Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aircraft Fuel
Prior to COVID-19, we did not experience significant difficulties with fuel availability. Recently, some of our fuel service providers have experienced logistical challenges transporting fuel to certain airports, that resulted in isolated levels of disruption to our operations. Although there is no assurance such challenges will not get worse in the future, we currently anticipate we will be able to obtain fuel at prevailing prices in quantities sufficient to meet our needs. Pursuant to our contract flying arrangements, United, Delta, American and Alaska agreed to bear the economic risk of fuel price fluctuations on our contracted flights. We bear the economic risk of fuel price fluctuations on our prorate operations. For the nine months ended September 30, 2021, approximately 16.1% of our total flying agreements revenue was derived from prorate agreements. For the nine months ended September 30, 2021, the average price per gallon of aircraft fuel was $2.37. For illustrative purposes only, we have estimated the impact of the market risk of fuel price fluctuations on our prorate operations using a hypothetical increase of 25% in the price per gallon we purchase. Based on this hypothetical assumption, we would have incurred an additional $19.4 million in fuel expense for the nine months ended September 30, 2021.
Interest Rates
As of September 30, 2021, our long-term debt had fixed interest rates. We currently intend to finance the acquisition of new aircraft through manufacturer financing or long-term borrowings. Changes in interest rates may impact the actual cost to us to acquire future aircraft. To the extent we place new aircraft in service under our capacity purchase agreements with United, Delta, American, Alaska or other carriers, our capacity purchase agreements currently provide that reimbursement rates will be adjusted to reflect the interest rates effective at the closing of the respective aircraft financing.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.