ITEM 1A. RISK FACTORS
In addition to factors discussed elsewhere in this Report, the following are important risks which could adversely affect our future results. Additional risks and uncertainties not presently known to us or that we currently do not deem material may also impair our business operations. If any of the risks we describe below occur, or if any unforeseen risk develops, our operating results may suffer, our financial condition may deteriorate, the trading price of our common stock may decline and investors could lose all or part of their investment in us.
Risks Related to Disruption of our Operations
Various negative economic or industry conditions may result in reductions to our flight schedules, which could materially and adversely affect our operations and financial condition.
Our operations and financial condition are affected by many changing economic and other conditions beyond our control, including, among others:
• actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, inflation, higher interest rates, higher taxes and/or tariffs, public health emergencies, including pandemics, international hostilities (including the ongoing conflicts in the Middle East and between Russia and Ukraine), terrorist attacks or political instability;
• impact on workforce availability and economic uncertainty;
• future public health threats, outbreaks of diseases or other illnesses could negatively affect travel behavior and the industry;
• changes in consumer preferences, perceptions, spending patterns or demographic trends;
• changes in the competitive environment due to industry consolidation, new airlines entering the market, our major Partner Airlines operating smaller sized aircraft that may reduce the demand for regional aircraft and other factors;
• actual or potential disruptions to U.S. air traffic control systems, caused by a government funding shutdown or otherwise;
• interference on aviation equipment from the deployment of 5G wireless telecommunications systems, or other factors disrupting communications;
• price of jet fuel and oil that may negatively impact the number of flights we are scheduled to operate by our major Partner Airlines under our CPAs and may negatively impact the profitability of our agreements;
• disruptions in the credit markets, which may impact availability of price competitive financing;
• weather and natural disasters.
The effect of any, or some combination, of the foregoing economic and industry conditions on our operations or financial condition is virtually impossible to forecast; however, the occurrence of any or all of such conditions in a significant manner could materially and adversely affect our operations and financial condition and could cause our major Partner Airlines to reduce the utilization levels of our aircraft under our code-share agreements.
We may experience disruption in service due to delays from key third-party service providers.
We rely on third-party vendors for a variety of services and functions critical to our business, including airframe and engine maintenance, telecommunication systems, and information technology infrastructure, as well as services and functions provided by our Partner Airlines such as ground handling, fueling, computer reservation system hosting, telecommunication systems, and information technology infrastructure and services.
Even though we strive to formalize agreements with these vendors that define expected service levels, our use of third-party vendors increases our exposure to several risks. In the event that one or more vendors goes into bankruptcy, ceases operation, or fails to perform as promised , replacement services may not be readily available at competitive rates, or at all. If one of our vendors fails to perform adequately, we may experience increased costs, delays, maintenance issues, safety issues, or negative public perception. Vendor bankruptcies, unionization, regulatory compliance issues, or significant changes in the competitive marketplace among suppliers could adversely affect vendor services or force us to renegotiate
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existing agreements on less favorable terms. These events could result in disruptions in our operations or increases in our cost structure.
We currently depend on Embraer, General Electric (“GE ” ) Aviation, and other original equipment manufacturers (“OEMs”) to support our fleet of aircraft.
We currently rely on Embraer as the primary manufacturer of all of our regional jets and GE Aviation and its affiliates as the primary manufacturer for our supporting engines. Our risks in relying on a limited number of aircraft and engine manufacturers include:
• the failure or inability of Embraer, GE Aviation, or an OEM to provide sufficient parts or related support services on a timely basis;
• the interruption of scheduled passenger service as a result of unscheduled or unanticipated maintenance requirements for these aircraft;
• the issuance of DOT or FAA directives restricting or prohibiting the use of Embraer aircraft or GE Aviation engines or requiring time-consuming inspections and maintenance;
• the enactment of tariffs that will increase cost and/or delay parts at the border causing prolonged time of repair; and
• the adverse public perception of a manufacturer as a result of an accident or other adverse publicity.
Our operations could be materially and adversely affected by the failure or inability of Embraer, GE Aviation, or an OEM to provide sufficient parts or related maintenance and support services on a timely basis or by an interruption of fleet service as a result of unscheduled or unanticipated maintenance requirements for our aircraft or engines.
In addition, our Partner Airlines include both Embraer aircraft and aircraft manufactured by other OEMs as part of their networks. If we continue to operate a single manufactured fleet, we may not be able to compete for and win new regional flying opportunities, and our growth could be limited. Therefore, our growth plan may require us to expand our operations to flying regional jets manufactured by other OEMs. In such event, the introduction of additional aircraft types will require us to develop and implement specific operational proficiencies, including pilots, flight attendants, and maintenance technicians. Doing so may erode our operational efficiencies gained from flying a single aircraft type and could cause margin degradation.
We are at risk of losses stemming from an accident or incident involving any of our regional or general aviation aircraft or personnel.
It is possible that one or more of our commercial passenger aircraft or general aviation aircraft may be involved in an accident in the future, causing death or serious injury to individual air travelers and our employees, destroying our aircraft, and the property of third parties.
In addition, an accident involving one of our aircraft could expose us to significant tort liabilities. Such liabilities could include liability arising from the claims of those on board, including passengers or their estates seeking to recover damages for death or injury. There can be no assurance that the insurance we carry to cover such damages will be adequate. Accidents could also result in unforeseen mechanical and maintenance costs. In addition, any accident involving an aircraft type that we operate could create a public perception that our aircraft are not safe. Such an accident could materially and adversely affect our financial condition, results of operations, and the price of our common stock.
We are also at risk of adverse publicity stemming from any incident involving us, which could expose us or our Partner Airlines to reputational harm and potential legal liability. Our involvement in any such incident could negatively impact our relationship with our Partner Airlines or affect our Partner Airlines’ respective brands, and as a result, adversely impact our business, results of operations, financial condition, and the price of our common stock.
Interruptions or disruptions in service at one of our hub airports, due to weather, system malfunctions, security closures, or for any other reason, could have an adverse impact on our operations.
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We currently operate primarily through hubs supporting our Partner Airlines’ respective route network across the Northeast, Midwest, and South regions of the United States. A significant portion of our flights either originate from or fly into one of these hubs. These regions tend to experience higher than average adverse weather events, air traffic control disruptions, and the airports within these regions tend to experience significant congestion relative to many other U.S. airports, each of which creates significant challenges to completing flights on time. Our revenues depend primarily on our completion of flights and, secondarily, on service factors such as timeliness of departures and arrivals. Certain revenues are also impacted by non-controllable conditions such as weather. Any interruptions or disruptions could, therefore, adversely affect us. Extreme weather such as blizzards, hurricanes or tornados can cause flight disruptions, and during periods of storms or adverse weather, our flights may be cancelled or significantly delayed. An interruption or disruption in service at one of our hubs, due to adverse weather, system malfunctions, air traffic control disruptions, airport construction, security closures, or otherwise, could result in the cancellation or delay of a portion of our flights and, as a result, could have adverse impact on our operations and financial performance.
Risks Related to the Merger and Integration with Mesa Air Group, Inc.
We may be unable to integrate Mesa’s business with ours successfully and realize any anticipated benefits of the Merger, which could negatively impact our stock price and our future business and financial results.
We must devote significant management attention and resources to integrating the business practices and operations of Mesa Airlines. Potential difficulties we may encounter as part of the integration process include the following:
• integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of the two companies in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies;
• diversion of the attention of our management and other key employees;
• integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running a safe, clean, and reliable flying experience;
• disruption of, or the loss of momentum in, our ongoing business;
• liabilities that are significantly larger than we currently anticipate and unforeseen increased expenses or delays associated with the Merger, including transition costs to integrate the two businesses that may exceed the costs that we currently anticipate;
• maintaining productive and effective employee relationships and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups;
• the increased scale of our operations resulting from the Merger;
• retaining key employees of our company; and
• obligations that we will have to counterparties of Mesa that arise as a result of the change in control of Mesa.
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business the size of Mesa, then we may not achieve any potential benefits of the Merger of Mesa and our revenues, expenses, operating results, and financial condition could be materially adversely affected.
We are expected to incur substantial expenses related to the Merger and the integration of Mesa Airlines’ business.
We are expected to incur substantial integration and transition expenses in connection with the Merger of Mesa Airlines related to a large number of processes, policies, procedures, operations, technologies, and systems that must be integrated. While we have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the financial benefits we expect to achieve from the Merger, including the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses likely will continue to result in us taking significant charges against earnings in future periods, and the amount and timing of such charges are uncertain at present.
Risks Related to our Capacity Purchase Agreements with our Partner Airlines
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Our business is dependent on our CPAs with our Partner Airlines.
Substantially all of our revenues depend on relationships created by our regional jet CPAs with American Airlines, Delta Air Lines, and United Airlines. For the year ended December 31, 2025, our American Airlines capacity purchase agreements (the “American Airlines CPAs”) accounted for 43% of our revenue, our Delta Air Lines capacity purchase agreements (the “Delta Air Lines CPAs”) accounted for 24% of our revenue and our United Airlines capacity purchase agreement s(the “United Airlines CPAs”) accounted for 31% of our revenue.
The American Airlines CPAs expire with respect to different tranches of aircraft between 2028 and 2033, unless otherwise extended or amended. In addition, the American Airlines CPAs are subject to early termination for cause. The Delta Air Lines CPAs expire with respect to different tranches of aircraft between 2027 and 2030, unless otherwise extended or amended. In addition, the Delta Air Lines CPAs are subject to early termination for material breach of contract and significant declines in operating performance, among other triggering events. The United Airlines CPAs expire with respect to different tranches of aircraft between 2026 and 2037 , unless otherwise extended or amended. In September 2021, we entered into a new capacity purchase agreement with United Airlines. The terms extended the contract expiration from 2029 to 2037 and provided for 38 E170 aircraft to be replaced with new E175s which began in June 2022 with the remaining three new E175s to be delivered throughout the three months ending March 31, 2026. In addition, the United Airlines CPAs are subject to early termination for breach of contract.
As substantially all of our revenues are currently generated under our CPAs, adverse material modification to, or termination of, our CPAs with any of our Partner Airlines could have a material adverse effect on our financial condition and the results of our operations. None of our Partner Airlines are under any obligation to renew their respective CPAs. If any one of our Partner Airlines were to terminate or fail to renew their CPA, we would have difficulty replacing these agreements, due to the concentration of major airlines in the industry. If we were unable to replace these CPAs with alternative commitments from our Partner Airlines or with new partners, our results of operations would be significantly impacted. Operating an airline independently from our Partner Airlines would be a significant departure from our business plan and would likely require significant time and resources, which may not be available to us at that point.
Reduced utilization levels of our aircraft under CPAs with our Partner Airlines would adversely impact our revenues, earnings, and liquidity.
Our CPAs with our Partner Airlines require each of them to schedule our aircraft to a minimum level of utilization. Even though the fixed fee rates may adjust, either up or down, based on scheduled utilization levels, or require a fixed amount per day to compensate for our fixed costs , if our aircraft are utilized only at the minimum requirement (taking into account block hour and departure utilization and frequency of its scheduled flights), we will likely lose both (i) fixed-fee revenues (as a result of reduced utilization) and (ii) the opportunity to earn an additional margin and incentive compensation for such flights.
Challenges with hiring, training, and retaining pilots, flight attendants, maintenance technicians, and dispatchers may also lead to reduced utilization levels of our aircraft and possibly the incurrence of penalties under our CPAs. Additionally, our Partner Airlines may change routes and frequencies of flights without notice to us or our consent, which can negatively impact our operating efficiencies. Changes in schedules may increase our flight costs, which could exceed the fixed rates paid by our Partner Airlines.
If the financial strength of any of our Partner Airlines decreases, our financial strength, in turn, is at risk.
We are directly affected by the financial and operating strength of our Partner Airlines. In the event of a decrease in the financial or operational strength of any of our Partner Airlines, such Partner may be unable to make the payments due to us under our CPA. In addition, a Partner may reduce utilization of our aircraft to the minimum levels specified in the relevant CPAs, and it is possible that any CPAs with a Partner that files for reorganization under Chapter 11 of the U.S. Bankruptcy Code may not be assumed in bankruptcy and could be modified or terminated. Our Partner Airlines have experienced, and may experience in the future, a sudden and severe loss of passenger demand and significant financial
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stress as a result of unforeseen events or conditions. Any such event impacting our Partner Airlines could have an adverse effect on our operations.
Our Partner Airlines may choose to operate their own regional aircraft, thus limiting the opportunity for expansion of our relationships with them.
We depend on major airlines, such as our Partner Airlines, to contract with us instead of purchasing and operating their own aircraft; however, some major airlines own their own regional airline subsidiaries and operate their own regional aircraft instead of entering into contracts with us or other independent regional carriers. Currently, the regional airlines owned by major airlines include Endeavor Air, Inc. (“Endeavor”) (owned by Delta Air Lines), Envoy Air Inc. (“Envoy”) (subsidiary of the parent company of American Airlines), PSA Airlines, Inc. (“PSA”) (subsidiary of the parent company of American Airlines), Piedmont Airlines (“Piedmont”) ( subsidiary of the parent company of American Airlines), and Horizon Air Industries, Inc. (“Horizon”) (owned by Alaska Air Group, Inc.). The major airlines possess the financial and other resources needed to acquire and operate their own regional jets, create or grow their own captive regional airlines, or acquire other regional air carriers instead of entering into contracts with us. We have no guarantee that, in the future, our Partner Airlines or any other airline will choose to enter into contracts with us instead of purchasing their own aircraft or entering into relationships with competing regional airlines, as they are not prohibited from doing so under the CPAs. A decision by American Airlines, Delta Air Lines, or United Airlines to phase out our contract-based relationships as they expire and instead acquire and operate their own aircraft or enter into similar agreements with one or more of our competitors could have a material adverse effect on our financial condition , results of operations, and the price of our common stock. Because of the concentration of major airlines in the industry, we would have difficulty replacing lost revenues if any of our Partner Airlines were to terminate or reduce their CPAs with us.
Our Partner Airlines may be restricted in increasing the level of business that they conduct with us, thereby limiting our growth.
In general, the pilots’ unions of certain major airlines have negotiated clauses in their CBAs that restrict the number and/or size of aircraft that can be operated by the regional partners of such major airlines, referred to in the industry as “scope clauses.” These CBAs limit regional airlines to flying aircraft with a maximum take-off weight of 86,000 pounds and a maximum passenger configuration of 76 seats with certain exceptions expressly provided in certain CBAs. Except as contemplated by our existing CPAs, we cannot be sure that our Partner Airlines will contract with us to fly any additional aircraft.
We may not have additional growth opportunities or may agree to modifications to our CPAs that reduce certain benefits to us in order to obtain additional aircraft or for other reasons. Given the competitive nature of the airline industry, we believe its current environment with limited growth opportunities may result in competitors accepting reduced margins and less favorable contract terms in order to secure new or additional capacity purchase operations. Even if we are offered growth opportunities by our Partner Airlines, those opportunities may involve economic terms or financing commitments that are unacceptable to us.
Additionally, our Partner Airlines may reduce the number of regional jets in their system by not renewing or extending existing flying arrangements with regional operators or transitioning those flying arrangements to their own captive regional carriers. Any one or more of these factors may reduce or eliminate our ability to expand our flight operations with our Partner Airlines.
Disagreements regarding the interpretation of the CPAs with our Partner Airlines could have an adverse effect on our operating results and financial condition.
To the extent that we experience disagreements regarding the interpretation of the CPAs or other agreements, we will likely expend valuable management time and financial resources in our efforts to resolve those disagreements. Those disagreements may result in litigation, arbitration, settlement negotiations, or other proceedings. Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our favor or that we would be able to exercise sufficient leverage in any proceeding relative to our Partner Airlines to achieve a favorable outcome. An
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unfavorable result in any such proceeding could have adverse financial consequences and could require us to modify our operations. Such disagreements and their consequences could have an adverse effect on our operating results and financial condition.
The residual value of our owned aircraft may be less than estimated in our depreciation policies.
As of December 31, 2025 , we had $2.4 billion of aircraft, engines, property, and other equipment, net of accumulated depreciation and amortization, of which most relates to aircraft and engines. In accounting for these long-lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived assets, and operating cash flow losses associated with the use of the long-lived assets. In the event the estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation policies. Impairment on any of the aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results. We have recorded impairment charges in the past when aircraft values decreased faster than our depreciation policies estimated and future cash flows did not support the current net book value of the aircraft.
Risks Related to our Operating Costs and Personnel
We may experience difficulty hiring, training, and retaining qualified aviation professionals.
As is common within the regional airline industry, we have, from time to time, faced considerable turnover of our employees. Our pilots, flight attendants, maintenance technicians, and dispatchers sometimes leave to work for major airline, low cost, and cargo carriers, which generally offer higher salaries and more extensive benefit programs than regional airlines are financially able to offer.
The airline industry has experienced a significant shortage of qualified personnel, specifically pilots, as a result of decreased interest in the profession, new and more stringent government regulations, and an aging pilot population. These factors have created a greater industry-wide demand for pilots, including at major airlines, low cost, and cargo carriers, which frequently recruit from regional airlines and offer higher salaries and more extensive benefit programs than regional carriers have historically offered. This, in turn, has increased difficulty for regional airlines to retain sufficient pilot staffing levels.
In 2013 , the congressionally mandated pilot experience qualifications contained in the Airline Safety and Federal Aviation Administration Extension Act of 2010 became effective (“FAA Qualification Standards”). As a result of this legislation, the age and training requirements for our First Officer pilots generally increased to 23 years and 1,500 hours of flight time, respectively, and First Officer pilots are required to hold an Air Transport Pilot (“ATP”) Certificate. Previously, First Officers were required to have only a commercial pilot certificate, which required 250 hours of flight time and no ATP certification requirement. Military pilots are subject to somewhat lower requirements, but there is a limited number of military-trained pilots available to enter the workforce. In addition, the FAA implemented a regulation beginning in 2014 that increased the flight crew duty, flight, and rest requirements for pilots. This update changed the length of time a pilot may be on duty and how much she or he may fly in a day, month, and year. These limitations, together with the more restrictive certification and qualification requirements, have resulted in a scarcity of qualified new entrants and have contributed to a severe nationwide pilot shortage from time to time.
The industry-wide pilot shortage is also caused by the aging population of experienced pilots approaching the mandatory retirement age of 65 . As a result, the global demand for pilots is expected to increase over the next decade. The shift in demographics is concentrated at major airline, low cost, and cargo carriers, giving rise to increased attrition at regional air carriers to replace those pilots. There can be no assurance that we will be able to attract and retain sufficient
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qualified pilots and our operations and financial condition may be negatively impacted if we are unable to hire and train pilots in a timely manner.
In 2022 and 2023, we experienced significant levels of pilot attrition, particularly attrition of C aptains and experienced First Officers, as a result of industry-wide hiring following the COVID-19 pandemic. The corresponding shortages of Captains caused a sequential reduction in our annual block hours in 2022, 2023, and the first half of 2024. Although Captain attrition levels eased in 2024, future elevated pilot attrition levels could constrain our flight schedules. Operating at reduced flying schedules results in operating inefficiencies which negatively impacts our financial results.
Additionally, there can be no assurance that labor shortages may not affect other staffing needs, including those related to flight attendants, dispatchers, and maintenance technicians. If we are unsuccessful in sufficiently staffing these positions, our operations and financial condition may be negatively impacted if hiring and training of flight attendants, dispatchers, and maintenance technicians is not done in a timely manner.
Furthermore, any labor disruption or labor strikes by our employees or those of our Partner Airlines would adversely affect our ability to conduct our business. Relations between air carriers and labor unions in the United States are governed by the RLA. Under the RLA, CBAs generally contain amendable dates rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and often lengthy series of bargaining process overseen by the NMB. This process continues until either the parties have reached agreement on a new CBA, or the parties have been released to “self-help” by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lock-outs and strikes. Any strike, labor dispute, or increased unionization among our employees could disrupt our operations, reduce profitability, or interfere with the ability of our management to focus on business strategies.
Increases in our labor costs, which constitute a substantial portion of our total operating costs, will directly impact our earnings and ability to compete for new fixed-fee business.
Wages and benefits constituted 51% of our total operating costs for the year ended December 31, 2025 , and we have experienced pressure to increase wages and benefits for our employees. Under our CPAs, our reimbursement rates for certain operating costs contemplate labor costs that increase on a set schedule generally tied to an increase in the consumer price index. We are entirely responsible for our labor costs, and we are not entitled to receive increased payments for our flights from our Partner Airlines if our labor costs increase above the assumed costs included in the reimbursement rates. As a result, a significant increase in our labor costs above the levels assumed in our reimbursement rates could result in a material adverse effect to our results of operations, cash flows, and the price of our common stock.
Due to our business strategy to position the airline for future capacity growth, we have from time to time reached a pilot staffing level that exceeds the pilot base necessary to operate our current contractual obligations. These staffing levels are necessary to position our airline to accept new business, acquire additional aircraft, and expand our fleet. During periods in advance of growth, or in the event that we are unable to achieve fleet expansion and capacity growth, the cost to carry excess pilots could result in a material adverse effect to our results of operations, cash flows, and the price of our common stock.
In response to past significant increases in attrition and wage escalation in selected work groups, we have increased wages and provided signing bonuses to attract new employees in order to be competitive in the marketplace. If our annual revenue rate increases are less than our actual cost escalations, our financial results will be negatively impacted.
Our maintenance expenses will increase as our fleet ages and may be higher than we anticipate.
We bear substantial costs for routine and major maintenance events. Maintenance expenses comprise a significant portion of our operating expenses. The average age of our aircraft is approxima tely 13.0 years old. As a result, our newer aircraft require less maintenance now than they will in the future. We have incurred lower maintenance expenses because some of the parts on our aircraft are under multi-year warranties. Our maintenance costs will increase as these warranties expire and our fleet ages. For example, our recent engine expenses for our aircraft do not reflect the full mature cost of
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maintaining the aircraft, as they do not include all of our expenses for future engine life limited parts replacement (“LLP”) restoration as these parts are only replaced approximately every ten to twelve years. As we incur expenses to replace these LLPs, only a portion of the expense may be passed through to our Partner Airlines, thus our future results of operations and liquidity will be materially impacted. If our annual revenue rate increases are less than our actual cost escalations, our financial results will be negatively impacted.
In addition, we are periodically required to take aircraft out of service for heavy maintenance checks, which can increase costs and reduce revenue. We also may be required to comply with regulations and airworthiness directives the FAA issues, the cost of which our aircraft lessors may only partially assume depending upon the magnitude of the expense. Although we believe that our owned and leased aircraft are currently in compliance with all effective FAA airworthiness directives, our aircraft could fall out of compliance, or additional airworthiness directives may be required in the future, necessitating additional expenditures.
We have a significant amount of debt and other contractual obligations that could impair our liquidity and thereby harm our business, results of operations, financial condition, and the price of our common stock.
The airline business is capital intensive, and as a result, we are highly leveraged. As of December 31, 2025 , we had approximately $ 1.1 billion in total debt and finance leases. Substantially all of our debt was incurred in connection with the acquisition of aircraft and spare aircraft engines. This substantial indebtedness could:
• require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations and future business opportunities;
• make it difficult for us to satisfy our debt service payments and other obligations;
• limit our ability to borrow additional funds for working capital, capital expenditures, or other purposes, if needed, and increase the cost of any of these borrowings; and/or
• reduce our flexibility in planning for or responding to changing business and economic conditions.
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could cause us to default on our existing debt obligations and impair our liquidity. Our ability to restructure or refinance our debt will depend on, among other things, our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates or otherwise on more onerous terms. Moreover, in the event of a default, the holders of our indebtedness, could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest, if any.
We also have significant long-term debt obligations primarily relating to our aircraft fleet. As of December 31, 2025 , our minimum required debt service payments for the next 12 months totals $257.0 million and our finance lease payments total approximately $9.5 million. We have significant operating lease obligations with respect to our flight simulators and facility leases, which aggregated to approximately $140.4 million a s of December 31, 2025 through the remaining minimum lease terms.
If our liquidity is materially diminished, we might not be able to timely pay our lease payments and debts or comply with material provisions of our contractual obligations.
Our business could be harmed if we are unable to attract, develop, and retain the services of our key personnel.
Our business depends upon the efforts of our key management and operating personnel. If we experience a substantial turnover in our leadership and other key employees and are not able to replace these persons with individuals with comparable skills, our performance could be materially adversely impacted. In addition, competition for skilled personnel has intensified and may continue to intensify if overall industry capacity continues to increase and/or we were to incur attrition at levels higher than we have historically.
We may have difficulty replacing management or other key personnel who leave and, therefore, the loss of the services of any of these individuals could harm our business.
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Risks Related to Regulation and Litigation
We may become involved in litigation that may have a material and adverse effect on our business and financial condition.
From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including employment, commercial, product liability, class action, whistleblower, and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, and cause us to incur significant expenses or liability and/or require us to change our business practices. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that it has meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure that the results of any of these actions will not have a material adverse effect on our business, results of operations, financial condition, and the price of our common stock.
Regulatory changes or tariffs could negatively impact our business and financial condition.
We rely on a limited number of aircraft types, including E170s and E175s, and we import a substantial portion of the equipment we need. The issuance of FAA or manufacturer directives restricting or prohibiting the use of the aircraft types we operate could negatively impact our business and financial results. Additionally, potential regulatory changes or action by the U.S. government or U.S. regulatory agencies, including the imposition of new tariffs, increase in existing tariffs, or changes in international trade treaties, could negatively impact the cost and availability of parts and aircraft. Our business may be subject to additional costs as a result of potential regulatory changes, which could have an adverse effect on our operations and financial results.
The United States has recently enacted and proposed to enact significant new tariffs. There continues to exist significant uncertainty about the future relationship between the United States and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly impact the cost of new Embraer aircraft imported from Brazil, aircraft parts and supplies sourced internationally or impact the cost of service providers located outside of the United States, which in turn would negatively impact us.
We are subject to various environmental and noise laws and regulations, which could negatively impact our business and financial condition.
We are subject to increasingly stringent Federal, state, local, and foreign laws, regulations, and ordinances relating to noise and the protection of the environment, including those relating to emissions to the air, discharges (including storm water discharges) to surface and subsurface waters, safe drinking water, and the use, management, disposal, and release of and exposure to, hazardous substances, oils, and waste materials.
We are or may become subject to new or proposed laws and regulations that may have a direct effect (or indirect effect through our third-party specialists or airport facilities at which we operate) on our operations. In addition to other potential new regulations, U.S. airport authorities are exploring ways to limit de-icing fluid discharges to groundwater, which can result in additional costs to and restrictions on airlines required to participate in the construction of new or modified airport de-icing facilities. Additionally, air quality initiatives at the state and local level (including state implementation plans for achieving national ozone standards) could, in the future, result in curtailments in services, increased operating costs, limits on expansion, or further emission reduction requirements. Certain airports and/or state governments either have or are seeking to establish environmental fees and other requirements applicable to carbon/greenhouse gas emissions, local air quality pollutants, and/or noise. As a result, we may face increased taxes or costs related to greenhouse gas emissions, as well as other regulatory requirements.
Similarly, we are subject to environmental laws and regulations that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under certain laws, generators of waste materials and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint, and several, meaning that
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we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of waste materials directly attributable to us.
We support our Partner Airlines’ goals and strategies to reduce carbon emissions on flights we operate under our code-share agreements and, as we work to support each of our Partner Airlines’ goals and strategies, initiatives to reduce emissions may not materialize and could materially and adversely affect the Company’s business plans, strategies, results of operations, and the price of our common stock.
Under our flying contracts, our Partner Airlines are responsible for fuel procurement and have significant control over our flight schedules. Accordingly, we anticipate our Partner Airlines will take responsibility for carbon emissions incurred on our contract flights. Each of our Partner Airlines may have different goals, strategies and timelines to reduce carbon emissions on our flights. We are largely dependent on the direction from our Partner Airlines regarding long-term fuel saving initiatives such as engine innovations reducing fuel consumption, use of sustainable alternative fuels, carbon sequestration programs, and air traffic flow routing efficiencies, among other initiatives. Each of our Partner Airlines may pursue alternative strategies and goals to reduce carbon emissions on flights we operate under our code-share agreements that may impact the rate at which we are able to reduce our carbon emissions, if at all. There is no assurance our Partner Airlines will take responsibility for carbon emissions incurred under our contract flights and no assurance future long-term fuel saving initiatives will materialize. In the event we pursue initiatives to reduce our carbon emissions, the cost could materially and adversely affect our business plans, results of operations, and the price of our common stock.
Risks Related to our Industry
Airlines are often affected by factors beyond their control, including economic conditions, air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, major construction or improvements at airports, FAA grounding of aircraft, increased security measures, new travel-related taxes and fees, adverse weather conditions and natural disasters.
Demand for air travel could weaken in an economic recession or due to other factors that are outside of our control. The airline industry is highly cyclical and the level of demand for air travel is correlated to the strength of the U.S. and global economies, including unemployment levels, consumer confidence levels and the availability of consumer and business credit. Air transportation is often a discretionary purchase that leisure travelers may limit or eliminate during difficult economic times. Short-haul travelers, in particular, have the option to replace air travel with surface travel. In addition, during periods of unfavorable economic conditions, business travelers historically have reduced the volume of their travel, either due to cost-saving initiatives, the replacement of travel with alternatives such as videoconferencing, or as a result of decreased business activity requiring travel. Furthermore, an increase in price levels generally or in price levels in a particular sector (such as current inflationary pressures related to domestic and global supply chain constraints, which have led to both overall price increases and pronounced price increases in certain sectors) could result in a shift in consumer demand away from both leisure and business travel. Any of the foregoing could have a significant negative impact on our results of operations and the price of our common stock.
Our business is also affected by other factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, major construction or improvements at airports at which we operate, increased security measures, new travel-related taxes and fees, adverse weather conditions, natural disasters, and public health events, including the outbreak of disease (such as the COVID-19 pandemic). During periods of fog, ice, low temperatures, storms, or other adverse weather conditions, flights may be cancelled or significantly delayed. For example, in 2025 , we cancelled approximately 3% of our scheduled flights due to extreme weather.
The Federal government controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient, and affordable manner. The air traffic control system, which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel. U.S. and foreign air-traffic controllers often rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect routes resulting in delays, and such delays may impact our operations. The Federal government also controls airport security. In addition, Congress could enact legislation that could impose a wide range of consumer protection requirements, which could
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increase the costs of doing business. Further, implementation of the Next Generation Air Transport System, or NextGen, by the FAA could result in changes to required aircraft equipment or aircraft routings and flight paths that could lead to increased flight time and potentially increased costs. In addition, Federal government shutdowns can affect the availability of federal resources necessary to provide air traffic control and airport security. Furthermore, a Federal government grounding of our aircraft type could result in flight cancellations and adversely affect our business.
Adverse weather conditions and natural disasters, such as hurricanes, thunderstorms, winter snowstorms, or earthquakes, can cause flight cancellations or significant delays, and in the past have led to Congressional demands for investigations. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security, or other factors may affect us to a greater degree than other, larger airlines that may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations, the price of our common stock, and financial condition to a greater degree. Similarly, outbreaks of pandemic or contagious diseases, such as COVID-19, Ebola, measles, avian flu, severe acute respiratory syndrome (SARS), H1N1 (swine) flu, pertussis (whooping cough), and zika virus, or their respective variants, have resulted and could continue to result in significant decreases in passenger traffic and the imposition of government restrictions in service and could have a material adverse impact on the airline industry. Any increases in travel-related taxes could also result in decreases in passenger traffic. Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations, the price of our common stock, and financial condition. Moreover, U.S. Federal government shutdowns may cause delays and cancellations or reductions in discretionary travel due to longer security lines, including as a result of furloughed government employees, or reductions in staffing levels, including air traffic controllers. U.S. government shutdowns may also impact our ability to take delivery of aircraft and commence operations in new domestic stations. Any extended shutdown may have a negative impact on our operations.
Under our CPAs, our regional airline business is partially protected against cancellations due to weather or air traffic control, although these factors may affect our ability to receive variable revenues for flight completions and incentive payments for flying more than the minimum number of flights specified in our CPAs.
The airline industry is heavily regulated.
Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that impose significant costs. In the last several years, Congress has passed laws and the FAA, DOT, and TSA have issued regulations, orders, directives, rulings, and guidance relating to the operation, maintenance, safety, and security of airlines and to consumer protections that have required significant expenditures. We expect to continue to incur expenses in connection with complying with such laws and government regulations, orders, directives, rulings, and guidance. FAA requirements cover, among other things, retirement of aged aircraft, collision avoidance systems, airborne wind shear avoidance systems, noise abatement, aircraft safety measures, and increased inspection and maintenance procedures to be conducted on older aircraft.
The FAA, in its authority granted by U.S. Federal legislation, issues mandatory regulations and orders relating to, among other things, pilot and flight attendant rest rules, air traffic procedures, the grounding of aircraft, inspection of aircraft, installation of new safety-related items, and removal, replacement, or modification of aircraft parts that have failed or may fail in the future. We are dependent on the operation of the FAA even in times of government agency closures and employee furloughs affected by intermittent periods of shutdown of the U.S. government. Our inability to secure the necessary registrations, permits, and approvals from the FAA in these times could impact our ability to operate our aircraft, which could in turn, adversely impact our results of operations and the price of our common stock. Similarly, a decision by the FAA to ground, or require time consuming inspections of or maintenance on, all or any of our aircraft, for any reason, could negatively impact our results of operations and the price of our common stock.
In addition to state and Federal regulation, airports, and municipalities enact rules and regulations that affect our operations. The imposition of any limits on the use of our aircraft at any airport at which it operates could interfere with our obligations under our CPAs and severely interrupt our business operations.
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Additional laws, regulations, taxes, and increased airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel.
We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules, and regulations to which we are subject. We cannot predict whether we will be able to comply with all present and future laws, rules, regulations, and certification requirements or that the cost of continued compliance will not significantly increase our costs of doing business.
The DOT has broad authority over airlines and their consumer and competitive practices and has used this authority to issue numerous regulations and pursue enforcement actions, including rules and fines relating to the handling of lengthy tarmac delays, consumer notice requirements, consumer complaints, customer service commitments, contracts of carriage, and the transportation of passengers with disabilities. Among these are recently issued rules on refunds on airfare, baggage fees, and ancillary services, rules on disclosure of information regarding fees for ancillary services and rules regarding accommodation of passengers with disabilities. Furthermore, in 2024 , the U.S. Congress approved a five -year reauthorization for the FAA, which encompasses significant aviation tax and policy-related issues. The law includes a range of policy changes related to enhancing aviation safety, improving and modernizing air traffic control, and strengthening the aviation workforce, implementation of some items continues into the new Administration, and depending on how they are implemented, could impact our operations and costs.
The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential partners, which could adversely affect our operating results and financial condition.
The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential partners, which could adversely affect our operating results and financial condition. We compete with other regional airlines, some of which are owned by or operated as partners of major airlines, on various factors including, but not limited to labor resources, including pilots, flight attendants, maintenance technicians, and dispatchers; financial resources, including the ability to finance aircraft at competitive terms; geographical infrastructure; and overall customer service levels relating to on-time arrival and flight completion percentages. Our Partner Airlines rely on us to fly passengers from various locations into their hubs under our CPAs at competitive terms. Within the airline industry, we also face indirect competition from low-cost or ultra-low-cost carriers who compete with our Partner Airlines on many routes we operate, and major airlines on many of our routes, including carriers that fly point to point instead of to, or through, a hub. Additionally, future developments of electric-powered aircraft designed to operate on routes typically served by regional aircraft could impact our Partner Airlines’ strategy and result in reduction of demand or increase our capital expenditures and could have a negative impact on our business and financial condition.
In addition, some of our competitors are larger and have significantly greater financial and other resources than we do. Moreover, federal deregulation of the industry allows competitors to rapidly enter our markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats.
In addition to traditional competition among airlines, the industry faces competition from videoconferencing and other methods of electronic communication. New advances in technology may add a new dimension of competition to the industry as business travelers seek lower-cost substitutes for air travel.
The DOT has broad authority over airlines and their consumer and competitive practices and has used this authority to issue numerous regulations and pursue enforcement actions, including rules and fines relating to the handling of lengthy tarmac delays, consumer notice requirements, consumer complaints, customer service commitments, contracts of carriage, and the transportation of passengers with disabilities. Among these is the series of Enhanced Airline Passenger Protection rules issued by the DOT. See “ The airline industry is heavily regulated .”
Furthermore, the airline industry has undergone substantial consolidation, and any additional consolidation or significant alliance activity within the airline industry could further limit the number of potential partners with whom we could enter into CPAs, which could adversely affect our operating results and financial condition.
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Terrorist activities or warnings have dramatically impacted the airline industry and will likely continue to do so.
Past terrorist attacks and their aftermath negatively impacted the airline industry in general, including our operations. If additional terrorist attacks or other acts of violence are launched against the airline industry, there will be lasting consequences of such attacks, which may include loss of life, property damage, increased security, and insurance costs, increased concerns about future terrorist attacks, increased government regulation, and airport delays due to heightened security. We cannot provide any assurance that these events will not harm the airline industry generally or our operations or financial condition in particular.
General Risks Related to Us
We are increasingly dependent on technology, and if our technology fails, we do not adequately continue to invest in new technology or we are the subject of any cybersecurity incidents of our information technology infrastructure, our business may be adversely affected.
The performance and reliability of our technology, and the technology of our Partner Airlines, are critical to our ability to compete effectively. We have become increasingly dependent on technology to manage our flight operations, reduce costs, and compete in the current business environment, such as software programs supporting flight operations, supply chain logistics, crew scheduling, and crew communications. Technology initiatives will continue to require significant capital investments in order to deliver these expected benefits. If we are unable to make these investments, the technology fails, or the expected benefits do not materialize, our business and operations could be negatively affected.
Any internal technological error or failure or large-scale external interruption in the information systems, networks, hardware, software, and technological infrastructure we depend on, such as U.S. air traffic control systems, power, telecommunications, or the internet, may disrupt our internal network, impact our ability to conduct our business, lower the utilization of our aircraft, negatively impact our reputation, lower revenue, and/or result in increased costs. Our technological systems (including those provided by third parties) and those of our Partner Airlines, may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications or IT System failures, computer viruses, hackers, and other security issues.
In addition, as a part of our ordinary business operations, we collect and store sensitive data, including the personal information of our employees. Our information systems are subject to an increasing threat of continually evolving cybersecurity risks that may compromise the confidentiality, integrity, and availability of such systems. Unauthorized parties, including diverse threat actors such as state-sponsored organizations, opportunistic hackers and hacktivists, may attempt to gain access to our technological systems or information through fraud or other means of deception, including through diverse attack vectors, such as social engineering/phishing, security breaches, malfeasance by insiders, human, or technological error, computer viruses, malicious destructive code, misconfigurations “bugs”, or other vulnerabilities in commercial software that is integrated into our technological systems. The methods used to obtain unauthorized access, disable, or degrade service, or sabotage systems are constantly evolving and threat actors are becoming increasingly sophisticated in using techniques and tools—including artificial intelligence—that circumvent security controls, evade detection and remove forensic evidence. As a result, we may be unable to anticipate or to detect, investigate, remediate, or recover from attacks or incidents for long periods of time.
We may not be able to prevent all data security breaches or misuse of data. The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to, employees’ or business partners’ information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption to our operations, and damage to our reputation, any or all of which could adversely affect its business and financial condition.
Our ability to obtain financing or access capital markets may be limited.
There are a number of factors that may limit our ability to raise financing or access capital markets in the future, including our significant debt and future contractual obligations, our liquidity and credit status, our operating cash flows, the market conditions in the airline industry, U.S. and global economic conditions, the general state of the capital markets,
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and the financial position of the major providers of commercial aircraft financing. We cannot assure you that we will be able to source external financing for our planned aircraft acquisitions or for other significant capital needs, and if we are unable to source financing on acceptable terms, or if we are unable to source financing at all, our business could be materially and adversely affected. To the extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our business strategy or otherwise constrain our growth and operations.
Our business strategy includes making investments that complement our existing business. These investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.
Some of the businesses we may seek to invest in may be marginally profitable or unprofitable. For these businesses to achieve acceptable levels of profitability, we may need to improve their management and operations. Investments may involve significant cash expenditures, debt incurrence, operating losses, and expenses. It may be difficult for us to complete investments quickly or integrate investments efficiently into our current business operations. Any investments may ultimately harm our business or financial condition, as such investments may not be successful and may ultimately result in impairment charges.
Risks Related to Owning Our Common Stock
The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline.
The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including: (i) announcements concerning our Partner Airlines, competitors, the airline industry, or the economy in general; (ii) strategic actions by us, our Partner Airlines, or our competitors, such as acquisitions or restructurings; (iii) media reports and publications about the safety of our aircraft or the types of aircraft we operate; (iv) new regulatory pronouncements and changes in regulatory guidelines; (v) announcements concerning the availability of the types of aircraft we use; (vi) significant volatility in the market price and trading volume of companies in the airline industry; (vii) changes in financial estimates or recommendations by securities analysts or failure to meet analysts’ performance expectations; (viii) sales of our common stock or other actions by insiders or investors with significant shareholdings, including sales by our principal shareholders; and (ix) general market, political and other economic conditions; and (x) in response to the risk factors described in this Report.
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. Broad market fluctuations may materially adversely affect the trading price of our common stock. In the past, shareholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management’s attention and resources, and have a material adverse effect on our business, results of operations, financial condition, and the price of our common stock .
Provisions in our charter documents might deter acquisition bids for us, which could adversely affect the price of our common stock.
Our second amended and restated articles of incorporation and amended and restated bylaws contain provisions that, among other things:
• authorize our Board of Directors, without shareholder approval, to designate and fix the voting powers, designations, preferences, limitations, restrictions, and relative rights of one or more series of preferred stock so designated, or right to acquire such preferred stock;
• dilute the interest of, or impair the voting power of, holders of our common stock and could also have the effect of discouraging, delaying, or preventing a change of control;
• establish advance notice procedures that shareholders must comply with in order to nominate candidates to our Board of Directors and propose matters to be brought before an annual or special meeting of our shareholders,
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which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company;
• authorize a majority of our Board of Directors to appoint a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which may prevent shareholders from being able to fill vacancies on our Board of Directors;
• restrict the number of directors constituting our Board of Directors to within a set range, and give our Board of Directors exclusive authority to increase or decrease the number of directors within such range, which may prevent shareholders from being able to fill vacancies on our Board of Directors; and
• restrict the ability of shareholders to call special meetings of shareholders.
We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
We have not historically paid dividends on shares of our common stock and do not expect to pay dividends on such shares in the foreseeable future. Additionally, our United CPA, certain of our aircraft lease facilities, and our loan with the U.S. Treasury contain restrictions that limit our ability to or prohibit us from paying dividends to holders of our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our results of operations, financial condition, capital requirements, restrictions contained in current or future leases and financing instruments, business prospects and such other factors as our Board of Directors deems relevant, including restrictions under applicable law. Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our common stock appreciates.
