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Section 1: 10-Q (10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________________________________________________
Form 10-Q
_______________________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35186
_______________________________________________________________________
SPIRIT AIRLINES, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________
Delaware
38-1747023
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
2800 Executive Way
Miramar, Florida
33025
(Address of principal executive offices)
(Zip Code)

(954) 447-7920
(Registrant’s telephone number, including area code) 
_______________________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
(Do not check if a smaller reporting company)
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.     o
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  o    No  ý
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the close of business on April 17, 2019:
Class
 
Number of Shares
Common Stock, $0.0001 par value
 
68,438,785




Table of Contents
INDEX
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I. Financial Information
ITEM 1.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
Spirit Airlines, Inc.
Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
 
 
Three Months Ended March 31,
 
2019
 
2018
Operating revenues:
 
 
 
Passenger
$
838,065

 
$
689,141

Other
17,731

 
14,997

Total operating revenues
855,796

 
704,138

 
 
 
 
Operating expenses:
 
 
 
Aircraft fuel
229,636

 
204,646

Salaries, wages and benefits
203,901

 
155,096

Landing fees and other rents
59,649

 
49,630

Aircraft rent
45,782

 
50,191

Depreciation and amortization
50,726

 
39,373

Distribution
35,719

 
30,631

Maintenance, materials and repairs
31,604

 
29,710

Special charges

 
89,168

Loss on disposal of assets
1,913

 
848

Other operating
109,062

 
93,642

Total operating expenses
767,992

 
742,935

 
 
 
 
Operating income (loss)
87,804

 
(38,797
)
 
 
 
 
Other (income) expense:
 
 
 
Interest expense
24,971

 
17,849

Capitalized interest
(2,557
)
 
(2,252
)
Interest income
(6,924
)
 
(4,066
)
Other expense
233

 
133

Special charges, non-operating

 
9,201

Total other (income) expense
15,723

 
20,865

 
 
 
 
Income (loss) before income taxes
72,081

 
(59,662
)
Provision (benefit) for income taxes
16,005

 
(14,740
)
 
 
 
 
Net income (loss)
$
56,076

 
$
(44,922
)
Basic earnings (loss) per share
$
0.82

 
$
(0.66
)
Diluted earnings (loss) per share
$
0.82

 
$
(0.66
)
The accompanying Notes are an integral part of these Condensed Financial Statements.

1




Spirit Airlines, Inc.
Condensed Statements of Comprehensive Income (Loss)
(unaudited, in thousands)

 
Three Months Ended March 31,
 
2019
 
2018
Net income (loss)
$
56,076

 
$
(44,922
)
Unrealized gain (loss) on short-term investment securities, net of deferred taxes of $39 and ($8)
130

 
(23
)
Interest rate derivative loss reclassified into earnings, net of taxes of $27 and $21
47

 
58

Other comprehensive income
$
177

 
$
35

Comprehensive income (loss)
$
56,253

 
$
(44,887
)

The accompanying Notes are an integral part of these Condensed Financial Statements.


2



Spirit Airlines, Inc.
Condensed Balance Sheets
(unaudited, in thousands)
 
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,122,139

 
$
1,004,733

Short-term investment securities
103,491

 
102,789

Accounts receivable, net
70,946

 
47,660

Aircraft maintenance deposits, net
129,838

 
106,901

Prepaid expenses and other current assets
90,346

 
83,383

Total current assets
1,516,760

 
1,345,466

 
 
 
 
Property and equipment:
 
 
 
Flight equipment
3,322,618

 
3,257,215

Ground property and equipment
201,579

 
191,661

Less accumulated depreciation
(369,405
)
 
(332,864
)
 
3,154,792

 
3,116,012

Operating lease right-of-use assets
1,046,262

 

Pre-delivery deposits on flight equipment
264,419

 
236,775

Long-term aircraft maintenance deposits
118,359

 
138,738

Deferred heavy maintenance, net
280,118

 
249,010

Other long-term assets
43,229

 
79,456

Total assets
$
6,423,939

 
$
5,165,457

 
 
 
 
Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
26,713

 
$
39,320

Air traffic liability
403,001

 
291,981

Current maturities of long-term debt and finance leases
173,413

 
163,557

Current maturities of operating leases
128,138

 

Other current liabilities
395,404

 
339,677

Total current liabilities
1,126,669

 
834,535

 
 
 
 
Long-term debt and finance leases, less current maturities
2,039,619

 
2,024,774

Operating leases, less current maturities
895,056

 

Deferred income taxes
366,854

 
355,141

Deferred gains and other long-term liabilities
18,085

 
22,503

Shareholders’ equity:
 
 
 
Common stock

7

 
7

Additional paid-in-capital
374,896

 
371,225

Treasury stock, at cost
(72,239
)
 
(67,016
)
Retained earnings
1,676,008

 
1,625,481

Accumulated other comprehensive income (loss)
(1,016
)
 
(1,193
)
Total shareholders’ equity
1,977,656

 
1,928,504

Total liabilities and shareholders’ equity
$
6,423,939

 
$
5,165,457

The accompanying Notes are an integral part of these Condensed Financial Statements.

3



Spirit Airlines, Inc.
Condensed Statements of Cash Flows
(unaudited, in thousands) 
 
Three Months Ended March 31,
 
2019
 
2018
Operating activities:

 

Net income (loss)
$
56,076

 
$
(44,922
)
Adjustments to reconcile net income to net cash provided by operations:

 

Losses reclassified from other comprehensive income
74


79

Share-based compensation
3,671

 
3,075

Amortization of deferred gains and losses and debt issuance costs
2,289

 
1,624

Depreciation and amortization
50,726

 
39,373

Deferred income tax expense (benefit)
11,647

 
(20,266
)
Loss on disposal of assets
1,913

 
848

Special charges, non-operating

 
9,201




 


Changes in operating assets and liabilities:


 
 
Accounts receivable
(23,285
)
 
(2,983
)
Aircraft maintenance deposits, net
(2,559
)
 
14,844

Long-term deposits and other assets
20,735

 
3,512

Deferred heavy maintenance, net
(44,161
)
 
(50,712
)
Accounts payable
(13,543
)
 
6,227

Air traffic liability
111,020

 
93,483

Other liabilities
30,712

 
117,779

Other
(164
)
 
(27
)
Net cash provided by operating activities
205,151

 
171,135

Investing activities:
 
 
 
Purchase of available-for-sale investment securities
(26,476
)

(30,853
)
Proceeds from the maturity of available-for-sale investment securities
26,085


30,504

Pre-delivery deposits on flight equipment, net of refunds
(37,913
)
 
(41,580
)
Capitalized interest
(2,276
)

(1,500
)
Assets under construction for others
(262
)
 

Purchase of property and equipment
(63,109
)
 
(237,221
)
Net cash used in investing activities
(103,951
)
 
(280,650
)
Financing activities:
 
 
 
Proceeds from issuance of long-term debt
59,706


227,128

Proceeds from stock options exercised

 
2

Payments on debt obligations
(37,901
)
 
(18,650
)
Payments on finance lease obligations
(239
)
 
(197
)
Reimbursement for assets under construction for others
262

 

Repurchase of common stock
(5,223
)
 
(959
)
Debt issuance costs
(399
)

(201
)
Net cash provided by financing activities
16,206

 
207,123

Net increase in cash and cash equivalents
117,406

 
97,608

Cash and cash equivalents at beginning of period
1,004,733

 
800,849

Cash and cash equivalents at end of period
$
1,122,139

 
$
898,457

Supplemental disclosures
 
 
 
Cash payments for:
 
 
 
Interest, net of capitalized interest
$
19,167

 
$
8,569

Income taxes paid, net of refunds
$
816

 
$
679

Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows for operating leases
$
47,577

 
$

Operating cash flows for finance leases
$
210

 
$

Financing cash flows for finance leases
$
29

 
$

Non-cash transactions:
 
 
 
Capital expenditures funded by finance lease borrowings
$
1,492


$
237,042

Capital expenditures funded by operating lease borrowings
$
128,191

 
$

The accompanying Notes are an integral part of these Condensed Financial Statements.

4



Spirit Airlines, Inc.
Condensed Statements of Shareholders’ Equity
(In thousands)

 
Three Months Ended March 31, 2018
 
Common Stock
 
Additional Paid-In-Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Balance at December 31, 2017
$
7

 
$
360,153

 
$
(65,854
)
 
$
1,469,732

 
$
(1,464
)
 
$
1,762,574

Share-based compensation

 
3,075

 

 

 

 
3,075

Repurchase of common stock

 

 
(959
)
 

 

 
(959
)
Proceeds from options exercised

 
2

 

 

 

 
2

Changes in comprehensive income

 

 

 

 
35

 
35

Net income (loss)

 

 

 
(44,922
)
 

 
(44,922
)
Balance at March 31, 2018
$
7

 
$
363,230

 
$
(66,813
)
 
$
1,424,810

 
$
(1,429
)
 
$
1,719,805


 
Three Months Ended March 31, 2019
 
Common Stock
 
Additional Paid-In-Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Balance at December 31, 2018
$
7

 
$
371,225

 
$
(67,016
)
 
$
1,625,481

 
$
(1,193
)
 
$
1,928,504

Effect of ASU No. 2016-02 implementation (refer to Note 2)

 

 

 
(5,549
)
 

 
(5,549
)
Share-based compensation

 
3,671

 

 

 

 
3,671

Repurchase of common stock

 

 
(5,223
)
 

 

 
(5,223
)
Proceeds from options exercised

 

 

 

 

 

Changes in comprehensive income

 

 

 

 
177

 
177

Net income

 

 

 
56,076

 

 
56,076

Balance at March 31, 2019
$
7

 
$
374,896

 
$
(72,239
)
 
$
1,676,008

 
$
(1,016
)
 
$
1,977,656



The accompanying Notes are an integral part of these Condensed Financial Statements.


5



Notes to Condensed Financial Statements
(unaudited)
1.
Basis of Presentation
The accompanying unaudited condensed financial statements include the accounts of Spirit Airlines, Inc. ("the Company"). These unaudited condensed financial statements reflect all normal recurring adjustments which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements of the Company and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on February 13, 2019.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect both the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.
The interim results reflected in the unaudited condensed financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations as demand is generally greater in the second and third quarters of each year. The air transportation business is also volatile and highly affected by economic cycles and trends.
2.
Recent Accounting Developments

Recently Adopted Accounting Pronouncements

Leases

The Company adopted ASU No. 2016-02, "Leases (Topic 842)," effective January 1, 2019. The Company adopted Topic 842 utilizing the modified retrospective adoption method with an effective date of January 1, 2019 and elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company's contracts are or contain leases, (2) lease classification and (3) initial direct costs. Therefore, the condensed financial statements for 2019 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company's historical accounting policy. This standard requires all lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, for all leases with a term greater than 12 months. The adoption of the new lease standard had a significant impact on the Company's condensed balance sheets due to the recognition of $1.0 billion of right-of-use assets for operating leases, $128.1 million of current maturities of operating leases and $895.1 million of operating leases, less current maturities. In addition, the Company recognized a $5.5 million cumulative effect adjustment, net of tax, to retained earnings. This adjustment was driven by the recognition of unamortized deferred gains and losses related to aircraft sale-leaseback transactions entered into in prior periods. Prior to the adoption of Topic 842, gains and losses on sale-leaseback transactions were generally deferred and recognized in income over the lease term. The accounting for finance leases is substantially unchanged. The adoption of Topic 842 did not have a significant impact on the Company's lease classification or a material impact on its statements of operations and liquidity. Additionally, adoption of Topic 842 did not have a material impact on the Company’s debt-covenant compliance under its current agreements. Refer to Note 9, Leases for information regarding the Company's adoption of Topic 842 and the Company's undiscounted future lease payments and the timing of those payments. 

Recently Issued Accounting Pronouncements Not Yet Adopted

Cloud Computing Arrangements

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software". This new standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification ("ASC") 350-40, "Accounting for Internal-Use Software", to determine which implementation costs to capitalize as assets and amortize over the term of the hosting arrangement or expense as incurred. This new standard is effective for public business entities in fiscal years beginning after December 15, 2019. Early

6



adoption is permitted, including during an interim period. Entities have the option to apply this standard prospectively to all implementation costs incurred after the date of adoption or retrospectively. The Company is evaluating this new standard, but does not expect it to have a significant impact on its financial statement presentation or results.

Accounting for Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses." The standard requires the use of an "expected loss" model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale securities and requires estimated credit losses to be recorded as allowances rather than as reductions to the amortized cost of the securities. This standard is effective for the Company for fiscal years, and interim periods within those years, beginning January 1, 2020, with early adoption permitted. The Company is evaluating the new guidance, but does not expect it to have a material impact on its financial statements.

3.
Revenue
Operating revenues is comprised of passenger revenues, which includes fare and non-fare revenues, and other revenues. The following table shows disaggregated operating revenues for the first quarter of 2019 and 2018.
 
Three Months Ended March 31,
 
2019
 
2018
 
(in thousands)
Operating revenues:
 
 
 
Fare
$
416,345

 
$
342,695

Non-fare
421,720

 
346,446

Total passenger revenues
838,065

 
689,141

Other
17,731

 
14,997

Total operating revenues
$
855,796

 
$
704,138



The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by geographic region as defined by the Department of Transportation (DOT) area are summarized below:
 
Three Months Ended March 31,
 
2019

2018
 
(in thousands)
DOT—Domestic
$
753,100


$
647,807

DOT—Latin America
102,696


56,331

Total
$
855,796


$
704,138

The Company defers the amount for award travel obligation as part of loyalty deferred revenue within air traffic liability (ATL) on the Company's condensed balance sheets and recognizes loyalty travel awards in passenger revenue as the mileage credits are used for travel. As of March 31, 2019 and December 31, 2018, the Company had ATL balances of $403.0 million and $292.0 million, respectively. The remaining ATL balance as of March 31, 2019 is expected to be recognized during the remainder of 2019.

7




4.
Special Charges

Special Charges, Operating

During the three months ended March 31, 2019, the Company had no special charges, operating in the statement of operations.

During the first quarter of 2018, the Company negotiated and amended the collective bargaining agreement with the Air Line Pilots Association, International ("ALPA"), under the guidance of the National Mediation Board ("NMB"). In connection with the amended agreement, the Company recorded a one-time ratification incentive of $80.7 million, including payroll taxes, and an $8.5 million adjustment related to other contractual provisions. These amounts totaling $89.2 million were recorded in special charges within operating expenses in the condensed statement of operations for the three months ended March 31, 2018.

    
Special Charges, Non-Operating

During the three months ended March 31, 2019, the Company had no special charges, non-operating within other (income) expense in the statement of operations.

During the three months ended March 31, 2018, the Company recorded $9.2 million in special charges, non-operating within other (income) expense in the statement of operations. On March 28, 2018, the Company entered into an aircraft purchase agreement for the purchase of 14 A319 aircraft previously operated under operating leases by the Company. The aggregate gross purchase price for the 14 aircraft was $285.0 million, and the price for each aircraft at the time of the sale was comprised of a cash payment net of the amount of maintenance reserves and security deposits for such aircraft held by the applicable lessor pursuant to the lease for such aircraft. The contract was deemed a lease modification which resulted in a change of classification from operating leases to finance leases for the 14 aircraft. During the first quarter of 2018, the finance lease assets were recorded at the lower of cost or fair value of the aircraft within flight equipment on the condensed balance sheets. During the second quarter of 2018, the purchase of the 14 aircraft was completed and the obligation was accreted up to the net cash payment price with interest charges recognized in special charges, non-operating in the statement of operations. The Company determined the valuation of the aircraft based on third-party appraisals considering the condition of the aircraft (a Level 3 measurement). 

5.
Earnings (Loss) per Share
The following table sets forth the computation of basic and diluted earnings (loss) per common share:
 
 
Three Months Ended March 31,
 
2019
 
2018
 
(in thousands, except per share amounts)
Numerator
 
 
 
Net income (loss)
$
56,076

 
$
(44,922
)
Denominator
 
 
 
Weighted-average shares outstanding, basic
68,380

 
68,222

Effect of dilutive stock awards
136

 

Adjusted weighted-average shares outstanding, diluted
68,516

 
68,222

Earnings (loss) per share
 
 
 
Basic earnings (loss) per common share
$
0.82

 
$
(0.66
)
Diluted earnings (loss) per common share
$
0.82

 
$
(0.66
)
 
 
 
 
Anti-dilutive weighted-average shares
159


324




8



6.
Short-term Investment Securities

The Company's short-term investment securities are classified as available-for-sale and generally consist of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. These securities are stated at fair value within current assets on the Company's condensed balance sheets. Realized gains and losses on sales of investments, if any, are reflected in non-operating income (expense) in the condensed statements of operations.

As of March 31, 2019 and December 31, 2018, the Company had $103.5 million and $102.8 million in short-term available-for-sale investment securities, respectively. During the three months ended March 31, 2019, these investments earned interest income at a weighted-average fixed rate of approximately 2.5%. For the three months ended March 31, 2019, an unrealized gain of $130 thousand, net of deferred taxes of $39 thousand, was recorded within accumulated other comprehensive income ("AOCI") related to these investment securities. For the three months ended March 31, 2018, an unrealized loss of $23 thousand, net of deferred taxes of $8 thousand, was recorded within AOCI related to these investment securities. The Company has not recognized any realized gains or losses related to these securities as the Company has not transacted any sale of these securities. As of March 31, 2019 and December 31, 2018, $56 thousand and $74 thousand, net of tax, respectively, remained in AOCI, related to these instruments.

7.
Accrued Liabilities
Other current liabilities as of March 31, 2019 and December 31, 2018 consist of the following:
 
March 31, 2019
 
December 31, 2018
 
(in thousands)
Federal excise and other passenger taxes and fees payable
$
90,504

 
$
60,604

Salaries and wages
79,359

 
82,900

Airport obligations
65,291

 
52,029

Aircraft maintenance
65,126

 
59,805

Fuel
28,378

 
25,368

Aircraft and facility lease obligations
20,630

 
15,149

Interest payable
19,344

 
18,086

Other
26,772

 
25,736

Other current liabilities
$
395,404

 
$
339,677




8.
Financial Instruments and Risk Management
As part of the Company’s risk management program, the Company from time to time uses a variety of financial instruments to reduce its exposure to fluctuations in the price of jet fuel and interest rates. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company may be exposed to credit losses in the event of nonperformance by counterparties to these financial instruments. The Company periodically reviews and seeks to mitigate exposure to the financial deterioration and nonperformance of any counterparty by monitoring the absolute exposure levels, each counterparty's credit ratings and the historical performance of the counterparties relating to hedge transactions. The credit exposure related to these financial instruments is limited to the fair value of contracts in a net receivable position at the reporting date. The Company also maintains security agreements that require the Company to post collateral if the value of selected instruments falls below specified mark-to-market thresholds. The Company records financial derivative instruments at fair value, which includes an evaluation of each counterparty's credit risk. As of March 31, 2019, the Company did not hold any derivatives with requirements to post collateral.

Fuel Derivative Instruments

From time to time, the Company may enter into fuel derivative contracts in order to mitigate the risk of future volatility in fuel prices. The Company's fuel derivative contracts, if any, generally consist of United States Gulf Coast jet fuel swaps ("jet fuel swaps") and United States Gulf Coast jet fuel options ("jet fuel options"). Both jet fuel swaps and jet fuel options are used at times to protect the refining price risk between the price of crude oil and the price of refined jet fuel, and to manage the risk of increasing fuel prices. Fair value of the instruments is determined using standard option valuation models.

9




The Company accounts for any fuel derivative contracts at fair value and recognizes them in the balance sheet in prepaid expenses and other current assets or other current liabilities. The Company did not enter into any fuel derivative instruments during the three months ended March 31, 2019 and 2018 and did not have any outstanding fuel derivatives as of March 31, 2019 and December 31, 2018. Historically, the Company has not elected hedge accounting on any fuel derivative instruments entered into and, as a result, changes in the fair value of fuel derivative contracts, if any, were recorded in aircraft fuel expense.
Interest Rate Swaps
From time to time, the Company may enter into interest rate swaps to fix the benchmark interest rate component of interest payments or for other reasons. These instruments limit the Company's exposure to changes in the benchmark interest rate in the period from the trade date through the date of maturity. Interest rate swaps may be designated as cash flow hedges. The Company generally accounts for interest rate swaps at fair value and recognizes them in the balance sheet in prepaid expenses and other current assets or other current liabilities with changes in fair value recorded within AOCI. As of March 31, 2019 and December 31, 2018, the Company did not have any outstanding interest rate swaps.
Realized gains and losses from cash flow hedges are recorded in the statement of cash flows as a component of cash flows from operating activities. Subsequent to the issuance of each debt instrument, amounts remaining in AOCI are amortized over the life of the fixed-rate debt instrument. During the three months ended March 31, 2019 and 2018, there were no unrealized gains or losses recorded within AOCI related to these instruments as they settled in 2015. For the three months ended March 31, 2019, the Company reclassified interest rate swap losses of $47 thousand, net of tax of $27 thousand, into earnings. For the three months ended March 31, 2018, the Company reclassified interest rate swap losses of $58 thousand, net of tax of $21 thousand, into earnings. As of March 31, 2019 and December 31, 2018, $1.1 million and $1.1 million, net of tax, respectively, remained in AOCI, related to these instruments.
9.
Leases
The Company leases aircraft, engines, airport terminal, maintenance and training facilities, aircraft hangars, commercial real estate, and office and computer equipment, among other items. Certain of these leases include provisions for variable lease payments which are based on several factors, including, but not limited to, relative leased square footage, enplaned passengers, and airports’ annual operating budgets. Due to the variable nature of the rates, these leases are not recorded on the Company's balance sheet as a right-of-use asset and lease liability. Lease terms are generally 8 years to 18 years for aircraft and up to 30 years for other leased equipment and property.
The Company adopted Topic 842 utilizing the modified retrospective adoption method with an effective date of January 1, 2019. The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of twelve months or less). Instead, a lessee may recognize the lease payments in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use asset.
Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company's leases generally do not provide a readily determinable implicit rate. Therefore, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company uses publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates. The Company has options to extend certain of its operating leases for an additional period of time and options to early terminate several of its operating leases. The lease term consists of the noncancellable period of the lease and the periods covered by options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company's lease agreements do not contain any residual value guarantees. The Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components.
As of March 31, 2019, the Company had 50 aircraft financed under operating leases, with lease term expirations between 2021 and 2031. In addition, as of March 31, 2019, the Company had 11 spare engines financed under operating leases with lease term expiration dates ranging from 2019 to 2027. One of the Company's leased aircraft has variable rent payments, which fluctuate based on changes in London Interbank Offered Rate ("LIBOR"). The Company entered into sale leaseback transactions with third-party aircraft lessors for some of these aircraft and engine leases. Upon adoption of Topic 842, the Company recognized a $5.5 million cumulative effect adjustment, net of tax, to retained earnings driven by the recognition of unamortized deferred gains and losses related to aircraft sale-leaseback transactions entered into in prior periods. Prior to the

10



adoption of Topic 842, gains and losses on sale-leaseback transactions were generally deferred and recognized in income over the lease term. Under Topic 842, gains and losses on sale-leaseback transactions, subject to adjustment for off-market terms, are recognized immediately.
Some of the Company’s aircraft and engine master lease agreements provide that the Company pays maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles, while some maintenance reserve payments are fixed, time-based contractual amounts. Maintenance reserve payments that are probable of being recovered when the Company performs qualifying maintenance are recorded in aircraft maintenance deposits on the Company's condensed balance sheet. Fixed maintenance reserve payments that are not probable of being recovered are considered lease payments and are included in the right-of-use asset and lease liability. Maintenance reserve payments that are based on a utilization measure and are not probable of being recovered are considered variable lease payment that are recognized when they are probable of being incurred and are not included in the right-of-use asset and lease liability.
Fixed maintenance reserve payments for the Company's aircraft and related flight equipment, including estimated amounts for contractual price escalations, are expected to be $4.3 million for the remainder of 2019, $5.6 million in 2020, $5.7 million in 2021, $4.9 million in 2022, $4.1 million in 2023, and $8.8 million in 2024 and beyond. Some of the master lease agreements do not require that the Company pay maintenance reserves so long as the Company's cash balance does not fall below a certain level. As of March 31, 2019, the Company is in full compliance with those requirements and does not anticipate having to pay reserves related to these master leases in the future.
Under the terms of the lease agreements, the Company will continue to operate and maintain the aircraft. Payments under the majority of the lease agreements are fixed for the term of the lease. The lease agreements contain standard termination events, including termination upon a breach of the Company's obligations to make rental payments and upon any other material breach of the Company's obligations under the leases, and standard maintenance and return condition provisions. These return provisions are evaluated at inception of the lease and throughout the lease terms and are accounted for as either fixed or variable lease payments (depending on the nature of the lease return condition) when it is probable that such amounts will be incurred. When determining probability and estimated cost of lease return obligations, there are various other factors that need to be considered such as the contractual terms of the lease, the ability to swap engines or other aircraft components, current condition of the aircraft, the age of the aircraft at lease expiration, utilization of engines and other components, the extent of repairs needed at return, return locations, current configuration of the aircraft and cost of repairs and materials at the time of return. As a result of the different factors listed above, management assesses the need to accrue lease return costs throughout the lease as facts and circumstances warrant an assessment. The Company expects lease return costs and unrecoverable maintenance deposits will increase as individual aircraft lease agreements approach their respective termination dates and the Company begins to accrue the estimated cost of return conditions for the corresponding aircraft. Upon a termination of the lease due to a breach by the Company, the Company would be liable for standard contractual damages, possibly including damages suffered by the lessor in connection with remarketing the aircraft or while the aircraft is not leased to another party.
Aircraft rent expense consists of monthly lease rents for aircraft and spare engines under the terms of the Company's aircraft and spare engine lease agreements recognized on a straight-line basis. Aircraft rent expense also includes maintenance reserves paid to aircraft lessors in advance of the performance of major maintenance activities that are not probable of being reimbursed and probable lease return condition obligations.


11



The following table provides details of the Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded on the Company's condensed balance sheets as of March 31, 2019. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
 
 
Finance Leases
 
Operating Leases
 
 
 
 
 
Aircraft and Spare Engine Leases
 
Property Facility Leases
 
Other
 
Total
Operating and Finance Lease Obligations
 
(in thousands)
remainder of 2019
 
$
894

 
$
142,701

 
$
2,088

 
$
434

 
$
146,117

2020
 
780

 
185,414

 
2,394

 
517

 
189,105

2021
 
606

 
183,572

 
1,903

 

 
186,081

2022
 
578

 
175,571

 
1,562

 

 
177,711

2023
 
202

 
151,177

 
1,055

 

 
152,434

2024 and thereafter
 

 
477,187

 
4,749

 

 
481,936

Total minimum lease payments
 
$
3,060

 
$
1,315,622

 
$
13,751

 
$
951

 
$
1,333,384

Less amount representing interest
 
310

 
303,429

 
3,658

 
43

 
307,440

Present value of minimum lease payments
 
$
2,750

 
$
1,012,193

 
$
10,093

 
$
908

 
$
1,025,944

Less current portion
 
1,053

 
125,429

 
2,165

 
544

 
129,191

Long-term portion
 
$
1,697

 
$
886,764

 
$
7,928

 
$
364

 
$
896,753


Commitments related to the Company's noncancellable short-term operating leases not recorded on the Company's condensed balance sheets are expected to be $0.2 million for the remainder of 2019 and $0.0 million in 2020 and beyond.
The majority of the Company's finance lease obligations relate to leased computer and office equipment. Payments under the Company's finance lease agreements are fixed for terms ranging from 3 to 5 years. Accounting for finance leases is substantially unchanged under Topic 842. Finance lease assets are recorded within property and equipment and the related liabilities are recorded within current maturities of long-term debt and finance leases and long-term debt and finance leases, less current maturities in the Company's condensed balance sheets.
The table below presents information for lease costs related to the Company's finance and operating leases:
 
Three Months Ended March 31, 2019
 
(in thousands)
Finance lease cost
 
Amortization of leased assets
$
210

Interest of lease liabilities
29

Operating lease cost
 
Operating lease cost (1)
49,715

Short-term lease cost (1)
3,449

Variable lease cost (1)
28,117

Total lease cost
$
81,520

(1) Expenses are classified within aircraft rent and landing fees and other rents on the Company's condensed statement of operations.
The table below presents lease-related terms and discount rates as of March 31, 2019:

12



 
March 31, 2019
Weighted-average remaining lease term
 
Operating leases
8.0 years

Finance leases
3.5 years

Weighted-average discount rate
 
Operating leases
6.72
%
Finance leases
6.12
%



10.
Commitments and Contingencies
Aircraft-Related Commitments and Financing Arrangements
The Company’s contractual purchase commitments consist primarily of aircraft and engine acquisitions through manufacturers. As of March 31, 2019, the Company's aircraft orders consisted of the following:
 
 
Airbus
 
Third-Party Lessor
 
 
 
 
A320ceo
 
A320neo
 
A320neo
 
Total
remainder of 2019
 
1
 
8
 
1
 
10
2020
 

 
17
 

 
17
2021
 

 
18
 

 
18
 
 
1
 
43
 
1
 
45


As of March 31, 2019, the Company has no contractual aircraft purchase commitments beyond 2021. The Company also has two spare engine orders for V2500 SelectTwo engines with International Aero Engines ("IAE") and seven spare engine orders for PurePower PW1100G-JM engines with Pratt & Whitney. Spare engines are scheduled for delivery from 2019 through 2023. Purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and pre-delivery payments, are expected to be $466.6 million for the remainder of 2019, $865.7 million in 2020, $775.7 million in 2021$17.6 million in 2022, $8.3 million in 2023, and $0.0 million in 2024 and beyond. As of March 31, 2019, the Company had secured debt financing commitments of $35.0 million for 1 aircraft, being delivered in May 2019. In addition, the Company has secured financing for one aircraft leased directly from a third-party lessor, which was delivered in April 2019. Aircraft rent commitments for this 1 leased aircraft are approximately $3.0 million for the remainder of 2019, $4.1 million in 2020, $4.1 million in 2021, $4.1 million in 2022, $4.1 million in 2023, and $29.4 million in 2024 and beyond. As of March 31, 2019, the Company does not have financing commitments in place for the remaining 43 Airbus aircraft on firm order, which are scheduled for delivery in the remainder of 2019 through 2021.
Interest commitments related to the secured debt financing of 61 delivered aircraft as of March 31, 2019 are $64.9 million for the remainder of 2019, $77.4 million in 2020, $70.3 million in 2021, $63.4 million in 2022, $53.2 million in 2023, and $154.2 million in 2024 and beyond. For principal commitments related to these financed aircraft, refer to Note 12, Debt and Other Obligations. As of March 31, 2019, principal and interest commitments related to the Company's future secured debt financing of 1 undelivered aircraft under bank debt are $2.2 million for the remainder of 2019, $4.7 million in 2020, $4.7 million in 2021, $3.5 million in 2022, $3.6 million in 2023, and $26.2 million in 2024 and beyond.
The Company is contractually obligated to pay the following minimum guaranteed payments for its reservation system and other miscellaneous subscriptions and services as of March 31, 2019: $9.3 million for the remainder of 2019, $14.4 million in 2020, $11.3 million in 2021, $11.2 million in 2022, $11.3 million in 2023, and $56.0 million thereafter. During the first quarter of 2018, the Company entered into a contract renewal with its reservation system provider which expires in 2028.

13



Litigation
The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its financial position, liquidity or results of operations.
Credit Card Processing Arrangements
The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage charges, and other ancillary services by customers. As is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations.
The Company's credit card processors do not require the Company to maintain cash collateral provided that the Company satisfies certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to place a holdback resulting in a commensurate reduction of unrestricted cash. As of March 31, 2019 and December 31, 2018, the Company was in compliance with such liquidity and other financial covenants in its credit card processing agreements and the processors were holding back no remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and $9 Fare Club memberships as of March 31, 2019 and December 31, 2018, was $455.5 million and $321.0 million, respectively.
Employees
The Company has 5 union-represented employee groups that together represented approximately 79% of all employees at March 31, 2019. The table below sets forth the Company's employee groups and status of the collective bargaining agreements as of March 31, 2019.
Employee Groups
 
Representative
 
Amendable Date
 
Percentage of Workforce
Pilots
 
Air Line Pilots Association, International ("ALPA")
 
February 2023
 
26%
Flight Attendants
 
Association of Flight Attendants ("AFA-CWA")
 
May 2021
 
45%
Dispatchers
 
Professional Airline Flight Control Association ("PAFCA")
 
October 2023
 
1%
Ramp Service Agents
 
International Association of Machinists and Aerospace Workers ("IAMAW")
 
June 2020
 
4%
Passenger Service Agents
 
Transport Workers Union of America ("TWU")
 
NA
 
3%
In August 2015, the Company's collective bargaining agreement with its pilots, represented by ALPA, became amendable. In February 2018, the pilot group voted to approve a new five-year agreement with the Company. In connection with the new agreement, the Company recorded a one-time ratification incentive of $80.7 million, including payroll taxes, and an $8.5 million adjustment related to other contractual provisions. These amounts totaling $89.2 million were recorded in special charges within operating expenses in the condensed statement of operations for the three months ended March 31, 2018. For additional information, refer to Note 4, Special Charges.

In June 2018, the NMB notified the Company that the TWU filed an application seeking a representation election for the Company's passenger service agents. The NMB determined that a representation election would be held and the voting period for the election took place through September 4, 2018. The Company’s passenger service agents voted to be represented by the TWU, but the representation applies only to the Company’s Fort Lauderdale station where the Company has direct employees in the passenger service classification. The Company and the TWU began meeting in late October 2018 to negotiate an initial collective bargaining agreement. As of March 31, 2019, the Company continued to negotiate with the TWU.
The Company is self-insured for health care claims, up to a stop loss amount for eligible participating employees and qualified dependent medical claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is

14



calculated from actual claim rates and adjusted periodically as necessary. The Company has accrued $5.1 million and $4.4 million in health care claims as of March 31, 2019 and December 31, 2018, respectively.

11.
Fair Value Measurements
Under ASC 820, "Fair Value Measurements and Disclosures", disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of the Company’s financial assets and liabilities.
Fuel Derivative Instruments
From time to time, the Company may enter into fuel derivative contracts in order to mitigate the risk of future volatility in fuel prices. The Company’s fuel derivative contracts generally consist of jet fuel swaps and jet fuel options. These instruments are valued using energy and commodity market data, which is derived by combining raw inputs with quantitative models and processes to generate forward curves and volatilities.
The Company utilizes the market approach to measure fair value for its fuel derivative instruments, if any. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The Company has not historically elected hedge accounting on its fuel derivative instruments, if any. As a result, the Company would record the fair value adjustment of any fuel derivatives in the accompanying statement of operations within aircraft fuel and on the balance sheet within prepaid expenses and other current assets or other current liabilities, depending on whether the net fair value of the derivatives is in an asset or liability position as of the respective date. Fair values of any fuel derivative instruments are determined using standard option valuation models. The Company also considers counterparty risk and its own credit risk in its determination of all estimated fair values. The Company offsets fair value amounts recognized for any derivative instruments executed with the same counterparty under a master netting arrangement. The Company determines fair value of any jet fuel options utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it may hold.

The fair value of the Company's jet fuel swaps, if any, are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets; therefore, the Company categorizes these instruments as Level 2. Due to the fact that certain inputs utilized to determine the fair value of jet fuel options are unobservable (principally implied volatility), the Company categorizes these derivatives as Level 3. Implied volatility of a jet fuel option is the volatility of the price of the underlying commodity that is implied by the market price of the option based on an option pricing model. Thus, it is the volatility that when used in a particular pricing model yields a theoretical value for the option equal to the current market price of that option. Implied volatility, a forward-looking measure, differs from historical volatility because the latter is calculated from known past returns. At each balance sheet date, the Company substantiates and adjusts unobservable inputs. The Company routinely assesses the valuation model's sensitivity to changes in implied volatility. As of March 31, 2019 and December 31, 2018, the Company had no outstanding jet fuel derivatives.
Long-Term Debt

15



The estimated fair value of the Company's term loan debt agreements has been determined to be Level 3 as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes a discounted cash flow method to estimate the fair value of the Level 3 long-term debt. The estimated fair value of the Company's publicly and non-publicly held EETC debt agreements has been determined to be Level 2 as the Company utilizes quoted market prices in markets with low trading volumes to estimate the fair value of its Level 2 long-term debt.
The carrying amounts and estimated fair values of the Company's long-term debt at March 31, 2019 and December 31, 2018 were as follows:
 
March 31, 2019
 
December 31, 2018
 
Fair Value Level Hierarchy
 
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
 
 
(in millions)
 
 
Fixed-rate senior term loans
$
373.2

 
$
384.0

 
$
382.4

 
$
373.6

 
Level 3
Fixed-rate junior term loans
29.0

 
29.5

 
31.1

 
31.1

 
Level 3
Fixed-rate term loans
649.5

 
665.6

 
625.1

 
600.1

 
Level 3
2015-1 EETC Class A
378.6

 
386.2

 
378.6

 
374.8

 
Level 2
2015-1 EETC Class B
80.0

 
80.8

 
80.0

 
78.1

 
Level 2
2015-1 EETC Class C
109.5

 
110.3

 
109.5

 
107.9

 
Level 2
2017-1 EETC Class AA
235.4

 
231.3

 
242.5

 
228.8

 
Level 2
2017-1 EETC Class A
78.5

 
76.3

 
80.8

 
76.6

 
Level 2
2017-1 EETC Class B
77.2

 
75.8

 
83.7

 
79.1

 
Level 2
2017-1 EETC Class C
85.5

 
86.3

 
85.5

 
84.2

 
Level 2
Revolving credit facility
160.0

 
160.0

 
135.3

 
135.3

 
Level 3
Total long-term debt
$
2,256.4

 
$
2,286.1

 
$
2,234.5

 
$
2,169.6

 
 

Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2019 and December 31, 2018 are comprised of liquid money market funds and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions.

Short-term Investment Securities

Short-term investment securities at March 31, 2019 and December 31, 2018 are classified as available-for-sale and generally consist of U.S. Treasury and U.S. government agency securities with contractual maturities of 12 months or less. The Company's short-term investment securities are categorized as Level 1 instruments, as the Company uses quoted market prices in active markets when determining the fair value of these securities. For additional information, refer to Note 6, Short-term Investment Securities.
Assets and liabilities measured at gross fair value on a recurring basis are summarized below:
 
Fair Value Measurements as of March 31, 2019
 
Total

Level
1

Level
2

Level
3

(in millions)
Cash and cash equivalents
$
1,122.1


$
1,122.1


$


$

Short-term investment securities
103.5


103.5





Total assets
$
1,225.6


$
1,225.6


$


$












Total liabilities
$


$


$


$


16



 
Fair Value Measurements as of December 31, 2018
 
Total

Level
1

Level
2

Level
3

(in millions)
Cash and cash equivalents
$
1,004.7


$
1,004.7


$


$

Short-term investment securities
102.8


102.8





Total assets
$
1,107.5


$
1,107.5


$


$













Total liabilities
$


$


$


$



The Company had no transfers of assets or liabilities between any of the above levels during the periods ended March 31, 2019 and December 31, 2018.

The Company's Valuation Group, which reports to the Chief Financial Officer, is made up of individuals from the Company's Treasury and Corporate Accounting departments. The Valuation Group is responsible for the execution of the Company's valuation policies and procedures. The Valuation Group compares the results of the Company's internally developed valuation methods with counterparty reports at each balance sheet date, assesses the Company's valuation methods for accurateness and identifies any needs for modification.

12.
Debt and Other Obligations

As of March 31, 2019, the Company had outstanding non-public and public debt instruments. During the three months ended March 31, 2019, the Company issued additional debt through a fixed-rate term facility and a previously existing revolving credit facility described below.

Fixed-rate term loans

During 2018, the Company entered into a facility agreement, which as of March 31, 2019, provided $35.0 million for an Airbus A320 aircraft delivered during the first quarter of 2019. The loan extended under the facility agreement is secured by a first-priority security interest on the individual aircraft. This loan has a term life of 12 years and amortizes on a mortgage-style basis, which requires quarterly principal and interest payments.

Revolving credit facility

During the fourth quarter of 2018, the Company entered into a revolving credit facility for up to $160 million secured by the collateral assignment of certain of the Company's rights under the purchase agreement with Airbus, related to 43 Airbus A320neo aircraft scheduled to be delivered between August 2019 and December 2021. The final maturity of the facility is December 30, 2020. As of March 31, 2019, the Company had drawn $160.0 million on the facility which is included in long-term debt and finance leases, less current maturities on the Company's condensed balance sheets. The revolving credit facility bears variable interest based on LIBOR.


Long-term debt is comprised of the following:

17



 
 
As of
 
Three Months Ended March 31,
 
March 31, 2019
 
December 31, 2018
 
2019
 
2018
 
 
(in millions)
 
(weighted-average interest rates)
Fixed-rate senior term loans due through 2027
 
$
373.2

 
$
382.4

 
4.10
%
 
4.10
%
Fixed-rate junior term loans due through 2022
 
29.0

 
31.1

 
6.90
%
 
6.90
%
Fixed-rate loans due through 2031
 
649.5

 
625.1

 
3.67
%
 
3.83
%
Fixed-rate class A 2015-1 EETC due through 2028
 
378.6

 
378.6

 
4.10
%
 
4.10
%
Fixed-rate class B 2015-1 EETC due through 2024
 
80.0

 
80.0

 
4.45
%
 
4.45
%
Fixed-rate class C 2015-1 EETC due through 2023
 
109.5

 
109.5

 
4.93
%
 
N/A

Fixed-rate class AA 2017-1 EETC due through 2030

 
235.4

 
242.5

 
3.38
%
 
3.38
%
Fixed-rate class A 2017-1 EETC due through 2030

 
78.5

 
80.8

 
3.65
%
 
3.65
%
Fixed-rate class B 2017-1 EETC due through 2026

 
77.2

 
83.7

 
3.80
%
 
3.80
%
Fixed-rate class C 2017-1 EETC due through 2023

 
85.5

 
85.5

 
5.11
%
 
N/A

Revolving credit facility due in 2020
 
160.0

 
135.3

 
3.88
%
 
N/A

Long-term debt
 
2,256.4

 
2,234.5

 
 
 
 
Less current maturities
 
172.3

 
162.8

 
 
 
 
Less unamortized discounts, net

 
46.0

 
47.7

 
 
 
 
Total
 
$
2,038.1

 
$
2,024.0

 
 
 
 

The Company's debt financings are collateralized by first priority security interest in the individual aircraft being financed with the exception of the Company's revolving credit facility secured by the Company's rights under the purchase agreement with Airbus related to certain A320neo aircraft. During the three months ended March 31, 2019 and March 31, 2018, the Company made scheduled principal payments of $37.9 million and $18.7 million on its outstanding debt obligations, respectively.
At March 31, 2019, long-term debt principal payments for the next five years and thereafter are as follows:
 
 
March 31, 2019
 
 
(in millions)
remainder of 2019
 
$
135.8

2020
 
212.8

2021
 
283.3

2022
 
161.9

2023
 
300.5

2024 and beyond
 
1,162.1

Total debt principal payments
 
$
2,256.4



Interest Expense

Interest expense related to long-term debt and finance leases consists of the following:

18



 
Three Months Ended March 31,
2019
 
2018
 
(in thousands)
Fixed-rate senior term loans
$
3,945

 
$
4,317

Fixed-rate junior term loans
523

 
667

Fixed-rate term loans
6,202

 
4,911

Class A 2015-1 EETC
3,838

 
4,142

Class B 2015-1 EETC