Allegiant Travel CO 10-K

Item 8. Financial Statements and Supplementary Data 53 Index to Consolidated Financial Statements Title Page No. Report of Independent Registered Public Accounting Firm (PCAOB ID 165) 55 Consolidated Balance Sheets as of December 31, 202 4 and 2 023 57 Consolidated Statements of Income for the years ended December 31, 202 4 , 202 3 , and 202 2 58 Consolidated Statements of Comprehensive Income for the years ended December 31, 202 4 , 202 3 , and 202 2 59 Consolidated Statements of Shareholders' Equity for the years ended December 31, 202 4 , 202 3 , and 202 2 60 Consolidated Statements of Cash Flows for the years ended December 31, 202 4 , 202 3 , and 202 2 61 Notes to Consolidated Financial Statements for the years ended December 31, 202 4 , 202 3 , and 202 2 62 Note 1 - Organization and Business of Company 62 Note 2 - Summary of Significant Accounting Policies 63 Note 3 - Special Charges 69 Note 4 - Revenue Recognition 70 Note 5 - Property and Equipment 71 Note 6 - Long-Term Debt 72 Note 7 - Leases 75 Note 8 - Shareholders' Equity 77 Note 9 - Fair Value Measurements 78 Note 10 - Income Taxes 80 Note 11 - Related Party Transactions 81 Note 12 - Employee Benefit Plans 82 Note 13 - Commitments and Contingencies 83 Note 14 - Segments 84 Note 15 - Impairment 87 N ote 16 - Subseque nt Events 88 54 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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, 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 3, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. 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 Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of Sunseeker Resort As discussed in Notes 2, 3, 5, 14, and 15 to the consolidated financial statements, the Company recorded an impairment charge of $321.8 million, primarily related to Sunseeker Resort. The Company records impairment losses on long-lived assets used in operations 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. The Company performed an undiscounted cash flow test and concluded that the carrying value of the long-lived assets was not recoverable. The estimated fair value of the assets was determined using a discounted cash flow model. The determination of fair value involved significant assumptions and estimates, including the discount rate, projected hotel revenue growth rates and the terminal capitalization rate. We identified the evaluation of impairment of Sunseeker Resort as a critical audit matter. We performed sensitivity analysis as a risk assessment procedure over assumptions used to estimate the fair value of Sunseeker Resort and determined the discount rate, projected hotel revenue growth rates and terminal capitalization rate represented the significant assumptions. The discount rate, projected hotel revenue growth rates and terminal capitalization rate assumptions used to estimate the fair value of Sunseeker Resort were challenging to test as they represented subjective determinations of future market and economic conditions that were also sensitive to variation. Minor changes to those assumptions could have had a significant effect on the Company’s assessment of the carrying value of 55 Sunseeker Resort. Additionally, the audit effort associated with this estimate required the use of professionals with specialized skills and knowledge. The following are the primary audit procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s impairment assessment process for Sunseeker Resort. This included controls over the development of the projected hotel revenue growth rates and terminal capitalization rate assumptions and selection of the discount rate assumption used to develop the fair value estimate. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the appropriateness of the discount rate, projected hotel revenue growth rates and terminal capitalization rate used by the Company by comparing them to market data and considering the risk profile of Sunseeker Resort. /s/ KPMG LLP We have served as the Company’s auditor since 2016. Dallas, Texas March 3, 2025 56 ALLEGIANT TRAVEL COMPANY CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) December 31, 2024 December 31, 2023 CURRENT ASSETS Cash and cash equivalents $ 285,892 $ 143,259 Restricted cash 16,427 16,325 Short-term investments 495,234 671,414 Accounts receivable 90,407 70,743 Expendable parts, supplies and fuel, net of reserve of $ 12,597 an d $ 10,284 36,070 36,335 Prepaid expenses and other current assets 67,575 63,054 TOTAL CURRENT ASSETS 991,605 1,001,130 Property and equipment (including $ 107,290 and $ 129,646 from VIEs, Note 6 ), net of accumulated depreciation of $ 1,067,194 and $ 964,866 3,069,949 3,430,103 Long-term investments 51,725 56,004 Deferred major maintenance, net of accumulated amortization of $ 165,333 and $ 143,275 173,892 170,032 Operating lease right-of-use assets, net 81,218 100,707 Deposits and other assets 61,464 $ 98,691 TOTAL ASSETS: $ 4,429,853 $ 4,856,667 CURRENT LIABILITIES Accounts payable 62,092 54,484 Accrued liabilities 327,404 292,335 Current operating lease liabilities 20,714 20,873 Air traffic liability 370,915 353,488 Current loyalty program liability 41,510 38,447 Current maturities of long-term debt and finance lease obligations (including $ 12,787 and $ 22,627 from VIEs, Note 6 ), net of related costs of $ 8,287 and $ 8,038 454,769 439,937 TOTAL CURRENT LIABILITIES 1,277,404 1,199,564 LONG-TERM DEBT AND OTHER NONCURRENT LIABILITIES Long-term debt and finance lease obligations (including $ 94,950 and $ 107,737 from VIEs, Note 6 ), net of current maturities and related costs of $ 8,842 and $ 14,477 1,611,735 1,819,717 Deferred income taxes 315,593 384,602 Noncurrent operating lease liabilities 62,392 82,410 Noncurrent loyalty program liability 39,201 32,366 Other noncurrent liabilities 34,136 9,448 TOTAL LIABILITIES: $ 3,340,461 $ 3,528,107 COMMITMENTS AND CONTINGENCIES ( NOTE 13 ) SHAREHOLDERS' EQUITY Common stock, par value $ 0.001 , 100,000,000 shares authorized; 25,580,445 and 25,501,823 shares issued; 18,407,799 and 18,269,090 shares outstanding in 2024 and 2023 26 26 Treasury shares, at cost, 7,172,646 and 7,232,733 shares in 2024 and 2023 ( 678,431 ) ( 681,932 ) Additional paid in capital 760,600 741,055 Accumulated other comprehensive income, net 3,949 3,991 Retained earnings 1,003,248 1,265,420 TOTAL EQUITY: $ 1,089,392 $ 1,328,560 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY: $ 4,429,853 $ 4,856,667 The accompanying notes are an integral part of these consolidated financial statements. 57 ALLEGIANT TRAVEL COMPANY CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 OPERATING REVENUES: Passenger $ 2,217,059 $ 2,324,397 $ 2,137,762 Third party products 142,128 112,579 100,959 Fixed fee contracts 80,660 68,548 60,937 Resort and other 72,742 4,333 2,171 Total operating revenues 2,512,589 2,509,857 2,301,829 OPERATING EXPENSES: Salaries and benefits 819,843 687,803 552,413 Aircraft fuel 627,755 695,871 814,803 Station operations 272,843 256,560 255,168 Depreciation and amortization 258,251 223,130 197,542 Maintenance and repairs 125,430 123,802 117,814 Sales and marketing 106,340 114,616 100,678 Aircraft lease rentals 23,573 24,948 23,621 Other 150,399 133,501 113,532 Special charges, net of recoveries 368,131 28,645 34,612 Total operating expenses 2,752,565 2,288,876 2,210,183 OPERATING INCOME (LOSS) ( 239,976 ) 220,981 91,646 OTHER (INCOME) EXPENSES: Interest income ( 44,012 ) ( 46,615 ) ( 16,469 ) Interest expense 156,443 153,186 115,711 Capitalized interest ( 45,385 ) ( 45,132 ) ( 12,640 ) Other, net 1,428 491 91 Total other expenses 68,474 61,930 86,693 INCOME (LOSS) BEFORE INCOME TAXES ( 308,450 ) 159,051 4,953 INCOME TAX PROVISION (BENEFIT) ( 68,212 ) 41,455 2,460 NET INCOME (LOSS) $ ( 240,238 ) $ 117,596 $ 2,493 Earnings (loss) per share to common shareholders: Basic $ ( 13.49 ) $ 6.32 $ 0.14 Diluted $ ( 13.49 ) $ 6.29 $ 0.14 Shares used for computation: Basic 17,852 17,945 17,959 Diluted 17,852 18,019 18,034 Cash dividends declared per share: $ 1.20 $ 1.20 $ — The accompanying notes are an integral part of these consolidated financial statements. 58 ALLEGIANT TRAVEL COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2024 2023 2022 NET INCOME (LOSS) $ ( 240,238 ) $ 117,596 $ 2,493 Other comprehensive income (loss): Change in available for sale securities, net of tax ( 42 ) 2,734 ( 799 ) TOTAL COMPREHENSIVE INCOME (LOSS) $ ( 240,280 ) $ 120,330 $ 1,694 The accompanying notes are an integral part of these consolidated financial statements. 59 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, 2021 18,111 $ 25 $ 692,053 $ 2,056 $ 1,167,475 $ ( 638,057 ) $ 1,223,552 Share-based compensation 323 — 17,418 — — — 17,418 Shares repurchased by the Company and held as treasury shares ( 379 ) — — — — ( 29,905 ) ( 29,905 ) Stock issued under employee stock purchase plan 73 — — — — 7,939 7,939 Other comprehensive loss — — — ( 799 ) — — ( 799 ) Net income — — — — 2,493 — 2,493 Balance at December 31, 2022 18,128 $ 25 $ 709,471 $ 1,257 $ 1,169,968 $ ( 660,023 ) $ 1,220,698 Share-based compensation 415 1 31,584 — — — 31,585 Shares repurchased by the Company and held as treasury shares ( 374 ) — — — — ( 30,076 ) ( 30,076 ) Stock issued under employee stock purchase plan 100 — — — — 8,167 8,167 Cash dividends, $ 1.20 per share — — — — ( 22,144 ) — ( 22,144 ) Other comprehensive income — — — 2,734 — — 2,734 Net income — — — — 117,596 — 117,596 Balance at December 31, 2023 18,269 $ 26 $ 741,055 $ 3,991 $ 1,265,420 $ ( 681,932 ) $ 1,328,560 Share-based compensation 79 — 19,545 — — — 19,545 Shares repurchased by the Company and held as treasury shares ( 95 ) — — — — ( 5,642 ) ( 5,642 ) Stock issued under employee stock purchase plan 155 — — — — 9,143 9,143 Cash dividends, $ 1.20 per share — — — — ( 21,934 ) — ( 21,934 ) Other comprehensive loss — — — ( 42 ) — — ( 42 ) Net loss — — — — ( 240,238 ) — ( 240,238 ) Balance at December 31, 2024 18,408 $ 26 $ 760,600 $ 3,949 $ 1,003,248 $ ( 678,431 ) $ 1,089,392 The accompanying notes are an integral part of these consolidated financial statements. 60 ALLEGIANT TRAVEL COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2024 2023 2022 OPERATING ACTIVITIES: Net income (loss) $ ( 240,238 ) $ 117,596 $ 2,493 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 258,251 223,130 197,542 (Gain) loss on aircraft and other equipment disposals ( 34,936 ) 920 2,158 Special charges, net of recoveries 348,985 27,189 34,268 Share-based compensation expense 22,568 29,749 15,198 Deferred income taxes ( 69,009 ) 38,214 2,178 Other adjustments ( 6,290 ) ( 11,284 ) 12,082 Changes in certain assets and liabilities: Accounts receivable 4,362 29,390 ( 33,887 ) Tax receivable ( 5,616 ) 3,932 3,697 Prepaid expenses ( 10,518 ) ( 1,825 ) ( 10,625 ) Accounts payable 8,742 ( 5,031 ) 14,770 Accrued liabilities 95,503 65,568 42,605 Loyalty program liability 9,899 14,313 15,704 Air traffic liability 17,427 ( 25,971 ) 72,006 Deferred major maintenance ( 73,331 ) ( 67,862 ) ( 54,675 ) Other assets/liabilities 12,657 ( 14,936 ) ( 12,464 ) Net cash provided by operating activities 338,456 423,092 303,050 INVESTING ACTIVITIES: Purchase of investment securities ( 567,299 ) ( 890,880 ) ( 1,267,266 ) Proceeds from maturities of investment securities 763,841 976,804 1,301,286 Proceeds from sale of property and equipment 86,156 26,526 1,320 Aircraft pre-delivery deposits ( 35,053 ) ( 342,167 ) ( 96,532 ) Purchase of property and equipment, including capitalized interest ( 300,154 ) ( 528,320 ) ( 434,690 ) Proceeds from loan receivable 50,000 — — Insurance proceeds from damage to property & equipment 6,646 35,730 5,450 Other investing activities 1,441 430 ( 992 ) Net cash provided by (used in) investing activities 5,578 ( 721,877 ) ( 491,424 ) FINANCING ACTIVITIES: Cash dividends paid to shareholders ( 21,934 ) ( 22,144 ) — Proceeds from the issuance of debt and finance lease obligations 386,975 642,581 863,627 Repurchase of common stock ( 6,030 ) ( 30,078 ) ( 29,905 ) Principal payments on debt and finance lease obligations ( 585,511 ) ( 480,818 ) ( 701,596 ) Debt issuance costs ( 2,260 ) ( 7,116 ) ( 14,297 ) Sunseeker construction financing disbursements 18,320 102,330 ( 92,650 ) Other financing activities 9,141 8,168 7,940 Net cash provided by (used in) financing activities ( 201,299 ) 212,923 33,119 NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 142,735 ( 85,862 ) ( 155,255 ) CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 159,584 245,446 400,701 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 302,319 $ 159,584 $ 245,446 CASH PAYMENTS FOR: Interest paid, net of amount capitalized $ 107,381 $ 111,912 $ 82,903 Income tax paid 8,738 1,012 308 SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS Right-of-use (ROU) assets acquired $ 1,379 $ 8,320 $ — Purchases of property and equipment in accrued liabilities and other $ ( 671 ) $ 71,672 $ 54,641 Flight equipment acquired under finance leases — — 192,457 The accompanying notes are an integral part of these consolidated financial statements. 61 ALLEGIANT TRAVEL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2024, 2023 and 2022 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 owns and operates Sunseeker Resort and Aileron, the related golf course. 62 Note 2 — 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 has reclassified certain prior period amounts to conform to the current period presentation . Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments and interest bearing instruments with original maturities of three months or less when purchased. 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 recorded at invoiced amount which approximates fair value. In addition to income tax receivable, 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 rental car providers 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. 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 material credit losses in the years presented. 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. 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 no material realized losses during the years ended December 31, 2024, 2023, and 2022. 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 expendable parts, supplies and fuel 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 fleet. The obsolescence allowance for expendable parts and supplies was $ 12.6 million and $ 10.3 million at December 31, 2024 and 2023, respectively. 63 Deposits and Other Assets Deposits and other assets consist primarily of airport deposits, aircraft lease deposits, investments in unconsolidated affiliates, credits receivable under aircraft purchase agreements and scrap assets. At December 31, 2023, deposits and other assets included a $ 50.0 million note receivable from the counterparty in the Company's joint-venture alliance, which amount was repaid in full during 2024. The Company also had outstanding receivables from third parties as of December 31, 2024 and 2023, of which $ 15.1 million and $ 17.0 million respectively, were due more than one year after the balance sheet date. 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. At lease commencement, the present value of lease payments is calculated using the rate implicit in the lease, if known, or an estimated incremental borrowing rate which takes into consideration recent debt issuances as well as other applicable market data available. 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 Accounting Standards (ASU) 2016-02, Leases (Topic 842). Lease payments do not include variable lease payments other than those based 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 using the rate implicit in the lease, if known, or on the basis of the Company’s estimated 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 - 39 Years Equipment 5 - 10 Years Computer hardware and software 3 - 15 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 input 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. Changes in the estimate for useful lives or residual values of the Company’s property and equipment could result in changes in depreciation expense. The Company is required to make pre-delivery payments ("PDPs") towards the purchase price of new aircraft and engines prior to delivery. These deposits are included in flight equipment on the Company's consolidated balance sheets. Interest is capitalized by applying a capitalization rate to the weighted-average carrying amount of expenditures for qualifying assets over the period and depreciated over the estimated useful life of the related asset(s) acquired/developed. 64 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 fifteen years . The Company had unamortized computer software development costs of $ 149.7 million and $ 139.1 million as of December 31, 2024 and 2023, respectively. Amortization expense related to computer software was $ 18.8 million, $ 12.4 million and $ 15.2 million for the years ended December 31, 2024, 2023 and 2022 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 fleet under the direct expense method. Under this method, maintenance and repair costs for aircraft are charged to maintenance and repair expenses as incurred. Maintenance and repair costs include all parts, materials, and line maintenance activities required to maintain the Company's fleet. The Company accounts for major maintenance costs of its airframes and 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 2024 and 2023, the Company capitalized $ 76.8 million and $ 68.5 million of major maintenance costs as deferred major maintenance. Amortization expense related to deferred major maintenance, excluding amounts recorded in special charges related to the Company's aircraft retirement plan, was $ 65.8 million, $ 55.5 million, and $ 43.8 million for the years ended December 31, 2024, 2023, and 2022, respectively. 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 those assets which are based on additional assumptions such as (but not limited to) asset utilization, average fare, block hours, fuel costs, fixed fee contracts, estimated salvage values, discount rate, projected growth rates and terminal value assumptions. For the year ended December 31, 2024, the Company recorded a $ 321.8 million impairment loss related to the Sunseeker Resort Segment. The impairment is more fully discussed in Note 15 . Manufacturer's Credits The Company periodically receives credits in connection with the acquisition of aircraft and engines or in connection with delivery delays or manufacturer's incentives. These credits are generally applied as a reduction of the cost of each item acquired under the purchase agreement at the time of delivery, which results in either deferral of the credit or recognition of an asset depending on the timing of receipt. Revenue Recognition Passenger revenue Passenger revenue includes scheduled service revenue, ancillary air-related charges, and travel point redemptions from the co-brand Allegiant credit card and the Company's non-card loyalty program. Revenue from travel point redemptions from the co-brand credit card and the loyalty program are described in the Allways Rewards ® Credit Card Program and Allways Rewards ® Loyalty Program sections below. 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 ticket voucher breakage occurs. Nonrefundable scheduled itineraries expire on the date of the intended flight, unless the itinerary is changed or canceled in advance of the flight under the terms and conditions of the ticket. Itineraries sold for transportation not yet used, as well as unexpired vouchers, are included in air traffic liability. Ancillary air-related charges include various 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 which are not included in the base ticket price. Revenues from air-related charges are nonrefundable and recognized when the transportation is provided. If a customer cancels a flight, a voucher may be issued for a future flight under certain circumstances, at which time 65 the associated revenue is recognized in scheduled service revenue upon completion of the future flight. Additionally, the Company estimates the value of vouchers that will expire unused and recognizes such estimate into revenue at the time of issuance. Air-related charges sold for transportation not yet used, as well as unexpired vouchers, are included in air traffic liability. 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. Third party products revenue Ancillary third party products revenue is generated from the sale of hotel rooms, rental cars, travel insurance and ticket attractions, as well as marketing revenue associated with the co-brand 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. Revenue from the sale of third party products is recorded net of amounts paid to wholesale providers, travel agent commissions, and transaction costs. Revenue from travel point redemptions from the co-brand credit card and the loyalty program are described in the Allways Rewards ® Credit Card Program and Allways Rewards ® Loyalty Program sections below. Fixed fee contract revenue Fixed fee contract revenue consists of fees under agreements to provide charter service on a year-round and ad hoc basis. Fixed fee contract revenue is recognized when the transportation is provided. Sunseeker Resort Sunseeker Resort's revenue from contracts with customers primarily consists of sales of rooms, food and beverage, golf, retail and other goods and services. As compensation for such goods and services, the Company is typically entitled to a fixed nightly fee for an agreed upon period and additional fixed fees for any ancillary services purchased. Room charges are generally payable at the time the hotel guest checks out of the hotel. The Company generally satisfies the performance obligation related to room sales over time, and the Company recognizes the revenue on a daily basis, as the rooms are occupied and the Company has rendered the services. Charges for food and beverage, golf, retail and other goods and services are settled at a point in time, as the sale is made. Sunseeker Resort revenues are included in resort and other revenue in the consolidated statements of income. Allways Rewards® Credit Card Program Under the Allegiant co-brand credit card arrangement, points are sold and consideration is received under an agreement with the issuer bank that expires in 2031. 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 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 the underlying service 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. Allways Rewards® Loyalty Program Allegiant’s Allways Rewards® Loyalty Program, which launched in 2021, enables program members to earn points for every dollar they spend on the Company’s website. In addition to opportunities to redeem points for flights, lodging, rental cars, and at Sunseeker Resort, the program leverages Allegiant's partnerships to offer additional rewards to members, including sports tickets and exclusive experiences. Members can also earn points by using their Allegiant co-brand credit card. Under Allways Rewards®, members receive one point for every $1 spent at Allegiant.com, and two points per $1 for spending over $500 (excluding taxes and fees). Members also earn one point for every $1 spent at sunseekerresorts.com and one point per $1 spent during their stay at Sunseeker Resort, provided the purchases are charged to their room. The Company utilizes the deferred revenue method of accounting for points earned through the program based on the stand-alone selling price and revenue is recognized when points are redeemed and the underlying service has been provided. The stand-alone selling price of points is adjusted for an estimate of points that will not be redeemed (“breakage”) using a statistical model based on historical redemption patterns to develop an estimate of the likelihood of future redemption. 66 Advertising Costs Advertising costs are charged to expense in the period incurred. Advertising expense was $ 32.0 million, $ 41.0 million and $ 40.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. Preopening expenses Preopening expenses represent personnel, advertising, and other costs incurred prior to the opening of Sunseeker Resort and were expensed as incurred. During the year ended December 31, 2023, the Company incurred $ 26.5 million of preopening expenses related to the opening of the Resort, which is included in salaries and benefits expense, sales and marketing expense, and other expense in the consolidated statements of income. Earnings per Share Basic and diluted earnings per share are computed using the two-class 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, 2024, 2023 and 2022, the second method above was used in the computation because it was more dilutive than the first method. The following table sets forth the computation of net income per share on a basic and diluted basis for the periods indicated: Year ended December 31, (in thousands, except per share data) 2024 2023 2022 Basic: Net income (loss) $ ( 240,238 ) $ 117,596 $ 2,493 Less income allocated to participating securities ( 618 ) ( 4,188 ) ( 32 ) Net income (loss) attributable to common stock $ ( 240,856 ) $ 113,408 $ 2,461 Earnings (loss) per share, basic $ ( 13.49 ) $ 6.32 $ 0.14 Weighted-average shares outstanding 17,852 17,945 17,959 Diluted: Net income (loss) $ ( 240,238 ) $ 117,596 $ 2,493 Less income allocated to participating securities ( 618 ) ( 4,175 ) ( 32 ) Net income (loss) attributable to common stock $ ( 240,856 ) $ 113,421 $ 2,461 Earnings (loss) per share, diluted $ ( 13.49 ) $ 6.29 $ 0.14 Weighted-average shares outstanding 17,852 17,945 17,959 Dilutive effect of stock options and restricted stock — 249 132 Adjusted weighted-average shares outstanding under treasury stock method 17,852 18,194 18,091 Participating securities excluded under two-class method — ( 175 ) ( 57 ) Adjusted weighted-average shares outstanding under two-class method 17,852 18,019 18,034 Stock awards outstanding of 452,560 , 81,748 , and 79,644 shares (not in thousands) as of December 31, 2024, 2023, and 2022, 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 67 income. The share-based compensation cost is measured based on grant date fair value. The Company’s share-based employee compensation plan is more fully discussed in Not e 12 . 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 assets and liabilities and measured using the enacted tax rates and provisions of the enacted tax law. A valuation allowance for deferred tax assets is recorded 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 Beginning with annual reporting for the year ended December 31, 2024, the Company adopted Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures that was issued by the Financial Accounting Standards Board ("FASB"). This new standard requires an enhanced disclosure of significant segment expenses on an annual and interim basis. Upon adoption, the guidance was applied retrospectively to all prior periods presented in the financial statements. See Note 1 4 - Operating Segments for additional information. In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures." This new standard requires expanded income tax disclosure of specific categories in the rate reconciliation and income taxes paid, disaggregated by jurisdiction. ASU 2023-09 is effective for the Company's annual periods beginning January 1, 2025, with early adoption and retrospective application permitted. The Company will adopt this standard effective for 2025 and does not expect that the adoption of this standard will have a material effect on its financial statements. In November 2024, the FASB issued ASU 2024-03 "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." This new standard requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 and does not expect the adoption of this standard will have a material effect on its financial statements. 68 Note 3 — Special Charges Sunseeker Resort Sunseeker Resort at Charlotte Harbor (the "Resort" or "Sunseeker Resort") was impacted by Hurricanes Ian, Idalia, Debby, Helene, and Milton between 2022 and 2024. While the Resort was built to withstand hurricanes and flooding, these weather events are unprecedented in their frequency and the amount of destruction caused in Southwest Florida. The Company believes these weather events will be unusual and has included the cost of these events and the related insurance recoveries in special charges. The estimated losses are recorded to special charges in the period of the event and are offset by insurance recoveries in the period they are approved for payment by the insurer. To date, the Company has recorded $ 87.2 million in losses and $ 58.6 million in insurance recoveries. At this time, the Company does not expect that additional amounts to be recovered are significant. During the fourth quarter of 2024, Sunseeker Resort was directly impacted by Hurricane Milton, which made landfall on the west coast of Florida on October 9, 2024. As the Resort was within the evacuation zone, operations were temporarily halted beginning October 7, 2024, and the Resort reopened with limited services on October 14, 2024. Additionally, the Resort was affected by Hurricanes Debby and Helene during 2024. The combined impact of Hurricanes Milton, Debby, and Helene resulted in a total of $ 7.7 million in losses recorded by the Company for 2024 without regard to lost revenues. In fourth quarter 2024, the Company recorded an impairment charge of $ 321.8 million in special charges related to Sunseeker Resort and associated Aileron Golf Course. For more detailed discussion regarding the impairment charge see Note 15 . Airline In September 2023, the Company reevaluated its fleet plan and identified 21 airframes for early retirement to coincide with 737 MAX aircraft deliveries as scheduled under an amendment to the Company's agreement with The Boeing Company signed in September 2023. Two airframes were retired in 2023 and seven airframes were retired in 2024. The remaining airframes are to be retired between January 2025 and December 2026. The accelerated depreciation on these airframes resulting from a change in the estimated useful life is recorded as a special charge in the years ended December 31, 2024 and December 31, 2023. The Company also recorded a special charge in the year ended December 31, 2022 related to accelerated depreciation on the last of the aircraft identified for early retirement during 2020. In April 2024, the Company's flight attendants, represented by the Transport Workers Union of America, ratified a new five-year collective bargaining agreement. Under the agreement, a ratification bonus was paid in May 2024, which amount is included within special charges. In third quarter 2024, the Company recorded $ 3.4 million of special charges related to organizational restructuring. Special Charges The table below summarizes special charges recorded during the years ended December 31, 2024, 2023, and 2022. Twelve Months Ended December 31, (in thousands) 2024 2023 2022 Accelerated depreciation on airframes identified for early retirement $ 31,066 $ 35,091 $ 567 Flight attendant ratification bonus 10,821 — — Organizational restructuring 3,420 — — Airline special charges 45,307 35,091 567 Sunseeker weather events, net of insurance recoveries (1) 987 ( 6,446 ) 34,045 Sunseeker impairment 321,837 — — Sunseeker special charges, net of insurance recoveries (1) 322,824 ( 6,446 ) 34,045 Total special charges $ 368,131 $ 28,645 $ 34,612 (1) Includes $ 2.7 million and $ 8.3 million of business interruption insurance proceeds for the years ended December 31, 2024 and December 31, 2023, respectively. There were no business interruption recoveries for the year ended December 31, 2022. 69 Note 4 — Revenue Recognition Passenger revenue Passenger revenue is the most significant category in the Company's reported operating revenues, as outlined below: Year Ended December 31, (in thousands) 2024 2023 2022 Scheduled service $ 1,030,795 $ 1,133,001 $ 1,062,753 Ancillary air-related charges 1,129,149 1,137,226 1,025,549 Loyalty redemptions 57,115 54,170 49,460 Total passenger revenue $ 2,217,059 $ 2,324,397 $ 2,137,762 Sales of passenger tickets not yet flown are recorded in air traffic liability. Passenger revenue is recognized when transportation is provided. As of December 31, 2024, the air traffic liability balance was $ 370.9 million, of which approximately $ 315.5 million was related to forward bookings, with the remaining $ 55.4 million related to credit vouchers for future travel. The normal contract term of passenger tickets is 12 months and passenger revenue associated with future travel will principally be recognized within this time frame. Of the $ 353.5 million that was recorded in the air traffic liability balance at December 31, 2023, substantially all was recognized into passenger revenue during the 12 months ended December 31, 2024. The Company periodically evaluates the estimated amount of credit vouchers expected to expire unused and any adjustment is removed from air traffic liability and included in passenger revenue in the period in which the evaluation is complete. Resort Revenue The Company's Resort revenues for the periods indicated are set forth in the table below: Year Ended December 31, (in thousands) 2024 2023 2022 Rooms $ 31,628 $ 946 $ — Food and beverage 29,895 1,713 — Other 10,227 222 — Total resort revenue $ 71,750 $ 2,881 $ — Revenue from banquets, golf, retail and spa services are included in other resort revenue. Resort revenue is recognized as the underlying services or goods have been provided. There is typically little to no lag between when the services are performed and when payment is remitted. Large group reservations, conventions, and other event bookings require advance deposits which are recorded as accrued liabilities in the Company's balance sheet until the related services and goods are provided. Guest receivables are recorded in accounts receivable on the Company's balance sheet for room nights stayed prior to payment at checkout. The amounts of advance deposit liabilities and guest ledger receivables were not material as of December 31, 2024 or December 31, 2023. Loyalty redemptions The following table presents the activity of the co-brand credit card and the loyalty program as of the dates indicated: Year Ended December 31, (in thousands) 2024 2023 Balance at January 1 $ 70,813 $ 56,500 Points awarded 67,050 68,483 Points redeemed ( 57,152 ) ( 54,170 ) Balance at December 31 $ 80,711 $ 70,813 The current portion of the loyalty program liability represents the 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. 70 Note 5 — Property and Equipment Property and equipment consisted of the following: As of December 31, (in thousands) 2024 2023 Airline Flight equipment $ 3,345,458 $ 3,329,207 Computer hardware and software 320,432 274,927 Land and buildings/leasehold improvements 66,115 63,863 Other property and equipment 115,043 109,727 Sunseeker Resort Land and buildings/leasehold improvements 255,201 542,129 Other property and equipment 34,894 75,116 Total property and equipment 4,137,143 4,394,969 Less accumulated depreciation and amortization ( 1,067,194 ) ( 964,866 ) Property and equipment, net $ 3,069,949 $ 3,430,103 As of December 31, 2024, the Company had firm commitments to purchase 46 aircraft which are expected to be delivered between 2025 and 2027. During the year ended December 31, 2024, the Company sold flight equipment with a carrying amount of $ 51.3 million for proceeds of $ 86.2 million resulting in a gain of $ 34.9 million, which is included as an offset to other operating expense in the Company's consolidated income statement. Accrued capital expenditures as of December 31, 2024 and 2023 were $ 8.9 million and $ 71.7 million, respectively. For the year ended December 31, 2024, the Company recorded a $ 321.8 million impairment loss related to the Sunseeker Resort Segment. The impairment is more fully discussed in Note 15 . 71 Note 6 — Long-Term Debt Long-term debt consisted of the following: As of December 31, (in thousands) 2024 2023 Fixed-rate debt and finance lease obligations due through 2032 $ 1,481,186 $ 1,834,754 Variable-rate debt due through 2036 585,318 424,900 Total long-term debt and finance lease obligations, net of related costs 2,066,504 2,259,654 Less current maturities, net of related costs 454,769 439,937 Long-term debt and finance lease obligations, net of current maturities and related costs $ 1,611,735 $ 1,819,717 Weighted average fixed-interest rate on debt 6.5 % 6.3 % Weighted average variable-interest rate on debt 6.8 % 7.9 % Interest Rate(s) Per Annum at As of December 31, (in thousands) Maturity Dates December 31, 2024 2024 2023 Senior secured notes 2027 7.25 % $ 550,000 $ 550,000 Consolidated variable interest entities 2028 — 2029 2.92 % — 5.19 % 107,959 130,650 Revolving credit facilities 2025 — 2027 N/A — 200,000 Debt secured by aircraft, engines, other equipment and real estate 2025 — 2036 1.87 % — 8.57 % 765,278 596,271 Finance leases 2028 — 2032 4.44 % — 7.01 % 429,896 455,248 Construction loan agreement 2026 5.75 % 100,000 350,000 Unsecured debt 2025 6.15 % 130,500 — Total debt $ 2,083,633 $ 2,282,169 Related costs ( 17,129 ) ( 22,515 ) Total debt net of related costs $ 2,066,504 $ 2,259,654 Maturities of long-term debt as of December 31, 2024, for the next five years and thereafter, in the aggregate, are: (in thousands) As of December 31, 2024 2025 (1) 454,769 2026 186,949 2027 673,600 2028 151,261 2029 160,510 Thereafter 439,415 Total debt and finance lease obligations, net of related costs $ 2,066,504 (1) Includes pre-delivery deposit financing which is due upon delivery of each respective aircraft Senior Secured Notes In August, 2022, the Company issued $ 550.0 million in aggregate principal amount of its 7.250 % Senior Secured Notes due 2027 (the “2027 Notes”) pursuant to an Indenture, dated as of August 17, 2022. The 2027 Notes are secured by first priority security interests in, subject to permitted liens, substantially all of the property and assets of the Company and its subsidiaries (other than Sunseeker Resort and its subsidiaries), except that the collateral package excludes aircraft, aircraft engines, real property and certain other assets. The collateral also secures the Company’s $ 75.0 million revolving credit facility (described below), on a pari passu basis. The 2027 Notes bear interest at a fixed rate of 7.25 percent per annum, payable in cash on February 15 and August 15 of each year. The 2027 Notes will mature on August 15, 2027. 72 The 2027 Notes contain certain covenants that limit the ability of the Company to, among other things: (i) make restricted payments; (ii) incur indebtedness or issue preferred stock; (iii) create or incur certain liens; (iv) dispose of loyalty program or brand intellectual property collateral; (v) merge, consolidate or sell all or substantially all assets and (vi) enter into certain transactions with affiliates. The 2027 Notes also require the Company to comply with certain affirmative covenants, including to maintain a minimum aggregate amount of liquidity of $ 300.0 million. If the Company fails to satisfy the minimum liquidity requirement, then the Company will be required to pay additional interest on all outstanding 2027 Notes in an amount equal to 2.0 % per annum of the principal amount of such 2027 Notes until the Company demonstrates compliance with the liquidity requirement. 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. The Company, through a wholly owned subsidiary, has entered into similarly structured agreements with trusts to borrow amounts collateralized by aircraft and engines.The trusts were funded at inception of the loan and at maturity, the Company will have purchase options at fixed amounts. As these transactions are common control transactions, the Company, as the primary beneficiary, measured and recorded the assets at their carrying values at the time of borrowing. Revolving Credit Facilities In August 2022, the Company entered into a credit agreement under which the Company is entitled to borrow up to $ 100.0 million. In October 2023, the Company extended the term of this agreement to August 2025 with all other terms to remain the same. The borrowing ability of the facility is based on the value of aircraft and engines placed into the collateral pool. The notes under the facility will bear interest at a floating rate based on SOFR. As of December 31, 2024, the facility remained undrawn. In August 2022, the Company entered into a credit agreement that provides a senior secured revolving loan facility of $ 75.0 million. The facility is secured by the same collateral that secures the 2027 Notes, has a term of 57 months and notes under the facility will bear interest at a floating rate based on SOFR. As of December 31, 2024, the facility remained undrawn. In September 2022, the Company entered into a credit agreement under which the Company was entitled to borrow up to $ 200.0 million, which expired as of December 31, 2024. At December 31, 2023, the Company had drawn the full $ 200 million available under the facility. During the year ended December 31, 2024, the facility was fully repaid. In March 2021, the Company entered into a revolving credit facility, under which it is entitled to borrow up to $ 50.0 million. In February, 2023, the Company extended the term of this agreement to March 2026 and the commitment was increased to $ 100.0 million. The borrowing ability is based on the value of the aircraft and engines placed into the collateral pool. The notes for amounts borrowed under the facility will bear interest at a floating rate based on SOFR. As of December 31, 2024, the facility remained undrawn. Other Secured Debt The Company is party to financing agreements under which aircraft, other equipment or other assets serve as collateral. Below are described those debt transactions entered into or that were drawn during 2024. In November 2023, the Company entered into a pre-delivery deposit financing facility to borrow up to $ 158.0 million secured by the Company's purchase rights for certain Boeing 737 MAX aircraft. The facility bears a floating interest rate based on SOFR and is due upon delivery of each aircraft or no later than June 30, 2025. The Company drew an additional $ 18.8 million on this facility during the year ended December 31, 2024 and as of the same date, the Company had drawn a total of $ 132.6 million under the facility. In September 2023, the Company entered into a credit agreement under which the Company is entitled to borrow up to $ 412.1 million. The initial draw of $ 196.4 million received in September 2023 was collateralized by aircraft and used in part to pay off existing debt. This initial draw bears interest at a fixed rate, with quarterly installments of principal and interest, and matures in September 2031. The Company received proceeds for the remaining commitment of $ 215.7 million in 2024. These draws were collateralized by aircraft and bear a floating interest rate based on SOFR. The 2024 draws have a term of twelve years , maturing between September 2036 and December 2036, and are payable in quarterly installments. In March 2024, the Company entered into a credit agreement under which it is entitled to borrow up to $ 218.5 million, which will be collateralized by new aircraft upon delivery. The loans will bear interest at a variable rate based on 3-month SOFR and are 73 payable in quarterly installments over a term of 12 years. At December 31, 2024, the commitments remain undrawn pending new aircraft delivery. In September 2024, the Company entered into a credit agreement under which the Company borrowed $ 22.0 million secured by certain aircraft assets. The loan bears interest at a variable rate based on SOFR, is payable in quarterly installments, and will mature in September 2029. Finance Leases The Company has finance lease obligations related to 23 aircraft, which impacted the Company's recognized assets and liabilities as of December 31, 2024. See Note 7 for more information on the Company's finance lease obligations. Construction Loan Agreement In October 2021, Sunseeker Florida, Inc. (“SFI”), a wholly-owned subsidiary of the Company, entered into a Credit Agreement pursuant to which SFI borrowed $ 350.0 million to fund the remaining construction of the initial phases of Sunseeker Resort. The loan is secured by the Resort. The equity of SFI is also pledged to secure the loan. The loan bears interest at 5.75 percent per annum payable semi-annually, provides for semi-annual principal payments of $ 26.0 million beginning in 2025 and matures in October 2028. The credit agreement includes covenants similar to the covenants in the 2027 Notes. To support the credit, the Company has guaranteed the full amount of the debt. In December 2024, the Company made a voluntary partial prepayment of $ 250.0 million, and as of December 31, 2024, the remaining principal balance of the loan was $ 100 million. Unsecured Debt In December 2024, the Company entered into an unsecured credit facility and received proceeds of $ 130.5 million. The loan bears interest at a floating rate based on SOFR, and principal repayments are due at the delivery of certain 737 MAX aircraft or no later than December 2025. 74 Note 7 — Leases The Company had 23 aircraft under finance leases and 17 aircraft under operating leases as of December 31, 2024 with remaining terms through 2032. Lease Costs 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 2024 2023 2022 Finance lease costs: Amortization of assets Depreciation and amortization $ 23,855 $ 27,170 $ 17,579 Interest on lease liabilities Interest expense 25,994 27,502 23,034 Operating lease cost Aircraft lease rentals; Station operations; Maintenance and repairs; Other operating expense 26,178 25,246 24,986 Variable lease cost Station operations; Maintenance and repairs; Other operating expense 492 1,563 1,469 Total lease cost $ 76,519 $ 81,481 $ 67,068 Lease position as of December 31, 2024 and December 31, 2023 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 2024 2023 Assets Operating lease assets Operating lease right-of-use assets, net $ 81,218 $ 100,707 Finance lease assets Property and equipment, net of accumulated depreciation 427,664 466,075 Total lease assets $ 508,882 $ 566,782 Liabilities Current Operating Current operating lease liabilities $ 20,714 $ 20,873 Finance Current maturities of long-term debt and finance lease obligations 26,836 25,352 Noncurrent Operating Noncurrent operating lease liabilities 62,392 82,410 Finance Long-term debt and finance lease obligations 403,060 429,896 Total lease liabilities $ 513,002 $ 558,531 Weighted-average remaining lease term Operating leases 7.2 years 7.4 years Finance leases 6.1 years 7.1 years Weighted-average discount rate Operating leases 5.6 % 5.5 % Finance leases 5.9 % 5.9 % 75 Other Information The table below presents supplemental cash flow information related to leases during the years ended December 31, 2024, 2023 and 2022. Year Ended December 31, (in thousands) 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for operating leases $ 26,679 $ 25,774 $ 25,775 Operating cash flows for finance leases 26,056 27,672 22,366 Financing cash flows for finance leases 25,352 39,044 16,621 Maturities of Lease Liabilities The table below indicates the future minimum payments of lease liabilities as of December 31, 2024. (in thousands) Operating Leases Finance Leases 2025 $ 24,532 $ 51,408 2026 13,896 51,108 2027 11,688 51,108 2028 9,997 65,908 2029 10,027 104,396 Thereafter 32,590 231,772 Total lease payments 102,730 555,700 Less imputed interest ( 19,624 ) ( 125,804 ) Total lease obligations 83,106 429,896 Less current obligations ( 20,714 ) ( 26,836 ) Long-term lease obligations $ 62,392 $ 403,060 76 Note 8 — 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. The Board of Directors has, to date, authorized additional expenditures for share repurchases when the authority is exhausted. The Company suspended stock repurchases upon the onset of the pandemic through September 30, 2022, as part of accepting benefits from the U.S. Treasury under the Payroll Support Programs. Since fourth quarter 2022, the Company is no longer subject to this restriction and has resumed repurchasing shares when advantageous opportunities arise. Share repurchases consisted of the following during the periods indicated: Year Ended December 31, 2024 2023 2022 Shares repurchased (1) — 309,155 377,529 Average price per share $ — $ 78.61 $ 78.94 Total (in thousands) $ — $ 24,303 $ 29,802 (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 95,014 , 65,284 , and 1,423 shares (not in thousands) for 2024, 2023, and 2022 respectively. Cash dividends declared by the Board of Directors and paid by the Company consisted of the following during the periods indicated: Year Ended December 31, 2024 2023 2022 Total quarterly cash dividends declared, per share $ 1.20 $ 1.20 $ — Total cash dividends paid (in thousands) 21,934 22,144 — The Company suspended payment of cash dividends upon the onset of the pandemic, and as part of accepting benefits from the U.S. Treasury under the Payroll Support Programs, the Company agreed not to pay cash dividends through September 30, 2022. The Company recommenced payment of cash dividends in the second half of 2023, but on July 8, 2024, the Company suspended its quarterly dividend indefinitely. 77 Note 9 — 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, U.S. treasury bonds, corporate debt securities and certificates of deposit, 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. Financial instruments measured at fair value on a recurring basis: As of December 31, 2024 As of December 31, 2023 (in thousands) Total Level 1 Level 2 Total Level 1 Level 2 Cash equivalents US Government and agency obligations $ 81,535 $ — $ 81,535 $ 10,201 $ — $ 10,201 Money market funds 41,494 41,494 — 33,613 33,613 — Commercial paper 22,689 — 22,689 19,575 — 19,575 Municipal debt securities 10,299 — 10,299 7,848 — 7,848 Corporate debt securities 4,133 — 4,133 — — — Total cash equivalents 160,150 41,494 118,656 71,237 33,613 37,624 Short-term Corporate debt securities 242,313 — 242,313 210,982 — 210,982 Commercial paper 149,807 — 149,807 237,870 — 237,870 US Government and agency obligations 94,295 — 94,295 208,648 — 208,648 Certificates of deposit 7,239 — 7,239 — — — Municipal debt securities 1,580 — 1,580 13,914 — 13,914 Total short-term 495,234 — 495,234 671,414 — 671,414 Long-term Corporate debt securities 39,931 — 39,931 43,869 — 43,869 US Government and agency obligations 10,452 — 10,452 12,135 — 12,135 Municipal debt securities 1,342 — 1,342 — — — Total long-term 51,725 — 51,725 56,004 — 56,004 Total financial instruments $ 707,109 $ 41,494 $ 665,615 $ 798,655 $ 33,613 $ 765,042 There were no significant transfers between Level 1 and Level 2 assets for the years ended December 31, 2024 or 2023. 78 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, 2024 As of December 31, 2023 (in thousands) Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Fair Value Level Non-publicly held debt $ 1,653,737 $ 1,667,275 $ 1,826,921 $ 1,815,351 3 Other Due to the short term nature, carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value. 79 Note 10 — Income Taxes The Company is subject to income taxation in the United States 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. The entirety of the Company's income before taxes is from its domestic operations. Income Tax Provision/(Benefit) The provision (benefit) for income taxes is composed of the following: Year ended December 31, (in thousands) 2024 2023 2022 Current: Federal $ 1,431 $ — $ 6 State ( 1,665 ) 3,306 73 Foreign 311 204 209 Total current 77 3,510 288 Deferred: Federal ( 62,244 ) 36,910 1,189 State ( 6,045 ) 1,035 983 Total deferred ( 68,289 ) 37,945 2,172 Total income tax provision $ ( 68,212 ) $ 41,455 $ 2,460 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) 2024 2023 2022 Income tax expense (benefit) at federal statutory rate $ ( 64,774 ) $ 33,401 $ 1,040 State income taxes, net of federal income tax benefit ( 7,168 ) 3,503 1,189 Foreign income tax expense 311 204 210 Executive compensation 2,707 3,692 57 Federal tax credits ( 1,135 ) ( 2,034 ) ( 1,103 ) Stock compensation 2,212 1,936 1,016 Other ( 365 ) 753 51 Total income tax expense (benefit) $ ( 68,212 ) $ 41,455 $ 2,460 80 Deferred Taxes The major components of the Company’s net deferred tax assets and liabilities are as follows: As of December 31, (in thousands) 2024 2023 Deferred tax assets: Employee benefits $ 38,277 $ 8,410 Interest expense 24,692 21,165 Net operating loss 6,252 22,237 Tax credits 3,683 4,128 Other 45,543 9,411 Less: valuation allowance 1,214 1,214 Total deferred tax assets 117,233 64,137 Deferred tax liabilities: Prepaid expenses 5,235 4,516 Depreciation 398,022 434,620 Other 29,569 9,603 Total deferred tax liabilities 432,826 448,739 Net deferred tax liabilities $ 315,593 $ 384,602 Net Operating Loss and Tax Credit Carryforwards At December 31, 2024, the Company recognized $ 6.3 million of tax-effected state net operating loss carryforwards. Under the current law, $ 1.8 million of the state net operating loss carryforward amounts do not expire and the remaining amounts expire between 2025 and 2043. Note 11— Related Party Transactions During the years ended December 31, 2024, 2023 and 2022, there were no related party transactions that required disclosure. 81 Note 12 — 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 up to 5 percent of eligible employee wages. The Company recognized expense under this plan of $ 28.9 million, $ 25.5 million, and $ 24.0 million for the years ended December 31, 2024, 2023 and 2022, 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 2022 Long-Term Incentive Plan (the "2022 Plan"). The 2022 Plan is administered by the 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"). The 2014 ESPP was extended for an additional ten years until October 2034 through an amendment and restatement of the ESPP ratified at the Company's 2024 annual meeting of stockholders. 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 2024, 2023, and 2022: Year Ended Total number of shares purchased in year Average price paid per share Weighted-average fair value of discount under the ESPP (1) December 31, 2022 73,268 $ 97.85 $ 16.25 December 31, 2023 99,802 $ 85.27 $ 14.44 December 31, 2024 155,101 $ 50.82 $ 8.84 (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. 15 percent is the maximum allowable discount under the ESPP. Compensation expense For the years ended December 31, 2024, 2023 and 2022, the Company recorded compensation expense of $ 24.0 million, $ 31.5 million and $ 16.3 million, respectively, related to stock compensation. Forfeiture rates are estimated at the time of grant based on historical actuals for similar grants and are reconciled to actuals over the vesting period. As of December 31, 2024, no stock options remain outstanding as options previously held by certain of the Company's executive officers have been forfeited or cancelled. 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. Most of the Company's unvested restricted stock awards, subject generally to the individual's continued employment or service, vest over a three year period. A summary of the status of non-vested restricted stock grants during the y ears ended December 31, 2024, 2023 and 2022 is presented below: Shares Weighted Average Grant Date Fair Value Per Share Non-vested at December 31, 2021 181,553 $ 183.63 Granted 374,540 89.31 Vested ( 74,170 ) 180.54 Forfeited ( 52,055 ) 123.01 Non-vested at December 31, 2022 429,868 $ 109.33 Granted 567,004 93.57 Vested ( 238,020 ) 119.00 Forfeited ( 151,459 ) 94.07 Non-vested at December 31, 2023 607,393 $ 94.64 Granted 223,825 51.12 Vested ( 321,281 ) 92.24 Forfeited ( 145,203 ) 92.91 Non-vested at December 31, 2024 364,734 $ 70.73 The total grant date fair value of restricted stock that vested during the years ended December 31, 2024, 2023 and 2022 was $ 29.6 million, $ 28.3 million and $ 13.4 million, respectively. Unrecognized compensation cost was $ 19.9 million as of December 31, 2024 for unvested restricted stock expected to be recognized over a weighted-average period of 2.09 years. Phantom stock awards During 2024, the Company granted phantom stock awards ("PSAs") to certain employees. The value of one PSA share is equal to the value of one share of the Company's common stock, and each grant is subject to a three-year graded vesting schedule. The awards are settled in cash at vesting, with compensation costs recognized over the vesting period and adjusted to market value at each period end. As of December 31, 2024, share-based compensation liability related to PSAs was $ 1.9 million, which is included in accrued liabilities in the Company's consolidated balance sheet. A summary of the status of non-vested PSA grants during the y ear ended December 31, 2024, is presented below. No PSAs have been granted prior to 2024. Phantom Stock Awards Weighted Average Fair Value Per Share (1) Non-vested at December 31, 2023 — — Granted 125,121 $ 46.15 Vested — — Forfeited ( 812 ) 46.15 Non-vested at December 31, 2024 124,309 $ 94.12 (1) Reflects grant date fair value, except for awards outstanding at December 31, 2024, which reflects fair value at that date. Unrecognized compensation cost was $ 8.9 million as of December 31, 2024 for unvested phantom stock awards expected to be recognized over a weighted-average period of 1.35 years. 82 Note 13 — 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 2025 to 2048. Refer to Note 7 for more information on the Company's lease agreements. As of December 31, 2024, the Company had outstanding purchase commitments for 46 aircraft which are expected to deliver from 2025 through 2027. 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, 2024 2025 $ 399,895 2026 721,437 2027 456,777 Total purchase commitments $ 1,578,109 Contingencies The Company is party to collective bargaining agreements with the employee groups listed below. As of December 31, 2024, the percentage of full-time equivalent employees for each of these pay groups was as follows: As of December 31, 2024 Pilots 20.5 % Flight Attendants 28.3 Maintenance Technicians 12.3 Flight Dispatchers 0.7 Total 61.8 % As of December 31, 2024, the Company employed approximately 6,700 full-time equivalent employees, 20.5 percent of whom (the pilots) are covered by collective bargaining agreements that are currently amendable and are i n negotiation. 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. 83 Note 14 — Operating 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 President and CEO, who assesses segment performance and makes resource allocation decisions using information about each operating segment's operating income and pretax income. The CODM reviews separate financial information and makes resource allocation decisions for the Company's two operating segments: Airline and Sunseeker Resort. 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. 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. Sunseeker Resort Segment The Sunseeker Resort segment operates as a single business unit and includes hotel rooms and suites for occupancy, group meeting facilities, food and beverage options, the Aileron Golf Course and other Resort amenities. Segment profit or loss, revenues, significant segment expenses, and other required financial information for each of the Company's operating segments are set forth below: 84 Twelve Months Ended December 31, 2024 (in thousands) Airline Sunseeker Consolidated REVENUES FROM EXTERNAL CUSTOMERS $ 2,440,839 $ 71,750 $ 2,512,589 OPERATING EXPENSES: Salaries and benefits 770,667 49,176 819,843 Aircraft fuel 627,755 — 627,755 Station operations 272,843 — 272,843 Depreciation and amortization 231,789 26,462 258,251 Maintenance and repairs 125,430 — 125,430 Sales and marketing 99,269 7,071 106,340 Aircraft lease rentals 23,573 — 23,573 Other operating expense (1) 102,007 48,392 150,399 Special charges, net of recoveries 45,307 322,824 368,131 Total operating expenses 2,298,640 453,925 2,752,565 OPERATING INCOME (LOSS) 142,199 ( 382,175 ) ( 239,976 ) OTHER (INCOME) EXPENSES: Interest income ( 44,012 ) — ( 44,012 ) Interest expense 135,584 20,859 156,443 Capitalized interest ( 45,059 ) ( 326 ) ( 45,385 ) Other non-operating expense (2) 1,428 — 1,428 INCOME (LOSS) BEFORE INCOME TAXES $ 94,258 $ ( 402,708 ) $ ( 308,450 ) Capital expenditures 244,802 19,499 264,301 Total assets 4,116,289 313,564 4,429,853 Twelve Months Ended December 31, 2023 (in thousands) Airline Sunseeker Consolidated REVENUES FROM EXTERNAL CUSTOMERS $ 2,506,976 $ 2,881 $ 2,509,857 OPERATING EXPENSES: Salaries and benefits 672,459 15,344 687,803 Aircraft fuel 695,871 — 695,871 Station operations 256,560 — 256,560 Depreciation and amortization 220,915 2,215 223,130 Maintenance and repairs 123,802 — 123,802 Sales and marketing 108,453 6,163 114,616 Aircraft lease rentals 24,948 — 24,948 Other operating expense (1) 117,400 16,101 133,501 Special charges, net of recoveries 35,091 ( 6,446 ) 28,645 Total operating expenses 2,255,499 33,377 2,288,876 OPERATING INCOME (LOSS) 251,477 ( 30,496 ) 220,981 OTHER (INCOME) EXPENSES: Interest income ( 46,615 ) — ( 46,615 ) Interest expense 131,318 21,868 153,186 Capitalized interest ( 21,838 ) ( 23,294 ) ( 45,132 ) Other non-operating expense (2) 491 — 491 INCOME (LOSS) BEFORE INCOME TAXES $ 188,121 $ ( 29,070 ) $ 159,051 Capital expenditures 568,309 321,044 889,353 Total assets 4,200,545 656,122 4,856,667 85 Twelve Months Ended December 31, 2022 (in thousands) Airline Sunseeker Consolidated REVENUES FROM EXTERNAL CUSTOMERS $ 2,301,829 $ — $ 2,301,829 OPERATING EXPENSES: Salaries and benefits 547,295 5,118 552,413 Aircraft fuel 814,803 — 814,803 Station operations 255,168 — 255,168 Depreciation and amortization 197,433 109 197,542 Maintenance and repairs 117,814 — 117,814 Sales and marketing 99,558 1,120 100,678 Aircraft lease rentals 23,621 — 23,621 Other operating expense (1) 108,600 4,932 113,532 Special charges, net of recoveries 567 34,045 34,612 Total operating expenses 2,164,859 45,324 2,210,183 OPERATING INCOME (LOSS) 136,970 ( 45,324 ) 91,646 OTHER (INCOME) EXPENSES: Interest income ( 16,469 ) — ( 16,469 ) Interest expense 99,665 16,046 115,711 Capitalized interest ( 4,308 ) ( 8,332 ) ( 12,640 ) Other non-operating expense (2) 91 — 91 INCOME (LOSS) BEFORE INCOME TAXES $ 57,991 $ ( 53,038 ) $ 4,953 Capital expenditures 475,254 288,408 763,662 Total assets 4,047,134 464,163 4,511,297 (1) Other operating expenses in the Airline segment consist of insurance, crew training and travel, legal expense, gains and losses on the sale of flight equipment, and other general and administrative expenses. Other operating expenses in the Sunseeker segment consist of food and beverage cost of goods sold, contract labor, property tax, insurance, and other general and administrative expense. (2) Other non-operating expenses in the Airline segment consist primarily of a loss on the sale in 2024 of a cost-method investment that arose from the contribution of intellectual property rights to a private company and realized income from equity method investments. 86 Note 15 — Impairment During the year ended December 31, 2024, Sunseeker Resort, along with the associated Aileron Golf Course and related assets, which consist primarily of land, buildings, and other furniture, fixtures, and equipment, incurred both an operating loss and a cash flow deficit, prompting multiple downward revisions to forecasts projecting continuing losses. Consequently, the Company engaged an advisor to conduct a strategic review of the Resort with the aim of enhancing financial performance and ultimately facilitating a sale. In fourth quarter 2024, the Company began to solicit proposals for the sale of the Resort or a majority interest in it. As a result, it is more likely than not that the Resort or a majority interest in it will be sold before the end of its previously estimated useful life. These circumstances constituted a triggering event, necessitating an impairment test for the long-lived assets. In accordance with ASC 360, "Property, Plant, and Equipment," the Company performed an undiscounted cash flow test and concluded that the carrying value of the long-lived assets was not recoverable. The estimated fair value of the assets was determined using a discounted cash flow model. The determination of fair value involved significant assumptions and estimates, including the discount rate, projected hotel revenue growth rates, and the terminal capitalization rate. Consequently, an impairment loss of $ 321.8 million was recorded at the end of fourth quarter 2024 to reflect the difference between the carrying values of these assets and their fair values. The impairment loss is included in special charges in the consolidated statement of income for the year ended December 31, 2024. 87 Note 16 — Subsequent Events In January 2025, the Company drew down $ 50.0 million from one of its existing revolving credit facilities. Amounts borrowed under this facility bear interest at a floating rate based on the Secured Overnight Financing Rate ("SOFR"). The facility matures in March 2026. In January and February 2025, the Company drew down $ 131.0 million on existing aircraft financing commitments. The facilities bear interest at a floating rate based on the SOFR and are payable in monthly installments through January and February 2037. In February 2025, the Company repaid $ 61.0 million on an existing unsecured credit facility. In February 2025, the Company repaid the full remaining balance of $ 100.0 million on the Sunseeker construction loan. The original loan, secured by the Resort and bearing interest at 5.75 percent per annum, was scheduled to mature in October 2028, with semi-annual principal payments of $ 26.0 million beginning in 2025. 88 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.