Fresh Start Accounting- 2024 Bankruptcy

9 Months Ended

Sep. 30, 2025

Fresh Start Accounting- 2024 Bankruptcy

2025 Chapter 11 Bankruptcy Proceedings

Voluntary Filing under Chapter 11

On August 29, 2025, Spirit and its Debtor affiliates filed voluntary petitions under Chapter 11 of the Bankruptcy Code in connection with the Chapter 11 Cases. Each of the Debtors in the Chapter 11 Cases (other than Spirit Aviation Holdings, Inc.) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on November 18, 2024 related to the Prior Bankruptcy.

The Company has applied Accounting Standards Codification (“ASC”) 852 - Reorganizations in preparing the condensed consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. In addition, pre-petition Debtor obligations that may be impacted by the Chapter 11 Cases have been classified as liabilities subject to compromise on the Company's condensed consolidated balance sheet as of September 30, 2025. These liabilities are reported at the amounts the Company anticipates will be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts.

Debtor-In-Possession

The Debtors are currently operating as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has approved motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Cases on the Company’s operations, customers and employees. In general, as debtors-in-possession under the Bankruptcy Code, the Debtors are authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Pursuant to first day motions filed with the Bankruptcy Court, the Company received approval from the Bankruptcy Court for a variety of “first day” motions to continue its ordinary course operations during the Chapter 11 Cases.

Automatic Stay

Subject to certain exceptions under the Bankruptcy Code, pursuant to Section 362 of the Bankruptcy Code, the filing of Spirit’s Chapter 11 Cases automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of Spirit or Spirit's property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise

control over property of Spirit’s bankruptcy estate, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above and other protections afforded by the Bankruptcy Code, governmental authorities may determine to continue actions brought under their police and regulatory powers.

Executory Contracts

Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, amend or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this document, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease of the Debtors, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code.

On September 5, 2025, the Debtors filed a motion under Section 1110 of the Bankruptcy Code ("Section 1110") to preserve the Debtors' right to retain and operate certain aircraft, aircraft engines and other equipment (collectively "Aircraft Counterparties") that are leased or subject to a security interest or conditional sale contract that is specifically governed by Section 1110. The motion sought authority for the Debtors to enter into Section 1110 agreements either to perform all of the obligations under the leases, security agreements, or conditional sale contracts and cure all defaults thereunder (other than defaults constituting a breach of provisions relating to the filing of the Chapter 11 Cases, the Debtors' insolvency or other financial condition of the Debtors) or to extend the Section 1110(a)(1) deadline and enter into 1110(b) stipulations with the Aircraft Equipment Counterparties ("Aircraft Counterparties") to, among other things, extend the 60-day period set forth in section 1110(a) ("60-day period"). On October 7, 2025, the Bankruptcy Court entered an order approving the motion.

On October 21, 2025, the Bankruptcy Court entered an order granting the Debtors’ First Omnibus Motion to reject certain equipment leases pursuant to Section 365 of the Bankruptcy Code, authorizing the rejection of leases associated with 58 aircraft. Pursuant to the order and in accordance with Section 365 and Bankruptcy Rule 6006, the rejection of the leases was approved effective as of the applicable rejection date of October 27, 2025.

In addition, on October 27, 2025, the Debtors notified the Aircraft Counterparties of the amounts required to bring certain related agreements current following the 60-day period and began making payments associated with certain executory contracts. In addition, the Debtors made adequate protection payments under the Revolving Credit Facility for continued use of the collateralized assets.

Potential Claims

The Debtors intend to file with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Debtors, subject to the assumptions to be filed in connection therewith. The schedules and statements may be subject to further amendment or modification after filing. As part of the Chapter 11 Cases, persons and entities believing that they have claims or causes of action against the Debtors may file proofs of claim evidencing such claims. The Debtors have not yet set a bar date (deadline) for holders of claims to file proofs of claim. Differences in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Debtors may ask the Bankruptcy Court to disallow claims that the Debtors believe are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. Accordingly, the ultimate number and amount of allowed claims is not determinable at this time.

In addition, as a result of this process, the Debtors may identify additional liabilities that will need to be recorded or reclassified to liabilities subject to compromise in the condensed consolidated balance sheets. In light of the substantial number of claims that may be filed, the claims resolution process may take considerable time to complete and may continue for the duration of the Debtors’ bankruptcy cases.

Liabilities Subject to Compromise

The accompanying condensed consolidated balance sheets as of September 30, 2025 include amounts classified as liabilities subject to compromise, which represent pre-petition liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases. These amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases, and may differ from actual future settlement amounts paid. Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process. The Company will continue to evaluate these liabilities throughout the Chapter 11 process and adjust amounts as necessary. Such adjustments may be material. Refer to Note 16, Debt and Other Obligations for additional information.

Liabilities subject to compromise include unsecured or under-secured liabilities incurred prior to the Petition Date. Such liabilities are reported at the expected amount of the total allowed claims, even if they may ultimately be settled for lesser amounts. This requires management to apply judgment and make estimates based on available information, including the nature of the claims and the status of the bankruptcy proceedings. As the bankruptcy process evolves and additional information becomes available, the Company may revise its estimates of allowed claims.

These liabilities represent the amounts expected to be allowed on known or potential claims to be resolved through the Chapter 11 Cases and remain subject to future adjustments based on negotiated settlements with claimants, actions of the Bankruptcy Court, rejection of executory contracts, proofs of claims or other events. Additionally, liabilities subject to compromise also include certain items that may be assumed under a plan of reorganization, and as such, may be subsequently reclassified to liabilities not subject to compromise. Generally, actions to enforce or otherwise effect payment of prepetition liabilities are subject to the automatic stay. Refer to Note 1, Basis of Presentation for additional information.


	September 30, 2025
	(in millions)
Accounts payable	$	105.6
Debt	1,814.2
Operating leases	4,635.4
Deferred gains and other liabilities	136.3
Liabilities subject to compromise	$	6,691.5

Determination of the value at which liabilities will ultimately be settled cannot be made until the Bankruptcy Court approves a plan of reorganization. The Company will continue to evaluate the amount and classification of its pre-petition liabilities. Any additional liabilities that are subject to compromise will be recognized accordingly, and the aggregate amount of liabilities subject to compromise may change.

Reorganization Items, Net

The Debtors have incurred and will continue to incur significant costs associated with the reorganization, primarily the write-off of original issue discount and deferred long-term debt fees on debt subject to compromise, legal and professional fees. The amount of these costs, which since the Petition Date are being expensed as incurred, are expected to significantly affect the Company’s results of operations. In accordance with applicable guidance, costs associated with the bankruptcy proceedings have been recorded as Reorganization items, net within the Company's condensed consolidated statements of operations for the three months ended September 30, 2025.

Reorganization items incurred as a result of the Chapter 11 Cases are presented separately in the Company's condensed consolidated statements of operations. For the three months ended September 30, 2025 and the Successor Period, the Company recorded $126.0 million of reorganization expense which consisted of the following items:



	(in millions)
Unamortized fair value adjustments (1)	$	75.5
Professional fees and other	41.0
Unamortized debt issuance costs	9.5



Reorganization (Gain) Expense, net	$	126.0

(1) Unamortized fair value adjustments represent the adjustments recorded upon the adoption of fresh start accounting on the Emergence Date from the 2024 Bankruptcy, related to the Exit Secured Notes and unsecured term loans.

Since the Petition Date through September 30, 2025, the Company paid $11.3 million in cash for reorganization items related to the 2025 Chapter 11 Bankruptcy.

During the Chapter 11 Cases, the Company expects its financial results to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact its condensed consolidated financial statements.

NYSE American Listing Status

In connection with the Company's emergence from the 2024 Bankruptcy and consistent with its contractual obligations, the Company applied to list its common stock for listing on the NYSE American stock exchange. Trading began on April 29, 2025, under the symbol FLYY.

Subsequently, on September 2, 2025, Spirit Aviation Holdings, Inc. (the “Company”) received a notice from the staff of NYSE Regulation (“NYSE Regulation”) that it had commenced proceedings to delist the common stock, par value $0.0001, of the Company (the “Common Stock”) from NYSE American LLC (“NYSE American”) and that trading in the Common Stock was immediately suspended on September 2, 2025. NYSE Regulation decided that the Company is no longer suitable for listing pursuant to Section 1003(c)(iii) of the NYSE American Company Guide after the Company disclosed in its August 29, 2025 Current Report on Form 8-K that the Company and its Debtor affiliates filed voluntary petitions under Chapter 11 of title 11 of Bankruptcy Code in the Bankruptcy Court on August 29, 2025.

NYSE American submitted an application to the U.S. Securities and Exchange Commission to delist the Common Stock upon completion of applicable procedures. The Company did appeal the determination and, therefore, it was delisted from NYSE American. As a result of the suspension and delisting, the Common Stock is being traded in the OTC Pink Limited Market under the symbol "FLYYQ". The OTC Pink Limited Market is a significantly more limited market than NYSE American, and quotation on the OTC Pink Limited Market likely results in a less liquid market for existing and potential holders of the Common Stock to trade in the Common Stock and could further depress the trading price of the Common Stock. The Company can provide no assurance that its Common Stock will continue to trade on this market, whether broker-dealers will continue to provide public quotes of the Common Stock on this market, or whether the trading volume of the Common Stock will be sufficient to provide for an efficient trading market. The transition to over-the-counter markets will not affect the Company’s business operations.

Subsequent Events

Post-petition Financing

On October 31, 2025, the Bankruptcy Court approved a final order which authorized the Debtors to obtain post-petition financing with a multi-draw senior secured non-amortizing super-priority priming debtor-in-possession facility (the “DIP Facility”) in the aggregate principal amount of up to $1.2 billion compromising:

•New money loans in an aggregate principal of up to $475.0 million. On October 14, 2025, the Company drew $200.0 million and on November 7, 2025 the Company drew $50.0 million. The remaining amount will be available to be drawn in two separate draws. Each draw is subject to its own specific conditions.

•Roll-up of pre-petition secured notes that are validly tendered in the syndication of the DIP Facility not to exceed the lesser of (i) the total aggregate amount of principal and (x) accrued and unpaid interest thereon through the Petition Date and (y) solely to the extent permitted under Section 506(b) of the Bankruptcy Code, all interest accrued thereon after the Petition Date and (ii) $750.0 million.

AerCap Transactions

On October 10, 2025, the Bankruptcy Court approved a global restructuring term sheet between the Company and AerCap, a key aircraft lessor. The agreement provides for a comprehensive restructuring of aircraft lease and purchase arrangements, subject to definitive documentation and certain conditions, including execution of amendments with Airbus. Key terms include:

•certain arrangements in respect of specific aircraft and engines;

•the assumption of 10 leases and the rejection of 27 leases;

•the entry into 30 new, post-petition leases;

•the settlement of claims and disputes and agreement to the terms of mutual releases in exchange for, among other things, certain payments, including a $150.0 million liquidity payment by AerCap, which the Company received on October 27, 2025, and allowed unsecured claims and administrative expense claims; and

•the terms of the transfer of purchase rights and options in respect to 52 aircraft, including purchase options for up to 10 aircraft.

Emergence from Voluntary Reorganization under the 2024 Chapter 11 Bankruptcy

Voluntary Filing under 2024 Chapter 11 Bankruptcy

On November 18, 2024, Spirit Airlines commenced a voluntary case under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York, and, on November 25, 2024, certain of Spirit Airlines' subsidiaries (together with Spirit Airlines, the “Company Parties”) also filed voluntary petitions seeking relief under Chapter 11 of the Bankruptcy Code and joined the 2024 Bankruptcy Case. On February 20, 2025, the Bankruptcy Court entered an order confirming the 2024 Bankruptcy's First Amended Joint Chapter 11 Plan of Reorganization of Spirit Airlines, Inc. and Its Debtor Affiliates (the “Plan of Reorganization” or the “Plan”). On March 12, 2025 (the “Emergence Date” or "Effective Date"), the Company Parties emerged from the 2024 Bankruptcy in accordance with the confirmed Plan of Reorganization.

Plan of Reorganization

On the Emergence Date, all conditions precedent to the effectiveness of the Plan were either satisfied or waived, and the Company Parties emerged from the Prior Bankruptcy. In accordance with the Plan and effective as of the Emergence Date:

•Cancellation of Senior Secured Notes and Convertible Notes. The then-outstanding Senior Secured Notes (Class 4 Claims) and Convertible Notes (Class 5 Claims) were canceled and terminated. Refer to Note 16, Debt and Other Obligations, for additional information.

•Exit Secured Notes. Certain subsidiaries of Spirit issued $840.0 million of senior secured notes due 2030 (the “Exit Secured Notes”), at an interest rate of (x) 12.00% per annum, of which 8.00% per annum shall be payable in cash and 4.00% per annum shall be payable in-kind or, (y) if elected by the Company in advance of each quarterly interest period, at 11.00% per annum payable in cash, to certain creditors in the 2024 Bankruptcy. Refer to Note 16, Debt and Other Obligations, for additional information.

•Exit Revolving Credit Facility. Spirit and certain of its subsidiaries entered into Amended and Restated Credit and Guaranty Agreement with the lenders of the revolving credit facility due in 2026 (“Exit RCF” or "Exit Revolving Credit Facility") that provides revolving credit loans and letters of credit in an aggregated amount equal to $275.0 million and an uncommitted incremental revolving credit facility up to $25.0 million. The commitment of $275.0 million will be reduced to $250.0 million on September 30, 2026. Concurrently, Spirit Airlines paid the then-outstanding Revolving Credit Facility of $300.0 million (Class 3 Claims) in full. Refer to Note 16, Debt and Other Obligations, for additional information.

•Termination of the Debtor-in-Possession Financing. The $300.0 million senior secured superpriority debtor-in-possession facility (the “DIP Facility”) that the Company Parties previously entered into was fully repaid and subsequently terminated. Refer to Note 16, Debt and Other Obligations, for additional information.

•Common Stock and Warrants. Spirit issued 16,067,305 shares of a single class of common stock (the “Common Stock”) and 24,255,256 warrants to purchase shares of Common Stock (the “Warrants”) to certain creditors in the 2024 Bankruptcy, as further described in Note 9, Equity, and certain adjustments set forth in the Plan.

•Cancellation of Prior Equity Securities. All common stock, unvested equity awards, any outstanding PSP loan warrants and all other equity interests in Spirit Airlines that were outstanding immediately prior to the Emergence Date were terminated and canceled. Refer to Note 9, Equity, for additional information.

•Settlement of Claims and Fees. General Administrative Claims, Professional Fee Claims, and fees payable to U.S. Trustee were or will be paid in full.

•Unimpaired Claims. Other Secured Claims and Other Priority Claims were paid or will be paid in full in the ordinary course, were reinstated, or otherwise rendered unimpaired. General Unsecured Claims were reinstated or otherwise rendered unimpaired.

•Election of Directors. Spirit appointed new members to its board of directors, and the directors of Spirit Airlines stepped down.

•Charter and Bylaws. Pursuant to the Plan, Spirit amended and restated its certificate of incorporation (the “Charter”) and bylaws (the “Bylaws”), each of which became effective on the Effective Date.

•Holding Company Reorganization. The Company completed a corporate reorganization (the “Corporate Reorganization”) pursuant to which Spirit became the new parent company, with Spirit Airlines becoming a wholly owned subsidiary of Spirit and converting from a Delaware corporation to a Delaware limited liability company. Spirit became the successor issuer to Spirit Airlines for SEC reporting purposes pursuant to Rule 15d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The costs of efforts to restructure the Company’s capital, prior to and during the 2024 Bankruptcy, along with all other costs incurred in connection with the Prior Bankruptcy, have been material.

Reorganization Items

Any expenses and losses incurred or realized as of or subsequent to November 18, 2024 through March 12, 2025 and as a direct result of the 2024 Bankruptcy, are recorded within reorganization (gain) expense on the Company's condensed consolidated statements of operations. For the Current Predecessor Period, the Company recorded $421.5 million of reorganization gain which consisted of the following items (in millions):



	Predecessor

Reorganization (Gain) Expense	Period from 1/1/25 through 3/12/25
Loss on Equity Rights Offering ("ERO") distribution and backstop issuance	$	115.8
Retained Professional fees	29.7
Reclass of ERO related expense and Exit RCF financing costs	19.8
Extinguishment of unvested stock compensation awards	7.6
Write off of prior RCF prepaid loan fees	3.0
Miscellaneous fees	0.6
Recognition of Exit Secured Notes and Exit RCF financing costs	(13.9)
Fresh start valuation adjustment	(22.5)
(Gain) on Class 4 settlement	(232.3)
(Gain) on Class 5 settlement	(329.3)
Reorganization (Gain) Expense, net	$	(421.5)

Special Charges, Non-Operating

Expenses incurred prior to November 18, 2024 or after March 12, 2025 in relation to the 2024 Bankruptcy are recorded within special charges, non-operating on the Company's condensed consolidated statements of operations. Refer to Note 8, Special Charges (Credits), non-operating for additional information.

Fresh Start Accounting

On the Emergence Date from the 2024 Bankruptcy, the Company qualified for and adopted fresh start accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 – Reorganizations (ASC 852), which specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. The application of fresh start accounting resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the implementation of the Plan and the application of fresh start accounting, these unaudited condensed consolidated financial statements after the Emergence Date are not comparable to the financial statements before that date and the historical financial statements on or before the Emergence Date are not a reliable indicator of its financial condition and results of operations for any period after the Company’s adoption of fresh start accounting. Refer to Note 5, Fresh Start Accounting- 2024 Bankruptcy for additional information.

Fresh Start Accounting- 2024 Bankruptcy

Adoption of Fresh Start Accounting

In connection with the emergence from the 2024 Bankruptcy and in accordance with ASC 852, the Company qualified for and adopted fresh start accounting on the Emergence Date because (1) the holders of the then-existing common shares of the Predecessor received less than 50% of the Common Stock shares of the Successor outstanding upon emergence and (2) the reorganization value of the Predecessor’s assets immediately prior to confirmation of the Plan of $8,720 million was less than the total of all post-petition liabilities and allowed claims of $9,819 million.

In accordance with ASC 852, upon adoption of fresh start accounting, the reorganization value derived from the enterprise value as disclosed in the Plan was allocated to the Company’s assets and liabilities based on their fair values in accordance with FASB ASC Topic No. 805 - Business Combinations (ASC 805) and FASB ASC Topic No. 820 - Fair Value Measurements (ASC 820), with limited exceptions (such as deferred taxes). The amount of deferred income taxes recorded due to the fair value adjustments to assets and liabilities was determined in accordance with FASB ASC Topic No. 740 - Income Taxes.

With the application of fresh start accounting, the Company allocated its reorganization value to its individual assets and liabilities based on their estimated fair value. Accordingly, the condensed consolidated financial statements after March 12, 2025 are not comparable with the condensed consolidated financial statements as of or prior to that date. The Effective Date fair values of the Successor’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheet of the Predecessor.

Reorganization Value

The reorganization value represents the fair value of the Successor’s total assets before considering certain liabilities and is intended to approximate the amount a willing buyer would pay for the Successor’s assets immediately after restructuring. The Plan confirmed by the Bankruptcy Court estimated a range of enterprise values between $6.1 billion and $6.8 billion.

The following table reconciles the enterprise value to the reorganization value of Successor’s assets that has been allocated to the Company’s individual assets as of the Fresh Start Reporting Date (in millions):


	Fresh Start Reporting Date
Enterprise Value	$	6,450
Plus: Excess cash and cash equivalents	508
Plus: Non-operating assets	447
Plus: Current and other liabilities (excluding debt)	1,315
Reorganization Value	$	8,720

Analyses

Management's advisors determined the enterprise and corresponding equity value of the Successor using various valuation methods, including (i) discounted cash flow analysis (“DCF”), (ii) public comparable analysis and (iii) precedent transaction analysis. The use of each approach provides corroboration for the other approaches.

DCF Analysis. The DCF analysis is an enterprise valuation methodology that estimates the value of an asset or business by calculating the present value of expected future cash flows to be generated by that asset or business plus a present value of the estimated terminal value of that asset or business. Management's advisor’s DCF analysis used estimated debt-free, after-tax free cash flows through 2028. These cash flows were then discounted at a range of estimated weighted average costs of capital (“Discount Rate”) for Spirit. The Discount Rate reflects the estimated blended rate of return that would be expected by debt and equity investors to invest in Spirit's businesses based on a target capital structure. The enterprise value was determined by calculating the present value of Spirit’s unlevered after-tax free cash flows plus an estimate for the value of Spirit beyond the period covered by the projections reviewed known as the terminal value.

Selected Publicly Traded Companies Analysis. The selected publicly traded companies analysis is based on the enterprise values of selected publicly traded companies that have operating and financial characteristics comparable in certain respects to Spirit. For example, such characteristics may include similar industry, size, and scale of operations, operating margins, growth rates, and geographical exposure. Under this methodology, certain financial multiples that measure financial performance and value are calculated for each selected company and then applied to Spirit’s financials to imply an enterprise value for Spirit. Management advisor used, among other measures, enterprise value (defined as market value of equity, plus book value of debt and book value of preferred stock and minority interests, less cash, subject to adjustments for underfunded obligations and other items where appropriate) for each selected company as a multiple of such company’s publicly available consensus projected EBITDAR for fiscal years 2025 and 2026. Although the selected companies were used for comparison purposes, no selected publicly traded company is either identical or directly comparable to Spirit or its businesses. Accordingly, management advisor’s comparison of selected publicly traded companies to Spirit and its businesses, and its analysis of the results of such comparisons, was not purely mathematical, but instead involved considerations and judgments concerning differences in operating and financial characteristics and other factors that could affect the relative values of the selected publicly traded companies and Spirit. The selection of appropriate companies for this analysis is a matter of judgment and subject to limitations due to sample size and the public availability of meaningful market-based information.

Selected Transaction Analysis. The selected transactions analysis is based on the implied enterprise values of companies and assets involved in publicly disclosed merger and acquisition transactions for which the targets had operating and financial characteristics comparable in certain respects to Spirit. Under this methodology, the enterprise value of each such target is determined by an analysis of the consideration paid and the net debt assumed in the merger or acquisition transaction. The enterprise value is then compared to a selected financial metric, in this case, EBITDAR for Spirit, respectively, for fiscal years 2025 and 2026, to determine an enterprise value multiple. In this analysis, the EBITDAR enterprise value multiples were utilized to determine a range of implied enterprise value for Spirit.

The enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in the Company's valuations, as well as the realization of certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond the Company's control. Accordingly, the Company cannot provide assurances that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially.

Valuation Process

The reorganization value was allocated to the Successor's single reporting segment using the discounted cash flow approach. The reorganization value was then allocated to the Successor’s identifiable assets and liabilities using the fair value principle as contemplated in ASC 820. The specific approach, or approaches, used to allocate reorganization value by asset class are noted below.

To determine fair value adjustments as of the Effective Date, the Company engaged third-party valuation specialists to conduct an analysis of the condensed consolidated balance sheets to determine the fair values of each balance. The most significant fair value adjustments were made to property and equipment, operating lease right-of-use assets and operating lease liabilities, assets held-for-sale, airport take-off and landing rights or "slots", and debt as discussed below.

Property and Equipment

The depreciable lives of the Company's assets were not changed as a result of the adoption of fresh start accounting.

Aircraft and Engines. The aircraft and engines were valued as of the emergence date, using a market approach. Multiple third-party valuation resources (including appraisals of specific aircraft/engines) were consulted and relied upon for estimates of recent half-life and maintenance adjusted ranges for all of the aircraft and engines.

Real Property. The fair values of real property locations were estimated using the sales comparison (market) approach and cost approach. As part of the valuation process, information was obtained on the Successor’s current usage, building type, year built, and cost history for properties. In determining the fair value for real property assets, functional and economic obsolescence was considered and taken as an adjustment at the asset level.

Personal Property. The fair values of the Company’s other personal property (non-aircraft/engines) were estimated using either the cost or market approach. For most personal property categories, a cost approach was utilized relying on purchase year, historic costs, and industry/equipment-based inflation factors to determine replacement cost new of the assets. Readily available market transaction data was used and adjusted for current market conditions for asset categories with active secondary markets such as heavy trucks and computer equipment. In both approaches, consideration was made for the effects of physical deterioration as well as functional and economic obsolescence in determining estimates of fair value.

Operating Right-of-Use Assets and Operating Lease Liabilities

The fair value of operating lease liabilities and the related right-of-use assets was evaluated using the income approach, which is measured as the present value of the remaining lease payments, as if the lease were a new lease as of the Fresh Start Reporting Date. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company's leases generally do not provide a readily determinable implicit rate. Therefore, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Successor used publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates. Additionally, each lease was evaluated for off-market terms as of the Fresh Start Accounting Reporting Date, and the related adjustments were recorded to the right of use asset on the Company's condensed consolidated balance sheets.

Airport Take-Off and Landing Rights or Slots

The fair value of the Company’s 22 airport take-off and landing rights (the “Slots”) at the LaGuardia Airport (“LGA”), a slot-controlled airport, was estimated using a market approach or sales-comparison approach. Specifically, the LGA Slots were valued using observable transaction data for historical sales of other airport take-off and landing rights at LGA. The data was reviewed to estimate a fair value price per Slot, which was applied to the Company’s LGA Slots.

Asset Held-for-Sale

As of Emergence Date, assets held for sale within the Company's condensed consolidated balance sheets, included 21 aircraft planned for future sales. As of September 30, 2025, the Company reassessed the classification of the remaining 20 A320ceo and A321ceo aircraft that were previously recorded as held for sale as the original sales agreement for these aircraft expired during the third quarter of 2025, and the Company now intends to retain the assets for ongoing use in its operations. As the criteria for held for sale classification under ASC 360 are no longer met, the Company reclassified the aircraft to “held and used.” Refer to Note 15, Fair Value Measurements for additional information.

Debt

As of the Emergence Date, Spirit had 35 individual debt instruments comprised of Exit Secured Notes, 4 publicly-traded Enhanced Equipment Trust Certificates ("EETCs"), 22 Fixed Aircraft loans, and 3 Payroll Support Program Agreements. The Company used an income approach, where future cash flows are discounted to present value using a discount rate selected by considering benchmark credit spreads and yield to maturities, to arrive at the estimated fair value for each debt instrument mentioned.

Exit Secured Notes. Upon Emergence, the Company issued $840.0 million of Exit Secured Notes, which began trading on March 18, 2025 at 92.50% of par. The Company used a discounted cash flow approach to determine the fair value of the Exit Secured Notes on the Emergence Date.

Enhanced Equipment Trust Certificates (EETC). The Company used publicly available trading prices as of the Emergence Date, ranging from 87.32% to 92.85% to determine the fair value of the EETCs.

Fixed-rate Aircraft Loans. Spirit has 22 individual Aircraft Loans issued to finance the purchase of specific aircraft. The Company used a discounted cash flow approach to determine the fair value of the Aircraft Loans. Since each of these loans is fully collateralized with first liens on the related aircraft, the Company applied a notching method to its current credit rating and utilized a credit rating of BB in the valuation of these debt instruments. The Company concluded that the fair value of the Aircraft Loans ranged from 95.61% to 99.84% of par, depending on the loan, as of the Fresh Start accounting Reporting Date.

Payroll Support Program ("PSP"). The Payroll Support Program ("PSP"), under the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided payroll support to passenger and cargo air carriers and certain contractors for the continuation of payment of employee wages, salaries, and benefits. The PSP loans were valued using a discounted cash flow approach based on a CCC- rating based on an estimated yield leveraging federal reserve economic data ("FRED") and other observable yields as of the Emergence Date.

Condensed Consolidated Successor Balance Sheet

The adjustments included in the following fresh start condensed consolidated balance sheet as of March 12, 2025 reflect the effects of the transactions contemplated by the Plan and executed by the Successor on the Fresh Start Reporting Date (reflected in the column Reorganization Adjustments), and fair value and other required accounting adjustments resulting from the adoption of fresh start accounting (reflected in the column Fresh Start Adjustments). The explanatory notes provide additional information with regard to the adjustments recorded, the methods used to determine the fair values and significant assumptions.

The condensed consolidated balance sheet as of the Fresh Start Reporting Date was as follows (in thousands):


	Predecessor		Reorganization Items			Fresh Start Adjustment			Successor
Assets
Current assets:
Cash and cash equivalents	$	678,382	$	(289,775)	(1)	$	—		$	388,607
Restricted cash	171,325		5,293		(2)	—			176,618
Short-term investment securities	119,315		—			—			119,315
Accounts receivable, net	201,681		—			—			201,681

Prepaid expenses and other current assets	259,522		(2,229)		(3)	—			257,294
Assets held for sale	447,271		—			—			447,271
Total current assets	$	1,877,498	$	(286,711)		$	—		$	1,590,787

Property and equipment:
Flight equipment	$	2,739,143	$	—		$	(850,445)	(12)	$	1,888,698
Ground property and equipment	787,057		—			(345,190)		(13)	441,866
Less accumulated depreciation	(1,062,116)		—			1,062,116		(14)	—
	$	2,464,084	$	—		$	(133,520)		$	2,330,564
Operating lease right-of-use assets	4,631,428		—			(194,510)		(15)	4,436,918
Intangible assets	550		—			82,932		(16)	83,482
Pre-delivery deposits on flight equipment	85,495		—			—			85,495
Deferred heavy maintenance, net	246,576		—			(120,871)		(17)	125,705
Other long-term assets	67,043		—			—			67,043
Total assets	$	9,372,673	$	(286,711)		$	(365,969)		$	8,719,994

Liabilities and Shareholders' Equity (Deficit)


Current liabilities:
Accounts payable	$	52,242	$	(5,566)	(4)	$	—		$	46,676
Air traffic liability	518,668		—			—			518,668
Current maturities of long-term debt, net, and finance leases	471,698		(309,000)		(5)	2,991		(18)	165,689
Current maturities of operating leases	259,713		—			(17,483)		(15)	242,230
Other current liabilities	623,035		(39,250)		(6)	(1,536)		(19)	582,249
Total current liabilities	$	1,925,357	$	(353,816)		$	(16,029)		$	1,555,512

Long-term debt and finance leases, less current maturities	$	1,704,517	$	526,841	(7)	$	(177,234)	(18)	$	2,054,124
Operating leases, less current maturities	4,380,845		—			(172,065)		(15)	4,208,781
Deferred income taxes	52,556		—			16,852		(20)	69,408
Deferred gains and other long-term liabilities	120,795		—			(22,996)		(19)	97,799
Total liabilities not subject to compromise	$	8,184,070	$	173,025		$	(371,472)		$	7,985,623

Liabilities subject to compromise	$	1,635,104	$	(1,635,104)	(8)	$	—		$	—

Shareholders’ equity:
Predecessor common stock	$	11	$	(11)	(9)	$	—		$	—
Predecessor Additional paid-in capital	1,174,925		(1,174,925)		(9)	—			—
Predecessor Treasury stock at cost	(81,285)		81,285		(9)	—			—
Successor common stock $0.0001 par value	—		2		(10)	—			2
Successor Additional paid-in capital	—		734,368		(10)	—			734,368
Retained earnings	(1,540,278)		1,534,648		(11)	5,630		(21)	—
Accumulated other comprehensive income (loss)	127		—			(127)		(22)	—
Total shareholders’ equity	$	(446,501)	$	1,175,368		$	5,503		$	734,370
Total liabilities and shareholders’ equity	$	9,372,673	$	(286,711)		$	(365,969)		$	8,719,994

Balance Sheet Reorganization Adjustments (in thousands)

(1) Changes in cash and cash equivalents included the following:


Funds received from the Equity Rights Offering	$	350,000
Repayment of Debtor in Possession financing principal and accrued interest	(310,555)
Repayment of prepetition Revolving Credit Facility	(300,856)
Funding to the professional fee escrow account	(5,293)
Payment of professional fees at Emergence	(8,191)
Payment of accrued interest on prepetition Senior Secured Notes	(12,826)
Payment of accrued interest on prepetition Convertible Senior Notes	(2,013)
Payment of Exit RCF Administrative Agent Fees	(41)
Net change in cash and cash equivalents	$	(289,775)

(2) Changes in restricted cash include the following:


Funding to the professional fee escrow account	$	5,293

Net change in restricted cash	$	5,293

(3) Changes in prepaid expenses and other current assets are related to certain debt issuance costs related to the Exit Revolving Credit Facility.

(4) Changes in accounts payable were due to the payment of $8.2 million in professional fees and recognition of $2.6 million of success fees earned at Emergence.

(5) The change in current maturities of long-term debt was due to the repayment of the $309.0 million principal balance of the Debtor in Possession facility at Emergence.

(6) Changes to other liabilities included the following:



Accrual of professional fees earned at Emergence	$	13,000
Settlement of the Backstop Commitment Premium in Successor shares	(35,000)
Payment of accrued interest on prepetition Senior Secured Notes	(12,826)
Payment of accrued interest on prepetition Convertible Senior Notes	(2,013)
Payment of accrued interest on the Debtor in Possession facility	(1,555)
Payment of accrued interest on prepetition Revolving Credit Facility	(856)
Net change in other liabilities	$	(39,250)

(7) Changes in long-term debt include the following:



Issuance of Exit Secured Notes	$	840,000
Recognition of deferred financing costs related to the Exit Secured Notes	(13,159)
Repayment of the prepetition Revolving Credit Facility principal	(300,000)
Net change in long-term debt	$	526,841

(8) Liabilities subject to compromise settled in accordance with the Plan:



Class 4 Senior Secured Notes claims settled via issuance of Successor shares	$	(1,110,000)
Class 5 Convertible Senior Notes claims settled via issuance of Successor shares	(525,104)
Total liabilities subject to compromise settled in accordance with the Plan	$	(1,635,104)

The resulting gain on liabilities subject to compromise was determined as follows:



Prepetition debt obligations settled at Emergence	$	1,635,104
Issuance of Exit Secured Notes to settle Class 4 and Class 5 claims	(840,000)
Issuance of Successor shares to settle Class 4 claims	(177,694)
Issuance of Successor shares to settle Class 5 claims	(55,836)
Gain on liabilities subject to compromise	$	561,574

(9) Changes to Predecessor common stock, additional paid-in-capital, and treasury stock are due to the extinguishment of Predecessor equity per the Plan.

(10) Reflects the Successor equity including the issuance of 16,067,305 shares of Common Stock and 24,255,256 Warrants, consisting of 3,617,385 Tranche 1 Warrants and 20,637,871 Tranche 2 Warrants pursuant to the Plan.


Issuance of Successor equity contemplated in Class 4 and Class 5 settlements	$	138,754
Issuance of Successor equity associated with the Rights Offering, Backstop Commitment, and Backstop Premium	153,870
Fair value of Tranche 2 Warrants contemplated in Class 4 and Class 5 settlements	94,775
Fair value of Tranche 2 Warrants associated with the Rights Offering, Backstop Commitment, and Backstop Premium	281,089

Fair value of Tranche 1 Warrants associated with Rights Offering, Backstop Commitment, and Backstop premium	65,881
Total change in Successor common stock and additional paid-in capital	$	734,370
Less: par value of Successor common stock	(2)
Change in Successor additional paid-in capital	$	734,368

The value of Successor equity issued per the Plan and ERO was derived from the Selected Enterprise Value as shown in the table below (in millions):


	Fresh Start Reporting Date
Enterprise Value	$	6,450
Minus: Debt and operating leases	(6,671)
Plus: Excess cash and cash equivalents	508
Plus: Non-operating assets	447
Successor Equity Value	$	734

(11) Changes to retained earnings included the following:



Extinguishment of Predecessor equity	$	1,093,651
Gain on settlement of liabilities subject to compromise	561,574
Gain on issuance of Successor shares via the Equity Rights Offering	(115,840)
Recognition of deferred financing costs related to the Exit Secured Notes	13,159
Recognition of deferred financing costs related to the Exit Revolving Credit Facility	775
Professional fees earned at Emergence	(15,625)
Write off of remaining old RCF prepaid loan fees	(3,003)
Recognition of Exit RCF Administrative Agent Fees	(41)
Net change to retained earnings	$	1,534,648

Balance Sheet Fresh Start Adjustments (in thousands)

(12) The change in flight equipment represents the fair value adjustments to the Company's fixed assets due to the adoption of fresh start accounting. The following table summarizes the fair value of flight equipment by asset class:


Airframes	$	1,382,116
Engines	301,906
Spare rotables and repairables	204,676
Total flight equipment	$	1,888,698

(13) The change in ground property and equipment represents the fair value adjustment to the Company's fixed assets due to the adoption of fresh start accounting. The following table summarizes the fair value of ground property and equipment by asset class:


Other equipment and vehicles	$	108,598
Internal use software	50,587
Buildings	230,003
Leasehold improvements	19,485
Land	33,193
Total ground property and equipment	$	441,866

(14) The Company's accumulated depreciation incurred in the Predecessor periods has been eliminated with the adoption of fresh start accounting.

(15) The change in operating lease right of use assets is due to the change in the Company's incremental borrowing rate used in the calculation of operating lease right of use assets and operating lease liabilities, as well as adjustment for off-market terms.

(16) The change in intangible assets represents the fair value adjustment to the Company's air carrier slots due to the adoption of fresh start accounting. The air carrier slots were valued at $83.5 million as of the Emergence Date.

(17) Changes to deferred heavy maintenance, net are due to the write-off of $120.9 million of capitalized deferred heavy maintenance costs related to the Company's owned aircraft with the adoption of fresh start accounting. The aircraft and spare engines values as of the emergence date, were determined using a market approach, and included recent half-life and maintenance adjusted values.

(18) Changes to long-term debt include adjustments to the carrying values of the Company's debt instruments to their fair value as of the Fresh Start Reporting Date. The fair value adjustments to the carrying value for each type of debt instrument are noted below:


Successor Exit Secured Notes	$	(24,488)
EETC Notes, all tranches	(54,118)
Fixed Rate and Senior Term Loans	(5,540)
Unsecured Term Loans	(45,007)
Finance lease liabilities due to Failed Sale Leasebacks	(45,090)
Net change to long-term debt and finance leases	$	(174,243)

(19) The change in other current liabilities and deferred gains and other long-term liabilities is due to the elimination of $24.5 million in the financial liability originally recorded to account for off-market terms on sale leaseback transactions completed in prior periods, commensurate with the adjustment of operating lease liabilities due to the change in the Company's incremental borrowing rate.

(20) The change to deferred income taxes is due to the increase of the net deferred tax liability of $16.9 million resulting from the changes in fair value of assets and liabilities due to the adoption of fresh start accounting.

(21) Change to retained earnings included the following:


Valuation adjustment to the Company's assets due to the adoption of fresh start accounting	$	(171,459)
Valuation adjustment to the Company's debt and financing lease obligations due to the adoption of fresh start accounting	174,243
Impact of IBR change to right of use assets	(194,510)
Impact of IBR change to operating lease liabilities	189,549
Impact of deferred gain on sale leaseback write off	24,532
Impact to deferred tax balances	(16,852)
Elimination of accumulated other comprehensive income	127
Net change to retained earnings	$	5,630

(22) Changes to accumulated other comprehensive income (loss) represent the write-off of Predecessor balance due to the adoption of fresh start accounting

Spirit Aviation Holdings, Inc. 10-Q