NOTE This Industry overview is only a starting point for your an.docx

NOTE: This Industry overview is only a starting point for your
analysis. Environment and industry issues can change rapidly
and some of the information here may therefore be out-of-date.
You MUST supplement this information with additional
research.
The Airline Industry
4940- Summer, 2014
Few inventions have changed how people live and experience
the world as much as the invention of the airplane. During both
World Wars, government subsidies and demands for new
airplanes vastly improved techniques for their design and
construction. Following World War II, the first commercial
airplane routes were set up in Europe. Over time, air travel has
become so commonplace that it would be hard to imagine life
without it. The airline industry certainly has progressed. It has
also altered the way in which people live and conduct business
by shortening travel time and altering our concept of distance,
making it possible for us to visit and conduct business in places
once considered remote.
The airline industry exists in an intensely competitive market.
In recent years, there has been an industry-wide shakedown,
which will have far-reaching effects on the industry's trend
towards expanding domestic and international services. In the
past, the airline industry was at least partly government owned.
This is still true in many countries, but in the U.S., all major
airlines have come to be privately held. The U.S. airline
industry has been in a chaotic state for a number of years.
According to the Air Transport Association, the airline
industry’s trade association, the loss from 1990 through 1994
was about $13 billion, while from 1995 through 2000, the

airlines earned about $23 billion and then lost about $35 billion
from 2001 through 2005. Against this backdrop of poor
financial performance, dramatic changes in industry structure
have occurred. Growth in air passenger traffic has outstripped
growth in the overall economy and the U.S. airline industry
remains in the midst of an historic restructuring. Over the last
five years, U.S. network airlines have reduced their annualized
mainline costs excluding fuel by more than 25%, or nearly $20
billion.
While some of the cost savings realized in the industry were the
product of identifying greater operational efficiencies, most of
the savings were generated by renegotiation of existing
contractual arrangements with creditors, aircraft lessors,
suppliers and airline employees and achieved either through the
bankruptcy process itself or under threat of bankruptcy. A
portion of industry capacity still operates in bankruptcy. But, it
is down from a high of 46 percent in 2005. As a result, several
carriers that were near liquidation now have lower cost
structures that should allow them to show improved
performance.
Economic profile of the Air line industry: The airline industry
has always exhibited cyclicality because travelers' demand is
sensitive to the performance of the macro economy yet airlines
must predict this demand accurately because of the lead time
required to acquire aircraft. When airlines over predict demand,
which can happen for any number of reasons, they suffer losses.
The main components of demand for airline services are
business travelers, tourism, freight transport, and mail
transport. Flight schedules tend to be the crucial competitive
issues for business travelers, while tourists and personal travel
is much more price sensitive.

This industry note has been compiled by Dr. Derrick D’Souza,
from various secondary sources (A list of sources is provided at
the end of this note), and is intended for use as an instructional
tool in the Business Policy (BUSI 4940) classroom at the
University of North Texas. The use of this note for any other
purpose, without the express permission of the author, is
prohibited.
Freight and mail services account for about 15% of airlines total
overall revenue, while international freight and mail is closer to
one-third of airlines' international revenue. Airline services
enable access to other goods, such as vacations, business
meetings, or foreign-sourced products. Thus, the demand for
airline services is closely linked to the demand for these goods.
Capacity of airline industry is influenced by the number of
aircrafts, frequency, availability of routes, number of airports,
etc. While industry analysts expect continued long-term growth
in the demand for air travel, airline industry profitability has
been volatile. High airline fixed costs, significant operating
cost sensitivity to fuel prices, and the sensitivity of
international travel to business and political conditions make
airline profitability depend significantly on macroeconomic
factors.
Airlines have responded to competitive pressures in a variety of
ways: liquidating, seeking government subsidies, improving
operating efficiency, privatization, and forming alliances with
other airlines. The growth of low cost carriers (LCCs) in the
U.S. and elsewhere is arguably the single most important factor
currently shaping the airline industry. The rapid growth of
LCCs has been commonly cited as one of the primary causes of
the financial crisis currently facing the large hub-and-spoke
carriers. The evolving market structure – and the resulting
impact on both fares and service – will depend critically on the
direction of the competitive clash between LCCs and the major

network carriers. At the same time, the percentage of business
travelers willing to pay much higher “walk up” or unrestricted
fares has steadily fallen. These trends were enhanced by the
growth of the Internet as a mainstream marketing and
distribution channel, creating an environment of nearly perfect
price information for both leisure and business travelers, further
curtailing the ability of network carriers to charge significantly
higher prices to the most time-sensitive passengers.
The influence of the economic cycle on domestic traffic is
apparent. The high-risk nature of the airline industry tends to
discourage entry. Because airlines have high fixed costs
relative to revenues, a small change in load factors or fare
levels can have a large impact on profits. The industry is
therefore highly vulnerable to an economic slowdown. Besides,
the airline industry is one of the most heavily taxed in the U.S.,
with taxes and fees accounting for approximately 20% of the
total fare charged to a customer.
Competition in Airline industry: It is important to examine the
substantive effect that mergers and alliances may have on
competition in general and on consumers in particular.
International alliances may have a somewhat different form than
domestic mergers, but may have the same substantive effect on
competition and thus appear to merit similar review and
oversight. Pricing is highly competitive. Deregulation and
increasing competition, while bringing considerable benefits to
consumers, have put additional pressure on airline companies’
profits. Several international markets still have unnecessary
constraints on competition including the United Kingdom,
China, Japan, and several countries in Latin America – that
effectively protect foreign airlines and raise costs for U.S.
carriers and consumers. Decentralization & deregulation were
the two major insights to boost the competition in the airline
industry.

The airline industry is separated into four categories by the U.S.
Department of Transportation (DOT):
· International - 130+ seat planes that have the ability to take
passengers just about anywhere in the world. Companies in this
category typically have annual revenue of $1 billion or more.
· National - Usually these airlines seat 100-150 people and have
revenues between $100 million and $1 billion.
· Regional - Companies with revenues less than $100 million
that focus on short-haul flights.
· Cargo - These are airlines that generally transport goods.
Airport capacity, route structures, technology and costs to lease
or buy the physical aircraft are significant in the airline
industry. Other large issues are:
· Weather - Weather is variable and unpredictable. Extreme
heat, cold, fog and snow can shut down airports and cancel
flights, which costs anairline money.
· Fuel Cost - According to the Air Transportation Association
(ATA), fuel is an airline's second largest expense. Fuel makes
up a significant portion of an airline's total costs, although
efficiency among different carriers can vary widely. Short haul
airlines typically get lower fuel efficiency because take-offs and
landings consume high amounts of jet fuel.
· Labor - According to the ATA, labor is the an airline's No.1
cost; airlines must pay pilots, flight attendants, baggage
handlers, dispatchers, customer service and others.
Ratios/Terms that bear close monitoring in the airline industry
· Available Seat Mile – (Total number of seats available for
transporting passengers) X (# of miles flown during period)
· Revenue Passenger Mile - (Number of revenue-paying
passengers) X (# of miles flown during the period)
· Revenue Per Available Seat Mile - (Revenue) / (number of
seats available)
· Air Traffic Liability - An estimate of the amount of money
already received for passenger ticket sales and cargo

transportation that is yet to be provided. It is important to find
out this figure so you can remove it from quoted revenue figures
(unless they specifically state that ATL was excluded).
· Load Factor - An indicator, compiled monthly by the Air
Transport Association (ATA), that measures the percentage of
available seating capacity that is filled with passengers.
Analysts state that once the airline load factor exceeds its
break-even point, then more and more revenue will trickle down
to the bottom line. Keep in mind that during holidays and
summer vacations load factor can be significantly higher,
therefore, it is important to compare the figures against the
same period from the previous year.
Airlines can earn revenue from transporting cargo, selling
frequent flier miles to other companies and up-selling in flight
services. However, the largest portion of airline revenue is
derived from regular and business passengers. Business
travelers are important to airlines because they are more likely
to travel several times throughout the year and they tend to
purchase the upgraded services that have higher margins for the
airline. On the other hand, leisure travelers are less likely to
purchase these premium services and are typically very price
sensitive, and are less likely to travel in times of economic
uncertainty or sharp decline in consumer confidence.
Deregulation of the airline industry: US airline deregulation
was a very significant and successful step to the development of
commercial airlines. Airlines can now develop their own
policies and standards; they can add new routes, which are
expected to be profitable, and remove old routes which are
considered unprofitable. Airlines received the opportunity to
vary the amount of airplanes on each route, to set fares by
themselves without government interference and to make
managerial decisions themselves. Airlines deregulation
attracted many new competitors; some of them bankrupted,
some merged and some prospered.

Government policies: An increasing number of governments are
moving to eliminate economic regulation of domestic airline
services under policies known as "open skies" policies.
However, even states that have deregulated the airline industry
have been reluctant to allow foreign airlines to provide
domestic services. In 1992, Congress established the National
Commission to Promote a Strong and Competitive Airline
Industry. The commission made recommendations concerning
FAA's structure, the airline industry's financial health, and
foreign ownership limits.
The events of 9/11 accelerated and aggravated negative
financial trends already evident in the airline industry. In order
for the industry to return to profitability, several steps must be
taken to increase consumer demand for air travel, especially
business travel, control costs, and address certain pricing
issues. Congress has enacted several measures aimed at helping
the airline industry to recover and respond to terrorist attacks.
Over the long term, however, the outlook for the U.S. airline
industry is more uncertain. The industry faces persistent
structural problems that must be addressed if we are to avoid
facing another wave of bankruptcies in the next economic
downtown, and if the industry is to take full advantage of the
very substantial progress made in lowering unit costs. When
the Federal Reserve increases the interest rate, then investments
in airline industry become costlier. Similarly, if government
follows contractionary fiscal policies by increasing the tax
rates, the profits of the airline industry will be affected. Thus,
economic policies & changes in the structure of the economy
highly influence the structure of the airline industry as the
industry is highly sensitive & dynamic to the policy changes.
At first glance, you might think that the airline industry is
pretty tough to break into, but don't be fooled. You'll need to
look at whether there are substantial costs to access bank loans

and credit. If borrowing is cheap, then the likelihood of more
airliners entering the industry is higher. The more new airlines
that enter the market, the more saturated it becomes for
everyone. Brand name recognition and frequent fliers point
also play a role in the airline industry. An airline with a strong
brand name and incentives can often lure a customer even if its
prices are higher.
The airline supply business is mainly dominated by Boeing and
Airbus. For this reason, there isn't a lot of cutthroat competition
among suppliers. Also, the likelihood of a supplier integrating
vertically isn't very likely. In other words, you probably will
not see suppliers starting to offer flight service on top of
building airlines.
What about the bargaining power of buyers in the airline
industry? While a single buyer may not be able to demand a
specific price for a given flight, consider the ability of a
consumer to switch from one airline to another. What, if
anything, can an airline company do to make their flights
different from any other? (e.g., Is the seat in one airline more
comfortable than another? Probably not unless you are
analyzing a luxury liner like the Concord Jet).
What is the likelihood that someone will drive or take a train to
his or her destination? For regional airlines, the threat might be
a little higher than international carriers. When determining
this you should consider time, money, personal preference and
convenience in the air travel industry.
Highly competitive industries generally earn low returns
because the cost of competition is high. This can spell disaster
when times get tough in the economy. The airlines constitute
one such industry.

Sources:
1. Investopedia,
http://www.investopedia.com/features/industryhandbook/airline.
asp#axzz1WGsHM2KY
2. AirlineFinancials.com:
http://www.airlinefinancials.com/Airline_Data_Analysis_.php
3.
http://www.mbacasestudysolutions.com/Blog/US_Airline_Indust
ry_7-11-2008.html
Supplemental Information on the Industry from major airline
annual reports. (Major airline annual reports are often good
sources of environmental/industry information).
Industry Conditions
Domestic Competition. The domestic airline industry is highly
competitive and dynamic. Currently, any U.S. carrier deemed fit
by the DOT is free to operate scheduled passenger service
between any two points within the United States. The
Company’s competitors consist primarily of other airlines and,
to a lesser extent, other forms of transportation. Competition
can be direct, in the form of another carrier flying the exact
non-stop route, or indirect, where a carrier serves the same two
cities non-stop from an alternative airport in that city or via an
itinerary requiring a connection at another airport.
Air carriers’ cost structures are not uniform and there are
numerous factors influencing cost structure. Carriers with lower
costs may deliver lower fares to passengers, which could have a
potential negative impact on the Company’s revenues. In
addition, future airline mergers, acquisitions or reorganizations
pursuant to Chapter 11 of the United States Bankruptcy Code
may enable airlines to improve their revenue and cost

performance relative to peers and thus enhance their
competitive position within the industry.
Decisions on domestic pricing are based on intense competitive
pressure exerted on the Company by other U.S. airlines. In
order to remain competitive and maintain passenger traffic
levels, we often find it necessary to match competitors’
discounted fares. Since we compete in a dynamic marketplace,
attempts to generate additional revenue through increased fares
oftentimes fail.
-------
The airline industry is highly competitive, marked by
significant competition with respect to routes, fares, schedules
(both timing and frequency), services, products, customer
service and frequent flyer programs. The industry is going
through a period of transformation through consolidation, both
domestically and internationally, and changes in international
alliances. Consolidation in the airline industry and changes in
international alliances have altered and will continue to alter
the competitive landscape in the industry by resulting in the
formation of airlines and alliances with increased financial
resources, more extensive global networks and altered cost
structures. In addition, other network carriers have also
significantly reduced their costs over the last several years
including through restructuring and bankruptcy reorganization.
American Airlines is nearing the end of its bankruptcy
restructuring, which is enabling it to reduce its costs. Our
ability to compete effectively depends, in part, on our ability to
maintain a competitive cost structure.
Industry Regulation
Domestic Regulation
General. All carriers engaged in air transportation in the United
States are subject to regulation by the DOT. Absent an

exemption, no air carrier may provide air transportation of
passengers or property without first being issued a DOT
certificate of public convenience and necessity. The DOT also
grants international route authority, approves international
codeshare arrangements, and regulates methods of competition.
The DOT regulates consumer protection and maintains
jurisdiction over advertising, denied boarding compensation,
tarmac delays, baggage liability and other areas, and may add
additional expensive regulatory burdens in the future. The
DOT’s series of rules to enhance airline passenger protections
have required U.S. air carriers to adopt contingency plans and
procedures for tarmac delays exceeding three hours for domestic
flights and four hours for international flights and to charge the
same baggage fee throughout a passenger’s entire itinerary
(even if on multiple carriers).
Airlines are also regulated by the Federal Aviation
Administration (the “FAA”), an agency within the DOT,
primarily in the areas of flight safety, air carrier operations, and
aircraft maintenance and airworthiness. The FAA issues air
carrier operating certificates and aircraft airworthiness
certificates, prescribes maintenance procedures, oversees airport
operations, and regulates pilot and other employee training. The
2011 FAA final rule amending existing flight, duty and rest
regulations applicable to U.S. air carriers under Part 117 of the
Federal Aviation Regulations, which took effect on January 4,
2014, mandates extensive changes to the way the Company
schedules crews and deploys aircraft. (See attached article for
more information on new pilot regulations). From time to time,
the FAA issues directives that require air carriers to inspect or
modify aircraft and other equipment, potentially causing the
Company to incur substantial, unplanned expenses. The airline
industry is also subject to numerous other federal laws and
regulations. The U.S. Department of Homeland Security has
jurisdiction over virtually every aspect of civil aviation
security. Beginning in March 2014, the Occupation Safety and

Health Administration (“OSHA”) will extend its regulatory
programs for hazard communication, hearing conservation and
blood borne pathogens to areas of cabin crewmember safety and
health. The Antitrust Division of the U.S. Department of Justice
(“DOJ”) has jurisdiction
over certain airline competition matters. The U.S. Postal
Service has authority over certain aspects of the transportation
of mail by airlines. Labor relations in the airline industry are
generally governed by the Railway Labor Act (“RLA”), a
federal statute.
The Company is also subject to investigation inquiries by the
DOT, FAA, DOJ and other U.S. and international regulatory
bodies.
Airport Access. Access to landing and take-off rights, or
“slots,” at several major U.S. airports and many foreign airports
served by the Company are, or recently have been, subject to
government regulation. Federally mandated domestic slot
restrictions currently apply at Reagan National Airport in
Washington D.C., John F. Kennedy International Airport
(“JFK”), LaGuardia Airport (“LaGuardia”) and Newark Liberty.
In addition, to address concerns about airport congestion, the
FAA has designated certain airports, including Newark Liberty,
JFK, and LaGuardia as “high density traffic airports” and has
imposed operating restrictions at these three airports, which
may include capacity reductions. Additional restrictions on
airline routes and takeoff and landing slots at these and other
airports may be proposed in the future that could affect the
Company’s rights of
ownership and transfer.
Legislation. The airline industry is subject to legislative activity
that may have an impact on operations and costs. In addition to
significant federal, state and local taxes and fees that the
Company is currently subject to, proposed taxes and fees are
currently pending that may increase the Company’s operating

costs if imposed on the Company. Congress may pass legislation
that could increase labor and operating costs. The Airline Safety
and Federal Aviation Extension Act of 2010 and the FAA
Modernization and Reform Act of 2012 have increased
regulation and are likely to cause increased costs in the areas of
airline safety, pilot training, and consumer protection. Climate
change legislation is also likely to be a significant area of
legislative and regulatory focus and could adversely impact the
Company’s costs.
Emissions . The U.S. Environmental Protection Agency (the
“EPA”) is authorized to regulate aircraft emissions and has
historically implemented emissions control standards previously
adopted by the International Civil Aviation Organization
(“ICAO”). Our aircraft comply with existing EPA standards as
applicable by engine design date. The ICAO has adopted two
additional aircraft engine emissions standards, the first of which
is applicable to engines certified after December 31, 2007, and
the second of which is applicable to engines certified after
December 31, 2013. In June 2012, the EPA published a final
rulemaking for new emission standards for oxides of nitrogen
(NOx), adopting ICAO's additional standards. Included in the
rule are two new tiers of more stringent emission standards for
NOx. These standards, referred to as the Tier 6 standards,
become effective for newly-manufactured aircraft engines
beginning in 2013.
Concern about aviation environmental issues, including climate
change and greenhouse gases, has led to taxes on our operations
in the United Kingdom and in Germany, both of which have
levied taxes directly on our customers. We may face additional
regulation of aircraft emissions in the United States and abroad
and become subject to further taxes, charges or additional
requirements to obtain permits or purchase allowances or
emission credits for greenhouse gas emissions in various
jurisdictions. This could result in taxation or permitting

requirements from multiple jurisdictions for the same
operations. Ongoing bilateral discussions between the United
States and other nations as well as discussions at the ICAO
Assembly and Conference of the Parties, most recently in Doha,
Qatar in December 2012, may lead to international treaties or
other actions focusing on reducing greenhouse gas emissions
from aviation.
Cap and trade restrictions have also been proposed in the United
States. In addition, other legislative or regulatory action,
including by the EPA, to regulate greenhouse gas emissions is
possible. In particular, the EPA has found that greenhouse gases
threaten the public health and welfare, which could result in
regulation of greenhouse gas emissions from aircraft. In the
event that legislation or regulation is enacted in the U.S. or in
the event similar legislation or regulation is enacted in
jurisdictions other than the European Union where we operate
or where we may operate in the future, it could result in
significant costs for us and the airline industry. In addition to
direct costs, such regulation may have a greater effect on the
airline industry through increases in fuel costs that could result
from fuel suppliers passing on increased costs that they incur
under such a system. We are monitoring and evaluating the
potential impact of such legislative and regulatory
developments.
We seek to minimize the impact of greenhouse gas emissions
from our operations through reductions in our fuel consumption
and other efforts and have realized reductions in our greenhouse
gas emission levels since 2005. We have reduced the fuel needs
of our aircraft fleet through the retirement and replacement of
certain elements of our fleet and with newer, more fuel efficient
aircraft. In addition, we have implemented fuel saving
procedures in our flight and ground support operations that
further reduce carbon emissions. We are also supporting efforts
to develop alternative fuels and efforts to modernize the air

traffic control system in the U.S., as part of our efforts to
reduce our emissions and minimize our impact on the
environment.
Noise . The Airport Noise and Capacity Act of 1990 recognizes
the rights of operators of airports with noise problems to
implement local noise abatement programs so long as such
programs do not interfere unreasonably with interstate or
foreign commerce or the national air transportation system. This
statute generally provides that local noise restrictions on Stage
3 aircraft first effective after October 1, 1990, require FAA
approval. While we have had sufficient scheduling flexibility to
accommodate local noise restrictions in the past, our operations
could be adversely impacted if locally-imposed regulations
become more restrictive or widespread
Finally, aviation security continues to be the subject of frequent
legislative and regulatory action, requiring changes to the
Company’s security processes, frequently increasing the cost of
its security procedures, and adversely affecting its operations.
The Analysis of the Firm: Spirit Airlines
Address all of the component parts of SBI-1(B). PLEASE SEE
TEMPLATE FOR SBI-1(B) IN THE subfolders contained within
“INDIVIDUAL ASSIGNMENT FOLDER”. The template goes
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Following along with the template and addressing all issues in

that by making rough notes for yourself, will help you score
better and keep you on track.
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Allow a space between your paragraphs. With this format, your
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also in the “INDIVIDUAL ASSIGNMENT FOLDER” for your
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THUS, YOU FOLLOW ALONG THE TEMPLATE THAT’LL
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Grading will be based on (a) completeness in covering all
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concepts to this firm.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2013
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File No. 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
Registered
Voting Common Stock, $0.0001 par value
Non-Voting Common Stock, $0.0001 par value
NASDAQ Global Select Market
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file

reports pursuant to Section 13 or Section 15(d) of the Act.
Yes No
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 No
Indicate by checkmark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period
that the registrant was required
to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or
a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer”
and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.

Large accelerated filer Accelerated filer Non-
accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the common stock held by non-
affiliates of the registrant was approximately $2.1 billion
computed by reference to the last
sale price of the common stock on the NASDAQ Global Select
Market on June 28, 2013, the last trading day of the registrant’s
most recently completed second
fiscal quarter. Shares held by each executive officer, director
and by certain persons that own 10 percent or more of the
outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a
conclusive determination for other
purposes.
The number of shares of each registrant's classes of common
stock outstanding as of the close of business on February 7,
2014:
Class Number of Shares
Common Stock, $0.0001 par value per share 72,670,673
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for the registrant's
2014 Annual Meeting of Stockholders are incorporated by
reference into Part III of this
Form 10-K to the extent stated herein. The Proxy Statement
will be filed within 120 days of the registrant's fiscal year
ended December 31, 2013.

TABLE OF CONTENTS
PART I Page
PART II
PART III
PART IV
__________________________________________________
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
Item 4. Mine Safety Disclosures. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29

Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 36
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Item 8. Financial Statements and Supplementary Data . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . 88
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
Item 10. Directors, Executive Officers and Corporate
Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 89
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters . . . . . . . 89
Item 13. Certain Relationships and Related Transactions and
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Item 14. Principal Accountant Fees and Services. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Item 15. Exhibits and Financial Statement Schedules . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91
4
PART I
ITEM 1. BUSINESS
Overview
Spirit Airlines is an ultra low-cost, low-fare airline based in
Miramar, Florida that offers affordable travel to price-
conscious customers. Our all-Airbus fleet currently operates
more than 250 daily flights to over 50 destinations in the United
States, Caribbean and Latin America. We completed an initial
public offering during the second quarter of 2011, and our stock
trades on the NASDAQ Global Select Stock Market under the
symbol "SAVE".
Our ultra low-cost carrier, or ULCC, business model allows us
to compete principally through offering low base fares and
charging separately for select optional services, thereby
allowing customers the freedom to save by choosing only the
extras
they value. We have unbundled components of our air travel
service that have traditionally been included in base fares, such
as
baggage and advance seat selection, and offer them as optional,
ancillary services (which we record in our financial statements
as non-ticket revenue) as part of a strategy to enable our

passengers to identify, select and pay only for the services they
want to
use.
Our History and Corporate Information
We were founded in 1964 as Clippert Trucking Company, a
Michigan corporation. We began air charter operations in
1990 and renamed ourselves Spirit Airlines, Inc. in 1992. In
1994, we reincorporated in Delaware, and in 1999 we relocated
our headquarters to Miramar, Florida.
Our mailing address and executive offices are located at 2800
Executive Way, Miramar, Florida 33025, and our telephone
number at that address is (954) 447-7920. We are subject to the
information and periodic reporting requirements of the
Securities Exchange Act of 1934, or Exchange Act, and, in
accordance therewith, file periodic reports, proxy statements
and
other information with the Securities and Exchange Commission
or SEC. Such periodic reports, proxy statements and other
information are available for inspection and copying at the
SEC's Public Reference Room at 100 F Street, NE., Washington,
DC 20549 or may be obtained by calling the SEC at 1-800-SEC-
0330. In addition, the SEC maintains a website at http://
www.sec.gov that contains reports, proxy statements and other
information regarding issuers that file electronically with the
SEC. We also post on the Investor Relations page of our
website, www.spirit.com, a link to our filings with the SEC, our
Corporate Governance Guidelines and Code of Business
Conduct and Ethics, which applies to all directors and all our
employees, and the charters of our Audit, Compensation,
Finance and Nominating and Corporate Governance committees.
Our
filings with the SEC are posted as soon as reasonably practical
after they are filed electronically with the SEC. Please note that

information contained on our website is not incorporated by
reference in, or considered to be a part of, this report. You can
also
obtain copies of these documents free of charge by writing to us
at: Corporate Secretary, Spirit Airlines, Inc., 2800 Executive
Way, Miramar, Florida 33025.
Our Business Model
Our ULCC business model provides customers very low base
fares with a range of optional services, allowing customers
the freedom to choose only the extras they value. The success
of our model is driven by our low cost structure, which permits
us to offer very low base fares while maintaining one of the
highest profit margins in the industry.
We are focused on price-sensitive travelers who pay for their
own travel, and our business model is designed to deliver
what we believe our customers want: low fares. We aggressively
use low fares to stimulate air travel demand in order to
increase passenger volume, load factors and non-ticket revenue
on the flights we operate. Higher passenger volumes and load
factors help us sell more ancillary products and services, which
in turn allows us to reduce the base fare we offer even further,
stimulating additional demand. We strive to be recognized by
our customers and potential customers as the low-fare leader in
the markets we serve.
We compete based on total price. We believe other airlines have
used an all-inclusive price concept to effectively raise
total prices to consumers, rather than lowering fares by
unbundling each product or service. For example, carriers that
tout
“free bags” have included the cost of checking bags in the total
ticket price, not allowing passengers to see how much they
would save if they did not check luggage. We believe that we

and our customers benefit when we allow our customers to
know
the total price of their travel by breaking out the cost of
additional, optional products or services. Before they pay, our
customers are easily able to compare the total cost of flying
with us versus flying with another airline.
We allow our customers to see all available options and their
prices prior to purchasing a ticket, and this full transparency
illustrates that our total prices are lower, on average, than our
competitors, even when options are included.
5
Our Strengths
We believe we compete successfully in the airline industry by
leveraging the following demonstrated business strengths:
Ultra-Low Cost Structure. Our unit operating costs are among
the lowest of all airlines operating in the Americas. We
believe this cost advantage helps protect our market position
and enables us to offer some of the lowest base fares in our
markets, sustain among the highest operating margins in our
industry and support continued growth. Our operating costs per
available seat mile (CASM) of 9.90 cents in 2013, were
significantly lower than those of the major domestic network
carriers,
American Airlines, Delta Air Lines, United Air Lines and US
Airways and among the lowest of the domestic low-cost
carriers,
including JetBlue Airways and Southwest Airlines. We achieve
these low unit operating costs in large part due to:

• high aircraft utilization;
• high-density seating configurations on our aircraft;
• our simple operations;
• no hub-and-spoke inefficiencies;
• highly productive workforce;
• opportunistic outsourcing of operating functions;
• operating a modern single fleet type of Airbus A320-family
aircraft with common flight crews across the fleet;
• reduced sales, marketing and distribution costs through direct-
to-consumer marketing;
• efficient flight scheduling, including minimal ground times
between flights; and
• a company-wide business culture that is keenly focused on
driving costs lower.
Innovative Revenue Generation. We execute our innovative,
unbundled pricing strategy to produce significant non-ticket
revenue generation, which allows us to stimulate passenger
demand for our product by lowering base fares and enabling
passengers to identify, select and pay for the products and
services they want to use. Our unbundled strategy has enabled
us to
grow average non-ticket revenue per passenger flight segment
from approximately $5 in 2006 to $54 in 2013 by:
• charging for checked and carry-on baggage;

• passing through all distribution-related expenses;
• charging for premium seats and advance seat selection;
• enforcing ticketing policies, including service charges for
changes and cancellations;
• generating subscription revenue from our $9 Fare Club ultra
low-fare subscription service;
• deriving brand-based revenues from proprietary services, such
as our FREE SPIRIT affinity credit card program;
• offering third-party travel products (travel packages), such as
hotel rooms, ground transportation (rental and hotel
shuttle products) and attractions (show or theme park tickets)
packaged with air travel;
• selling third-party travel insurance through our website;
• selling in-flight products and onboard advertising.
Resilient Business Model and Customer Base. By focusing on
price-sensitive travelers, we have maintained relatively
stable unit revenue and profitability during volatile economic
periods because we are not highly dependent on premium-fare
business traffic. We believe our growing customer base is more
resilient than the customer bases of most other airlines because
our low fares and unbundled service offering appeal to price-
sensitive passengers. For example, in 2009, when premium-fare
business traffic dried up due to the economic recession, our
operating revenue per available seat mile (RASM) declined
1.9%,
compared to an average U.S. airline industry decline of over
9%.

Well Positioned for Growth. We have developed a substantial
network of destinations in profitable U.S. domestic niche
markets, targeted growth markets in the Caribbean and Latin
America and high-volume routes flown by price-sensitive
travelers. In the United States, we also have grown into large
markets that, due to higher fares, have priced out those more
price-sensitive travelers. Our strategy to balance growth in
large domestic markets, niche markets and opportunities in the
Caribbean and Latin America gives us a significant number of
growth opportunities.
Experienced International Operator. We believe we have
substantial experience in foreign local aviation, security and
customs regulations, local ground operations and flight crew
training required for successful international and overwater
flight
6
operations. All of our aircraft are certified for overwater
operations. We believe we compete favorably against other low-
cost
carriers because we have been conducting international flight
operations since 2003 and have developed substantial
experience
in complying with the various regulations and business
practices in the international markets we serve.
Financial Strength Achieved with Focus on Cost Discipline. We
believe our ULCC business model has delivered strong
financial results in difficult economic times. We have generated
these results by:
• keeping a consistent focus on maintaining low unit operating

costs;
• ensuring our sourcing arrangements with key third parties are
continually benchmarked against the best industry
standards;
• maintaining a simple operation that focuses on delivering
transportation; and
• generating and maintaining an adequate level of liquidity to
insulate against volatility in key cost inputs, such as fuel,
and in passenger demand that may occur as a result of changing
general economic conditions.
Route Network
As of December 31, 2013, our route network included 130
markets served by 56 airports throughout North America,
Central America, South America and the Caribbean.
Below is a route map of our current network, which includes
seasonal routes and routes announced as of February 12,
2014 for which service has not yet started:
7
Our network expansion targets underserved and/or overpriced
markets. We utilize a rigorous process to identify
growth opportunities to deploy new aircraft where we believe
they will be profitable. To monitor the profitability of each
route,
we analyze weekly and monthly profitability reports as well as
near term forecasting.

Competition
The airline industry is highly competitive. The principal
competitive factors in the airline industry are fare pricing, total
price, flight schedules, aircraft type, passenger amenities,
number of routes served from a city, customer service, safety
record
and reputation, code-sharing relationships and frequent flier
programs and redemption opportunities. Our competitors and
potential competitors include traditional network airlines, low-
cost carriers, and regional airlines. We typically compete in
markets served by traditional network airlines and other low-
cost carriers, and, to a lesser extent, regional airlines.
Our single largest overlap, at approximately 61% of our markets
as of January 3, 2014, is with American Airlines. Our
principal competitors on domestic routes are American Airlines
(including US Airways which merged with American in
December 2013 but currently continues to operate as a separate
carrier), Southwest Airlines, United Airlines and Delta Airlines.
Our principal competitors for service from South Florida to our
markets in the Caribbean and Latin America are American
Airlines through its hub in Miami and JetBlue Airways through
its operations in Fort Lauderdale. Our principal competitive
advantages are our low base fares and our focus on the price-
sensitive traveler who pays his or her own travel costs. These
low
base fares are facilitated by our low unit operating costs, which
in 2013 were among the lowest in the industry. We believe our
low costs coupled with our non-ticket revenues allow us to price
our fares at levels where we can be profitable while our
primary competitors cannot.
The airline industry is particularly susceptible to price
discounting because, once a flight is scheduled, airlines incur
only

nominal incremental costs to provide service to passengers
occupying otherwise unsold seats. The expenses of a scheduled
aircraft flight do not vary significantly with the number of
passengers carried and, as a result, a relatively small change in
the
number of passengers or in pricing could have a
disproportionate effect on an airline’s operating and financial
results. Price
competition occurs on a market-by-market basis through price
discounts, changes in pricing structures, fare matching, target
promotions and frequent flier initiatives. Airlines typically use
discount fares and other promotions to stimulate traffic during
normally slower travel periods to generate cash flow and to
maximize RASM. The prevalence of discount fares can be
particularly acute when a competitor has excess capacity that it
is under financial pressure to sell. A key element to our
competitive strategy is to maintain very low unit costs in order
to permit us to compete successfully in price-sensitive markets.
Seasonality
Our business is subject to significant seasonal fluctuations. We
generally expect demand to be greater in the second and
third quarters compared to the rest of the year. The air
transportation business is also volatile and highly affected by
economic
cycles and trends.
Distribution
The majority of our tickets are sold through direct channels
including online via www.spirit.com, our call center and the
ticket counter with spirit.com being the primary channel. We
also partner with a number of third parties to distribute our
tickets,
including online and traditional travel agents and electronic

global distribution systems.
Customers
We believe our customers are primarily leisure travelers who
make their purchase decision based on price. By focusing on
lowering our cost structure, we can successfully sell tickets at
low fares while maintaining a strong profit margin.
Customer Service
We are committed to taking care of our customers. We believe
focus on customer service in every aspect of our
operations including personnel, flight equipment, in-flight and
ancillary amenities, on-time performance, flight completion
ratios, and baggage handling will strengthen customer loyalty
and attract new customers. We proactively aim to improve our
operations to ensure further improvement in customer service.
In response to customer and other demands, we recently
modified our online booking process to allow our customers to
see all available options and their prices prior to purchasing a
ticket, and have initiated a campaign that illustrates our total
prices are lower, on average, than our competitors, even when
options are included.
8
Fleet
We fly only Airbus A320 family aircraft, which provides us
significant operational and cost advantages compared to
airlines that operate multiple aircraft types. By operating a
single aircraft type, we avoid the incremental costs of training

crews
across multiple types. Flight crews are entirely interchangeable
across all of our aircraft, and maintenance, spare parts
inventories and other operational support remains highly
simplified compared to those of more complex fleets. Due to
this
commonality among Airbus single-aisle aircraft, we can retain
the benefits of a fleet comprised of a single type of aircraft
while
still having the flexibility to match the capacity and range of
the aircraft to the demands of each route.
As of December 31, 2013, we had a fleet of 54 Airbus single-
aisle aircraft, consisting of 29 A319s, 23 A320s and 2
A321s and the average age of the fleet was 5.1 years. All of our
existing aircraft were financed under operating leases with
expirations between 2016 and 2025.
As of December 31, 2013, firm aircraft orders consisted of 112
A320 family aircraft (37 of the existing A320 aircraft
model, 45 A320neos, 25 of the existing A321 model and 5
A321neos) with Airbus and 5 direct operating leases for
A320neos
with a third-party lessor. As of December 31, 2013, spare
engine orders consisted of six V2500 SelectOne engines with
IAE
and nine PurePower PW 1100G-JM engines with Pratt &
Whitney. Aircraft are scheduled for delivery from 2014 through
2021
and spare engines are scheduled for delivery from 2014 through
2024. The firm aircraft orders provide for capacity growth as
well as the flexibility to replace all or some of the 54 aircraft in
our present fleet. We may elect to supplement these deliveries
by additional acquisitions from the manufacturer or in the open
market if demand conditions merit.

Consistent with our ULCC business model, each of our aircraft
is configured with a high density seating configuration,
which helps us maintain a lower unit cost and pass savings to
our customers. Our A319s accommodate 145 passengers
(compared to 114 or 128 on United, 124 on US Airways and 128
on American Airlines), our A320s accommodate 178
passengers (compared to 138 or 150 on United, 150 on US
Airways and 150 on JetBlue) and our A321s accommodate 218
passengers (compared to 183 or 187 on US Airways, 102 on
American Airlines and 159 or 190 on JetBlue).
Maintenance and Repairs
We have an FAA mandated and approved maintenance program,
which is administered by our technical services
department. Our maintenance technicians undergo extensive
initial and ongoing training to ensure the safety of our aircraft.
Aircraft maintenance and repair consists of routine and non-
routine maintenance, and work performed is divided into
three general categories: line maintenance, heavy maintenance
and component service. Line maintenance consists of routine
daily and weekly scheduled maintenance checks on our aircraft,
including pre-flight, daily, weekly and overnight checks, and
any diagnostics and routine repairs and any unscheduled items
on an as needed basis. Line maintenance events are currently
serviced by in-house mechanics supplemented by contract labor
and are primarily completed at airports we currently serve.
Heavy airframe maintenance checks consist of a series of more
complex tasks that can take from one to four weeks to
accomplish and typically are required approximately every 20
months. Heavy engine maintenance is performed approximately
every four to six years and includes a more complex scope of
work. Due to our relatively small fleet size and projected fleet
growth, we believe outsourcing all of our heavy maintenance
activity, such as engine servicing, major part repair and

component service repairs is more economical. Outsourcing
eliminates the substantial initial capital requirements inherent
in
heavy aircraft maintenance. We have entered into a long-term
flight hour agreement for our current fleet with IAE for our
engine overhaul services and Lufthansa Technik on an hour-by-
hour basis for component services. We outsource our heavy
airframe maintenance to FAA-qualified maintenance providers.
Our recent maintenance expenses have been lower than what we
expect to incur in the future because of the relatively
young age of our aircraft fleet. Our maintenance costs are
expected to increase as the scope of repairs increases with the
increasing age of our fleet. As our aircraft age, scheduled scope
of work and frequency of unscheduled maintenance events is
likely to increase like any mature fleet. Our aircraft utilization
rate could decrease with the increase in aircraft maintenance.
Employees
Our business is labor intensive, with labor costs representing
approximately 19.1%, 19.1% and 19.6% of our total
operating costs for 2013, 2012 and 2011, respectively. As of
December 31, 2013, we had 869 pilots, 1,248 flight attendants,
25
flight dispatchers, 346 mechanics, 791 airport agents/other and
340 employees in administrative roles for a total of 3,619
employees. Approximately 59% of our employees were
represented by labor unions under three different collective-
bargaining
agreements. On an average full-time equivalent basis, for the
full year 2013, we had 3,224 employees, compared to 2,767 in
2012.

9
FAA regulations require pilots to have commercial licenses with
specific ratings for the aircraft to be flown, and to be
medically certified as physically fit to fly. FAA and medical
certifications are subject to periodic renewal requirements
including recurrent training and recent flying experience.
Mechanics, quality-control inspectors and flight dispatchers
must be
certificated and qualified for specific aircraft. Flight attendants
must have initial and periodic competency training and
qualification. Training programs are subject to approval and
monitoring by the FAA. Management personnel directly
involved
in the supervision of flight operations, training, maintenance
and aircraft inspection must also meet experience standards
prescribed by FAA regulations. All safety-sensitive employees
are subject to pre-employment, random and post-accident drug
testing.
The Railway Labor Act, or RLA, governs our relations with
labor organizations. Under the RLA, the collective
bargaining agreements generally do not expire, but instead
become amendable as of a stated date. If either party wishes to
modify the terms of any such agreement, they must notify the
other party in the manner agreed to by the parties. Under the
RLA, after receipt of such notice, the parties must meet for
direct negotiations, and if no agreement is reached, either party
may
request the National Mediation Board, or NMB, to appoint a
federal mediator. The RLA prescribes no set timetable for the
direct negotiation and mediation process. It is not unusual for
those processes to last for many months, and even for a few
years. If no agreement is reached in mediation, the NMB in its
discretion may declare at some time that an impasse exists, and
if an impasse is declared, the NMB proffers binding arbitration

to the parties. Either party may decline to submit to arbitration.
If arbitration is rejected by either party, a 30-day “cooling off”
period commences. During that period (or after), a Presidential
Emergency Board, or PEB, may be established, which examines
the parties’ positions and recommends a solution. The PEB
process lasts for 30 days and is followed by another “cooling
off” period of 30 days. At the end of a “cooling off” period,
unless
an agreement is reached or action is taken by Congress, the
labor organization and the airline each may resort to “self-
help,”
including, for the labor organization, a strike or other labor
action, and for the airline, the imposition of any or all of its
proposed amendments and the hiring of new employees to
replace any striking workers. Congress and the President have
the
authority to prevent “self-help” by enacting legislation that,
among other things, imposes a settlement on the parties. The
table
below sets forth our employee groups and status of the
collective bargaining agreements.
Employee Groups Representative Amendable Date
Pilots Air Line Pilots Association, International (ALPA)
August 2015
Flight Attendants Association of Flight Attendants (AFA-
CWA) August 2007
Dispatchers Transport Workers Union (TWU) August 2018
In December 2013, with the help of the NMB, we reached a
tentative agreement for a five-year contract with our flight
attendants. The tentative agreement was subject to ratification
by the flight attendant membership. On February 7, 2014, we
were notified that the flight attendants voted to not ratify the

tentative agreement. We will continue to work together with the
AFA-CWA and the NMB with a goal of reaching a mutually
beneficial agreement.
We focus on hiring highly productive employees and, where
feasible, designing systems and processes around
automation and outsourcing in order to maintain our low cost
base.
Safety and Security
We are committed to the safety and security of our passengers
and employees. We strive to comply with or exceed health
and safety regulation standards. In pursuing these goals, we
maintain an active aviation safety program and all of our
personnel
are expected to participate in the program and take an active
role in the identification, reduction and elimination of hazards.
Our ongoing focus on safety relies on training our employees to
proper standards and providing them with the tools and
equipment they require so they can perform their job functions
in a safe and efficient manner. Safety in the workplace targets
several areas of our operation including: flight operations,
maintenance, in-flight, dispatch and station operations. The
Transportation Security Administration, or TSA, is charged with
aviation security for both airlines and airports. We maintain
active, open lines of communication with the TSA at all of our
locations to ensure proper standards for security of our
personnel, customers, equipment and facilities are exercised
throughout the operation.
Insurance
We maintain insurance policies we believe are customary in the
airline industry and as required by the DOT. The policies

principally provide liability coverage for public and passenger
injury; damage to property; loss of or damage to flight
equipment; fire and extended coverage; directors’ and officers’
liability; advertiser and media liability; cyber risk liability;
fiduciary; and workers’ compensation and employer’s liability.
We have obtained third-party war risk (terrorism) insurance
through a special program administered by the FAA. Should the
government discontinue this coverage, obtaining comparable
10
coverage from commercial underwriters could result in a change
in premiums and more restrictive terms, if it is available at all.
Although we currently believe our insurance coverage is
adequate, there can be no assurance that the amount of such
coverage
will not be changed or that we will not be forced to bear
substantial losses from accidents.
Management Information Systems
We have continued our commitment to technology
improvements to support our ongoing operations and initiatives.
During 2013, we completed the integration of a new SAP
Enterprise Resource Planning application, which replaced our
general
ledger, accounts payable, accounts receivable, cash management
and fixed asset systems. The conversion was designed to
improve our key business processes by implementing an
integrated tool to increase efficiency, consistency, data
accuracy and
cost effectiveness.
Foreign Ownership

Under DOT regulations and federal law, we must be controlled
by U.S. citizens. In order to qualify, at least 75% of our
stock must be voted by U.S. citizens, and our president and at
least two-thirds of our board of directors and senior
management
must be U.S. citizens.
We believe we are currently in compliance with such foreign
ownership rules.
Government Regulation
Operational Regulation
The airline industry is heavily regulated, especially by the
federal government. Two of the primary regulatory authorities
overseeing air transportation in the United States are the DOT
and the FAA. The DOT has jurisdiction over economic issues
affecting air transportation, such as competition, route
authorizations, advertising and sales practices, baggage liability
and
disabled passenger transportation, among other areas, several of
which were included in rules that became effective in 2011 and
2012 relating to, among other things, how airlines handle
interactions with passengers through advertising, the reservation
process, at the airport and on board the aircraft. The DOT has
extended the effective date for certain of these rules.
Additional
consumer and disabled passenger rules may be proposed in
2014. See “Risk Factors—Restrictions on or increased taxes
applicable to charges for ancillary products and services paid by
airline passengers and burdensome consumer protection
regulations or laws could harm our business, results of
operations and financial condition.”

The DOT has authority to issue certificates of public
convenience and necessity required for airlines to provide air
transportation. We hold a DOT certificate of public convenience
and necessity authorizing us to engage in scheduled air
transportation of passengers, property and mail within the
United States, its territories and possessions and between the
United
States and all countries that maintain a liberal aviation trade
relationship with the United States (known as “open skies”
countries). We also hold DOT certificates to engage in air
transportation to certain other countries with more restrictive
aviation
policies.
The FAA is responsible for regulating and overseeing matters
relating to air carrier flight operations, including airline
operating certificates, aircraft certification and maintenance and
other matters affecting air safety. The FAA requires each
commercial airline to obtain and hold an FAA air carrier
certificate. This certificate, in combination with operations
specifications issued to the airline by the FAA, authorizes the
airline to operate at specific airports using aircraft approved by
the FAA. As of December 31, 2013, we had FAA airworthiness
certificates for all of our aircraft, we had obtained the necessary
FAA authority to fly to all of the cities we currently serve, and
all of our aircraft had been certified for overwater operations.
The FAA recently issued its final regulations governing pilot
rest periods and work hours for all airlines certificated under
Part
121 of the Federal Aviation Regulations. The rule, known as
FAR 117 and which became effective on January 4, 2014,
impacts
the required amount and timing of rest periods for pilots
between work assignments, and modifies duty and rest
requirements
based on the time of day, number of scheduled segments, flight

types, time zones and other factors. In addition, this will lead to
increased pilot costs as we will be required to hire more pilots
as a result of FAR 117. We believe we hold all necessary
operating and airworthiness authorizations, certificates and
licenses and are operating in compliance with applicable DOT
and
FAA regulations, interpretations and policies.
International Regulation
All international service is subject to the regulatory
requirements of the foreign government involved. We currently
operate international service to Aruba, the Bahamas, Colombia,
Costa Rica, Dominican Republic, El Salvador, Guatemala,
Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Peru and
St. Maarten, as well as Puerto Rico and the U.S. Virgin
Islands. If we decide to increase our routes to additional
international destinations, we will be required to obtain
necessary
11
authority from the DOT and the applicable foreign government.
We are also required to comply with overfly regulations in
countries that lay along our routes but which we do not serve.
International service is also subject to Customs and Border
Protection, or CBP, immigration and agriculture requirements
and the requirements of equivalent foreign governmental
agencies. Like other airlines flying international routes, from
time to
time we may be subject to civil fines and penalties imposed by
CBP if unmanifested or illegal cargo, such as illegal narcotics,
is

found on our aircraft. These fines and penalties, which in the
case of narcotics are based upon the retail value of the seizure,
may be substantial. We have implemented a comprehensive
security program at our airports to reduce the risk of illegal
cargo
being placed on our aircraft, and we seek to cooperate actively
with CBP and other U.S. and foreign law enforcement agencies
in investigating incidents or attempts to introduce illegal cargo.
Security Regulation
The TSA was created in 2001 with the responsibility and
authority to oversee the implementation, and ensure the
adequacy, of security measures at airports and other
transportation facilities. Funding for passenger security is
provided in part
by a per enplanement ticket tax (passenger security fee) of
$2.50 per passenger flight segment, subject to a $5 per one-way
trip
cap. Effective July 1, 2014, the security fee will be set at a flat
rate of $5.60 each way. The TSA was granted authority to
impose additional fees on air carriers if necessary to cover
additional federal aviation security costs. Pursuant to its
authority,
the TSA may revise the way it assesses this fee, which could
result in increased costs for passengers and us. We cannot
forecast
what additional security and safety requirements may be
imposed in the future or the costs or revenue impact that would
be
associated with complying with such requirements. The TSA
also assesses an Aviation Security Infrastructure Fee, or ASIF,
on
each airline. Our ASIF fee is approximately $1.6 million per
year.

Environmental Regulation
We are subject to various federal, state and local laws and
regulations relating to the protection of the environment and
affecting matters such as aircraft engine emissions, aircraft
noise emissions and the discharge or disposal of materials and
chemicals, which laws and regulations are administered by
numerous state and federal agencies. The Environmental
Protection
Agency, or EPA, regulates operations, including air carrier
operations, which affect the quality of air in the United States.
We
believe the aircraft in our fleet meet all emission standards
issued by the EPA. Concern about climate change and
greenhouse
gases may result in additional regulation or taxation of aircraft
emissions in the United States and abroad.
Federal law recognizes the right of airport operators with
special noise problems to implement local noise abatement
procedures so long as those procedures do not interfere
unreasonably with interstate and foreign commerce and the
national air
transportation system. These restrictions can include limiting
nighttime operations, directing specific aircraft operational
procedures during takeoff and initial climb, and limiting the
overall number of flights at an airport.
Other Regulations
We are subject to certain provisions of the Communications Act
of 1934, as amended, and are required to obtain an
aeronautical radio license from the Federal Communications
Commission, or FCC. To the extent we are subject to FCC
requirements, we will take all necessary steps to comply with
those requirements. We are also subject to state and local laws

and regulations at locations where we operate and the
regulations of various local authorities that operate the airports
we serve.
Future Regulations
The U.S. and foreign governments may consider and adopt new
laws, regulations, interpretations and policies regarding a
wide variety of matters that could directly or indirectly affect
our results of operations. We cannot predict what laws,
regulations, interpretations and policies might be considered in
the future, nor can we judge what impact, if any, the
implementation of any of these proposals or changes might have
on our business.
12
ITEM 1A. RISK FACTORS
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking
statements within the meaning of Section 27A of the Securities
Act
of 1933 and Section 21E of the Securities Exchange Act of
1934, as amended, or the Exchange Act. Forward-looking
statements may include words such as “believe,” “may,”
“estimate,” “continue,” “anticipate,” “intend,” “expect,”
“predict,”
“potential” and similar expressions indicating future results or
expectations, as they relate to our company, our business and
our management, are intended to identify forward-looking
statements. Forward-looking statements should not be read as a

guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which
such
performance or results will be achieved, if at all. Forward-
looking statements are based on information available at the
time
those statements are made and/or management's good faith
belief as of that time with respect to future events, and are
subject
to risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in or
suggested by the forward-looking statements. Therefore, actual
results may differ materially from what is expressed in or
indicated by our forward-looking statements or from historical
experience or our present expectations. Known material risk
factors that could cause these differences are set forth below
under "Risk Factors." Additional risks or uncertainties (i) that
are
not currently known to us, (ii) that we currently deem to be
immaterial, or (iii) that could apply to any company, could also
materially adversely affect our business, financial condition, or
future results. You should carefully consider the risks described
below and the other information in this report. If any of the
following risks materialize, our business could be materially
harmed, and our financial condition and results of operations
could be materially and adversely affected. References in this
report to “Spirit,” “we,” “us,” “our,” or the “Company” shall
mean Spirit Airlines, Inc., unless the context indicates
otherwise.
Risks Related to Our Industry
We operate in an extremely competitive industry.
We face significant competition with respect to routes, fares
and services. Within the airline industry, we compete with

traditional network airlines, other low-cost airlines and regional
airlines on many of our routes. Competition in most of the
destinations we presently serve is intense, due to the large
number of carriers in those markets. Furthermore, other airlines
may
begin service or increase existing service on routes where we
currently face no or little competition. Substantially all of our
competitors are larger and have significantly greater financial
and other resources than we do.
The airline industry is particularly susceptible to price
discounting because once a flight is scheduled, airlines incur
only
nominal additional costs to provide service to passengers
occupying otherwise unsold seats. Increased fare or other price
competition could adversely affect our operations. Moreover,
many other airlines have begun to unbundle services by
charging
separately for services such as baggage and advance seat
selection. This unbundling and other cost reducing measures
could
enable competitor airlines to reduce fares on routes that we
serve.
In addition, airlines increase or decrease capacity in markets
based on perceived profitability. Decisions by our
competitors that increase overall industry capacity, or capacity
dedicated to a particular domestic or foreign region, market or
route, could have a material adverse impact on our business. If a
traditional network airline were to successfully develop a low-
cost structure or if we were to experience increased competition
from other low-cost carriers, our business could be materially
adversely affected.
All of the domestic traditional network airlines have on one or
more occasions initiated bankruptcy proceedings in

attempts to restructure their debt and other obligations and
reduce their operating costs. On November 29, 2011, AMR
Corporation and substantially all of its subsidiaries, including
American Airlines, Inc., filed a petition for relief under Chapter
11 of the U.S. Bankruptcy Code. In December 2013, AMR
Corporation and US Airways Group, Inc. completed a merger
and
formally became American Airlines Group Inc. We presently
compete with American Airlines (including US Airways, which
merged with American in December 2013 but continues to
operate as a separate carrier) in a majority of our markets. We
cannot predict the extent to which this merger will result in a
more effective competitor with us.
Our growth and the success of our ULCC business model could
stimulate competition in our markets through our
competitors’ development of their own ULCC strategies or new
market entrants. Any such competitor may have greater
financial resources and access to cheaper sources of capital than
we do, which could enable them to operate their business with
13
a lower cost structure than we can. If these competitors adopt
and successfully execute a ULCC business model, we could be
materially adversely affected.
There has been significant consolidation within the airline
industry including, for example, the combinations of American
Airlines and US Airways, Delta Air Lines and Northwest
Airlines, United Airlines and Continental Airlines and
Southwest
Airlines and AirTran Airways. In the future, there may be
additional consolidation in our industry. Any business

combination
could significantly alter industry conditions and competition
within the airline industry and could cause fares of our
competitors to be reduced.
The extremely competitive nature of the airline industry could
prevent us from attaining the level of passenger traffic or
maintaining the level of fares or revenues related to ancillary
services required to sustain profitable operations in new and
existing markets and could impede our growth strategy, which
could harm our operating results. Due to our relatively small
size, we are susceptible to a fare war or other competitive
activities in one or more of the markets we serve, which could
have a
material adverse effect on our business, results of operations
and financial condition.
Our low cost structure is one of our primary competitive
advantages, and many factors could affect our ability to
control our costs.
Our low cost structure is one of our primary competitive
advantages. However, we have limited control over many of our
costs. For example, we have limited control over the price and
availability of aircraft fuel, aviation insurance, airport and
related infrastructure taxes, the cost of meeting changing
regulatory requirements and our cost to access capital or
financing. In
addition, the compensation and benefit costs applicable to a
significant portion of our employees are established by the
terms of
our collective bargaining agreements. We cannot guarantee we
will be able to maintain a cost advantage over our competitors.
If our cost structure increases and we are no longer able to
maintain a cost advantage over our competitors, it could have a

The airline industry is heavily impacted by the price and
availability of aircraft fuel. Continued volatility in fuel costs or
significant disruptions in the supply of fuel, including
hurricanes and other events affecting the Gulf Coast in
particular,
could materially adversely affect our business, results of
operations and financial condition.
Aircraft fuel costs represent our single largest operating cost,
accounting for 40.2%, 41.2% and 41.9% of our total
operating expenses for 2013, 2012 and 2011, respectively. As
such, our operating results are significantly affected by changes
in the availability and the cost of aircraft fuel, especially
aircraft fuel refined in the U.S. Gulf Coast region, on which we
are
highly dependent. Both the cost and the availability of aircraft
fuel are subject to many meteorological, economic and political
factors and events occurring throughout the world, which we
can neither control nor accurately predict. For example, a major
hurricane making landfall along the Gulf Coast could cause
disruption to oil production, refinery operations and pipeline
capacity in that region, possibly resulting in significant
increases in the price of aircraft fuel and diminished availability
of
aircraft fuel supplies. Any disruption to oil production, refinery
operations, or pipeline capacity in the Gulf Coast region could
have a disproportionate impact on our operating results
compared to other airlines that have more diversified fuel
sources.
Aircraft fuel prices have been subject to high volatility,
fluctuating substantially over the past several years. Due to the
large proportion of aircraft fuel costs in our total operating cost
base, even a relatively small increase in the price of aircraft

fuel
can have a significant negative impact on our operating costs
and on our business, results of operations and financial
condition.
Our fuel derivative activity may not reduce our fuel costs.
From time to time, we enter into fuel derivative contracts in
order to mitigate the risk to our business from future
volatility in fuel prices. Our derivatives 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 risk between the price of crude oil and the price of
refined jet fuel, and to manage the risk of increasing fuel prices.
As
of December 31, 2013, we had no outstanding fuel derivative
contracts. There can be no assurance that we will be able to
enter
into fuel hedge contracts in the future. Our liquidity and general
level of capital resources impacts our ability to hedge our fuel
requirements. Even if we are able to hedge portions of our
future fuel requirements, we cannot guarantee that our hedge
contracts will provide sufficient protection against increased
fuel costs or that our counterparties will be able to perform
under
our hedge contracts, such as in the case of a counterparty’s
insolvency. Furthermore, our ability to react to the cost of fuel,
absent hedging, is limited because we set the price of tickets in
advance of incurring fuel costs. Our ability to pass on any
significant increases in aircraft fuel costs through fare increases
could also be limited. In the event of a reduction in fuel prices
compared to our hedged position, our hedged positions could
counteract the cost benefit of lower fuel prices and could
require

us to post additional cash margin collateral. Please see
“Management’s Discussion and Analysis of Financial Condition
and
Results of Operations—Trends and Uncertainties Affecting Our
Business—Aircraft Fuel.”
14
Restrictions on or increased taxes applicable to charges for
ancillary products and services paid by airline passengers
and burdensome consumer protection regulations or laws could
harm our business, results of operations and financial
condition.
During 2013, 2012 and 2011, we generated non-ticket revenues
of $668.4 million, $535.6 million and $381.5 million,
respectively. Our non-ticket revenues are generated from
charges for, among other things, baggage, bookings through our
distribution channels, advance seat selection, itinerary changes
and loyalty programs. In April 2011, the DOT published a broad
set of final rules relating to, among other things, how airlines
handle interactions with passengers through advertising, the
reservations process, at the airport and on board the aircraft.
The final rules require airlines to publish a full fare for a flight,
including mandatory taxes and fees, and to enhance disclosure
of the cost of optional products and services, including baggage
charges. The rules restrict airlines from increasing ticket prices
post-purchase (other than increases resulting from changes in
government-imposed fees or taxes) or increase significantly the
amount and scope of compensation payable to passengers
involuntarily denied boarding due to oversales. The final rules
also extend the applicability of tarmac delay reporting and
penalties to include international flights and provide that
reservations made more than one week prior to flight date may

be held
at the quoted fare without payment, or cancelled without
penalty, for 24 hours. All of these rules became effective by
January
24, 2012. If we are not able to remain in compliance with these
rules, the DOT may subject us to fines or other enforcement
action, including requirements to modify our passenger
reservations system, which could have a material adverse effect
on our
business. The U.S. Congress and Federal administrative
agencies have investigated the increasingly common airline
industry
practice of unbundling the pricing of certain products and
services. If new taxes are imposed on non-ticket revenues, or if
other laws or regulations are adopted that make unbundling of
airline products and services impermissible, or more
cumbersome or expensive, our business, results of operations
and financial condition could be harmed. Congressional and
other
government scrutiny may also change industry practice or
public willingness to pay for ancillary services. See also “—We
are
subject to extensive regulation by the Federal Aviation
Administration, the Department of Transportation and other
U.S. and
foreign governmental agencies, compliance with which could
cause us to incur increased costs and adversely affect our
business and financial results.”
The airline industry is particularly sensitive to changes in
economic conditions. Continued adverse economic conditions
or a reoccurrence of such conditions would negatively impact
our business, results of operations and financial condition.
Our business and the airline industry in general are affected by
many changing economic conditions beyond our control,

including, among others:
• changes and volatility in general economic conditions,
including the severity and duration of any downturn in the U.S.
or global economy and financial markets;
• changes in consumer preferences, perceptions, spending
patterns or demographic trends, including any increased
preference for higher-fare carriers offering higher amenity
levels, and reduced preferences for low-fare carriers
offering more basic transportation, during better economic
times;
• higher levels of unemployment and varying levels of
disposable or discretionary income;
• depressed housing and stock market prices; and
• lower levels of actual or perceived consumer confidence.
These factors can adversely affect, and from time to time have
adversely affected, our results of operations, our ability to
obtain financing on acceptable terms and our liquidity.
Unfavorable general economic conditions, such as higher
unemployment rates, a constrained credit market, housing-
related pressures and increased focus on reducing business
operating
costs can reduce spending for price-sensitive leisure and
business travel. For many travelers, in particular the price-
sensitive
travelers we serve, air transportation is a discretionary purchase
that they may reduce or eliminate from their spending in
difficult economic times. The overall decrease in demand for air
transportation in the United States in 2008 and 2009 resulting
from record high fuel prices and the economic recession
required us to take significant steps to reduce our capacity,

which
reduced our revenues. Unfavorable economic conditions could
also affect our ability to raise prices to counteract increased
fuel,
labor or other costs, resulting in a material adverse effect on our
business, results of operations and financial condition.
The airline industry faces ongoing security concerns and related
cost burdens, further threatened or actual terrorist
attacks or other hostilities that could significantly harm our
industry and our business.
The terrorist attacks of September 11, 2001 and their aftermath
negatively affected the airline industry. The primary
effects experienced by the airline industry included:
15
• substantial loss of revenue and flight disruption costs caused
by the grounding of all commercial air traffic in or
headed to the United States by the Federal Aviation
Administration, or FAA, for three days after the terrorist
attacks;
• increased security and insurance costs;
• increased concerns about future terrorist attacks;
• airport shutdowns and flight cancellations and delays due to
security breaches and perceived safety threats; and
• significantly reduced passenger traffic and yields due to the
subsequent dramatic drop in demand for air travel.

Since September 11, 2001, the Department of Homeland
Security and the Transportation Security Administration, or
TSA, have implemented numerous security measures that
restrict airline operations and increase costs, and are likely to
implement additional measures in the future. For example,
following the widely publicized attempt of an alleged terrorist
to
detonate plastic explosives hidden underneath his clothes on a
Northwest Airlines flight on Christmas Day in 2009, passengers
became subject to enhanced random screening, which may
include pat-downs, explosive detection testing or body scans.
Enhanced passenger screening, increased regulation governing
carry-on baggage and other similar restrictions on passenger
travel may further increase passenger inconvenience and reduce
the demand for air travel. In addition, increased or enhanced
security measures have tended to result in higher governmental
fees imposed on airlines, resulting in higher operating costs for
airlines, which we may not be able to pass on to consumers in
the form of higher prices. Any future terrorist attacks or
attempted attacks, even if not made directly on the airline
industry, or the fear of such attacks or other hostilities
(including
elevated national threat warnings or selective cancellation or
redirection of flights due to terror threats) would likely have a
and financial condition and on the airline industry in general.
Airlines are often affected by factors beyond their control
including: air traffic congestion at airports; air traffic control
inefficiencies; adverse weather conditions, such as hurricanes or
blizzards; increased security measures; new travel
related taxes or the outbreak of disease, any of which could
harm our business, operating results and financial
condition.
Like other airlines, our business is affected by factors beyond

our control, including air traffic congestion at airports, air
traffic control inefficiencies, adverse weather conditions,
increased security measures, new travel related taxes and the
outbreak
of disease. Factors that cause flight delays frustrate passengers
and increase costs, which in turn could adversely affect
profitability. The federal government singularly controls all
U.S. airspace, and airlines are completely dependent on the
FAA to
operate that airspace in a safe, efficient and affordable manner.
The air traffic control system, which is operated by the FAA,
faces challenges in managing the growing demand for U.S. air
travel. U.S. and foreign air-traffic controllers often rely on
outdated technologies that routinely overwhelm the system and
compel airlines to fly inefficient, indirect routes resulting in
delays. Adverse weather conditions and natural disasters, such
as hurricanes affecting southern Florida and the Caribbean as
well as other areas of the eastern United States (such as
Hurricane Sandy in October 2012), winter snowstorms or the
January
2010 earthquakes in Port-au-Prince, Haiti, can cause flight
cancellations or significant delays. Cancellations or delays due
to
adverse weather conditions or natural disasters, air traffic
control problems or inefficiencies, breaches in security or other
factors could harm our business, results of operations and
financial condition. Similarly, outbreaks of pandemic or
contagious
diseases, such as avian flu, severe acute respiratory syndrome
(SARS) and H1N1 (swine) flu, could result in significant
decreases in passenger traffic and the imposition of government
restrictions in service and could have a material adverse impact
on the airline industry. Increased travel taxes, such as those
provided in the Travel Promotion Act, enacted March 10, 2010,
which charges visitors from certain countries a $10 fee every
two years to travel into the United States to subsidize certain

travel promotion efforts, could also result in decreases in
passenger traffic. Any general reduction in airline passenger
traffic
could have a material adverse effect on our business, results of
Restrictions on or litigation regarding third-party membership
discount programs could harm our business, operating
results and financial condition.
We generate a relatively small but growing portion of our
revenue from order referral fees, revenue share and other fees
paid to us by third-party merchants for customer click-throughs,
distribution of third-party promotional materials and referrals
arising from products and services of the third-party merchants
that we offer to our customers on our website. Some of these
third-party referral-based offers are for memberships in
discount programs or similar promotions made to customers
who have
purchased products from us, and for which we receive a
payment from the third-party merchants for every customer that
accepts the promotion. Certain of these third-party membership
discount programs have been the subject of consumer
complaints, litigation and regulatory actions alleging that the
enrollment and billing practices involved in the programs
violate
various consumer protection laws or are otherwise deceptive.
Any private or governmental claim or action that may be
brought
against us in the future relating to these third-party membership
programs could result in our being obligated to pay damages or
incurring legal fees in defending claims. These damages and
fees could be disproportionate to the revenues we generate

16
through these relationships. In addition, customer
dissatisfaction or a significant reduction in or termination of the
third-party
membership discount offers on our website as a result of these
claims could have a negative impact on our brand, and have a
We face competition from air travel substitutes.
In addition to airline competition from traditional network
airlines, other low-cost airlines and regional airlines, we also
face competition from air travel substitutes. On our domestic
routes, we face competition from some other transportation
alternatives, such as bus, train or automobile. In addition,
technology advancements may limit the demand for air travel.
For
example, video teleconferencing and other methods of
electronic communication may reduce the need for in-person
communication and add a new dimension of competition to the
industry as travelers seek lower-cost substitutes for air travel. If
we are unable to adjust rapidly in the event the basis of
competition in our markets changes, it could have a material
adverse
effect on our business, results of operations and financial
condition.
Risks Related to Our Business
Increased labor costs, union disputes, employee strikes and
other labor-related disruption may adversely affect our
business, results of operations and financial conditions.
Our business is labor intensive, with labor costs representing

approximately 19.1%, 19.1% and 19.6% of our total
operating costs for 2013, 2012 and 2011, respectively. As of
December 31, 2013, approximately 59% of our workforce was
represented by labor unions and thereby covered by collective
bargaining agreements. We cannot assure you that our labor
costs going forward will remain competitive because in the
future our labor agreements may be amended or become
amendable
and new agreements could have terms with higher labor costs;
one or more of our competitors may significantly reduce their
labor costs, thereby reducing or eliminating our comparative
advantages as to one or more of such competitors; or our labor
costs may increase in connection with our growth. We may also
become subject to additional collective bargaining agreements
in the future as non-unionized workers may unionize.
Relations between air carriers and labor unions in the United
States are governed by the Railway Labor Act, or the RLA.
Under the RLA, collective bargaining agreements generally
contain “amendable dates” rather than expiration dates, and the
RLA requires that a carrier maintain the existing terms and
conditions of employment following the amendable date through
a
multi-stage and usually lengthy series of bargaining processes
overseen by the National Mediation Board, or the NMB. This
process continues until either the parties have reached
agreement on a new collective bargaining agreement, or the
parties have
been released to “self-help” by the NMB. In most
circumstances, the RLA prohibits strikes; however, after release
by the NMB,
carriers and unions are free to engage in self-help measures
such as lockouts and strikes.
Our flight operations were shut down due to a strike by our
pilots beginning on June 12, 2010 and lasting until we and the

union representing our pilots reached a tentative agreement for
a new contract. Under a Return to Work Agreement, we began
to resume flights on June 17, 2010 and resumed our full flight
schedule on June 18, 2010. On August 1, 2010, we and the
pilots’ union executed a five-year collective bargaining
agreement. This shutdown had a material adverse effect on our
results
of operations for 2010.
We entered into a five-year agreement with our flight
dispatchers in August 2013. In December 2013, with the help of
the
NMB, we reached a tentative agreement for a five-year contract
with our flight attendants. The tentative agreement was subject
to ratification by the flight attendant membership. On February
7, 2014, we were notified that the flight attendants voted not to
ratify the tentative agreement. We will continue to work
together with the AFA-CWA and the NMB with a goal of
reaching a
mutually beneficial agreement. If we are unable to reach
agreement with any of our unionized work groups in current or
future
negotiations regarding the terms of their collective bargaining
agreements, we may be subject to work interruptions or
stoppages. Any such action or other labor dispute with
unionized employees could disrupt our operations, reduce our
profitability, or interfere with the ability of our management to
focus on executing our business strategies.
We have a significant amount of aircraft-related fixed
obligations that could impair our liquidity and thereby harm our
The airline business is capital intensive and, as a result, many
airline companies are highly leveraged. All of our aircraft
are leased, and in 2013 and 2012 we paid the lessors rent of

$166.3 million and $140.8 million, respectively, and
maintenance
deposits net of reimbursements of $24.1 million and $31.6
million, respectively. As of December 31, 2013, we had future
operating lease obligations of approximately $1.4 billion. In
addition, we have significant obligations for aircraft and spare
engines that that we have ordered from Airbus, International
Aero Engines AG, or IAE, and Pratt and Whitney for delivery
over
the next several years. Our ability to pay the fixed costs
associated with our contractual obligations will depend on our
operating performance, cash flow and our ability to secure
adequate financing, which will in turn depend on, among other
17
things, the success of our current business strategy, whether
fuel prices continue at current price levels and/or further
increase
or decrease, further weakening or improving in the U.S.
economy, as well as general economic and political conditions
and
other factors that are, to some extent, beyond our control. The
amount of our aircraft related fixed obligations could have a
and financial condition and could:
• require a substantial portion of cash flow from operations for
operating lease and maintenance deposit payments,
thereby reducing the availability of our cash flow to fund
working capital, capital expenditures and other general
corporate purposes;
• limit our ability to make required pre-delivery deposit

payment, or PDPs, including those payable to our aircraft and
engine manufacturers for our aircraft and spare engines on
order;
• limit our ability to obtain additional financing to support our
expansion plans and for working capital and other
purposes on acceptable terms or at all;
• make it more difficult for us to pay our other obligations as
they become due during adverse general economic and
market industry conditions because any related decrease in
revenues could cause us to not have sufficient cash flows
from operations to make our scheduled payments;
• reduce our flexibility in planning for, or reacting to, changes
in our business and the airline industry and, consequently,
place us at a competitive disadvantage to our competitors with
less fixed payment obligations; and
• cause us to lose access to one or more aircraft and forfeit our
rent deposits if we are unable to make our required
aircraft lease rental payments and our lessors exercise their
remedies under the lease agreement including cross default
provisions in certain of our leases.
A failure to pay our operating lease and other fixed cost
obligations or a breach of our contractual obligations could
result
in a variety of adverse consequences, including the exercise of
remedies by our creditors and lessors. In such a situation, it is
unlikely that we would be able to cure our breach, fulfill our
obligations, make required lease payments or otherwise cover
our
fixed costs, which would have a material adverse effect on our

We are highly dependent upon our cash balances and operating
cash flows.
As of December 31, 2013, we had access to lines of credit from
four counterparties to our jet fuel derivatives and our
purchase credit card issuer aggregating $53.1 million. These
credit facilities are not adequate to finance our operations, and
we
will continue to be dependent on our operating cash flows and
cash balances to fund our operations and to make scheduled
payments on our aircraft related fixed obligations. Although our
credit card processors currently do not have a right to hold
back credit card receipts to cover repayment to customers, if we
fail to maintain certain liquidity and other financial covenants,
their rights to holdback would be reinstated, which would result
in a reduction of unrestricted cash that could be material. In
addition, we are required by some of our aircraft lessors to fund
reserves in cash in advance for scheduled maintenance, and a
portion of our cash is therefore unavailable until after we have
completed the scheduled maintenance in accordance with the
terms of the operating leases. Based on the age of our fleet and
our growth strategy, these maintenance deposits will increase
over the next few years before we receive any significant
reimbursement for completed maintenance. If we fail to
generate
sufficient funds from operations to meet our operating cash
requirements or do not obtain a line of credit, other borrowing
facility or equity financing, we could default on our operating
lease and fixed obligations. Our inability to meet our
obligations
as they become due would have a material adverse effect on our
A deterioration in worldwide economic conditions may
adversely affect our business, operating results, financial
condition, liquidity and ability to obtain financing or access

capital markets.
The general worldwide economy has in the past experienced
downturns due to the effects of the European debt crisis,
unfavorable U.S. economic conditions and slowing growth in
certain Asian economies, including general credit market crises,
collateral effects on the finance and banking industries,
concerns about inflation, slower economic activity, decreased
consumer
confidence, reduced corporate profits and capital spending,
adverse business conditions and liquidity concerns. The airline
industry is particularly sensitive to changes in economic
conditions, which affect customer travel patterns and related
revenues.
A weak economy could reduce our bookings, and a reduction in
discretionary spending could also decrease amounts our
customers are willing to pay. Unfavorable economic conditions
can also impact the ability of airlines to raise fares to help
offset increased fuel, labor and other costs. We cannot
accurately predict the effect or duration of any economic
slowdown or
the timing or strength of a subsequent economic recovery.
18
In addition, we have significant obligations for aircraft and
spare engines that we have ordered from Airbus. IAE and
Pratt and Whitney over the next several years, and we will need
to finance these purchases. We may not have sufficient
liquidity or creditworthiness to fund the purchase of aircraft and
engines, including payment of PDPs, or for other working
capital. Factors that affect our ability to raise financing or
access the capital markets include market conditions in the
airline

industry, economic conditions, the perceived residual value of
aircraft and related assets, the level and volatility of our
earnings,
our relative competitive position in the markets in which we
operate, our ability to retain key personnel, our operating cash
flows and legal and regulatory developments. Regardless of our
creditworthiness, at times the market for aircraft purchase or
lease financing has been very constrained due to such factors as
the general state of the capital markets and the financial
position of the major providers of commercial aircraft
financing.
Our liquidity and general level of capital resources impact our
ability to hedge our fuel requirements.
We enter into fuel derivative contracts in order to mitigate the
risk to our business from future volatility in fuel prices. As
of December 31, 2013, we had no outstanding fuel derivative
contracts. While we intend to hedge a portion of our future fuel
requirements, there can be no assurance that, at any given time,
we will be able to enter into fuel hedge contracts. In the past,
we have not had and in the future we may not have sufficient
creditworthiness or liquidity to post the collateral necessary to
hedge our fuel requirements. Even if we are able to hedge
portions of our future fuel requirements, we cannot guarantee
that
our hedge contracts will provide any particular level of
protection against increased fuel costs or that our counterparties
will be
able to perform under our hedge contracts, such as in the case of
a counterparty’s insolvency. Furthermore, our ability to react
to the cost of fuel, absent hedging, is limited, because we set
the price of tickets in advance of knowing our fuel costs at the
time the tickets are flown. Our ability to pass on any significant
increases in aircraft fuel costs through fare increases could also
be limited.

We rely on maintaining a high daily aircraft utilization rate to
implement our low cost structure, which makes us
especially vulnerable to flight delays or cancellations or aircraft
unavailability.
We maintain a high daily aircraft utilization rate. Our average
daily aircraft utilization was 12.7 hours, 12.8 hours and
12.7 hours for 2013, 2012 and 2011, respectively. Aircraft
utilization is the average amount of time per day that our
aircraft
spend carrying passengers. Our revenue per aircraft can be
increased by high daily aircraft utilization, which is achieved in
part
by reducing turnaround times at airports so we can fly more
hours on average in a day. Aircraft utilization is reduced by
delays
and cancellations from various factors, many of which are
beyond our control, including air traffic congestion at airports
or
other air traffic control problems, adverse weather conditions,
increased security measures or breaches in security,
international
or domestic conflicts, terrorist activity, or other changes in
business conditions. A significant portion of our operations are
concentrated in markets such as South Florida, the Caribbean,
Latin America and the Northeast and northern Midwest regions
of the United States, which are particularly vulnerable to
weather, airport traffic constraints and other delays. In addition,
pulling aircraft out of service for unscheduled and scheduled
maintenance, which will increase as our fleet ages, may
materially
reduce our average fleet utilization and require that we seek
short-term substitute capacity at increased costs. Due to the
relatively small size of our fleet and high daily aircraft
utilization rate, the unavailability of one or more aircraft and

resulting
reduced capacity could have a material adverse effect on our
Our maintenance costs will increase as our fleet ages, and we
will periodically incur substantial maintenance costs due
to the maintenance schedules of our aircraft fleet.
As of December 31, 2013, the average age of our aircraft was
approximately 5.1 years. Our relatively new aircraft require
less maintenance now than they will in the future. Our fleet will
require more maintenance as it ages and our maintenance and
repair expenses for each of our aircraft will be incurred at
approximately the same intervals. We expect that the final
heavy
maintenance events will be amortized over the remaining lease
term rather than until the next estimated heavy maintenance
event, because we account for heavy maintenance under the
deferral method. This will result in significantly higher
depreciation and amortization expense related to heavy
maintenance in the last few years of the leases as compared to
the costs
in earlier periods. Moreover, because our current fleet was
acquired over a relatively short period, significant maintenance
that
is scheduled on each of these planes is occuring at roughly the
same time, meaning we will incur our most expensive scheduled
maintenance obligations, known as heavy maintenance, across
our present fleet around the same time. These more significant
maintenance activities result in out-of-service periods during
which our aircraft are dedicated to maintenance activities and
unavailable to fly revenue service. In addition, the terms of
some of our lease agreements require us to pay supplemental
rent,
also known as maintenance reserves, to the lessor in advance of
the performance of major maintenance, resulting in our

recording significant prepaid deposits on our balance sheet. We
expect scheduled and unscheduled aircraft maintenance
expenses to increase as a percentage of our revenue over the
next several years. Any significant increase in maintenance and
repair expenses would have a material adverse effect on our
business, results of operations and financial condition. Please
see
and Results of Operations—Critical Accounting Policies and
19
Estimates—Aircraft Maintenance, Materials and Repair Costs
and Heavy Maintenance Amortization” and “—Maintenance
Reserves.”
Our lack of marketing alliances could harm our business.
Many airlines, including the domestic traditional network
airlines (American, Delta and United) have marketing alliances
with other airlines, under which they market and advertise their
status as marketing alliance partners. These alliances, such as
OneWorld, SkyTeam and Star Alliance, generally provide for
code-sharing, frequent flier program reciprocity, coordinated
scheduling of flights to permit convenient connections and other
joint marketing activities. Such arrangements permit an airline
to market flights operated by other alliance members as its own.
This increases the destinations, connections and frequencies
offered by the airline and provides an opportunity to increase
traffic on that airline’s segment of flights connecting with
alliance
partners. We currently do not have any alliances with U.S. or
foreign airlines. Our lack of marketing alliances puts us at a
competitive disadvantage to traditional network carriers who are

able to attract passengers through more widespread alliances,
particularly on international routes, and that disadvantage may
result in a material adverse effect on our passenger traffic,
We are subject to extensive and increasing regulation by the
Federal Aviation Administration, the Department of
Transportation and other U.S. and foreign governmental
agencies, compliance with which could cause us to incur
increased costs and adversely affect our business and financial
results.
Airlines are subject to extensive and increasing regulatory and
legal compliance requirements, both domestically and
internationally, that involve significant costs. In the last several
years, Congress has passed laws, and the DOT, FAA and TSA
have issued regulations, relating to the operation of airlines that
have required significant expenditures. We expect to continue
to incur expenses in connection with complying with
government regulations. Additional laws, regulations, taxes and
increased
airport rates and charges have been proposed from time to time
that could significantly increase the cost of airline operations or
reduce the demand for air travel. If adopted, these measures
could have the effect of raising ticket prices, reducing revenue
and
increasing costs. For example, the DOT finalized rules in April
2010 requiring new procedures for customer handling during
long onboard tarmac delays, as well as additional reporting
requirements for airlines that could increase the cost of airline
operations or reduce revenues. The DOT has been aggressively
investigating alleged violations of these rules. A second set of
DOT final rules, which became effective in August 2011 and
January 2012, addresses, among other things, concerns about
how
airlines handle interactions with passengers through advertising,

the reservations process, at the airport and on board the
aircraft, including requirements for disclosure of base fares plus
a set of regulatorily dictated options and limits on cancellations
and service charges for changes and cancellations. Additional
consumer and disabled passenger rules may be proposed in
2014.
In addition, the FAA recently issued its final regulations
governing pilot rest periods and work hours for all airlines
certificated
under Part 121 of the Federal Aviation Regulations. The rule
known as FAR 117 and which became effective January 4, 2014,
impacts the required amount and timing of rest periods for
pilots between work assignments and modifies duty and rest
requirements based on the time of day, number of scheduled
segments, flight types, time zones and other factors.
Compliance
with these rules may increase our costs, while failure to remain
in full compliance with these rules may subject us to fines or
other enforcement action.
We cannot assure you that compliance with these rules will not
have a material adverse effect on our business.
In August 2010, the Airline Baggage Transparency and
Accountability Act was introduced in the United States Senate.
This legislation, if enacted, would increase disclosure regarding
fees for airline ticket sales, impose federal taxes on charges for
carry-on and checked baggage, authorize the DOT's Aviation
Consumer Protection Division to oversee lost and stolen
baggage
claims, and require data collection and the public release of
collected data concerning airline handling of lost, damaged and
stolen luggage. In early 2011, the United States Senate passed
an amendment to the FAA reauthorization bill that, if enacted,
would impose federal taxes at a rate of 7.5% on charges for
carry-on baggage. If the Airline Baggage Transparency and

Accountability Act, the Senate amendment to the FAA
reauthorization bill or similar legislation were to be enacted, it
is
uncertain what effect it would have on our results of operations
We cannot assure you that these and other laws or regulations
enacted in the future will not harm our business. In
addition, the TSA mandates the federalization of certain airport
security procedures and imposes additional security
requirements on airports and airlines, most of which are funded
by a per ticket tax on passengers and a tax on airlines. In July
2014, the TSA will implement an increased passenger security
fee at a flat rate of $5.60. The ticket tax increase could
negatively impact our financial results.
Our ability to operate as an airline is dependent on our
maintaining certifications issued to us by the DOT and the
FAA. The FAA has the authority to issue mandatory orders
relating to, among other things, the grounding of aircraft,
inspection
of aircraft, installation of new safety-related items and removal
and replacement of aircraft parts that have failed or may fail in
20
the future. A decision by the FAA to ground, or require time
consuming inspections of or maintenance on, our aircraft, for
any
reason, could negatively affect our business and financial
results. Federal law requires that air carriers operating large
aircraft
be continuously “fit, willing and able” to provide the services
for which they are licensed. Our “fitness” is monitored by the

DOT, which considers factors such as unfair or deceptive
competition, advertising, baggage liability and disabled
passenger
transportation. While the DOT has seldom revoked a carrier's
certification for lack of fitness, such an occurrence would
render
it impossible for us to continue operating as an airline. The
DOT may also institute investigations or administrative
proceedings
against airlines for violations of regulations.
International routes are regulated by treaties and related
agreements between the United States and foreign
governments. Our ability to operate international routes is
subject to change because the applicable arrangements between
the
United States and foreign governments may be amended from
time to time. Our access to new international markets may be
limited by our ability to obtain the necessary certificates to fly
the international routes. In addition, our operations in foreign
countries are subject to regulation by foreign governments and
our business may be affected by changes in law and future
actions taken by such governments, including granting or
withdrawal of government approvals and restrictions on
competitive
practices. We are subject to numerous foreign regulations based
on the large number of countries outside the United States
where we currently provide service. If we are not able to
comply with this complex regulatory regime, our business could
be
significantly harmed. Please see “Business — Government
Regulation.”
We may not be able to implement our growth strategy.
Our growth strategy includes acquiring additional aircraft,

increasing the frequency of flights and size of aircraft used in
markets we currently serve, and expanding the number of
markets we serve where our low cost structure would likely be
successful. Effectively implementing our growth strategy is
critical for our business to achieve economies of scale and to
sustain or increase our profitability. We face numerous
challenges in implementing our growth strategy, including our
ability to:
• maintain profitability;
• obtain financing to acquire new aircraft;
• access airports located in our targeted geographic markets
where we can operate routes in a manner that is consistent
with our cost strategy;
• gain access to international routes; and
• access sufficient gates and other services at airports we
currently serve or may seek to serve.
Our growth is dependent upon our ability to maintain a safe and
secure operation and requires additional personnel,
equipment and facilities. An inability to hire and retain
personnel, timely secure the required equipment and facilities in
a cost-
effective manner, efficiently operate our expanded facilities or
obtain the necessary regulatory approvals may adversely affect
our ability to achieve our growth strategy, which could harm
our business. In addition, expansion to new markets may have
other risks due to factors specific to those markets. We may be
unable to foresee all of the existing risks upon entering certain
new markets or respond adequately to these risks, and our
growth strategy and our business may suffer as a result. In
addition,

our competitors may reduce their fares and/or offer special
promotions following our entry into a new market. We cannot
assure
you that we will be able to profitably expand our existing
markets or establish new markets.
Some of our target growth markets in the Caribbean and Latin
America include countries with less developed economies
that may be vulnerable to unstable economic and political
conditions, such as significant fluctuations in gross domestic
product,
interest and currency exchange rates, civil disturbances,
government instability, nationalization and expropriation of
private
assets and the imposition of taxes or other charges by
governments. The occurrence of any of these events in markets
served by
us and the resulting instability may adversely affect our ability
to implement our growth strategy.
In 2008, in response to record high fuel prices and rapidly
deteriorating economic conditions, we modified our growth
plans by terminating our leases for seven aircraft. We incurred
significant expenses relating to our lease terminations, and have
incurred additional expenses to acquire new aircraft in place of
those under the terminated leases as we expanded our network.
We may in the future determine to reduce further our future
growth plans from previously announced levels, which may
impact
our business strategy and future profitability.
21
We rely heavily on technology and automated systems to

operate our business and any failure of these technologies or
systems or failure by their operators could harm our business.
We are highly dependent on technology and automated systems
to operate our business and achieve low operating costs.
These technologies and systems include our computerized
airline reservation system, flight operations system, financial
planning, management and accounting system,
telecommunications systems, website, maintenance systems and
check-in
kiosks. In order for our operations to work efficiently, our
website and reservation system must be able to accommodate a
high
volume of traffic, maintain secure information and deliver flight
information. Substantially all of our tickets are issued to
passengers as electronic tickets. We depend on our reservation
system, which is hosted and maintained under a long-term
contract by a third-party service provider, to be able to issue,
track and accept these electronic tickets. If our reservation
system
fails or experiences interruptions, and we are unable to book
seats for any period of time, we could lose a significant amount
of
revenue as customers book seats on competing airlines. We have
experienced short duration reservation system outages from
time to time and may experience similar outages in the future.
For example, in November 2010, we experienced a significant
service outage with our third-party reservation service provider
on the day before Thanksgiving, one of the industry’s busiest
travel days and in August 2013, we experienced another 13 hour
outage that affected our sales and customer service response
times. We also rely on third-party service providers of our other
automated systems for technical support, system maintenance
and software upgrades. If our automated systems are not
functioning or if the current providers were to fail to adequately
provide technical support or timely software upgrades for any

one of our key existing systems, we could experience service
disruptions, which could harm our business and result in the
loss of important data, increase our expenses and decrease our
revenues. In the event that one or more of our primary
technology or systems’ vendors goes into bankruptcy, ceases
operations
or fails to perform as promised, replacement services may not
be readily available on a timely basis, at competitive rates or at
all and any transition time to a new system may be significant.
In addition, our automated systems cannot be completely
protected against events that are beyond our control, including
natural disasters, computer viruses or telecommunications
failures. Substantial or sustained system failures could cause
service
delays or failures and result in our customers purchasing tickets
from other airlines. We have implemented security measures
and change control procedures and have disaster recovery plans;
however, we cannot assure you that these measures are
adequate to prevent disruptions. Disruption in, changes to or a
breach of, these systems could result in a disruption to our
business and the loss of important data. Any of the foregoing
could result in a material adverse effect on our business, results
of
We are subject to cyber security risks and may incur increasing
costs in an effort to minimize those risks.
Our business employs systems and websites that allow for the
secure storage and transmission of proprietary or
confidential information regarding our customers, employees,
suppliers and others, including personal identification
information, credit card data and other confidential information.
Security breaches could expose us to a risk of loss or misuse of
this information, litigation and potential liability. Although we

take steps to secure our management information systems, and
although multiple auditors review and approve the security
configurations and management processes of these systems,
including our computer systems, intranet and internet sites,
email and other telecommunications and data networks, the
security
measures we have implemented may not be effective, and our
systems may be vulnerable to theft, loss, damage and
interruption
from a number of potential sources and events, including
unauthorized access or security breaches, natural or man-made
disasters, cyber attacks, computer viruses, power loss, or other
disruptive events. We may not have the resources or technical
sophistication to anticipate or prevent rapidly evolving types of
cyber attacks. Attacks may be targeted at us, our customers and
suppliers, or others who have entrusted us with information. In
addition, attacks not targeted at us, but targeted solely at
suppliers, may cause disruption to our computer systems or a
breach of the data that we maintain on customers, employees,
suppliers and others.
Actual or anticipated attacks may cause us to incur increasing
costs, including costs to deploy additional personnel and
protection technologies, train employees and engage third-party
experts and consultants, or costs incurred in connection with
the notifications to employees, suppliers or the general public
as part of our notification obligations to the various
governments
that govern our business. Advances in computer capabilities,
new technological discoveries, or other developments may
result
in the breach or compromise of technology used by us to protect
transaction or other data. In addition, data and security
breaches can also occur as a result of non-technical issues,
including breaches by us or by persons with whom we have
commercial relationships that result in the unauthorized release

of personal or confidential information. Our reputation, brand
and financial condition could be adversely affected if, as a
result of a significant cyber event or other security issues: our
operations are disrupted or shut down; our confidential,
proprietary information is stolen or disclosed; we incur costs or
are
required to pay fines in connection with stolen customer,
employee or other confidential information; we must dedicate
significant resources to system repairs or increase cyber
security protection; or we otherwise incur significant litigation
or other
costs.
22
Our processing, storage, use and disclosure of personal data
could give rise to liabilities as a result of governmental
regulation.
In the processing of our customer transactions, we receive,
process, transmit and store a large volume of identifiable
personal data, including financial data such as credit card
information. This data is increasingly subject to legislation and
regulation, typically intended to protect the privacy of personal
data that is collected, processed and transmitted. More
generally, we rely on consumer confidence in the security of our
system, including our website on which we sell the majority of
our tickets. Our business, results of operations and financial
condition could be adversely affected if we are unable to
comply
with existing privacy obligations or legislation or regulations
are expanded to require changes in our business practices.
We may not be able to maintain or grow our non-ticket

revenues.
Our business strategy includes expanding our portfolio of
ancillary products and services. There can be no assurance that
passengers will pay for additional ancillary products and
services or that passengers will continue to choose to pay for
the
ancillary products and services we currently offer. Further,
regulatory initiatives could adversely affect ancillary revenue
opportunities. Failure to maintain our non-ticket revenues
would have a material adverse effect on our results of
operations and
financial condition. Furthermore, if we are unable to maintain
and grow our non-ticket revenues, we may not be able to
execute
our strategy to continue to lower base fares in order to stimulate
demand for air travel. Please see “—Restrictions on or
increased taxes applicable to charges for ancillary products and
services paid by airline passengers and burdensome consumer
protection regulations or laws could harm our business, results
of operations and financial condition.”
Our inability to expand or operate reliably or efficiently out of
our key airports where we maintain a large presence
We are highly dependent on markets served from airports where
we maintain a large presence. Our results of operations
may be affected by actions taken by governmental or other
agencies or authorities having jurisdiction over our operations
at
airports, including, but not limited to:
• increases in airport rates and charges;

• limitations on take-off and landing slots, airport gate capacity
or other use of airport facilities;
• termination of our airport use agreements, some of which can
be terminated by airport authorities with little notice to
us;
• increases in airport capacity that could facilitate increased
competition;
• international travel regulations such as customs and
immigration;
• increases in taxes;
• changes in the law that affect the services that can be offered
by airlines in particular markets and at particular
airports;
• restrictions on competitive practices;
• the adoption of statutes or regulations that impact customer
service standards, including security standards; and
• the adoption of more restrictive locally-imposed noise
regulations or curfews.
In general, any changes in airport operations could have a
We rely on third-party service providers to perform functions
integral to our operations.
We have entered into agreements with third-party service
providers to furnish certain facilities and services required for

our operations, including ground handling, catering, passenger
handling, engineering, maintenance, refueling, reservations and
airport facilities as well as administrative and support services.
We are likely to enter into similar service agreements in new
markets we decide to enter, and there can be no assurance that
we will be able to obtain the necessary services at acceptable
rates.
Although we seek to monitor the performance of third parties
that provide us with our reservation system, ground
handling, catering, passenger handling, engineering,
maintenance services, refueling and airport facilities, the
efficiency,
23
timeliness and quality of contract performance by third-party
service providers are often beyond our control, and any failure
by
our service providers to perform their contracts may have an
adverse impact on our business and operations. For example, in
2008, our call center provider went bankrupt. Though we were
able to quickly switch to an alternative vendor, we experienced
a significant business disruption during the transition period
and a similar disruption could occur in the future if we changed
call center providers or if an existing provider ceased to be able
to serve us. We expect to be dependent on such third-party
arrangements for the foreseeable future.
We rely on third-party distribution channels to distribute a
portion of our airline tickets.
We rely on third-party distribution channels, including those
provided by or through global distribution systems, or GDSs,

conventional travel agents and online travel agents, or OTAs, to
distribute a portion of our airline tickets, and we expect in the
future to rely on these channels to an increasing extent to
collect ancillary revenues. These distribution channels are more
expensive and at present have less functionality in respect of
ancillary revenues than those we operate ourselves, such as our
call centers and our website. Certain of these distribution
channels also effectively restrict the manner in which we
distribute
our products generally. To remain competitive, we will need to
successfully manage our distribution costs and rights, and
improve the functionality of third-party distribution channels,
while maintaining an industry-competitive cost structure.
Negotiations with key GDSs and OTAs designed to manage our
costs, increase our distribution flexibility, and improve
functionality could be contentious, could result in diminished or
less favorable distribution of our tickets, and may not provide
the functionality we require to maximize ancillary revenues.
Any inability to manage our third-party distribution costs,
rights
and functionality at a competitive level or any material
diminishment in the distribution of our tickets could have a
material
adverse effect on our competitive position and our results of
operations. Moreover, our ability to compete in the markets we
serve may be threatened by changes in technology or other
factors that may make our existing third-party sales channels
impractical, uncompetitive, or obsolete.
We rely on a single service provider to manage our fuel supply.
As of December 31, 2013, we had a single fuel service contract
with World Fuel Services Corporation to manage the
sourcing and contracting of our fuel supply. A failure by this
provider to fulfill its obligations could have a material adverse
effect on our business, results of operations and financial

condition.
Our reputation and business could be adversely affected in the
event of an emergency, accident or similar incident
involving our aircraft.
We are exposed to potential significant losses in the event that
any of our aircraft is subject to an emergency, accident,
terrorist incident or other similar incident, and significant costs
related to passenger claims, repairs or replacement of a
damaged aircraft and its temporary or permanent loss from
service. There can be no assurance that we will not be affected
by
such events or that the amount of our insurance coverage will be
adequate in the event such circumstances arise and any such
event could cause a substantial increase in our insurance
premiums. Please see “—Increases in insurance costs or
significant
reductions in coverage could have a material adverse effect on
our business, financial condition and results of operations.” In
addition, any future aircraft emergency, accident or similar
incident, even if fully covered by insurance or even if it does
not
involve our airline, may create a public perception that our
airline or the equipment we fly is less safe or reliable than other
transportation alternatives, or could cause us to perform time
consuming and costly inspections on our aircraft or engines
which
Negative publicity regarding our customer service could have a
material adverse effect on our business.
In the past we have experienced a relatively high number of
customer complaints related to, among other things, our

customer service and reservations and ticketing systems. In
particular, we generally experience a higher volume of
complaints
when we make changes to our unbundling policies, such as
charging for baggage. In addition, in 2009, we entered into a
consent order with the DOT for our procedures for bumping
passengers from oversold flights and our handling of lost or
damaged baggage. Under the consent order, we were assessed a
civil penalty of $375,000, of which we were required to pay
$215,000 based on an agreement with the DOT and our not
having similar violations in the year after the date of the
consent
order. Our reputation and business could be materially
adversely affected if we fail to meet customers’ expectations
with
respect to customer service or if we are perceived by our
customers to provide poor customer service.
We depend on a limited number of suppliers for our aircraft and
engines.
One of the elements of our business strategy is to save costs by
operating a single-family aircraft fleet - currently Airbus
A320-family, single-aisle aircraft, powered by engines
manufactured by IAE. If Airbus, IAE, or Pratt and Whitney
becomes
unable to perform its contractual obligations, or if we are
unable to acquire or lease aircraft or engines from other owners,
operators or lessors on acceptable terms, we would have to find
other suppliers for a similar type of aircraft or engine. If we
24
have to lease or purchase aircraft from another supplier, we

would lose the significant benefits we derive from our current
single fleet composition. We may also incur substantial
transition costs, including costs associated with retraining our
employees, replacing our manuals and adapting our facilities
and maintenance programs. Our operations could also be harmed
by the failure or inability of aircraft, engine and parts suppliers
to provide sufficient spare parts or related support services on a
timely basis. Our business would be significantly harmed if a
design defect or mechanical problem with any of the types of
aircraft or components that we operate were discovered that
would ground any of our aircraft while the defect or problem
was
corrected, assuming it could be corrected at all. The use of our
aircraft could be suspended or restricted by regulatory
authorities in the event of any actual or perceived mechanical or
design problems. Our business would also be significantly
harmed if the public began to avoid flying with us due to an
adverse perception of the types of aircraft that we operate
stemming from safety concerns or other problems, whether real
or perceived, or in the event of an accident involving those
types of aircraft or components. Carriers that operate a more
diversified fleet are better positioned than we are to manage
such
events.
Reduction in demand for air transportation, or governmental
reduction or limitation of operating capacity, in the South
Florida, Caribbean, Latin American or domestic U.S. markets
could harm our business, results of operations and
financial condition.
A significant portion of our operations are conducted to and
from the South Florida, Caribbean, Latin American or
domestic U.S. markets. Our business, results of operations and
financial condition could be harmed if we lost our authority to
fly to these markets, by any circumstances causing a reduction

in demand for air transportation, or by governmental reduction
or limitation of operating capacity, in these markets, such as
adverse changes in local economic or political conditions,
negative
public perception of these destinations, unfavorable weather
conditions, or terrorist related activities. Furthermore, our
business
could be harmed if jurisdictions that currently limit competition
allow additional airlines to compete on routes we serve. Many
of the countries we serve are experiencing either economic
slowdowns or recessions, which may translate into a weakening
of
demand and could harm our business, results of operations and
financial condition.
Increases in insurance costs or significant reductions in
coverage could have a material adverse effect on our business,
financial condition and results of operations.
We carry insurance for public liability, passenger liability,
property damage and all-risk coverage for damage to our
aircraft. As a result of the September 11, 2001 terrorist attacks,
aviation insurers significantly reduced the amount of insurance
coverage available to commercial air carriers for liability to
persons other than employees or passengers for claims resulting
from acts of terrorism, war or similar events (war risk
insurance). Accordingly, our insurance costs increased
significantly and
our ability to continue to obtain certain types of insurance
remains uncertain. While the price of commercial insurance has
declined since the period immediately after the terrorist attacks,
in the event commercial insurance carriers further reduce the
amount of insurance coverage available to us, or significantly
increase its cost, we would be adversely affected. We currently
maintain commercial airline insurance with several
underwriters. However, there can be no assurance that the

amount of such
coverage will not be changed, or that we will not bear
substantial losses from accidents. We could incur substantial
claims
resulting from an accident in excess of related insurance
coverage that could have a material adverse effect on our results
of
We have obtained third-party war risk insurance, which insures
against some risks of terrorism, through a special
program administered by the FAA, resulting in lower premiums
than if we had obtained this insurance in the commercial
insurance market. If the special program administered by the
FAA is not continued, or if the government discontinues this
coverage for any reason, obtaining comparable coverage from
commercial underwriters may result in higher premiums and
more restrictive terms, if it is available at all. Our business,
results of operations and financial condition could be materially
adversely affected if we are unable to obtain adequate war risk
insurance. The FAA war risk hull and liability insurance policy
is effective from October 1, 2013 through September 30, 2014.
Failure to comply with applicable environmental regulations
could have a material adverse effect on our business,
results of operations and financial condition.
We are subject to increasingly stringent federal, state, local and
foreign laws, regulations and ordinances relating to the
protection of the environment, including those relating to
emissions to the air, discharges to surface and subsurface
waters, safe
drinking water and the management of hazardous substances,
oils and waste materials. Compliance with all environmental
laws
and regulations can require significant expenditures and any

future regulatory developments in the United States and abroad
could adversely affect operations and increase operating costs
in the airline industry. For example, climate change legislation
was previously introduced in Congress and such legislation
could be re-introduced in the future by Congress and state
legislatures, and could contain provisions affecting the aviation
industry, compliance with which could result in the creation of
substantial additional costs to us. Similarly, the Environmental
Protection Agency issued a rule that regulates larger emitters of
25
greenhouse gases. Future operations and financial results may
vary as a result of such regulations. Compliance with these
regulations and new or existing regulations that may be
applicable to us in the future could increase our cost base and
could
have a material adverse effect on our business, results of
Governmental authorities in several U.S. and foreign cities are
also considering or have already implemented aircraft
noise reduction programs, including the imposition of nighttime
curfews and limitations on daytime take-offs and landings. We
have been able to accommodate local noise restrictions imposed
to date, but our operations could be adversely affected if
locally-imposed regulations become more restrictive or
widespread.
If we are unable to attract and retain qualified personnel or fail
to maintain our company culture, our business, results
of operations and financial condition could be harmed.
Our business is labor intensive. We require large numbers of

pilots, flight attendants, maintenance technicians and other
personnel. The airline industry has from time to time
experienced a shortage of qualified personnel, particularly with
respect to
pilots and maintenance technicians. In addition, as is common
with most of our competitors, we have faced considerable
turnover of our employees. We may be required to increase
wages and/or benefits in order to attract and retain qualified
personnel. If we are unable to hire, train and retain qualified
employees, our business could be harmed and we may be unable
to
implement our growth plans.
In addition, as we hire more people and grow, we believe it may
be increasingly challenging to continue to hire people
who will maintain our company culture. Our company culture,
which we believe is one of our competitive strengths, is
important to providing high-quality customer service and having
a productive, accountable workforce that helps keep our costs
low. As we continue to grow, we may be unable to identify, hire
or retain enough people who meet the above criteria, including
those in management or other key positions. Our company
culture could otherwise be adversely affected by our growing
operations and geographic diversity. If we fail to maintain the
strength of our company culture, our competitive ability and our
business, results of operations and financial condition could be
harmed.
Our business, results of operations and financial condition could
be materially adversely affected if we lose the services
of our key personnel.
Our success depends to a significant extent upon the efforts and
abilities of our senior management team and key
financial and operating personnel. In particular, we depend on
the services of our senior management team, including Ben

Baldanza, our President and Chief Executive Officer.
Competition for highly qualified personnel is intense, and the
loss of any
executive officer, senior manager, or other key employee
without adequate replacement or the inability to attract new
qualified
personnel could have a material adverse effect on our business,
results of operations and financial condition. We do not
maintain key-man life insurance on our management team.
The requirements of being a public company may strain our
resources, divert management’s attention and affect our
ability to attract and retain qualified board members.
As a public company, we incur significant legal, accounting and
other expenses that we did not incur as a private
company, including costs associated with public company
reporting requirements. We also have incurred and will incur
costs
associated with the Sarbanes-Oxley Act of 2002, as amended,
the Dodd-Frank Wall Street Reform and Consumer Protection
Act and related rules implemented or to be implemented by the
SEC and the NASDAQ Stock Market. The expenses incurred
by public companies generally for reporting and corporate
governance purposes have been increasing. We expect these
rules
and regulations to increase our legal and financial compliance
costs and to make some activities more time-consuming and
costly. These laws and regulations could also make it more
difficult or costly for us to obtain certain types of insurance,
including director and officer liability insurance, and we may be
forced to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar
coverage. These laws and regulations could also make it more
difficult
for us to attract and retain qualified persons to serve on our

board of directors, our board committees, or as our executive
officers and may divert management’s attention. Furthermore, if
we are unable to satisfy our obligations as a public company,
we could be subject to delisting of our common stock, fines,
sanctions and other regulatory action and potentially civil
litigation.
We are required to assess our internal control over financial
reporting on an annual basis, and any future adverse
findings from such assessment could result in a loss of investor
confidence in our financial reports, significant expenses
to remediate any internal control deficiencies, and ultimately
have an adverse effect on the market price of our common
stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as
amended, our management is required to report on, and
our independent registered public accounting firm to attest to,
the effectiveness of our internal control over financial
reporting.
26
The rules governing the standards that must be met for
management to assess our internal control over financial
reporting are
complex and require significant documentation, testing and
possible remediation. Annually, we perform activities that
include
reviewing, documenting and testing our internal control over
financial reporting. During the performance of these activities,
we
may encounter problems or delays in completing the
implementation of any changes necessary to make a favorable

assessment
of our internal control over financial reporting. In connection
with the attestation process by our independent registered
public
accounting firm, we may encounter problems or delays in
completing the implementation of any requested improvements
and
receiving a favorable attestation. In addition, if we fail to
maintain the adequacy of our internal control over financial
reporting
we will not be able to conclude on an ongoing basis that we
have effective internal control over financial reporting in
accordance with Section 404. If we fail to achieve and maintain
an effective internal control environment, we could suffer
material misstatements in our financial statements and fail to
meet our reporting obligations, which would likely cause
investors to lose confidence in our reported financial
information. This could harm our operating results and lead to a
decline in
our stock price. Additionally, ineffective internal control over
financial reporting could expose us to increased risk of fraud or
misuse of corporate assets and subject us to potential delisting
from the NASDAQ Global Select Market, regulatory
investigations, civil or criminal sanctions and class action
litigation.
The market price of our common stock may be volatile, which
could cause the value of an investment in our stock to
decline.
The market price of our common stock may fluctuate
substantially due to a variety of factors, many of which are
beyond
our control, including:
• announcements concerning our competitors, the airline

industry or the economy in general;
• strategic actions by us or our competitors, such as acquisitions
or restructurings;
• media reports and publications about the safety of our aircraft
or the aircraft type we operate;
• new regulatory pronouncements and changes in regulatory
guidelines;
• changes in the price of aircraft fuel;
• announcements concerning the availability of the type of
aircraft we use;
• general and industry-specific economic conditions;
• changes in financial estimates or recommendations by
securities analysts or failure to meet analysts’ performance
expectations;
• sales of our common stock or other actions by investors with
significant shareholdings;
• trading strategies related to changes in fuel or oil prices; and
• general market, political and economic conditions.
The stock markets in general have experienced substantial
volatility that has often been unrelated to the operating
performance of particular companies. These types of broad
market fluctuations may adversely affect the trading price of
our
common stock.

In the past, stockholders have sometimes instituted securities
class action litigation against companies following periods
of volatility in the market price of their securities. Any similar
litigation against us could result in substantial costs, divert
management’s attention and resources and harm our business or
results of operations.
If securities or industry analysts do not publish research or
reports about our business, or publish negative reports
about our business, our stock price and trading volume could
decline.
The trading market for our common stock depends in part on the
research and reports that securities or industry analysts
publish about us or our business. If one or more of the analysts
who cover us downgrade our stock or publish inaccurate or
unfavorable research about our business, our stock price would
likely decline. If one or more of these analysts cease coverage
of our company or fail to publish reports on us regularly,
demand for our stock could decrease, which might cause our
stock
price and trading volume to decline.
27
Our anti-takeover provisions may delay or prevent a change of
control, which could adversely affect the price of our
common stock.
Our amended and restated certificate of incorporation and
amended and restated bylaws contain provisions that may
make it difficult to remove our board of directors and
management and may discourage or delay “change of control”
transactions, which could adversely affect the price of our

common stock. These provisions include, among others:
• our board of directors is divided into three classes, with each
class serving for a staggered three-year term, which
prevents stockholders from electing an entirely new board of
directors at an annual meeting;
• actions to be taken by our stockholders may only be effected
at an annual or special meeting of our stockholders and
not by written consent;
• special meetings of our stockholders can be called only by the
Chairman of the Board or by our corporate secretary at
the direction of our board of directors;
• advance notice procedures that stockholders must comply with
in order to nominate candidates to our board of
directors and propose matters to be brought before an annual
meeting of our stockholders may discourage or deter a
potential acquirer from conducting a solicitation of proxies to
elect the acquirer’s own slate of directors or otherwise
attempting to obtain control of our company; and
• our board of directors may, without stockholder approval,
issue series of preferred stock, or rights to acquire preferred
stock, that could dilute the interest of, or impair the voting
power of, holders of our common stock or could also be
used as a method of discouraging, delaying or preventing a
change of control.
Our corporate charter and bylaws include provisions limiting
voting by non-U.S. citizens and specifying an exclusive
forum for stockholder disputes.
To comply with restrictions imposed by federal law on foreign
ownership of U.S. airlines, our amended and restated

certificate of incorporation and amended and restated bylaws
restrict voting of shares of our common stock by non-U.S.
citizens. The restrictions imposed by federal law currently
require that no more than 25% of our stock be voted, directly or
indirectly, by persons who are not U.S. citizens, and that our
president and at least two-thirds of the members of our board of
directors and senior management be U.S. citizens. Our amended
and restated bylaws provide that the failure of non-U.S.
citizens to register their shares on a separate stock record,
which we refer to as the “foreign stock record,” would result in
a
suspension of their voting rights in the event that the aggregate
foreign ownership of the outstanding common stock exceeds the
foreign ownership restrictions imposed by federal law.
Our amended and restated bylaws further provide that no shares
of our common stock will be registered on the foreign
stock record if the amount so registered would exceed the
foreign ownership restrictions imposed by federal law. If it is
determined that the amount registered in the foreign stock
record exceeds the foreign ownership restrictions imposed by
federal
law, shares will be removed from the foreign stock record in
reverse chronological order based on the date of registration
therein, until the number of shares registered therein does not
exceed the foreign ownership restrictions imposed by federal
law.
As of December 31, 2013, we believe we were in compliance
with the foreign ownership rules.
As of December 31, 2013, there are no shares of non-voting
common stock outstanding. When shares of non-voting
common stock are outstanding, the holders of such stock may
convert such shares, on a share-for-share basis, in the order
reflected on our foreign stock record as shares of common stock
are sold or otherwise transferred by non-U.S. citizens to U.S.

citizens.
Our amended and restated certificate of incorporation also
specifies that the Court of Chancery of the State of Delaware
shall be the exclusive forum for substantially all disputes
between us and our stockholders.
We do not intend to pay cash dividends for the foreseeable
future.
We have never declared or paid cash dividends on our common
stock. We currently intend to retain our future earnings, if
any, to finance the further development and expansion of our
business and do not intend to pay cash dividends in the
foreseeable future. Any future determination to pay dividends
will be at the discretion of our board of directors and will
depend
on our financial condition, results of operations, capital
requirements, restrictions contained in current or future
financing
instruments, business prospects and such other factors as our
board of directors deems relevant.
28
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Aircraft
We operated a total of 54 aircraft, all of which are under

operating leases, as of December 31, 2013.
The following table details information on the 54 aircraft in our
fleet as of December 31, 2013:
Aircraft Type Seats Average Age (years) Number of Aircraft
A319 145 6.8 29
A320 178 1.8 23
A321 218 8.4 2
5.1 54
During 2013, we converted ten Airbus A320 orders to Airbus
A321 orders and converted five Airbus A321 orders to
Airbus A321neo orders. As of December 31, 2013, our aircraft
orders, consisted of 112 A320 family aircraft with Airbus (37 of
the existing A320 aircraft model, 45 A320neos, 25 of the
existing A321 model and 5 A321neos) and 5 direct operating
leases
for A320neos with a third-party lessor. As of December 31,
2013, our future fleet plan, net of contractual lease returns, is
illustrated in the table below.
Aircraft Type 2014 2015 2016 2017 2018 2019 2020 2021
A319 29 29 26 22 17 16 9 5
A320 34 45 50 58 58 58 58 58
A320 NEO — 1 5 5 11 19 32 50
A321 2 4 12 20 25 25 25 25
A321 NEO — — — — — 5 5 5
Total Aircraft 65 79 93 105 111 123 129 143
* Actual fleet count may differ depending on future fleet
decisions, including actual lease retirements.

We also have six spare engine orders for V2500 SelectOne
engines with IAE and nine spare engine orders for PurePower
PW 1100G-JM engines with Pratt & Whitney. Spare engines are
scheduled for delivery from 2014 through 2024.
Ground Facilities
We lease all of our facilities at each of the airports we serve.
Our leases for terminal passenger service facilities, which
include ticket counter and gate space, operations support areas
and baggage service offices, generally have a term ranging from
month-to-month to 20 years, and contain provisions for periodic
adjustments of lease rates. We also are responsible for
maintenance, insurance and other facility-related expenses and
services. We also have entered into use agreements at the
airports we serve that provide for the non-exclusive use of
runways, taxiways and other airfield facilities. Landing fees
paid
under these agreements are based on the number of landings and
weight of the aircraft.
As of December 31, 2013, Ft. Lauderdale/Hollywood
International Airport (FLL) remained our single largest airport
served, with over 17% of our capacity operating to or from FLL
during 2013. We operate primarily out of Terminal 4, the
international terminal. We currently use up to nine gates at
Terminal 4 and Terminal 3. We have preferential access to six
of the
Terminal 4 gates, preferential access to one of the Terminal 3
gates, common use access to the remaining two Terminal 4
gates,
and common use access to other Terminal 3 gates. FLL is in the
middle of a concourse replacement and expansion project,
which would expand the number of gates at Terminal 4 to 14.
Other airports through which we conduct significant operations
include Dallas-Fort Worth International Airport (DFW),

McCarran International Airport (LAS) serving Las Vegas,
Chicago
O'Hare International Airport (ORD), Detroit Metropolitan
Wayne County Airport (DTW), LaGuardia Airport (LGA)
serving
New York City and Orlando International Airport (MCO).
29
Our largest maintenance facility is currently located in a leased
facility at FLL under a lease that expires in January 2015.
We also conduct additional maintenance operations in leased
facilities in Detroit, Michigan; Chicago, Illinois; Atlantic City,
New Jersey; Dallas, Texas; and Las Vegas, Nevada.
Our principal executive offices and headquarters are located in
a leased facility at 2800 Executive Way, Miramar, Florida
33025, consisting of approximately 56,000 square feet. The
lease for this facility expires in January 2025. We have
executed an
agreement to lease the facility located at 2844 Corporate Way,
Miramar, Florida 33025, consisting of approximately 15,000
square feet. We expect to take possession of this facility in
February 2014 to expand our principal executive offices and
headquarters. The lease for this facility expires in January 2025.
We also have a training center located in a leased facility at
1050 Lee Wagener Boulevard, Fort Lauderdale, Florida 33315,
consisting of approximately 12,000 square feet, under a lease
that expires in January 2015.
ITEM 3. LEGAL PROCEEDINGS
We are subject to commercial litigation claims and to
administrative and regulatory proceedings and reviews that may

be asserted or maintained from time to time. We believe the
ultimate outcome of pending lawsuits, proceedings and reviews
will not, individually or in the aggregate, have a material
adverse effect on our financial position, liquidity, or results of
operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
30
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Price of our common stock
Our common stock is listed and traded on the NASDAQ Global
Select Market under the symbol "SAVE." The following
table shows, for the periods indicated, the high and low per
share sales prices for our common stock on the NASDAQ
Global
Select Market.
High Low
Fiscal year ending December 31, 2012
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.70 $ 13.90
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.75 17.41

Third Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.13 15.85
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.00 15.64
Fiscal year ending December 31, 2013
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26.87 $ 17.40
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.75 24.30
Third Quarter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.83 29.65
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.62 32.50
As of February 7, 2014, there were approximately 28 holders of
record of our common stock. Because many of our
shares are held by brokers and other institutions on behalf of
stockholders, we are unable to estimate the total number of
stockholders represented by the beneficial holders.
The information under the caption “Equity Compensation Plan
Information” in our 2014 Proxy Statement is incorporated
herein by reference.
Dividend Policy
We have never declared or paid, and do not anticipate declaring
or paying, any cash dividends on our common stock. Any
future determination as to the declaration and payment of
dividends, if any, will be at the discretion of our board of
directors
and will depend on then existing conditions, including our
financial condition, operating results, contractual restrictions,
capital
requirements, business prospects and other factors our board of

directors may deem relevant.
31
Our Repurchases of Equity Securities
The following table reflects our repurchases of our common
stock during the fourth quarter of 2013. All stock
repurchases during this period were made from employees who
received restricted stock grants. All stock repurchases were
made at the election of each employee pursuant to an offer to
repurchase by us. In each case, the shares repurchased
constituted
the portion of vested shares necessary to satisfy minimum
withholding tax requirements.
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total
Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number
of Shares
Purchased as
Part of Publicly

Announced
Plans or
Programs
Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under Plans or
Programs.
October 1-31, 2013 . . . . . . . . . . . — N/A — —
November 1-30, 2013 . . . . . . . . . 763 $ 44.50 — —
December 1-31, 2013 . . . . . . . . . — N/A — —
Total . . . . . . . . . . . . . . . . . . . . 763 $ 44.50 — —
During the first three quarters of 2013, we repurchased and
retired 103,484 shares for a total of $2.3 million. All stock
repurchases were made at the election of each employee
pursuant to an offer to repurchase by us. In each case, the
shares
repurchased constituted the portion of vested shares necessary
to satisfy withholding tax requirements. We did not make any
open market stock repurchases during 2013.
Stock Performance Graph
The following graph compares the cumulative total stockholder
return on our common stock with the cumulative total
return on the NASDAQ Composite Index and the NYSE ARCA

Airline Index for the period beginning on May 26, 2011 (the
date our common stock was first traded) and ending on the last
day of 2013. The graph assumes an investment of $100 in our
stock and the two indices, respectively, on May 26, 2011, and
further assumes the reinvestment of all dividends. The May 26,
2011 stock price used for our stock is the initial public offering
price. Stock price performance, presented for the period from
May 26, 2011 to December 31, 2013, is not necessarily
indicative of future results.
32
5/26/2011 12/31/2011 12/31/2012 12/31/2013
Spirit . . . . . . . . . . . . . . . . . . . . . . . . . $ 100.00 $ 130.00 $
147.75 $ 378.42
NYSE ARCA Airline Index . . . . . . . $ 100.00 $ 75.49 $ 103.90
$ 164.39
NASDAQ Composite Index . . . . . . . $ 100.00 $ 94.23 $ 110.91
$ 155.15
33
ITEM 6. SELECTED FINANCIAL DATA
You should read the following selected historical financial and
operating data below in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and the financial statements, related notes and
other
financial information included in this annual report. The

selected financial data in this section are not intended to replace
the
financial statements and are qualified in their entirety by the
financial statements and related notes included in this annual
report.
We derived the selected statements of operations data for the
years ended December 31, 2013, 2012 and 2011 and the
balance sheet data as of December 31, 2013 and 2012 from our
audited financial statements included in this annual report. We
derived the selected statements of operations data for the years
ended December 31, 2010 and 2009 and the balance sheet data
as of December 31, 2011, 2010 and 2009 from our audited
financial statements not included in this annual report. Our
historical
results are not necessarily indicative of the results to be
expected in the future.
Year Ended December 31,
2013 2012 2011 2010 (1) 2009
(in thousands except share and per share data)
Operating revenues:
Passenger $ 986,018 $ 782,792 $ 689,650 $ 537,969 $ 536,181
Non-ticket 668,367 535,596 381,536 243,296 163,856
Total operating revenue 1,654,385 1,318,388 1,071,186 781,265
700,037
Operating expenses:
Aircraft fuel (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 551,746 471,763 388,046 248,206 181,107
Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 262,150 218,919 181,742 156,443 135,420
Aircraft rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 169,737 143,572 116,485 101,345 89,974

Landing fees and other rents . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 83,604 68,368 52,794 48,118 42,061
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 67,481 56,668 51,349 41,179 34,067
Maintenance, materials and repairs . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 60,143 49,460 34,017 27,035 27,536
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 31,947 15,256 7,760 5,620 4,924
Other operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 144,586 127,886 91,172 83,748 72,921
Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 525 956 255 77 1,010
Special charges (credits) (3) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 174 (8,450) 3,184 621 (392)
Total operating expenses 1,372,093 1,144,398 926,804 712,392
588,628
Operating income 282,292 173,990 144,382 68,873 111,409
Other expense (income):
Interest expense (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 214 1,350 24,781 50,313 46,892
Capitalized interest (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . (214) (1,350) (2,890) (1,491) (951)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . (401) (925) (575) (328) (345)
Gain on extinguishment of debt (6). . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . — — — — (19,711)
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 283 331 235 194 298
Total other expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . (118) (594) 21,551 48,688 26,183
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 282,410 174,584 122,831 20,185 85,226
Provision (benefit) for income taxes (7). . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . 105,492 66,124 46,383 (52,296) 1,533
Net income $ 176,918 $ 108,460 $ 76,448 $ 72,481 $ 83,693
Earnings Per Share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . $ 2.44 $ 1.50 $ 1.44 $ 2.77 $ 3.23
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . $ 2.42 $ 1.49 $ 1.43 $ 2.72 $ 3.18
Weighted average shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 72,592,765 72,385,574 53,240,898 26,183,772
25,910,766
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 72,999,221 72,590,574 53,515,348 26,689,855
26,315,121
(1) We estimate that the 2010 pilot strike had a net negative
impact on our operating income for 2010 of approximately $24
million consisting of an
estimated $28 million in lost revenues and approximately $4
million of incremental costs resulting from the strike, offset in
part by a reduction of
variable expenses during the strike of approximately $8 million
for flights not flown. Additionally, under the terms of the pilot
contract, we also paid
$2.3 million in return-to-work payments during the second
quarter, which are not included in the strike impact costs
described above.
34

(2) Aircraft fuel expense is the sum of (i) “into-plane fuel cost,”
which includes the cost of jet fuel and certain other charges
such as fuel taxes and oil,
(ii) settlement gains and losses and (iii) unrealized mark-to-
market gains and losses associated with fuel hedge contracts.
The following table
summarizes the components of aircraft fuel expense for the
periods presented:
2013 2012 2011 2010 2009
(in thousands)
Into-plane fuel cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
542,523 $ 471,542 $ 392,278 $ 251,754 $ 181,806
Realized losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . 8,958
175 (7,436) (1,483) 750
Unrealized losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . 265
46 3,204 (2,065) (1,449)
Aircraft fuel expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $
551,746 $ 471,763 $ 388,046 $ 248,206 $ 181,107
(3) Special charges (credits) include: (i) for 2009, amounts
relating to the early termination in mid-2008 of leases for seven
Airbus A319 aircraft, a
related reduction in workforce and the exit facility costs
associated with returning planes to lessors in 2008; (ii) for 2009
and 2010, amounts relating
to the sale of previously expensed MD-80 parts; (iii) for 2010
and 2011 amounts relating to exit facility costs associated with
moving our Detroit,
Michigan maintenance operations to Fort Lauderdale, Florida;
(iv) termination costs in connection with the IPO during the
three months ended June
30, 2011 comprised of amounts paid to Indigo Partners, LLC to
terminate its professional services agreement with us and fees

paid to three
individual, unaffiliated holders of our subordinated notes; (v)
for 2011 and 2012, a $9.1 million gain related to the sale of
four permanent air carrier
slots at Ronald Reagan National Airport (DCA) offset by costs
connected with the 2012 secondary offerings; and for 2013,
costs related to the 2013
secondary offering. For more information, please see
and Results of Operations—
Our Operating Expenses—Special Charges (Credits).”
(4) Substantially all of the interest expense recorded in 2009,
2010 and 2011 relates to notes and preferred stock held by our
principal stockholders that
were repaid or redeemed, or exchanged for shares of common
stock, in connection with the Recapitalization in 2011 that was
effected in connection
with the IPO. Interest expense in 2012 primarily relates to
interest on PDPs and interest related to the TRA. Interest
expense in 2013 primarily
relates to interest related to the TRA.
(5) Interest attributable to funds used to finance the acquisition
of new aircraft, including PDPs is capitalized as an additional
cost of the related asset.
Interest is capitalized at the weighted average implicit lease rate
of our aircraft.
(6) Gain on extinguishment of debt represents the recognition of
contingencies provided for in our 2006 recapitalization
agreements, which provided
for the cancellation of shares of Class A preferred stock and
reduction of the liquidation preference of the remaining Class A
preferred stock and
associated accrued but unpaid dividends based on the outcome

of the contingencies.
(7) Net income for 2010 includes a $52.3 million net tax benefit
primarily due to the release of a valuation allowance resulting
in a deferred tax benefit
of $52.8 million in 2010. Absent the release of the valuation
allowance and corresponding tax benefit, our net income would
have been $19.7
million for 2010.
The following table presents balance sheet data for the periods
presented.
As of December 31,
2013 2012 2011 2010 2009
Balance Sheet Data: (in thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $
530,631 $ 416,816 $ 343,328 $ 82,714 $ 86,147
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,180,765 919,884 745,813 475,757 327,866
Long-term debt, including current portion . . . . . . . . — — —
260,827 242,232
Mandatorily redeemable preferred stock. . . . . . . . . . — — —
79,717 75,110
Stockholders' equity (deficit). . . . . . . . . . . . . . . . . . . 769,117
582,535 466,706 (105,077) (178,127)
35
OPERATING STATISTICS

2013 2012 2011 2010 2009
Operating Statistics (unaudited) (A)
Average aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . 49.9 41.2
34.8 30.5 28.0
Aircraft at end of period . . . . . . . . . . . . . . . . . . . . 54 45 37 32
28
Airports served in the period (B) . . . . . . . . . . . . . 56 55 50 41
43
Average daily Aircraft utilization (hours). . . . . . . 12.7 12.8
12.7 12.8 13.0
Average stage length (miles). . . . . . . . . . . . . . . . . 958 909 921
941 931
Block hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,148
192,403 161,898 141,864 133,227
Passenger flight segments (thousands) . . . . . . . . . 12,414
10,423 8,518 6,952 6,325
Revenue passenger miles (RPMs) (thousands). . . 12,001,088
9,663,721 8,006,748 6,664,395 6,039,064
Available seat miles (ASMs) (thousands). . . . . . . 13,861,393
11,344,731 9,352,553 8,119,923 7,485,141
Load factor (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 86.6 85.2
85.6 82.1 80.7
Average ticket revenue per passenger flight
segment ($) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.43
75.11 80.97 77.39 84.77
Average non-ticket revenue per passenger flight
segment ($) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.84
51.39 44.79 35.00 25.91
Total revenue per passenger segment ($) . . . . . . . 133.27
126.50 125.76 112.39 110.68
Average yield (cents) . . . . . . . . . . . . . . . . . . . . . . 13.79 13.64
13.38 11.72 11.59
RASM (cents) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.94
11.62 11.45 9.62 9.35
CASM (cents) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.90 10.09

9.91 8.77 7.86
Adjusted CASM (cents) (C) . . . . . . . . . . . . . . . . . 9.89 10.15
9.84 8.79 7.89
Adjusted CASM ex fuel (cents) (C) . . . . . . . . . . . 5.91 6.00
5.72 5.71 5.45
Fuel gallons consumed (thousands) . . . . . . . . . . . 171,931
142,991 121,030 106,628 98,422
Average economic fuel cost per gallon ($) . . . . . . 3.21 3.30
3.18 2.35 1.85
(A) See “Glossary of Airline Terms” elsewhere in this annual
report for definitions of terms used in this table.
(B) Includes airports served during the period that had service
canceled as of the end of the period. Previously, we reported
only airports served during
the period with continuing operations.
(C) Excludes special charges (credits) of $(0.4) million (less
than (0.01) cents per ASM) in 2009, $0.6 million (less than 0.01
cents per ASM) in 2010,
$3.2 million (0.03 cents per ASM) in 2011, $(8.5) million
((0.07) cents per ASM) in 2012 and $0.2 million (less than 0.01
cents per ASM) in 2013.
These amounts are excluded from all calculations of Adjusted
CASM provided in this prospectus. Please see “Management’s
Discussion and
Analysis of Financial Condition and Results of Operations—Our
Operating Expenses—Special Charges (Credits).” Also excludes
unrealized mark-
to-market, or MTM, (gains) and losses $(1.4) million ((0.02)
cents per ASM) in 2009, $(2.1) million ((0.03) cents per ASM)
in 2010, $3.2 million
(0.03 cents per ASM) in 2011, $0.0 million (less than 0.01 cents
per ASM) in 2012 and $0.3 million (less than 0.01 cent per

ASM) in 2013. Please
see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Critical Accounting
Policies and Estimates.”
36
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion of our financial
condition and results of operations in conjunction with the
financial
statements and the notes thereto included elsewhere in this
annual report.
2013 Year in Review
The year 2013 marks the seventh consecutive year of
profitability and one of the most successful years on record for
us. We achieved earnings of $176.9 million ($2.42 per share,
diluted), compared to net income of $108.5 million ($1.49 per
share, diluted) in 2012. The increase in our 2013 net income is a
result of our increased capacity, continued strong demand for
our ultra-low fares and growth in our ancillary revenues.
For the year ended December 31, 2013, we achieved record
annual profits and a 17.1% operating profit margin, the
highest in our history, on $1,654.4 million in operating
revenues. Our traffic grew by 24.2% as we continued to
stimulate
demand with ultra-low fares. Total revenue per passenger flight
segment increased by 5.4% from $126.50 to $133.27. Total

RASM for 2013 was 11.94 cents, an increase of 2.8% compared
to the prior year period, as a result of both higher average
passenger yields and increased load factors. Strength in demand
throughout 2013 allowed us to leverage our ability to revenue
manage our inventory, resulting in increased profitability year
over year.
Our operating cost structure is a primary area of focus and is at
the core of our ULCC business model in which we
compete solely on the basis of price. Spirit's unit operating
costs continue to be among the lowest of any airline in the
Americas. During 2013, we increased our capacity by 22.2% as
we grew our fleet of Airbus single-aisle aircraft from 45 to 54,
added 25 new nonstop routes during the year, and launched
service to two new destinations: New Orleans, Louisiana and
Philadelphia, Pennsylvania.
During 2013, we increased our average non-ticket revenue per
passenger flight segment by 4.8%, or $2.45, to $53.84.
Our total non-ticket revenue increased by 24.8%, or $132.8
million, to $668.4 million in 2013. The year-over-year increase
in
average non-ticket revenue per passenger flight segment was
primarily driven by changes we made late in 2012 to our bag fee
schedule to optimize revenue by channel, a change we made in
July 2013 to align our foreign passenger usage fee with our
domestic passenger usage fee, and an increase in service
charges collected as a result of increased volume of third-party
bookings. Growth in travel package sales including the offering
of third-party travel-related options such as hotels and rental
cars for sale through our website, subscriptions to our $9 Fare
Club and other options designed to enhance our customers'
travel
experience also contributed to the growth of our non-ticket
revenue.

During 2013, our adjusted CASM ex-fuel decreased by 1.5% to
5.91 cents. Better operational performance during
2013 as compared to 2012 helped drive lower wages and
passenger re-accommodation expenses. In addition, during
2013, we
entered into lease extensions covering 14 of our existing A319
aircraft resulting in reduced lease rates for the remaining term
of
the leases which contributed to the decrease in adjusted CASM
ex-fuel as compared to 2012. These decreases were partially
offset by higher heavy maintenance amortization expense for
2013 resulting from the increase in deferred heavy aircraft
maintenance events as compared to the same period in 2012.
During 2013, we reached a Company milestone with the
introduction of the 50th aircraft into our operating fleet. As of
December 31, 2013, our 54 Airbus A320-family aircraft fleet
was comprised of 29 A319s, 23 A320s and 2 A321s. As of
December 31, 2013, our aircraft orders consisted of 112 A320
family aircraft with Airbus and 5 direct operating leases for
A320neos with a third party, scheduled for delivery from 2014
through 2021. Our plan calls for growing the fleet by 20.4% in
2014.
2011 IPO
On June 1, 2011, we completed our initial public offering of
common stock, or IPO, which raised net proceeds of $150.0
million after repayment of debt, payment of transaction
expenses and other fees. In connection with the IPO, we
effected a
recapitalization, which we refer to as the 2011 Recapitalization,
that resulted in the repayment or conversion of all of our notes
and shares of preferred stock into shares of common stock.
Our Operating Revenues

Our operating revenues are comprised of passenger revenues
and non-ticket revenues.
Passenger Revenues. Passenger revenues consist of the base
fares that customers pay for air travel.
37
Non-ticket Revenues. Non-ticket revenues are generated from
air travel-related charges for baggage, passenger usage fee
(PUF) for bookings through our distribution channels, advance
seat selection, itinerary changes, hotel travel packages and
loyalty programs such as our FREE SPIRIT affinity credit card
program and $9 Fare Club. Non-ticket revenues also include
revenues derived from services not directly related to providing
transportation such as the sale of advertising to third parties on
our website and on board our aircraft.
Substantially all of our revenues are denominated in U.S.
dollars. Passenger revenues are recognized once the related
flight departs. Accordingly, the value of tickets sold in advance
of travel is included under our current liabilities as “air traffic
liability,” or ATL, until the related air travel is provided. Non-
ticket revenues are generally recognized at the time the
ancillary
products are purchased or ancillary services are provided. Non-
ticket revenues also include revenues from our subscription-
based $9 Fare Club, which we recognize on a straight-line basis
over 12 months. Revenue generated from the FREE SPIRIT
credit card affinity program are recognized in accordance with
the criteria as set forth in Accounting Standards Update ASU
No. 2009-13. Please see “—Critical Accounting Policies and
Estimates—Frequent Flier Program”.

We recognize revenues net of certain taxes and airport
passenger fees, which are collected by us on behalf of airports
and
governmental agencies and remitted to the applicable
governmental entity or airport on a periodic basis. These taxes
and fees
include U.S. federal transportation taxes, federal security
charges, airport passenger facility charges and foreign arrival
and
departure taxes. These items are collected from customers at the
time they purchase their tickets, but are not included in our
revenues. We record a liability upon collection from the
customer and relieve the liability when payments are remitted to
the
applicable governmental agency or airport.
Our Operating Expenses
Our operating expenses consist of the following line items.
Aircraft Fuel. Aircraft fuel expense is our single largest
operating expense. It includes the cost of jet fuel, related
federal
taxes, fueling into-plane fees and transportation fees. It also
includes realized and unrealized gains and losses arising from
any
fuel price hedging activity.
Salaries, Wages and Benefits. Salaries, wages and benefits
expense includes the salaries, hourly wages, bonuses and
equity compensation paid to employees for their services, as
well as the related expenses associated with employee benefit
plans and employer payroll taxes.
Aircraft Rent. Aircraft rent expense consists of monthly lease

rents for aircraft and spare engines under the terms of the
related operating leases and is recognized on a straight-line
basis. Aircraft rent expense also includes supplemental rent.
Supplemental rent is made up of maintenance reserves paid or to
be paid to aircraft lessors in advance of the performance of
major maintenance activities that are not probable of being
reimbursed and lease return condition obligations which we
begin
to accrue when they are probable. Aircraft rent expense is net of
the amortization of gains and losses on sale and leaseback
transactions on our flight equipment. Presently, all of our
aircraft and spare engines are financed under operating leases.
Landing Fees and Other Rents. Landing fees and other rents
include both fixed and variable facilities expenses, such as
the fees charged by airports for the use or lease of airport
facilities, overfly fees paid to other countries and the monthly
rent
paid for our headquarters facility.
Distribution. Distribution expense includes all of our direct
costs including the cost of web support, our third-party call
center, travel agent commissions and related GDS fees and
credit card transaction fees, associated with the sale of our
tickets
and other products and services.
Maintenance, Materials and Repairs. Maintenance, materials
and repairs expense includes all parts, materials, repairs and
fees for repairs performed by third-party vendors directly
required to maintain our fleet. It excludes direct labor cost
related to
our own mechanics, which is included under salaries, wages and
benefits. It also excludes the amortization of heavy
maintenance expenses, which we defer under the deferral
method of accounting and amortize as a component of

depreciation
and amortization expense.
Depreciation and Amortization. Depreciation and amortization
expense includes the depreciation of fixed assets we own
and leasehold improvements. It also includes the amortization
of heavy maintenance expenses we defer under the deferral
method of accounting for heavy maintenance events and
recognize into expense on a straight-line or usage basis until the
earlier of the next estimated heavy maintenance event or the
aircraft's return at the end of the lease term.
Loss on Disposal of Assets. Loss on disposal of assets includes
the net losses on the disposal of our fixed assets, including
losses on sale and leaseback transactions.
38
Other Operating Expenses. Other operating expenses include
airport operations expense and fees charged by third-party
vendors for ground handling services and food and liquor
supply service expenses, passenger re-accommodation expense,
the
cost of passenger liability and aircraft hull insurance, all other
insurance policies except for employee health insurance, travel
and training expenses for crews and ground personnel,
professional fees, personal property taxes and all other
administrative
and operational overhead expenses. No individual item included
in this category represented more than 5% of our total
operating expenses.
Special Charges (Credits). Special charges (credits) include
termination costs, secondary offering costs and the gain on

the sale of take-off and landing slots.
In 2012, we sold four permanent air carrier slots at Ronald
Reagan National Airport (DCA) to another airline for $9.1
million. We recognized the $9.1 million gain within special
charges (credits) in the third quarter of 2012, the period in
which
the FAA operating restriction lapsed and written confirmation
of the slot transfer was received by the buyer from the FAA.
During the third quarter of 2013, certain stockholders affiliated
with Indigo Partners LLC (Indigo) sold an aggregate of
12,070,920 shares of common stock in an underwritten public
offering. We incurred $0.3 million in costs related to this
offering
in 2013. Upon completion of this secondary offering,
investment funds affiliated with Indigo owned no shares of our
common
stock.
On July 31, 2012, certain stockholders affiliated with Oaktree
Capital Management (Oaktree) sold an aggregate of
9,394,927 shares of common stock in an underwritten public
offering. We incurred $0.7 million in costs related to this
offering
in 2012. Upon completion of this secondary offering,
investment funds affiliated with Oaktree owned no shares of our
common
stock.
On January 25, 2012, certain stockholders of the Company,
including affiliates of Oaktree and Indigo and certain
members of our executive team, sold an aggregate of 12,650,000
shares of common stock in an underwritten public offering.
We incurred a total of $1.3 million in costs between 2011 and
2012 related to this secondary offering, offset by

reimbursements
from certain selling stockholders of $0.6 million in accordance
with the Fourth Amendment to the Second Amended and
Restated Investor Rights Agreement.
We did not receive any proceeds from any of these secondary
offerings.
In the second quarter of 2011, we incurred $2.3 million of
termination costs in connection with the IPO comprised of
amounts paid to Indigo to terminate its professional services
agreement with us and fees paid to three individual, unaffiliated
holders of our subordinated notes.
Our Other Expense (Income)
Interest Expense. Paid-in-kind interest on notes due to related
parties and preferred stock dividends due to related parties
account, on average, for over 80% of interest expense incurred
in 2011. Non-related party interest expense accounted for the
remainder of interest expense in 2011. All of the notes and
preferred stock were repaid or redeemed, or exchanged for
common
stock, in connection with the 2011 Recapitalization. Interest
expense in 2012 primarily relates to interest on PDPs and
interest
related to the Tax Receivable Agreement, or TRA. Interest
expense in 2013 primarily relates to interest on the TRA.
Capitalized Interest. Capitalized interest represents interest cost
incurred during the acquisition period of an aircraft
which theoretically could have been avoided had we not made
PDPs for that aircraft. These amounts are capitalized as part of
the cost of the aircraft upon delivery. Capitalization of interest
ceases when the asset is ready for service. Capitalized interest
for 2011 primarily relates to the interest incurred on debt due to

related parties. Capitalized interest for 2012 and 2013 primarily
relates to interest incurred in connection with payments owed
under the TRA.
Our Income Taxes
We account for income taxes using the liability method. We
record a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more
likely than not that some portion or all of the deferred tax assets
will
not be realized. Deferred taxes are recorded based on
differences between the financial statement basis and tax basis
of assets
and liabilities and available tax loss and credit carryforwards.
In assessing the realizability of the deferred tax assets, we
consider whether it is more likely than not that some or all of
the deferred tax assets will be realized. In evaluating the ability
to
utilize our deferred tax assets, we consider all available
evidence, both positive and negative, in determining future
taxable
income on a jurisdiction by jurisdiction basis.
In connection with the IPO, we entered into the TRA and
thereby distributed immediately prior to the completion of the
IPO to the holders of common stock as of such time, or the Pre-
IPO Stockholders, the right to receive an amount equal to 90%
39
of the cash savings in federal income tax realized by it by virtue
of the use of the federal net operating loss, deferred interest
deductions and alternative minimum tax credits held by us as of

March 31, 2011, which is defined as the Pre-IPO NOL. Cash
tax savings generally will be computed by comparing actual
federal income tax liability to the amount of such taxes that we
would have been required to pay had such Pre-IPO NOLs (as
defined in the TRA) not been available. Upon consummation of
the IPO and execution of the TRA, we recorded a liability with
an offsetting reduction to additional paid in capital. The amount
and timing of payments under the TRA will depend upon a
number of factors, including, but not limited to, the amount and
timing of taxable income generated in the future and any future
limitations that may be imposed on our ability to use the Pre-
IPO NOLs. The term of the TRA will continue until the first to
occur (a) the full payment of all amounts required under the
agreement with respect to utilization or expiration of all of the
Pre-IPO NOLs, (b) the end of the taxable year including the
tenth anniversary of the IPO or (c) a change in control of the
Company.
In accordance with the TRA, we are required to submit a Tax
Benefit Schedule showing the proposed TRA payout
amount to the Stockholder Representatives within 45 calendar
days after we file our tax return. Stockholder Representatives
are
defined as Indigo Pacific Partners, LLC and OCM FIE, LLC,
representing the two largest ownership interest of pre-IPO
shares.
The Tax Benefit Schedule shall become final and binding on all
parties unless a Stockholder Representative, within 45 calendar
days after receiving such schedule, provides us with notice of a
material objection to such schedule. If the parties, for any
reason, are unable to successfully resolve the issues raised in
any notice within 30 calendar days of receipt of such notice, we
and the Stockholder Representatives have the right to employ
the reconciliation procedures as set forth in the TRA. If the Tax
Benefit Schedule is accepted, then we have five days after
acceptance to make payments to the Pre-IPO stockholders.

Pursuant
to the TRA's reconciliation procedures, any disputes that cannot
be settled amicably, are settled by arbitration conducted by a
single arbitrator jointly selected by both parties.
During the second quarter of 2012, we paid $27.2 million, or
90% of the 2011 tax savings realized from the utilization of
NOLs, including $0.3 million of applicable interest. During
2012, management adjusted for an immaterial error in the
original
estimate of the liability. This adjustment reduced the liability
with an offset to additional paid in capital.
During 2013, we filed an amended 2009 income tax return in
order to correct its NOL carry forward as of December 31,
2009. As a result, our NOL carry forward as of March 31, 2011
was consequently reduced by $7.8 million, which corresponds
to a reduction in the estimated TRA benefit of $2.4 million with
an offset to additional paid in capital. On September 13, 2013,
we filed our 2012 federal income tax return, and on October 14,
2013, we submitted a Tax Benefit Schedule to the Stockholder
Representatives. On November 27, 2013, pursuant to the TRA,
we received an objection notice to the Tax Benefit Schedule
from the Stockholder Representatives. As of December 31,
2013, we estimated the TRA liability to be $5.6 million. We are
in
discussions with the Stockholder Representatives attempting to
resolve the objection related to the Tax Benefit Schedule and
thus have not employed the TRA's reconciliation procedures.
Trends and Uncertainties Affecting Our Business
We believe our operating and business performance is driven by
various factors that affect airlines and their markets,
trends affecting the broader travel industry and trends affecting
the specific markets and customer base that we target. The

following key factors may affect our future performance.
Competition. The airline industry is highly competitive. The
principal competitive factors in the airline industry are fare
pricing, total price, flight schedules, aircraft type, passenger
amenities, number of routes served from a city, customer
service,
safety record and reputation, code-sharing relationships and
frequent flier programs and redemption opportunities. Price
competition occurs on a market-by-market basis through price
discounts, changes in pricing structures, fare matching, target
promotions and frequent flier initiatives. Airlines typically use
discount fares and other promotions to stimulate traffic during
normally slower travel periods to generate cash flow and to
maximize unit revenue. The prevalence of discount fares can be
particularly acute when a competitor has excess capacity that it
is under financial pressure to sell.
Seasonality and Volatility. Our results of operations for any
interim period are not necessarily indicative of those for the
entire year because the air transportation business is subject to
significant seasonal fluctuations. We generally expect demand
to
be greater in the second and third quarters compared to the rest
of the year. The air transportation business is also volatile and
highly affected by economic cycles and trends. Consumer
confidence and discretionary spending, fear of terrorism or war,
weakening economic conditions, fare initiatives, fluctuations in
fuel prices, labor actions, changed in governmental regulations
on taxes and fees, weather and other factors have resulted in
significant fluctuations in revenues and results of operations in
the
past. We believe demand for business travel historically has
been more sensitive to economic pressures than demand for
low-
price travel. Finally, a significant portion of our operations are

concentrated in markets such as South Florida, the Caribbean,
Latin America and the Northeast and northern Midwest regions
of the United States, which are particularly vulnerable to
weather, airport traffic constraints and other delays.
40
Aircraft Fuel. Fuel costs represent the single largest operating
expense for most airlines, including ours. Fuel costs have
been subject to wide price fluctuations in recent years. Fuel
availability and pricing are also subject to refining capacity,
periods
of market surplus and shortage and demand for heating oil,
gasoline and other petroleum products, as well as
meteorological,
economic and political factors and events occurring throughout
the world, which we can neither control nor accurately predict.
We source a significant portion of our fuel from refining
resources located in the southeast United States, particularly
facilities
adjacent to the Gulf of Mexico. Gulf Coast fuel is subject to
volatility and supply disruptions, particularly in hurricane
season
when refinery shutdowns have occurred in recent years, or when
the threat of weather-related disruptions has caused Gulf
Coast fuel prices to spike above other regional sources. 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. Historically, we have protected approximately 70% of
our forecasted fuel requirements during peak hurricane season
(August through October) using jet fuel swaps. Our fuel hedging
practices are dependent upon many factors, including our
assessment of market conditions for fuel, our access to the

capital necessary to support margin requirements, the pricing of
hedges and other derivative products in the market, our overall
appetite for risk and applicable regulatory policies. As of
December 31, 2013, we had no derivative contracts outstanding.
As of December 31, 2013, we purchased all of our aircraft fuel
under a single fuel service contract. The cost and future
availability of jet fuel cannot be predicted with any degree of
certainty.
Labor. The airline industry is heavily unionized. The wages,
benefits and work rules of unionized airline industry
employees are determined by collective bargaining agreements,
or CBAs. Relations between air carriers and labor unions in the
United States are governed by the RLA. Under the RLA, CBAs
generally contain “amendable dates” rather than expiration
dates, and the RLA requires that a carrier maintain the existing
terms and conditions of employment following the amendable
date through a multi-stage and usually lengthy series of
bargaining processes overseen by the NMB. This process
continues
until either the parties have reached agreement on a new CBA,
or the parties have been released to “self-help” by the NMB. In
most circumstances, the RLA prohibits strikes; however, after
release by the NMB, carriers and unions are free to engage in
self-help measures such as strikes and lockouts.
We have three union-represented employee groups comprising
approximately 59% of our employees at December 31,
2013. Our pilots are represented by the Airline Pilots
Association, International or ALPA, our flight attendants are
represented
by the Association of Flight Attendants, or AFA-CWA, and our
flight dispatchers are represented by the Transport Workers
Union of America, or TWU. Conflicts between airlines and their
unions can lead to work slowdowns or stoppages. In June
2010, we experienced a five-day strike by our pilots, which

caused us to shut down our flight operations. The strike ended
as a
result of our reaching a tentative agreement under a Return to
Work Agreement and a full flight schedule was resumed on
June 18, 2010. On August 1, 2010, we entered into a five-year
collective bargaining agreement with our pilots. In August
2013,
we entered into a five-year agreement with our flight
dispatchers. In December 2013, with the help of the NMB, we
reached a
tentative agreement for a five-year contract with our flight
attendants. The tentative agreement was subject to ratification
by the
flight attendant membership. On February 7, 2014, we were
notified that the flight attendants voted to not ratify the
tentative
agreement. We will continue to work together with the AFA and
the NMB with a goal of reaching a mutually beneficial
agreement. We believe the five-year term of our CBAs is
valuable in providing stability to our labor costs and provide us
with
competitive labor costs compared to other U.S.-based low-cost
carriers. If we are unable to reach agreement with any of our
unionized work groups in current or future negotiations
regarding the terms of their CBAs, we may be subject to work
interruptions or stoppages, such as the strike by our pilots in
June 2010. A strike or other significant labor dispute with our
unionized employees is likely to adversely affect our ability to
conduct business.
Maintenance Expense. Maintenance expense grew through 2013,
2012 and 2011 mainly as a result of the increasing age
(approximately 5.1 years on average at December 31, 2013) and
size of our fleet. As the fleet ages, we expect that maintenance
costs will increase in absolute terms. The amount of total
maintenance costs and related amortization of heavy

maintenance
(included in depreciation and amortization expense) is subject
to many variables such as future utilization rates, average stage
length, the size and makeup of the fleet in future periods and
the level of unscheduled maintenance events and their actual
costs. Accordingly, we cannot reliably quantify future
maintenance expenses for any significant period of time.
However, we
believe, based on our scheduled maintenance events,
maintenance expense and maintenance-related amortization
expense in
2014 will be approximately $113 million. In addition, we expect
to capitalize $40 million of costs for heavy maintenance
during 2014.
As a result of a significant portion of our fleet being acquired
over a relatively short period of time, significant
maintenance scheduled on each of our planes will occur at
roughly the same time, meaning we will incur our most
expensive
scheduled maintenance obligations across our current fleet
around the same time. These more significant maintenance
activities
will result in out-of-service periods during which our aircraft
will be dedicated to maintenance activities and unavailable to
fly
revenue service. In addition, management expects that the final
heavy maintenance events will be amortized over the remaining
lease term rather than until the next estimated heavy
maintenance event, because we account for heavy maintenance
under the
deferral method. This will result in significantly higher
depreciation and amortization expense related to heavy
maintenance in

41
the last few years of the leases as compared to the costs in
earlier periods. Please see “—Critical Accounting Policies and
Estimates—Aircraft Maintenance, Materials, Repair Costs and
Related Heavy Maintenance Amortization.”
Maintenance Reserve Obligations. The terms of some of our
aircraft lease agreements require us to post deposits for
future maintenance, also known as maintenance reserves, to the
lessor in advance of and as collateral for the performance of
major maintenance events, resulting in our recording significant
prepaid deposits on our balance sheet. As a result, the cash
costs of scheduled major maintenance events are paid well in
advance of the recognition of the maintenance event in our
results
of operations. Please see “—Critical Accounting Policies and
Estimates—Aircraft Maintenance, Materials, Repair Costs and
Related Heavy Maintenance Amortization” and “—Maintenance
Reserves.”
Critical Accounting Policies and Estimates
The following discussion and analysis of our financial condition
and results of operations is based on our financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.
The
preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of
assets
and liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities at the date of our financial
statements. For a detailed discussion of our significant
accounting policies, please see “Notes to Financial

Statements—1.
Summary of Significant Accounting Policies”.
Critical accounting policies are defined as those policies that
reflect significant judgments or estimates about matters that
are both inherently uncertain and material to our financial
condition or results of operations.
Revenue Recognition. Revenues from tickets sold are initially
deferred as ATL. Passenger revenues are recognized when
transportation is provided. An unused non-refundable ticket
expires at the date of scheduled travel and is recognized as
revenue for the expired ticket value at the date of scheduled
travel.
Our most significant non-ticket revenues include revenues
generated from air travel-related services paid for baggage,
bookings through our call center or third-party vendors, advance
seat selection, itinerary changes and loyalty programs, and are
recognized at the time products are purchased or ancillary
services are provided. These revenues also include commissions
from the sales of hotel rooms, trip insurance and rental cars
recognized at the time the service is rendered. Non-ticket
revenues
also include revenues from our subscription-based $9 Fare Club,
recognized on a straight-line basis over 12 months.
Customers may elect to change their itinerary prior to the date
of departure. A service charge is assessed and recognized
on the date the change is initiated and is deducted from the face
value of the original purchase price of the ticket, and the
original ticket becomes invalid. The amount remaining after
deducting the service charge is called a credit shell which
expires
60 days from the date the credit shell is created and can be used
towards the purchase of a new ticket and our other service

offerings. The amount of credits expected to expire is
recognized as revenue upon issuance of the credit and is
estimated based
on historical experience. Estimating the amount of credits that
will go unused involves some level of subjectivity and
judgment.
Frequent Flier Program. We accrue for mileage credits earned
through travel, including mileage credits for members
with an insufficient number of mileage credits to earn an award,
under our FREE SPIRIT program based on the estimated
incremental cost of providing free travel for credits that are
expected to be redeemed. Incremental costs include fuel,
insurance,
security, ticketing and facility charges reduced by an estimate
of amounts required to be paid by the passenger when
redeeming
the award.
Under our affinity card program, funds received for the
marketing of a co-branded Spirit credit card and delivery of
award miles are accounted for as a mulitple-deliverable
arrangement. At the inception of the arrangement, we evaluated
all
deliverables in the arrangement to determine whether they
represent separate units of accounting. We determined the
arrangement had three separate units of accounting: (i) travel
miles to be awarded, (ii) licensing of brand and access to
member
lists and (iii) advertising and marketing efforts. At inception of
the arrangement, we established the relative selling price for all
deliverables that qualified for separation, as arrangement
consideration should be allocated based on relative selling
price. The
manner in which the selling price was established was based on
the applicable hierarchy of evidence. Total arrangement

consideration was then allocated to each deliverable on the
basis of the deliverable's relative selling price. In considering
the
hierarchy of evidence, we first determined whether vendor-
specific objective evidence of selling price or third-party
evidence
of selling price existed. We determined that neither vendor-
specific objective evidence of selling price nor third-party
evidence
existed due to the uniqueness of our program. As such, we
developed our best estimate of the selling price for all
deliverables.
For the selling price of travel, we considered a number of
entity-specific factors including the number of miles needed to
redeem an award, average fare of comparable segments,
breakage, restrictions and other charges. For licensing of brand
and
access to member lists, we considered both market-specific
factors and entity-specific factors, including general profit
margins
realized in the marketplace/industry, brand power, market
royalty rates and size of customer base. For the advertising and
marketing element, we considered market-specific factors and
entity-specific factors including, our internal costs (and
42
fluctuations of costs) of providing services, volume of
marketing efforts and overall advertising plan. Consideration
allocated
based on the relative selling price to both brand licensing and
advertising elements is recognized as revenue when earned and
recorded in non-ticket revenue. Consideration allocated to
award miles is deferred and recognized ratably as passenger

revenue
over the estimated period the transportation is expected to be
provided which is currently estimated at 16 months. We used
entity-specific assumptions coupled with the various judgments
necessary to determine the selling price of a deliverable in
accordance with the required selling price hierarchy. Changes in
these assumptions could result in changes in the estimated
selling prices. Determining the frequency to reassess selling
price for individual deliverables requires significant judgment.
For
additional information, please see “Notes to Financial
Statements—1. Summary of Significant Accounting Policies—
Frequent
Flier Program”.
Aircraft Maintenance, Materials, Repair Costs and Related
Heavy Maintenance Amortization. We account for heavy
maintenance under the deferral method. Under the deferral
method the cost of heavy maintenance is capitalized and
amortized
as a component of depreciation and amortization expense until
the earlier of the next estimated heavy maintenance event or the
aircraft's return at the end of the lease term. Amortization of
engine and aircraft overhaul costs was $23.6 million, $9.1
million
and $2.6 million for the years ended December 31, 2013, 2012
and 2011, respectively. If heavy maintenance costs were
amortized within maintenance, material and repairs expense in
the statement of operations, our maintenance, material and
repairs expense would have been $83.8 million, $58.6 million
and $36.6 million for the years ended December 31, 2013, 2012
and 2011, respectively. During the years ended December 31,
2013, 2012 and 2011, we capitalized $70.8 million, $61.6
million
and $22.1 million of costs for heavy maintenance, respectively.
The timing of the next heavy maintenance event is estimated

based on assumptions including estimated usage, FAA-mandated
maintenance intervals and average removal times as
suggested by the manufacturer. These assumptions may change
based on changes in our utilization of our aircraft, changes in
government regulations and suggested manufacturer
maintenance intervals. In addition, these assumptions can be
affected by
unplanned incidents that could damage an airframe, engine or
major component to a level that would require a heavy
maintenance event prior to a scheduled maintenance event. To
the extent our planned usage increases, the estimated life would
decrease before the next maintenance event, resulting in
additional expense over a shorter period. Heavy maintenance
events
are our 6-year and 12-year airframe checks (HMV4 and HMV8,
respectively), engine overhauls and overhauls to major
components. Certain maintenance functions are outsourced
under contracts that require payment based on a performance
measure such as flight hours. Costs incurred for maintenance
and repair under flight hour maintenance contracts, where labor
and materials price risks have been transferred to the service
provider, are accrued based on contractual payment terms.
Routine
cost for maintaining the airframes and engines and line
maintenance are charged to maintenance, materials and repairs
expense
as performed.
Maintenance Reserves. Some of our master lease agreements
provide that we pay maintenance reserves to aircraft lessors
to be held as collateral in advance of our performance of major
maintenance activities. These lease agreements provide that
maintenance reserves are reimbursable to us upon completion of
the maintenance event in an amount equal to the lesser of (1)
the amount of the maintenance reserve held by the lessor
associated with the specific maintenance event or (2) the

qualifying
costs related to the specific maintenance event. Substantially all
of these maintenance reserve payments are calculated based on
a utilization measure, such as flight hours or cycles and are
used solely to collateralize the lessor for maintenance time run
off
the aircraft until the completion of the maintenance of the
aircraft.
At lease inception and at each balance sheet date, we assess
whether the maintenance reserve payments required by the
master lease agreements are substantively and contractually
related to the maintenance of the leased asset. Maintenance
reserve
payments that are substantively and contractually related to the
maintenance of the leased asset are accounted for as
maintenance deposits. Maintenance deposits expected to be
recovered from lessors are reflected as prepaid maintenance
deposits in the accompanying balance sheets. When it is not
probable we will recover amounts currently on deposit with a
lessor, such amounts are expensed as supplemental rent.
Because we are required to pay maintenance reserves for our
operating
leased aircraft, and we choose to apply the deferral method for
maintenance accounting, management expects that the final
heavy maintenance events will be amortized over the remaining
lease term rather than over the next estimated heavy
maintenance event. As a result, our maintenance costs in the
last few years of leases could be significantly in excess of the
costs
in earlier periods. In addition, these late periods could include
additional costs from unrecoverable maintenance reserve
payments required in the late years of the lease. We expensed
$1.9 million, $2.0 million and $1.5 million of paid maintenance
reserves as supplemental rent during 2013, 2012 and 2011,
respectively.

As of December 31, 2013 and 2012, we had prepaid
maintenance deposits of $220.7 million and $198.5 million,
respectively, on our balance sheets. We have concluded that
these prepaid maintenance deposits are probable of recovery
primarily due to the rate differential between the maintenance
reserve payments and the expected cost for the related next
maintenance event that the reserves serve to collateralize.
These master lease agreements also provide that most
maintenance reserves held by the lessor at the expiration of the
lease are nonrefundable to us and will be retained by the lessor.
Consequently, we have determined that any usage-based
43
maintenance reserve payments after the last major maintenance
event are not substantively related to the maintenance of the
leased asset and therefore are accounted for as contingent rent.
We accrue contingent rent beginning when it becomes probable
and reasonably estimable we will incur such nonrefundable
maintenance reserve payments. We make certain assumptions at
the
inception of the lease and at each balance sheet date to
determine the recoverability of maintenance deposits. These
assumptions are based on various factors such as the estimated
time between the maintenance events, the cost of future
maintenance events and the number of flight hours the aircraft
is estimated to be utilized before it is returned to the lessor.
Maintenance reserves held by lessors that are refundable to us
at the expiration of the lease are accounted for as prepaid
maintenance deposits on the balance sheet when they are paid.
RESULTS OF OPERATIONS

In 2013, we generated operating revenues of $1,654.4 million
and operating income of $282.3 million resulting in a
17.1% operating margin and net earnings of $176.9 million. In
2012, we generated operating revenues of $1,318.4 million and
operating income of $174.0 million resulting in a 13.2%
operating margin and net earnings of $108.5 million. Operating
revenues increased year-over-year as a result of a 24.2%
increase in traffic and a 1.1% improvement in average yield.
The
increase in operating income in 2013 over 2012 of $108.3
million, is mainly due to a 25.5% increase in revenue partially
offset
by increased fuel and other expenses resulting from increase in
operations. Fuel costs increased by $80.0 million during 2013
compared to 2012, primarily driven by an 20.2% increase in
consumption resulting from our increase in operations.
Operating
expenses increased primarily due to our growth in capacity
resulting from the addition of nine aircraft to our fleet and our
route
network expansion. The increase in operating margin year-over-
year is due in part to the negative revenue impact in the fourth
quarter of 2012 related to Hurricane Sandy, which we estimated
to be $25 million, as well as lower fuel cost per gallon in 2013.
As of December 31, 2013, our cash and cash equivalents grew
to $530.6 million, an increase of $113.8 million compared
to the prior year, mainly driven by cash from our operating
activities offset by cash used to fund PDPs and capital
expenditures.
Operating Revenue
Year Ended
2013

% change 2013
versus 2012
Year Ended
2012
% change 2012
versus 2011
Year Ended
2011
Passenger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
986,018 26.0% $ 782,792 13.5% $ 689,650
Non-ticket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
668,367 24.8% 535,596 40.4% 381,536
Total operating revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,654,385 25.5% $ 1,318,388 23.1% $ 1,071,186
RASM (cents) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.94 2.8% 11.62 1.5% 11.45
Average ticket revenue per passenger flight segment. . . . $
79.43 5.8% $ 75.11 (7.2)% $ 80.97
Average non-ticket revenue per passenger flight segment $
53.84 4.8% $ 51.39 14.7% 44.79
Total revenue per passenger flight segment . . . . . . . . . . . $
133.27 5.4% $ 126.50 0.6% $ 125.76
2013 compared to 2012
Operating revenue increased by $336.0 million, or 25.5%, to
$1,654.4 million in 2013 compared to 2012 as we increased
traffic by 24.2% and improved our average yield by 1.1% to
13.79 cents.
Our results for 2013 were driven by a capacity increase of

22.2% compared to 2012 while maintaining a high load factor
of 86.6% and an increase of 1.4 points compared to 2012. In
addition, the year-over-year increase was partly attributable to
the
negative revenue impact in the fourth quarter 2012 related to
Hurricane Sandy which we estimated to be $25 million. Total
RASM for 2013 was 11.94 cents, an increase of 2.8% compared
to 2012, as a result of higher average passenger yields and
higher load factor. Total revenue per passenger flight segment
increased 5.4% from $126.50 in 2012 to $133.27 in 2013.
Non-ticket revenue increased 24.8% in 2013, as compared to
2012, mainly due to a 24.2% increase in traffic and an
increase in baggage revenue per passenger flight segment. Non-
ticket revenue as a percentage of total revenue remained
relatively stable from 40.6% for 2012 to 40.4% for 2013. On a
per passenger segment basis the increase is in non-ticket is
attributed to changes to our bag fee schedule which better
optimized revenue by channel. Additionally, during June 2012
and
July 2013, we made adjustments to our passenger usage fee
(PUF) helping to drive the increase in PUF fees year-over-year.
Stronger demand throughout 2013, particularly in the second
half of the year, as compared to 2012, allowed us to better
leverage our ability to revenue manage our inventory, resulting
in higher ticket revenue per passenger segment. Our average
ticket fare per passenger flight segment increased 5.8% from
$75.11 in 2012 to $79.43 in 2013.
44

Operating revenues increased by $247.2 million, or 23.1%, to
$1,318.4 million in 2012 compared to 2011 as increased
traffic by 20.7% and improved our average yield by 1.9% to
13.64 cents.
Our results for 2012 were driven by growing capacity 21.3%
compared to 2011 while maintaining a high load factor of
85.2% and a network reorientation in mid-2011 that added
capacity in Dallas-Fort Worth, Chicago and Las Vegas. In
October
2012, we canceled 136 flights, or 19.9 million available seat
miles, as a result of adverse weather conditions and airport
closures in connection with Hurricane Sandy. The negative
impact of the storm on 2012 revenue was approximately $25
million. We generated greater demand in 2012 by lowering our
average ticket revenue per passenger flight segment to $75.11,
or by 7.2% compared to 2011, while increasing our non-ticket
revenue per passenger flight segment from $44.79 to $51.39, a
14.7% increase compared to 2011. Total revenue per passenger
flight segment increased 0.6% from $125.76 in 2011 to $126.50
in 2012.
We experienced a 40.4% increase in non-ticket revenues in 2012
compared to 2011, reflecting the continued development
and optimization of ancillary revenues and a 22.4% increase in
passenger flight segments. During the fourth quarter of 2011
and continuing into 2012, we further standardized our passenger
usage fee across all markets and fare classes, which drove
much of the increases in non-ticket revenue in 2012 compared
to 2011. Non-ticket revenue represented 40.6% of total revenue
in 2012 compared to 35.6% in 2011.
Operating Expenses
Since adopting our ULCC model, we have continuously sought
to reduce our unit operating costs and have created one of

the industry's lowest cost structures in the Americas. The table
below presents our operating expenses, as a percentage of
operating revenue for the last three years, as well as unit
operating costs (CASM).
2013 2012 2011
% of
Revenue CASM
% of
Revenue CASM
% of
Revenue CASM
Operating revenue 100.0% 100.0% 100.0%
Operating expenses:
Aircraft fuel (1) . . . . . . . . . . . . . . . . . . 33.4% 3.98¢ 35.8%
4.16¢ 36.2% 4.15¢
Salaries, wages and benefits . . . . . . . . . 15.8 1.89 16.6 1.93
17.0 1.94
Aircraft rent . . . . . . . . . . . . . . . . . . . . . 10.3 1.22 10.9 1.27
10.9 1.25
Landing fees and other rentals . . . . . . . 5.1 0.60 5.2 0.60 4.9
0.56
Distribution. . . . . . . . . . . . . . . . . . . . . . 4.1 0.49 4.3 0.50 4.8
0.55
Maintenance, materials and repairs . . .
3.6 0.43 3.8 0.44 3.3 0.38
Depreciation and amortization . . . . . . . 1.9 0.23 1.2 0.13 0.7
0.08

Other operating expenses . . . . . . . . . . . 8.7 1.04 9.7 1.13 8.4
0.96
Loss on disposal of assets. . . . . . . . . . . — — 0.1 0.01 — —
Special charges (credits) (2) . . . . . . . . . — — (0.6) (0.07) 0.3
0.03
Total operating expense 82.9% 86.8% 86.5%
CASM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.90¢ 10.09¢
9.91¢
MTM losses (gains)per ASM . . . . . . . . . . . . — — 0.03
Special charges (credits) per ASM . . . . . . . . — (0.07) 0.03
Adjusted CASM (excludes MTM gains or
losses, loss on disposal of assets and special
charges (credits)) . . . . . . . . . . . . . . . . . . . . . . 9.89 10.15 9.84
Adjusted CASM excluding fuel . . . . . . . . . . 5.91 6.00 5.72
(1) Aircraft fuel expense is the sum of (i) “into-plane fuel cost,”
which includes the cost of jet fuel and certain other
charges such as fuel taxes and oil, (ii) settlement gains and
losses and (iii) unrealized mark-to-market gains and losses
both associated with fuel hedge contracts. The following table
summarizes the components of aircraft fuel expense for
the periods presented:
45
2013 2012 2011
(in thousands)
Into-plane fuel cost. . . . . . . . . . . . . . . . . . $ 542,523 $ 471,542
$ 392,278

Settlement losses (gains) . . . . . . . . . . . . . 8,958 175 (7,436)
Unrealized mark-to-market losses (gains) 265 46 3,204
Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . $ 551,746 $
471,763 $ 388,046
(2) Includes special charges (credits) of $(8.5) million ((0.07)
cents per ASM) in 2012 and $3.2 million (0.03 cents per
ASM) in 2011. Special charges (credits) for 2012 primarily
include a $9.1 million gain related to the sale
of four permanent air carrier slots at Ronald Reagan National
Airport (DCA), offset by $0.6 million in secondary
offering costs. Special charges for 2011 include $2.3 million of
termination costs in connection with the IPO
comprised of amounts paid to Indigo Partners, LLC to terminate
its professional services agreement with us and fees
paid to three individual, unaffiliated holders of our
subordinated notes and $0.8 million of legal, accounting,
printing
and filing fees in the fourth quarter related to the secondary
offering completed on January 25, 2012. Please see “—
Our Operating Expenses—Special Charges (Credits).”
Operating expense increased by $227.7 million, or 19.9%, in
2013 primarily due to our 22.2% growth in capacity as well
as higher amortization of heavy maintenance events on our
aircraft.
Our adjusted CASM ex fuel for 2013 decreased by 1.5% as
compared to 2012. Better operational performance during
2013 as compared to 2012 helped drive lower wages and
passenger re-accommodation expenses. In addition, during
2013, we
entered into lease extensions covering 14 of our existing A319
aircraft resulting in reduced lease rates for the remaining term

of
the leases which contributed to the decrease in adjusted CASM
ex-fuel as compared to 2012. These decreases were partially
offset by higher heavy maintenance amortization expense for
2013 resulting from the increase in deferred heavy aircraft
maintenance events as compared to 2012.
Aircraft fuel expenses includes both into-plane expense (as
defined below) plus the effect of mark-to-market adjustments
to our portfolio of derivative instruments, which is a component
of aircraft fuel expenses. Into-plane fuel expense is defined as
the price that we generally pay at the airport, or the “into-
plane” price, including taxes and fees. Into-plane fuel prices are
affected by world oil prices and refining costs, which can vary
by region in the United States and the other countries where we
operate. Into-plane fuel expense approximates cash paid to the
supplier and does not reflect the effect of our fuel derivatives.
Because our fuel derivative contracts do not qualify for hedge
accounting, we recognize both realized and unrealized changes
in the fair value of our derivatives when they occur as a
component of aircraft fuel expense.
We evaluate economic fuel expense, which we define as into-
plane fuel expense including the cash we receive from or
pay to counterparties for hedges that we settle during the
relevant period, including hedges that we terminate early during
the
period. The key difference between aircraft fuel expense and
economic fuel expense is the timing of gain or loss recognition
on
our hedge portfolio. When we refer to economic fuel expense,
we include net settlement gains or losses only when they are
realized through a cash payment from our derivative contract
counterparties for those contracts that were settled during the
period. We believe this is the best measure of the effect that
fuel prices are currently having on our business because it most

closely approximates the net cash outflow associated with
purchasing fuel for our operations. Accordingly, many industry
analysts also evaluate airline results using this measure, and it
is frequently used in our internal management reporting.
Aircraft fuel expense increased by 17% from $471.8 million in
2012 to $551.7 million in 2013. The increase was
primarily due to an 20.2% increase in fuel gallons consumed
partially offset by a 2.7% decrease in fuel prices per gallon.
46
The difference between aircraft fuel expense and economic fuel
expense and the elements of the changes are illustrated in
the following table:
Percent
Change 2013 2012
(in thousands, except per
gallon amounts)
Into-plane fuel expense $ 542,523 $ 471,542 15.1 %
Cash paid (received) from settled derivatives, net 8,958 175
5,018.9 %
Economic fuel expense 551,481 471,717 16.9 %
Impact on fuel expense from unrealized (gains) and losses
arising from mark-to-
market adjustments to our outstanding fuel derivatives 265 46
476.1 %
Aircraft fuel expense (per Statement of Operations) $ 551,746 $
471,763 17.0 %
Fuel gallons consumed 171,931 142,991 20.2 %

Economic fuel cost per gallon $ 3.21 $ 3.30 (2.7)%
Into-plane fuel cost per gallon $ 3.16 $ 3.30 (4.2 )%
Fuel gallons consumed increased 20.2% as a result of increased
operations, as evidenced by a 20.1% increase in block
hours.
Total net loss recognized for hedges that settled during 2013
was $9.0 million, compared to a net loss of $0.2 million in
2012. These amounts represent the net cash paid (received) for
the settlement of hedges.
Labor costs in 2013 increased by $43.2 million, or 19.7%,
compared to 2012, due mainly to a 30.9% increase in our pilot
and flight attendant workforce required to operate the nine new
aircraft deliveries in 2013. On a per-ASM basis, labor costs
decreased as a result of better operational performance during
2013 as compared to 2012, which helped drive lower crew-
related salary expenses during 2013.
During 2013, aircraft rent increased $26.2 million, or 18.2%,
compared to 2012. This increase was primarily driven by
the delivery of nine new aircraft during 2013. On a per-ASM
basis, aircraft rent expense decreased as a result of the
modification and extension of 14 A319 aircraft leases. The
modification resulted in reduced lease rates for the remaining
term
of these leases. This reduction was slightly offset by higher
supplemental rent on three 40-month aircraft leases taken
during
late 2012 and early 2013.
Landing fees and other rents for 2013 increased by $15.2
million, or 22.3%, compared to 2012 primarily due to
a 14.9% increase in departures as well as increased volume at
higher cost airports. On a per-ASM basis, landing fees and other

rents remained flat as increased volume at higher-cost airports
were offset by the increase in capacity which outpaced the
increase of departures due to higher stage length year over year.
The increase in distribution expense of $10.8 million, or 19.1%,
in 2013 compared to 2012 was primarily due to
increased sales volume driving up credit card fees as well as an
increase of approximately 6.3 percentage points year-over-year
in the percentage of sales from third-party travel agents, which
are more expensive than sales directly through our website. This
shift in distribution mix did not materially affect operating
income because the revenues received from sales through third-
party
travel agents are designed to at least offset the associated
incremental costs. On a per-ASM basis, distribution expense
was
relatively flat as credit card fee rates remained stable period
over period.
The following table shows our distribution channel usage:
Year Ended
December 31,
2013 2012 Change
Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61.0% 64.2% (3.2)
Third-party travel agents . . . . . . . . . . . . . . . . . . . . . . . . . .
33.5 27.2 6.3
Call center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5 8.6 (3.1)

47
Maintenance, materials and repair costs increased by $10.7
million, or 21.6%, in 2013, as compared to 2012. The
increase in maintenance costs is primarily due to the aging of
our fleet, which requires more comprehensive work during
routine scheduled maintenance, as well as the timing of the mix
of maintenance checks performed during 2013 as compared to
2012. On October 15, 2013, we had an aircraft experience an
engine failure shortly after takeoff. The airframe and engine
incurred damage as a result of the failure. We anticipate we
will recover insurance proceeds to cover the expenses related to
this incident and therefore we have expensed the insurance
deductible of approximately $0.8 million included in
maintenance,
materials and repairs expense. On a per-ASM basis,
maintenance, materials and repair costs were generally flat due
to the one
time costs associated with the seat maintenance program we
incurred in 2012. Maintenance expense and amortization of
deferred heavy maintenance events is expected to increase
significantly as our fleet continues to age, resulting in the need
for
additional repairs over time.
Depreciation and amortization increased by $16.7 million, or
109.4%, primarily due to deferred heavy aircraft
maintenance events, which in turn resulted in higher
amortization expense recorded in 2013 compared to 2012.
Other operating expenses in 2013 increased by $16.7 million, or
13.1%, compared to 2012 primarily due to an increase in
departures of 14.9% which led to increases in variable operating
expenses such as ground handling and security expense. On a
per-ASM basis, our other operating expenses decreased as

compared to the same period in 2012. The decrease is primarily
due
to better operational performance during 2013 as compared to
2012 which helped drive lower passenger re-accommodation
expenses. In addition, we incurred less software consulting
costs related to our Enterprise Resource Planning (ERP) system
implementation during 2013 as compared to 2012.
Special charges (credits) for 2012 primarily include a $9.1
million gain related to the sale of four permanent air carrier
slots at Ronald Reagan National Airport (DCA), offset by $0.6
million in secondary offering costs.
Operating expense increased by $217.6 million for 2012
compared to 2011 mostly due to increases in fuel and labor
costs, which were primarily driven by our 21.3% capacity
growth, in addition to increases in other operating costs.
Our adjusted CASM ex fuel for 2012 increased by 4.9% as
compared to the same period in 2011. During 2012, we
incurred higher other operating expenses driven by higher costs
associated with passenger re-accommodations related to
slightly higher flight cancellations. Additionally, overall
increased rates at the airports resulted in increased variable
operating
costs such as ground handling expenses and travel and lodging
expense. During 2012, we also incurred an increase in
maintenance costs related to our seat maintenance program and
an increase in deferred heavy aircraft maintenance events,
which in turn resulted in higher heavy maintenance amortization
expense. Our average stage length for 2012 decreased
by 1.3%, contributing to the year-over-year increase in adjusted
CASM ex fuel.

Aircraft fuel expense increased from $388.0 million in 2011 to
$471.8 million in 2012, representing 41.2% of our total
operating expenses for 2012. The increase was primarily due to
an 18.1% increase in fuel gallons consumed as well as a 3.8%
increase in fuel prices.
The difference between aircraft fuel expense and economic fuel
expense and the elements of the changes are illustrated in
the following table:
Percent
Change 2012 2011
(in thousands, except per
gallon amounts)
Into-plane fuel expense $ 471,542 $ 392,278 20.2 %
Cash paid (received) from settled derivatives, net 175 (7,436)
(102.4)%
Economic fuel expense 471,717 384,842 22.6 %
Impact on fuel expense from unrealized (gains) and losses
arising from mark-to-
market adjustments to our outstanding fuel derivatives 46 3,204
(98.6)%
Aircraft fuel expense (per Statement of Operations) $ 471,763 $
388,046 21.6 %
Fuel gallons consumed 142,991 121,030 18.1 %
Economic fuel cost per gallon $ 3.30 $ 3.18 3.8 %
Into-plane fuel cost per gallon $ 3.30 $ 3.24 1.9 %
48
Fuel gallons consumed increased 18.1% as a result of increased

operations, as evidenced by an 18.8% increase in block
hours. Our average daily aircraft utilization in 2012 increased
slightly compared to 2011. We estimate the fuel savings related
to the 136 flights cancellations due to Hurricane Sandy were
approximately $0.6 million.
Total net loss recognized for hedges that settled during 2012
was $0.2 million, compared to a net loss of $7.4 million in
2011. These amounts represent the net cash paid (received) for
the settlement of hedges.
Labor costs in 2012 increased by $37.2 million, or 20.5%,
compared to 2011, primarily driven by a 22.4% increase in our
pilot and flight attendant workforce as we increased our fleet
size by 21.6%, or eight aircraft, during 2012. During 2012, we
incurred an incremental $3.8 million of share-based
compensation recorded within salaries, wages and benefits,
driven
primarily by the commencement of the Performance Share
Awards program in 2012.
During 2012, aircraft rent increased $27.1 million, or 23.3%,
mainly due to the delivery of eight Airbus A320 aircraft
subsequent to the fourth quarter of 2011. All aircraft were
financed through operating leases. The increase of aircraft rent
expense on a per-ASM basis is primarily due to the fact that we
incurred $2.5 million of additional aircraft rent during
2012 related to a short-term lease agreement with a third-party
provider (wet-leased aircraft) to maintain desired capacity
during the summer months.
Landing fees and other rents for 2012 increased by $15.6
million, or 29.5%, compared to 2011 primarily due to
a 19.9% increase in departures. On a per-ASM basis, the
increase in landing fees and other rents of 7.1% during 2012 as
compared to the prior year period is due to increased volume at

higher-cost airports, including the addition of six new airports
served in 2012, which on average are higher-cost airports than
the system average.
The increase in distribution expense of $5.3 million, or 10.4%,
in 2012 compared to 2011 was primarily due to increased
volume and an increase of approximately 4.1 percentage points
year-over-year in the percentage of sales from third-party travel
agents, which are more expensive than sales directly through
our website. This shift in distribution mix did not materially
affect
operating income because the revenues received from sales
through third-party travel agents are designed to at least offset
the
associated incremental costs. The decrease on a per-unit basis is
primarily due to a decrease of approximately 14% in credit
card fee rates period over period.
The following table shows our distribution channel usage:
Year Ended
December 31,
2012 2011 Change
Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64.2% 66.3% (2.1)
Third-party travel agents . . . . . . . . . . . . . . . . . . . . . . . . . .
27.2 23.1 4.1
Call center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.6 10.6 (2.0)
Maintenance, materials and repair costs increased by $15.4
million, or 45.4%, in 2012. The increase in maintenance costs

is primarily due to $6.8 million in one-time start-up costs of the
seat maintenance program, which was introduced and
completed in 2012. We do not expect the ongoing expense of
our seat maintenance program to have a material impact on our
overall future maintenance cost outlook. The average age of our
fleet increased to 4.6 years as of December 31, 2012 from 4.5
years as of December 31, 2011. Maintenance expense is
expected to increase significantly as our fleet continues to age,
resulting in the need for additional repairs over time.
Depreciation and amortization increased by $7.5 million, or
96.6%, primarily due to deferred heavy aircraft maintenance
events, which in turn resulted in higher amortization expense
recorded in 2012 compared to 2011.
Other operating expenses in 2012 increased by $36.7 million, or
40.3%, compared to 2011 primarily due to a 19.9%
increase in departures. Overall increased rates at the airports we
serve resulted in increased variable operating costs such as
ground handling expenses and travel and lodging expense in
2012 compared to 2011. The increase on a per-ASM basis of
17.7% is primarily due to a shift in our route network to include
higher volumes at the higher-cost airports we serve. In
addition, we experienced increases in travel and lodging costs
driven by both volume and hotel rate increases associated with
increased training and scope of operations, as well as higher
passenger re-accommodation expenses associated with slightly
higher flight cancellations during 2012. We also incurred
additional expenses related to the implementation of our ERP
system.
Special charges (credits) for 2012 primarily include a $9.1
million gain related to the sale of four permanent air carrier
slots at Ronald Reagan National Airport (DCA), offset by $0.6
million in secondary offering costs. Special charges for 2011
relate to termination costs of $2.6 million in connection with

our IPO, including $1.8 million paid to Indigo Partners, LLC to
49
terminate its professional services agreement with us and $0.5
million paid to three individual, unaffiliated holders of our
subordinated notes.
Other (income) expense, net
Other (income) expense, net decreased from $(0.6) million in
2012 to $(0.1) million in 2013. The decrease is primarily
driven by a decrease of $0.5 million of interest income year
over year due to the lower interest rates year over year that we
earn
from our money market investments.
In 2011 we incurred $22.1 million of other (income) expense,
net compared to $(0.6) million in 2012. During 2011, the
interest expense is related to interest on debt for five months in
2011 prior to the elimination of debt in 2011 in conjunction
with the IPO in June 2011. Related-party and non-related
interest expense incurred in 2011 was $21.0 million and $3.8
million,
respectively, and was offset slightly by capitalized interest.
During 2012, we earned interest income on money market
investments of $0.9 million offset by other expense of $0.3
million.
Income Taxes

Our effective tax rate was 37.4% compared to 37.9% in 2012
and 37.8% in 2011. While we expect our tax rate to be
fairly consistent in the near term, it will tend to vary depending
on recurring items such as the amount of income we earn in
each state and the state tax rate applicable to such income.
Discrete items particular to a given year may also affect our
effective
tax rates.
50
Quarterly Financial Data (unaudited)
Three Months Ended
March 31,
2012
June 30,
2012
September 30,
2012
December 31,
2012
March 31,
2013

June 30,
2013
September 30,
2013
December 31,
2013
(in thousands except share and per share amounts)
Total operating revenue $ 301,495 $ 346,308 $ 342,317 $
328,268 $ 370,437 $ 407,339 $ 456,625 $ 419,984
Passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
180,078 211,812 202,181 188,721 218,897 241,119 279,499
246,503
Non-ticket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121,417 134,496 140,136 139,547 151,540 166,220 177,126
173,481
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,244 55,132 49,681 31,933 49,669 66,758 97,804 68,061
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23,419 $ 34,591 $ 30,884 $ 19,566 $ 30,554 $ 42,068 61,103
43,193
Earnings Per Share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.32 $ 0.48 $ 0.43 $ 0.27 $ 0.42 $ 0.58 $ 0.84 $ 0.59
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.32 $ 0.48 $ 0.43 $ 0.27 $ 0.42 $ 0.58 $ 0.84 $ 0.59
Weighted average shares outstanding
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,292,164 72,379,185 72,427,490 72,442,183 72,486,209
72,592,973 72,631,646 72,657,916
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72,498,705 72,583,690 72,658,298 72,622,718 72,804,245
72,992,084 73,002,761 73,195,479
51
Three Months Ended
March 31,
2012
June 30,
2012
September 30,
2012
December 31,
2012
March 31,
2013
June 30,
2013
September 30,
2013
December 31,
2013
Other operating statistics
Aircraft at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . 40 42 42 45 49 50 51 54
Airports served (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 50 52 53 53 52 55 54 53
Average daily Aircraft utilization (hours) . . . . . . . . . . . . . . . . .
. . . . 12.8 12.9 12.8 12.6 12.6 12.8 12.8 12.5
Average stage length (miles) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 912 902 892 932 941 935 956 998
Passenger flight segments (thousands) . . . . . . . . . . . . . . . . . . .
. . . . 2,349 2,613 2,814 2,647 2,768 3,111 3,374 3,161
Revenue passenger miles (RPMs) (thousands) . . . . . . . . . . . . .
. . . . 2,194,350 2,397,663 2,552,316 2,519,392 2,661,491
2,930,912 3,241,309 3,167,376
Available seat miles (ASMs) (thousands) . . . . . . . . . . . . . . . . .
. . . . 2,589,014 2,826,916 2,972,651 2,956,150 3,127,214
3,420,257 3,637,951 3,675,972
Load factor (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 84.8 84.8 85.9 85.2 85.1 85.7 89.1 86.2
Average ticket revenue per passenger flight segment ($) . . . . . .
. . . 76.65 81.06 71.85 71.30 79.09 77.51 82.84 77.98
Average non-ticket revenue per passenger flight segment ($) . . .
. . 51.68 51.47 49.80 52.73 54.75 53.43 52.50 54.88
Operating revenue per ASM (RASM) (cents). . . . . . . . . . . . . . .
. . . 11.65 12.25 11.52 11.10 11.85 11.91 12.55 11.43
CASM (cents) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 10.21 10.30 9.84 10.02 10.26 9.96 9.86 9.57
Adjusted CASM (cents) (2)(3) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 10.18 10.26 10.15 10.03 10.14 9.78 10.00 9.67
Adjusted CASM ex fuel (cents) (2). . . . . . . . . . . . . . . . . . . . . .
. . . . 5.99 6.05 6.02 5.93 6.04 6.00 5.86 5.78
Fuel gallons consumed (thousands) . . . . . . . . . . . . . . . . . . . . .
. . . . 32,730 35,829 37,761 36,670 38,628 42,683 45,521 45,100
Average economic fuel cost per gallon ($) . . . . . . . . . . . . . . . .
. . . . 3.31 3.32 3.26 3.31 3.32 3.03 3.31 3.17
(1) Includes airports served during the period that had service
canceled as of the end of the period. Previously, we reported

only airports served during the period with continuing
operations.
(2) Excludes special charges (credits) of $(0.1) million (less
than (0.01) cents per ASM) in the three months ended March 31,
2012, $0.0 million (less than 0.01 cents per ASM) in the three
months ended June 30,
2012, $(8.3) million ((0.28) cents per ASM) in the three months
ended September 30, 2012, $(0.1) million (less than (0.01) cents
per ASM) in the three months ended December 31, 2012, $0.0
million (less than 0.01
cents per ASM) in the three months ended March 31, 2013, $0.0
million (less than 0.01 cents per ASM) in the three months
ended June 30, 2013, $0.4 million (0.01 cents per ASM) in the
three months ended
September 30, 2013 and $(0.3) million ((0.01) cents per ASM)
in the three months ended December 31, 2013. These amounts
are excluded from all calculations of Adjusted CASM provided
in this annual report.
Please see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Our Operating
Expenses—Special Charges (Credits)."
(3) Excludes unrealized mark-to-market (gains) and losses of
$0.3 million (0.01 cents per ASM) in the three months ended
March 31, 2012,
$1.1 million (0.04 cents per ASM) in the three months ended
June 30, 2012, $(0.9) million ((0.03) cents per ASM) in the
three months ended September 30, 2012,
$(0.4) million ((0.01) cents per ASM) in the three months ended
December 31, 2012, $3.4 million (0.11 cents per ASM) in the
three months ended March 31, 2013, $5.8 million (0.17 cents
per ASM) in the three
months ended June 30, 2013, $(5.7) million ((0.16) cents per
ASM) in the three months ended September 30, 2013 and $(3.2)
million ((0.09) cents per ASM) in the three months ended
December 31, 2013. Please see

and Results of Operations—Our Operating Expenses—Critical
Accounting Policies and Estimates.”
52
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of liquidity is cash on hand and cash
provided by operations. Primary uses of liquidity are for
working capital needs, capital expenditures, aircraft pre-
delivery deposits (PDPs) and maintenance reserves. Our total
cash at
December 31, 2013 was $530.6 million, an increase of $113.8
million from December 31, 2012.
Currently our single largest capital need is to fund the
acquisition costs of our aircraft. PDPs relating to future
deliveries
under our agreement with Airbus are required at various times
prior to each delivery date. During 2013, $36.7 million of PDPs
have been returned related to delivered aircraft in the period,
and we have paid $107.0 million in PDPs for future deliveries
of
aircraft and spare engines. As of December 31, 2013, we have
secured financing commitments with third parties for seven
aircraft deliveries from Airbus, scheduled for delivery in 2014,
and for five aircraft to be leased directly from a third party,
scheduled for delivery between 2015 and 2016. We do not have
financing commitments in place for the remaining 105 Airbus
firm aircraft orders scheduled for delivery between 2014 and
2021.
In addition to funding the acquisition of our future fleet, we are
required to make maintenance reserve payments for a

majority of our current fleet. Maintenance reserves are paid to
aircraft lessors and are held as collateral in advance of our
performance of major maintenance activities. In 2013, we
recorded an increase of $24.1 million in maintenance reserves,
net of
reimbursements, and as of December 31, 2013, we have $220.7
million ($59.2 million in prepaid expenses and other current
assets and $161.5 million in aircraft maintenance deposits) on
our balance sheet, representing the amount paid in reserves
since
inception, net of reimbursements.
As of December 31, 2013, we are compliant with our credit
card processing agreements, and not subject to any credit
card holdbacks. The maximum potential exposure to cash
holdbacks by our credit card processors, based upon advance
ticket
sales and $9 Fare Club memberships as of December 31, 2013
and December 31, 2012, was $188.6 million and $144.8 million,
respectively.
During 2011, we completed our IPO, which raised net proceeds
of $150.0 million after repayment of debt, payment of
transaction expenses and payments of fees to certain
unaffiliated holders of our notes. Additionally, during 2011, the
IPO
allowed us to amend our agreements with our credit card
processors enabling us to eliminate our restricted cash balance
(holdback) and increase our unrestricted cash balance.
Net Cash Flows Provided By Operating Activities. Operating
activities in 2013 provided $195.4 million in cash compared
to $113.6 million provided in 2012. The increase is primarily
due to larger operating profits in 2013 as compared to 2012. In
addition, a slightly higher air traffic liability year-over-year led
to higher cash inflows at the end of 2013. This increase is

driven by higher capacity and future bookings.
Operating activities in 2012 provided $113.6 million in cash
compared to $171.2 million provided in 2011. The decrease
is primarily due to $72.7 million received from the release of all
credit card holdbacks in 2011 coupled with significantly higher
heavy scheduled maintenance costs in 2012, slightly offset by
cash inflows received on future travel as of December 31, 2012.
Net Cash Flows Used In Investing Activities. During 2013,
investing activities used $90.1 million, compared to $27.3
million used in 2012. The increase is mainly due to an increase
in paid PDPs, net of refunds, during 2013, compared to 2012,
driven by the timing of aircraft deliveries and our amended
order with Airbus. This was offset by $9.1 million received as a
result of proceeds from the sale of slots at Ronald Reagan
National Airport (DCA). Capital expenditures decreased year-
over-
year mainly due to higher expenses incurred in 2012 related to
the implementation of our ERP system.
During 2012, investing activities used $27.3 million, compared
to $67.2 million used in 2011. The decrease is mainly due
to the refund of $40.5 million in PDPs related to the delivery of
seven aircraft from Airbus and corresponding sale and
leaseback transactions, and the sale of airport slots for $9.1
million. These effects were offset by higher capital
expenditures,
including the purchase of two spare engines for $10.3 million
during 2012.
Net Cash Provided By Financing Activities. During 2013,
financing activities provided $8.5 million. We received $6.9
million in proceeds from the sale of one spare engine as part of
sale and leaseback transactions, retained $1.9 million as a result
of excess tax benefits related to share-based payments and

received cash as a result of exercised stock options. Additional
cash
used in financing activities consisted of cash used to purchase
treasury stock. As of December 31, 2013, an estimated
remaining cash benefit of $5.6 million is expected to be paid to
our Pre-IPO Stockholders under the terms of the TRA.
During 2012, $12.8 million was used for financing activities
driven mostly by the payment to Pre-IPO Stockholders
pursuant to the TRA offset by the proceeds received from the
sale of two spare engines as part of sale and leaseback
transactions.
53
During 2011, we completed our recapitalization and initial
public offering, from which we received $150.0 million in
proceeds, net of underwriting fees, transaction costs and our
repayment of $20.6 million of stockholder debt of which $2.3
million was paid in kind interest and included in operating
activities. Remaining stockholder debt was exchanged for newly
issued shares of our common stock. In addition, during 2011 we
received $4.5 million in proceeds from the sale of one engine
as part of a sale leaseback transaction.
Commitments and Contractual Obligations
The following table discloses aggregate information about our
contractual obligations as of December 31, 2013 and the
periods in which payments are due (in millions):
2014 2015 - 2016 2017 - 2018
2019 and
beyond Total

Operating lease obligations . . . . . . . . . . . . . . . . . $ 203 $ 396
$ 319 $ 527 $ 1,445
Flight equipment purchase obligations . . . . . . . . 559 1,252
1,348 2,197 5,356
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10 6 —
21
Total future payments on contractual
obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 767 $
1,658 $ 1,673 $ 2,724 $ 6,822
Some of our master lease agreements provide that we pay
maintenance reserves to aircraft lessors to be held as collateral
in advance of our required performance of major maintenance
activities. Some maintenance reserve payments are fixed
contractual amounts, while others are based on actual flight
hours. In addition to the contractual obligations disclosed in the
table above, we have fixed maintenance reserve payments for
these aircraft and related flight equipment, including estimated
amounts for contractual price escalations, which are
approximately $7.4 million in 2014, $7.6 million in 2015, $8.0
million in
2016, $7.4 million in 2017, $5.8 million in 2018 and $18.4
million in 2019 and beyond.
Additionally, we are contractually obligated to make payments
to the Pre-IPO Stockholders under the Tax Receivable
Agreement. As of December 31, 2013, we estimated the TRA
liability to be $5.6 million. For additional information, please
see
“Notes to Financial Statements—18. Initial Public Offering and
Tax Receivable Agreement".
Off-Balance Sheet Arrangements
We have significant obligations for aircraft as all 54 of our

aircraft are operated under operating leases and therefore are
not reflected on our balance sheets. These leases expire between
2016 to 2025. Aircraft rent payments were $166.3 million and
140.8 million for 2013 and 2012, respectively. Our aircraft
lease payments for 49 of our aircraft are fixed-rate obligations.
Five
of our leases provide for variable rent payments, which
fluctuate based on changes in LIBOR (London Interbank
Offered Rate).
Our contractual purchase commitments consist primarily of
aircraft and engine acquisitions through manufacturer and
aircraft leasing companies. During 2013, we converted ten
Airbus A320 orders to Airbus A321 orders and converted five
Airbus A321 orders to Airbus A321neo orders. As of December
31, 2013, our aircraft orders consisted of the following:
Airbus
Third-Party
Lessor
A320 A320NEO A321 A321NEO A320NEO Total
2014 11 11
2015 11 2 1 14
2016 5 8 4 17
2017 10 10 20
2018 6 5 11
2019 8 5 13
2020 13 13
2021 18 18
37 45 25 5 5 117
We also have six spare engine orders for V2500 SelectOne

engines with IAE and nine spare engine orders for PurePower
PW 1100G-JM engines with Pratt & Whitney. Spare engines are
scheduled for delivery from 2014 through 2024.
54
As of December 31, 2013, we had lines of credit related to
corporate credit cards of $18.6 million from which we had
drawn $3.7 million.
As of December 31, 2013, we had lines of credit with
counterparties for both physical fuel delivery and jet fuel
derivatives in the amount of $34.5 million. As of December 31,
2013, we had drawn $13.8 million on these lines of credit. We
are required to post collateral for any excess above the lines of
credit if the derivatives are in a net liability position and make
periodic payments in order to maintain an adequate undrawn
portion for physical fuel delivery.
As of December 31, 2013, we have $6.0 million in
uncollateralized surety bonds and a $25.1 million unsecured
standby
letter of credit facility, representing an off balance-sheet
commitment, of which $10.4 million had been drawn upon for
issued
letters of credit.
55
GLOSSARY OF AIRLINE TERMS
Set forth below is a glossary of industry terms:

“Adjusted CASM” means operating expenses, excluding mark-
to-market gains or losses, loss on disposal of assets, and
special charges (credits), divided by ASMs.
“Adjusted CASM ex fuel” means operating expenses excluding
aircraft fuel expense, loss on disposal of assets, and
special charges (credits), divided by ASMs.
“AFA-CWA” means the Association of Flight Attendants-CWA.
“Air traffic liability” or “ATL” means the value of tickets sold
in advance of travel.
“ALPA” means the Airline Pilots Association, International.
“ASIF” means an Aviation Security Infrastructure Fee assessed
by the TSA on each airline.
“Available seat miles” or “ASMs” means the number of seats
available for passengers multiplied by the number of miles
the seats are flown, also referred to as "capacity".
“Average aircraft” means the average number of aircraft in our
fleet as calculated on a daily basis.
“Average daily aircraft utilization” means block hours divided
by number of days in the period divided by average
aircraft.
“Average economic fuel cost per gallon” means total aircraft
fuel expense, excluding mark-to-market gains and losses,
divided by the total number of fuel gallons consumed.
“Average non-ticket revenue per passenger flight segment”
means the total non-ticket revenue divided by passenger flight

segments.
“Average ticket revenue per passenger flight segment” means
total passenger revenue divided by passenger flight
segments.
“Average stage length” represents the average number of miles
flown per flight.
“Average yield” means average operating revenue earned per
RPM, calculated as total revenue divided by RPMs.
“Block hours” means the number of hours during which the
aircraft is in revenue service, measured from the time of gate
departure before take-off until the time of gate arrival at the
destination.
“CASM” or “unit costs” means operating expenses divided by
ASMs.
“CBA” means a collective bargaining agreement.
“CBP” means United States Customs and Border Protection.
“DOT” means the United States Department of Transportation.
“EPA” means the United States Environmental Protection
Agency.
“FAA” means the United States Federal Aviation
Administration.
“FCC” means the United States Federal Communications
Commission.
“FLL Airport” means the Fort Lauderdale-Hollywood

International Airport.
“GDS” means Global Distribution System (e.g., Amadeus,
Galileo, Sabre and Worldspan).
“Into-plane fuel cost per gallon” means into-plane fuel expense
divided by number of fuel gallons consumed.
“Into-plane fuel expense” represents the cost of jet fuel and
certain other charges such as fuel taxes and oil.
“Load factor” means the percentage of aircraft seats actually
occupied on a flight (RPMs divided by ASMs).
56
“NMB” means the National Mediation Board.
“Operating revenue per ASM,” “RASM” or “unit revenue”
means operating revenue divided by ASMs.
“OTA” means Online Travel Agent (e.g., Orbitz and
Travelocity).
“Passenger flight segments” means the total number of
passengers flown on all flight segments.
“PDP” means pre-delivery deposit payment.
“Revenue passenger mile” or “RPM” means one revenue
passenger transported one mile. RPMs equals revenue
passengers multiplied by miles flown, also referred to as
"traffic".

“RLA” means the United States Railway Labor Act.
“TWU” means the Transport Workers Union of America.
“TSA” means the United States Transportation Security
Administration.
“ULCC” means “ultra low-cost carrier.”
“VFR” means visiting friends and relatives.
"Wet-leased aircraft" means a lease where the lessor provides
for aircraft, crew, maintenance and insurance, also known
as an "ACMI".
57
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Market Risk-Sensitive Instruments and Positions
We are subject to certain market risks, including commodity
prices (specifically aircraft fuel). The adverse effects of
changes in these markets could pose a potential loss as
discussed below. The sensitivity analysis provided below 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. Actual
results may differ.
Aircraft Fuel. Our results of operations can vary materially due

to changes in the price and availability of aircraft fuel.
Aircraft fuel expense for the years ended December 31, 2013,
2012 and 2011 represented approximately 40.2%, 41.2% and
41.9% of our operating expenses. Increases in aircraft fuel
prices or a shortage of supply could have a material adverse
effect
on our operations and operating results. We source a significant
portion of our fuel from refining resources located in the
southeast United States, particularly facilities adjacent to the
Gulf of Mexico. Gulf Coast fuel is subject to volatility and
supply
disruptions, particularly during hurricane season when refinery
shutdowns have occurred, or when the threat of weather related
disruptions has caused Gulf Coast fuel prices to spike above
other regional sources. 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. In addition to other fuel
derivative contracts, we have historically protected
approximately 70%
of our forecasted fuel requirements during peak hurricane
season (August through October) using jet fuel swaps. Gulf
Coast Jet
indexed fuel is the basis for a substantial majority of our fuel
consumption. Based on our annual fuel consumption, a 10%
increase in the average price per gallon of aircraft fuel would
have increased into-plane aircraft fuel cost for 2013 by
approximately $54.3 million. As of December 31, 2013, we had
no derivative contracts outstanding.
The fair value of our fuel derivative contracts as of December
31, 2012 was $0.3 million net liability. We measure our
financial derivative instruments at fair value. Fair value of the
instruments is determined using standard option valuation
models. We measure the fair value of the derivative instruments

based on either quoted market prices or values provided by the
counterparty. Changes in the related commodity derivative
instrument cash flows may change by more or less than this
amount
based upon further fluctuations in futures prices. Outstanding
financial derivative instruments expose us to credit loss in the
event of nonperformance by the counterparties to the
agreements. However, we do not expect the counterparties to
fail to meet
their obligations. As of December 31, 2013, we had no credit
exposure related to counterparties as we had no derivative
contracts outstanding.
Interest Rates. We have market risk associated with changing
interest rates due to LIBOR-based lease rates on five of our
aircraft. A hypothetical 10% change in interest rates in 2013
would affect total aircraft rent expense in 2014 by less than
$0.1
million.
58
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Financial Statements: Page
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Statements of Shareholders’ Equity (Deficit) . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Report of Independent Registered Public Accounting Firm . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
59
Statements of Operations
(In thousands, except per share data)
2013 2012 2011
Operating revenues:
Passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . $ 986,018 $ 782,792 $ 689,650
Non-ticket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 668,367 535,596 381,536
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 1,654,385 1,318,388 1,071,186
Operating expenses:
Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 551,746 471,763 388,046
Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 262,150 218,919 181,742
Aircraft rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . 169,737 143,572 116,485
Landing fees and other rents . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 83,604 68,368 52,794
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 67,481 56,668 51,349
Maintenance, materials and repairs . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 60,143 49,460 34,017
. . . . . . . . . . . . . . . 31,947 15,256 7,760
Other operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 144,586 127,886 91,172
. . . . . . . . . . . . . . . . 525 956 255
Special charges (credits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 174 (8,450) 3,184
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 1,372,093 1,144,398 926,804
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 282,292 173,990 144,382
Other (income) expense:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 214 1,350 24,781
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . (214) (1,350) (2,890)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . (401) (925) (575)
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 283 331 235
Total other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . (118) (594) 21,551
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . 282,410 174,584 122,831
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 105,492 66,124 46,383
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $ 176,918 $ 108,460 $ 76,448
Basic earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . $ 2.44 $ 1.50 $ 1.44
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . $ 2.42 $ 1.49 $ 1.43
See accompanying Notes to Financial Statements.
60
Balance Sheets
(In thousands, except share data)
December 31,
2013
December 31,
2012
Assets
Current assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . $ 530,631 $ 416,816
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . 23,246 22,740
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 16,243 12,591
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 78,955 95,210
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 649,075 547,357
Property and equipment:
Flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 9,847 2,648
Ground and other equipment. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 50,987 43,580
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . (25,221) (17,825)
35,613 28,403
Deposits on flight equipment purchase contracts. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 157,669 96,692
Aircraft maintenance deposits . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 161,484 122,379
Deferred heavy maintenance, net . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 125,288 80,533
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . 51,636 44,520
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . $ 1,180,765 $ 919,884
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . $ 23,104 $ 24,166
Air traffic liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 167,627 131,414

Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 145,262 121,314
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 335,993 276,894
Long-term deferred income taxes . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 48,916 33,216
Deferred credits and other long-term liabilities . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 26,739 27,239
Shareholders’ equity: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Common stock: Common stock, $.0001 par value, 240,000,000
shares authorized at
December 31, 2013 and 2012, respectively; 72,670,673 and
70,861,822 issued and
72,566,426 and 70,801,782 outstanding as of December 31,
2013 and 2012,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 7 6
Common stock: Non-Voting common stock: $.0001 par value,
50,000,000 shares
authorized at December 31, 2013 and 2012, respectively; 0 and
1,669,205 issued
and outstanding as of December 31, 2013 and 2012, respectively
. . . . . . . . . . . . . . . . — 1
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 515,331 504,527
Treasury stock, at cost: 104,247 and 60,040 shares as of
December 31, 2013 and
2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . (2,291) (1,151)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . 256,070 79,152
Total shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 769,117 582,535
Total liabilities and shareholders’ equity. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . $ 1,180,765 $ 919,884
61
Statements of Cash Flows
(In thousands)
2013 2012 2011
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 176,918
$ 108,460 $ 76,448
Adjustments to reconcile net income to net cash provided by
operations:
Changes in fair value of open fuel hedge contracts . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 46 3,204
Non-cash restructuring credit charges, net. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Equity based stock compensation, net . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,689 4,327 530
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 78 27
Amortization of deferred gains, losses and debt issuance costs .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (558) (830) (1,047)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,947 15,256
7,760
Deferred income tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,047 29,255
44,180
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 956 255
Gain on slot sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (9,060) —
Interest and dividends incurred but not paid . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 21,875
Capitalized interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214) (1,350)
(2,890)
Changes in operating assets and liabilities: . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 72,736
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (461) (7,393) (5,728)
Prepaid maintenance reserves . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,058) (31,567)
(36,848)
Long-term deposits and other assets . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,654) (68,248)
(15,992)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,674) 8,452 2,457
Air traffic liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,226 19,134 6,573
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,235 46,115 (2,189)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (153)
Net cash provided by operating activities . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,376
113,631 171,198
Investing activities:
Proceeds from sale of property and equipment . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 14 150
Proceeds from sale of slots . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,060 —
Pre-delivery deposits for flight equipment, net of refunds . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,288) (12,626)
(53,274)
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,812) (23,771)
(14,093)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,100)
(27,323) (67,217)
Financing activities:
Proceeds from issuance of common stock, net of offering
expenses — — 170,828
Proceeds from options exercised . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852 469 423
Payments on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (18,221)
Proceeds from sale and leaseback transactions . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,900 12,540 4,481
Payments to pre-IPO shareholders pursuant to tax receivable
agreement . . . . . . . . . . . . . . . . . . . . . . . . . . — (26,905) —
Excess tax benefits from share-based compensation . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,927 2,098 —
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,140) (1,022)
(886)
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 8
Net cash provided by (used in) financing activities . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,539 (12,820)
156,633
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,815
73,488 260,614
Cash and cash equivalents at beginning of period . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416,816 343,328
82,714
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 530,631 $
416,816 $ 343,328
Supplemental disclosures
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29 $ 303 $
10,562
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85,705 $
40,204 $ 1,477
Non-cash transactions:
Exchange of notes due to related parties for common stock . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 279,206
Exchange of mandatorily redeemable preferred stock for
common stock . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $
81,747
Liability and equity related to tax receivable agreement . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,336) $ (1,497)
$ 36,522

Capital expenditures funded by capital lease borrowings . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,234) $ — $ —
62
Statements of Shareholders’ Equity (Deficit)
(In thousands)
Class A
Common
Stock
Class B
Common
Stock
Common
Stock
Non-
Voting
Common
Stock
Additional

Paid-In
Capital
Treasury
Stock
Retained
Earnings
(Accumulated
Deficit) Total
Balance at December 31, 2010. $ 2 $ 1 $ — $ — $ 676 $ — $
(105,756) $ (105,077)
Conversion of Class A & B
common stock to common stock (2) (1) 3 — — — — —
Proceeds from initial public
offering, net . . . . . . . . . . . . . . . . — — 1 — 170,827 — —
170,828
Conversion of debt to common
stock . . . . . . . . . . . . . . . . . . . . . . — — 2 — 279,204 — —
279,206
Conversion of preferred stock to
common stock . . . . . . . . . . . . . . — — 1 — 81,746 — —
81,747
Record liability under Tax
Receivable Agreement . . . . . . . . — — — — (36,522) — —
(36,522)
Share-based compensation . . . . . — — — — 530 — — 530
Repurchase of common stock . . — — — — (757) (129) —
(886)
Conversion of common stock to
non-voting common stock . . . . . — — (1) 1 — — — —
Proceeds from options exercised — — — — 423 — — 423
Net income . . . . . . . . . . . . . . . . . — — — — — — 76,448
76,448

Other. . . . . . . . . . . . . . . . . . . . . . — — — — 9 — — 9
Balance at December 31, 2011. — — 6 1 496,136 (129)
(29,308) 466,706
Adjustment to liability recorded
under Tax Receivable
Agreement . . . . . . . . . . . . . . . . . — — — — 1,497 — — 1,497
Share-based compensation . . . . . — — — — 4,327 — — 4,327
Repurchase of common stock . . — — — — — (1,022) —
(1,022)
Excess tax benefits from share-
based compensation . . . . . . . . . . — — — — 2,098 — — 2,098
Net income . . . . . . . . . . . . . . . . . — — — — — — 108,460
108,460
Balance at December 31, 2012. — — 6 1 504,527 (1,151)
79,152 582,535
Adjustment to liability recorded
under Tax Receivable
Agreement . . . . . . . . . . . . . . . . . — — — — 2,336 — — 2,336
Share-based compensation . . . . . — — — — 5,689 — — 5,689
Repurchase of common stock . . — — — — (1,140) — (1,140)
Conversion of non-voting
common stock to common stock — — 1 (1) — — — —
Excess tax benefits from share-
based compensation . . . . . . . . . . — — — — 1,927 — — 1,927
Net income . . . . . . . . . . . . . . . . . — — — — — — 176,918
176,918
Balance at December 31, 2013 $ — $ — $ 7 $ — $ 515,331 $
(2,291) $ 256,070 $ 769,117
63

Notes to Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
Spirit Airlines, Inc. (Spirit or the Company) headquartered in
Miramar, Florida, is an ultra low-cost, low-fare airline that
provides affordable travel opportunities principally throughout
the domestic United States, the Caribbean and Latin America.
The Company manages operations on a system-wide basis due to
the interdependence of its route structure in the various
markets served. As only one service is offered (i.e., air
transportation), management has concluded there is only one
reportable
segment.
Certain prior period amounts have been reclassified to conform
to the current year's presentation.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States
of America requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with
maturities of less than three months at the date of acquisition
to be cash equivalents. Investments included in this category
primarily consist of money market funds.

Restricted Cash
Restricted cash, when reported, can consist of funds held by
credit card processors as collateral for future travel paid with
a credit card.
Accounts Receivable
Accounts receivable primarily consist of amounts due from
credit card processors associated with the sales of tickets and
amounts due from counterparties associated with fuel derivative
instruments which have settled. The Company records an
allowance for doubtful accounts for amounts not expected to be
collected. The Company estimates the allowance based on
historical write offs and chargebacks as well as aging trends.
The allowance for doubtful accounts was immaterial as of
December 31, 2013, 2012 and 2011.
In addition, the provision for doubtful accounts and write-offs
for 2013, 2012 and 2011 were each immaterial.
Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation of operating
property and equipment is computed using the straight-line
method applied to each unit of property, except on flight
equipment
(major rotable parts, avionics and assemblies), which are
depreciated on a group basis over the average life of the
applicable
equipment. Property under capital leases and related obligations
are initially recorded at an amount equal to the present value of
future minimum lease payments computed using the Company's
incremental borrowing rate or, when known, the interest rate

implicit in the lease. Amortization of property under capital
leases is on a straight-line basis over the lease term and is
included
in depreciation and amortization expense. During 2012, the
Company wrote off approximately $15.3 million in fully
depreciated and out-of-service assets and recorded a
corresponding entry to accumulated depreciation.
The depreciable lives used for the principal depreciable asset
classifications are:
Estimated Useful Life
Spare rotables and flight assemblies . . . . . . . . . . . . . . . . . . . . .
. Lesser of the useful life of equipment or average remaining
fleet life
Other equipment and vehicles . . . . . . . . . . . . . . . . . . . . . . . . .
. . 5 to 7 years
Internal use software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 3 to 10 years
Capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . Lease term
All aircraft and spare engines are financed through operating
leases with terms of 3 to 15 years for aircraft and 7 to 12
years for spare engines. Residual values for major spare rotable
parts, avionics and assemblies are estimated to be 10%.
Notes to Financial Statements—(Continued)
64
The following table illustrates the components of depreciation

and amortization expense:
2013 2012 2011
(in thousands)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . $ 8,340 $ 6,156 $ 5,186
Amortization of heavy maintenance . . . . . . . . . . . . . . . . . . . . .
. . . . . . 23,607 9,100 2,574
Total depreciation and amortization. . . . . . . . . . . . . . . . . . . . .
. . . . . . . $ 31,947 $ 15,256 $ 7,760
The Company capitalizes certain internal and external costs
associated with the acquisition and development of internal-
use software for new products, and enhancements to existing
products, that have reached the application development stage
and
meet recoverability tests. Capitalized costs include external
direct costs of materials and services utilized in developing or
obtaining internal-use software, and labor cost for employees
who are directly associated with, and devote time, to internal-
use
software projects. Capitalized computer software, included as a
component of ground and other equipment in the
accompanying balance sheets, net of accumulated depreciation,
was $8.1 million and $7.8 million at December 31, 2013 and
2012, respectively.
Amortization of capitalized software development costs is
charged to depreciation on a straight-line method basis.
Amortization of capitalized software development costs was
$3.7 million, $3.2 million and $2.0 million for the years ended
2013, 2012 and 2011, respectively. The Company placed in
service internal-use software of $7.0 million, $2.3 million and

$3.3
million, during the years ended 2013, 2012 and 2011,
respectively.
Measurement of Asset Impairments
The Company records impairment charges on long-lived assets
used in operations when events and circumstances
indicate that the assets may be impaired, the undiscounted cash
flows estimated to be generated by those assets are less than the
carrying amount of those assets, and the net book value of the
assets exceeds their estimated fair value. In making these
determinations, the Company uses certain assumptions,
including, but not limited to: (i) estimated fair value of the
assets; and
(ii) estimated, undiscounted future cash flows expected to be
generated by these assets, which are based on additional
assumptions such as asset utilization, length of service the asset
will be used in the Company’s operations, and estimated
salvage values.
Capitalized Interest
Capitalized interest represents interest cost incurred during the
acquisition period of an aircraft which theoretically could
have been avoided had the Company not made purchase delivery
deposits (PDPs) for that aircraft. These amounts are
capitalized as part of the cost of the aircraft upon delivery.
Capitalization of interest ceases when the asset is ready for
service.
Passenger Revenue Recognition
Tickets sold are initially deferred as “air traffic liability.”
Passenger revenue is recognized at time of departure when
transportation is provided. A nonrefundable ticket expires at the

date of scheduled travel and is recognized as revenue at the
date of scheduled travel.
Customers may elect to change their itinerary prior to the date
of departure. A service charge is assessed and recognized
on the date the change is initiated and is deducted from the face
value of the original purchase price of the ticket, and the
original ticket becomes invalid. The amount remaining after
deducting the service charge is called a credit shell which
expires
60 days from the date the credit shell is created and can be used
towards the purchase of a new ticket and the Company’s other
service offerings. The amount of credits expected to expire is
recognized as revenue upon issuance of the credit and is
estimated based on historical experience. Estimating the amount
of credits that will go unused involves some level of
subjectivity and judgment.
The Company is also required to collect certain taxes and fees
from customers on behalf of government agencies and
airports and remit these back to the applicable governmental
entity or airport on a periodic basis. These taxes and fees
include
U.S. federal transportation taxes, federal security charges,
airport passenger facility charges and foreign arrival and
departure
taxes. These items are collected from customers at the time they
purchase their tickets, but are not included in passenger
revenue. The Company records a liability upon collection from
the customer and relieves the liability when payments are
remitted to the applicable governmental agency or airport.

65
Frequent Flier Program
Flown Miles. The Company records a liability for mileage
credits earned by passengers under its FREE SPIRIT program,
including mileage credits for members with an insufficient
number of mileage credits to earn an award, based on the
estimated
incremental cost of providing free travel for credits that are
expected to be redeemed. Incremental costs include fuel,
insurance,
security, ticketing and facility charges reduced by an estimate
of fees required to be paid by the passenger when redeeming the
award.
Affinity Card Program. Under the Company's affinity card
program, funds received for the marketing of a co-branded
Spirit credit card and delivery of award miles are accounted for
as a mulitple-deliverable arrangement. At the inception of the
arrangement, the Company evaluated all deliverables in the
arrangement to determine whether they represent separate units
of
accounting using the criteria as set forth in ASU No. 2009-13.
The Company determined the arrangement had three separate
units of accounting: (i) travel miles to be awarded, (ii) licensing
of brand and access to member lists and (iii) advertising and
marketing efforts. Under ASU No. 2009-13, arrangement
consideration was allocated based on relative selling price. At
inception of the arrangement, the Company established the
relative selling price for all deliverables that qualified for
separation. The manner in which the selling price was
established was based on a hierarchy of evidence that the
Company
considered. Total arrangement consideration was then allocated
to each deliverable on the basis of the deliverable’s relative

selling price. In considering the hierarchy of evidence under
ASU No. 2009-13, the Company first determined whether
vendor
specific objective evidence of selling price or third-party
evidence of selling price existed. It was determined by the
Company
that neither vendor specific objective evidence of selling price
nor third-party evidence existed due to the uniqueness of the
Company’s program. As such, the Company developed its best
estimate of the selling price for all deliverables. For the award
miles, the Company considered a number of entity-specific
factors when developing the best estimate of the selling price
including the number of miles needed to redeem an award,
average fare of comparable segments, breakage, restrictions and
other charges. For licensing of brand and access to member
lists, the Company considered both market-specific factors and
entity-specific factors including general profit margins realized
in the marketplace/industry, brand power, market royalty rates
and size of customer base. For the advertising element, the
Company considered market-specific factors and entity-specific
factors, including the Company’s internal costs (and
fluctuations of costs) of providing services, volume of
marketing efforts
and overall advertising plan. Consideration allocated based on
the relative selling price to both brand licensing and advertising
elements is recognized as revenue when earned and recorded in
non-ticket revenue. Consideration allocated to award miles is
deferred and recognized ratably as passenger revenue over the
estimated period the transportation is expected to be provided
which is estimated at 16 months. The Company used entity-
specific assumptions coupled with the various judgments
necessary
to determine the selling price of a deliverable in accordance
with the required selling price hierarchy. Changes in these
assumptions could result in changes in the estimated selling
prices. Determining the frequency to reassess selling price for

individual deliverables requires significant judgment. As of
December 31, 2013, there have been no changes in either the
selling price or the method or assumptions used to determine
selling price for any of the identified units of accounting that
would have a significant effect on the allocation of
consideration.
The following table illustrates total cash proceeds received from
the sale of mileage credits and the portion of such
proceeds recognized in revenue immediately as marketing
component:
Cash proceeds from
sale of miles to non-airline
third parties
Portion of proceeds
recognized immediately as
marketing component
Year Ended (in thousands)
December 31, 2013 . . . . . . . . . . . . . . . . . $ 28,496 $ 23,124
December 31, 2012 . . . . . . . . . . . . . . . . . 24,938 20,998
December 31, 2011 . . . . . . . . . . . . . . . . . 20,954 16,580
The total liability for future FREE SPIRIT award redemptions
and unrecognized revenue from the sale of mileage credits
was $2.6 million and $2.4 million at December 31, 2013 and
2012, respectively. These balances are recorded as a component
of
air traffic liability in the accompanying balance sheets.
Non-ticket Revenue Recognition

Non-ticket revenues are generated from air travel-related
services for baggage, bookings through the Company’s call
center or third-party vendors, advance seat selection, itinerary
changes and loyalty programs. Non-ticket revenues also consist
of services not directly related to providing transportation such
as the FREE SPIRIT affinity credit card program, $9 Fare Club
and the sale of advertising to third parties on Spirit’s website
and on board aircraft.
66
The following table summarizes the primary components of
non-ticket revenue and the revenue recognition method
utilized for each service or product:
Non-ticket revenue Recognition method 2013 2012 2011
(in thousands)
Baggage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time of
departure $ 275,958 $ 217,536 $ 168,290
Passenger usage fee . . . . . . . . . . . . . . . . . . . . . Time of
departure 188,911 149,577 71,757
Advance seat selection . . . . . . . . . . . . . . . . . . Time of
departure 59,241 48,956 42,112
Service charges for changes and cancellations When itinerary is
changed 32,546 27,762 25,927
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,711
91,765 73,450
Non-ticket revenue . . . . . . . . . . . . . . . . . . . . . $ 668,367 $
535,596 $ 381,536

Charges for services recognized at time of departure are
initially recorded as a liability until time of departure. The
passenger usage fee is charged for tickets sold through the
Company’s primary sales distribution channels, to cover the
Company’s distribution costs. The primary sales distribution
channels for which passenger usage fees are charged include
sales
through the Company’s website, sales through the third-party
provided call center and sales through travel agents; the
Company
does not charge a passenger usage fee for sales made at its
airport ticket counters. Other non-ticket revenues include
revenues
from other air related charges as well as non-air related charges.
Other air related charges include optional services and
products provided to passengers such as on-board products,
travel insurance and use of the Company’s call center or travel
agents, among others. Non-air related charges primarily consist
of revenues from advertising on the Company’s aircraft and
website, the Company’s $9 Fare Club subscription-based
membership program and the Company’s FREE SPIRIT affinity
credit card program.
Airframe and Engine Maintenance
The Company accounts for heavy maintenance and major
overhaul and repair under the deferral method whereby the cost
of heavy maintenance and major overhaul and repair is deferred
and amortized until the earlier of the end of the remaining
lease term or until the next scheduled heavy maintenance event.
Amortization of heavy maintenance and major overhaul costs is
charged to depreciation and amortization expense and
was $23.6 million, $9.1 million and $2.6 million for the years
ended 2013, 2012 and 2011, respectively. During the years
ended

2013, 2012 and 2011, the Company deferred $70.8 million,
$61.6 million and $22.1 million, respectively, of costs for heavy
maintenance. At December 31, 2013 and 2012, the Company
had deferred heavy maintenance balance of $165.3 million and
$94.5 million, and accumulated heavy maintenance amortization
of $40.0 million and $14.0 million, respectively.
On October 15, 2013, the Company had an aircraft experience
an engine failure shortly after takeoff. The aircraft
immediately returned to the airport, and the passengers and
crew safely disembarked from the aircraft. The airframe and
engine
incurred damage as a result of the failure. The Company
anticipates it will recover insurance proceeds to cover the
expenses
related to this incident and therefore it has expensed the
insurance deductible of approximately $0.8 million recorded
within
maintenance, materials and repairs expense.
The Company outsources certain routine, non-heavy
maintenance functions under contracts that require payment on a
utilization basis, such as flight hours. Costs incurred for
maintenance and repair under flight hour maintenance contracts,
where
labor and materials price risks have been transferred to the
service provider, are expensed based on contractual payment
terms.
All other costs for routine maintenance of the airframes and
engines are charged to expense as performed.
The table below summarizes the extent to which the Company’s
maintenance costs are rate capped due to flight hour
maintenance contracts:

2013 2012 2011
(in thousands)
Flight hour-based maintenance expense . . . . . . . . . . . . . . . . . .
. $ 30,322 $ 25,748 $ 21,974
Non-flight hour-based maintenance expense. . . . . . . . . . . . . . .
. 29,821 23,712 12,043
Total maintenance, materials and repairs. . . . . . . . . . . . . . . . . .
. $ 60,143 $ 49,460 $ 34,017
67
Leased Aircraft Return Costs
Costs associated with returning leased aircraft are accrued when
it is probable that a cash payment will be made and that
amount is reasonably estimable. Leased aircraft return costs are
recorded as a component of aircraft rent and characterized as
supplemental rent. Any accrual is based on time remaining on
the lease, planned aircraft usages and the provisions included in
the lease agreement, although the actual amount due to any
lessor upon return will not be known with certainty until lease
termination.
Aircraft Fuel
Aircraft fuel expense includes jet fuel and associated “into-
plane” costs, taxes, oil and all gains and losses associated with
fuel hedge contracts.
Derivative Instruments

The Company accounts for derivative financial instruments at
fair value and recognizes them in the balance sheet in
prepaid expenses and other current assets or other current
liabilities. For derivatives designated as cash flow hedges,
changes in
fair value of the derivative are generally reported in other
comprehensive income and are subsequently reclassified into
earnings when the hedged item affects earnings. For the years
ended 2013, 2012 and 2011, the Company did not hold
derivative
instruments that qualified as cash flow hedges for accounting
purposes. As a result, changes in the fair value of such
derivative
contracts were recorded within aircraft fuel expense in the
accompanying statements of operations. These amounts include
both
realized gains and losses and mark-to-market adjustments of the
fair value of unsettled derivative instruments at the end of each
period.
Advertising
The Company expenses advertising and the production costs of
advertising as incurred. Marketing and advertising
expenses were $2.1 million, $2.4 million and $2.5 million for
the years ended 2013, 2012 and 2011, respectively.
Income Taxes
The Company accounts for income taxes using the liability
method. The Company records a valuation allowance to
reduce the deferred tax assets reported if, based on the weight
of the evidence, it is more likely than not that some portion or
all
of the deferred tax assets will be not realized.

Interest Expense
Related-party interest expense incurred during 2013, 2012 and
2011 was $0.0 million, $0.0 million and $21.0 million,
respectively, and consisted primarily of paid-in-kind interest on
tranche notes due to related parties, and preferred stock
dividends due to related parties. Non-related party interest
expense during 2013, 2012 and 2011 was $0.2 million, $1.4
million
and $3.8 million, respectively.
Stock-Based Compensation
The Company recognizes cost of employee services received in
exchange for awards of equity instruments based on the
fair value of each instrument at the date of grant. Compensation
expense is recognized on a straight-line basis over the period
during which an employee is required to provide service in
exchange for an award. The Company has issued and
outstanding
restricted stock awards, stock option awards and performance
share awards. Restricted stock awards are valued at the fair
value
of the shares on the date of grant. To the extent a market price
was not available, the fair value of stock awards was estimated
using a discounted cash flow analysis based on management’s
estimates of revenue, driven by assumed market growth rates
and estimated costs as well as appropriate discount rates. These
estimates are consistent with the plans and estimates that
management uses to manage the Company’s business. The fair
value of share option awards is estimated on the date of grant
using the Black-Scholes valuation model. The fair value of
performance share awards is estimated through the use of a
Monte
Carlo simulation model. See Note 8 for additional information.

Concentrations of Risk
The Company’s business has been, and may continue to be,
adversely affected by increases in the price of aircraft fuel,
the volatility of the price of aircraft fuel, or both. Aircraft fuel
was the Company’s single largest expenditure representing
approximately 40%, 41% and 42% of total operating expenses in
2013, 2012 and 2011, respectively.
The Company’s operations are largely concentrated in the
southeast United States with Fort Lauderdale being the highest
volume fueling point in the system. Gulf Coast Jet indexed fuel
is the basis for a substantial majority of the Company’s fuel
68
consumption. Any disruption to the oil production or refinery
capacity in the Gulf Coast, as a result of weather or any other
disaster, or disruptions in supply of jet fuel, dramatic
escalations in the costs of jet fuel and/or the failure of fuel
providers to
perform under fuel arrangements for other reasons could have a
material adverse effect on the Company’s financial condition
and results of operations.
The Company’s operations will continue to be vulnerable to
weather conditions (including hurricane season or snow and
severe winter weather), which could disrupt service, create air
traffic control problems, decrease revenue and increase costs.
Due to the relatively small size of the fleet and high utilization

rate, the unavailability of one or more aircraft and
resulting reduced capacity could have a material adverse effect
on the Company’s business, results of operations and financial
condition.
The Company has three union-represented employee groups that
together represent approximately 59% and 54% of all
employees at December 31, 2013 and 2012, respectively. A
strike or other significant labor dispute with the Company’s
unionized employees is likely to adversely affect the Company’s
ability to conduct business. Additional disclosures are
included in Note 15.
2. Recent Accounting Developments
In December 2011, the FASB issued amendments to Accounting
Standards Update No. 2011-11, Balance Sheet (Topic
210); Disclosures about Offsetting Assets and Liabilities (ASU
2011-11). The amendments in this update are designed to
enhance disclosures by requiring improved information about
financial instruments and derivative instruments that are either
(a) offset in accordance with certain right to set-off conditions
prescribed by current accounting guidance or (b) subject to an
enforceable master netting arrangement or similar agreement,
irrespective of whether they are offset in accordance with
current
accounting guidance. In January 2013, the FASB issued
Accounting Standards Update No. 2013-01, Scope Clarification
of
Disclosures about Offsetting Assets and Liabilities (ASU 2013-
01), to limit the scope of ASU 2011-11, and its new balance
sheet offsetting disclosure requirements to derivatives
(including bifurcated embedded derivatives), repurchase
agreements and
reverse repurchase agreements and securities borrowing and
lending transactions. ASU 2011-11 and ASU 2013-01 became

effective for the Company's annual and interim periods
beginning January 1, 2013, and the required disclosures are
included in
Note 16 of this report.
3. Special Charges and Credits
Slot Transaction and Restructuring
In 2012, the Company sold four permanent air carrier slots at
Ronald Reagan National Airport (DCA) to another airline
for $9.1 million. The Company recognized the $9.1 million gain
within special charges (credits) in the third quarter of 2012, the
period in which the FAA operating restriction lapsed and
written confirmation of the slot transfer was received by the
buyer
from the FAA.
In 2013, the Company incurred an additional $0.1 million of
cost in connection with the DCA exit and relieved $0.2
million of previously accrued exit cost in connection with
Chicago O'Hare (ORD).
Secondary Offering Costs
In the third quarter of 2013, the Company incurred costs of $0.3
million, recorded within special charges (credits), related
to an underwritten public offering of 12,070,920 shares of
common stock by certain stockholders affiliated with Indigo
Partners
LLC (Indigo). Upon completion of this offering, investment
funds affiliated with Indigo owned no shares of common stock
of
Spirit Airlines. The Company did not receive any proceeds from
this offering.

In the third quarter of 2012, the Company incurred costs of $0.7
million, recorded within special charges (credits), related
to an underwritten public offering of 9,394,927 shares of
common stock by certain stockholders affiliated with Oaktree
Capital
Management (Oaktree). Upon completion of this offering,
investment funds affiliated with Oaktree owned no shares of
common stock of Spirit Airlines. The Company did not receive
any proceeds from this offering.
In January 2012, certain stockholders of the Company,
including affiliates of Oaktree and Indigo Partners, LLC
(Indigo)
and certain members of the Company's executive team, sold an
aggregate of 12,650,000 shares of common stock in an
underwritten public offering. The Company incurred a total of
$1.3 million in costs between 2011 and 2012 related to this
offering, of which $0.5 million were incurred during the year
ended December 31, 2012, offset by reimbursements from
certain
selling shareholders of $0.6 million in accordance with the
Fourth Amendment to the Second Amended and Restated
Investor
Rights Agreement. The Company did not receive any proceeds
from this offering.
69
Initial Public Offering Costs
In June 2011, the Company issued and sold 15,600,000 shares
of common stock in its initial public offering (IPO). The

Company incurred contract termination costs and fees of $2.3
million in connection with the IPO during the year ended
December 31, 2011, which included $1.8 million paid to Indigo
to terminate its professional services agreement with the
Company, and $0.5 million paid to three individual, unaffiliated
holders of the Company’s subordinated notes.
4. Letters of Credit
In connection with agreements with certain airports, the
Company is required to post letters of credit, which totaled $0.2
million as of both December 31, 2013 and 2012. The issuing
banks require that the Company deposit funds at those banks to
cover the amounts that could be drawn under the letters of
credit. These funds are generally invested in money market
accounts
and are classified as long-term assets within other long-term
assets. Additionally, as of December 31, 2013, the Company
had a
$25.1 million unsecured standby letter of credit facility,
representing an off balance-sheet commitment, of which $10.4
million
had been drawn upon for issued letters of credit to airports and
insurance underwriters.
5. 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 it 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.
During 2011, the Company amended its processing agreements
with all of its processors. Prior to the amendments, the
credit card processors required the Company to maintain cash
collateral equal to approximately 100% of the Company's air
traffic liability. The amendments were approved in light of the
Company's improved balance sheet as a result of the IPO, the
related recapitalization and the elimination of the holdback held
by the credit card processors, effectively eliminating the
Company's restricted cash balance, provided that the Company
continues to satisfy certain liquidity and other financial
covenants. Failure to meet these covenants would provide the
processors the right to reinstate a holdback, resulting in a
commensurate reduction of unrestricted cash. As of December
31, 2013 and 2012, the Company continued to be in compliance
with its credit card processing agreements, and the processors
were holding back $0 of 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 December 31, 2013
and 2012, was $188.6 million and $144.8 million, respectively.
6. Accrued Liabilities
Accrued liabilities included in other current liabilities as of
December 31, 2013 and 2012 consist of the following:
As of December 31,
2013 2012

(in thousands)
Aircraft maintenance $ 36,165 $ 22,319
Federal excise and other passenger taxes and fees payable
26,979 23,401
Salaries and wages 26,174 21,057
Airport expenses 17,109 16,024
Fuel 13,819 11,219
Aircraft and facility rent 7,993 8,020
Tax receivable agreement 5,643 7,987
Other 11,380 11,287
Other current liabilities $ 145,262 $ 121,314
7. Common Stock and Preferred Stock
The Company’s amended and restated certificate of
incorporation dated June 1, 2011, authorizes the Company to
issue up
to 240,000,000 shares of common stock, $0.0001 par value per
share, 50,000,000 shares of non-voting common stock, $0.0001
70
par value per share and 10,000,000 shares of preferred stock,
$0.0001 par value per share. All of the Company’s issued and
outstanding shares of common stock and preferred stock are
duly authorized, validly issued, fully paid and non-assessable.
The
Company’s shares of common stock and non-voting common
stock are not redeemable and do not have preemptive rights.
Common Stock

Dividend Rights. Holders of the Company’s common stock are
entitled to receive dividends, if any, as may be declared
from time to time by the Company’s board of directors out of
legally available funds ratably with shares of the Company’s
non-
voting common stock, subject to preferences that may be
applicable to any then outstanding preferred stock and
limitations
under Delaware law.
Voting Rights. Each holder of the Company’s common stock is
entitled to one vote for each share on all matters submitted
to a vote of the stockholders, including the election of directors.
The Company’s stockholders do not have cumulative voting
rights in the election of directors. Accordingly, holders of a
majority of the voting shares are able to elect all of the
directors
properly up for election at any given stockholders’ meeting.
Liquidation. In the event of the Company’s liquidation,
dissolution or winding up, holders of the Company's common
stock will be entitled to share ratably with shares of the
Company’s non-voting common stock in the net assets legally
available
for distribution to stockholders after the payment of all of the
Company’s debts and other liabilities and the satisfaction of any
liquidation preference granted to the holders of any then
outstanding shares of preferred stock.
Rights and Preferences. Holders of the Company’s common
stock have no preemptive, conversion, subscription or other
rights and there are no redemption or sinking fund provisions
applicable to the Company’s common stock. The rights,
preferences and privileges of the holders of the Company’s
common stock are subject to and may be adversely affected by,

the
rights of the holders of shares of any series of the Company’s
preferred stock that the Company may designate in the future.
Non-Voting Common Stock
Dividend Rights. Holders of the Company’s non-voting common
stock are entitled to receive dividends, if any, as may be
declared from time to time by the Company’s board of directors
out of legally available funds ratably with shares of the
Company’s common stock, subject to preferences that may be
applicable to any then outstanding preferred stock and
limitations under Delaware law.
Voting Rights. Shares of the Company’s non-voting common
stock are not entitled to vote on any matters submitted to a
vote of the stockholders, including the election of directors,
except to the extent required under Delaware law.
Conversion Rights. Shares of the Company’s non-voting
common stock will be convertible on a share-for-share basis
into
common stock at the election of the holder subject to the
Company remaining in compliance with applicable foreign
ownership
limitations.
Liquidation. In the event of the Company’s liquidation,
dissolution or winding up, holders of the Company’s non-voting
common stock will be entitled to share ratably with shares of
the Company’s common stock in the net assets legally available
for distribution to stockholders after the payment of all of the
Company’s debts and other liabilities and the satisfaction of any
liquidation preference granted to the holders of any then
outstanding shares of preferred stock.

Rights and Preferences. Holders of the Company’s non-voting
common stock have no preemptive, subscription or other
rights, and there are no redemption or sinking fund provisions
applicable to the Company’s common stock. The rights,
preferences and privileges of the holders of the Company’s
common stock are subject to and may be adversely affected by,
the
rights of the holders of shares of any series of the Company’s
preferred stock that the Company may designate in the future.
On December 7, 2011, the Company entered into a Stock
Distribution Agreement with Indigo Miramar LLC and its
members. Pursuant to the Stock Distribution Agreement
10,576,180 shares of outstanding common stock were exchanged
on a
share-for-share basis for shares of non-voting common stock.
As of December 31, 2012, the number of outstanding non-voting
common stock had decreased to 1,669,205. In February 2013,
all of the remaining outstanding shares of non-voting common
stock were converted to voting shares in accordance with the
Stock Distribution Agreement. As of December 31, 2013, there
were no shares of non-voting common stock outstanding.
Preferred Stock
The Company’s board of directors has the authority, without
further action by the Company’s stockholders, to issue up to
10,000,000 shares of preferred stock in one or more series and
to fix the rights, preferences, privileges and restrictions thereof.
These rights, preferences and privileges could include dividend
rights, conversion rights, voting rights, terms of redemption,

71
liquidation preferences, sinking fund terms and the number of
shares constituting any series or the designation of such series,
any or all of which may be greater than the rights of common
stock. The Company’s issuance of preferred stock could
adversely affect the voting power of holders of common stock
and the likelihood that such holders will receive dividend
payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying,
deferring or preventing a change of control of the Company or
other corporate action. As of December 31, 2013 and 2012,
there were no shares of preferred stock outstanding.
8. Stock-Based Compensation
The Company has stock plans under which directors, officers,
key employees and consultants of the Company may be
granted restricted stock awards, stock options and other equity-
based instruments as a means of promoting the Company’s
long-term growth and profitability. The plans are intended to
encourage participants to contribute to and participate in the
success of the Company.
The Company's board of directors adopted, and the Company's
stockholders approved, the Amended and Restated 2005
Incentive Stock Plan, or the 2005 Stock Plan, effective January
1, 2008. The total number of shares of common stock
authorized for issue pursuant to awards granted under the 2005
Stock Plan was 2,500,000 shares. The 2005 Stock Plan provided
for the grant of non-qualified stock options, stock appreciation
rights, restricted stock, performance shares, phantom stock,
restricted stock units and other awards that are valued in whole
or in part by reference to the Company's stock.
On May 9, 2011, the Company's board of directors adopted, and

the Company's stockholders approved, the 2011 Equity
Incentive Award Plan, or 2011 Plan. Under the 2011 Plan,
3,000,000 new shares of common stock are reserved for
issuance
pursuant to a variety of stock-based compensation awards,
including stock options, stock appreciation rights or SARs,
restricted
stock awards, restricted stock unit awards, deferred stock
awards, dividend equivalent awards, stock payment awards and
performance share awards and other stock-based awards, plus
the number of shares remaining available for future awards
under
the Company's 2005 Stock Plan. The number of shares reserved
for issuance or transfer pursuant to awards under the 2011 Plan
will be increased by the number of shares represented by awards
outstanding under the Company's 2005 Stock Plan that are
forfeited or lapse unexercised and which, following the
effective date of the 2011 Plan, are not issued under the
Company's
2005 Stock Plan. No further awards will be granted under the
2005 Stock Plan, and all outstanding awards will continue to be
governed by their existing terms. As of December 31, 2013 and
December 31, 2012, 2,685,029 and 2,689,490 shares of the
Company’s common stock, respectively, remained available for
future issuance under the 2011 Plan.
Stock-based compensation cost is included within salaries,
wages and benefits in operating expenses in the
accompanying statements of operations. Stock-based
compensation cost amounted to $5.7 million, $4.3 million and
$0.5
million for 2013, 2012 and 2011, respectively. During 2013,
2012 and 2011, there was $2.1 million, $1.6 million and $0.2
million tax benefit recognized in income related to stock-based
compensation, respectively.

Restricted Stock
Restricted stock and restricted stock unit awards are valued at
the fair value of the shares on the date of grant. Generally,
granted shares and units vest 25% per year on each anniversary
of issuance. Each restricted stock unit represents the right to
receive one share of common stock upon vesting of such
restricted stock unit. Compensation expense, net of forfeitures,
is
recognized on a straight-line basis over the requisite service
period.
A summary of the status of the Company’s restricted stock
shares (restricted stock awards and restricted stock unit
awards) as of December 31, 2013 and changes during the year
ended December 31, 2013 is presented below:
Number of
Shares
Weighted-
Average
Grant Date Fair
Value ($)
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 449,629 16.94
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,202 27.70
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . (168,514) 13.19
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,269) 19.28
Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 336,048 22.99

There were 151,202 and 391,418 restricted stock shares granted
during the years ended December 31, 2013 and
December 31, 2012, respectively. As of December 31, 2013 and
December 31, 2012, there was $6.1 million and $6.1 million,
respectively, of total unrecognized compensation cost related to
nonvested restricted stock to be recognized over 2.7 years and
3.2 years, respectively.
72
The weighted-average fair value of restricted stock granted
during the years ended December 31, 2013 and 2012 was
$27.70 and $20.01, respectively. There was no restricted stock
granted during the year ended December 31, 2011. The total fair
value of restricted stock shares vested during the years ended
December 31, 2013, 2012 and 2011 was $4.3 million, $3.9
million and $3.2 million respectively.
Stock Options
Stock option awards are granted with an exercise price equal to
the fair market value of the Company’s common stock at
the date of grant, vest over four years of continuous service and
have ten-year contractual terms. The fair value of each stock
option award is estimated on the date of grant using the Black
Scholes model. There were no options granted during 2013 or
2012. For option grants during 2011, the Company’s weighted
average assumptions for expected volatility, dividends, term and
risk-free interest rate were 46.25%, 0%, 6.25 years and 2.03%,
respectively. Expected volatilities are based on the historical
volatility of a group of peer entities within the same industry.

The expected term of options is based upon the simplified
method, which represents the average of the vesting term and
the contractual term. The risk-free interest rate is based on U.S.
Treasury yields for securities with terms approximating the
expected term of the option.
Prior to the Company's IPO, to the extent a market price was not
available, the fair value of the Company’s common
stock was estimated using a discounted cash flow analysis and
market multiples, based on management’s estimates of revenue,
driven by assumed market growth rates, and estimated costs as
well as appropriate discount rates. These estimates are
consistent with the plans and estimates management uses to
manage the Company’s business.
A summary of share option activity under the 2011 Plan as of
December 31, 2013 and changes during the year ended
December 31, 2013 is presented below:
Number
of Options
Weighted-
Average
Exercise
Price ($)
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic

Value
($000)
Outstanding at December 31, 2012 247,650 9.59 8.0 2,015
Exercised (92,400) 9.22
Forfeited or expired (98,750) 10.70
Outstanding at December 31, 2013 56,500 8.26 6.7 2,099
Exercisable at December 31, 2013 27,125 8.12 6.6 1,011
Vested or Expected to Vest at December 31, 2013 56,260 8.25
6.7 2,090
There were no options granted during the years ended December
31, 2013 or 2012. The weighted-average fair value of
option awards granted during the year ended December 31, 2011
was $5.73. The total intrinsic value of share options exercised
during the years ended December 31, 2013, 2012 and 2011 was
$2.0 million, $0.7 million and $0.2 million, respectively. The
total fair value of shares vested during the years ended
December 31, 2013, 2012 and 2011 was $0.2 million, $0.4
million and
$0.3 million, respectively.
As of December 31, 2013 and December 31, 2012, there was
$46.7 thousand and $650.5 thousand respectively, of
total unrecognized compensation cost related to options
expected to be recognized over 0.8 years and 1.99 years,
respectively.
Performance Share Awards
During 2013 and 2012, the Company granted certain senior-
level executives restricted stock units that vest based on
market and service conditions as part of a long-term incentive
plan, which are referred to herein as performance share awards.
The number of shares of common stock underlying each award

is determined at the end of a three-year performance period. In
order to vest, the senior level executive must still be employed
by the Company, with certain contractual exclusions, at the end
of the performance period. At the end of the performance
period, the percentage of the stock units that will vest will be
determined by ranking the Company’s total shareholder return
compared to the total shareholder return of the nine peer
companies identified in the plan. Based on the level of
performance, between 0% and 200% of the award may vest.
Within 60
days after vesting, the shares underlying the award will be
issued to the participant. In the event of a change in control of
the
Company or the disability or death of a participant, the payout
of any award is limited to a pro-rated portion of such award
based upon a performance assessment prior to the change-in-
control date or date of disability or death.
The market condition requirements are reflected in the grant
date fair value of the award, and the compensation expense,
net of forfeitures, for the award will be recognized assuming
that the requisite service is rendered regardless of whether the
market conditions are achieved.
73
The grant date fair value of the performance share awards was
determined through the use of a Monte Carlo simulation
model, which utilizes multiple input variables that determine
the probability of satisfying the market condition requirements
applicable to each award as follows:

Weighted-Average
at Grant Date for
Year Ended
December 31, 2013
Weighted-Average
at Grant Date for
Year Ended
December 31, 2012
Expected volatility factor . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 0.41 0.39
Risk free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 0.33 % 0.44 %
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 2.65 2.72
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . — % — %
The volatility was based upon a weighted average of the
volatility for the Company and the most recent volatility of the
peer group. The peer group used to calculate volatility is
consistent with the group used for the traditional employee
stock
options. The Company chose to use historical volatility to value
these awards because historical stock prices were used to
develop the correlation coefficients between the Company and
each of the peer companies within the peer group in order to
model stock price movements. The volatilities used were
calculated as the remaining term of the performance period at
the date
of grant. The risk-free interest rate was based on the implied
yield available on U.S. Treasury zero-coupon issues with
remaining terms equivalent to the remaining performance

period. The Company does not intend to pay dividends on its
common stock in the foreseeable future. Accordingly, the
Company used a dividend yield of zero in its model.
The following table summarizes the Company’s performance
share awards for the year ended December 31, 2013:
Number of
Awards
Weighted-Average
Fair Value at Grant
Date ($)
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . .
280,907 20.30
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
126,147 28.09
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
—
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(79,950) 21.76
Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . .
327,104 22.94
As of December 31, 2013 and December 31, 2012, there was
$6.5 million and $6.9 million, respectively, of total
unrecognized compensation cost related to performance share
awards expected to be recognized over 1.54 years and 2.0 years,
respectively.
74

9. Net Income per Share
The following table sets forth the computation of basic and
diluted earnings per common share:
2013 2012 2011
(in thousands, except per share amounts)
Numerator:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. $ 176,918 $ 108,460 $ 76,448
Denominator:
Weighted-average shares outstanding, basic . . . . . . . . . . . . . .
72,593 72,386 53,241
Effect of dilutive stock awards . . . . . . . . . . . . . . . . . . . . . . . .
406 205 274
Adjusted weighted-average shares outstanding, diluted . . . . .
72,999 72,591 53,515
Net Income per Share:
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . .
$ 2.44 $ 1.50 $ 1.44
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . $
2.42 $ 1.49 $ 1.43
Anti-dilutive weighted-average shares 1 88 70
10. Debt, Related-Party Transactions and Other Obligations
In connection with the closing of the IPO, the Company
consummated the transaction contemplated by the

Recapitalization Agreement on June 1, 2011, which resulted in
the repayment or exchange for common stock of all of the
Company’s notes and preferred stock. The Company’s principal
stockholders provided certain consulting services to the
Company for a management fee of $0.3 million in 2011. In
connection with the IPO, the management fee agreement with
the
Company's principal stockholders was terminated. See Note 18.
As of December 31, 2013 and 2012, there was no outstanding
long term debt or outstanding amounts due to related
parties. During the fourth quarter of 2013, the Company
executed an agreement for the lease of two quick engine change
kits
(QEC kit), classified as capital leases. Aggregate annual
principal maturities of capital leases as of December 31, 2013,
were
$1.0 million in 2014, $1.1 million in 2015, $1.0 million in 2016,
$0.0 million in 2017 and $0.0 million in 2018 and $0.0 million
in 2019 and beyond. As of December 31, 2012, the Company
had no outstanding amounts related to capital leases.
The Company had a line of credit for $18.6 million and $18.6
million related to corporate credit cards, of which the
Company had drawn $3.7 million and $3.2 million as of
December 31, 2013 and 2012, respectively, which is included in
accounts payable.
As of December 31, 2013, the Company had lines of credit with
derivatives in the amount of $34.5 million. As of December 31,
2013, the Company had drawn $13.8 million on these lines of
credit, which is included in other current liabilities. As of
December 31, 2012, the Company had lines of credit with
derivatives in the amount $18.0 million. As of December 31,

2012,
the Company had drawn $11.2 million on these lines of credit,
which is included in other current liabilities. The Company is
required to post collateral for any excess above the lines of
credit if the derivatives are in a net liability position and make
periodic payments in order to maintain an adequate undrawn
portion for physical fuel delivery.
11. Leases and Prepaid Maintenance Deposits
The Company leases various types of equipment and property,
primarily aircraft, spare engines and airport facilities
under leases, which expire in various years through 2032. Lease
terms are generally 3 to 15 years for aircraft and up to 25 years
for other leased equipment and property.
Total rental expense for all leases charged to operations for the
years ended 2013, 2012 and 2011 was $207.4 million,
$172.4 million and $139.1 million, respectively. Total rental
expense charged to operations for aircraft and engine operating
leases for the years ended December 31, 2013, 2012 and 2011
was $169.7 million, $143.6 million and $116.5 million,
75
respectively. Supplemental rent is made up of maintenance
reserves paid or to be paid to aircraft lessors in advance of the
performance of major maintenance activities that are not
probable of being reimbursed and probable return condition
obligations. The Company expensed $5.2 million, $2.0 million
and $1.5 million of supplemental rent recorded within aircraft
rent during 2013, 2012 and 2011, respectively.

Some of the Company’s 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. Some maintenance
reserve payments are fixed contractual amounts, while others
are based on actual flight hours. Fixed maintenance reserve
payments for these aircraft and related flight equipment,
including estimated amounts for contractual price escalations,
will be
approximately $7.4 million in 2014, $7.6 million in 2015, $8.0
million in 2016, $7.4 million in 2017, $5.8 million in 2018 and
$18.4 million in 2019 and beyond. These lease agreements
provide that maintenance reserves are reimbursable to the
Company
upon completion of the maintenance event in an amount equal to
the lesser of (1) the amount of the maintenance reserve held
by the lessor associated with the specific maintenance event or
(2) the qualifying costs related to the specific maintenance
event. Substantially all of these maintenance reserve payments
are calculated based on a utilization measure, such as flight
hours or cycles, and are used solely to collateralize the lessor
for maintenance time run off the aircraft until the completion of
the maintenance of the aircraft. 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. 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.
At lease inception and at each balance sheet date, the Company
assesses whether the maintenance reserve payments
required by the master lease agreements are substantively and
contractually related to the maintenance of the leased asset.
Maintenance reserve payments that are substantively and
contractually related to the maintenance of the leased asset are

accounted for as maintenance deposits to the extent they are
expected to be recoverable and are reflected as prepaid
maintenance deposits in the accompanying balance sheets.
When it is not probable the Company will recover amounts
currently
on deposit with a lessor, such amounts are expensed as
supplemental rent. As of December 31, 2013 and 2012, the
Company
had aircraft maintenance deposits of $220.7 million and $198.5
million, respectively, on its balance sheets of which $59.2
million and $76.1 million, respectively, are included within
prepaid expenses and other current assets on its balance sheets.
The
Company has concluded that these prepaid maintenance deposits
are probable of recovery primarily due to the rate differential
between the maintenance reserve payments and the expected
cost for the related next maintenance event that the reserves
serve
to collateralize.
The Company’s master lease agreements also provide that most
maintenance reserves held by the lessor at the expiration
of the lease are nonrefundable to the Company and will be
retained by the lessor. Consequently, any usage-based
maintenance
reserve payments after the last major maintenance event are not
substantively related to the maintenance of the leased asset and
therefore are accounted for as contingent rent. The Company
accrues for contingent rent beginning when it becomes probable
and reasonably estimable the Company will incur such
nonrefundable maintenance reserve payments. The Company
makes
certain assumptions at the inception of the lease and at each
balance sheet date to determine the recoverability of
maintenance
deposits. These assumptions are based on various factors such

as the estimated time between the maintenance events, the date
the aircraft is due to be returned to the lessor, and the number
of flight hours the aircraft is estimated to be utilized before it is
returned to the lessor. The Company expensed $1.9 million,
$2.0 million and $1.5 million of paid maintenance reserves as
supplemental rent during 2013, 2012 and 2011, respectively.
Maintenance reserves held by lessors that are refundable to the
Company at the expiration of the lease are accounted for as
prepaid maintenance deposits on the balance sheet when they
are
paid.
At December 31, 2013, the Company had its entire fleet of 54
aircraft and nine spare engines financed under operating
leases with lease term expiration dates ranging from 2016 to
2025. Five of the leased aircraft have variable rent payments,
which fluctuate based on changes in LIBOR (London Interbank
Offered Rate). During the second quarter of 2013, the
Company extended the operating leases on 14 of its Airbus
A319 aircraft, which were previously set to expire in 2017
through
2019. The Company has the option to renew three leases for
three-year periods with contractual notice required in the tenth
year. Twenty-three of the aircraft leases and all of the engine
leases were the result of sale and leaseback transactions.
Deferred
gains or losses from sale and leaseback transactions are
amortized over the term of the lease as a reduction in rent or
additional
rent, respectively. Losses are deferred when the fair value of the
aircraft or engine is higher than the price it was sold for, which
is in substance, a prepayment of rent. A loss on disposal is
recorded at the time of sale for the excess of the carrying
amount
over the fair value of the aircraft or engine. The costs of
returning aircraft to lessors, or lease return conditions, are

accounted
for in a manner similar to the accounting for contingent rent.
These costs are recognized over the remaining life of the lease
as
aircraft hours accumulate, beginning from the time when the
Company determines it is probable such costs will be incurred
and
can generally be estimated. Such estimated costs exclude the
costs of maintenance events that are covered by reserves on
deposit with the relevant lessor, or routine maintenance costs
that are recorded in maintenance expense.
76
During 2013, the Company entered into sale and leaseback
transactions with third-party aircraft lessors for the sale and
leaseback of seven Airbus A320 aircraft that resulted in net
deferred losses of $3.1 million, which are included in other
long-
term assets within the balance sheet. Deferred losses are
amortized as rent expense on a straight-line basis over the term
of the
respective operating leases. The Company had agreements in
place prior to the delivery of these aircraft which resulted in the
settlement of the purchase obligation by the lessor and the
refund of $36.7 million in pre-delivery deposits from Airbus
during
2013. The refunded pre-delivery deposits have been disclosed in
the statement of cash flows as investing activities within pre-
delivery deposits, net of refunds. In addition, the Company
entered into a sale and leaseback transaction with a third-party
lessor for the sale and leaseback of one V2500 IAE

International Aero Engines AG engine. Cash outflows related to
the
purchase of the engine have been disclosed in the statement of
cash flows as investing activities within purchases of property
and equipment and the cash inflows from the sale of the engine
as financing activities within proceeds received on sale lease
back transactions. All of the leases from these sale and
leaseback transactions are accounted for as operating leases.
Under the
terms of the lease agreements, the Company will continue to
operate and maintain the aircraft. Payments under 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. 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. During the
fourth
quarter of 2013, the Company entered into an agreement for the
lease of two QEC kits, classified as capital leases. Payments
under the lease agreement are fixed for the three year term of
the lease.
The Company had two QEC kits classified as capital leases at
December 31, 2013, compared to no capital leases at
December 31, 2012. Amounts applicable to these QEC kits that
are included in property and equipment were:
(in thousands) 2013 2012

Flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,234 $ —
Less: accumulated amortization . . . . . . . . . . . . . . . . . . . . . . .
54 —
$ 3,180 $ —
Future minimum lease payments under capital leases and
noncancellable operating leases with initial or remaining terms
in excess of one year at December 31, 2013 were as follows:
Operating Leases
Capital Leases
Aircraft
and Spare Engine
Leases
Property Facility
Leases
Total Operating
Leases
(in thousands)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200 $
184,131 $ 18,535 $ 202,666
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
184,694 16,308 201,002
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
182,984 11,610 194,594
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 163,673
8,795 172,468

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 139,740
6,445 146,185
2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . — 502,102
24,406 526,508
Total minimum lease payments . . . . . . . . . . . . . . $ 3,400 $
1,357,324 $ 86,099 $ 1,443,423
Less amount representing interest . . . . . . . . . . . . 366
Present value of minimum lease payments . . . . . 3,034
Less current portion . . . . . . . . . . . . . . . . . . . . . . . 1,400
Long term portion . . . . . . . . . . . . . . . . . . . . . . . . 1,634
12. 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. The Company does not hold or issue derivative
financial instruments for trading purposes.
The Company is 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
77
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. As
of December 31, 2013, the Company held none of these
instruments and, therefore, was not required to post collateral.
The Company records financial derivative instruments at fair
value, which includes an evaluation of each counterparty's
credit risk. The Company's derivative contracts 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.
The Company chose not to elect hedge accounting on any
derivative instruments entered into during 2013, 2012 and 2011
and, as a result, changes in the fair value of these fuel hedge
contracts are recorded each period in aircraft fuel expense.
The following table summarizes the components of aircraft fuel
expense for the years ended December 31, 2013, 2012
and 2011:
2013 2012 2011
(in thousands)

Into-plane fuel cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . $ 542,523 $ 471,542 $ 392,278
Settlement losses (gains) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 8,958 175 (7,436)
Unrealized mark-to-market losses (gains) . . . . . . . . . . . . . . . . .
. . . . . . 265 46 3,204
Aircraft fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . $ 551,746 $ 471,763 $ 388,046
All realized gains and losses are reflected in the statements of
cash flows in cash flow from operating activities.
As of December 31, 2013, the Company had no outstanding fuel
hedges in place. As of December 31, 2012, the
Company had fuel hedges using U.S. Gulf Coast jet fuel options
as the underlying commodity. As of December 31, 2012, the
Company had agreements in place to protect 7.8 million gallons
or approximately 5% of its 2013 fuel consumption at a
weighted-average ceiling and floor price of $3.09 and $2.84 per
gallon, respectively.
13. Defined Contribution 401(k) Plan
The Company sponsors three defined contribution 401(k) plans,
Spirit Airlines, Inc. Employee Retirement Savings Plan
(first plan), Spirit Airlines, Inc. Pilots’ Retirement Savings Plan
(second plan) and Spirit Airlines, Inc. Puerto Rico Retirement
Savings Plan (third plan). The first plan was adopted on
February 1, 1994. Essentially, all employees that are not
covered by
the pilots’ collective bargaining agreement, who have at least
one year of service, have worked at least 1,000 hours during the
year and have attained the age of 21 may participate in this
plan. The Company may make a Qualified Discretionary
Contribution, as defined in the plan, or provide matching

contributions to this plan. Effective July 1, 2007, the Company
amended this plan to change the service requirement to 60 days
and provided for matching contribution to the plan at 50% of
the employee’s contribution up to a maximum employer
contribution of 3% of the employee’s annual compensation.
The second plan is for the Company’s pilots, and contained the
same service requirements as the first plan and was
amended effective July 1, 2007, to change the service
requirements to 60 days and having attained the age of 21. The
Company
matches 100% of the pilot’s contribution, up to 8% of the
individual pilot’s annual compensation. Both the first and the
second
plans are subject to the annual IRS elective deferral limit, which
was $17,500 for 2013.
The third plan is for all Company employees residing in Puerto
Rico and was adopted on April 16, 2012. It contains the
same amended service requirements as the first and second
plans. For pilots participating in the Puerto Rico plan, the
Company
matches 100% of their contribution, up to 8% of the individual
pilot's annual compensation, but subject to the annual Puerto
Rico pre-tax elective deferral limit, which was $17,500 for
2013. For all other employees participating in the Puerto Rico
plan,
the Company provides for matching contribution to the plan at
50% of the employee's contribution up to a maximum employer
contribution of 3% of the employee's annual compensation.
Matching contributions made to all plans were $7.7 million ,
$6.6 million and $4.9 million in 2013, 2012 and 2011,
respectively, and were included within salaries, wages and
benefits in the accompanying statements of operations.

78
14. Income Taxes
Significant components of the provision for income taxes from
continuing operations are as follows:
For the Years Ended December 31,
2013 2012 2011
(in thousands)
Current:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
86,437 $ 32,656 $ 1,866
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,595
3,250 74
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 963
263
Total current expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,445 36,869 2,203
Deferred:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,658
27,870 42,148
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389
1,385 2,032
Total deferred expense (benefit). . . . . . . . . . . . . . . . . . . .
12,047 29,255 44,180
Total income tax expense (benefit) . . . . . . . . . . . . . . . . . $

105,492 $ 66,124 $ 46,383
The reconciliation of income tax expense computed at the
federal statutory tax rates to income tax expense from
continuing operations is as follows:
For the Years Ended December 31,
2013 2012 2011
(in thousands)
Expected provision at federal statutory tax rate . . . . . . . . . . . .
. . . . $ 98,843 $ 61,104 $ 42,991
State and foreign tax expense, net of federal benefit . . . . . . . . .
. . . 4,695 3,726 2,255
Interest and dividend on preferred stock . . . . . . . . . . . . . . . . . .
. . . — — 710
Meals and entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 772 649 469
Fines and penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 134 84 (36)
Federal credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . (58) (182) (103)
Adjustment to deferred tax assets and liabilities . . . . . . . . . . . .
. . . (54) (3) (3)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 1,160 746 100
Total income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . .
. . . . $ 105,492 $ 66,124 $ 46,383
79

The Company accounts for income taxes using the asset and
liability method. Deferred taxes are recorded based on
differences between the financial statement basis and tax basis
of assets and liabilities and available tax loss and credit
carryforwards. At December 31, 2013 and 2012, the significant
components of the Company's deferred taxes consisted of the
following:
December 31,
2013 2012
(in thousands)
Deferred tax assets:
Net operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . $ 188 $ 83
Deferred loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 1,428 —
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 6,241 5,829
Nondeductible accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 9,734 6,744
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 2,767 1,073
Deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 20,358 13,729
Deferred tax liabilities:
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 736 1,125
Deferred gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . — 364
Fuel hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . — 97
Accrued engine maintenance . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . 45,911 29,497
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 6,384 3,271
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 53,031 34,354
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . $ (32,673) $ (20,625)
Deferred taxes included within:
Assets:
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . $ 16,243 $ 12,591
Liabilities:
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . $ 48,916 $ 33,216
In assessing the realizability of the deferred tax assets,
management considered whether it is more likely than not that
some or all of the deferred tax assets would be realized. In
evaluating the Company’s ability to utilize its deferred tax
assets, it
considered all available evidence, both positive and negative, in
determining future taxable income on a jurisdiction by
jurisdiction
basis. Management does not believe that the realization of
deferred tax assets is in jeopardy and thus a valuation allowance
for
2013 will not be necessary.
During 2013, the Company filed an amended 2009 income tax
return in order to correct its net operating loss
carryforward (NOL) as of December 31, 2009. See Note 18. The
amendment of the 2009 tax return resulted in a decrease to the
Company's NOL of $7.9 million as of December 31, 2009. In

addition, during the preparation of its 2012 tax return, the
Company uncovered certain adjustments relating to the NOL
carryforward balance as of December 31, 2011. These
adjustments resulted in an increase to the NOL carryforward of
$3.7 million. The net decrease to the NOL carryforwards of
$4.2 million changed the NOL carryforwards as of December
31, 2011 from $20.8 million, as previously reported in 2012 and
2011, to $16.6 million. At December 31, 2011, the Company
had available for federal income tax purposes an alternative
minimum tax (AMT) credit carryforward of $3.2 million and
federal NOL carryforwards of $16.6 million which were fully
utilized against federal taxable income during 2012. As of
December 31, 2013 and 2012, the Company did not have any
NOLs
or AMT credits to utilize against federal taxable income. As of
December 31, 2013, the Company had approximately $4.7
million of State NOLs which can be used to offset future state
taxable income. State net operating losses begin to expire in
2017.
Excess tax benefits are recognized in the financial statements
upon actual realization of the related tax benefit which
occurred in 2012 upon utilization of the remaining NOLs and
AMT credit carryforwards during the year. During 2013, the
Company recognized a windfall tax benefit of $1.9 million
which was recorded as a reduction to income tax payable and a
corresponding entry to additional paid in capital.
80
During 2013, the Company recorded a foreign tax credit of $0.4
million against its 2013 federal income tax liability

which was fully utilized during the year. Previously the
Company deducted income taxes paid in foreign countries in
arriving at
federal taxable income.
On September 13, 2013, the United States Treasury and Internal
Revenue Service issued final tangible personal property
regulations that broadly apply to amounts paid to acquire,
produce or improve tangible property, as well as dispositions of
such
property. In review of these regulations, the Company has
concluded that there is no material impact on its financial
position,
results of operations or cash flows.
On January 25, 2012, the Company experienced a subsequent
ownership change under the principles of IRC §382, as a
result of the secondary offering outlined in more detail in Note
3. Although the Company was subject to the limitations of IRC
§382 on the utilization of its NOL and the tax credit
carryforwards in 2012, the limitation was sufficiently in excess
of the tax
attribute carryforwards as not to prohibit complete utilization
during the year.
The Company accrues interest related to unrecognized tax
benefits in its provision for income taxes, and any associated
penalties are recorded in selling, general and administrative
expenses.
The Company files its tax returns as prescribed by the tax laws
of the jurisdictions in which it operates. The Company's
tax years from 2006 through 2012 are still subject to
examination in the United States due to net operating loss
carryovers
generated in such years. Various state and foreign jurisdiction

tax years remain open to examination and the Company was
under examination in certain jurisdictions during 2012, and the
outcome of these audits were immaterial to the financial
statements. The Company believes that the effect of any
additional assessment(s) will be immaterial to its financial
statements.
15. Commitments and Contingencies
Aircraft-Related Commitments and Financing Arrangements
The Company’s contractual purchase commitments consist
primarily of aircraft and engine acquisitions through
manufacturers and aircraft leasing companies. On June 20,
2013, the Company entered into an amendment to the Airbus
A320
Family Purchase Agreement, by and between the Company and
Airbus S.A.A., dated May 5, 2004 (Airbus Amendment) for the
order of an additional 20 Airbus A321 aircraft. These aircraft
are in addition to the 92 aircraft not yet delivered under Spirit's
existing order with Airbus. In addition, the Company is
committed to take delivery of an additional five aircraft directly
from a
third-party lessor. During the year, the Company converted ten
Airbus A320 orders to Airbus A321 orders and converted five
Airbus A321 orders to Airbus A321neo orders. On October 1,
2013, the Company entered into agreements with International
Aero Engines AG (IAE) and Pratt & Whitney (collectively, the
IAE & P&W Agreement) for the provision and servicing of
engines to power its fleet of Airbus A320 family aircraft.
As of December 31, 2013, the Company's aircraft orders
consisted of the following:
Airbus
Third-Party

Lessor
A320 A320NEO A321 A321NEO A320NEO Total
2014 11 11
2015 11 2 1 14
2016 5 8 4 17
2017 10 10 20
2018 6 5 11
2019 8 5 13
2020 13 13
2021 18 18
37 45 25 5 5 117
The Company also has six spare engine orders for V2500
SelectOne engines with IAE and nine spare engine orders for
PurePower PW 1100G-JM engines with Pratt & Whitney. Spare
engines are scheduled for delivery from 2014 through 2024.
Purchase commitments for these aircraft and engines, including
estimated amounts for contractual price escalations and pre-
delivery payments, will be approximately $559.3 million in
2014, $619.1 million in 2015, $633.1 million in 2016, $804.5
million in 2017, $543.1 million in 2018 and $2,197.1 million in
2019 and beyond. The Company has secured financing
81
commitments with third parties for seven aircraft deliveries
from Airbus, scheduled for delivery in 2014 and for the five
aircraft

to be leased directly from a third party. The Company does not
have financing commitments in place for the remaining 105
Airbus firm aircraft orders scheduled for delivery between 2014
and 2021.
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.
Employees
The Company has three union-represented employee groups that
together represent approximately 59% of all employees
at December 31, 2013 and 54% of all employees at December
31, 2012. The table below sets forth the Company's employee
groups and status of the collective bargaining agreements as of
December 31, 2013.
Employee Groups Representative Amendable Date Percentage
of Workforce
Pilots Air Line Pilots Association, International (ALPA)
August 2015 24%
Flight Attendants Association of Flight Attendants (AFA-
CWA) August 2007 34%
Dispatchers Transport Workers Union (TWU) August 2018
1%

In December 2013, with the help of the National Mediation
Board (NMB), the Company reached a tentative agreement
for a five-year contract with the Company's flight attendants.
The tentative agreement was subject to ratification by the flight
attendant membership. On February 7, 2014, the Company was
notified that the flight attendants voted to not ratify the
tentative agreement. The Company will continue to work
together with the AFA and the NMB with a goal of reaching a
mutually beneficial agreement.
The Company is self-insured for health care claims, subject to a
stop-loss policy, 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
calculated from actual claim rates and adjusted periodically as
necessary. The Company has accrued $2.1 million and $1.9
million, for health care claims as of December 31, 2013, and
2012, respectively.
Other
The Company is contractually obligated to pay the following
minimum guaranteed payments to the provider of its
reservation system as of December 31, 2013: $3.9 million in
2014, $3.9 million in 2015, $3.9 million in 2016, $3.9 million in
2017, $2.6 million in 2018 and $0.0 million in 2019 and
thereafter.
The Company entered into a Tax Receivable Agreement (TRA)
with the Company's Pre-IPO Stockholders (as defined in
the TRA) that became effective immediately prior to the
consummation of the IPO. In accordance with the TRA, the
Company

paid $27.2 million, including $0.3 million of applicable interest,
in the second quarter of 2012. As of December 31, 2013, the
Company has $5.6 million accrued related to the TRA and $0.2
million of applicable interest. See Note 18.
16. Fair Value Measurements
Under ASC 820, Fair Value Measurements and Disclosures,
disclosures are required about how fair value is determined
for assets and liabilities, 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.
82
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. The Company’s 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 financial assets and liabilities. The market
approach uses prices and other relevant information generated
by market transactions involving identical or comparable assets
or liabilities.
Assets and liabilities measured at gross fair value on a recurring
basis are summarized below:
Fair Value Measurements as of December 31, 2013
Total
Level
1
Level
2
Level
3
(in millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 530.6 $ 530.6 $ — $ —
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . $ 530.6 $ 530.6 $ — $ —
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . $ — $ — $ — $ —
Fair Value Measurements as of December 31, 2012
Total
Level
1
Level
2
Level
3
(in millions)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. $ 416.8 $ 416.8 $ — $ —
Jet fuel options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 0.3 — — 0.3
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . $ 417.1 $ 416.8 $ — $ 0.3
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . $ — $ — $ — $ —
Cash and cash equivalents at December 31, 2013 and December

31, 2012 are comprised of liquid money market funds
and cash. The Company maintains cash with various high-
quality financial institutions. The company had no outstanding
derivatives as of December 31, 2013. The Company had no
transfers of assets or liabilities between any of the above levels
during the years ended December 31, 2013 and 2012.
The Company did not elect hedge accounting on any of the
derivative instruments, and as a result, changes in the fair
values of these fuel hedge contracts are recorded each period in
fuel expense. Fair values of the 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 derivative instruments
executed with the same counterparty under a master netting
arrangement. The Company determines the fair value of 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
holds.
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. Based on the
Company's assessment of the valuation model's sensitivity to
changes in implied volatility, it noted that holding other inputs
83
constant, a significant increase (decrease) in implied volatility
would result in a significantly higher (lower) determination of
fair value measurement for the Company's aircraft fuel
derivatives.
The Company's Valuation Group is made up of individuals from
the Company's Risk Management, Treasury and
Corporate Accounting departments. The Valuation Group is
responsible for the Company's valuation policies, procedures
and
execution thereof. The Company's Valuation Group reports to
the Company's Chief Financial Officer and Finance Committee
who approve all derivative transactions. The Valuation Group
compares the results of the Company's internally developed
valuation methods with counterparty reports at each balance
sheet date and assesses the Company's valuation methods for
accurateness and identifies any needs for modification.
The following table presents the Company’s activity for assets
and liabilities measured at gross fair value on a recurring
basis using significant unobservable inputs (Level 3):

Jet Fuel Options
(in millions)
Balance at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . $ 3.5
Total realized or unrealized gains (losses) included in earnings,
net . . . . . . . . . . . . . 4.2
Settlements, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . (7.4)
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 0.3
net . . . . . . . . . . . . . (0.2)
Settlements, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 0.2
. . . . . . . . . . . . . . . . . . . . 0.3
net . . . . . . . . . . . . . 0.1
Settlements, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . (0.4)
. . . . . . . . . . . . . . . . . . . . $ —
The Company records the fair value adjustment of its aircraft
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.

17. Operating Segments and Related Disclosures
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:
2013 2012 2011
(in millions)
DOT—domestic . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,467.5 $
1,135.1 $ 900.1
DOT—Latin America . . . . . . . . . . . . . . . . . . . . . 186.9 183.3
171.1
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,654.4 $
1,318.4 $ 1,071.2
During 2013, 2012 and 2011, no revenue from any one foreign
country represented greater than 4% of the Company’s
total passenger revenue. The Company attributes operating
revenues by geographic region based upon the origin and
destination of each passenger flight segment. The Company’s
tangible assets consist primarily of flight equipment, which are
mobile across geographic markets and, therefore, have not been
allocated.
18. Initial Public Offering and Tax Receivable Agreement
On June 1, 2011, the Company raised $187.2 million of gross
proceeds from an initial public offering of 15,600,000
shares of its common stock at a price of $12.00 per share. The
resulting proceeds to the Company were approximately $176.9
million, after deducting underwriter commissions. The Company
retained $150.0 million of the net proceeds, after paying
$20.6 million of debt, $0.5 million to pay three unaffiliated
holders of its subordinated notes and $5.9 million in direct costs

of
the offering. In accordance with a Recapitalization Agreement,
all of the principal and accrued and unpaid interest on
outstanding notes, to the extent not paid, totaling $279.2
million, as well as all of the Class A and B preferred stock
outstanding
immediately prior to the offering along with accrued and unpaid
dividends totaling $81.7 million, were exchanged for
30,079,420 shares of common stock at a share price of $12.00
per share. Each share of Class B Common Stock was exchanged
84
for one share of common stock. In addition, interest expense
was reduced by $0.4 million due to a write off of the
unamortized
portion of prepaid loan fees and deferred interest.
In connection with the IPO, the Company entered into the TRA
and thereby distributed immediately prior to the
completion of the IPO to the holders of common stock as of
such time, or the Pre-IPO Stockholders, the right to receive an
amount equal to 90% of the cash savings in federal income tax
realized by it by virtue of the use of the federal net operating
loss, deferred interest deductions and alternative minimum tax
credits held by the Company as of March 31, 2011, which is
defined as the Pre-IPO NOL. Cash tax savings generally will be
computed by comparing actual federal income tax liability to
the amount of such taxes that the Company would have been
required to pay had such Pre-IPO NOLs (as defined in the TRA)
not been available. Upon consummation of the IPO and
execution of the TRA, the Company recorded a liability with an

offsetting reduction to additional paid in capital. The amount
and timing of payments under the TRA will depend upon a
number of factors, including, but not limited to, the amount and
timing of taxable income generated in the future and any future
limitations that may be imposed on the Company's ability to use
the Pre-IPO NOLs. The term of the TRA will continue until
the first to occur (a) the full payment of all amounts required
under the agreement with respect to utilization or expiration of
all
of the Pre-IPO NOLs, (b) the end of the taxable year including
the tenth anniversary of the IPO or (c) a change in control of the
Company.
In accordance with the TRA, the Company is required to submit
a Tax Benefit Schedule showing the proposed TRA
payout amount to the Stockholder Representatives within 45
calendar days after the Company files its tax return.
Stockholder
Representatives are defined as Indigo Pacific Partners, LLC and
OCM FIE, LLC, representing the two largest ownership
interest of pre-IPO shares. The Tax Benefit Schedule shall
become final and binding on all parties unless a Stockholder
Representative, within 45 calendar days after receiving such
schedule, provides the Company with notice of a material
objection to such schedule. If the parties, for any reason, are
unable to successfully resolve the issues raised in any notice
within 30 calendar days of receipt of such notice, the Company
and the Stockholder Representatives have the right to employ
the TRA's reconciliation procedures. If the Tax Benefit
Schedule is accepted, the Company has five days after
acceptance to
make payments to the Pre-IPO stockholders. Pursuant to the
TRA's reconciliation procedures, any disputes that cannot be
settled amicably, are settled by arbitration conducted by a
single arbitrator jointly selected by both parties.

During the second quarter of 2012, the Company paid $27.2
million, or 90% of the 2011 tax savings realized from the
utilization of NOLs, including $0.3 million of applicable
interest. During 2012, management adjusted for an immaterial
error in
the original estimate of the liability. This adjustment reduced
the liability with an offset to additional paid in capital.
During 2013, the Company filed an amended 2009 income tax
return in order to correct its NOL carry forward as of
December 31, 2009. See Note 14. As a result, the Company's
NOL carry forward as of March 31, 2011 was consequently
reduced by $7.8 million, which corresponds to a reduction in
the estimated TRA benefit of $2.4 million with an offset to
additional paid in capital. On September 13, 2013, the Company
filed its 2012 federal income tax return, and on October 14,
2013, the Company submitted a Tax Benefit Schedule to the
Stockholder Representatives. On November 27, 2013, pursuant
to
the TRA, the Company received an objection notice to the Tax
Benefit Schedule from the Stockholder Representatives. As of
December 31, 2013, the Company estimated the TRA liability to
be $5.6 million. The Company and the Stockholder
Representatives are in discussions attempting to resolve the
objection related to the Tax Benefit Schedule and have not
employed the TRA's reconciliation procedures.
19. Quarterly Financial Data (Unaudited)
Quarterly results of operations for the year ended December 31,
2013 are summarized below:
85

Three Months Ended
March 31 June 30 September 30 December 31
(in thousands, except per share amounts)
2013
Operating revenue . . . . . . . . . . . . . . . . $ 370,437 $ 407,339 $
456,625 $ 419,984
Operating income . . . . . . . . . . . . . . . . 49,669 66,758 97,804
68,061
Net income. . . . . . . . . . . . . . . . . . . . . . 30,554 42,068 61,103
43,193
Basic earnings per share . . . . . . . . . . . 0.42 0.58 0.84 0.59
Diluted earnings per share . . . . . . . . . . 0.42 0.58 0.84 0.59
2012
Operating revenue . . . . . . . . . . . . . . . . $ 301,495 $ 346,308 $
342,317 $ 328,268
Operating income . . . . . . . . . . . . . . . . 37,244 55,132 49,681
31,933
Net income. . . . . . . . . . . . . . . . . . . . . . 23,419 34,591 30,884
19,566
Basic earnings per share . . . . . . . . . . . 0.32 0.48 0.43 0.27
Diluted earnings per share . . . . . . . . . . 0.32 0.48 0.43 0.27
86
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders of
We have audited the accompanying balance sheets of Spirit

Airlines, Inc. as of December 31, 2013 and 2012, and the
related
statements of operations, shareholders' equity (deficit), and cash
flows for each of the three years in the period ended December
31, 2013. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Spirit
Airlines, Inc. at December 31, 2013 and 2012, and the results of
its operations and its cash flows for each of the three years in
the period ended December 31, 2013, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Spirit Airlines, Inc.'s internal control over financial reporting as
of December 31, 2013, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992
framework) and our report dated February 20, 2014 expressed

an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
Miami, Florida
February 20, 2014
87
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Board of Directors and Stockholders of
We have audited Spirit Airlines, Inc's internal control over
financial reporting as of December 31, 2013 based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (1992 framework), as applicable (the COSO
criteria). Spirit Airlines, Inc's management is responsible for
maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying
Management's Report on Internal Control Over Financial
Reporting. Our
responsibility is to express an opinion on the Company's
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal

control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design
and
operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (2) provide
reasonable assurance that transactions are recorded as necessary
to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the
Company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use
or
disposition of the Company's assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, Spirit Airlines, Inc. maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
the accompanying balance sheet of Spirit Airlines, Inc. as of
December 31, 2013 and 2012, and the related statement of
operations, shareholders equity (deficit), and cash flows for
each of the three years in the period ended December 31, 2013
of
Spirit Airlines, Inc. and our report dated February 20, 2014
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
Miami, Florida
February 20, 2014
88
ITEM 9. CHANGES AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive
Officer and our Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of
December 31, 2013. The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required
to be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in
the
SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company
in the reports that it files or submits under the Exchange Act is
accumulated and communicated to our management, including
its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required
disclosure.
Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the
cost-
benefit relationship of possible controls and procedures. Based
on the evaluation of our disclosure controls and procedures as
of
December 31, 2013, our Chief Executive Officer and Chief
Financial Officer concluded that, as of such date, our disclosure
controls and procedures were effective at the reasonable
assurance level.

Management's Annual Report on Internal Control Over
Financial Reporting
Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934. Our internal control over
financial
reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies may deteriorate.
Management conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the
1992 framework in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO Framework). Based on that
evaluation, management believes that our internal control over
financial reporting was effective as of December 31, 2013.
The effectiveness of our internal control over financial
reporting as of December 31, 2013 has been audited by Ernst &
Young LLP, an independent registered public accounting firm,
which also audited our Consolidated Financial Statements for
the year ended December 31, 2013. Ernst & Young LLP's report
on our internal control over financial reporting, which is
included herein.

Changes in Internal Control over Financial Reporting
During the first quarter of 2013, we implemented SAP, a new
Enterprise Resource Planning (ERP) system that replaced
our financial reporting module. We have made appropriate
changes to our internal controls over financial reporting to
accommodate the implementation of the ERP system.
There were no other changes in our internal control over
financial reporting during 2013 that have materially affected, or
are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
89
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
The information under the captions, “Election of Directors,”
“Corporate Governance,” “Committee and Meetings of the
Board of Directors,” “Executive Officers,” “Code of Ethics” and
“Section 16(a) Beneficial Ownership Reporting Compliance”
in our 2014 Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION

The information under the captions, “Director Compensation”
and “Executive Compensation” in our 2014 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information under the captions, “Security Ownership” and
“Equity Compensation Plan Information” in our 2014
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information under the captions, “Certain Relationships and
Related Transactions” and “Corporate Governance” in
our 2014 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information under the captions, “Ratification of
Independent Registered Public Accounting Firm” in our 2014
Proxy
Statement is incorporated herein by reference.
With the exception of the information specifically incorporated
by reference in Part III to this Annual Report on Form 10-
K from our 2014 Proxy Statement, our 2014 Proxy Statement
shall not be deemed to be filed as part of this Report.
90
PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a) 1. Financial Statements:
The financial statements included in Item 8. Financial
Statements and Supplementary Data above are filed as part of
this annual report.
2. Financial Statement Schedules:
There are no financial statement schedules filed as part of this
annual report, since the required information is included
in the Financial Statements, including the notes thereto, or the
circumstances requiring inclusion of such schedules are not
present.
3. Exhibits:
The exhibits filed as part of this Annual Report on Form 10-K
are listed on the Exhibit Index included after the
signature page.
91
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of
the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPIRIT AIRLINES, INC.
Date: February 20, 2014 By: /s/ B. Ben Baldanza
B. Ben Baldanza

President and Chief Executive Officer
92
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and
appoints B. Ben Baldanza, Edward Christie and Thomas
Canfield, and each of them, their true and lawful attorneys-in-
fact,
each with full power of substitution, for them in any and all
capacities, to sign any amendments to this report on Form 10-K
and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of
said attorneys-in-fact or their substitute or substitutes may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons
on behalf of the registrant in the capacities and on the dates
indicated
Signature Title Date
/s/ B. Ben Baldanza
President and Chief Executive Officer (principal
executive officer) February 20, 2014
B. Ben Baldanza
/s/ Edward M. Christie
Chief Financial Officer (principal financial and

accounting officer) February 20, 2014
Edward M. Christie
/s/ H. McIntyre Gardner Director (Chairman of the Board)
February 20, 2014
H. McIntyre Gardner
/s/ Carlton D. Donaway Director February 20, 2014
Carlton D. Donaway
/s/ David G. Elkins Director February 20, 2014
David G. Elkins
/s/ Robert D. Johnson Director February 20, 2014
Robert D. Johnson
/s/ Barclay G. Jones Director February 20, 2014
Barclay G. Jones
/s/ Stuart I. Oran Director February 20, 2014
Stuart I. Oran
/s/ Horacio Scapparone Director February 20, 2014
Horacio Scapparone
93
EXHIBIT INDEX
Exhibit No. Description of Exhibit
3.1

Amended and Restated Certificate of Incorporation of Spirit
Airlines, Inc., dated as of June 1, 2011, filed as
Exhibit 3.1 to the Company's Current Report on Form 8-K dated
June 1, 2011, is hereby incorporated by
reference.
3.2
Amended and Restated Bylaws of Spirit Airlines, Inc., dated as
of June 1, 2011, filed as Exhibit 3.2 to the
Company's Current Report on Form 8-K dated June 1, 2011, is
hereby incorporated by reference.
4.1
Specimen Common Stock Certificate, filed as Exhibit 4.1 to the
Company's Form S-1 Registration
Statement (No. 333-178336), is hereby incorporated by
reference.
10.1+ General Release, dated January 14, 2014, between Spirit
Airlines, Inc. and Ben Baldanza.
10.2+
Amended and Restated Employment Agreement, dated as of
January 8, 2014, between Spirit Airlines, Inc.
and Ben Baldanza.
10.3+ Offer Letter, dated September 7, 2013, between Spirit
Airlines, Inc. and John Bendoraitis.

10.4†
Amended and Restated V2500 General Terms of Sale, dated as
of October 1, 2013, by and between Spirit
Airlines, Inc. and IAE International Aero Engines AG, as
supplemented by Side Letter No. 1 dated as of
October 1, 2013, filed as Exhibit 10.1 to the Company's Form
10-Q/A dated February 20, 2014, is hereby
incorporated by reference.
10.5† Amended and Restated Fleet Hour Agreement, dated as of
October 1, 2013, by and between Spirit Airlines,
Inc. and IAE International Aero Engines AG, as supplemented
by Side Letter No. 1 dated as of October 1,
2013, filed as Exhibit 10.2 to the Company's Form 10-Q/A
dated February 20, 2014, is hereby incorporated
by reference.
10.6† V2500 General Terms of Sale, dated as of October 1,
2013, by and between Spirit Airlines, Inc. and IAE
International Aero Engines AG, as supplemented by Side Letter
No. 1 dated as of October 1, 2013 and Side
Letter No. 2 dated as of October 1, 2013, filed as Exhibit 10.3
to the Company's Form 10-Q/A dated
February 20, 2014, is hereby incorporated by reference.
10.7† Fleet Hour Agreement, dated of as October 1, 2013, by
and between Spirit Airlines, Inc. and IAE
International Aero Engines AG, as supplemented by Side Letter
No. 1 dated as of October 1, 2013, filed as
Exhibit 10.4 to the Company's Form 10-Q/A dated February 20,
2014, is hereby incorporated by reference.
10.8† PurePower PW1100G Engine Purchase Support
Agreement, dated as of October 1, 2013, by and between

the Company and United Technologies Corporation, acting
through its Pratt & Whitney Division, filed as
Exhibit 10.5 to the Company's Form 10-Q dated October 30,
2013, is hereby incorporated by reference.
10.9†
Hosted Services Agreement, dated as of February 28, 2007,
between Spirit Airlines, Inc. and Navitaire Inc.,
as amended by Amendment No. 1 dated as of October 23, 2007,
Amendment No. 2 dated as of May 15,
2008, Amendment No. 3 dated as of November 21, 2008,
Amendment No. 4 dated as of August 17, 2009
and Amendment No. 5 dated November 4, 2009, filed as Exhibit
10.3 to the Company's Amendment No. 4
to Form S-1 Registration Statement (No. 333-169474), is hereby
10.10†
Signatory Agreement, dated as of May 21, 2009, between Spirit
Airlines, Inc. and U.S. Bank National
Association, as amended by First Amendment dated January 18,
2010, filed as Exhibit 10.4 to the
Company's Amendment No. 4 to Form S-1 Registration
Statement (No. 333-169474), is hereby
10.11†
Terms and Conditions for Worldwide Acceptance of the
American Express Card by Airlines, dated
September 4, 1998, between Spirit Airlines, Inc. and American

Express Travel Related Services Company,
Inc., as amended January 1, 2003 and August 28, 2003, filed as
Exhibit 10.6 to the Company's Amendment
No. 4 to Form S-1 Registration Statement (No. 333-169474), is
10.12
Tax Receivable Agreement, dated as of June 1, 2011 between
Spirit Airlines, Inc., Indigo Pacific Partners
LLC, and OCM FIE, LLC, filed as Exhibit 10.12 to the
Company's Form S-1 Registration Statement (No.
333-178336), is hereby incorporated by reference.
94
10.13†
Lease, dated as of June 17, 1999, between Sunbeam
Development Corporation and Spirit Airlines, Inc., as
amended by Lease Modification and Contraction Agreement
dated as of May 7, 2009, filed as Exhibit 10.13
to the Company's Amendment No. 4 to Form S-1 Registration
10.14†† Lease Modification and Extension Agreement, dated as
of September 26th, 2013, between Sunbeam
Development Corporation and Spirit Airlines, Inc.
10.15†† Lease, dated as of September 26th, 2013, between
Sunbeam Development Corporation and Spirit Airlines,

Inc.
10.16
Airline-Airport Lease and Use Agreement, dated as of August
17, 1999, between Broward County and
Spirit Airlines, Inc., as supplemented by Addendum dated
August 17, 1999, filed as Exhibit 10.14 to the
Company's Amendment No. 3 to Form S-1 Registration
10.17†
Airbus A320 Family Purchase Agreement, dated as of May 5,
2004, between AVSA, S.A.R.L. and Spirit
Airlines, Inc.; as amended by Amendment No. 1 dated as of
December 21, 2004, Amendment No. 2 dated
as of April 15, 2005, Amendment No. 3 dated as of June 30,
2005, Amendment No. 4 dated as of October
27, 2006 (as amended by Letter Agreement No. 1, dated as of
October 27, 2006, to Amendment No. 4 and
Letter Agreement No. 2, dated as of October 27, 2006, to
Amendment No. 4), Amendment No. 5 dated as of
March 5, 2007, Amendment No. 6 dated as of March 27, 2007,
Amendment No. 7 dated as of June 26, 2007
(as amended by Letter Agreement No. 1, dated as of June 26,
2007, to Amendment No. 7), Amendment No.
8 dated as of February 4, 2008, Amendment No. 9 dated as of
June 24, 2008 (as amended by Letter
Agreement No. 1, dated as of June 24, 2008, to Amendment No.
9) and Amendment No. 10 dated July 17,
2009 (as amended by Letter Agreement No. 1, dated as of July
17, 2009, to Amendment No. 10), and as

supplemented by Letter Agreement No. 1 dated as of May 5,
2004, Letter Agreement No. 2 dated as of May
5, 2004, Letter Agreement No. 3 dated as of May 5, 2004, Letter
Agreement No. 4 dated as of May 5, 2004,
Letter Agreement No. 5 dated as of May 5, 2004, Letter
Agreement No. 6 dated as of May 5, 2004, Letter
Agreement No. 7 dated as of May 5, 2004, Letter Agreement
No. 8 dated as of May 5, 2004, Letter
Agreement No. 9 dated as of May 5, 2004, Letter Agreement
No. 10 dated as of May 5, 2004 and Letter
Agreement No. 11 dated as of May 5, 2004, all filed as Exhibit
10.15 to the Company's Amendment No. 4
to Form S-1 Registration Statement (No. 333-169474); as
further amended by Amendment No. 11 dated as
of December 29, 2011 (as amended by Letter Agreement No. 1
dated as of December 29, 2011, Letter
Agreement No. 2 dated as of December 29, 2011, Letter
Agreement No. 3 dated as of December 29, 2011,
Letter Agreement No. 4 dated as of December 29, 2011, Letter
Agreement No. 5 dated as of December 29,
2011, Letter Agreement No. 6 dated as of December 29, 2011,
Letter Agreement No. 7 dated as of
December 29, 2011 and Letter Agreement No. 8 dated as of
December 29, 2011) all filed as Exhibit 10.1 to
the Company's Form 8-K dated January 5, 2012; Amendment
No. 12, dated as of June 29, 2012, filed as
Exhibit 10.1 to the Company's Form 10-Q dated July 26, 2013;
Amendment No. 13, dated as of January 10,
2013, filed as Exhibit 10.2 to the Company's Form 10-Q dated
July 26, 2013; and Amendment No. 14,
dated as of June 20, 2013, filed as Exhibit 10.3 to the
Company's Form 10-Q dated July 26, 2013 is hereby
10.18+ Spirit Airlines, Inc. Executive Severance Plan, filed as
Exhibit 10.16 to the Company's Amendment No. 3 to

Form S-1 Registration Statement (No. 333-169474), is hereby
10.19+ Amended and Restated Spirit Airlines, Inc. 2005 Stock
Incentive Plan and related documents, filed as
Exhibit 10.17 to the Company's Amendment No. 3 to Form S-1
Registration Statement (No. 333-169474),
is hereby incorporated by reference.
10.20+ Spirit Airlines, Inc. 2011 Equity Incentive Award Plan,
filed as Exhibit 10.2 to the Company's Form S-8
Registration Statement (No. 333-174812), is hereby
10.21+ Offer Letter, dated September 10, 2007, between Spirit
Airlines, Inc. and Thomas Canfield, filed as Exhibit
10.22 to the Company's Amendment No. 3 to Form S-1
10.22 Form of Indemnification Agreement between Spirit
Airlines, Inc. and its directors and executive officers,
filed as Exhibit 10.24 to the Company's Amendment No. 3 to
Form S-1 Registration Statement (No.
333-169474), is hereby incorporated by reference.
10.23+ Form of Restricted Stock Unit Award Grant Notice and
Restricted Stock Unit Award Agreement under the
Spirit Airlines, Inc. 2011 Equity Incentive Award Plan, filed as
Exhibit 10.4 to the Company's Form S-8
95

10.24† Addendum and Amendment to the Agreement Governing
Acceptance of the American Express Card by
Airlines, dated as of June 24, 2011, by and between Spirit
Airlines, Inc. and American Express Travel
Related Services Company, Inc., filed as Exhibit 10.1 to the
Company's Form 10-Q dated July 28, 2011, is
10.25† Second Amendment to Signatory Agreement, effective as
of September 6, 2011, by and between the
Company and U.S. Bank, National Association, filed as Exhibit
10.1 to the Company's Form 10-Q/A dated
December 22, 2011, is hereby incorporated by reference.
10.26+ Letter Agreement, effective April 16, 2012, by and
between Spirit Airlines, Inc. and Edward M. Christie,
III, filed as Exhibit 10.2 to the Company's Form 10-Q dated
May 1, 2012, is hereby incorporated by
reference.
10.27+ Letter Agreement, dated January 16, 2012, by and
between Spirit Airlines, Inc. and Jim Lynde
10.28+ Separation and Transition Agreement with Tony
Lefebvre, dated April 29, 2013, filed as Exhibit 10.4 to the
Company's Form 10-Q dated July 26, 2013, is hereby
14.1 Code of Business Conduct and Ethics, filed as Exhibit 14.1
to the Company's Form S-1 Registration
Statement (No. 333-178336), is hereby incorporated by
reference.
21.1 List of subsidiaries.
23.1 Consent of Ernst & Young LLP, independent registered

public accounting firm.
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certifications pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
101.INS***
XBRL Instance Document.
101.SCH***
XBRL Taxonomy Extension Schema Document.
101.CAL***
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF***
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB***
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE***
XBRL Taxonomy Extension Presentation Linkbase Document.
† Confidential treatment granted for certain portions of this
Exhibit pursuant to Rule 406 under the Securities Act or Rule
24b-2 under the Exchange Act, which portions are omitted and
filed separately with the Securities and Exchange
Commission.
†† Confidential treatment has been requested for certain
portions of this Exhibit pursuant to Rule 406 under the

Securities
Act or Rule 24b-2 under the Exchange Act which portions are
omitted and filed separately with the Securities and
Exchange Commission.
+ Indicates a management contract or compensatory plan or
arrangement.
** Exhibit 32.1 is being furnished and shall not be deemed to
be “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or
otherwise subject to the liability of that section, nor shall
such exhibit be deemed to be incorporated by reference in any
registration statement or other document filed under the
Securities Act of 1933, as amended, or the Exchange Act,
except as otherwise specifically stated in such filing.
*** XBRL (Extensible Business Reporting Language)
information is furnished and not filed or a part of a registration
statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933, as amended, is deemed not filed
for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, and is not otherwise subject to liability
under these Sections.
COVER PAGETABLE OF CONTENTSITEM 1.
BUSINESSITEM 1A. RISK FACTORSITEM 1B.
UNRESOLVED STAFF COMMENTSITEM 2.
PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. MINE
SAFETY DISCLOSURESITEM 5. MARKET FOR
REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIESITEM 6. SELECTED FINANCIAL
DATAITEM 7. MANAGEMENT S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONSYear in ReviewOther Recent EventsOur
Operating RevenuesOur Operating ExpensesOur Other Expense

(Income)Our Income TaxesTrends and Uncertainties Affecting
Our BusinessCritical Accounting Policies and EstimatesResults
of OperationsOperating RevenueOperating ExpensesOther
(income) expense, netIncome TaxesQuarterly Financial
DataLiquidity and Capital ResourcesCommitments and
Contractual ObligationsOff-Balance Sheet
ArrangementsGLOSSARY OF AIRLINE TERMSITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATAINDEX TO FINANCIAL
STATEMENTSStatement of OperationsBalance
SheetsStatements of Cash FlowsStatements of Shareholders
Equity (Deficit)Notes to Financial Statements1. Summary of
Significant Accounting Policies2. Recent Accounting
Developments3. Special Charges and Credits4. Letters of
Credit5. Credit Card Processing Arrangements6. Accrued
Liabilities7. Common Stock and Preferred Stock8. Stock-Based
Compensation9. Net Income per Share10. Debt, Related-Party
Transactions and Other Obligations11. Leases and Prepaid
Maintenance Deposits12. Financial Instruments and Risk
Management13. Defined Contribution 401(k) Plan14. Income
Taxes15. Commitments and Contingencies16. Fair Value
Measurements17. Operating Segments and Related
Disclosures18. Initial Public Offering and Tax Receivable
Agreement19. Quarterly Financial Data (Unaudited)Report of
Independent Registered Public Accounting FirmITEM 9.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSUREITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATIONITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCEITEM 11. EXECUTIVE
COMPENSATIONITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICESITEM 15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULESSignaturesExhibit Index
Wiki Template Part-1B: Analyzing the Current Situation
BUSI 4940 – Business Policy
Part 1-B(2): ASSESS CURRENT ORG. CAPABILITIES
1. DATA COLLECTION
Theory informs us that “org. capabilities” result from a
purposeful combination of a firm’s resources and organizing
processes, and that they are influenced by the desires and
preferences of managers. Therefore, in order to identify the
current capabilities of a firm, you must first understand the
current resources, organizing processes and management
preferences of the firm before you can identify the current org.
capabilities.
a. FIRM RESOURCES
From the case material and, when possible, outside sources,
identify as much as you can about the resources of the firm.
Consider both tangible and intangible resources in a variety of
areas. The list in Table 6.1 in your book provides a good
overview of resource areas where information could be
gathered, but you should tailor the collection of information to
the nature of the company you are examining. Note that at this
point you are mostly collecting a “laundry list” of what the firm
has, and thus should be as detailed as possible. Determination
of the particular value/importance of any given resource will
come in later steps.
b. MANAGEMENT PREFERENCES

Working from the case material, identify as much as you can
about the preferences of key managers. Note that, depending on
the case material, this may come as statements from specific
managers, as statements about the views of a department, or in a
variety of other forms. You are likely to have to “read between
the lines” in many instances to get a feel for the preferences of
the company as a whole and for those of key managers and/or
departments. Note that, as in previous steps, your goal at this
point is data collection. That is, you are trying to collect as
many indicators of management preferences as you can. Sorting
through and determining the importance of any particular view
will come in later steps.
c. ORGANIZING PROCESSES
The “Organizing Processes” piece of your analysis is focused on
examining and interpreting indicators of how the firm organizes
its assets in ways that create specific capabilities for the firm
and, ultimately, value for its customers. The “organizing” that
occurs, in turn, results from three organizational components: a)
organization structure, b) management processes, and c)
leadership behavior (see Chapter 8).
To appreciate the organizing processes of a firm, you need to
start by gathering information about each of the 3 components
and how they allow the firm to organize its assets. Working
from the case material, identify as much as you can about how
this is accomplished. Note that, depending on the case material,
information on organization structure, management processes,
and leadership behavior may come from multiple sources, e.g., a
picture of an organization chart, statements about “how things
are done” within the firm, or in a variety of other forms. You
are likely to have to “read between the lines” in many instances
to get a feel for each of the components of organizational
processes.
As in previous steps, your goal at this point is data collection.

That is, you are trying to collect as many indicators as you can
about the characteristics and the effectiveness of the processes
used by the firm to organize its assets. Sorting through and
determining the importance of particular aspects will come in
later steps.
2. ORGANIZATION AND ANALYSIS – Identifying Org.
Capabilities
On their own, resources, management preferences and
organization are simply pieces of the puzzle. Put them together
correctly, however, and a firm can generate powerful Org.
Capabilities. Now that you have information on the company’s
resources, management preferences, and organization you need
to evaluate them within this context and consider how they
combine to create the Org. Capabilities that are available for the
firm.
a. Current Org. Capabilities. Use the informationcollected in
the prior section to identify 3 –4 of the most significant org.
capabilities that the firm currently possesses and identify the
relative role played by resources, management preferences and
organizing processes in generating each of the capabilities. Err
on the side of listing more rather than less capabilities – the list
can be evaluated and narrowed in the next step. If you believe
that a capability could be stronger with the addition of (or a
change in) resources, management preferences or organization,
note this for future consideration.
How you organize this information is up to you, but you need to
be sure that for each identified org. capability you address the
following items.
Available Org. Capability
a. Role played in the Capability by

i. Resources
ii. Management Preferences
iii. Organizing processes
b. Additions or changes that might make this Capability
stronger (resources, management preferences, or organizing
capabilities)
b. Potential Org. Capabilities. Consider the resources,
management preferences and organization of the firm. Are
there any additional org. capabilities that could be developed by
building on what the firm already? That is, are there potential
org. capabilities available to the firm that could be developed
without too much additional investment?
Again, how you organize this information is up to you, but you
need to be sure that for each potential org. capability you
address a similar set of items as you did above.
Potential Org. Capability
a. Role played in the Capability by
i. Resources
ii. Management Preferences
iii. Organizing capabilities
b. Additional investments in resources, management
preferences, or organizing capabilities that would be needed to
fully develop this org. capability

3. CONCLUSIONS AND RECOMMENDATIONS
Given your analysis above, you are now in a position to arrive
at conclusions regarding the org. capabilities that the firm
possesses. You need to determine which, if any of these have
the potential to support strategic actions for the firm as it seeks
to build a sustainable competitive advantage. Said differently,
you need to evaluate each of the current and potential org.
capabilities in light of the VRIO criteria (see Chapter 6 as well
as supplements on blackboard).
Based on this evaluation, identify the 2 or 3 most important org.
capabilities that the firm currently has (from 3.2 A above)
and/or could easily develop (from 3.2 B above). Justify why
these are most important and clearly identify how they match up
with the VRIO criteria. Are any of them capable of generating
a sustainable competitive advantage?
a.
_____________________________________________________
______________________
_____________________________________________________
______________________
b.
_____________________________________________________
______________________
_____________________________________________________
______________________
c.
_____________________________________________________

______________________
_____________________________________________________
______________________
3
Spotlight:
The 50-seater bubble:
Boom to bust
Tailwinds
2013 airline industry trends
We are pleased to introduce Tailwinds, a new
publication for the airline industry. Each edition
of Tailwinds will provide an overview of the
state of the industry and highlight an important
trend or challenge facing the industry.
The first section looks at key metrics in the US
airline industry, such as growth and operating
income, as well as expense patterns since 2008.
While the industry has become better at managing
capacity and generating ancillary revenues, it
faces rising costs for labor, maintenance, and
fuel. Achieving profitability under these difficult
conditions requires operating discipline and new
ways of generating revenue.

The second section examines two critical issues
facing the regional airlines: the challenging
economics of operating 50-seat regional
jets and an “impending pilot shortage.” Our
discussion looks at the immediate and longer-
term impacts of these factors and how the
regional airlines are dealing with them.
We hope you will find our perspectives on the
industry and its challenges to be interesting,
informative, and enjoyable to read.
Table of contents
Part one: Current US domestic industry trends 2
Part two: The 50-seater bubble: Boom to bust 6
Contacts 10
2 Tailwinds: 2013 airline industry trends
Revenue growth in the US airline
industry has recovered to close to the
pre-recession levels of 2008. Except
for a dramatic dip in 2009, when the
recession significantly decreased
demand, airline revenue growth has
exceeded real GDP (Figure 1). Load
factors have increased by almost
four percent since 2008, primarily

due to better capacity discipline and
reduced supply driven by industry
consolidations.1 Since 2008, there
has been an eight percent reduction
in the number of flights, but only
a one percent reduction in total
passengers.2 Given these favorable
metrics, expectations of slightly lower
fuel prices, and continuing consumer
confidence, the industry is expected
to maintain profitability into 2013.
The International Air Transport
Association (IATA) supports this
view, noting that airline share prices
were up seven percent for the first
two months of the year, despite a five
percent rise in jet fuel prices.3
Looking at revenues: ticket
prices and ancillary fees
The price of a domestic airline ticket
has increased in line with inflation
over the last five years, growing less
than two percent in real terms (Figure
2). However, revenue was buoyed by
charging customers fees and selling
ancillary products. The increase was
driven primarily by baggage, standby,
and cancellation/change fees and,
to a lesser extent, priority access and
other miscellaneous charges.4
Part one: Current US domestic industry trends

-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Figure 1: Real GDP and airline revenue growth (2008–2012)
2008 2009 2010 2011 2012
Sources: US Bureau of Economic Analysis (2013), Company 10-
Ks (2008–2012), PwC analysis (based on large US carriers with
annual revenues greater than $4 billion in 2012)
US GDP growth Airline revenue growth
$300
$310
$320
$330

$340
$350
$360
$370
$380
$390
$400
Figure 2: Average domestic airfare and main ancillary fees
(2008–2012) ($US)
Source: Bureau of transportation statistics (2013)
Average domestic airfare Average domestic airfare with fees
1
Q
0
8
2
Q
0
8
3
Q

0
8
4
Q
0
8
1
Q
0
9
2
Q
0
9
3
Q
0
9
4
Q
0
9
1
Q

1
0
2
Q
1
0
3
Q
1
0
4
Q
1
0
1
Q
1
1
2
Q
1
1
3
Q

1
1
4
Q
1
1
1
Q
1
2
2
Q
1
2
3
Q
1
2
4
Q
1
2

The average customer paid $9.66 for
bag and change fees on top of base
airfare in the first quarter of 2012.5
Even more strikingly, the largest US
carriers collected more than $3.5
billion in baggage fees in 2012,6
adding nearly three percent to the
average airfare. When other fees and
revenues are added and averaged
across all passengers, the average
base airfare increased by almost nine
percent.7
In the past three years, the actual
average airfare has rebounded, while
bag and change fees have reached
a plateau. Since the third quarter of
2009, the average fare has increased
$60, or 11.6 percent after inflation
adjustment.8 On the other hand,
since 2009, revenue generated from
bag and change fees has remained
relatively stable on a per customer
basis. Faced with higher baggage
fees—ranging up to $45 for the first
bag—many passengers have opted
to travel light or not check baggage
at all. Consequently, baggage fee
revenue is flat. Therefore, airlines
are looking for ways to generate
ancillary revenue by strategically
charging fees and bundling services
that are aimed at enhancing the
travel experience.

Looking at expenses: fuel
Over the last decade, fuel costs have
more than doubled as a percentage
of operating expenses to become the
single greatest cost faced by airlines.
In 2003, fuel was about 12 percent of
costs, rising to 28 percent in 2012.9
Airlines have tried to mitigate this
increase through hedging strategies
and the use of newer, more efficient
aircraft and improved operating
procedures, such as reduced taxiing.
In 2012, the price of jet fuel averaged
$3.08 a gallon, greater than the record
high of $3.00 in 2011.
The crack spread, or gap between
jet fuel and unrefined oil prices,
has also increased to 25 percent of
total jet fuel cost as refineries focus
on higher-margin product, creating
an additional cost challenge for
airlines.10 Some carriers are taking
aggressive steps to address the crack
spread, even to the point of acquiring
refining capability.
Finally, some slight relief on fuel
costs is anticipated: The US Energy
Information Administration (EIA)
forecasts lower petroleum prices in
2013, from an average of $94 per
barrel in 2012 to $93 per barrel

in 2013 and $92 in 2014. This
moderation in fuel prices is expected
to help drive improved margins for
domestic airlines this year.
Looking at expenses: labor
The second-highest expense for
airlines is labor. Labor expenses,
primarily flight and ground crew
salaries, accounted for 23 percent of
US airline expenses in 2012.11 Over
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
Figure 3: Crack spread (2008–2012) ($US)
2008 2009 2010 2011 2012
Source: US Energy Information Administration (2013), PwC
analysis
Average jet fuel price (per gallon) Average unrefined oil price
(per gallon)

the last five years, labor expense for
airline employees has been increasing,
as shown in Figure 4, in part as a result
of merger and consolidation activity
in the airline industry. When airlines
negotiate merger terms, they often
agree to higher salaries and better
terms of employment in order to gain
union buy-in. This overall increase
in salaries has reversed some of the
reductions implemented during
past bankruptcies.
A n impending pilot shortage is
likely to result in pushing pilot
salaries higher. Starting in August,
new US commercial copilots will
need a minimum of 1,500 hours
f light experience, six times the
current requirement. Beginning
in 2014, the FA A will also require
more rest time bet ween f lights.
These changes are coming at a
time when baby boomer pilots are
reaching the mandator y retirement
age, militar y pilots are staying in
the militar y longer, and foreign
airlines are competing for pilots.
Looking at expenses:
maintenance costs

Aircraft maintenance expenses are
a significant cost for airlines as they
manage balance sheets by deferring
aircraft replacement. Maintenance
costs per seat mile increased from
0.77 cents in 2008 to 0.89 cents in
2012, as shown in Figure 5. This
increase of over 16 percent was driven
by an aging fleet and above-inflation
increases in engine maintenance
0.0
1.0
2.0
3.0
4.0
Figure 4: Labor expense per average seat mile (2008–2012)
2008 2009 2010 2011 2012
Labor expense: cents per ASM
3.08
3.49
3.68 3.63 3.76
Source: Company 10-Ks (2008–2012), PwC analysis (based on
large US carriers with annual revenues greater than $4 billion in
2012)

10
11
12
13
0.65
0.70
0.75
0.80
0.85
0.90
0.95
Figure 5: Maintenance expense per average seat mile and airline
fleet age
(2008–2012)
2008 2009 2010 2011 2012
Maintenance expense: cents per ASM
0.77 0.79
0.89
Average fleet age in years

2012)
0.76
0.83
costs.12 The average age of the US
fleet has increased from 11.8 years
in 2008 to almost 13 years in 2012.
Lower-cost carriers (LCCs) have
helped hold down average fleet
age through their aggressive fleet
expansion, but now LCC growth has
slowed. Engine maintenance costs
have increased because of aging
and reduced competition as engine
original equipment manufacturers
control an increasing share of the
engine maintenance, repair, and
overhaul market. Airlines are looking
to leverage advanced analytics
and predictive maintenance to
control these increases, but they are
hampered by legacy IT platforms,
which generally lack the ability
to capture and consolidate the
large amounts of data created by
newer fleets.

A decline in
operating income
Operating income per available seat
mile continued to decline after a
rebound in 2010, and in 2012 it fell to
an average of 0.28 cents, compared
with -2.51 cents in 2008 (Figure 6),
during the worst recession since
the 1930s. High fuel costs were a
significant driver of lower operating
income in 2008, 2011, and 2012, and
merger and bankruptcy issues put
further pressure on earnings in 2011
and 2012. The overall net result is an
industry that continues to struggle to
achieve consistent profitability.
Airlines continue to fight
for profitability
Airlines continue to be challenged by
high expenses, especially the cost of
jet fuel, and unplanned disruptions,
such as bad weather. Tony Tyler, IATA
CEO, called the industry “fragile.”13
However, there are several positive
trends operating in the industry.
During 2013, 155 new and more
efficient aircraft will be added to
North American fleets.14 The 14
percent reduction in domestic flights
from 2005 to 2011 allowed airlines
to manage a smaller network more
efficiently.15 According to Airlines for

America (A4A), an industry trade
group, US airlines are expected to
scale back capacity in 2013 to offset
fuel prices, projecting a 2.4 percent
reduction in scheduled domestic flights.16
A4A also said that last year, domestic
airlines achieved an 82.8 percent load
factor, the highest since 1945.17 Fleet
age is expected to decline over the next
decade as airlines use deliveries of
new technology aircraft to replace less
fuel efficient aircraft, reducing both
maintenance and fuel costs.
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
Figure 6: Operating income per available seat mile (2008–2012)
2008 2009 2010 2011 2012

Operating income: cents per ASM
-2.51
0.15
0.79
0.53
0.28
2012)
Part two: The 50-seater bubble: Boom to bust
Despite global economic challenges,
the airline industry has returned
to profitability through operational
improvements, consolidation,
and ancillary revenues. Passenger
demand is up, airlines are more
efficiently managing capacity, and
load factors are at a record high.
Last year, US airlines achieved their
second-best performance in more
than twenty years, as measured
by the number of on-time arrivals,
mishandled bags, consumer
complaints, and overbookings.18
Yet the industry as a whole is still

operating on very thin margins and
looking for additional ways to control
costs and increase profitability in a
time of high fuel prices. This struggle
is clearly manifest in the story of
the 50-seat jet, the workhorse of the
regional sector, which has become
unprofitable to fly.
The 50-seater bubble
Introduced in the mid-’90s based on
new engine designs, the 50-seater
was an economical replacement
for turboprops and larger jets that
enabled airlines to better match
capacity with demand. Airlines could
serve smaller cities and markets and
provide more connections between
the major airports and secondary
and tertiary airports, feeding into
long-haul and international routes.
The regional jets were also more
comfortable, quieter, and faster than
the older turbojets, creating better
flying conditions for commuters.
Given their attractive attributes, these
jets very quickly became the aircraft
of choice for most domestic routes
shorter than 1,000 miles. The demand
for the 50-seat jets understandably
exploded, creating the conditions for
the development of a market bubble.
The bursting bubble

Less than 20 years since its
introduction, the 50-seat jet is once
again having a game-changing
effect on the airlines—only this
time, the aircraft is being viewed as
a liability. Small size limits the jet’s
profitability at a time of consistently
high fuel prices and less attractive
capacity purchase agreements (CPAs).
In the last several years, with the
restructuring of the major airlines
through bankruptcy proceedings,
the majors altered their CPAs with
regional partners, leading to less
favorable terms for the regionals.
Bankruptcy proceedings changed
the duration of contracts and
reimbursement rates, creating a
“mismatch between the lease terms
for 50-seat aircraft and the duration
of the capacity purchase agreements
between US regionals and their
network partners.”19
Bigger regional jets
taking flight
The logical replacement for a 50-seat
jet is a larger, more economical jet. A
larger jet can spread its fuel costs and
overhead over more seats, reducing unit
costs. The move to larger jets is already
underway, as evidenced by some
recent moves by Delta. Delta closed
down its wholly owned subsidiary,

Comair, and has renegotiated its deal
with Pinnacle Airlines that will nearly
double the number of large planes it
flies for Delta and phase out its smaller
planes.20 Delta has limited 50-seat
flights to trips shorter than 700 miles
and has indicated it will phase out
these planes over the next few years.
It is purchasing 90-seat and leasing
100-seat jets and has already replaced
some regional jet flights with mainline
flights.21 Bombardier, one of the two
principal manufacturers of the 50-seat
jet, maintains that the 60- to 90-seaters
have started to take hold, with more
than 200 aircraft delivered in 2011.
It projects that by the end of 2031,
the total fleet of 60- to 90-seaters will
expand to 6,800 aircraft. (Figure 7) A
little more than half of the new delivery
aircraft will be regional jets, and the
Figure 7: Fleet growth forecast
World 2011 fl eet Deliveries Retirements 2031 fl eet
20-to-59 seat 3,600 300 2,700 1,200
60-to-99 seat 2,500 5,600 1,300 6,800
100-to-149 seat 5,100 6,900 3,000 9,000
Total 11,200 12,800 7,000 17,000
Bombardier Commercial Aircraft Market Forecast 2012–2031

Issues in transitioning
to larger jets
Scope clauses
Scope clauses, provisions in a pilot’s
contract that define the number and
size of aircraft a regional can fly on
behalf of a carrier, may have slowed
the transition to larger aircraft.
The 50-seat jet is still the dominant
regional jet and constitutes 43 percent
of the entire regional airline fleet,
according to the Regional Airline
Association.23 However, as contracts
expire and are renegotiated, the
scope clauses that held airlines to
50-seaters are falling by the wayside
as airlines attempt to increase the
size of their regional jets. One major
carrier has gained the ability to
increase its 70-plus-seat aircraft by 27
percent, while reducing the number of
50-seaters. Another major US carrier
negotiated to gradually shift 60
percent of 70-seaters to 76-seaters.24
With the handwriting on the wall,
what will happen to the 50-seaters?
Given their past ubiquity and scope
clauses limiting the number of
larger regional jets, it’s a safe bet
that 50-seaters will be part of the

regional fleet for some time. But how
many will continue to fly depends on
whether the economics of the aircraft
can be changed. A key variable in this
calculation is the renegotiation of
terms with lessors to lower lease rates.
Typically, lease rates are reduced to
a market clearing rate that offsets
inefficiency. However, it remains to be
seen whether even very low rates can
turn the 50-seater into a profit maker
in today’s environment.
Retired planes
Historically, most retired planes were
repurposed. Some went to other
parts of the world, such as Russia,
Africa, and Latin America. Others
were reconfigured as business jets
or cargo planes. However, the resale
market for 50-seaters does not look
very promising, since jet fuel is an
expensive commodity globally. Their
size makes them potential business
or private jets, but even during the
best of times, the resale market for
private and business jets is relatively
small. Perhaps some cargo companies
could deploy some 50-seaters to
replace turboprops for short-haul
flying, but even this usage will be
limited because of fuel considerations
and the planes’ limited payload, only
one-third that of a 737 aircraft.25

Ownership
With the supply of retired 50-seaters
outstripping demand, many planes
may sit in storage, leaving open
the question of who will suffer the
financial consequences. To a large
extent, the answer depends on who
owns the aircraft. In the case of the
50-seaters, some aircraft are owned
by network carriers that sublease
them to their regional partners.
Some manufacturers have backstop
agreements with residual value
guarantees that leave them with
some liability and provide them with
an incentive to help the airlines find
buyers. Less impacted by the issues
surrounding the 50-seat jets are most
of the leading airplane lessors, who
have focused more on ownership of
mainline aircraft. A notable exception
is GE Capital Aviation Services, which
owns nearly 70 percent of all leased
regional jets.26
Longer-term impact
on airlines
At the start of the growth of the
50-seater market, many mainline
carriers owned their regional
subsidiaries to gain greater control
over their schedules, routes, and
brand. It also provided a direct feed

of pilot talent from the regional to the
mainline owner.
Today, this ownership model is
being re-examined, especially in
light of the challenging economics
of the 50-seat jets. If mainline
carriers own regionals, they may
continue to incur losses because
of the number of 50-seat jets still
flying. Also, ownership constrains a
mainline carrier from competitive
negotiations with different regionals.
rest will be modern turbojets, which are
more economical to operate on short
flights and provide a “natural hedging
tool for air carriers against high and
volatile fuel prices.”22
In addition to being more fuel efficient,
the larger jets offer an opportunity
to increase fares. With 20 or more
additional seats, airlines can offer first
class and premium economy sections,
an advantage for both the airlines and
their customers.
Consequently, most mainline
carriers have chosen to sell their

regional businesses.
Going forward, airlines will also
have to decide whether they want to
own or lease the 70–90-seat jets that
are supplanting the 50-seaters. If an
airline thinks these jets will lose their
value as quickly as the 50-seaters,
then it is unlikely to choose an
ownership model.
Impact on manufacturers
Even when the demand for 50-seaters
was at its peak, the two primary
manufacturers of these planes,
Embraer and Bombardier, anticipated
that the growth of airline travel would
create the need for larger planes on
many routes. Before fuel prices began
to climb, Embraer and Bombardier
stopped making 50-seaters for the US
market and refocused their resources
on building bigger jets. Embraer
is concentrating on jets in the
70–90 seat range and is now facing
competition from Mitsubishi Aircraft
for that segment of the market.
Bombardier is betting on 120-seaters,
putting it in direct competition with
Boeing and Airbus.
Impending pilot shortage
Less than a year after a commuter
plane crash in 2009, Congress, in an

attempt to improve airline safety,
passed legislation mandating more
training time for new pilots. The
ruling, which is set to take effect
in August 2013, will require most
commercial pilots to have 1,500
hours of prior flight experience—six
times the current minimum. The
Federal Aviation Administration has
proposed some exceptions, reducing
the requirement for military pilots to
750 hours and graduates of accredited
university training programs to 1,000
hours.27 But the military exception
is not likely to change the dynamic;
military pilots have been staying in
the military for longer periods of
time.28
Severely aggravating the expected
shortage is the impending retirement
of thousands of pilots at major airlines
who are reaching the mandatory
retirement age of 65.29 Approximately
3,000 pilots a year have retired in
recent times, and that number may
jump to 10,000 a year over the next ten
years.30 These retirements will begin
at about the same time that a second
new regulation is set to take effect
early in 2014, mandating more daily
rest time for pilots. It is estimated that
this regulatory change will require an
additional five percent increase in the
number of commercial pilots, further

intensifying the pilot shortage.31
Regional airlines are likely to
feel the greatest impact of this
pilot shortage because new pilots
typically start their commercial
careers f lying for regionals. Many
people now in pilot training
programs will find it difficult to log
enough hours before the deadline.
In addition, many new pilots choose
to start their careers overseas,
where the pay is often better.32
Combating the
pilot shortage
In the short term, the pilot shortage
may cause some regional airlines to
curtail flight schedules, eliminate
lower-trafficked routes, and raise
airfares. In the long term, the
regionals may have to be more
engaged in filling the pilot pipeline
by funding training and subsidizing
pre-certification flying time.
They may also have to increase
compensation packages in order
to attract more potential pilots,
particularly given that the regulation
requiring additional flying experience
will increase the investment required
to become a commercial pilot.
In anticipation of a pilot shortage, one
mainline-owned regional carrier said

it would offer a $5,000 signing bonus
at the start of training in exchange
for a two-year commitment.33 The
regionals may also look to strike
deals with the mainline airlines
to help them with funding and
compensation, since mainline
carriers rely on regionals to provide
experienced pilots. For mainline
airlines that owned regionals, this
pipeline was a natural progression.
But now, with many regional airlines
spun off from their mainline parent,
carriers may have to look for other
means to ensure they have enough
pilots. One example is the agreement
between Delta and Pinnacle Airlines,
an independent regional airline that
filed for bankruptcy protection last
year. As part of that deal, Pinnacle
pilots will be hired by Delta, allowing
for “career progression.”34
A view of the future
The 50-seat jets are being replaced by
70-to 90-seaters principally because
larger jets make more economic sense
in an era of high fuel prices. Yet many
50-seaters may remain to provide
service to small cities, as larger jets
may not be the best choice for less

populated areas.
Another factor affecting the number
of 50-seaters is the scope clause.
While three of the largest mainline
carriers have negotiated the addition
of 70-plus-seat jets to their fleets,
restrictions still exist. Delta’s deal
with its pilots, for example, reduces
the number of its 50-seaters to 125,
but also caps the number of 70-seaters
at 102.35
Practically, though, the move to
70-seaters may also be delayed by
the inability of manufacturers to fill
orders quickly enough. This shortage
could result in new partnerships
among the airlines, as those that were
first to order the larger planes will
have a competitive advantage.
Will the 70-seater go the way of the
50-seater and be replaced as quickly
by the 90-seater? Probably not.
The story of the 50-seaters may be
an exception rather than a change
in the normative retirement age
of aircraft. The next generation of
aircraft is more likely to be a 30-year
asset, with manufacturers looking
to make incremental improvements.
The 70-seater, built with a focus on
creating more efficient fuel burn,

offers room for engine optimization
that will help to lower maintenance
costs and extend the life of
the aircraft.
But if the mainline airlines fall into
bankruptcy again and scope clauses
are further loosened, we may yet see
a second bubble—only this time with
the 70-seaters.
Endnotes
1, 4, 5, 11, 12, 24, 25 PwC analysis
2 Sources: US Bureau of Economic Analysis (2013), Company
10-Ks (2008–2012), PwC analysis (based on large US carriers
with annual revenues greater
than $4 billion in 2012)
3 IATA.org, Financial Forecast, Mar. 2013
6, 8, 9, 16 Bureau of Transportation Statistics
7 PwC, Aviation perspectives: Airline mega-merger impact on
the US domestic airline industry, Dec. 12, 2012
10 US Energy Information Administration (2013), PwC analysis
13 SITA Air Transport IT Summit, Brussels, Jun. 2012.Quoted
in Airline Leader, Aug.-Sep. 2012,p. 21
14 Bloomberg Industries, "Airline Profits Rise on Lower Fuel,
Tighter Capacity: Outlook," Nov. 27, 2012
15 Bureau of Transportation Statistics, Flights: All U.S.
Carriers - All Airports
16 ainonline.com, Air Transport Perspective, “U.S. airlines will
reduce capacity next year to help offset high jet fuel prices,
according to Airlines for
America,” Nov. 12, 2012
17 airlines.org, “A4A announces U.S. airlines achieve 83
percent passenger load factor, highest level since 1945,”
18 March 26, 2013 19 USA Today, “U.S. airline quality has

second best year in 20 years,” Apr. 8, 2013
19 CAPA, Aviation Analysis, “Republic works to restructure
loss-making 50-seat operations at its subsidiary Chautauqua,”
May 3, 2012
20, 23, 34 online.wsj.com, “Judge Approves Deals Between
Pinnacle, Delta Air,” Jan. 16, 2013
21 online.wsj.com, “Are These Model Airplanes?” Feb. 27,
2013
22 Bombardier Commercial Aircraft Market Forecast 2012–
2031
26 flightglobal.com, Aircraft Finance Report 2012
27 Federal Aviation Administration, RIN 2120–AJ67, Pilot
Certification and Qualification Requirements for Air Carrier
Operations
28, 30 chicagotribune.com, “Arrival time for a pilot shortage?"
Jan. 26, 2013
29 USA Today, "Pilot shortage looms for airline," Jan. 6, 2013
31 online.wsj.com, “Airlines Face Acute Shortage of Pilots,”
Nov. 12, 2012
32 npr.org, “Airlines Fear Pilot Shortage Amid New Federal
Safety Rules,” Dec. 26, 2012
33 examiner.com, “[Carrier] offers signing bonus as pilot
shortage looms,” Jan. 12, 2013
35 ainonline.com, “U.S. Scope Clause ‘Relief’ a Double-Edged
Sword,” June 11, 2012
© 2013 PwC. All rights reserved. “PwC” and “PwC US” refer to
PricewaterhouseCoopers LLP, a Delaware limited liability
partnership which is a member firm of
PricewaterhouseCoopers International Limited, each member
firm of which is a separate legal entity. This document is for
general information purposes only, and
should not be used as a substitute for consultation with
professional advisors.

PwC refers to the US member firm, and may sometimes refer to
the PwC network. Each member firm is a separate legal entity.
Please see www.pwc.com/structure for
further details.
This content is for general information purposes only, and
should not be used as a substitute for consultation with
professional advisors.
http://www.pwc.com/us/airlines
Jonathan Kletzel
US Transportation & Logistics Leader
+1 (312) 298 6869
[email protected]
Richard Wysong
US Transportation & Logistics Director, Advisory
+1 (415) 498 5353
[email protected]
Alexander T. Stillman
US Transportation & Logistics Director, Advisory
+1 (202) 487 8086
[email protected]
For general inquiries, contact:
Diana Garsia
US Transportation & Logistics Sr. Marketing Manager
+1 (973) 236 7264
[email protected]
Contacts
To have a deeper conversation about this subject or other
related
airline/transportation matters, please contact:

Guidelines for Completing Individual Assignment Part-2
“Analysis of the Firm”: Spirit Airlines
Due: 6:00 PM, June 16th, 2014
Please use the template for Part 1-B of the Strategic Business
Integration Process to help you complete this analysis. Be sure
to support your stance with evidence culled through your
research on the firm
OVERVIEW
What is the mission and vision of the firm? If you believe the
firm is unclear on one or both of these, please explain. Identify
the components of the firm’s current strategy (i.e., its goals,
product/market focus, and value proposition). If you believe
the firm is unclear on one or more components of its strategy,
please explain. Identify specifics about the firm’s capabilities in
three areas:
a. Customer Capabilities
b. Operational Capabilities
c. Innovation Capabilities
How would you characterize the overall performance of the firm
(see Chapter-1)? Why? Be sure to demonstrate how you used
the performance analysis technique, taught in class, to analyze
the firm’s overall performance (i.e., show how you integrated
information about financial performance, market performance
and organizational health of the firm to arrive at your
conclusion about the overall performance of the firm).
Here is a suggested OUTLINE for your report:
I. Brief Introduction/Exec Summary
a. Summarize major conclusions about the firm’s strategic
orientation, clarity and consistency of strategy components, and
overall performance now and trends
b. Briefly describe your approach: what info gathered, how

analyzed, what tools, etc.
II. Assessing Firm Strategy
a. Describe the mission, values, and major goals of the firms
b. Describe the firm’s strategic orientation (P/M Focus and
Value Prop.)
c. Describe the core activities/major capabilities by the three
main areas; you may address capabilities the firm has, those
they have but are underutilized, and those that are notably
missing
i. Customer capabilities
ii. Operational capabilities
iii. Innovation capabilities
III. Assessing Firm Performance
a. Describe the Operating Performance of the firm (position,
profitability, and market performance)
b. Describe the organizational health of the firm
c. Conclusions as to the performance of the firm (performance
matrix)
Conclusions on trends – speculate on future of the firm as is;
how urgent is the need for change?

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