Spirit Airlines 2011 Annual Report Download - page 23

January 24, 2012. Failure to remain in full compliance with these rules by the January 2012 effective date, 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. Moreover, we cannot assure you that compliance with these new rules will not have a material adverse effect on our business. In
addition, the U.S. Congress and Federal administrative agencies have undertaken investigations of the airline industry practice of unbundling
services, including public hearings held in July 2010. If new taxes are imposed on non-
ticket revenues, or if other laws or regulations are adopted
that make unbundling of services impermissible, or more cumbersome or expensive than the new rules described above, 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 negative 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:
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 generally. 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 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 that we 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 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:
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
• 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.
• 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 about 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.