As of June 30, 2026, the Company’s firm aircraft and engine purchase orders consisted of the following:


	A320neo	A321neo	Total Aircraft(a)	Engines
Year Ending
Remainder of 2026	1	8	9	1
2027	—	8	8	3
2028	9	11	20	2
2029	—	15	15	5
2030	—	22	22	7
Thereafter	3	78	81	2
Total	13	142	155	20

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The Company is party to certain aircraft and engine purchase agreements that provide for, among other things, varying purchase incentives. These purchase incentives are allocated proportionally by aircraft or engine type over the remaining aircraft or engines to be delivered so that each aircraft’s or engine’s capitalized cost upon induction would be equal. Therefore, as cash paid for deliveries is greater than the capitalized cost due to the allocation of these purchase incentives, a deferred purchase incentive is recognized, which will ultimately be offset by future deliveries of aircraft or engines with lower cash payments than their associated capitalized cost. As of June 30, 2026 and December 31, 2025, the Company had $61 million and $81 million, respectively, of deferred purchase incentives recognized within other assets on the Company’s condensed consolidated balance sheets. As of June 30, 2026 and December 31, 2025, the Company had $49 million and $52 million, respectively, of deferred purchase incentives recognized within other long-term liabilities on the Company’s condensed consolidated balance sheets.

As of June 30, 2026, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and PDPs, consisted of the following (in millions):


	Total
Year Ending
Remainder of 2026	$	554
2027	533
2028	1,224
2029	1,044
2030	1,555
Thereafter	5,504
Total	$	10,414

The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. Following a federal excise tax audit by the Internal Revenue Service covering the first quarter of 2021 to the second quarter of 2023, in June 2025, the Company received a revised preliminary assessment in the amount of $133 million related to the applicability of federal excise tax to certain optional ancillary products and services. The Company established an estimated liability for certain fees subject to the assessment where it believes a loss for this matter is probable and reasonably estimable. The Company is contesting the updated assessment. The Company could be subject to further excise tax assessments.

The Company previously received an immaterial audit assessment from the U.S. Transportation Security Administration (the “TSA”) that covered the third quarter of 2016 through the fourth quarter of 2018 and related to the remittance of TSA fees where flight credits expired unused (the “2016-2018 Audit”). The Company appealed this assessment to the United States Tenth Circuit Court of Appeals. In addition, the Company is under audit by the TSA for the period from the fourth quarter of 2019 through the fourth quarter of 2022 (the “2019-2022 Audit”). In April 2026, the Company lost its appeal regarding the 2016-2018 Audit and received a preliminary assessment for the 2019-2022 Audit in the amount of $42 million, which mainly covered remittance of TSA fees where flight credits expired unused as well as for other passengers that purchased tickets and did not travel. During the three months ended March 31, 2026, the Company recorded an additional estimated liability of $77 million, which was largely related to remittance of TSA fees for passengers that purchased tickets and did not travel and is included in other current liabilities and other long-term liabilities on the Company’s condensed consolidated balance sheets and in passenger revenues within the Company’s condensed consolidated statements of operations. The Company could be subject to further TSA audit examinations and resulting assessments.

The Company regularly evaluates the status of such matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Further, in determining whether disclosure is appropriate, the Company evaluates if the matter has been asserted as well as if there is at least a reasonable possibility that a loss or additional losses may have been incurred and whether an estimate of possible loss or range of loss can be made.

The ultimate outcomes of legal actions are unpredictable and can be subject to significant uncertainties, and it is difficult to determine whether any loss is probable or even possible. Additionally, it is also difficult to estimate the amount of loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Thus, actual losses may be in excess of any recorded liability or the range of reasonably possible loss. The Company believes the ultimate outcome of any potential lawsuits, proceedings and reviews will likely not, individually or in the aggregate, have a material adverse effect on its condensed consolidated financial position, liquidity or results of operations, other than disclosed herein, and that the Company’s current accruals cover matters where loss is deemed probable and can be reasonably estimated.

Percentage of Workforce

Employee Group

Representative

Amendable Date(a)

June 30, 2026

Pilots

Air Line Pilots Association (“ALPA”)

January 2024(b)

27%

Flight Attendants

Association of Flight Attendants (“AFA-CWA”)

May 2024(c)

53%

Aircraft Technicians

International Brotherhood of Teamsters (“IBT”)

May 2025(d)

Aircraft Appearance Agents

IBT

July 2030

Dispatchers

Transport Workers Union (“TWU”)

August 2028

Material Specialists

IBT

November 2030

<1%

Maintenance Controllers

IBT

December 2030

<1%

(b) ALPA filed for mediation through the National Mediation Board (the “NMB”) in January 2024, and the parties are meeting regularly as part of the mediation process. Pursuant to the U.S. Railway Labor Act (the “RLA”), the parties continue to be bound by the existing agreements as negotiations continue.

(c) AFA-CWA filed for mediation through the NMB in October 2024, and the parties are meeting monthly as part of the mediation process, with the first meeting held in February 2025. Pursuant to the RLA, the parties continue to be bound by the existing agreements as negotiations continue.

The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees and qualified dependent medical and dental claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company had accrued $7 million for health care claims estimated to be incurred but not yet paid as of both June 30, 2026 and December 31, 2025, which are included as a component of other current liabilities on the Company’s condensed consolidated balance sheets.

The Company has various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under some of these contracts, the Company is party to joint and several liability regarding environmental damages. Under others, where the Company is a member of an LLC or other entity that contracts directly with the airport operator, liabilities are borne through the fuel consortia structure.

The Company’s aircraft, services, equipment lease and sale and financing agreements typically contain provisions requiring the Company, as the lessee, obligor or recipient of services, to indemnify the other parties to those agreements, including certain of those parties’ related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or such other equipment. The Company believes that its insurance would cover most of its exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft, services, equipment lease and sale and financing agreements described above.

Certain of the Company’s aircraft and other financing transactions include provisions that require payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations. In certain of these financing transactions and other agreements, the Company also bears the risk of certain changes in tax laws that would subject payments to non-U.S. entities to withholding taxes.

Certain of these indemnities survive the length of the related financing or lease. The Company cannot reasonably estimate the potential future payments under the indemnities and related provisions described above because it cannot predict (i) when and under what circumstances these provisions may be triggered, and (ii) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.