Spirit Airlines 2013 Annual Report Download - page 17

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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
material adverse effect on our business, results of operations 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 business, results of operations and financial condition.
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 business, results of operations and financial condition.
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.