What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-03-03 · 175 added, 130 removed, 205 unchanged (60% of the section changed)

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2025 Highlights

• Took delivery of our first four newly manufactured Boeing 737 MAX aircraft and inducted them into service with promising early performance

• Total operating revenue of $2.5 billion, up 0.1 percent year-over-year

• Record total average ancillary fare of $75.83 per passenger, up 4.0 percent from 2023

• Average third party products fare was $8.48 per passenger, up 29.1 percent year-over-year

• Restored utilization to near 2019 levels during the peak December 2024 holiday period

• Ancillary revenue increased as a result of progress on commercial initiatives such as Allegiant Extra, third party travel insurance and restoration of a third bundle of ancillary products

• Recorded $80.7 million in fixed fee revenue, up 17.7 percent compared to the prior year's Company record breaking high

• $134.7 million in total co-brand credit card remuneration, up 12.7 percent from the prior year

• As of December 31, 2024, we had approximately 545,000 total Allegiant Allways Rewards Visa cardholders

• Ended 2024 with approximately 18 million total active Allways Rewards members

• In April 2024, ratified a new five-year agreement with the Transport Workers Union of America, AFL-CIO Local 577, representing Allegiant's flight attendants

◦ Agreement includes wage increases, certain quality-of-life improvements and a ratification bonus

• Published the 2023 Sustainability Report reaffirming the Company's sustainability goals

• Ranked third on the American Customer Satisfaction Index for Airlines, moving up from seventh in 2023

• Named best low-cost carrier in North America by Skytrax, the international air transport rating organization

• Named the number one Best Airline Credit Card for the sixth consecutive year and Best Frequent Flyer program in USA TODAY's 10Best 2024 Readers' Choice Awards

• Ranked number 4 among major US carriers in the Wall Street Journal's "The Best and Worst Airlines of 2024"

• Announced 44 new nonstop routes during the fourth quarter, tying the record for the largest expansion in Company history, including three new cities, of which 39 routes had no prior nonstop service

• Gregory Anderson assumed the role of chief executive officer and president in September 2024

• Completed our first full year of operations of Sunseeker Resort and engaged experienced hospitality advisors to pursue strategic alternatives with potential partners

• In January 2026, announced a definitive merger agreement under which Allegiant plans to acquire Sun Country Airlines

• Record total airline-only operating revenue of $2.5 billion, up 4.3 percent year-over-year

• Achieved controllable completion of 99.9% for the year

• Airline-only operating CASM, excluding fuel and special charges of 8.04 cents, down 6.1 percent as compared with full-year 2024, on capacity growth of 12.6 percent

• During the year, expanded the network by announcing 54 new routes, including service to eight new cities:

Atlantic City (NJ), Burbank (CA), Columbia (MO), Fort Myers (FL), Huntsville (AL), La Crosse (WI), Philadelphia (PA), and Trenton (NJ)

• Ranked 2nd best airline among major US carriers in the Wall Street Journal's "The Best and Worst Airlines of 2025"

• The only US Airline named by Newsweek as one of America's Most Loved Brands 2025

• Named Best Airline Credit Card by USA TODAY's Readers' Choice Awards for the seventh consecutive year and Best Frequent Flyer Program by USA TODAY's Readers' Choice Awards for the second consecutive year

• $139.6 million in total co-brand credit card remuneration received from Bank of America, up 3.6 percent from the prior year

• Ended the year with 21 million total active Allways Rewards members

• Completed the sale of Sunseeker Resort on September 4, 2025

• Published the company's fourth annual sustainability report

Operating Fleet

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Total 123 125 126

(1) Does not include one aircraft of which we have taken delivery as of December 31, 2023 and which was not in service as of that date.

(2) Includes 23 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2024 and December 31, 2023, and 20 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2022.

(3) Includes four aircraft under operating lease as of December 31, 2024, December 31, 2023, and December 31, 2022.

As of December 31, 2024, we are party to forward purchase agreements for 46 aircraft with nine deliveries expected in 2025, approximately 14 in 2026 and the remainder in 2027.

(1) Includes 23 aircraft under finance lease and 9 aircraft under operating lease as of December 31, 2025, and 23 aircraft under finance lease and 13 aircraft under operating lease as of December 31, 2024 and December 31, 2023.

As of December 31, 2025, excludes three aircraft under operating lease which have been removed from service pending redelivery.

(2) As of December 31, 2025, excludes three aircraft under operating lease which have been removed from service pending redelivery.

Includes four aircraft under operating lease as of December 31, 2024, and December 31, 2023.

As of December 31, 2025, we are party to forward purchase agreements for 34 aircraft with 11 deliveries expected in 2026, 15 in 2027, and the remainder in 2028.

The timing of these deliveries is based on management's best estimates and differs from the contract in place.

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Properties for further detail regarding our aircraft fleet.

We manage capacity and route expansion through optimization of our flight schedule to, among other things, better match demand in certain markets.

We continually adjust our network through the addition of new markets and routes, adjusting the frequencies into existing markets, and exiting under-performing markets, as we seek to achieve and maintain profitability on each route we serve.

We paused network growth in 2023 and 2024 due to flight crew constraints and aircraft delivery delays among other factors.

We aim to achieve meaningful growth with greater utilization of our fleet.

In November 2024, we announced 44 new routes and three new cities beginning in 2025 as we begin to pursue network growth in 2025 and after.

As of February 1, 2025, and including service announcements through that date, we were selling seats on 577 routes serving 122 cities in 42 states.

As of February 1, 2026, and including service announcements through that date, we were selling travel on 578 routes to 126 cities in 42 states.

These include 39 routes scheduled to begin service in 2026.

Network growth in the future will continue to be affected by timing of aircraft deliveries, aircraft in heavy maintenance, airport construction and disruptions, trends in domestic, leisure air travel demand and other factors.

We have identified over 1,400 incremental domestic nonstop routes as opportunities for future network growth, of which over 75 percent currently have no nonstop service.

Our total number of origination cities and leisure destinations were 91 and 35, respectively, as of February 1, 2026, including announced routes.

Our unique model is predicated on expanding and contracting capacity to meet seasonal leisure travel demands.

The following table shows the number of leisure destinations and cities served as of the dates indicated (includes cities served seasonally):

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Total routes 540 541 544

Proposed Acquisition of Sun Country Airlines

In January 2026, we entered into an agreement to acquire Sun Country subject to satisfaction of customary closing conditions, including each company's receipt of certain shareholder approvals and regulatory reviews and approvals.

Business - "Announced Acquisition of Sun Country Airlines." We believe the proposed transaction aligns with our long-term strategic objectives and is expected to enhance our network breadth, operational flexibility, and ability to respond to demand shifts, while supporting scheduled service, charter and cargo operations of both airlines.

We believe the combination of our two financially strong leisure carriers in the U.S.

will create benefits for customers, communities, employees, and partners by enhancing stability, expanding opportunities, and enabling continued investment and innovation.

There are several risks associated with whether or not the transaction will close and also with respect to future operations if the transaction does close.

Risk Factors - " Risks Related to our Proposed Acquisition of Sun Country Airlines Holdings, Inc.

” Future results of operations will be affected by the timing of regulatory approvals, integration considerations, transaction costs and other factors.

Business and Macroeconomic Conditions

Consumer confidence vacillated during 2025, which along with other macroeconomic and airline industry events, initially contributed to a general decline in consumer spending and, in particular, softened demand for domestic, leisure air travel.

Although demand fluctuates, macroeconomic uncertainty persists, driven by factors such as trade policies and tariffs.

These factors have impacted our fares, load factors, and profitability.

Our results of operations may continue to be impacted while these conditions persist.

We continue to monitor how these factors could impact our business and take steps to mitigate their effect on our business.

Aircraft Fuel

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We have not sought to use financial derivative products to hedge our exposure to fuel price volatility, nor do we have any plans to do so in the future.

Increasing Utilization

We are in the midst of an initiative to increase aircraft utilization back to 2019 levels by adding service to our schedule in our most profitable peak periods.

By way of example, our aircraft utilization rate was 9.8 hours per aircraft per day in July 2019 compared to 7.7 hours per aircraft per day in July 2024.

During the December 2024 holiday period, we matched our daily utilization from the corresponding period in 2019 and expect to continue the momentum to achieve this goal during our busiest periods of March, June and July 2025.

However, this effort is subject to various risks, some of which may not be under our control.

Elevated fuel costs in the future may impact our overall cost structure and operating results.

Boeing Agreement

We have signed an agreement and amendments with Boeing to purchase 50 newly manufactured 737 MAX aircraft with options to purchase up to an additional 80 737 MAX aircraft.

We took delivery of four MAX aircraft in 2024, with the aircraft entering revenue service before the end of the year.

We have taken delivery of 16 MAX aircraft from this order and all 16 aircraft are currently in revenue service.

We believe this new aircraft purchase is complementary with our low-cost strategy based on our intent to retain ownership of the aircraft, the longer useful life for depreciation purposes, and expected fuel savings and operational reliability from the use of these new aircraft.

In the interest of increased quality control at Boeing and its suppliers, the FAA has indicated aircraft production rates will be capped until they are satisfied with Boeing's quality practices.

These factors, other delays in Boeing obtaining needed regulatory approvals, and other factors impacting Boeing could delay deliveries to us even further than management's current expectations.

Although the contract provides for more deliveries, at this time, we currently expect nine aircraft to be delivered to us in 2025.

There continues to be regulatory focus on increasing quality control standards at Boeing and its suppliers with the aim of stabilizing aircraft production.

These factors and the requirements for Boeing to obtain routine and necessary regulatory approvals could delay deliveries to us beyond management's current expectations.

Although the contract provides for more deliveries, at this time, we currently expect eleven aircraft to be delivered to us in 2026.

Further delays in aircraft deliveries will impact our ability to schedule additional growth in late 2026 and beyond.

New Reservation System

During 2023, we converted to the Navitaire reservation system to replace our legacy home-grown system.

While we expect incremental passenger revenue once this system is fully implemented, we suffered some per passenger air ancillary revenue degradation (in the area of bundled ancillary products in particular) as certain functionality was unavailable during the transition.

We restored functionality around our third bundled product offering in late 2024 and will continue to devote resources to the transition issues.

We currently expect to regain all the lost per passenger revenue and begin to achieve some of the expected incremental per passenger revenue in 2026.

Union Negotiations

The collective bargaining agreement with our pilots has been amendable since 2021.

We and the International Brotherhood of Teamsters jointly requested the mediation services of the National Mediation Board in January 2023 to assist with the negotiations.

We and the International Brotherhood of Teamsters ("IBT") jointly requested the mediation services of the National Mediation Board in January 2023 to assist with the negotiations.

The mediation process with the NMB is continuing.

At this time, the announced acquisition of Sun Country has not changed the mediation process.

Separately from the ongoing collective bargaining agreement negotiations, to address retention and pilot pay issues and increase pilot staffing levels, effective in May 2023, we began accruing a retention bonus, with IBT's agreement, for pilots who continue employment with us until a new labor agreement is approved.

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We have identified more than 1,400 incremental routes as opportunities for future network growth, with approximately 75 percent of these additional routes having no current nonstop service.

Our ability to add significant numbers of new routes has been constrained in recent years by flight crew staffing, high fuel costs, economic conditions and other factors.

During 2025 and future periods, we expect to add meaningful capacity growth with greater utilization of our fleet (and, in particular, during peak demand periods) and with projected growth of the fleet after 2025.

Our ability to add significant numbers of new routes has been constrained in recent years by aircraft availability, flight crew staffing, high fuel costs, economic conditions and other factors.

During 2026, we expect to continue focusing on the strategic utilization of our fleet, particularly during peak demand periods with only minimal scheduled service growth expected at this time.

We anticipate that projected fleet growth after 2026 will provide additional flexibility to pursue network expansion opportunities.

Sunseeker Resort

Sunseeker Resort at Charlotte Harbor opened in December 2023.

As with many new hotels or resorts, Sunseeker's booking and occupancy rates are lower than more established properties.

In addition, occupancy during 2024 was compromised by three major hurricanes impacting the area in summer and fall 2024.

Sunseeker incurred significant operating losses in its first year of operations in 2024.

Although we are seeing improvement in recent months, we expect losses to continue in 2025.

Our customer reviews continue to be positive and we hope to build on that favorable customer sentiment to achieve better financial performance of the Resort in the future.

We have hired experienced advisors to begin a process to seek a capital partner to purchase the Resort or an interest in the Resort.

In the meantime, we have engaged experienced hospitality advisors to identify areas for improvement in an effort to optimize the value of this asset and evaluate strategic alternatives with potential partners.

These efforts are subject to many uncertainties and may not be successful.

VivaAerobus Alliance

In December 2021, we announced plans for a fully-integrated commercial alliance agreement with VivaAerobus, designed to expand options for nonstop leisure air travel between our markets in the United States and Mexico.

We and VivaAerobus submitted a joint application to the DOT requesting approval of, and antitrust immunity for, the alliance.

The DOT's review of our application is currently suspended pending the outcome of diplomatic engagement on broader treaty issues and, as a result, the timing of commencement of this service is uncertain as it will depend on when or if the DOT will ultimately approve the grant of antitrust immunity.

In September 2025, we completed the sale of Sunseeker Resort.

The sale aligns with our strategic focus on our core Airline operations.

Our Operating Expenses

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Salaries and benefits expense includes wages, salaries, employee bonuses and pilot retention bonus accruals, as well as expenses associated with employee benefit plans, stock compensation expense related to equity grants, and employer payroll taxes.

The CARES Act employee retention tax credit was recorded as an offset to salaries and benefits expense in 2022.

Aircraft fuel expense includes the cost of aircraft fuel, fuel taxes, into plane fees and airport fuel flowage, storage or through-put fees.

Salaries and benefits expense also includes such costs for Sunseeker Resort personnel through the sale of the Resort in September 2025.

Aircraft fuel expense includes the cost of aircraft fuel, fuel taxes, into plane fees and airport fuel flowage, storage or throughput fees.

Station operations expense includes the fees charged by airports for the use or lease of airport facilities and fees charged by third party vendors for ground handling services, commissary expenses, and other related services.

Station operations expense also includes most of our irregular operations costs.

Depreciation and amortization expense includes the depreciation of all owned fixed assets, including aircraft and engines, Sunseeker Resort assets, and assets recorded in connection with finance leases.

Depreciation and amortization expense includes the depreciation of all owned fixed assets, including aircraft and engines, Sunseeker Resort assets (until determined to be an asset held for sale in June 2025), and assets recorded in connection with finance leases.

Also included is the amortization of heavy maintenance expenses on our aircraft and engines, which are capitalized under the deferral method of accounting and amortized as a component of depreciation and amortization expense over the estimated period until the next scheduled major maintenance event.

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Also included are fees for repairs performed by third party vendors.

Sales and marketing expense includes all advertising, promotional expenses, sponsorships, travel agent commissions, debit and credit card processing fees associated with the sale of scheduled service and air-related ancillary charges, costs related to advertising and marketing for Sunseeker Resort, and credit card processing fees for Resort bookings.

Prior to the sale of Sunseeker Resort on September 4, 2025, sales and marketing expense also included costs related to advertising and marketing for the Resort, and credit card processing fees for Resort bookings.

Aircraft lease rentals expense consists of the cost of leasing aircraft under operating leases with third parties as well as the cost for sub-service which may be utilized in order to accommodate passengers in the event of operational disruption.

Other expense includes travel and training expenses for crews and ground personnel, facility lease expenses, professional fees, personal property taxes, information technology consulting, other expenses for Sunseeker Resort, the cost of passenger liability insurance, aircraft hull insurance and all other insurance policies, excluding employee welfare insurance.

Additionally, this expense includes gain and loss on disposals of aircraft and other equipment, and all other administrative and operational overhead expenses not included in other line items above.

Special charges include charges taken in 2024 for a bonus paid to flight attendants upon ratification of a new collective bargaining agreement, costs related to an organizational restructuring of certain administrative personnel, and an impairment charge taken on Sunseeker Resort and the related Aileron Golf Course.

Other special charges in 2024, 2023, and 2022 relate to accelerated retirements of 21 airframes for early retirement to coincide with planned 737 MAX aircraft deliveries and losses incurred by Sunseeker from the impact of hurricanes and other weather related events, net of insurance recoveries.

Other expense includes travel and training expenses for crews and ground personnel, facility lease expenses, professional fees, personal property taxes, information technology consulting, the cost of passenger liability insurance, aircraft hull insurance and all other insurance policies, excluding employee welfare insurance.

Additionally, this expense includes gains and losses on disposals of aircraft and other equipment, and all other administrative and operational overhead expenses not included in other line items above.

Special charges for 2025 include expenses related to organizational restructuring driven by reduced air travel demand amid heightened macroeconomic uncertainty, accelerated amortization and disposal of software identified for redevelopment, costs related to the proposed acquisition of Sun Country Airlines, and charges related to the sale of Sunseeker Resort.

Additional special charges in 2025, 2024, and 2023 include costs associated with the accelerated retirement of 24 airframes to align with planned 737 MAX aircraft deliveries, a ratification bonus for our flight attendants in 2024, an impairment charge in 2024 for Sunseeker Resort, as well as losses incurred at the Resort from hurricanes and other severe weather events, net of insurance recoveries.

RESULTS OF OPERATIONS

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Fixed fee contracts 77,647 80,660 (3.7)

Resort and other 72,742 4,333 NM

Resort and other 61,396 72,742 (15.6)

Total operating revenues $ 2,606,579 $ 2,512,589 3.7

NM - not meaningful

Passenger revenue.

Passenger revenue decreased 4.6 percent in 2024 compared to 2023 related to a 2.2 percent decrease in scheduled service passengers on a slight increase in capacity and a 6.3 percent decrease in scheduled service base fares which more than offset a 1.5 percent increase in air-related ancillary revenue per passenger.

Passenger revenue increased $107.3 million or 4.8 percent in 2025 compared to 2024, driven by a 10.5 percent increase in scheduled service passengers on a 13.1 percent increase in scheduled service departures.

The increase in scheduled service passengers was offset by a 5.3 percent decrease in scheduled service total fare, which largely resulted from a 12.3 percent decline in average base fare due to demand softness in the industry.

This decrease was partially offset by a 1.9 percent increase in average fare for air-related charges.

Over the last year, revenues for air-related charges have been bolstered by sales of our Allegiant Extra product.

Since December 31, 2024, we have configured an additional 31 aircraft with the extra legroom seating for our Allegiant Extra offering, bringing the total number to 87 aircraft as of December 31, 2025.

The restoration of functionality around our third party bundled product offering, which began in late 2024, has also contributed to ancillary revenue increases over the last year.

Third party products revenue.

Third party products revenue increased $1.1 million or 0.7 percent in 2025 compared to 2024.

The increase was driven by a $21.1 million increase in marketing revenue from our co-brand credit card and $10.1 million from a travel insurance offering introduced during 2024, partially offset by declines in revenues from sales of hotel rooms and rental cars.

The increase was driven by a $3.8 million increase in revenue from sales of a third party travel insurance product, as well as a $1.4 million increase from sales of rental cars.

These increases were partially offset by a $3.7 million decrease in the marketing component of co-brand revenue as certain bonus compensation was phased out in late 2024 and a decline in revenue from sales of hotel rooms.

Fixed fee contract revenue.

Fixed fee contract revenue increased 17.7 percent in 2024 compared to 2023 as the result of an 18.3 percent increase in fixed fee departures.

Increased fixed fee flying was primarily driven by military charters, which increased by 34.4 percent compared to the prior year.

Fixed fee contract revenue decreased $3.0 million or 3.7 percent in 2025 compared to 2024.

While fixed fee departures were consistent year over year, revenue per departure declined due to operating a higher proportion of ad-hoc charter flights, which generated lower fuel pass through contributions (the fuel pass throughs being accounted for as revenue) driven by the decrease in average fuel prices year over year.

Resort and other revenue.

Resort and other revenue increased $68.4 million in 2024 compared to 2023, primarily as the result of the opening of Sunseeker Resort in December 2023.

Resort revenue was $71.8 million in 2024 compared to $2.9 million in 2023.

Resort and other revenue decreased $11.3 million or 15.6 percent primarily due to the sale of Sunseeker Resort on September 4, 2025, resulting in approximately four fewer months of revenue included in 2025 compared to 2024.

Operating Expenses

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Airline operating CASM, excluding fuel and airline special charges.

Airline operating CASM, excluding fuel and airline special charges, increased by 5.4 percent to 8.56 ¢ for 2024 compared to 8.12 ¢ in 2023.

The CASM-ex increase is primarily attributable to a 13.4 percent increase in airline salaries and benefits expense on a per ASM basis (for the reasons described in the expense line item discussion below).

This increase was on relatively flat capacity as during 2024 we continued to incur significant labor costs for pilots trained to fly our Boeing 737 MAX aircraft while the aircraft deliveries were delayed.

Aircraft fuel expense.

Aircraft fuel expense decreased $68.1 million, or 9.8 percent, in 2024 compared to 2023.

The decrease was primarily driven by a 10.7 percent decrease in average fuel cost per gallon, offset by a 1.0 percent increase in gallons consumed on a 1.1 percent increase in total system ASMs.

Airline operating CASM, excluding fuel and airline special charges, decreased by 6.1 percent to 8.04 ¢ from 8.56 ¢ in 2024.

The primary driver of the CASM-ex decrease was a 12.6 percent increase in ASMs, as we grew into our existing infrastructure.

In particular, we achieved the increased capacity with no increase to the average number of aircraft in service.

A majority of expense line items were lower on a per ASM basis due in part to the increase in capacity.

With limited ASM growth currently expected in 2026, CASM-ex is expected to increase to some extent during the year.

Salaries and benefits expense.

Airline salaries and benefits expense increased $34.8 million or 4.5 percent in 2025 compared to 2024.

During 2024, we continued to incur significant labor costs for pilots trained to fly our Boeing 737 MAX aircraft while the aircraft deliveries were delayed, which contributed to a 6.2 percent increase in airline full-time equivalent employees ("FTEs").

Other factors contributing to the increase included pilot retention bonuses that we began to accrue in May 2023, for which there was a full year of accrual in 2024 versus only eight months in 2023, and increases in crew pay including increased pay rates under a new collective bargaining agreement with our flight attendants.

Salaries and benefits expense at Sunseeker Resort increased by $33.8 million due to a full year of operations in 2024 compared to a partial year in 2023.

The increase was primarily attributable to an increase in flight crew wages as the result of a 13.5 percent increase in total block hours flown resulting in part from our efforts to increase peak period utilization to pre-pandemic levels.

Additionally, average flight crew wages increased due to an increase in average tenure.

These increases were partially offset by savings from the organizational restructuring implemented in April 2025.

Salaries and benefits expense at Sunseeker Resort decreased by $21.6 million or 43.9 percent primarily due to the sale of the Resort on September 4, 2025, resulting in approximately four fewer months of expense included in 2025 compared to 2024.

In addition, during the period prior to the sale, average full-time equivalent employees declined as certain functions were outsourced and staffing levels were strategically adjusted to align with operational needs.

Aircraft fuel expense.

Aircraft fuel expense increased $12.0 million or 1.9 percent in 2025 compared to 2024.

The increase was primarily driven by a 10.4 percent increase in fuel gallons consumed, attributable to a 12.6 percent increase in total system ASMs.

This increase was partially offset by a 7.6 percent decrease in average fuel cost per gallon.

Fuel efficiency improved by 1.9 percent year over year.

Station operations expense.

Station operations expense increased $24.7 million or 9.1 percent in 2025 compared to 2024.

This increase was primarily driven by a $6.2 million increase in building rent stemming primarily from base expansions and a $4.6 million increase in passenger compensation attributable in large part to the CrowdStrike outage in July 2024.

Increases in airport and landing fees on a 0.9 percent increase in departures also contributed to the change.

The increase was primarily driven by a 12.7 percent year-over-year increase in total system departures that resulted in a corresponding rise in airport and landing fees, ground handling, deicing costs, and other stations-related expenses.

In addition, station operations expense increased due to higher rent expense resulting from rate increases at multiple stations.

These increases were partially offset by a reduction in passenger compensation expense resulting from fewer irregular operations events compared to the prior year as our controllable completion increased to 99.9 percent in 2025.

Depreciation and amortization expense.

Airline depreciation and amortization expense increased $10.9 million, or 4.9 percent, in 2024 compared to 2023 as the result of increases in deferred heavy maintenance amortization as well as increases in capitalized software amortization resulting from the airline's implementation of new enterprise resource planning ("ERP") systems including SAP, Navitaire, and Trax during 2023 and 2024.

Sunseeker Resort depreciation and amortization increased by $24.2 million in 2024 compared to 2023 as the result of only a partial year of expense in 2023 due to the Resort opening in December 2023.

Airline depreciation and amortization expense increased $10.2 million or 4.4 percent in 2025 compared to 2024.

This increase was primarily attributable to the addition of 12 new aircraft from our 737 MAX order, which were placed into service during 2025.

Additionally, there was an increase in software amortization resulting from the airline's implementation of new enterprise resource planning systems throughout 2024 and 2025.

These increases were partially offset by decreases in depreciation and heavy maintenance amortization associated with the retirement of six Airbus airframes during 2025.

Sunseeker Resort depreciation and amortization decreased by $19.3 million in 2025 compared to 2024.

Depreciation of the Resort's assets ceased upon meeting held-for-sale classification criteria in June 2025.

In addition, depreciation expense recorded during the first half of 2025 was lower than the same period in 2024 as a result of an impairment charge recorded in fourth quarter 2024 which reduced the carrying amount of Resort assets.

Maintenance and repairs expense.

Maintenance and repairs expense increased by $1.6 million or 1.3 percent in 2024 compared to 2023, which remained flat on a per ASM basis.

Maintenance and repairs expense increased by $24.5 million or 19.5 percent in 2025 compared to 2024, primarily as the result of the 12.6 percent increase in capacity.

The increase was further driven by higher volumes of certain rotable part repairs and expendable consumption, as well as an increase in drop-in engine repairs during

Maintenance and repairs expense was also impacted by tariffs and repairs to aircraft that we plan to return from operating leases.

Sales and marketing expense.

Airline sales and marketing expense decreased by $9.2 million or 8.5 percent in 2024 compared to 2023 primarily as the result of the discontinuation of a marketing agreement in 2024 and a fee incurred for transitioning our co-brand credit card to a new payment network in 2023 that was not present in 2024.

Credit card processing fees also decreased in line with a 4.6 percent decrease in passenger revenue compared to 2023.

Sunseeker Resort sales and marketing expense increased by $908.0 thousand or 14.7 percent in 2024 compared to 2023 as the result of increased marketing efforts after the Resort's opening.

Airline sales and marketing expense decreased by $4.2 million or 4.2 percent in 2025 compared to 2024 driven by a decrease in sponsorship expenses and a decrease in credit card processing fees.

Notably, credit card processing fees decreased year over year, despite an increase in passenger revenue.

We have made strategic efforts throughout the year to manage card processing fees, including adding a new payment option for our customers and migrating to a lower-fee card processor for our buy-on-board transactions.

Sunseeker Resort sales and marketing expense decreased by $2.7 million or 37.9 percent in 2025 compared to 2024 primarily due to the sale of Sunseeker Resort on September 4, 2025, resulting in approximately four fewer months of expense included in the year ended December 31, 2025 compared to 2024.

Aircraft lease rentals.

Aircraft lease rental expense increased $12.9 million or 54.8 percent in 2025 compared to 2024.

The increase is attributable to estimated lease return costs we began to accrue in second quarter 2025 for certain aircraft on operating leases related to redeliveries in 2025 and future years.

Other operating expense.

Airline other operating expense decreased by $15.4 million or 13.1 percent in 2024 compared to 2023 as the result of gains on opportunistic sales of spare flight equipment, which decrease was partially offset by increases in software licenses, crew travel, and property taxes.

Sunseeker Resort other operating expense increased $32.3 million in 2024 compared to 2023 as the result of only a partial year of expense in 2023 due to the opening of the Resort in December 2023.

The increase at the Resort includes $14.1 million related to insurance and property taxes and $8.3 million in food and beverage cost of sales, with other general and administrative expenses driving the remaining change.

Airline other operating expense decreased by $9.7 million or 9.5 percent in 2025 compared to 2024, reflecting reductions across several expense categories as a result of continued cost-management initiatives.

These decreases were driven by lower corporate and crew travel, reduced crew administration and training costs, decreased legal expense, and lower corporate administrative costs during 2025.

Other operating expenses were also impacted by gains and losses on sales of assets in each year.

Sunseeker Resort other operating expense decreased $14.3 million or 29.6 percent in 2025 compared to 2024 primarily due to the sale of Sunseeker Resort on September 4, 2025, resulting in approximately four fewer months of expense included in the year ended December 31, 2025 compared to 2024.

Special charges.

Airline special charges were $45.3 million in 2024 compared to $35.1 million in 2023.

2024 airline special charges included $31.1 million of accelerated depreciation on airframes identified for early retirement, compared to $35.1 million in 2023.

2024 airline special charges also included a $10.8 million ratification bonus related to the new collective bargaining agreement with our flight attendants and a $3.4 million organizational restructuring charge.

Sunseeker Resort special charges in 2024 primarily consist of a $321.8 million impairment charge on the long-lived assets of the Resort recorded in fourth quarter 2024.

Other special charges in both 2024 and 2023 relate to hurricane damages and other weather-related events, offset by insurance recoveries during the period.

Refer to Note 15 in the consolidated financial statements for additional information regarding the impairment charge.

Income tax expense .

We recorded a $68.2 million tax benefit in 2024 compared to a $41.5 million tax expense during 2023.

The effective tax rates for 2024 and 2023 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes, executive compensation, and the impact of ASU 2016-09 related to share-based compensation.

Airline special charges were $43.5 million in 2025.

Special charges included $8.0 million of accelerated depreciation on airframes identified for early retirement, $12.1 million related to corporate restructuring charges, $19.3 million related to accelerated amortization and disposal of certain internal-use software designated for redevelopment, and $4.1 million for initial professional services and other costs related to the proposed acquisition of Sun Country.

Sunseeker Resort special charges were $94.2 million in 2025, which primarily related to the sale of the Resort and the associated Aileron Golf Course.

This included an asset write-down charge of $100.4 million, slightly offset by $2.1 million in other items and adjustments associated with the sale.

Special charges also included further offsets of $4.2 million for net insurance recoveries received during 2025, related to previous damage from weather events.

Refer to Note 15 in the consolidated financial statements for additional information on the sale of Sunseeker Resort.

Interest Expense and Income

Interest expense, net of interest income and capitalized interest, increased by $23.9 million or 35.6 percent, compared to 2024.

The increase was primarily driven by a $27.8 million decrease in capitalized interest resulting from the delivery of 12 aircraft from our 737 MAX order since December 31, 2024, as interest on the related acquisition debt is no longer eligible for capitalization.

In addition, we recognized $7.9 million of losses on debt extinguishment, primarily associated with the early repayment of various debt instruments during 2025, including $3.4 million related to the repayment of the Sunseeker construction loan, all of which are reflected in interest expense.

These increases were partially offset by a $14.1 million or 9.0 percent decrease in interest expense attributable to a lower average outstanding debt balance year over year and a reduction in the weighted‑average variable interest rate on our debt compared to 2024.

We recorded a $10.2 million tax benefit in 2025 compared to a $68.2 million tax benefit in 2024.

The effective tax rates for 2025 and 2024 differed from the statutory federal income tax rate of 21.0 percent primarily due to state income taxes and the impact of permanent tax differences.

2024 compared to 2023

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Current liquidity

Cash, cash equivalents and investment securities (short-term and long-term) decreased to $832.9 million at December 31, 2024, from $870.7 million at December 31, 2023.

Cash, cash equivalents and investment securities (short-term and long-term) increased to $838.5 million at December 31, 2025, from $832.9 million at December 31, 2024.

Investment securities represent highly liquid marketable securities which are available-for-sale.

As of December 31, 2024, we had $275.0 million of undrawn capacity under revolving credit facilities plus another $25.1 million of undrawn capacity under a PDP financing facility and $218.5 million under prearranged aircraft financing facilities.

Restricted cash represents escrowed funds under fixed fee contracts, escrowed project funds and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties.

As of December 31, 2025, we had $250.0 million of undrawn capacity under revolving credit facilities, plus another $25.1 million of undrawn capacity under a PDP financing facility.

Restricted cash represents escrowed funds under fixed fee contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties.

Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us.

The prepayments are escrowed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability until the flight is completed.

We reinstituted a regular cash dividend in third quarter 2023 at an annual rate of $2.40 per share, payable quarterly.

The quarterly cash dividend was subsequently suspended in July 2024 for an indefinite period of time.

We resumed our share repurchases in fourth quarter 2022 but we did not repurchase any shares on the open market during 2024.

We had $75.7 million of unused authority at December 31, 2024.

We believe we have more than adequate liquidity resources through our cash, cash equivalent and short term investment balances, financing commitments, our undrawn capacity under existing credit facilities, operating cash flows and anticipated access to liquidity, to meet our current contractual obligations and remain in compliance with the debt covenants in our existing financing agreements for the next 12 months.

We will continue to consider raising funds through debt financing to finance aircraft purchases and also on an opportunistic basis.

The prepayments are escrowed until the flight is completed and are recorded as restricted cash with a corresponding amount reflected as air traffic liability.

Our operating cash flows and long-term debt borrowing have allowed us to invest in our fleet renewal.

Future capital needs are primarily for the acquisition of additional aircraft, including our existing aircraft commitments, and for the proposed acquisition of Sun Country and related expenditures.

Our share repurchase authority at December 31, 2025 is $64.7 million.

During the first quarter of 2025, we made $11.0 million of open market share repurchases.

We did not repurchase any shares on the open market during the second, third, or fourth quarters of 2025.

We have indefinitely suspended our quarterly cash dividend in anticipation of upcoming capital needs related to our fleet investments.

We believe we have more than adequate liquidity resources through our cash, cash equivalents and short term investment balances, financing commitments, our undrawn capacity under existing credit facilities, operating cash flows and anticipated access to liquidity, to meet our current contractual obligations and remain in compliance with the debt covenants in our existing financing agreements for the next 12 months.

We will continue to consider raising funds through debt financing as needed to fund capital expenditures.

Our debt and finance lease obligations balance, without reduction for related issuance costs, decreased from $2.08 billion as of December 31, 2024 to $1.82 billion as of December 31, 2025.

During 2024, we borrowed $387.0 million at variable rates.

Additionally, we made principal payments of $585.5 million, including a partial prepayment of $250.0 million of principal of our Sunseeker construction loan.

As of December 31, 2024, we had $275.0 million undrawn and available under our revolving credit facilities.

During 2025, we borrowed $638.9 million of which $589.0 million was secured by aircraft and aircraft related assets.

Additionally, we made principal payments (scheduled principal payments and prepayments) totaling $906.3 million, including $390.2 million of the principal amount of facilities secured by aircraft and aircraft-related assets, $147.0 million of the principal amount of our Senior Secured Notes, a $100.0 million prepayment of the remaining principal balance of our Sunseeker construction loan, and $263.1 million related to our unsecured debt and PDP financing.

As of December 31, 2025, approximately 58.8 percent of our debt and finance lease obligations are fixed-rate.

Sources and Uses of Cash

Operating Activities.

Operating cash inflows are primarily derived from providing air transportation and related ancillary products and services to customers.

During 2024, our operating activities provided $338.5 million of cash compared to $423.1 million during 2023.

This change was primarily attributable to a $109.3 million decrease in airline operating income as well as a full-year operating loss from Sunseeker Resort compared to 2023 with offsets for changes in individual current asset and liability items.

During 2025, we generated cash flows from operations of $389.8 million, compared to $338.5 million during 2024.

Our operating cash flows are impacted by the following factors:

Advance Ticket Sales.

Tickets for air travel are typically purchased in advance of the travel date.

When we receive a cash payment at the time of booking, we record the cash received as deferred revenue in air traffic liability.

When the flight is flown, we recognize the liability from air traffic liability into revenue.

Due to the seasonal nature of our operations, our air traffic liability balances will fluctuate in line with our peak flying seasons.

Salaries and Benefits.

Salaries and benefits expense represents our single largest expense and has increased considerably in recent years.

Cash payments for our salaries and benefits expense are typically made in the period that they are incurred with the exception of our pilot retention bonus, which will be paid to all pilots after ratification of a new collective bargaining agreement.

At December 31, 2025 and 2024, we have recorded a liability of $235.9 million and $146.1 million, respectively, in relation to the pilot retention bonus, including related payroll taxes.

Fuel expense is our second largest expense.

The market price for jet fuel is volatile, which can impact the comparability of our periodic cash flows from operations.

During 2025, we increased our year over year flying capacity by 12.6 percent , which led to a 10.4 percent increase in fuel gallons consumed and a $12.0 million increase in fuel expense.

This increase was partially offset by a 7.6 percent decrease in average fuel cost per gallon.

Investing Activities.

Cash provided by investing activities was $5.6 million during 2024 compared to cash used of $721.9 million in 2023.

During 2024, cash outflows for purchases of property and equipment decreased by $535.3 million, which includes a $307.1 million decrease in cash paid for aircraft pre-delivery deposits and a $235.7 million reduction in construction costs for Sunseeker Resort.

Also contributing to the change were a $110.6 million increase in proceeds from maturities of investment securities, net of purchases, a $59.6 million increase in proceeds from sales of flight equipment, and $50.0 million in proceeds from the repayment of a loan receivable.

Investments .

We hold various financial assets and will strategically purchase and sell these assets based on operational cash needs.

During 2025, we had $105.2 million of net investment purchases (net cash outflows) compared to $196.5 million of net investment maturities (net cash inflows) during 2024.

Capital Expenditures.

Capital expenditures for 2025 and 2024 (including aircraft pre-delivery deposits) were $387.6 million and $335.2 million, respectively.

In December 2021, we committed to purchase 50 Boeing 737 MAX aircraft, of which we began to receive delivery in September 2024.

During 2025, we took delivery of 12 aircraft, and as of December 31, 2025, we have firm commitments to purchase 34 more aircraft.

Proceeds from Sale of Assets.

During 2025, we received $266.7 million in proceeds from the sale of assets, which included $189.9 million from the sale of Sunseeker Resort, which was completed on September 4, 2025.

During 2024, proceeds from the sale of assets totaled $86.2 million.

Financing Activities.

Cash used in financing activities for 2024 was $201.3 million, compared to cash provided by financing activities of $212.9 million in 2023.

The change was primarily the result of a $104.7 million increase in principal payments on long term debt and finance lease obligations and a decrease of $255.6 million in proceeds from issuance of debt and finance leases.

The remaining change relates to an $84.0 million decrease in Sunseeker construction financing disbursements, which are the proceeds of Sunseeker insurance recoveries disbursed to us.

Long-Term Debt and Finance Leases.

During 2025 and 2024, we received proceeds of $638.9 million and $387.0 million, respectively, from issuances of new debt, driven by our aircraft acquisition activity.

In the same periods, we made principal payments (scheduled principal payments and prepayments) totaling $906.3 million and $585.5 million, respectively, on long term debt and finance lease obligations.

We had heightened debt repayment activity in 2025 due to the prepayment of the Sunseeker construction loan, refinancing of our pre-delivery deposit loans upon aircraft delivery, redemptions and repurchases (prepayments) of a portion of our 2027 Senior Secured Notes, and prepayments of other aircraft secured debt.

OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTRACTUAL OBLIGATIONS

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Total future payments under contractual obligations $ 880,386 $ 1,578,349 $ 514,449 $ 740,638 $ 3,713,822

(1) Long-term debt obligations (including variable interest entities) include scheduled interest payments, using applicable reference rates as of December 31, 2024, and exclude debt issuance costs.

(1) Long-term debt obligations (including variable interest entities) include scheduled interest payments, using applicable reference rates as of December 31, 2025, and excluding debt issuance costs.

(2) Includes aircraft and engine acquisition obligations under existing purchase agreements based on our current expectations of aircraft deliveries (which differs from the contractual provisions).

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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) the overall effect of trends in the airline and hospitality industries and the economy, asset utilization, average fare, block hours, fuel costs, fixed fee contracts, average daily rates, occupancy, cost of goods sold, group bookings, reserve for capital replacement, length of service the asset will be used in operations, and estimated salvage values.

In estimating the fair value of Sunseeker Resort using a discounted cash flow model, we have primarily relied upon current and projected future market information and input from other industry sources and third party experts in developing projections of growth rates, occupancy, average daily rates, operating costs, the discount rate, and the terminal capitalization rate.

Subsequent revisions to these estimates could be caused by changing market conditions in the region, hospitality industry, the economy, weather and related events and other factors.

In estimating the useful lives and residual values of our aircraft, we have primarily relied 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 our aircraft, changes in utilization of the aircraft, and other fleet events.

We classify assets as held for sale when the asset or asset group meets all of the accounting requirements to be classified as held for sale.

Assets held for sale and any related liabilities are presented as single asset and liability amounts on the balance sheet with a valuation allowance, if necessary, to reduce the carrying amount of the net assets to the lower of carrying amount or estimated fair value less cost to sell.

Estimates are required to determine the fair value and the related disposal costs.

The estimated fair value is generally based on solicited offers or a discounted cash flow model.

During second quarter 2025, we determined that Sunseeker Resort met all of the held for sale accounting criteria.

In estimating the fair value of Sunseeker Resort, we relied on an agreed-upon transaction price as the best indicator of the Resort's fair value.

The sale of the Resort was completed on September 4, 2025.

RECENT ACCOUNTING PRONOUNCEMENTS

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What changed 10-K

Item 7. Management’s Discussion and Analysis