What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-03-01 · 72 added, 97 removed, 233 unchanged (42% of the section changed)

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Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic has materially and adversely affected, and will likely continue to materially and adversely affect, our results of operations, financial position and liquidity.

The COVID-19 pandemic has materially and adversely affected, and may continue to materially and adversely affect, our results of operations, financial position and liquidity.

In December 2019, an outbreak of COVID-19 was identified in Wuhan, China.

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As a result, we incurred a net loss of $184 million in 2020, our first net loss since 2002.

We applied various measures to conserve our liquidity through cost reductions and other means.

These efforts included reducing airline capital expenditures, suspending all non-airline capital expenditures;

reducing our published flight schedule;

placing a number of aircraft in storage;

accelerated the retirement date of certain aircraft;

implementing voluntary time-off programs for employees;

suspending all hiring and non-contract salary increases;

temporarily reducing named executive officer salaries and

Board of Director cash retainer fees;

and extending vendor payment terms.

We will continue some of these measures into the future as we deem necessary until we return to profitability.

The extent of the impact of the COVID-19 pandemic on our business and our financial and operational performance will depend on future developments, including the duration, spread, severity and recurrences of the COVID-19 or similar viruses;

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the extent of the impact of the COVID-19 pandemic on overall demand for air travel;

and our access to capital, all of which are highly uncertain and cannot be predicted.

and our access to capital during the pandemic, all of which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has caused public health officials to recommend precautions to mitigate the spread of the virus.

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issuing directives forcing businesses to temporarily close, restricting air travel and issuing shelter-in-place and similar orders limiting the movement of individuals.

Such measures have depressed demand for air travel, disrupted our operations, and materially adversely affected our business.

The resulting cancellations of flights resulted in an unprecedented amount of cash refunds and the issuance of travel vouchers to customers.

Further, due to the fears and restrictions involved with travel in the near term, sales of tickets for future travel have been adversely affected.

The cancellations and cash refunds have negatively affected our revenues and liquidity, and such negative effects may continue based on circumstances surrounding the pandemic.

We will continue to be materially adversely affected if government authorities extend existing orders or impose new orders or other restrictions intended to mitigate the spread of COVID-19, or if fear of travel continues to depress future ticket sales.

To the extent in effect in the future, such measures may depress demand for air travel, disrupt our operations, and materially adversely affect our business.

Instances of actual or perceived risk of infection among our employees, or our service providers’ employees, could further negatively impact our operations.

We could also be materially adversely affected if we are unable to effectively maintain a suitably skilled and sized workforce, address employment-related matters, or maintain satisfactory relations with our employees or our employees’ labor representatives.

Particularly during December 2021 and January 2022, widespread positive COVID tests resulted in flight crew absences which have caused us to cancel numerous flights.

These cancellations resulted in unusually high irregular operations costs as we compensate passengers on company-cancelled flights for inconvenience suffered in addition to the ticket price.

Moreover, the ability to attract and retain passengers depends, in part, upon the perception and reputation of our company and the public’s concerns regarding the health and safety of air travel generally.

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We expect we will continue to incur COVID-19 related costs as we sanitize airplanes and implement additional hygiene-related protocol to airplanes, and take other action to limit infection among our employees and passengers.

The COVID-19 pandemic has also significantly increased economic and demand uncertainty.

Historically, unfavorable U.S.

economic conditions have driven changes in travel patterns, including reduced spending for both leisure and business travel.

Unfavorable economic conditions, when low fares are often used to stimulate traffic, have also historically hampered the ability of airlines to raise fares to counteract any increases in fuel, labor, and other costs.

Any significant increases in unemployment in the United States due to the adoption of social distancing and other policies to slow the spread of the virus would likely continue to have a negative impact on passenger bookings, and these effects could exist for an extensive period of time.

The COVID-19 pandemic continues to rapidly evolve.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

We rely on discretionary spending by individuals and households as most of our customers fly with us for leisure as opposed to business purposes.

Many attractions in the leisure destinations we serve, such as Walt Disney World in Orlando, Florida and Las Vegas hotels, temporarily closed, and those which have reopened have done so with restrictions in place, which have and will continue to impact travel to these destinations.

The spread of COVID-19 and related responsive actions have adversely impacted our financial condition, liquidity and cash flow.

The spread of COVID-19 and related government and private sector responsive actions, including actions we have taken to stem the spread of the virus, have and will continue to adversely impact our financial condition, liquidity and cash flow in the near term.

While we are focused on mitigating the impact to our balance sheet by, among other things, suspending dividends and share repurchases and suspending all non-essential capital expenditures and discretionary spending, a prolonged disruption due to the COVID-19 pandemic could have a longer-term material adverse effect on our financial condition, liquidity and cash flow.

We may need to seek significant amounts of additional liquidity if the pandemic results in continuing losses.

In that event, we would consider the issuance of additional debt securities, equity securities and equity-linked securities, as well as through credit facilities.

However, the terms of our existing debt agreements, including our Term Loan and Senior Secured Notes (as defined in Management's Discussion and Analysis), may not permit us to do so.

These credit agreements contain covenants limiting our ability to, among other things, make certain types of restricted payments, including paying dividends, incur debt or liens, merge or consolidate with others, dispose of assets, enter into certain transactions with affiliates, engage in certain business activities or make certain investments.

In addition, the Term Loan and Senior Secured Notes contain financial covenants, including requiring us, at the end of each calendar quarter, to maintain a maximum total leverage ratio of 5.00:1.00 and to maintain a minimum aggregate amount of liquidity of $300.0 million.

We have pledged our assets to secure these loans with the exceptions of aircraft

and aircraft engines, the Sunseeker Resort and certain other exceptions.

This will limit our ability to obtain debt secured by these pledged assets while these loans are outstanding.

The loan agreements contain various events of default (including failure to comply with the covenants under the loan agreements), and upon an event of default the lenders may, subject to various cure rights, require the immediate payment of all amounts outstanding under these loans.

As a result of these restrictive covenants, we may be limited in how we conduct business, and we may be unable to raise additional debt or equity financing.

Moreover, on March 17, 2020, S&P Global Ratings downgraded our corporate issue rating and Moody’s Investors Service placed our ratings on downgrade review, in both cases due to reduced demand for air travel.

Our ability to raise cost-effective capital is in part dependent on our credit ratings, and we cannot assure you that our credit ratings will be stable or improve.

Such downgrade actions and potential future downgrade actions may negatively affect our ability to seek additional sources of liquidity on favorable terms, if at all.

Although our working capital has been sufficient to meet our obligations to date, our future liquidity could be severely impacted by the prolonged continuance of the COVID-19 pandemic and the aforementioned negative effects on our ability to raise cost-effective capital, which could have a material adverse effect on our business, financial condition and results of operations.

Many attractions in the leisure destinations we serve, such as Walt Disney World in Orlando, Florida and Las Vegas hotels, temporarily closed during the pandemic, and many of these have reopened with restrictions in place, which have and will continue to impact travel to these destinations.

We have entered into agreements with the U.S.

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On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was signed into law.

The CARES Act provides liquidity in the form of grants and loans to air carriers, such as to us, that incurred, or are expected to incur, covered losses such that the continued operations of the business are jeopardized, as determined by the Treasury.

Additional benefits were made available to us under a section of the Consolidated Appropriations Act, 2021 (the “PSP Extension Act”) enacted in December 2020.

In April 2020 and in January 2021, we reached agreements with the Treasury with respect to funding support pursuant to the Payroll Support Program and the PSP Extension Act.

The CARES Act provides liquidity in the form of grants and loans to air carriers, such as to us.

Additional benefits were made available to us under a section of the Consolidated Appropriations Act, 2021 (the “PSP Extension Act”) enacted in December 2020 and the American Rescue Plan Act enacted in March 2021 ("PSP3").

In April 2020, January 2021 and April 2021, we reached agreements with the Treasury with respect to funding support pursuant to the Payroll Support Programs under the CARES Act, the PSP Extension Act and PSP3.

Pursuant to these agreements, we have agreed to certain restrictions on our business and operations, including the following:

We are prohibited from repurchasing our common stock and from paying cash dividends on our common stock until March 31, 2022;

We must place certain restrictions on certain higher-paid employee and executive pay, including limiting pay increases and severance pay or other benefits upon terminations, until October 1, 2022;

We are prohibited from involuntary terminations or furloughs of our employees (except for death, disability, cause, or certain disciplinary reasons) until March 31, 2021, and we are required to recall and compensate certain employees terminated after October 1, 2020;

We may not reduce the salary, wages, or benefits of our employees (other than our executive officers, or as otherwise permitted under the terms of the Payroll Support Program and PSP Extension Act) until March 31, 2021;

We are prohibited from repurchasing our common stock and from paying cash dividends on our common stock until October 1, 2022;

We must place certain restrictions on certain higher-paid employee and executive pay, including limiting pay increases and severance pay or other benefits upon terminations, until April 1, 2023;

Until March 1, 2022, we must comply with any requirement issued by the DOT that we maintain certain scheduled air transportation service as DOT deems necessary to ensure services to any point served by us before March 1, 2020.

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Our automated systems cannot be completely protected against events that are beyond our control, such as natural disasters, telecommunications failures, malware, ransom ware, security breaches or cyber-security attacks.

Although we have implemented security measures, have information systems disaster recovery plans in place and carry cyber-security insurance, we cannot assure investors that these measures are adequate to prevent disruptions or that the insurance would cover all losses.

Although we have implemented security measures and have information systems disaster recovery plans in place, we cannot assure investors that these measures are adequate to prevent disruptions or that the insurance would cover all losses.

Substantial or repeated website, reservations system, or telecommunication system failures could decrease the attractiveness of our services.

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Increases in fuel prices or unavailability of fuel would harm our business and profitability.

Fuel costs constituted approximately 17.5 percent of our total operating expenses in 2020.

Fuel costs constituted approximately 30.5 percent of our total operating expenses in 2021 and the average cost per gallon increased by 45.3 percent in 2021 over 2020 and has continued to increase in first quarter 2022.

Significant increases in fuel costs have negatively affected our operating results in the past, and future fuel cost volatility could materially affect our financial condition and results of operations.

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Increased labor costs could result from industry conditions and could be impacted by labor-related disruptions.

Labor costs excluding the impact of the CARES Act grant constituted approximately 30 percent of our total operating costs in 2020, our largest expense line item.

Labor costs excluding the impact of the CARES Act grants constituted approximately 33.5 percent of our total operating costs in 2021, our largest expense line item.

Labor costs are generally rising and it has become more difficult to find suitable candidates in the current economic environment.

Further, we have four employee groups (pilots, flight attendants, flight dispatchers and maintenance technicians) which have elected union representation.

These groups represent approximately 71.0 percent of our employees.

In 2016, we reached a collective bargaining agreement with the International Brotherhood of Teamsters, representing our pilots, which became effective as of August 1, 2016.

The pilot agreement becomes amendable in August 2021.

An agreement with the Transport Workers Union for the flight attendant group was approved in December 2017, and an agreement with the International Brotherhood of Teamsters for the flight dispatchers was approved in May 2019.

These agreements will also increase costs over their respective five-year contract terms.

We are also still in the negotiation process with our maintenance technicians, for which negotiations commenced in January 2019.

Union contracts with these, or other, work groups could put additional pressure on our labor costs.

In 2016, we reached a collective bargaining agreement with the International Brotherhood of Teamsters, representing our pilots.

The pilot agreement is now amendable and the parties are in the process of negotiating a new labor agreement.

An agreement with the Transport Workers Union for the flight attendant group was approved in 2017 and becomes amendable during 2022.

We also have agreements with the International Brotherhood of Teamsters for the flight dispatchers which was approved in May 2019 and for maintenance technicians which was approved in October 2021.

These agreements will impact our costs over their respective five-year contract terms.

Future union contracts with these, or other, work groups could put additional pressure on our labor costs.

If we are unable to reach agreement on the terms of collective bargaining agreements in the future, or we experience wide-spread employee dissatisfaction, we could be subject to work slowdowns or stoppages.

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We are developing a hotel resort in Southwest Florida.

Construction began in the first quarter of 2019 but construction was suspended in March 2020 so that we could conserve liquidity during the pandemic.

We do not currently intend to re-commence construction until we secure satisfactory financing arrangements.

The successful development of the project will be subject to various risks inherent in construction projects (such as securing sufficient financing on a timely basis, cost overruns and construction delays) as well as risks of gaining sufficient interest from vacationers to stay in our hotel and suites, the desirability of the project’s location, competition and the ability to profitably operate the hotel and related offerings once open.

After suspension of construction during the pandemic, construction recommenced in August 2021.

The successful development of the project will be subject to various risks inherent in construction projects (such as supply chain issues, cost overruns and construction delays) as well as risks of gaining sufficient interest from vacationers to stay in our hotel and suites, the desirability of the project’s location, competition and the ability to profitably operate the hotel and related offerings once open.

The success of our alliance with Viva Aerobus will depend on our ability to obtain necessary government approvals and other factors.

We will be able to implement the joint alliance with Viva Aerobus as planned only if the DOT grants us antitrust immunity and we receive similar approval from Mexican authorities.

Although we believe we should qualify for these approvals, there can be no assurance we will be able to obtain them on a timely basis, or at all.

Many of the U.S.

airports from which we hope to offer this service do not currently qualify to offer international service.

The initiation of this service from these airports will depend on the airport satisfying the requirements for international service, for which we can provide no assurance.

Prior to offering international service on our website, we will need to implement the necessary systems to accommodate international travel and to meet the various requirements imposed by the U.S.

There is no assurance that these requirements will be met in time for the expected launch of these services.

For Mexican routes to be operated by Viva Aerobus, we will be relying on them to provide our customers with the quality flight experience our customers expect when traveling on our airline.

Otherwise, the success of the joint alliance and our reputation may suffer.

Increases in taxes could impact demand for our services.

In 2022, Congress may consider legislation that could increase the amount of Federal Excise Tax (“FET”) and/or one or more of the other government fees imposed on air travel.

Under the CARES Act, applicability of FET was suspended for the remainder of 2020;

it was reinstated as of January 1, 2021.

By increasing the overall price charged to passengers, any additional taxes or fees could lessen the demand for air travel or force carriers to lower fares to maintain demand.

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economic conditions have historically driven changes in travel patterns and have resulted in reduced discretionary spending for leisure travel.

Unfavorable economic conditions could impact demand for airline travel in our small and medium-sized cities to our leisure destinations.

Unfavorable economic conditions could impact demand for airline travel in our under-served cities to our leisure destinations.

During difficult economic times, we may be unable to raise prices in response to fuel cost increases, labor, or other operating costs, which could adversely affect our results of operations and financial condition.

Our indebtedness, debt service obligations and other commitments could adversely affect our business, financial condition and results of operations as well as limit our ability to react to changes in the economy or our industry and prevent us from servicing our debt and operating our business.

Our debt and finance lease obligations as of December 31, 2020 totaled $1.66 billion.

This indebtedness and other commitments with debt service and fixed charge obligations could:

Our debt and finance lease obligations as of December 31, 2021 totaled $1.74 billion net of related costs.

In addition, in December 2021, we entered into a purchase agreement with The Boeing Company to purchase 50 Boeing 737 MAX aircraft to deliver in 2023 to 2025.

This indebtedness, the Boeing purchase agreement and other commitments with debt service and fixed charge obligations could:

– make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under agreements governing our indebtedness;

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The announced upcoming discontinuance of publishing LIBOR rates may impact the cost or availability of financing for us.

A large portion of our variable rate indebtedness references the London interbank offered rates ("LIBOR") as a benchmark for establishing the rate.

As announced in July 2017, LIBOR is expected to be phased out by the end of 2021.

A large portion of our variable rate indebtedness ( $927.5 million of outstanding principal as of December 31, 2021) references the London interbank offered rates ("LIBOR") as a benchmark for establishing the interest rate.

LIBOR is expected to be phased out by the end of 2022.

Although all of our LIBOR-based borrowings offer prepayment without penalty, uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely impact the cost and availability of borrowings on which we have relied and intend to rely in the future.

Covenants in our senior secured term loan and senior secured notes could limit how we conduct our business, which could affect our long-term growth potential.

As of December 31, 2020, the principal balances of our Term Loan and Senior Secured Notes totaled $691.4 million.

Covenants in our senior secured term loan, senior secured notes and construction loan could limit how we conduct our business, which could affect our long-term growth potential.

As of December 31, 2021, the principal balances of our Term Loan and Senior Secured Notes totaled $685.9 million and the principal balance of our Sunseeker construction loan was $175.0 million.

The loan agreements contain covenants limiting our ability to, among other things, make certain types of restricted payments, including paying dividends, incur debt or liens, merge or consolidate with others, dispose of assets, enter into certain transactions with affiliates, engage in certain business activities or make certain investments.

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We have pledged our assets to secure the Term Loan and Senior Secured Notes with the exceptions of aircraft and aircraft engines, the Sunseeker Resort and certain other exceptions.

The Sunseeker Resort is pledged to secure a $350.0 million construction loan agreement to finance the completion of the construction of the Resort.

This will limit our ability to obtain debt secured by these pledged assets while these loans are outstanding.

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Although we believe debt financing will be available

for the aircraft we will acquire, we cannot provide assurance that we will be able to secure such financing on terms attractive to

us or at all.

To the extent we cannot secure such financing on acceptable terms or at all, we may be required to modify our

aircraft acquisition plans, incur higher than anticipated financing costs, or use more of our cash balances for aircraft acquisitions than we currently expect.

for the aircraft we will acquire and for required pre-delivery deposits for our Boeing order, we cannot provide assurance that we will be able to secure such financing on terms attractive to us or at all.

To the extent we cannot secure such financing on acceptable terms or at all, we may be required to modify our aircraft acquisition plans, incur higher than anticipated financing costs, or use more of our cash balances for aircraft acquisitions than we currently expect.

Our maintenance costs may increase as our fleet ages.

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These regulations can directly impact the frequency of inspections as an aircraft ages, and vary by aircraft or engine type, depending on the unique characteristics of each aircraft and/or engine.

Engine overhaul expenses for our Airbus A320 series aircraft are significantly higher than similar expenses for our prior MD-80 aircraft fleet.

These major maintenance expenses for the Airbus aircraft are capitalized and amortized as part of depreciation and amortization expense.

In addition, we may be required to comply with any future law changes, regulations, or airworthiness directives.

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Our reliance on others to provide essential services on our behalf gives us less control over costs and the efficiency, timeliness and quality of contract services.

We also rely on the owners of aircraft under contract to be able to deliver aircraft in accordance with the terms of executed agreements in a timely manner.

We also rely on Boeing and the owners of used aircraft under contract to be able to deliver aircraft in accordance with the terms of executed agreements in a timely manner.

Our planned initiation of service with these aircraft in the future could be adversely affected if the third parties fail to perform as contractually obligated.

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Gallagher, Jr., president, John Redmond, and a small number of executive management and operating personnel.

As of June 1, 2022, Mr.

Gallagher will transition from chief executive officer to executive chairman and Mr.

Redmond will assume the role of president and chief executive officer.

We do not currently maintain key-man life insurance on Mr.

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The airline industry is highly competitive.

The smaller cities we serve on a scheduled basis have traditionally attracted considerably less attention from our potential competitors than larger markets, and in most of our small city markets, we are the only provider of nonstop service to our leisure destinations.

We have continued to expand service to medium-sized cities which we believe to be under-served for nonstop service to our leisure destinations.

The under-served cities we serve on a scheduled basis have traditionally attracted considerably less attention from our potential competitors than larger markets, and in most of our small city markets, we are the only provider of nonstop service to our leisure destinations.

If other airlines or new airline start-ups begin to provide nonstop services to and from these or similar markets, or otherwise target these or similar markets, the increase in the amount of direct or indirect competition could cause us to reconsider service to affected markets, could impact our margins or could impact our future planned service.

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In the last several years, the FAA has issued a number of directives and other regulations relating to the maintenance and operation of aircraft that have required us to incur significant expenditures.

FAA requirements cover, among other things, retirement of older aircraft, fleet integration of newer aircraft, safety management systems, collision avoidance systems, airborne windshear avoidance systems, noise abatement, weight and payload limits, assumed average passenger weight, employee drug and alcohol testing, and increased inspection and maintenance procedures to be conducted on aging aircraft.

FAA requirements cover, among other things, retirement of older aircraft, fleet integration of newer aircraft, safety management systems, collision avoidance systems, airborne windshear avoidance systems, noise abatement, weight and payload limits, assumed average passenger weight, employee drug and alcohol testing, pilot and flight attendant duty time limitations, and increased inspection and maintenance procedures to be conducted on aging aircraft.

The future cost of complying with these and other laws, rules and regulations, including new federal legislative and DOT regulatory requirements in the consumer-protection area, cannot be predicted and could significantly increase our costs of doing business.

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Even if our practices are found to be in compliance with the DOT rules, we could incur substantial costs defending our practices.

Congress may in the future consider privatization of the U.S.

Air Traffic Control system with user fee based funding;

the potential effect on our operating costs is unknown.

Additionally, federal funding to airports and/or airport bond financing could be affected through future deficit reduction legislation, which could result in higher fees, rates, and charges at many of the airports we serve.

Additionally, federal funding to airports and/or airport bond financing could be affected through future deficit reduction legislation,

which could result in higher fees, rates, and charges at many of the airports we serve.

From time to time legislative proposals have been made to re-regulate the airline industry in varying degrees - for example, to specify minimum seat-size and legroom requirements - which if adopted could affect our costs materially.

We (i.e., our airline subsidiary) and Viva, a Mexican airline, recently submitted to DOT a joint application requesting approval of and antitrust immunity for a comprehensive alliance agreement applicable to all routes we and/or Viva may operate between points in the United States and points in Mexico.

We and Viva have asked DOT to provide final approval of the alliance agreement and to issue antitrust immunity by July 31, 2022, to help facilitate inauguration of service under the agreement in the first quarter of 2023.

Some similar applications involving other carriers have taken DOT far longer to process, and there is no assurance our proposed time frame will be achieved.

Nor is there assurance DOT will ultimately approve the agreement and grant antitrust immunity.

Both parties have stated they do not intend to proceed under the agreement in the absence of antitrust immunity.

In addition, performance under the agreement is contingent upon Mexican regulatory approval, as well as Mexico reattaining Category 1 status under the FAA’s International Aviation Safety Assessment program, a matter within the control of the FAA and the Government of Mexico.

An adverse outcome in one or more of these respects would likely thwart our plans to enter the U.S.-Mexico market for a number of years, despite the effort and expense we have incurred and continue to incur on the project.

We anticipate that in 2022 and thereafter, legislative and regulatory concern with the environmental impacts of the air transportation industry will increase, and that the longer-term effects on our fleet and operating costs may be substantial.

Aviation accounts for approximately 2.6 percent of total U.S.

GHG emissions and approximately 9 percent of emissions by the U.S.

transportation sector as a whole.

In the past, legislation to address climate change issues as they relate to the transportation industry has been introduced in the U.S.

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Similarly, as recently as February 2021, legislation was introduced in the U.S.

Congress to incentivize the production of sustainable aviation fuel (also known as biofuel) and to assist the aviation industry in reducing GHG emissions.

If enacted as proposed, the legislation would establish a national goal for the U.S.

aviation sector to achieve a net 35 percent reduction in GHG emissions by 2035 and net zero emissions by 2050.

We cannot predict whether this or any similar legislation will pass the Congress or, if enacted into law, how it ultimately would apply to the airline industry.

Congress to incentivize the production of sustainable aviation fuel (also known as biofuel) and to assist the aviation industry in reducing emissions.

In September 2021, the Biden Administration announced plans to release a comprehensive aviation climate action plan in the coming months.

According to the White House announcement, civil aviation accounts for 11 percent of emissions by the U.S.

transportation sector as a whole.

Other executive actions taken by the Administration are intended to serve the goal of reducing aviation emissions by 20% by 2030 and unlocking the potential for a zero-carbon aviation sector as of 2050.

We cannot predict whether this or any similar legislation will pass the Congress or, if enacted into law, how it ultimately would apply to our operations or the airline industry.

In addition, the EPA concluded in 2016 that current and projected concentrations of GHG emitted by various aircraft, including all of the aircraft we and other carriers operate, threaten public health and welfare.

This finding may be a precursor to EPA regulation of commercial aircraft emissions in the United States, as has taken effect for operations within the European Union under EU legislation.

Binding international measures adopted under the auspices of the International Civil Aviation Organization (“ICAO”), a specialized agency of the United Nations, are scheduled to become effective over the next several years, with the pilot phase beginning in 2021.

This finding may be a precursor to increased EPA regulation of commercial aircraft emissions in the United States, as has taken effect for operations within the European Union under EU legislation.

In January 2021 the EPA adopted regulations setting emissions standards equivalent to ICAO’s for newly-designed aircraft, with immediate effect, and for in-production aircraft, effective 2028.

The aircraft we currently operate are not affected by these standards, although as noted, we anticipate an ever-increasing legislative and regulatory focus on

aviation’s impacts on the environment.

Similarly, in December 2021, the EPA proposed particulate matter emission standards and test procedures applicable to certain classes of jet engines (including those commonly used in the airline industry) to replace the existing smoke standards for aircraft.

These proposed standards and procedures would harmonize with ICAO requirements and apply to newly-designed and in-production aircraft engines.

At present, the aircraft we operate are not affected by these standards, although as noted, we anticipate an ever-increasing legislative and regulatory focus on aviation’s impacts on the environment.

These developments and any additional legislation or regulations addressing climate change are likely to increase our costs of doing business in the future and the increases could be material.

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A substantial proportion of our scheduled flights have Las Vegas, Orlando, Phoenix, Tampa/St.

Petersburg, Los Angeles, Punta Gorda, Cincinnati, or Destin as either their destination or origin.

Petersburg, Los Angeles, Punta Gorda, or Destin as either their destination or origin.

Our business could be harmed by any circumstances causing a reduction in demand for air transportation to one or more of these markets, or our other leisure destinations, such as adverse changes in local economic conditions, negative public perception of the particular city, significant price increases, or the impact of future terrorist attacks or natural disasters.

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– additional issuances of our common stock

– labor work actions

– labor costs or work actions

– general market conditions

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors