REPUBLIC AIRWAYS HOLDINGS INC. 10-Q

Item 3. Quantitative And Qualitative Disclosures About Market Risk Aircraft Fuel Pursuant to our capacity purchase agreements, American Airlines, Delta Air Lines, and United Airlines have agreed to materially bear the economic risk of fuel price fluctuations on our contracted flights. Interest Rates 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. The majority of our long-term debt portfolio is currently protected from this risk, as approximately 84% of our debt is at a fixed rate. 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. 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. Changes in prevailing market interest rates may impact the actual cost to obtain financing on these assets. 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. A hypothetical 50 basis point change in market interest rates would not have a material effect on our financial results. Labor and Inflation Risk The global economy has experienced, and continues to experience, high rates of inflation. 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. 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. Wages and benefits expenses represented 48.0% of our total operating expenses for the six months ended June 30, 2026. For illustrative purposes, a hypothetical increase of 25% of our wages and benefits during the six months ended June 30, 2026, would have increased our operating expenses by approximately $118 million. 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. 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 revenues and operating inefficiencies, such as incremental new-hire training costs, and could harm our business, financial condition, and operating results.