SPIRIT AIRLINES, INC. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are subject to the "safe harbor" created by those sections. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. All statements other than statements of historical factors are "forward-looking statements" for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential," and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" in this report and in Item 1A "Risk Factors" in our Annual Report on Form 10-K/A for the year endedDecember 31, 2019 and subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. OverviewSpirit Airlines , headquartered inMiramar, Florida , offers affordable travel to value-conscious customers. Our all-Airbus fleet is one of the youngest and most fuel efficient inthe United States . We serve destinations throughoutthe United States ,Latin America and theCaribbean , and are dedicated to giving back and improving those communities. Our stock trades under the symbol "SAVE" on theNew York Stock Exchange ("NYSE"). We focus on value-conscious travelers who pay for their own travel, and our business model is designed to deliver what our Guests want: low fares and a great experience. We compete based on total price. We allow our Guests to see all available options and their respective prices prior to purchasing a ticket, and this full transparency illustrates that our total price, including options selected, is lower on average than other airlines. By offering Guests unbundled base fares, we give them the power to save by paying only for the À La SmarteTM options they choose, such as checked and carry-on bags and advance seat assignments. We record revenue related to these options as non-fare passenger revenue, which is recorded within passenger revenues in our statement of operations. We use low fares to address underserved markets, which helps us to increase passenger volume, load factors and non-ticket revenue. We also have high-density seating configurations on our fuel-efficient, all-Airbus fleet and a simplified onboard product designed to lower costs. High passenger volumes and load factors help us sell more ancillary products and services, which in turn allows us to reduce our fares even further. We are committed to delivering the best value in the sky while providing an exceptional Guest experience. Our optimized mobile-friendly website makes booking easier. Our updated mobile app allows Guests to search for the lowest fares, book and check in while on the go, and our airport kiosks and self-bag tagging help our Guests move through the airport more quickly.
Subsidiaries
InAugust 2020 ,Spirit formed several new subsidiaries;Spirit Finance Cayman 1 Ltd. ("Holdco 1"),Spirit Finance Cayman 2 Ltd. ("HoldCo 2 ),Spirit IP Cayman Ltd. ("Spirit IP") andSpirit Loyalty Cayman Ltd. ("Spirit Loyalty"). Each areCayman Islands exempted companies incorporated with limited liability.Spirit IP andSpirit Loyalty are wholly-owned subsidiaries ofHoldCo 2 (other than the special share issued to the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes (as defined herein)).HoldCo 1 andHoldCo 2 are special purpose holding companies.HoldCo 2 is a wholly-owned direct subsidiary ofHoldCo 1 (other than the special share issued to the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes).HoldCo 1 is a wholly-owned subsidiary ofSpirit (other than the special share issued to the special shareholder, who granted a proxy to vote such share to the collateral agent for the 8.00% senior secured notes).
Loyalty Programs
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We operate the $9 Fare ClubTM (the "$9 Fare ClubTM"), which is a
subscription-based loyalty program that allows members access to unpublished,
extra-low fares as well as discounted prices on bags, exclusive offers on
hotels, rental cars and other travel necessities. We also operate the Free
Spirit loyalty program (the "Free Spirit Program"), which attracts members and
partners and builds customer loyalty for us by offering a variety of awards,
benefits and services. Free Spirit Program members earn and accrue miles for
taking our flights and services from non-air partners such as retail merchants,
hotels or car rental companies or by making purchases with credit cards issued
by partner banks and financial services providers. Miles earned and accrued by
Free Spirit Program members can be redeemed for travel awards such as free
(other than taxes and government-imposed fees), discounted or upgraded travel.
We expect to launch a more expansive Free Spirit Program and $9 Fare ClubTM in
January 2021 . Starting January 2021 , the benefits of the $9 Fare ClubTM will be
expanded to include discounts on seats, shortcut boarding and security, and
"Flight Flex" flight modification product.
Contribution Transactions
In connection with the consummation of the private offering of the 8.00% senior secured notes,Spirit ,HoldCo 1 ,HoldCo 2 andSpirit IP orSpirit Loyalty, as applicable, transferred to (a)Spirit Loyalty (i)Spirit 's,HoldCo 1's andHoldCo 2's rights to the intellectual property and data that we own (or purport to own) and which is required or necessary to operate, or used, generated or produced as part of, the FreeSpirit Program and$9 Fare ClubTM (such assets, with certain exclusions, the "Transferred Loyalty Program IP"), (ii) all ofSpirit 's,HoldCo 1's andHoldCo 2's payment rights under any co-branding, partnering or similar agreements related to or entered into in connection with the FreeSpirit Program, with certain exclusions (each a "FreeSpirit Agreement") (but not any of its obligations thereunder), including its rights to receive payment under or with respect to the FreeSpirit Agreements and all payments due and to become due thereunder, (iii) membership fees from members of the$9 Fare ClubTM and (iv) all rights to establish, create, organize, initiate, participate, operate, assist, benefit from, promote or otherwise be involved in or associated with, in any capacity, the FreeSpirit Program, the$9 Fare ClubTM or any other customer loyalty miles program or any similar customer loyalty program, other than in connection with any permitted loyalty programs (clauses (i) through (iv) collectively, the "Transferred Loyalty Program Assets") and (b)Spirit IP,Spirit 's,HoldCo 1's andHoldCo 2's rights to the intellectual property, including trademarks and domain names ofSpirit or including "Spirit" (collectively, with certain exceptions, the "Transferred Brand Assets" and, together with the Transferred Loyalty Program Assets, the "TransferredSpirit Assets"). For further discussion on our 8.00% senior secured notes private offering, refer to "Notes to Condensed Consolidated Financial Statements-13. Debt and Other Obligations." Additionally,Spirit Loyalty andSpirit IP entered into agreements with each ofHoldCo 2 andSpirit to grant each of them exclusive, worldwide, perpetual and royalty-bearing licenses for the use of the Transferred Loyalty Program IP and the Transferred Brand Assets, andSpirit IP entered into an agreement withSpirit Loyalty to grant toSpirit Loyalty an exclusive, worldwide, perpetual and royalty-bearing license for the use of the Transferred Brand Assets, effective solely upon the termination of certain management agreements.Spirit also entered into management agreements withSpirit IP,Spirit Loyalty andHoldCo 2 to perform certain management services forSpirit IP andSpirit Loyalty, including as it relates to certain contributed intellectual property. 32 -------------------------------------------------------------------------------- Comparative Operating Statistics: The following tables set forth our operating statistics for the three and nine month periods endedSeptember 30, 2020 and 2019: Three
Months Ended
2020 2019 Percent Change
Operating Statistics (unaudited) (A):
Average aircraft 154.5 135.1 14.4 %
Aircraft at end of period 155 136 14.0 %
Average daily aircraft utilization (hours) 6.9 12.5 (44.8) %
Average stage length (miles) 1,037 979 5.9 %
Block hours 98,667 155,167 (36.4) %
Departures 37,120 59,314 (37.4) %
Passenger flight segments (PFSs) (thousands) 4,623 9,004 (48.7) %
Revenue passenger miles (RPMs) (thousands) 4,879,334 9,057,574 (46.1) %
Available seat miles (ASMs) (thousands) 7,164,634 10,686,246 (33.0) %
Load factor (%) 68.1 % 84.8 % (16.7) pts
Fare revenue per passenger flight segment ($) 35.57 54.80 (35.1) %
Non-ticket revenue per passenger flight segment ($) 51.37 55.37 (7.2) %
Total revenue per passenger flight segment ($) 86.94 110.17 (21.1) %
Average yield (cents) 8.24 10.95 (24.7) %
TRASM (cents) 5.61 9.28 (39.5) %
CASM (cents) 7.00 8.12 (13.8) %
Adjusted CASM (cents) 9.07 8.03 13.0 %
Adjusted CASM ex-fuel (cents) 7.75 5.66 36.9 %
Fuel gallons consumed (thousands) 74,222 122,072 (39.2) %
Average economic fuel cost per gallon ($) 1.27 2.08 (38.9) %
(A) See "Glossary of Airline Terms" elsewhere in this quarterly report for definitions used in this table.
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Nine Months Ended September 30,
2020 2019 Percent Change
Operating Statistics (unaudited) (A):
Average aircraft 151.6 135.0 12.3 %
Aircraft at end of period 155 136 14.0 %
Average daily aircraft utilization (hours) 6.8 12.4 (45.2) %
Average stage length (miles) 1,020 1,003 1.7 %
Block hours 283,937 455,778 (37.7) %
Departures 106,048 170,006 (37.6) %
Passenger flight segments (PFSs) (thousands) 13,176 25,777 (48.9) %
Revenue passenger miles (RPMs) (thousands) 13,723,197 26,348,093 (47.9) %
Available seat miles (ASMs) (thousands) 19,888,442 31,291,168 (36.4) %
Load factor (%) 69.0 % 84.2 % (15.2) pts
Fare revenue per passenger flight segment ($) 41.72 55.30 (24.6) %
Non-ticket revenue per passenger flight segment ($) 57.82 55.68 3.8 %
Total revenue per passenger flight segment ($) 99.54 110.98 (10.3) %
Average yield (cents) 9.56 10.86 (12.0) %
TRASM (cents) 6.59 9.14 (27.9) %
CASM (cents) 8.34 7.94 5.0 %
Adjusted CASM (cents) 9.85 7.90 24.7 %
Adjusted CASM ex-fuel (cents) 8.21 5.51 49.0 %
Fuel gallons consumed (thousands) 211,164 354,347 (40.4) %
Average economic fuel cost per gallon ($) 1.55 2.11 (26.5) %
(A) See "Glossary of Airline Terms" elsewhere in this quarterly report for definitions used in this table.
Executive Summary We experienced healthy passenger booking and revenue trends for the first two months of 2020 and year-over-year increases that were in line with our expectations. However, as a result of the COVID-19 pandemic, we experienced sharp declines in passenger demand and bookings beginning inMarch 2020 , which continued through the third quarter of 2020, and had unprecedented levels of cancellations and capacity reductions. As a result, our operations for the third quarter of 2020 were adversely affected by this reduction in air travel demand. With the sudden and significant reduction in air travel demand resulting from the COVID-19 pandemic, our load factor significantly decreased beginning in the latter part ofMarch 2020 and remained as such through the majority of the second and third quarters of 2020. Load factor for the third quarter of 2020 was 68.1% as compared to 84.8% for the same period in the prior year. We continued to experience weak passenger demand and bookings in the third quarter driving a decrease in operating revenues of 59.5%, year over year, and a decrease in capacity of 33.0%, year over year. As the COVID-19 pandemic evolves, our financial and operational outlook remains subject to change. We continue to monitor the impact of the pandemic on our operations and financial condition, and to implement mitigation strategies while working to preserve our cash and protect our long-term sustainability.
We have implemented measures for the safety of our Guests and Team Members as well as to mitigate the impact of COVID-19 on our financial position and operations.
Caring for Guests and Team Members
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Our Operations and Task Force teams remain in constant contact with authorities,
continuing to evolve its response to ensure the safety of Guests and Team
Members. In addition to previously existing procedures including utilization of
hospital-grade disinfectants and state-of-the-art HEPA filters that capture
99.97% of airborne particles on board the aircraft, we have implemented and
continued the following steps to protect its Guests and Team Members:
•Secured and distributed additional supplies of gloves and sanitizer across the
our network and augmented the contents of onboard supply kits to contain
additional cleaning and sanitizing materials;
•Secured and provided face coverings for all crew and Guest facing team members;
•Expanded cleaning protocols at airports and other facilities, including the use
of EPA-registered disinfectants in all check-in and gate areas and the use of
electrostatic sprayers at high-traffic airports;
•Expanded aircraft turn and overnight cleaning protocols focusing on high
frequency touch points as well as enhanced cockpit cleaning and the use of
ultra-low volume ("ULV") fogging process to apply a safe, high-grade
EPA-registered airborne disinfectant that is effective against coronaviruses;
•Launched a new antimicrobial fogging tool in our facilities and aircraft that
uses a product that forms an invisible barrier on all surfaces killing bacteria
and viruses on contact for 30 days;
•Split our Operational Control Center ("OCC") into multiple units to enable
social distancing and prepared the OCC to work remotely to minimize potential
operational disruption;
•Implemented a remote work policy for the Support Center teams to maintain
support of our operations;
•Automated the Team Member screening process upon entry to all Company-operated
facilities by installing an automatic temperature scanner which is activated and
monitored 24 hours a day;
•Required all Guests and Guest-facing Team Members to wear an appropriate face
covering when traveling through the airport or onboard aircraft;
•Offered future flight credits with extended expiration dates to Guests with
impacted travel plans and waived change and cancellation fees for Guests who
booked travel by October 31, 2020 .
Supporting Communities
During this unprecedented time, many travelers became stranded abroad when bans and other restrictions on travel were implemented globally and domestically with little notice. We have worked with embassies and local governments inAruba ,Colombia ,Dominican Republic ,Ecuador ,Haiti ,Honduras ,Panama and theU.S. to operate special flights for stranded travelers in such countries. Thus far, we have provided over 260 flights to more than 30,000 stranded travelers and preparations continue to transport many more. In addition, we have pledged$250 thousand in vouchers for flights to minority organizations. We have also made efforts to address the growing needs of its communities throughThe Spirit Airlines Charitable Foundation (the "Foundation"). As part of the its focus on supporting families, the Foundation partnered with other non-profit organizations including theYMCA andJack and Jill Children's Center to provide food to seniors and families struggling during this time and supported organizations creating face coverings for healthcare workers. In addition, we have partnered to offer Guests face coverings for a small contribution to theRed Cross .
Capacity Reductions
InMarch 2020 , in response to government restrictions on travel and drastically reduced consumer demand, we began to reduce capacity. We reduced capacity forApril 2020 andMay 2020 by 76.2% and 93.9%, respectively, year over year. We had initially expected to reduceJune 2020 capacity by approximately 95%, year over year. However, due to an increase in demand for air travel, we added some flights back to the June schedule, building throughout the month, resulting in an average capacity reduction of 79.0%, year over year. Capacity in July, August and September of 2020 was reduced by 17.5%, 36.4% and 47.1% respectively, year over year. InOctober 2020 , capacity has been reduced by approximately 36%, year over year. In the holiday months of November and December, with modestly improved bookings and demand, we expect to reduce capacity, year over year, by approximately 20%. We continue to closely monitor demand and will make adjustments to the flight schedule as appropriate. We currently estimate that air travel demand will continue to be volatile and will fluctuate in the upcoming months as the lingering effects of COVID-19 continue. Overall, we expect that air travel demand will continue to gradually recover in the remainder of 2020 through 2021. However, the situation continues to be fluid and actual capacity adjustments may be different than what we currently expect. Refer to "Notes to Condensed Consolidated Financial Statements-4. Revenue," for discussion of the impact of COVID-19 on our air traffic liability, credit shells and refunds. CARES Act 35
-------------------------------------------------------------------------------- OnMarch 27, 2020 , PresidentDonald Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law. The CARES Act was a relief package intended to assist many aspects of the American economy, including providing the airline industry with up to$25 billion in grants to be used for employee salaries, wages and benefits and up to$25 billion in secured loans. OnApril 20, 2020 , we entered into a Payroll Support Program ("PSP") Agreement with theUnited States Department of the Treasury ("Treasury"), pursuant to which we received a total of$334.7 million throughJuly 31, 2020 , used exclusively to pay for salaries, wages and benefits for our Team Members throughSeptember 30, 2020 . Of that amount,$70.4 million is in the form of a low-interest 10-year loan. In addition, in connection with our participation in the PSP, we issued to theTreasury warrants pursuant to a warrant agreement to purchase up to 500,151 shares of our common stock at a strike price of$14.08 per share (the closing price for the shares of our common stock onApril 9, 2020 ) with a fair value of$3.7 million . The remaining amount of$260.6 million is in the form of a grant and was recognized in special credits on our condensed consolidated statement of operations. InSeptember 2020 , we were notified by theTreasury of additional funds available under the PSP portion of the CARES Act. We received an additional installment of$9.7 million from theTreasury of which$2.9 million is in the form of a low-interest 10-year loan. Also, in connection with this additional installment, we issued to theTreasury warrants to purchase up to an additional 20,646 shares of the Company's common stock at a strike price of$14.08 per share (the closing price for the shares of our common stock onApril 9, 2020 ) with a fair value of$0.2 million . The remaining amount of$6.6 million is in the form of a grant and was recognized in special credits on our condensed consolidated statement of operations. Pursuant to the warrant agreement with theTreasury , we registered the resale of the initial warrants and the 500,151 shares of common stock issuable upon exercise of such warrants onSeptember 30, 2020 , and registered the resale of the remaining warrants and shares of common stock issuable upon exercise of such warrants onOctober 8, 2020 . Total warrants issued represent less than 1% of the outstanding shares of our common stock as ofSeptember 30, 2020 . For additional information on the notes issued, please refer to "Notes to Condensed Consolidated Financial Statements-13. Debt and Other Obligations." For additional information on the warrants issued, please refer to "Notes to Condensed Consolidated Financial Statements-14. Equity." During the three and nine months endedSeptember 30, 2020 , we recognized$142.9 million and$266.8 million , respectively, of the deferred salaries, wages and benefits within special credits on our condensed consolidated statements of operations. For additional information, refer to "Notes to Condensed Consolidated Financial Statements-6. Special Credits."
In connection with our receipt of funds under the PSP, we are and continue to be subject to certain restrictions, including, but not limited to:
•Restrictions on payment of dividends and stock buybacks through
•Requirements to maintain certain levels of scheduled service through
•A prohibition on involuntary terminations or furloughs of our employees (except
for health, disability, cause, or certain disciplinary reasons) through
•A prohibition on reducing the salary, wages, or benefits of our employees (other than our executive officers or independent contractors, or as otherwise permitted under the terms of the PSP) throughSeptember 30, 2020 ;
•Limits on certain executive compensation, including limiting pay increases and
severance pay or other benefits upon terminations, through
•Use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits; and
•We are subject to additional reporting and recordkeeping requirements relating to the CARES Act funds.
OnApril 29, 2020 , we applied for additional funds under theTreasury's loan program under the CARES Act ("Loan Program"). OnJuly 1, 2020 , we executed a non-binding letter of intent with theTreasury which summarized the principal terms of the financing request submitted to theTreasury . InSeptember 2020 , we decided that we would not participate in theTreasury's loan program as we were able to secure other forms of financing described below. The CARES Act also provides an employee retention credit ("CARES Employee Retention credit") which is a refundable tax credit against certain employment taxes of up to$5,000 per employee for eligible employers. The credit is equal to 50% of 36 -------------------------------------------------------------------------------- qualified wages paid to employees during a quarter, capped at$10,000 of qualified wages through year end. We qualified for the credit beginning onApril 1, 2020 and expect to continue to receive additional credits for qualified wages throughDecember 31, 2020 . During the three and nine months endedSeptember 30, 2020 , we recorded$7.8 million and$35.8 million , respectively, related to the CARES Employee Retention credit within special credits on our condensed consolidated statements of operations and within accounts receivable, net on our condensed consolidated balance sheet. We expect to record an additional approximately$2 million in CARES Employee Retention credits in the remainder of 2020. For additional information, refer to "Notes to Condensed Consolidated Financial Statements-6. Special Credits." The CARES Act also provides for certain tax loss carrybacks and a waiver on federal fuel taxes throughDecember 31, 2020 . As ofSeptember 30, 2020 , we had recognized$140.8 million in related tax loss carrybacks and$3.4 million in federal fuel tax savings reflected within aircraft fuel in the Company's statements of operations. We expect to recognize an additional$3 million in savings related to the waiver on federal fuel taxes in the remainder of 2020. Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount dueDecember 31, 2021 and the remaining 50% dueDecember 31, 2022 . This is expected to provide us with approximately$23 million of additional liquidity during the current year. As ofSeptember 30, 2020 , we had deferred$17.6 million in social security tax payments. The deferred amounts are recorded as a liability within deferred gains and other long-term liabilities on our condensed consolidated balance sheet.
Balance Sheet, Cash Flow and Liquidity
Since the onset of the spread of COVID-19 in theU.S. in the first quarter of 2020, we have taken several actions to increase liquidity and strengthen our financial position. As a result of these actions, as ofSeptember 30, 2020 , we had unrestricted cash and cash equivalents and short-term investment securities of$2,053.9 million . InMarch 2020 , we entered into a senior secured revolving credit facility (the "2022 revolving credit facility") for an initial commitment amount of$110.0 million , and subsequently, in the second quarter of 2020, increased the commitment amount to$180.0 million . As ofSeptember 30, 2020 , we had fully drawn the available amount of$180.0 million under the 2022 revolving credit facility. The 2022 revolving credit facility matures onMarch 30, 2022 . Refer to "Notes to Condensed Consolidated Financial Statements-13. Debt and Other Obligations," for additional information about the 2022 revolving credit facility. OnMay 12, 2020 , we completed the public offering of$175.0 million aggregate principal amount of 4.75% convertible senior notes due 2025 (the "convertible notes"). The convertible notes will bear interest at the rate of 4.75% per year and will mature onMay 15, 2025 . Interest on the convertible notes is payable semi-annually in arrears onMay 15 andNovember 15 of each year, beginning onNovember 15, 2020 . We received proceeds of$168.3 million , net of total issuance costs of$6.7 million and recorded$95.6 million in long-term debt and finance leases, net of debt issuance costs of$3.8 million on our condensed consolidated balance sheets, related to the debt component of the convertible notes, and$72.7 million in APIC, net of issuance costs of$2.9 million on our condensed consolidated balance sheets, related to the equity component of the convertible notes. For additional information on our convertible debt, refer to "Notes to Condensed Consolidated Financial Statements-13. Debt and Other Obligations." Also onMay 12, 2020 , we completed the public offering of 20,125,000 shares of our voting common stock, which includes full exercise of the underwriters' option to purchase an additional 2,625,000 shares of common stock, at a public offering price of$10.00 per share (the "common stock offering"). We received proceeds of$192.4 million , net of issuance costs of$8.9 million . For additional information about our common stock offering, refer to "Notes to Condensed Consolidated Financial Statements-14. Equity." InJune 2020 , we entered into an agreement to amend our revolving credit facility entered into in 2018 to finance aircraft pre-delivery payments. The agreement amends the revolving credit facility to extend the final maturity date fromDecember 30, 2020 toMarch 31, 2021 . Upon execution of the amended agreement, the maximum borrowing capacity decreased from$160.0 million to$111.2 million . This facility is secured by the collateral assignment of certain of our rights under the purchase agreement with Airbus. As ofSeptember 30, 2020 , collateralized amounts were related to 19 Airbus A320neo aircraft scheduled to be delivered betweenOctober 2020 andOctober 2022 . The maximum borrowing capacity of$95.1 million , as ofSeptember 30, 2020 , decreased from$111.2 million due to the delivery of an aircraft during the third quarter of 2020 and will continue to decrease as we take delivery of the related aircraft. The amendment provides approximately$54 million in additional liquidity throughMarch 2021 . For additional information, refer to "Notes to Condensed Consolidated Financial Statements-Note 13. Debt and Other Obligations." 37 -------------------------------------------------------------------------------- Also, inJune 2020 , we also entered into an agreement to defer certain aircraft deliveries originally scheduled in 2020 and 2021, as well as the related pre-delivery deposit payments. During the nine months endedSeptember 30, 2020 , we took delivery of 10 aircraft under this agreement and we have 2 aircraft scheduled for delivery during the remainder of 2020. In addition, we have 16 aircraft scheduled for delivery in 2021. For additional information about our future aircraft deliveries, refer to "Notes to Condensed Consolidated Financial Statements-Note 11. Commitments and Contingencies." OnJuly 22, 2020 , we entered into an equity distribution agreement relating to the issuance and "at-the-market" sale from time to time of up to 9,000,000 shares of our common stock in sales deemed to be "at-the-market offerings" as defined in Rule 415 under the Securities Act. As ofSeptember 30, 2020 , we had completed the sale of all 9,000,000 shares under our "at-the-market offering" program ("ATM Program") and had received proceeds of$156.7 million , net of$5.0 million in related issuance costs. For additional information, refer to "Notes to Condensed Consolidated Financial Statements-Note 14. Equity." OnSeptember 17, 2020 , we announced the completion of the private offering bySpirit IP Cayman Ltd. , an indirect wholly-owned subsidiary of the Company, andSpirit Loyalty Cayman Ltd. , an indirect wholly-owned subsidiary of the Company of an aggregate of$850 million principal amount of 8.00% senior secured notes due 2025 (the "8.00% senior secured notes"). The 8.00% senior secured notes are guaranteed by the Company,Spirit Finance Cayman 1 Ltd. ("HoldCo 1"), a direct wholly owned subsidiary of the Company andSpirit Finance Cayman 2 Ltd., a direct subsidiary ofHoldCo 1 , and indirect wholly owned subsidiary of the Company ("HoldCo 2"). The 8.00% senior secured notes will be secured by, among other things, a first priority lien on the core assets of the Company's loyalty programs, comprised of cash proceeds from its FreeSpirit co-branded credit card programs, its$9 Fare ClubTM program membership fees, and certain intellectual property required or necessary to operate the loyalty programs, as well as the Company's brand intellectual property. Refer to"Notes to Condensed Consolidated Financial Statements-Note 4, Revenue," for further information on our loyalty programs. The 8.00% senior secured notes will mature onSeptember 20, 2025 . The 8.00% senior secured notes bear interest at a rate of 8.00% per annum, payable in quarterly installments onJanuary 20 ,April 20 ,July 20 andOctober 20 of each year, beginningJanuary 20, 2021 . In the three months endedSeptember 30, 2020 , we received proceeds of$823.9 million , net of issuance costs of$17.4 million and original issue discount of$8.7 million , related to this private offering. For additional information, refer to "Notes to Condensed Consolidated Financial Statements-Note 13, Debt and Other Obligations."
In addition, since the onset of the COVID-19 pandemic, we have taken additional action, including:
•Reduced planned discretionary non-aircraft capital spend in 2020 by approximately$65 million ; •Deferred$20 million in heavy maintenance events from 2020 to 2021; •Reduced planned non-fuel operating costs for 2020 by$20 million to$30 million , excluding savings related to reduced capacity; •Suspended hiring across the Company except to fill essential roles; •Entered into agreements to defer payments in 2020 related to facility rents and other airport services contracts at certain locations; •Entered into agreements with lessors to temporarily defer aircraft rent payments; •Continued to work with service providers to temporarily defer maintenance and service contract payments; •Continued to work with unionized and non-unionized employees to create voluntary leave programs; •Continued to pursue additional financing secured by our unencumbered assets.
We continue to engage in discussions with our significant stakeholders and vendors regarding financial support or contract adjustments, including extensions of payment terms, during this transition period.
For purposes of assessing our liquidity needs, we estimate that demand will continue to improve slightly in the remainder of 2020, but remain well below 2019 levels, and continue to recover into 2021. While we believe the actions described above address our future liquidity needs, we anticipate we may implement further discretionary changes and other cost reduction and liquidity preservation and/or enhancement measures as needed to address the volatility and quickly changing dynamics of passenger demand and the impact of revenue changes, regulatory and public health directives and prevailing government policy and financial market conditions.
Workforce Actions
InJuly 2020 , we distributed a letter to our employees, including approximately 2,500U.S. -based union represented employees, regarding the possibility of a workforce reduction at their work location. Throughout the second and third quarters of 2020, we worked with unionized employees and the related unions to create voluntary leave programs for pilots, flight attendants and other unionized employee groups. We also created voluntary leave programs for certain non-unionized employee groups. InAugust 2020 , we announced a voluntary separation program for non-unionized employees. Due to the high level of 38 -------------------------------------------------------------------------------- support and acceptance of the voluntary programs offered, the total number of Team Members involuntarily terminated as ofOctober 1, 2020 was reduced by more than 95%. In the three months endedSeptember 30, 2020 , we recorded$2.4 million in expenses related to the voluntary and involuntary employee separations. These expenses were recorded within special credits on our condensed consolidated statement of operations. Expenses related to voluntary leave programs were recorded within salaries, wages and benefits on our condensed consolidated statement of operations. As we continue to monitor the impacts of the pandemic on our operations and financial condition, we will consider and evaluate the need for any additional workforce actions in future periods. For the third quarter of 2020, we had a negative operating margin of 24.7%, a decrease of 37.3 percentage points compared to the prior year period. We generated a pre-tax loss of$128.5 million and a net loss of$99.1 million on operating revenues of$401.9 million . For the third quarter of 2019, we generated pre-tax income of$109.0 million and net income of$83.5 million on operating revenues of$992.0 million . Our Adjusted CASM ex-fuel for the third quarter of 2020 was7.75 cents compared to5.66 cents in the same period in prior year. The increase on a per-ASM basis was primarily driven by an average increase in fixed costs such as salaries, wages and benefits expense, depreciation and amortization expense and landing fees and other rents expense as well as a decrease of 33.0% in ASMs compared to the same period in the prior year. The decrease in ASMs was due to reduced air travel demand resulting from the COVID-19 pandemic. As ofSeptember 30, 2020 , we had 155 Airbus A320-family aircraft in our fleet comprised of 31 A319s, 64 A320s, 30 A321s, and 30 A320neos. With the scheduled delivery of 2 aircraft during the remainder of 2020, we expect to end 2020 with 157 aircraft in our fleet. Since the delivery of our initial five A320neo aircraft in the fourth quarter of 2016, we have experienced introductory issues with the new-generation PW1100G-JM engines, which has resulted in diminished service availability of such aircraft. We continuously work withPratt & Whitney to secure support and relief in connection with possible engine related operation disruptions.
Comparison of three months ended
Operating revenues decreased$590.0 million , or 59.5%, to$401.9 million for the third quarter of 2020, as compared to the third quarter of 2019, primarily due to reduced air travel demand resulting from the COVID-19 pandemic. The length and severity of the reduction in air travel demand due to the COVID-19 pandemic continue to be uncertain. We expect air travel demand will continue to be volatile and will fluctuate in the upcoming months until the global pandemic has moderated and demand for air travel returns. Total revenue per passenger flight segment decreased 21.1%, year over year. Fare revenue per passenger flight segment decreased 35.1% and non-ticket revenue per passenger flight segment decreased 7.2%. The decrease in total revenue per passenger flight segment was primarily driven by a 24.7% decrease in average yield, period over period. In the three months endedSeptember 30, 2020 , breakage, brand-related and other revenues (typically not directly driven by the number of passenger flight segments) as a percentage of total revenue was 13.0%, compared to 9.0% for the same period in prior year. Breakage revenue is comprised of estimated unredeemed flight credits that expired unused, no-show revenue, and cancellation fees. Brand-related revenue is comprised of revenues associated with$9 Fare ClubTM membership and the marketing component of our co-branded credit card revenue. Operating Expenses Operating expenses decreased$365.9 million , or 42.2%, to$501.4 million for the third quarter of 2020 compared to$867.3 million for the third quarter of 2019, primarily due to a decrease in operations as reflected by a 33.0% decrease in capacity and a 46.1% decrease in traffic, as a result of the impact of COVID-19 on air travel demand. In addition, we had$148.3 million in special credits in the third quarter of 2020. For additional information, refer to "Notes to Condensed Consolidated Financial Statements-6. Special Credits." Aircraft fuel expense includes into-plane fuel expense (defined below) and realized and unrealized gains and losses associated with our fuel derivative contracts, if any. Into-plane fuel expense is defined as the price that we generally pay at the airport, including taxes and fees. Into-plane fuel prices are affected by the global oil market, refining costs, taxes and fees, 39
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which can vary by region inthe United States and other countries where we operate. Into-plane fuel expense approximates cash paid to the supplier and does not reflect the effect of any fuel derivatives. We had no activity related to fuel derivative instruments during the three months endedSeptember 30, 2020 and 2019. Aircraft fuel expense decreased by$159.6 million , or 62.9%, from$253.8 million in the third quarter of 2019 to$94.3 million in the third quarter of 2020. This lower fuel expense, year over year, was due to a 39.2% decrease in fuel gallons consumed, as a result of the impact of COVID-19 on air travel demand, and a 38.9% decrease in average economic fuel cost per gallon. The elements of the changes in aircraft fuel expense are illustrated in the following table:
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