Spirit Airlines 2013 Annual Report Download - page 24

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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
operations and financial condition.
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