 18.4 million of major maintenance costs for airframes with associated amortization expense of $ 19.9 million and $ 14.9 million, respectively. 
 
 Until the full retirement of the MD-80 aircraft in November 2018, the Company accounted for major maintenance costs of the MD-80 airframes and JT8D-219 engines, as well as all non-major maintenance and repair costs incurred for the MD-80 fleet, under the direct expense method. 
 
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 Measurement of Impairment of Long-Lived Assets 
 
 The Company records impairment losses on long-lived assets used in operations, consisting principally of property and equipment, when events or changes in circumstances indicate, in management’s judgment, that the assets might be impaired, and the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In making these determinations, the Company utilizes certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service for which the asset will be used in operations, and estimated salvage values. 
 
 For the year ended December 31, 2020, the Company recorded a $ 161.6 million impairment as a result of COVID-19. The impairment is more fully discussed in Note 17. 
 
 For the years ended December 31, 2019 and 2018, the Company did not incur any impairment losses. 
 
 Revenue Recognition 
 
 Passenger revenue 
 Passenger revenue includes scheduled service revenue, ancillary air-related charges, and travel point redemptions from the co-branded Allegiant World Mastercard® credit card. 
 
 Scheduled service revenue consists of ticket revenue generated from nonstop flights in the Company’s route network, recognized either when the transportation is provided or when the itinerary expires unused. Nonrefundable scheduled itineraries expire on the date of the intended flight, unless the date is extended by notification from the customer in advance. Itineraries sold for transportation not yet used, as well as unexpired credits, are included in air traffic liability. 
 
 Ancillary air-related charges include various unbundled services and products related to the flight such as baggage fees, the use of the Company’s website to purchase scheduled service transportation, advance seat assignments, and other services. Revenues from air-related charges are recognized when the transportation is provided. If a customer cancels a flight, a voucher may be issued for a future flight, at which time the associated revenue is recognized. Additionally, the Company estimates the value of vouchers that will expire unused and recognizes such revenue at the time of issuance. 
 
 Various taxes and fees, assessed on the sale of tickets to customers, are collected by the Company serving as an agent, and remitted to taxing authorities. These taxes and fees are not included as revenue in the Company’s consolidated statements of income and are recorded as a liability until remitted to the appropriate taxing authority. 
 
 Revenue from travel point redemptions from the co-branded credit card are described in the Affinity Credit Card Program section below. 
 
 Third party products revenue 
 Ancillary third party products revenue is generated from the sale of hotel rooms, rental cars and ticket attractions, as well as marketing revenue associated with the co-branded credit card. Revenue from the sale of third party products is recognized at the time the product is utilized, such as the time a purchased hotel room is occupied. The Company follows accounting standards for determining the amount of revenue to be recognized for each element of a bundled sale involving third party products in addition to airfare. Revenue from the sale of third party products is recorded net of amounts paid to wholesale providers, travel agent commissions, and transaction costs. 
 
 Pursuant to the co-brand arrangement with Bank of America, the Company has various performance obligations which are collectively referred to as the marketing component. These obligations consist of use of the Company’s brand and access to its member lists, and certain other advertising and marketing elements. The marketing component is recorded as third party products revenue in the period in which points are awarded to the credit card holders. 
 
 Fixed fee contract revenue 
 Fixed fee contract revenue consists of agreements to provide charter service on a year-round and ad hoc basis. Fixed fee contract revenue is recognized when the transportation is provided. 
 
 Other revenue 
 Other revenue is generated from non-airline activities as well as leasing aircraft and engines. Lease revenue is recognized ratably over the lease term. 
 
 Affinity Credit Card Program 
 
 The Allegiant World Mastercard® is issued by Bank of America through which arrangement points are sold and consideration is received under an agreement that was amended in 2020 and expires in 2029. Under this arrangement, the Company identified the following deliverables: travel points to be awarded (the travel component), use of the Company’s brand and access to its 
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 member lists, and certain other advertising and marketing elements (collectively the marketing component). Each of these deliverables is accounted for separately and allocation of the consideration from the agreement is determined based on the relative selling price of each deliverable. The Company applied a level of management judgment and estimation in determining the best estimate of selling price for each deliverable by considering multiple inputs and methods including, but not limited to, the redemption value of points awarded, discounted cash flows, brand value, volume discounts, published selling prices, number of points to be awarded and number of points expected to be redeemed. 
 Revenue from the travel component is deferred based on its relative selling price and is recognized into passenger revenue when the points are redeemed by cardholders and transportation is provided. Revenue from the marketing component is considered earned in the period in which points are sold and is therefore recognized into third party products revenue in the same period. 
 Advertising Costs 
 
 Advertising costs are charged to expense in the period incurred. Advertising expense was $ 12.4 million, $ 29.1 million and $ 28.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. In 2019, the Company entered into a naming rights agreement with the Raiders of the National Football League for the professional football stadium in Las Vegas which opened in 2020. Prepayments and other associated advertising expenses began in mid-2020 and will continue through the term of this agreement. 
 
 Earnings per Share 
 
 Basic and diluted earnings per share are computed pursuant to the two-class method as opposed to the treasury method. Under the two-class method, the Company attributes net income to two classes, common stock and unvested restricted stock awards. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities because they receive non-forfeitable rights to cash dividends at the same rate as common stock. 
 
 Diluted net income per share is calculated using the more dilutive of two methods. Under both methods, the exercise of employee stock options is assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs as described below: 
 
 1. Assume vesting of restricted stock using the treasury stock method. 
 2. Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method. 
 
 For the years ended December 31, 2019 and 2018, the second method above was used in the computation because it was more dilutive than the first method. Given the loss position in 2020, both methods yield the same result. The following table sets forth the computation of net income (loss) per share on a basic and diluted basis for the periods indicated: 
 
 Year ended December 31, 
 (in thousands, except per share data) 2020 2019 2018 
 Basic: 
 Net income (loss) $ ( 184,093 ) $ 232,117 $ 161,802 
 Less net income (loss) allocated to participating securities ( 236 ) ( 3,413 ) ( 2,106 ) 
 Net income (loss) attributable to common stock $ ( 184,329 ) $ 228,704 $ 159,696 
 Earnings (loss) per share, basic $ ( 11.53 ) $ 14.27 $ 10.02 
 Weighted-average shares outstanding 15,992 16,027 15,941 
 Diluted: 
 Net income (loss) $ ( 184,093 ) $ 232,117 $ 161,802 
 Less net income (loss) allocated to participating securities ( 236 ) ( 3,410 ) ( 2,104 ) 
 Net income (loss) attributable to common stock $ ( 184,329 ) $ 228,707 $ 159,698 
 Earnings (loss) per share, diluted $ ( 11.53 ) $ 14.26 $ 10.00 
 Weighted-average shares outstanding 15,992 16,027 15,941 
 Dilutive effect of stock options and restricted stock — 51 53 
 Adjusted weighted-average shares outstanding under treasury stock method 15,992 16,078 15,994 
 Participating securities excluded under two-class method — ( 37 ) ( 27 ) 
 Adjusted weighted-average shares outstanding under two-class method 15,992 16,041 15,967 

 53 
 
 Stock awards outstanding of 24,004 , 19,928 , and 77,037 shares (not in thousands) as of December 31, 2020, 2019, and 2018, respectively, were excluded from the computation of diluted earnings per share as they were antidilutive. 
 
 Share-Based Compensation 
 
 The Company accounts for share-based compensation in accordance with accounting standards which require the compensation cost related to share-based payment transactions be recognized in the Company’s consolidated statements of income. The share-based cost is measured based on grant date fair value. The Company’s share-based employee compensation plan is more fully discussed in Note 13. 
 
 Income Taxes 
 
 The Company recognizes deferred income taxes based on the asset and liability method required by accounting standards. Deferred tax assets and liabilities are determined based on the timing differences between book basis for financial reporting purposes and tax basis of the asset and liability and measured using the enacted tax rates and provisions of the enacted tax law. A valuation allowance for deferred tax assets is provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company determines the net non-current deferred tax assets or liabilities separately for federal, state, foreign and other local jurisdictions. 
 The Company’s income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the jurisdictions where the Company operates. The Company assesses potentially unfavorable outcomes of such examinations based on the criteria set forth in uncertain tax position accounting standards. The accounting standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. 
 Accounting standards for income taxes utilize a two-step approach for evaluating tax positions. Recognition (Step I) occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step II) is only addressed if the position is deemed to be more likely than not to be sustained. Under Step II, the tax benefit is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. 
 The tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period they meet the “more likely than not” standard. If it is subsequently determined that a previously recognized tax position no longer meets the “more likely than not” standard, it is required that the tax position be derecognized. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes. 
 Recent Accounting Pronouncements 
 
 In February 2016, the FASB issued the New Lease Standard. This standard requires leases, other than short-term, to be recognized on the balance sheet as a liability and a corresponding ROU asset. 
 
 This standard was effective for interim and annual reporting periods beginning after December 15, 2018 and the Company adopted the New Lease Standard as of January 1, 2019. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification. 
 
 The Company adopted the New Lease Standard using the modified retrospective transition approach as of the effective date as permitted by the amendments in ASU 2018-11, "Targeted Improvements - Leases (Topic 842)." Under this method, the cumulative effect adjustment to the opening balance of retained earnings was recognized at the adoption date. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption on January 1, 2019. 
 
 The Company's consolidated balance sheet was affected by this standard, but the consolidated statements of income and cash flows were not significantly impacted. The most significant change to the consolidated balance sheet upon adoption on January 1, 2019 related to the recognition of new right-of-use (ROU) assets of $ 18.0 million and operating liabilities of $ 19.1 million. The Company's accounting for finance leases remains substantially unchanged. See Note 7 for more information on the impact of this standard. 
 
 On June 16, 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. The standard requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to amortized cost of the securities. The Company adopted this accounting standard prospectively as of January 1, 2020, and it did not have a significant impact on its consolidated financial statements 
 
 In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard is intended to simplify various aspects related to accounting for income taxes and is effective for fiscal years 
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 beginning after December 15, 2020, including interim periods therein, and early adoption is permitted. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. The Company plans to adopt ASU 2019-12 in the first quarter of 2021 and its adoption is not expected to have a material effect on the Company's consolidated financial statements. 
 
 Note 4 — Revenue Recognition 
 
 Passenger revenue 
 
 Passenger revenue is the most significant category in our reported operating revenues, as outlined below: 
 
 Year Ended December 31, 
 (in thousands) 2020 2019 2018 
 Scheduled service $ 435,668 $ 897,631 $ 898,653 
 Ancillary air-related charges 453,545 770,206 621,939 
 Co-brand redemptions 12,974 15,118 13,109 
 Total passenger revenue $ 902,187 $ 1,682,955 $ 1,533,701 

 Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided or when ticket voucher breakage occurs, to the extent different from estimated breakage. As of December 31, 2020, approximately 27.9 percent of the air traffic liability balance was related to forward bookings, with the remaining 72.1 percent related to credit vouchers for future travel. 
 
 The normal contract term of passenger tickets is 12 months and revenue associated with future travel will principally be recognized within this time frame. $ 201.0 million of the $ 250.0 million that was recorded in the air traffic liability balance at December 31, 2019 was recognized into passenger revenue during the 12 months ended December 31, 2020. 
 
 In April 2020, the Company announced that credits issued for canceled travel in April through the end of the COVID-19 pandemic will have an extended expiration date of two years from the original booking date. The Company later announced that this extension would also apply to credits issued for cancelled travel in January through March 2020. This change has been considered in estimating the future breakage rate, which represents the value of credit vouchers that are not expected to be redeemed prior to their contractual expiration date. 
 
 Co-brand redemptions 
 
 In relation to the travel component of the co-branded credit card contract with Bank of America, the Company has a performance obligation to provide cardholders with points to be used for future travel award redemptions. Therefore, consideration received from Bank of America related to the travel component is deferred based on its relative selling price and is recognized into passenger revenue when the points are redeemed and the transportation is provided. 
 
 The following table presents the activity of the co-brand point liability as of the dates indicated: 
 
 Year Ended December 31, 
 (in thousands) 2020 2019 
 Balance at January 1 $ 15,613 $ 10,708 
 Points awarded 19,202 20,023 
 Points redeemed ( 12,974 ) ( 15,118 ) 
 Balance at December 31 $ 21,841 $ 15,613 

 As of December 31, 2020 and 2019, $ 10.9 million and $ 11.6 million, respectively, of the current points liability is reflected in accrued liabilities and represents the current estimate of revenue to be recognized in the next 12 months based on historical trends, with the remaining balance reflected in other noncurrent liabilities and expected to be recognized into revenue in periods thereafter. 
 
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 Note 5 — Property and Equipment 
 
 Property and equipment consisted of the following: 
 
 As of December 31, 
 (in thousands) 2020 2019 
 Flight equipment $ 2,331,499 $ 2,289,157 
 Computer hardware and software 149,727 171,516 
 Land and buildings/leasehold improvements (1) 
 87,030 98,885 
 Other property and equipment 80,601 161,760 
 Total property and equipment 2,648,857 2,721,318 
 Less accumulated depreciation and amortization ( 598,546 ) ( 484,510 ) 
 Property and equipment, net $ 2,050,311 $ 2,236,808 

 (1) Balance includes a building currently held for sale in Chesterfield, Missouri with a carrying value of $ 4.8 million 
 
 As of December 31, 2020, the Company had firm commitments to purchase three Airbus A320 series aircraft which are expected to be delivered between 2021 and 2022. 
 
 Accrued capital expenditures as of December 31, 2020 and 2019 were $ 16.9 million and $ 16.5 million, respectively. 
 
 Note 6 — Accrued Liabilities 
 
 Accrued liabilities consisted of the following: 
 
 As of December 31, 
 (in thousands) 2020 2019 
 Salaries, wages and benefits $ 21,878 $ 44,441 
 Sunseeker Resort development 14,084 15,209 
 Maintenance and repairs 12,847 12,713 
 Loyalty card program liability 10,929 11,567 
 Station expenses 10,526 14,573 
 Property taxes 9,042 12,272 
 Interest 6,560 6,514 
 Passenger taxes and fees 4,686 14,653 
 Advertising accruals 890 3,303 
 Other accruals 24,651 23,786 
 Total accrued liabilities $ 116,093 $ 159,031 

 Note 7 — Long-Term Debt 
 
 Long-term debt consisted of the following: 
 
 As of December 31, 
 (in thousands) 2020 2019 
 Fixed-rate debt and finance lease obligations due through 2030 $ 525,240 $ 235,071 
 Variable-rate debt due through 2029 1,133,771 1,186,782 
 Total long-term debt and finance lease obligations, net of related costs 1,659,011 1,421,853 
 Less current maturities, net of related costs 217,234 173,274 
 Long-term debt and finance lease obligations, net of current maturities and related costs $ 1,441,777 $ 1,248,579 
 
 Weighted average fixed-interest rate on debt 5.7 % 3.7 % 
 Weighted average variable-interest rate on debt 2.4 % 4.5 % 

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 Maturities of long-term debt as of December 31, 2020, for the next five years and thereafter, in the aggregate, are: 
 
 (in thousands) As of December 31, 2020 
 2021 $ 217,234 
 2022 137,252 
 2023 136,781 
 2024 806,383 
 2025 89,194 
 Thereafter 272,167 
 Total debt and finance lease obligations, net of related costs $ 1,659,011 

 Total long-term debt is presented net of related costs of $ 23.5 million and $ 23.6 million at December 31, 2020 and 2019, respectively. 
 
 Term Loan and Senior Secured Notes 
 
 In February 2019, the Company entered into a Credit and Guaranty Agreement (the “Term Loan”) to borrow $ 450.0 million, guaranteed by all of the Company's subsidiaries, excluding Sunseeker Resorts Inc. and its subsidiaries, and other insignificant subsidiaries (the "Term Loan Guarantors"). In February 2020, the Company entered into an amendment to the Term Loan under which the interest rate was reduced by 150 basis points, and the principal amount of the debt was increased by a net amount of $ 100.0 million to $ 545.5 million. Quarterly principal payments increased under the amendment, but the remaining provisions were substantially unchanged, including the maturity date. The Term Loan is secured by substantially all property and assets of the Company and the Term Loan Guarantors, excluding aircraft and aircraft engines, and excluding certain other assets. The Term Loan bears interest based on LIBOR with a zero percent floor and provides for quarterly interest payments along with quarterly principal payments of $ 1.4 million through February 2024, at which time the Term Loan is due. The Term Loan may be prepaid at any time without penalty. 
 
 In October 2020, the Company closed on the private offering of $ 150.0 million principal amount of 8.5 percent Senior Secured Notes due 2024 (the "Senior Secured Notes"). The Senior Secured Notes and related guarantees are secured by first priority security interests in the same collateral package as securing the Term Loan and the debt is subject to an Intercreditor Agreement with the collateral agent for the Term Loan.The guarantors of the Notes include all significant subsidiaries other than Sunseeker Resorts, Inc. and its subsidiaries. 
 
 Consolidated Variable Interest Entities 
 
 The Company evaluates ownership, contractual lease arrangements and other interests in entities to determine if they are variable interest entities ("VIEs") based on the nature and extent of those interests. The Company consolidates a VIE when, among other criteria, it has the power to direct the activities that most significantly impact the VIE’s economic performance as well as the obligation to absorb losses or the right to receive benefits of the VIE, thus making the Company the primary beneficiary of the VIE. 
 
 In October 2019, the Company, through a wholly owned subsidiary, entered into agreements with a trust to borrow $ 23.5 million secured by one Airbus A320 series aircraft. The trust was funded on inception. The borrowing bears interest at a blended rate of 3.2 percent and is payable in monthly installments through October 2024, at which time the Company will have a purchase option at a fixed amount. As this transaction is a common control transaction, the Company, as the primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were $ 18.6 million and $ 23.5 million, respectively, at the time of borrowing. 
 
 In March 2019, the Company, through a wholly owned subsidiary, entered into agreements with a trust to borrow $ 44.0 million secured by one aircraft. The trust was funded on inception. The borrowing bears interest at a blended rate of 3.8 percent and is payable in quarterly installments through April 2029, at which time the Company will have a purchase option at a fixed amount. As this transaction is a common control transaction, the Company, as the primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were $ 38.5 million and $ 44.0 million, respectively, at the time of borrowing. 
 
 In September 2018, the Company, through a wholly owned subsidiary, entered into agreements with a trust to borrow $ 44.0 million secured by one Airbus A320 series aircraft. The trust was funded on inception. The borrowing bears interest at a blended rate of 4.0 percent and is payable in quarterly installments through September 2028, at which time the Company will have a purchase option at a fixed amount. As this transaction is a common control transaction, the Company, as the primary beneficiary, has measured and recorded the assets and liabilities at their carrying values, which were $ 37.8 million and $ 44.0 million, respectively, at the time of borrowing. 
 
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 CARES Act Payroll Support Program Loan 
 
 In April 2020 the Company entered into a low-interest rate, senior unsecured term promissory note (the "PSP" Note) with the Treasury under the CARES Act payroll support program. The Note matures in full on April 20, 2030, and bears interest at a rate of 1.0 percent per annum prior to April 20, 2025 and, thereafter, at the secured overnight financing rate (SOFR) plus 2 percent. The PSP Note is prepayable at any time at par, without penalty. 
 
 During 2020, the Company received $ 23.1 million in funds under the PSP Note, which is recorded within noncurrent debt on the balance sheet. 
 
 In connection with the PSP Note, the Company is required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022. These restrictions have been extended until March 31, 2022 with respect to stock repurchases and payment of dividends and until October 1, 2022 with respect to executive compensation limits as a result of the Payroll Support Extension Program. 
 
 Senior Secured Revolving Credit Facility 
 
 The Company has a senior secured revolving credit facility under which it is entitled to borrow up to $ 81.0 million. The facility has a term of 24 months and the borrowing ability is based on the value of the Airbus A320 series aircraft placed in the collateral pool. In December 2019, the Company drew down $ 81.0 million under this facility. Principal payments were made during 2020 totaling $ 27.1 million, and the remaining balance as of December 31, 2020 is $ 53.9 million. Aircraft remain in the collateral pool for up to two years , and, as of December 31, 2020, there were six aircraft in the pool. The notes for the amounts borrowed under the facility bear interest at a floating rate based on LIBOR and are due in March 2021. 
 
 Other Secured Debt 
 
 In September 2020, the Company borrowed $ 84.0 million under a loan agreement secured by aircraft and spare engines. The note bears interest at a fixed rate, payable in monthly installments maturing in September 2025 and September 2026 for the spare engines and aircraft, respectively. 
 
 In April 2020, the Company borrowed $ 31.0 million under a loan agreement secured by two aircraft. The note bears interest at a fixed rate, payable in quarterly installments with a maturity date in April 2028. 
 
 General Unsecured Notes 
 
 In connection with the Term Loan discussed above, the Company completed a tender offer in February 2019, whereby it purchased $ 347.9 million of its previously outstanding unsecured notes due July 2019, and incurred related debt extinguishment costs of $ 3.7 million. The remaining $ 102.1 million of the unsecured notes were paid at their maturity in July 2019. 
 
 Construction Loan Agreement 
 
 In March 2019, Sunseeker Florida, Inc. (“SFI”), a wholly owned subsidiary of the Company, entered into a Construction Loan Agreement with certain lenders affiliated with TPG Sixth Street Partners, LLC (the “Lender”). Under the Construction Loan Agreement, SFI would have been able to borrow up to $ 175.0 million (the “Loan”) to fund the construction of Phase 1 of Sunseeker Resort - Charlotte Harbor. No amount was ever drawn under this agreement. 
 
 Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort, and it is uncertain when construction will resume. In light of these conditions, the Company reached a $ 19.8 million settlement agreement with the Lender to terminate the Loan which was fully paid in 2020. The expense is reflected within non-operating special charges on the statement of income. 
 
 Finance Leases 
 
 The Company has finance lease obligations related to six aircraft, which impacted the Company's recognized assets and liabilities as of December 31, 2020. See Note 8 for more information on finance lease obligations. 
 
 Note 8 — Leases 
 
 Total rental expense for operating leases for the years ended December 31, 2020, 2019 and 2018 was $ 24.6 million, $ 15.0 million and $ 12.7 million, respectively. 
 
 The Company had six aircraft under finance leases as of December 31, 2020 with remaining terms through 2029. 
 
 Lease Costs 
 
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 The components of lease costs recognized on the statements of income were as follows: 
 
 Year Ended December 31, 
 (in thousands) Classification on the Statements of Income 2020 2019 
 Finance lease costs: 
 Amortization of assets Depreciation and amortization $ 6,631 $ 6,517 
 Interest on lease liabilities Interest expense 5,335 5,264 
 Operating lease cost Aircraft lease rentals; Station operations; Maintenance and repairs; Other operating expense 12,616 3,541 
 
 Variable lease cost Station operations; Maintenance and repairs; Other operating expense 3,560 2,274 
 Total lease cost $ 28,142 $ 17,596 

 Lease position as of December 31, 2020 
 
 The table below presents the lease-related assets and liabilities recorded on the balance sheet. 
 
 As of December 31, 
 (in thousands) Classification on the Balance Sheet 2020 2019 
 Assets 
 Operating lease assets Operating lease right-of-use assets, net $ 115,911 $ 22,081 
 Finance lease assets Property and equipment, net 133,175 111,665 
 Total lease assets $ 249,086 $ 133,746 
 
 Liabilities 
 Current 
 Operating Current operating lease liabilities $ 14,313 $ 2,662 
 Finance Current maturities of long-term debt and finance lease obligations 9,767 7,666 
 Noncurrent 
 Operating Noncurrent operating lease liabilities 102,289 21,290 
 Finance Long-term debt and finance lease obligations 117,060 107,930 
 Total lease liabilities $ 243,429 $ 139,548 
 
 Weighted-average remaining lease term 
 Operating leases 8.3 years 9.1 years 
 Finance leases 7.6 years 9.9 years 
 Weighted-average discount rate 
 Operating leases 5.4 % 4.3 % 
 Finance leases 5.0 % 4.4 % 

 59 
 
 Sale-Leaseback Transactions 
 
 During the year ended December 31, 2020, the Company entered into sale-leaseback transactions involving eight total aircraft. The transactions qualified as sales, and generated $ 87.6 million of proceeds. As a result of the sales, the aircraft were removed from property and equipment in the Company's balance sheet, resulting in a $ 53.2 million loss on the sales. The loss is reflected within operating special charges on the statement of income since the Company would not likely have completed the transactions absent cash conservation efforts as a result of COVID-19. The leased aircraft were subsequently recorded within operating lease right-of-use assets, with the related lease liabilities recorded within current and noncurrent operating lease liabilities on the balance sheet. The proceeds from the sales of aircraft in these transactions are treated as cash inflows from investing activities on the statement of cash flows. 
 
 Other Information 
 
 The table below presents supplemental cash flow information related to leases during the year ended December 31. 
 
 Year Ended December 31, 
 (in thousands) 2020 2019 
 Cash paid for amounts included in the measurement of lease liabilities 
 Operating cash flows for operating leases $ 13,102 $ 2,927 
 Operating cash flows for finance leases $ 5,335 5,264 
 Financing cash flows for finance leases 15,908 7,336 

 Maturities of Lease Liabilities 
 
 The table below indicates the future minimum payments of lease liabilities as of December 31, 2020. 
 
 (in thousands) Operating Leases Finance Leases 
 2021 $ 20,055 $ 15,871 
 2022 20,313 14,366 
 2023 20,160 26,045 
 2024 19,853 10,500 
 2025 17,723 10,500 
 Thereafter 44,486 82,458 
 Total lease payments 142,590 159,740 
 Less imputed interest ( 25,988 ) ( 32,913 ) 
 Total lease obligations 116,602 126,827 
 Less current obligations ( 14,313 ) ( 9,767 ) 
 Long-term lease obligations $ 102,289 $ 117,060 

 Note 9 — Shareholders’ Equity 
 
 The Company is authorized by its Board of Directors to acquire the Company’s stock through open market purchases under its share repurchase program. As repurchase authority is exhausted, the Board of Directors has, to date, authorized additional expenditures for share repurchases. The Company suspended stock repurchases upon the onset of the pandemic and as part of accepting benefits from the Treasury under the PSPA and PSP2, the Company has agreed not to repurchase stock through March 31, 2022. 
 
 Share repurchases consisted of the following during the periods indicated: 
 
 Year Ended December 31, 
 2020 2019 2018 
 Shares repurchased (1) 
 197,570 103,943 — 
 Average price per share $ 155.14 $ 141.64 NA 
 Total (in thousands) $ 30,651 $ 14,723 $ — 

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 (1) Share amounts shown above include only open market repurchases and do not include shares withheld from employees for tax withholding obligations related to restricted stock vestings, which were 19,001 , 27,700 and 22,981 shares for 2020, 2019 and 2018, respectively. 
 
 Cash dividends declared by the Board and paid by the Company consisted of the following during the periods indicated: 
 
 Year Ended December 31, 
 2020 2019 2018 
 Total quarterly cash dividends declared, per share $ 0.70 $ 2.80 $ 2.80 
 Total cash dividends paid (in thousands) 11,361 45,552 45,247 

 The Company suspended payment of cash dividends upon the onset of the pandemic and as part of accepting benefits from the Treasury under the PSPA and PSP2, the Company has agreed not to pay cash dividends through March 31, 2022. 
 
 Note 10 — Fair Value Measurements 
 
 Investments 
 
 The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: 
 
 Level 1 - Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities 
 
 Level 2 - Defined as inputs other than Level 1 inputs that are either directly or indirectly observable 
 
 Level 3 - Defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions 
 
 The Company uses the market approach valuation technique to determine fair value for investment securities. The assets classified as Level 1 consist of money market funds for which original cost approximates fair value. The assets classified as Level 2 consist of commercial paper, municipal debt securities, federal agency debt securities, corporate debt securities, and US treasury bonds, which are valued using quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs. The Company has no investment securities classified as Level 3. 
 
 For those assets classified as Level 2 that are not in active markets, the Company obtains fair value from pricing sources using quoted market prices for identical or comparable instruments, and uses pricing models which include all significant observable inputs: maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers and other market related data. These inputs are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset. 
 
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 Financial instruments measured at fair value on a recurring basis: 
 
 As of December 31, 2020 As of December 31, 2019 
 (in thousands) Total Level 1 Level 2 Total Level 1 Level 2 
 Cash equivalents 
 Money market funds $ 5,340 $ 5,340 $ — $ 42,653 $ 42,653 $ — 
 Commercial paper 48,908 — 48,908 5,807 — 5,807 
 Municipal debt securities 34,338 — 34,338 1,202 — 1,202 
 Federal agency debt securities 51,400 — 51,400 — — — 
 Total cash equivalents 139,986 5,340 134,646 49,662 42,653 7,009 
 Short-term 
 Commercial paper 229,821 — 229,821 161,286 — 161,286 
 Corporate debt securities 166,768 — 166,768 145,975 — 145,975 
 Federal agency debt securities 48,598 — 48,598 13,515 — 13,515 
 Municipal debt securities 87,290 — 87,290 12,237 — 12,237 
 US Treasury Bonds — — — 2,915 — 2,915 
 Total short-term 532,477 — 532,477 335,928 — 335,928 
 Long-term 
 Corporate debt securities — — — 15,396 — 15,396 
 US Treasury Bonds — — — 146 — 146 
 
 Total long-term — — — 15,542 — 15,542 
 Total financial instruments $ 672,463 $ 5,340 $ 667,123 $ 401,132 $ 42,653 $ 358,479 

 There were no significant transfers between Level 1 and Level 2 assets for the years ended December 31, 2020 or 2019. 
 
 Long-term Debt 
 
 None of the Company's long-term debt is publicly traded. The Company has determined the estimated fair value of all of this debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs.The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt. 
 
 Carrying value and estimated fair value of long-term debt, including current maturities and without reduction for related costs: 
 
 As of December 31, 2020 As of December 31, 2019 
 (in thousands) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Fair Value Level 
 Non-publicly held debt $ 1,555,637 $ 1,191,008 $ 1,329,882 $ 1,140,232 3 
 
 Other 
 
 Due to the short term nature, carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value. 
 
 Note 11 — Income Taxes 
 
 The Company is subject to income taxation in the United States, foreign countries and various state jurisdictions in which it operates. In accordance with income tax accounting standards, the Company recognizes tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities. 
 In 2020, 2019 and 2018, the Company recorded net tax (benefit)/provision of $( 177.0 ) million, $ 69.1 million and $ 37.5 million, respectively. Cash taxes, net of refunds, were $( 95.2 ) million, $ 2.2 million and $ 41.6 million, respectively. 
 
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 Components of Income before Income Taxes from Continuing Operations 
 
 The components of income before taxes for domestic and foreign operations consisted of the following: 
 
 Year ended December 31, 
 (in thousands) 2020 2019 2018 
 Domestic $ ( 361,242 ) $ 299,330 $ 195,843 
 Foreign 175 1,917 3,475 
 Total $ ( 361,067 ) $ 301,247 $ 199,318 

 Income Tax Provision/(Benefit) 
 
 The provision for income taxes is composed of the following: 
 
 Year ended December 31, 
 (in thousands) 2020 2019 2018 
 Current: 
 Federal $ ( 195,572 ) $ ( 34 ) $ ( 3,707 ) 
 State ( 211 ) 505 ( 650 ) 
 Foreign 132 530 1,086 
 Total current ( 195,651 ) 1,001 ( 3,271 ) 
 Deferred: 
 Federal 24,126 63,430 41,593 
 State ( 5,449 ) 4,699 3,744 
 Foreign — — ( 4,550 ) 
 Total deferred 18,677 68,129 40,787 
 Total income tax provision $ ( 176,974 ) $ 69,130 $ 37,516 

 Reconciliation of Effective Tax Rate 
 
 The effective tax rate on income before income taxes differed from the federal statutory income tax rate as follows: 
 
 Year ended December 31, 
 (in thousands) 2020 2019 2018 
 Income tax expense at federal statutory rate $ ( 70,459 ) $ 63,262 $ 41,857 
 State income taxes, net of federal income tax benefit ( 5,495 ) 5,070 3,560 
 
 CARES Act ( 97,988 ) — — 
 Foreign income tax expense 132 530 ( 3,464 ) 
 Other ( 3,164 ) 268 ( 4,437 ) 
 Total income tax expense $ ( 176,974 ) $ 69,130 $ 37,516 

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 Deferred Taxes 
 
 The major components of the Company’s net deferred tax assets and liabilities are as follows: 
 
 As of December 31, 
 (in thousands) 2020 2019 
 Deferred tax assets: 
 Accrued vacation $ 1,024 $ 907 
 Accrued bonus — 5,523 
 State taxes — 88 
 Accrued property taxes 1,111 1,742 
 Stock-based compensation expense 1,025 1,415 
 Net operating loss 15,979 58,066 
 
 Tax credit 10,995 — 
 Less: valuation allowance 1,214 1,193 
 Total deferred tax assets 28,920 66,548 
 Deferred tax liabilities: 
 Prepaid expenses 2,517 6,211 
 Depreciation 308,266 278,554 
 
 Other 20,242 14,522 
 Total deferred tax liabilities 331,025 299,287 
 Net deferred tax liabilities $ 302,105 $ 232,739 

 Net Operating Loss and Tax Credit Carryforwards 
 
 Pursuant to the CARES Act, the Company carried back net operating losses generated in 2018, 2019 and 2020 in the amounts of $ 185.4 million, $ 116.7 million and $ 422.1 million respectively to tax years ended December 31, 2013 through December 31, 2016. The net operating loss carryback resulted in prior years’ foreign tax credits and general business credits being released, and these credits generated in 2014 - 2020 in the amount of $ 5.7 million and $ 5.2 million will be carried forward. The foreign tax credit and general business credits will expire 2024 – 2040, but the Company expects to utilize these credits prior to the expiration. 
 
 In addition, as of December 31, 2020, the Company recognized federal and state net operating loss carryforwards for income tax purposes in the amount of $ 8.5 million and $ 7.4 million, respectively. Federal net operating loss carryforwards will not expire per the “Tax Cuts and Jobs Act” (the “Tax Act”). The majority of the state net operating loss carryforward amounts will expire between 2022 and 2040 while some state net operating losses have an indefinite carryforward period. 
 
 The Company previously recognized a federal capital loss carryforward of $ 0.7 million, as remeasured pursuant to the Tax Act, as of December 31, 2016 which expired in 2021. 
 
 Tax Contingencies 
 
 The reconciliation of the Company's tax contingencies is as follows: 
 
 As of December 31, 
 (in thousands) 2020 2019 2018 
 Beginning Balance $ 3,970 $ 4,175 $ 778 
 Increases for tax position of prior years — — 3,364 
 Increases for tax position of current year — 146 293 
 Decreases for tax positions of prior years ( 3,602 ) ( 135 ) ( 10 ) 
 Settlements ( 26 ) ( 216 ) ( 110 ) 
 Decreases for lapses in statute of limitations — — ( 140 ) 
 Ending Balance $ 342 $ 3,970 $ 4,175 

 The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company’s income tax returns are subject to examination by the Internal Revenue Service as well as 
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 other taxing jurisdictions. The timing of the resolution of income tax examinations is uncertain, and the ultimate resolution with these taxing authorities may differ from the amounts accrued. Therefore, the Company cannot currently provide an estimate of the range of possible outcomes in the next twelve months. 
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 Note 12— Related Party Transactions 
 
 During the years ended December 31, 2020 and 2019, 2018 there were no related party transactions that required disclosure. 
 
 Note 13 — Employee Benefit Plans 
 
 401(k) Plan 
 
 The Company has a defined contribution plan covering all eligible employees. Under the plan, employees may contribute up to 90 percent of their eligible annual compensation with the Company making matching contributions on employee deferrals of up to 5 percent of eligible employee wages. The matching contributions on pilot deferrals is 10 percent of eligible wages resulting from the pilot collective bargaining agreement. 
 
 The Company recognized expense under this plan of $ 18.6 million, $ 19.0 million, and $ 19.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. 
 
 Share-based employee compensation 
 
 The Company reserved 2,000,000 shares of common stock for the Company to grant stock options, restricted stock, cash-settled stock appreciation rights ("SARs") and other stock-based awards to certain officers, directors and employees of the Company under the 2016 Long-Term Incentive Plan (the "2016 Plan"). The 2016 Plan is administered by the Company’s compensation committee of the Board of Directors. 
 
 Employee Stock Purchase Plan 
 
 The Company reserved 1,000,000 shares of common stock for employee purchases under the 2014 Employee Stock Purchase Plan ("ESPP"). Shares are purchased semi-annually, at a discount, based on the market value at period-end. Employees may contribute up to 25 percent of their base pay per offering period, not to exceed $ 25,000 each calendar year, for the purchase of common stock. The ESPP is a compensatory plan under applicable accounting guidance and results in the recognition of compensation expense. 
 
 The following table provides information about the Company’s ESPP activity during 2020, 2019, and 2018: 
 
 Total number of shares purchased in year Average price paid per share Weighted-average fair value of discount under the ESPP (1) 
 
 As of December 31, 2018 33,300 $ 134.31 $ 16.79 
 As of December 31, 2019 38,464 $ 133.54 $ 23.51 
 As of December 31, 2020 56,866 $ 90.63 $ 14.10 

 (1) The weighted-average fair value of the discount under the ESPP granted is equal to a percentage discount from the market value of the common stock at the end of each semi-annual purchase period. The Company increased the discount from 10 percent to 15 percent for the second offering period of 2018. 15 percent is the maximum allowable discount under the ESPP. 
 
 Compensation expense 
 
 For the years ended December 31, 2020, 2019 and 2018, the Company recorded compensation expense of $ 20.1 million, $ 19.2 million and $ 15.6 million, respectively, related to restricted stock, stock options, cash-settled SARs and the ESPP. Forfeiture rates are estimated at the time of grant based on historical actuals for similar grants, and are matched to actuals over the vesting period. 
 
 The unrecognized compensation cost was $ 27.5 million as of December 31, 2020 for unvested restricted stock expected to be recognized over a weighted-average period of 1.34 years. As of December 31, 2020, there was no unrecognized compensation cost for either cash-settled SARs or stock options. 
 
 Stock options 
 
 The fair value of stock options granted is estimated as of the grant date using the Black-Scholes option pricing model. The contractual terms of the Company’s stock option awards granted range from five to ten years . A summary of option activity as of December 31, 2020, 2019 and 2018, and changes during the years then ended, is presented below: 
 
 Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (thousands) 
 Outstanding at December 31, 2017 27,575 $ 97.88 0.72 $ 1,568 
 Exercised ( 17,838 ) 92.04 
 Outstanding at December 31, 2018 9,737 $ 108.59 0.18 $ — 
 Exercised ( 9,737 ) 108.59 
 Outstanding at December 31, 2019 — $ — 0.00 $ — 
 Exercised — — 
 Outstanding at December 31, 2020 — $ — 0.00 $ — 

 During the years ended December 31, 2020, 2019 and 2018, the total intrinsic value of options exercised was $ 0.0 million, $ 0.2 million and $ 1.4 million, respectively. Cash received from option exercises for the years ended December 31, 2020, 2019 and 2018 was $ 0.0 million, $ 1.1 million and $ 1.6 million, respectively. 
 
 Restricted stock awards 
 
 The closing price of the Company's stock on the date of grant is used as the fair value for the issuance of restricted stock. A summary of the status of non-vested restricted stock grants during the years ended December 31, 2020, 2019 and 2018 is presented below: 
 
 Shares Weighted Average Grant Date Fair Value Per Share 
 Non-vested at December 31, 2017 192,890 $ 153.32 
 Granted 102,842 155.02 
 Vested ( 85,410 ) 153.85 
 Forfeited ( 14,128 ) 154.65 
 Non-vested at December 31, 2018 196,194 $ 153.88 
 Granted 218,477 143.72 
 Vested ( 104,816 ) 152.07 
 Forfeited ( 15,047 ) 148.97 
 Non-vested at December 31, 2019 294,808 $ 147.25 
 Granted 267,169 137.80 
 Vested ( 291,303 ) 147.58 
 Forfeited ( 5,147 ) 145.82 
 Non-vested at December 31, 2020 265,527 $ 142.25 

 The total fair value of restricted stock that vested during the years ended December 31, 2020, 2019 and 2018 was $ 43.0 million, $ 15.9 million and $ 13.4 million, respectively. 
 
 Cash-settled SARs 
 
 Cash-settled SARs are liability classified awards for which the fair value and compensation expense recognized are updated monthly using the Black-Scholes option pricing model. 
 
 The following range of assumptions in the Black-Scholes pricing model was used to determine fair value as of December 31 of the years indicated below (all cash-settled SARs were fully vested as of December 31, 2019): 
 
 2020 2019 2018 
 Weighted-average volatility — % — % 35.0 % 
 Expected term (in years) N/A N/A 0.8 
 Risk-free interest rate — % — % 2.6 % 
 Dividend yield — % — % 1.68 % 

 These rights were fully vested as of December 31, 2019. Expected volatilities used for award valuation are based on the historical volatility of the Company's common stock price. 
 
 Expected term represents the weighted average time between the award’s grant date and its expected exercise date. The Company estimated the expected term assumption in 2020, 2019 and 2018 using historical award exercise activity and employee termination activity. 
 
 The risk-free interest rate for periods equal to the expected term of an award is based on a blended historical rate using Federal Reserve rates for U.S. Treasury securities. 
 
 The dividend yield reflects the effect that paying a dividend has on the fair value of the Company's stock. 
 
 The contractual term of the Company’s cash-settled SARs awards granted is five years . 
 
 A summary of cash-settled SARs awards activity during the years ended December 31, 2020, 2019 and 2018 is presented below: 
 
 # of SARs Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (thousands) 
 Balance at December 31, 2017 80,464 $ 155.13 
 
 Forfeited ( 12,890 ) 181.47 
 Exercised ( 13,642 ) 98.37 
 Balance at December 31, 2018 53,932 $ 163.19 
 
 Exercised ( 9,886 ) 135.53 
 Balance at December 31, 2019 44,046 $ 169.40 
 
 Forfeited ( 29,046 ) 181.47 
 Exercised ( 15,000 ) 186.85 
 Balance at December 31, 2020 — $ — 0.00 $ — 
 Vested at December 31, 2020 — $ — 0.00 $ — 
 Exercisable at December 31, 2020 — $ — 0.00 $ — 

 Note 14 — Commitments and Contingencies 
 
 The Company leases assets including aircraft, office facilities, office equipment, certain airport and terminal facilities, and other space. These commitments have remaining non-cancelable lease terms, which range from 2021 to 2048. Refer to Note 8 for more information on the Company's lease agreements. 
 
 The Company's contractual purchase commitments consist primarily of aircraft and engine acquisitions. The total future commitments are as follows: 
 
 (in thousands) As of December 31, 2020 
 2021 65,900 
 2022 21,000 
 
 Total purchase commitments $ 86,900 

 Aircraft Commitments 
 66 
 
 Through December 31, 2020, the Company has entered into purchase agreements for five Airbus A320 series aircraft which are expected to deliver in 2021 and 2022. 
 
 Contingencies 
 
 The Company is party to collective bargaining agreements with the employee groups listed below. As of December 31, 2020 the percentage of full-time equivalent employees for these pay groups were as follows: 
 
 As of December 31, 2020 
 Flight Attendants 36.1 % 
 Pilots 23.2 
 Flight Dispatchers 1.1 
 Total 60.3 % 

 See Item I - Business, for further discussion on the status of each group which has elected union representation. 
 
 The Company is subject to certain other legal and administrative actions it considers routine to its business activities. The Company believes the ultimate outcome of any pending legal or administrative matters will not have a material adverse impact on its financial position, liquidity or results of operations. 
 
 Note 15 — Valuation and Qualifying Accounts 
 
 (in thousands) Balance at Beginning of Year Changes Charged to Statement of Income Accounts Write Offs (net of recoveries) Balance at End of Year 
 Allowance for expendable parts and supplies 
 For the Year Ended December 31, 2020 $ 2,748 $ 1,575 $ — $ 4,323 
 For the Year Ended December 31, 2019 (1) 
 14,410 2,257 ( 13,919 ) 2,748 
 For the Year Ended December 31, 2018 13,756 2,624 ( 1,970 ) 14,410 

 (1) Increase in write offs mostly related to disposal of MD-80 fleet parts in 2019. 
 
 Note 16 — Segments 
 
 Operating segments are components of a company for which separate financial and operating information is regularly evaluated and reported to the Chief Operating Decision Maker ("CODM"), and is used to allocate resources and analyze performance. The Company's CODM is the executive leadership team, which reviews information about the Company's three operating segments: Airline, Sunseeker Resort, and other non-airline. 
 
 Airline Segment 
 
 The Airline segment operates as a single business unit and includes all scheduled service air transportation, ancillary air-related products and services, third party products and services, fixed fee contract air transportation and other airline-related revenue. The CODM evaluation includes, but is not limited to, route and flight profitability data, ancillary and third party product and service offering statistics, and fixed fee contract information when making resource allocation decisions with the goal of optimizing consolidated financial results. 
 
 Sunseeker Resort Segment 
 
 The Sunseeker Resort segment represents activity related to the development and construction of Sunseeker Resort in Southwest Florida, as well as the operation of Kingsway Golf Course. Due to the various impacts of COVID-19, the Company suspended construction of Sunseeker Resort and temporarily closed operation of Kingsway Golf Course. At this time, it is uncertain if and when construction will resume and the golf course will re-open. 
 
 Other non-Airline Segment 
 
 The other non-airline segment includes the Teesnap golf course management solution and Allegiant Nonstop family entertainment centers. Allegiant Nonstop family entertainment centers are comprised of games, attractions, and food facilities. 
 
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 Due to the impacts of COVID-19, the Company permanently closed the Allegiant Nonstop locations in Warren, MI, Clearfield, Utah, and the Allegiant Nonstop location in West Jordan, Utah, which was being developed. 
 
 In July 2019, management began evaluating strategic alternatives for Teesnap, and its business-to-business software as a service offering. As the Company's current strategy has a business to customer focus, rather than business to business, management determined that the best course of action for both entities would be to sell Teesnap and management is actively pursuing this avenue. 
 
 Selected information for the Company's segments and the reconciliation to the consolidated financial statement amounts are as follows: 
 
 (in thousands) Airline Sunseeker Resort Other non - airline Consolidated 
 Year Ended December 31, 2020 
 Operating revenue: 
 Passenger $ 902,187 $ — $ — $ 902,187 
 Third party products 46,482 — — 46,482 
 Fixed fee contract 26,865 — — 26,865 
 Other 1,462 650 12,427 14,539 
 Operating income (loss) ( 104,745 ) ( 145,721 ) ( 30,519 ) ( 280,985 ) 
 Interest expense, net 50,355 562 — 50,917 
 Depreciation and amortization 174,882 615 770 176,267 
 Capital expenditures 262,748 45,160 442 308,350 
 Year Ended December 31, 2019 
 Operating revenue: 
 Passenger $ 1,682,955 $ — $ — $ 1,682,955 
 Third party products 70,012 — — 70,012 
 Fixed fee contract 65,057 — — 65,057 
 Other 4,474 2,048 16,419 22,941 
 Operating income (loss) 388,740 ( 6,588 ) ( 18,202 ) 363,950 
 Interest expense, net 58,112 1,694 — 59,806 
 Depreciation and amortization 151,060 1,250 3,542 155,852 
 Capital expenditures 438,765 66,659 18,304 523,728 
 Year Ended December 31, 2018 
 Operating revenue: 
 Passenger $ 1,533,701 $ — $ — $ 1,533,701 
 Third party products 58,060 — — 58,060 
 Fixed fee contract 50,286 — — 50,286 
 Other 17,125 601 7,674 25,400 
 Operating income (loss) 255,888 ( 3,299 ) ( 9,130 ) 243,459 
 Interest expense, net 44,534 2 — 44,536 
 Depreciation and amortization 127,460 129 1,762 129,351 
 Capital expenditures 290,998 32,635 16,657 340,290 

 Total assets were as follows as of the dates indicated: 
 
 (in thousands) As of December 31, 2020 As of December 31, 2019 
 Airline $ 3,214,523 $ 2,830,236 
 Sunseeker Resort 36,612 133,362 
 Other non-airline 7,790 47,205 
 Consolidated $ 3,258,925 $ 3,010,803 

 Note 17 — Impairment 
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 Accounting Standards Codification (ASC) 360 - Property, Plant, and Equipment (ASC 360) requires long-lived assets to be assessed for impairment when events and circumstances indicate that the assets may be impaired. 
 
 As described in Note 2, the Company's operations and liquidity were significantly impacted by decreased passenger demand and U.S. government travel restrictions and quarantine requirements due to COVID-19. As a result of these events and circumstances, the Company performed impairment tests on its long-lived assets in connection with the preparation of its financial statements. 
 
 In accordance with ASC 360, an impairment of a long-lived asset or group of long-lived assets exists only when the sum of the estimated undiscounted future cash flows expected to be generated directly by the assets is less than the carrying value of the assets. Assets were grouped by operating segment when estimating future cash flows, and further grouped within each segment as applicable. Estimates of future cash flows were generally based on historical results, and management's best estimate of future market and operating conditions. 
 
 Airline Segment 
 
 Long-lived assets for the Airline segment consist primarily of owned and leased flight and ground equipment. To test the recoverability of the Company's airline operating fleet, undiscounted future cash flows for each aircraft under the Company's current expected operating fleet plan were assessed and it was determined that there was no impairment as of December 31, 2020. As the Company obtains greater clarity about the duration and extent of reduced demand due to COVID-19, the Company will continue to evaluate its current fleet compared to network requirements and may decide to permanently retire additional aircraft. 
 
 The Airline has an equity investment in a technology company. A $ 5.0 million charge was recorded to impair the investment in the second quarter 2020. As a result of the impairment, net book value of the investment is zero. This decision reflects management's best estimate of the fair value of this investment based on recent market trends. 
 
 Sunseeker Resort Segment 
 
 Long-lived assets for Sunseeker Resort and related Kingsway Golf Course consist primarily of the land, construction in process, building, and other various equipment. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows was less than the long-lived assets' carrying value. Impairment charges of $ 128.9 million and $ 1.1 million were recorded for Sunseeker Resort and Kingsway Golf Course respectively, in the first quarter 2020 to reflect the difference between the carrying values of these assets and their fair values. Fair value reflects management's best estimate, including valuation inputs from third parties and recent market transactions. Based on an evaluation of impairment indicators in the second, third and fourth quarters 2020, no additional impairment was recognized. 
 
 Other non-airline Segment 
 
 Long-lived assets for Allegiant Nonstop family entertainment centers consisted primarily of leasehold improvements, arcade games, various equipment, and ROU assets. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows were less than the long-lived assets' carrying value. An $ 18.3 million impairment charge was recorded in the first quarter 2020 to reflect the difference between the carrying values of these assets and their fair values. Fair value reflects management's best estimate, including valuation inputs from third parties and recent market trends. Based on an evaluation of impairment indicators in the second, third and fourth quarters 2020, no additional impairment was recognized. 
 
 Long-lived assets for Teesnap consist primarily of capitalized software and computer equipment. As a result of the impairment tests performed, the Company determined the sum of the undiscounted cash flows was less than the long-lived assets' carrying value. Management does not expect to recover any of the book value of the assets through operations, and an $ 8.3 million impairment charge was recorded in the first quarter 2020 to write down all long-lived assets to a net book value of zero . This reflects management's best estimate of the fair value of these assets as of the date of the impairment based on recent market trends. 
 
 Note 18 — Subsequent Events 
 
 On January 15, 2021, the Company through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Extension Agreement (the “PSP2”) with the Treasury for the first installment of an award Allegiant Air is to receive under the Payroll Support Program Extension. The total amount expected to be allocated to Allegiant Air under the Payroll Support Extension Program is approximately $ 91.8 million. The Company received an initial installment of $ 45.9 million in January 2021, which must be used exclusively for wages, salaries and benefits. The remainder of funds are expected to be received during first quarter 2021. 
 
 If additional funds are allocated by the Treasury under the PSP2 such that the amount received by the Company exceeds $ 100.0 million, then Allegiant Air will issue a note for 30 percent of the funds received under the PSP2 in excess of $ 100.0 million 
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 and the Company will issue to Treasury warrants to purchase a number of shares of common stock of the Company (based on 10 percent of the amount of Note issued) at a price of $ 179.23 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on December 24, 2020). 
 
 In connection with the PSP2, the Company will be required to comply with the relevant provisions of the CARES Act for a longer period of time, including prohibiting the repurchase of common stock and the payment of cash dividends until March 31, 2022, as well as restricting the payment of certain executive compensation for periods through October 1, 2022. 
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 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
 
 None.
Allegiant Travel CO 10-K

Item 8. Financial Statements and Supplementary Data
