QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: We are subject to market risks in the ordinary course of our business.
−Removed: These risks include interest rate risk and, on a limited basis, commodity price risk with respect to foreign exchange transactions.
−Removed: The adverse effects of changes in these markets could pose a potential loss as discussed below.
−Removed: The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes.
−Removed: Actual results may differ.
−Removed: Interest Rate Risk.
−Removed: We are subject to market risk associated with changing interest rates on our variable rate long-term debt;
−Removed: the variable interest rates are based on SOFR.
−Removed: The interest rates applicable to variable rate notes may rise and increase the amount of interest expense on our variable rate long-term debt.
−Removed: We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates.
−Removed: As of September 30, 2024, we had $217.4 million of variable rate debt including current maturities.
−Removed: A hypothetical 100 basis point change in market interest rates would have increased interest expense by approximately $2.2 million in our fiscal year ended September 30, 2024.
−Removed: As of September 30, 2024, we had $97.9 million of fixed rate debt, including current maturities.
−Removed: A hypothetical 100 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed rate debt instruments as of September 30, 2024.
−Removed: Foreign Currency Risk.
−Removed: We have de minimis foreign currency risks related to our station operating expenses denominated in currencies other than the U.S.
−Removed: dollar, primarily the Canadian dollar.
−Removed: Our revenue is U.S.
−Removed: dollar denominated.
−Removed: To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not had a formal hedging program with respect to foreign currency.
−Removed: A 10% increase or decrease in current exchange rates would not have a material effect on our financial results.
−Removed: Fuel Price Risk.
−Removed: Unlike other airlines, our CPA largely shelters us from volatility related to fuel prices, which are directly paid and supplied by United.
+Added: Aircraft Fuel
+Added: Pursuant to our capacity purchase agreements, American Airlines, Delta Air Lines, and United Airlines have agreed to bear the economic risk of fuel price fluctuations on our contracted flights.
+Added: Interest Rates
+Added: Our earnings and cash flows can be affected by changes in interest rates from interest expense on variable-rate debt instruments and interest income on marketable securities.
+Added: The majority of our long-term debt portfolio is currently protected from this risk, as 84.2% of our debt is at a fixed rate.
+Added: The effect to interest expense from increased market interest rates is expected to be offset by interest income available to us on our marketable securities, therefore having a minimal impact to our results of operations.
+Added: We currently have secured borrowings on a portion of the Aviation Campus and the ability to finance the remaining elements and the acquisition of aircraft through third-party leases or secured borrowings.
+Added: Changes in prevailing market interest rates may impact the actual cost to obtain financing on these assets.
+Added: To the extent that we place these aircraft in service under our CPAs, our reimbursement rates may not be adjusted to reflect any changes in underlying ownership costs.
+Added: A hypothetical 50 basis point change in market interest rates would not have a material effect on our financial results.
+Added: Labor and Inflation Risk
+Added: The global economy has experienced, and continues to experience, high rates of inflation.
+Added: We cannot predict how long these inflationary pressures will continue, or how they may change over time, but we expect to see continued impacts on the global economy and our Company.
+Added: As a result, our costs have become, and we expect they will continue to be, subject to inflationary pressures, and we may not be able to fully offset such higher costs through price increases under our CPAs.
+Added: Wages and benefits expenses represented 50.6% of our total operating expenses for the year ended December 31, 2025.
+Added: For illustrative purposes, a hypothetical increase of 25% of our wages and benefits during the year ended December 31, 2025, would have increased our operating expenses by approximately $190.7 million.
+Added: Our inability or failure to offset material increases in costs due to inflation and/or labor costs could harm our business, financial condition, and operating results.
+Added: Additionally, in the event we are unable to hire and retain qualified pilots and other operational personnel, including flight attendants and maintenance technicians, we may be unable to operate requested flight schedules under our CPAs, which could result in a reduction in revenue and operating inefficiencies, such as incremental new-hire training costs, and could harm our business, financial condition, and operating results.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.