Allegiant Travel CO (Form: 10-K, Received: 02/27/2012 15:15:31)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001-33166

ALLEGIANT TRAVEL COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Nevada (State or Other Jurisdiction of Incorporation or Organization)	20-4745737 (I.R.S. Employer Identification No.)

8360 S. Durango Drive, Las Vegas, Nevada (Address of Principal Executive Offices)	89113 (Zip Code)

Registrant’s telephone number, including area code: (702) 851-7300

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $.001 par value per share		Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

(Do not check if a smaller

reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of common equity held by non-affiliates of the registrant as of June 30, 2011, was approximately $740,000,000 computed by reference to the closing price at which the common stock was sold on the Nasdaq Global Select Market on that date. This figure has been calculated by excluding shares owned beneficially by directors and executive officers as a group from total outstanding shares solely for the purpose of this response.

The number of shares of the registrant’s Common Stock outstanding as of the close of business on February 1, 2012 was 19,081,407.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement to be used in connection with the solicitation of proxies to be voted at the registrant’s annual meeting to be held on June 5, 2012, and to be filed with the Commission subsequent to the date hereof, are incorporated by reference into Part III of this Report on Form 10-K.

EXHIBIT INDEX IS LOCATED ON PAGE 59

ALLEGIANT TRAVEL COMPANY

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2011

TABLE OF CONTENTS

Item		Page
PART I
1	Business	3
1A	Risk Factors	10
1B	Unresolved Staff Comments	15
2	Properties	16
3	Legal Proceedings	17
4	Mine Safety Disclosures	17
PART II
5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	18
6	Selected Financial Data	20
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
7A	Quantitative and Qualitative Disclosures about Market Risk	35
8	Financial Statements and Supplementary Data	36
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	56
9A	Controls and Procedures	56
9B	Other Information	57
PART III
10	Directors, Executive Officers, and Corporate Governance	58
11	Executive Compensation	58
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	58
13	Certain Relationships and Related Transactions, and Director Independence	58
14	Principal Accountant’s Fees and Services	58
PART IV
15	Exhibits and Financial Statement Schedules	59
	Signatures	61

PART I

Item 1. Business

Overview

We are a leisure travel company focused on providing travel services and products to residents of small, underserved cities in the United States. We were founded in 1997 and in conjunction with our initial public offering in 2006, we incorporated in the state of Nevada. Our unique business model provides diversified revenue streams from various travel service and product offerings which distinguish us from other travel companies. We operate a low-cost passenger airline marketed primarily to leisure travelers in small cities, allowing us to sell air transportation both on a stand-alone basis and bundled with the sale of air-related and third party services and products. In addition, we provide air transportation under fixed fee flying arrangements. Our developed route network, pricing philosophy, advertising and product offering built around relationships with premier leisure companies are all intended to appeal to leisure travelers and make it attractive for them to purchase travel services and products from us.

A brief description of the travel services and products we provide to our customers:

Scheduled service air transportation. We provide scheduled air transportation on limited frequency nonstop flights between small city markets and popular leisure destinations. As of February 1, 2012, our operating fleet consisted of 56 MD-80 aircraft and one Boeing 757-200 aircraft providing service on 168 routes between 64 small cities and 11 leisure destinations.

Air-related travel services and products. We provide unbundled air-related services and products in conjunction with air transportation for an additional cost to customers. These optional air-related services and products include use of our website for purchases, use of our call center for purchases, advance seat assignment, baggage fees, priority boarding, our own travel protection product, change fees, food and beverage purchases on board and other air-related services.

Third party travel products. We offer third party travel products such as hotel rooms, ground transportation (rental cars and hotel shuttle products) and attractions (show tickets) bundled with the purchase of our air transportation.

Fixed fee contract air transportation. We provide air transportation through fixed fee agreements and charter service on a seasonal and ad-hoc basis for other customers. During 2011, the majority of air transportation under fixed fee agreements was with affiliates of Caesars Entertainment, Inc. and Peppermill Resorts Inc.

Our principal executive offices are located at 8360 South Durango Drive, Las Vegas, Nevada 89113. Our telephone number is (702) 851-7300. Our website addresses are http://www.allegiant.com and http://www.allegianttravelcompany.com. We have not incorporated by reference into this annual report the information on our websites and you should not consider it to be a part of this document. Our website addresses are included in this document for reference only. Our annual report, quarterly reports, current reports and amendments to those reports are made available free of charge through our website at ir.allegiant.com , as soon as reasonably practicable after electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).

Unique Business Model

We have developed a unique business model that focuses on leisure travelers in small cities. The business model has evolved as our experienced management team has looked differently at the traditional way business has been conducted in the airline and travel industry. Our focus on the leisure customer allows us to eliminate the costly, complexity which others in our industry are burdened with in their goal to be all things to all customers.

Traditional Airline Approach	Allegiant Approach
• Focus on business traveler	• Focus on leisure traveler
• Provide high frequency service	• Provide low frequency service from small cities
• Use smaller aircraft to provide connecting service from smaller markets through hubs	• Use larger jet aircraft to provide nonstop service from small cities direct to leisure destinations
• Sell through various intermediaries	• Sell only directly to travelers without participation in global distribution systems
• Offer flight connections	• No connecting flights offered
• Use code-share arrangements to increase passenger traffic	• Do not use code-share arrangements

Since the beginning of 2004, we have expanded our route network (including seasonal service) from six small cities to 64 small cities as of February 1, 2012. We have established a route network with a national footprint, providing service on 168 routes between these 64 small cities and 11 leisure destinations. Our entire route network provides service in 39 states. In most of these cities, we provide service to more than one of our leisure destinations. We currently provide service to the popular leisure destinations of Las Vegas, Nevada, Orlando, Florida, Phoenix, Arizona, Tampa Bay/St. Petersburg, Florida, Los Angeles, California, Ft. Lauderdale, Florida and the San Francisco Bay Area. We also currently provide limited service to other leisure destinations of Punta Gorda, Florida, San Diego, California and Palm Springs, California, along with seasonal service to Myrtle Beach, South Carolina. We are currently working with the Federal Aviation Administration (“FAA”) to gain flag carrier status and complete the ETOPS certification process in order to launch service to Hawaii in the second half of 2012. We believe our route network reflects geographic diversity which protects us from regional variations in the economy and insulates us from competitive actions (as it would be difficult for a competitor to materially impact our business by targeting one city or region). Our widespread route network also contributes to the continued growth in our customer base.

As we have developed our unique business model, the sale of third party products and services have been a significant source of our total operating revenue growth. We have increased ancillary revenue per passenger from $5.87 in 2004 to $36.36 in 2011. In 2010, we began an effort to upgrade our IT hardware infrastructure and E-Commerce platform to allow for more selling flexibility, offer a more customer centric buying experience and further develop our hotel packaging and ancillary product offerings. We own and manage our own automation system which gives us the ability to modify or upgrade our software applications to enhance product offerings based on specific needs instead of being dependent on non-customized product upgrades from outside suppliers. We believe the control of our automation systems has allowed us to be innovators in the industry in providing our customers with a variety of different travel services and products. We expect initial implementation of these technology enhancements in the first quarter of 2012 with further enhancements to follow.

We believe the following strengths from our unique business model allow us to maintain a competitive advantage in the markets we serve:

Leisure customers in small cities

We believe small cities represent a large market, especially for leisure travel. Prior to our initiation of service, travelers from the small city markets we serve had limited desirable options to reach leisure destinations as existing carriers are generally focused on having business customers connect into their business hubs. These limited options provide us with significant growth opportunities in these small city markets. We believe our nonstop service, along with our low prices and leisure company relationships, make it attractive for leisure travelers to purchase our travel services and products. The size of these markets and our focus on the leisure customer requires less frequency to adequately serve and allows us to vary our air transportation capacity to match seasonal demand patterns.

By focusing on small cities, we believe we avoid the intense competition in high traffic domestic air corridors. In our typical small city market, travelers faced high airfares and cumbersome connections or long drives to major airports to reach our leisure destinations before we started providing service. Based on published data from the U.S. Department of Transportation (“DOT”), we believe the initiation of our service stimulates demand as there has been a substantial increase in traffic after we have begun service on new routes. We believe our market strategy has had the benefit of not appearing hostile to either legacy carriers, whose historical focus has been connecting small cities to business markets, or traditional low cost carriers (“LCCs”), which have tended to focus more on larger markets than the small city markets we serve.

Capacity management

We aggressively mange seat capacity to match leisure demand patterns in our leisure destinations. With our ability to generate strong ancillary revenue and the ability to spread out our costs over a larger number of passengers, we price our fares and actively manage our capacity to achieve a 90% load factor which has allowed us to operate profitably throughout periods of high fuel prices and economic recessions. Our low cost aircraft facilitates our ability to adjust service levels quickly and maintain profitability during difficult economic times.

Low cost structure

We believe our low cost structure is essential to competitive success in the airline industry. Our operating expense per available seat mile (“ASM”) or operating CASM was 10.90¢ and 8.95¢ in 2011 and 2010, respectively. Excluding the cost of fuel, our operating CASM was 5.70¢ for 2011 and 5.05¢ for 2010. We continue to focus on low operating costs through the following:

Cost-driven schedule. We design our flight schedule to concentrate our aircraft each night in our crew bases. This concentration allows us to better utilize personnel, airport facilities, aircraft, spare parts inventory, and other assets. We can do this because we believe leisure travelers are generally less concerned about day of travel, departure and arrival times than business travelers. Therefore, we are able to schedule flights at times that enable us to reduce our costs.

Low aircraft ownership costs. We believe we properly balance low aircraft ownership costs and low operating costs to minimize our total costs. As of February 1, 2012, our operating fleet consists of 56 MD-80 series aircraft and one Boeing 757-200 aircraft. MD-80 aircraft are substantially less expensive to acquire than newer narrow body aircraft and have been highly reliable aircraft. As of February 1, 2012, we owned four Boeing 757-200 aircraft, of which three were leased out to third parties on a short-term basis, and one is in revenue service. The expected return dates of the leased out aircraft, under the leases, are through the third quarter of 2012. We have contracted for the purchase of two additional Bowing 757-200 aircraft, which is expected to take place during the first half of 2012. We expect to introduce these aircraft into our fleet during 2012. We believe the Boeing 757-200 aircraft will allow us to serve longer haul routes which could not be reached with the MD-80 aircraft, while maintaining low aircraft ownership costs consistent with our business model.

Highly productive workforce. We believe we have one of the most productive workforces in the U.S. airline industry with approximately 28.3 full-time equivalent employees per operating aircraft as of February 1, 2012. We believe this compares favorably with the same ratio for other airlines based on recent publicly available industry data for other airlines. Our high level of employee productivity is created by cost-driven scheduling and the effective use of automation and part-time employees. We benefit from a motivated, enthusiastic workforce committed to high standards of friendly and reliable service. We invest a significant amount of time and resources into carefully developing our training programs and selecting individuals to join our team who share our focus on ingenuity and continuous improvement. We conduct ongoing training programs to incorporate industry best practices and encourage strong and open communication channels among all of the members of our team so we can continue to improve the quality of the services we provide.

Simple product. We believe offering a simple product is critical to achieving low operating costs. As such, we sell only nonstop flights; we do not code-share or interline with other carriers; we have a single class cabin; we do not provide any free catered items—everything on board is for sale; we do not overbook our flights; we do not provide cargo or mail services; and we do not offer other perks such as airport lounges.

Low distribution costs. Our nontraditional marketing approach results in very low distribution costs. We do not sell our product through outside sales channels and, as such, avoid the fees charged by travel web sites (such as Expedia, Orbitz or Travelocity) and the traditional global distribution systems (“GDS”) (such as Sabre or Worldspan). Our customers can only purchase travel at our airport ticket counters or, for a fee, through our telephone reservation center or website. The purchase of travel through our website is the least expensive form of distribution and accounted for 88.8% of our scheduled service revenue during 2011. We believe our percentage of website sales is among the highest in the U.S. airline industry. Further, we are 100% ticketless, which saves printing, postage, and back-office processing expenses.

Small city market airports. Our business model focuses on residents of small cities in the United States. Typically the airports in these small cities have lower operating costs than those of our major leisure destinations. These lower costs are driven by less expensive passenger facilities, landing and ground service charges. In addition to inexpensive airport costs, many small cities provide for marketing support which results in lower marketing costs.

Ancillary product offerings

We believe most leisure travelers are concerned primarily with purchasing air travel for the least expensive price. As such, we have unbundled the air transportation product and created sources of revenue by charging fees for services many U.S. airlines historically bundled in their product offering. We believe by offering a simple base product at an attractive low fare we can stimulate demand and generate incremental revenue as customers pay additional amounts for conveniences they value. For example, we do not offer complimentary advance seat assignments; however, customers who value this product can purchase advance seat assignments for a small incremental cost. We also sell snacks and beverages on board the aircraft so our customers can pay for only the items they value. We aim to continue increasing ancillary revenue by further unbundling our air travel product, and with our automation advancements, specifically enable third party product growth.

Our third party product offerings allow our customers the opportunity to purchase hotels, rental cars, show tickets, night club packages and other attractions packaged with air travel. We provide a low price guarantee to our customer and seek to maintain the most attractive products for our customers to choose from. Our third party offerings are available to customers based on our agreements with various premier travel and leisure companies. For example, we have contracts with Caesars Entertainment Inc. and MGM MIRAGE, among others, that allow us to provide hotel rooms sold in packages to our customers. In addition, we have an exclusive agreement with one rental car operator for the sale of rental cars packaged with air travel at most of our leisure destinations. Pricing of attractions, shows and tours are based on a net-pricing model. The pricing of each product can be adjusted market to market based on customer demand.

Closed distribution

Since approximately 88.8% of our scheduled service revenue was purchased directly through our website in 2011, we are able to establish direct relationships with our customers by utilizing their email addresses in our database. This information provides us multiple cost effective opportunities to market products and services, including at the time they purchase their travel, between the time they purchase and initiate their travel, and after they have completed their travel. In addition, we market products and services to our customers during the flight. We believe the breadth of options we can offer them allows us to provide a “one-stop” shopping solution to enhance their travel experience.

Strong financial position

We have a strong financial position with significant cash balances. As of December 31, 2011, we had $319.5 million of unrestricted cash, cash equivalents and investment securities. As of December 31, 2011, our total debt was $146.1 million and our debt to total capitalization ratio was 29.4%. We also have grown profitably with generation of net income in nine consecutive years. On March 10, 2011, we borrowed $125.0 million under a senior secured term loan facility (“Term Loan”). We believe the Term Loan has further strengthened our financial position and provide us greater financial flexibility to grow the business and weather sudden industry disruptions or U.S. macroeconomic events.

Marketing and Distribution

Our website is our primary distribution method, which provided 88.8% of scheduled service air transportation bookings for 2011. We also sell through our call center or at our airport ticket counters, even if booked through travel agents. This distribution mix creates significant cost savings for us and enables us to continue to build loyalty with our customers through increased interaction with them.

We do not sell through Expedia, Travelocity, Orbitz or any other online travel agencies nor is our product displayed and sold through the global distribution systems which include Sabre, Galileo, Worldspan and Amadeus. This distribution strategy results in reduced expenses by avoiding the fees associated with the use of GDS distribution points. This distribution strategy also permits us to closely manage ancillary product offerings and pricing while developing and maintaining a direct relationship with our customers. The direct relationship enables us to engage continuously in communications with our customers which we believe will result in substantial benefits over time. With our own automation system, we have the ability to continually change our ancillary product offerings and pricing points which allows us to experiment to find the optimal pricing levels for our various offerings. We believe this would be difficult and impractical to achieve through the use of the global distribution systems.

We expect the continued improvement of our website and other automation enhancements will allow us to capitalize on our customer loyalty with additional product offerings.

Competition

The airline industry is highly competitive. Passenger demand and fare levels have historically been influenced by, among other things, the general state of the economy, international events, industry capacity and pricing actions taken by other airlines. The principal competitive factors in the airline industry are fare pricing, customer service, routes served, flight schedules, types of aircraft, safety record and reputation, code-sharing relationships and frequent flyer programs.

Our competitors include legacy airlines, LCCs, regional airlines and new entrant airlines. Many of these airlines are larger, have significantly greater financial resources and serve more routes than we do. In a limited number of cases, following our entry into some markets, competitors have chosen to add service, reduce their fares or both. In a few cases, other airlines have entered after we have developed a market.

Our small city strategy has reduced the intensity of competition we might otherwise face. As of February 1, 2012, we are the only domestic scheduled carrier operating out of the Orlando Sanford International Airport, one of two scheduled carriers operating out of Phoenix-Mesa Gateway Airport in Phoenix and one of only three carriers serving the St. Petersburg-Clearwater International Airport, but virtually all U.S. airlines serve the nearby major airport serving Orlando, Phoenix and Tampa. In addition, virtually all U.S. airlines serve Las Vegas, Los Angeles and Ft. Lauderdale and we could face greater competition on our routes in the future.

As of February 1, 2012, we face mainline competition on only 12 of our 168 routes. We compete with AirTran on five routes into Orlando and one route into Tampa Bay/St. Petersburg, and with Frontier on two routes from Des Moines (Tampa Bay/St. Petersburg and Orlando). We compete with Spirit on one route to Las Vegas (Phoenix-Mesa) and one route to Ft. Lauderdale (Plattsburgh). We compete with two carriers on our Las Vegas to Oakland route (Southwest and US Airways). We also compete with Alaska Airlines on one route to Las Vegas (Bellingham). In addition, we compete with smaller regional jet aircraft on our Fresno to Las Vegas route (United Express) and on our Medford to Los Angeles route (Horizon Air).

Indirectly, we compete with Southwest, US Airways, AirTran, Delta and other carriers that provide nonstop service to our leisure destinations from airports near our small city markets. For example, we fly from Bellingham, Washington, which is a two-hour drive from Seattle-Tacoma International Airport, where travelers can access nonstop service to Las Vegas, Los Angeles, Phoenix and San Francisco on various other carriers. We also face indirect competition from legacy carriers offering hub-and-spoke connections to our markets. For example, travelers can travel to Las Vegas from Peoria on United, American or Delta, although all of these legacy carriers currently utilize regional aircraft to access their hubs and mainline jets to access Las Vegas. Legacy carriers offering these segments with connecting flights and use of regional aircraft tend to charge higher and restrictive fares. In addition, these alternatives to our direct flight service have a much longer elapsed time of travel.

We also face indirect competition from automobile travel in our short-haul flights, primarily to our Florida leisure destinations. We believe our low cost pricing model, customer service, and the convenience of air transportation help us compete favorably against automobile travel.

In our fixed fee operations, we compete with the aircraft of other scheduled airlines as well as with independent passenger charter airlines such as Xtra. We also compete with aircraft owned or controlled by large tour companies. The basis of competition in the fixed fee market is cost, equipment capabilities, service and reputation.

Aircraft Fuel

Fuel is our largest operating expense. The cost of fuel is volatile, as it is subject to many economic and geopolitical factors we can neither control nor predict. Significant increases in fuel costs could materially affect our operating results and profitability. We do not currently use financial derivative products to hedge our exposure to jet fuel price volatility.

In an effort to reduce our fuel costs, we have sought to become involved at an earlier stage in the fuel distribution channels. In this regard, we formed a wholly-owned subsidiary which entered into a limited liability company operating agreement with an affiliate of Orlando Sanford International Airport to engage in contract fueling transactions for the provision of aviation fuel to airline users at that airport. In addition, we have invested in fuel storage units and fuel transportation facilities involved in the fuel distribution process. These efforts could result in the creation of additional joint ventures to further our involvement in the fuel distribution process. By reason of these activities, we could potentially incur material liabilities, including possible environmental liabilities, to which we would not otherwise be subject.

People

We believe our growth potential and the achievement of our corporate goals are directly linked to our ability to attract and retain some of the best professionals available in the airline business. Full-time equivalent employees at February 1, 2012 consisted of 351 pilots, 397 flight attendants, 52 airport operations personnel, 287 mechanics, 126 reservation agents, and 281 management and other personnel. As of February 1, 2012, we employed 1,494 full-time and 225 part-time employees, which we consider to be 1,613 full-time equivalent employees.

We place great emphasis on the selection and training of enthusiastic employees with potential to add value to our business and who we believe fit in with and contribute to our business culture. The recruiting and training process begins with an evaluation and screening process, followed by multiple interviews and experience verification. We provide extensive training intended to meet all FAA requirements for security, safety and operations for our pilots, flight attendants and customer service agents.

To help retain talented and highly motivated employees, we offer competitive compensation packages as well as affordable health and retirement savings options. We offer medical, dental and 401(k) plans to full-time employees. Other salaried benefits include paid time off, as well as supplemental life insurance and long-term disability. We do not have a defined benefit pension plan for any employees. We review our compensation packages on a regular basis in an effort to ensure that we remain competitive and are able to hire and retain the best people possible.

In addition to offering competitive compensation and benefits, we take a number of steps to make our company an attractive place to work and build a career such as maintaining various employee recognition programs and consistently communicating our vision and mission statement to our employees. We believe creating a great place for our people to work motivates them to treat our customers beyond their expectations.

We have never experienced an organized work stoppage or strike. We have an in-house pilot association which we meet with on a regular basis to address relevant issues and matters of concern. The terms of our existing compensation and benefits arrangement for our pilots will become amendable in November 2013 and includes base pay scale variability based on operating margin production.

In December 2010, our flight attendant employee group voted for representation from the Transport Workers Union (“TWU”). We are currently in negotiations with TWU for a labor agreement and look to maintain a mutually satisfactory arrangement consistent with the existing compensation arrangement negotiated with the flight attendant in-house association prior to the selection of TWU.

Maintenance

We have an FAA-approved maintenance program, which is administered by our maintenance department headquartered in Las Vegas. Consistent with our core value of safety, all mechanics and avionics specialists employed by us have appropriate training and experience and hold required licenses issued by the FAA. We provide them with comprehensive training and maintain our aircraft and associated maintenance records in accordance with FAA regulations. The maintenance performed on our aircraft can be divided into three general categories: line maintenance, heavy maintenance, and component and engine overhaul and repair. Scheduled line maintenance is generally performed by our personnel. We contract with outside organizations to provide heavy maintenance and component and engine overhaul and repair. We have chosen not to invest in facilities or equipment to perform our own heavy maintenance, engine overhaul or component work. Our management closely supervises all maintenance functions performed by our personnel and contractors employed by us, and by outside organizations. We closely supervise the outsourced work performed by our heavy maintenance and engine overhaul contractors. In addition to the maintenance contractors we presently utilize, we believe there are sufficient qualified alternative providers of maintenance services that we can use to satisfy our ongoing maintenance needs.

Insurance

We maintain insurance policies we believe are of types customary in the industry and as required by the DOT and are in amounts we believe are adequate to protect us against material loss. The policies principally provide coverage for public liability, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment and workers’ compensation insurance. There is no assurance, however, that the amount of insurance we carry will be sufficient to protect us from material loss.

Government Regulation

We are subject to federal, state and local laws affecting the airline industry and to regulation by the DOT, FAA and other governmental agencies.

DOT. The DOT primarily regulates economic issues affecting air transportation such as certification and fitness of carriers, insurance requirements, consumer protection, competitive practices and statistical reporting. The DOT also regulates requirements for accommodation of passengers with disabilities. The DOT has the authority to investigate and institute proceedings to enforce its regulations and may assess civil penalties, suspend or revoke operating authority and seek criminal sanctions. The DOT also has authority to restrict or prohibit a carrier’s cessation of service to a particular community if such cessation would leave the community without scheduled airline service.

We hold a DOT certificate of public convenience and necessity authorizing us to engage in: (i) scheduled air transportation of passengers, property and mail within the United States, its territories and possessions and between the United States and all countries that maintain a liberal aviation trade relationship with the United States (known as “open skies” countries), and (ii) charter air transportation of passengers, property and mail on a domestic and international basis.

FAA. The FAA primarily regulates flight operations and safety, including matters such as airworthiness and maintenance requirements for aircraft, pilot, mechanic, dispatcher and flight attendant training and certification, flight and duty time limitations and air traffic control. The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. This certificate, in combination with operations specifications issued to the airline by the FAA, authorizes the airline to operate at specific airports using aircraft certificated by the FAA. We have and maintain in effect FAA certificates of airworthiness for all of our aircraft, and we hold the necessary FAA authority to fly to all of the cities we currently serve. Like all U.S. certificated carriers, providing scheduled service to certain destinations may require governmental authorization. The FAA has the authority to investigate all matters within its purview and to modify, suspend or revoke our authority to provide air transportation, or to modify, suspend or revoke FAA licenses issued to individual personnel, for failure to comply with FAA regulations. The FAA can assess civil penalties for such failures and institute proceedings for the collection of monetary fines after notice and hearing. The FAA also has authority to seek criminal sanctions. The FAA can suspend or revoke our authority to provide air transportation on an emergency basis, without notice and hearing, if, in the FAA’s judgment, safety requires such action. A legal right to an independent, expedited review of such FAA action exists. Emergency suspensions or revocations have been upheld with few exceptions. The FAA monitors our compliance with maintenance, flight operations and safety regulations on an ongoing basis, maintains a continuous working relationship with our operations and maintenance management personnel, and performs frequent spot inspections of our aircraft, employees and records.

The FAA also has the authority to promulgate rules and regulations and issue maintenance directives and other mandatory orders relating to, among other things, inspection, repair and modification of aircraft and engines, increased security precautions, aircraft equipment requirements, noise abatement, mandatory removal and replacement of aircraft parts and components, mandatory retirement of aircraft and operational requirements and procedures. Such rules, regulations and directives are normally issued with the opportunity to comment, however, they may be issued without advance notice or opportunity for comment if, in the FAA’s judgment, safety requires such action.

We believe we are operating in compliance with applicable DOT and FAA regulations, interpretations and policies and we hold all necessary operating and airworthiness authorizations, certificates and licenses.

Security. Within the United States, civil aviation security functions, including review and approval of the content and implementation of air carriers’ security programs, passenger and baggage screening, cargo security measures, airport security, assessment and distribution of intelligence, threat response, and security research and development are the responsibility of the TSA of the Department of Homeland Security. The TSA has enforcement powers similar to DOT’s and FAA’s described above. It also has the authority to issue regulations, including in cases of emergency, the authority to do so without advance notice, including issuance of a grounding order as occurred on September 11, 2001.

Environmental. We are subject to various federal, state and local laws and regulations relating to the protection of the environment and affecting matters such as aircraft engine emissions, aircraft noise emissions, and the discharge or disposal of materials and chemicals, which laws and regulations are administered by numerous state and federal agencies. These agencies have enforcement powers similar to DOT’s and FAA’s described above. In addition, we may be required to conduct an environmental review of the effects projected from the addition of service at airports.

Federal law recognizes the right of airport operators with special noise problems to implement local noise abatement procedures so long as those procedures do not interfere unreasonably with interstate and foreign commerce and the national air transportation system. These restrictions can include limiting nighttime operations, directing specific aircraft operational procedures during takeoff and initial climb, and limiting the overall number of flights at an airport. None of the airports we serve currently restricts the number of flights or hours of operation, although it is possible one or more such airports may do so in the future with or without advance notice.

Foreign Ownership. To maintain our DOT and FAA certificates, our airline operating subsidiary and we (as the airline’s holding company) must qualify continuously as a citizen of the United States within the meaning of U.S. aeronautical laws and regulations. This means we must be under the actual control of U.S. citizens and we must satisfy certain other requirements, including that our president and at least two-thirds of our board of directors and other managing officers must be U.S. citizens, and that not more than 25% of our voting stock may be owned or controlled by non-U.S. citizens. The amount of non-voting stock that may be owned or controlled by non-U.S. citizens is strictly limited as well. We believe we are in compliance with these ownership and control criteria.

Other Regulations. Air carriers are subject to certain provisions of federal laws and regulations governing communications because of their extensive use of radio and other communication facilities, and are required to obtain an aeronautical radio license from the Federal Communications Commission (“FCC”). To the extent we are subject to FCC requirements, we will continue to comply with those requirements.

The quality of water used for drinking and hand-washing aboard aircraft is subject to regulation by the Environmental Protection Agency (“EPA”). To the extent we are subject to EPA requirements, we will continue to comply with those requirements.

We are responsible for collection and remittance of federally imposed and federally approved taxes and fees applicable to air transportation passengers. We believe we are in compliance with these requirements, and we will continue to comply with them.

Our operations may become subject to additional federal requirements in the future under certain circumstances. For example, our labor relations are covered under Title II of the Railway Labor Act of 1926, as amended, and are subject to the jurisdiction of the National Mediation Board. During a period of past fuel scarcity, air carrier access to jet fuel was subject to allocation regulations promulgated by the Department of Energy. Changes to the federal excise tax on air transportation have been proposed from time to time and may result in an increased tax burden for airlines and their passengers.

We are also subject to state and local laws, regulations and ordinances at locations where we operate and to the rules and regulations of various local authorities that operate airports we serve. None of the airports in the small cities in which we operate have slot control, gate availability or curfews that pose meaningful limitations on our operations. However, some small city airports have short runways that require us to operate some flights at less than full capacity.

International air transportation, whether provided on a scheduled or charter basis, is subject to the laws, rules and regulations of the foreign countries to, from and over which the international flights operate. Foreign laws, rules and regulations governing air transportation are generally similar, in principle, to the regulatory scheme of the United States as described above, although in some cases foreign requirements are comparatively less onerous and in others, more onerous. We must comply with the laws, rules and regulations of each country to, from or over which we operate. International flights are also subject to U.S. Customs and Border Protection, Immigration and Agriculture requirements and the requirements of equivalent foreign governmental agencies.

Future Laws and Regulations. Congress, the DOT, the FAA, the EPA and other governmental agencies have under consideration, and in the future may consider and adopt, new laws, regulations, interpretations and policies regarding a wide variety of matters that could affect, directly or indirectly, our operations, ownership and profitability. We cannot predict what other matters might be considered in the future by the FAA, the DOT, the EPA, other agencies or Congress, nor can we judge what impact, if any, the implementation of any of these proposals or changes might have on our business.

Civil Reserve Air Fleet. In February 2009 we received approval to become a participant in the Civil Reserve Air Fleet (“CRAF”) Program which affords the U.S. Department of Defense the right to charter our aircraft during national emergencies when the need for military airlift exceeds the capability of available military resources. During the Persian Gulf War of 1990-91 and on other occasions, CRAF carriers were required to permit the military to use their aircraft in this manner. As a result of our CRAF approval, we are eligible to bid on and be awarded peacetime airlift contracts with the military.

Item 1A. Risk Factors

Investors should carefully consider the risks described below before making an investment decision. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and investors may lose all or part of their investment.

Risks Related to Allegiant

Increases in fuel prices or unavailability of fuel would harm our business and profitability.

Fuel costs constitute a significant portion of our total operating expenses, representing approximately 47.7% and 43.6% during 2011 and 2010, respectively. Significant increases in fuel costs have negatively affected our operating results in the past and future fuel cost volatility could materially affect our financial condition and results of operations.

Both the cost and availability of aircraft fuel are subject to many meteorological, economic and political factors and events occurring throughout the world over which we have no control. Aircraft fuel availability is also subject to periods of market surplus and shortage and is affected by demand for heating oil, gasoline and other petroleum products. Because of the effect of these events on the price and availability of aircraft fuel, our ability to control this cost is limited and the price and future availability of fuel cannot be predicted with any degree of certainty. Due to the high percentage of our operating costs represented by fuel, a relatively small increase in the price of fuel can have a significant negative impact on our operating costs. A fuel supply shortage or higher fuel prices could result in curtailment of our service.

We have made a business decision in recent years not to purchase financial derivatives to hedge against increases in the cost of fuel. This decision may make our operating results more vulnerable to the impact of fuel price increases.

Current negative economic conditions may adversely affect travel from our small city markets to our leisure destinations.

The U.S. economy continues to be impacted by high unemployment and other factors which may reduce the wealth and tighten spending of consumers. Leisure travel is aligned with discretionary spending and it is uncertain to what extent the continuance of these economic conditions will affect consumers and leisure travel in the future. These conditions could impact demand for airline travel in our small city markets or to our leisure destinations.

Our reputation and financial results could be harmed in the event of an accident or new regulations affecting our MD-80 aircraft.

An accident or incident involving one of our MD-80 aircraft, even if fully insured, could cause a public perception that we are less safe or reliable than other airlines, which would harm our business. Because we are smaller than most airlines, an accident would likely adversely affect us to a greater degree than a larger, more established airline.

Additionally, our current dependence on the MD-80 aircraft and engine type for the majority of our flights (as of February 1, 2012, our operating aircraft consisted of 56 MD-80 aircraft and one Boeing 757-200 aircraft) makes us particularly vulnerable to any problems that might be associated with, or aging aircraft requirements affecting, this aircraft type or these engines. Our business would be significantly harmed if a mechanical problem with the MD-80 series aircraft or the Pratt & Whitney JT8D-200 series engine were discovered causing our aircraft to be grounded while any such problem is being corrected, assuming it could be corrected at all. The Federal Aviation Administration (“FAA”) could also suspend or restrict the use of our aircraft in the event of any actual or perceived mechanical problems, whether involving our aircraft or another U.S. or foreign airline’s aircraft, while it conducts its own investigation. Our business would also be significantly harmed if the public avoids flying our aircraft due to an adverse perception of the MD-80 series aircraft or the Pratt & Whitney JT8D-200 series engine because of safety concerns or other problems, whether real or perceived, or in the event of an accident involving an MD-80 aircraft.

Covenants in our senior secured term loan facility could limit how we conduct our business, which could affect our long-term growth potential.

As of December 31, 2011, we owed $123.5 million under a senior secured term loan facility (the “Term Loan”). The Term Loan contains restrictive covenants that, among other things, limit:

· Capital expenditures

· Incurrence of future indebtedness

· Mergers and acquisitions

· Certain investments

As a result of these restrictive covenants, we may be limited in how we conduct business, and we may be unable to raise additional debt or equity financing to operate during difficult times or to take advantage of new business opportunities.

We may not be able to successfully implement our planned service to Hawaii.

We have announced our intention to begin to serve Hawaii in the second half of 2012. Before beginning to serve Hawaii, we will need to obtain regulatory approval for extended over water operations. There is no assurance that we will be able to secure such authority in order to allow us to begin service when planned or at all.

Although we plan to serve Hawaii from small city markets which do not currently have direct service to Hawaii, there is intense competition on routes to Hawaii from larger airports. There is no assurance we will be able to achieve acceptable levels of market acceptance for these long-haul flights from the small city markets we decide to serve on these routes. Further, as these long-haul flights will require more fuel than our shorter-haul routes, the risk of fuel price increases is exacerbated by this new service. As a result of these factors, there is no assurance we will be able to achieve the desired level of profitability from our planned service to Hawaii.

We rely heavily on automated systems to operate our business and any failure of these systems could harm our business.

We depend on automated systems to operate our business, including our computerized airline reservation system, our telecommunication systems, our website and other automated systems. Our continuing work on enhancing the capabilities of our automation systems and the migration of data to a new platform could increase the risk of automation failures during the process. Any failure by us to handle our automation needs could negatively affect our internet sales (on which we rely heavily) and customer service and result in increased costs.

Our website and reservation system must be able to accommodate a high volume of traffic and deliver important flight information. Our automated systems cannot be completely protected against events that are beyond our control, such as natural disasters, telecommunications failures or computer viruses. Although we have implemented security measures and have in place disaster recovery plans, we cannot assure investors these measures are adequate to prevent disruptions. Substantial or repeated website, reservations system or telecommunication systems failures could reduce the attractiveness of our services. Any disruption in these systems could result in the loss of important data, loss of revenue, increase our expenses and generally harm our business.

In the processing of our customer transactions, we receive and store credit card and other identifiable personal data. This data is increasingly subject to legislation and regulation typically intended to protect the privacy of personal data that is collected, processed and transmitted. Further, we rely on consumer confidence in the security of our systems, including our website on which we sell almost 90% of our tickets. We could be adversely affected if we fail to comply with existing rules or practices or if legislation or regulations are expanded to require changes in our business practices in ways that negatively affect our business, financial condition or results of operations. As privacy and data protection become more sensitive issues, we may also become exposed to potential liability. These and other privacy developments are difficult to anticipate and could adversely affect our business, financial condition and results of operations.

Our maintenance costs will increase as our fleet ages.

Our MD-80 aircraft range from 16 to 26 years old, with an average age of 22.3 years as of February 1, 2012. In general, the cost to maintain aircraft increases as they age and exceeds the cost to maintain new aircraft. FAA regulations require additional and enhanced maintenance inspections for older aircraft. These regulations include Aging Aircraft Airworthiness Directives, which typically increase as an aircraft ages and vary by aircraft or engine type depending on the unique characteristics of each aircraft and/or engine.

In addition, we may be required to comply with any future law changes, regulations or airworthiness directives. We cannot assure you our maintenance costs will not exceed our expectations.

We believe our aircraft are and will continue to be mechanically reliable. We cannot assure our aircraft will continue to be sufficiently reliable over longer periods of time. Furthermore, given the age of our fleet, any public perception that our aircraft are less than completely reliable could have an adverse effect on our bookings and profitability.

Increased labor costs could result in the long-term from unionization and labor-related disruptions.

Labor costs constitute a significant percentage of our total operating costs. In general, unionization has increased costs in the airline industry. In December 2010, our flight attendant employee group voted for representation from the Transport Workers Union (“TWU”). We are currently in negotiations with TWU for a labor agreement which could result in increased labor costs in the long-term.

Our pilot employee group is represented by an in-house association to negotiate matters of concern with us. Although we have negotiated a mutually acceptable arrangement with our pilot group, our costs could be adversely affected by the cumulative results of discussions with pilots in the future.

Unionization of any employee groups could result in demands that may increase our operating expenses and adversely affect our profitability. If employee groups elect to unionize in the future and if we are unable to reach agreement with any unionized employee group with respect to the terms of labor agreements, we may be subject to work interruptions or stoppages which could adversely affect our ability to conduct business.

Our business is heavily dependent on the attractiveness of our leisure destinations and a reduction in demand for air travel to these markets could harm our business.

A substantial proportion of our scheduled flights have Las Vegas, Orlando, Phoenix, Tampa/St. Petersburg, Los Angeles, Ft. Lauderdale or Oakland (the San Francisco Bay Area) as either their destination or origin. Our business could be harmed by any circumstances causing a reduction in demand for air transportation to one or more of these markets, such as adverse changes in local economic conditions, negative public perception of the particular city, significant price increases, or the impact of future terrorist attacks.

We rely on third parties to provide us with facilities and services that are integral to our business.

We have entered into agreements with third-party contractors to provide certain facilities and services required for our operations, such as aircraft maintenance, ground handling, flight dispatch, baggage services and ticket counter space. One of these agreements with third party contractors include station operation services at McCarran International Airport in Las Vegas, our largest served leisure destination. Our reliance on others to provide essential services on our behalf also gives us less control over costs and the efficiency, timeliness and quality of contract services.

Our business could be harmed if we lose the services of our key personnel.

Our business depends upon the efforts of our chief executive officer, Maurice J. Gallagher, Jr., our president, Andrew C. Levy, and a small number of management and operating personnel. We do not currently maintain key-man life insurance on Mr. Gallagher or Mr. Levy. 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.

Risks Associated with the Airline and Travel Industry

The airline industry is highly competitive and future competition in our small city markets could harm our business.

The airline industry is highly competitive. The small cities we serve on a scheduled basis have traditionally attracted considerably less attention from our potential competitors than larger markets, and in most of our markets, we are the only provider of nonstop service to our leisure destinations. It is possible other airlines will begin to provide nonstop services to and from these markets or otherwise target these markets. An increase in the amount of direct or indirect competition could harm our business.

A future act of terrorism, the threat of such acts or escalation of U.S. military involvement overseas could adversely affect our industry.

Even if not directed at the airline industry, a future act of terrorism, the threat of such acts or escalation of U.S. military involvement overseas could have an adverse effect on the airline industry. In the event of a terrorist attack, the industry would likely experience significantly reduced demand for travel services. These actions, or consequences resulting from these actions, would likely harm our business and the airline and travel industry.

Changes in government laws and regulations imposing additional requirements and restrictions on our operations could increase our operating costs.

Airlines are subject to extensive regulatory and legal compliance requirements, both domestically and internationally, that involve significant costs. In the last several years, the FAA has issued a number of directives and other regulations relating to the maintenance and operation of aircraft that have required us to make significant expenditures. FAA requirements cover, among other things, retirement of older aircraft, security measures, collision avoidance systems, airborne windshear avoidance systems, noise abatement, weight and payload limits, assumed average passenger weight, and increased inspection and maintenance procedures to be conducted on aging aircraft. The future cost of complying with these and other laws, rules and regulations, including new federal legislative and DOT regulatory requirements in the consumer-protection area, cannot be predicted and could significantly increase our costs of doing business.

In January 2011, the FAA adopted new regulations applying to aging aircraft. These rules obligate aircraft design approval holders (typically the aircraft manufacturer or its successor) to establish a limit of validity ("LOV") of the engineering data that supports the aircraft’s structural maintenance program, demonstrate that widespread fatigue damage will not occur in aircraft of that type prior to reaching LOV, and establish or revise airworthiness limitations applicable to that aircraft type to include LOV. According to the FAA, establishment of LOVs is necessary because structural fatigue characteristics of airplanes are understood only up to the point where analyses and testing of the structure are valid. Once an LOV has been established, commercial operation of the aircraft beyond that value will be prohibited, unless an extended LOV has been obtained for the aircraft and incorporated into the operator’s maintenance program. The operator or any other person, such as the aircraft manufacturer, would be eligible to apply for an extended LOV. It is not currently possible to predict the LOV-based life limitations that will apply to our aircraft, nor is it possible to predict the future cost of our complying with aging aircraft requirements and/or replacing any aircraft that must be retired. The LOV is required to be incorporated into our maintenance program for MD-80 series aircraft by July 2013. As of February 1, 2012, the average number of cycles on our fleet was approximately 33,000 and the highest number of cycles on any of our aircraft was approximately 48,000. We historically operate approximately 1,000 cycles per aircraft per year. While we expect the LOV to be based on number of cycles flown, our MD-80 aircraft have low number of cycles, and we understand Boeing is working on this issue, we cannot be sure of how the LOV will impact us until there has been a formal FAA approval of the manufacturer suggested limit. In the case of our B757-series aircraft, the similar compliance deadline is January 2016.

On December 21, 2011, in response to federal legislation requiring that the FAA adopt updated regulations regarding flight crewmember duty and rest requirements, the FAA published new regulations on that topic. Previously proposed regulations, taking into account current scientific knowledge and understanding of fatigue factors, rest requirements and other relevant data, drew thousands of pages of comment from interested parties, which the FAA was obligated to consider before issuing the new regulations. We are studying the new rules and analyzing how they will affect our operating both practically and financially. We are not yet able to draw conclusions, except to state that based on the previous proposal, additional cost will result. The new regulations will take effect on January 4, 2014.

In April 2011, the DOT adopted revisions and expansions to a variety of its consumer-protection regulations. Among other changes, the new rules (which became effective on or before January 26, 2012) substantially reduce the flexibility concerning airline advertising and sales practices, including on websites. These new regulations, and further DOT rulemaking activity, may curtail our ability to advertise, price and sell our services in the particular manner we have developed and found most advantageous, forcing a more homogenized industry approach to advertising and sales. We believe our revenues could be adversely impacted by these developments. Although we are taking steps to seek to minimize the extent of the adverse effects, we cannot assure investors we will be successful in this regard in the long-term. In addition, we and other airlines have challenged the legality of these new DOT rules in the United States Court of Appeals in Washington, D.C., and are actively prosecuting our case. Even if our legal challenge is successful, however, we will be required to operate under the new rules until the rules are overturned (if ever) and we will have incurred significant costs in the process. We could be subject to fines or other enforcement actions if the DOT believes we are not in compliance with these rules. Even if our practices are upheld to be in compliance with the DOT rules, we could incur substantial costs defending our practices.

Legislation to address climate change issues has been introduced in the U.S. Congress, including a proposal to require transportation fuel producers and importers to acquire market-based allowances to offset the emissions resulting from combustion of their fuels. We cannot predict if this or any similar legislation will pass the Congress or, if passed and enacted into law, how it would apply to the airline industry. In addition, the Administrator of the Environmental Protection Agency (EPA) has concluded that current and projected concentrations of greenhouse gases in the atmosphere threaten public health and welfare. Although legal challenges and additional legislative proposals are expected, the finding could ultimately result in strict regulation of commercial aircraft emissions, as has taken effect for operations to, from and within the European Union under EU legisltation. These developments and any additional legislation or regulations addressing climate change are likely to increase our costs of doing business in the future and the increases could be material.

In respect of aging aircraft, crewmember duty and rest, consumer protection, climate change, taxation and other matters affecting the airline industry, whether the source of new requirements is legislative or regulatory, increased costs will adversely affect our profitability if we are unable to pass the costs on to our customers.

Airlines are often affected by factors beyond their control, including air traffic congestion, weather conditions, increased security measures and the outbreak of disease, any of which could harm our operating results and financial condition.

Like other airlines, we are subject to delays caused by factors beyond our control, including air traffic congestion at airports and en route, adverse weather conditions, increased security measures and the outbreak of disease. Delays frustrate passengers and increase costs, which in turn could affect profitability. During periods of fog, snow, rain, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic control problems and breaches in security could harm our operating results and financial condition. An outbreak of a disease that affects travel behavior, such as severe acute respiratory syndrome (SARS) or H1N1 virus (swine flu), could have a material adverse impact on the airline industry. Any general reduction in airline passenger traffic as a result of an outbreak of disease or other travel advisories could dampen demand for our services even if not applicable to our markets. Resulting decreases in passenger volume would harm our load factors, could increase our cost per passenger and adversely affect our profitability.

Risks Related to Our Stock Price

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:

•

fuel price volatility, and the effect of economic and geopolitical factors and worldwide oil supply consumption on fuel availability

•

announcements concerning our competitors, the airline industry or the economy in general

•

strategic actions by us or our competitors, such as acquisitions or restructurings

•

media reports and publications about the safety of our aircraft or the aircraft type we operate

•

new regulatory pronouncements and changes in regulatory guidelines

•

announcements concerning our business strategy

•

general and industry-specific economic conditions

•

changes in financial estimates or recommendations by securities analysts

•

sales of our common stock or other actions by investors with significant shareholdings

•

general market conditions

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect the trading price of our common stock.

In the past, stockholders 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 harm our business or results of operations.

Other companies may have difficulty acquiring us, even if doing so would benefit our stockholders, due to provisions under our corporate charter, bylaws and option plans, as well as Nevada law.

Provisions in our articles of incorporation, our bylaws, and under Nevada law could make it more difficult for other companies to acquire us, even if doing so would benefit our stockholders. Our articles of incorporation and bylaws contain the following provisions, among others, which may inhibit an acquisition of our company by a third party:

•

advance notification procedures for matters to be brought before stockholder meetings

•

a limitation on who may call stockholder meetings

•

the ability of our board of directors to issue up to 5,000,000 shares of preferred stock without a stockholder vote

We are also subject to provisions of Nevada law that prohibit us from engaging in any business combination with any “interested stockholder,” meaning generally that a stockholder who beneficially owns more than 10% of our stock cannot acquire us for a period of time after the date this person became an interested stockholder, unless various conditions are met, such as approval of the transaction by our board of directors.

Under U.S. laws and the regulations of the DOT, U.S. citizens must effectively control us. As a result, our president and at least two-thirds of our board of directors must be U.S. citizens and not more than 25% of our voting stock may be owned by non-U.S. citizens (although subject to DOT approval, the percent of foreign economic ownership may be as high as 49%). Any of these restrictions could have the effect of delaying or preventing a change in control.

Our corporate charter and bylaws include provisions limiting voting by non-U.S. citizens.

To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our articles of incorporation and bylaws restrict voting of shares of our capital stock by non-U.S. citizens. The restrictions imposed by federal law currently require no more than 25% of our stock be voted, directly or indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of the members of our board of directors be U.S. citizens. Our bylaws provide no shares of our capital stock may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which we refer to as the foreign stock record. Our bylaws further provide no shares of our capital stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. Registration on the foreign stock record is made in chronological order based on the date we receive a written request for registration. Non-U.S. citizens will be able to own and vote shares of our common stock only if the combined ownership by all non-U.S. citizens does not violate these requirements.

The value of our common stock may be negatively affected by additional issuances of common stock or preferred stock by us and general market factors.

Future issuances or sales of our common stock or convertible preferred stock by us will likely be dilutive to our existing common stockholders. Future issuances or sales of common or preferred stock by us, or the availability of such stock for future issue or sale, could have a negative impact on the price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock in the public or private market, a perception in the market that such sales could occur, or the issuance of securities exercisable or convertible into our common stock, could also adversely affect the prevailing price of our common stock.

Substantial sales of our common stock could cause our stock price to fall.

If our existing stockholders sell a large number of shares of our common stock or the public market perceives existing stockholders might sell shares of common stock, the market price of our common stock could decline significantly. All of our outstanding shares are either freely tradable, without restriction, in the public market or eligible for sale in the public market at various times, subject, in some cases, to volume limitations under Rule 144 of the Securities Act of 1933, as amended.

We cannot predict whether future sales of our common stock or the availability of our common stock for sale will adversely affect the market price for our common stock or our ability to raise capital by offering equity securities.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties

Aircraft

As of December 31, 2011, our total fleet consisted of 56 MD-80 aircraft, and one Boeing 757-200, currently in revenue service. In addition, we owned three other MD-80 aircraft and three other Boeing 757-200 aircraft at December 31, 2011, which we expect to place into revenue service in the future. The following table summarizes our total aircraft fleet as of December 31, 2011:

Aircraft Type	Owned (1)		Leased (2)		Total		Seating Capacity (per aircraft)		Average Age in Years

MD-88/82/83 (3)		52		2		54		150/166		22.0
MD-87		2		-		2		130		22.7
B757-200		1		-		1		217		19.7
Total aircraft in service		55		2		57				21.5

MD-88/82/83		3		-		3		150		24.0
B757-200(4)		3		-		3		217		18.7
Total aircraft not in service		6		-		6

Total Aircraft		61		2		63

(1)

All of our owned aircraft are encumbered. Refer to “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 5 – Long-Term Debt” for discussion of our notes payable and senior secured term loan facility.

(2)

In December 2011, we exercised purchase options on two leased MD-80 aircraft and took ownership of the aircraft in January 2012. Upon taking ownership of these two aircraft in January 2012, we no longer have any aircraft under operating leases.

(3)

During the third quarter of 2011, our first MD-80 aircraft from our seat reconfiguration program entered into revenue service. Under this program, we will reconfigure all our MD-80 aircraft, excluding our two MD-87 aircraft, from 150 seats to 166 seats. As of December 31, 2011, 45 of our 52 owned MD-80 aircraft in service have 150 seats and seven aircraft have 166 seats. Refer to “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of our seat reconfiguration program.

(4)

As of December 31, 2011, we have three owned Boeing 757-200 aircraft leased out to third parties on a short-term basis. The expected return dates of the leased out aircraft, under their respective leases, are through the third quarter of 2012.

Ground Facilities

We lease facilities at each of our leisure destinations and several of the other airports we serve. Our leases for our terminal passenger services facilities, which include ticket counter and gate space, and operations support areas, generally have terms of less than two years in duration and can generally be terminated with a 30 to 60 day notice. We have also entered into use agreements at each of the airports we serve that provide for non-exclusive use of runways, taxiways and other facilities. Landing fees under these agreements are based on the number of landings and weight of the aircraft.

We have operational bases at airports at each of the major leisure destinations we serve and additionally at Bellingham, Washington. In January 2012, we announced the establishment of an operational base at Oakland International Airport with seven new routes to serve the San Francisco Bay Area starting in April 2012.

We use leased facilities at our operational bases to perform line maintenance, overnight parking of aircraft, and other operations support. We lease additional space in cargo areas at the McCarran International Airport and Orlando Sanford International Airport for our primary line maintenance operations. We also lease additional warehouse space in Las Vegas for aircraft parts and supplies warehouse. The following details the airport locations we utilize as operational bases:

Airport		Location

McCarran International Airport		Las Vegas, Nevada
Orlando Sanford International Airport		Orlando, Florida
Phoenix-Mesa Gateway Airport		Mesa, Arizona
Los Angeles International Airport		Los Angeles, California
St. Petersburg-Clearwater International Airport		St. Petersburg, Florida
Ft. Lauderdale-Hollywood International Airport		Ft. Lauderdale, Florida
Bellingham International Airport		Bellingham, Washington
Tunica Airport		Tunica, Mississippi
Laughlin Bullhead International Airport		Bullhead City, Arizona
Wendover Airport		Wendover, Nevada

The Bellingham International Airport is continuing an expansion project which began in 2010 and we believe will allow for sufficient gate space for long-term growth. We believe we have sufficient access to gate space for current and presently contemplated future operations at all other airports we serve.

Our primary corporate offices are located in Las Vegas, where we lease approximately 65,000 square feet of space under a lease that expires in April 2019. We also lease approximately 10,000 square feet of office space in a building adjacent to our corporate offices which is utilized for training and other corporate purposes. In addition to base rent, we are also responsible for our share of common area maintenance charges. In both leases, the landlord is a limited liability company in which certain of our directors own significant interests as non-controlling members.

Item 3. Legal Proceedings

We are subject to certain legal and administrative actions we consider routine to our business activities. We believe the ultimate outcome of any pending legal or administrative matters will not have a material adverse effect on our financial position, liquidity or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market for our common stock

Our common stock is quoted on the Nasdaq Global Select Market. On February 1, 2012, the last sale price of our common stock was $56.27 per share. The following table sets forth the range of high and low sale prices for our common stock for the periods indicated.

Period	High		Low
2011
1st Quarter	$	52.35	$	39.21
2nd Quarter	$	50.29	$	38.95
3rd Quarter	$	49.93	$	40.31
4th Quarter	$	55.36	$	45.25
2010
1st Quarter	$	59.04	$	47.17
2nd Quarter	$	58.12	$	42.04
3rd Quarter	$	46.37	$	37.05
4th Quarter	$	52.95	$	38.12

As of February 1, 2012, there were approximately 208 holders of record of our common stock. We believe that a substantially larger number of beneficial owners hold shares of our common stock in depository or nominee form.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information regarding options, warrants and other rights to acquire equity securities under our equity compensation plans as of December 31, 2011:

	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (b)
Equity compensation plans approved by security holders		493,433	$	34.34		1,499,557
Equity compensation plans not approved by security holders	None			N/A	None
Total		493,433	$	34.34		1,499,557

(a)	The shares shown as being issuable under equity compensation plans approved by our security holders excludes restricted stock awards as these shares are deemed to have been issued. In addition to the above, there were 107,223 shares of nonvested restricted stock as of December 31, 2011.

(b)	The shares shown as remaining available for future issuance under equity compensation plans is reduced for outstanding cash-settled stock appreciation rights (“SARs”). Although, these outstanding cash-settled SARs will not result in the issuance of shares, the number of outstanding cash-settled SARs reduce the number of shares available for other awards.

Dividend Policy

We did not declare or pay any dividends during 2011. In second quarter 2010, we declared and paid a one-time cash dividend of $0.75 per share on our outstanding common stock. Our Term Loan limits the amount of restricted payments, including cash dividends, that may be paid. As of December 31, 2011, the limitation is not material based on the amount of cash dividends we have previously paid. Future payments of cash dividends, if any, will depend on our financial condition, results of operations, cash from operations, business conditions, capital requirements, debt covenants and other factors deemed relevant to our Board of Directors.

Our Repurchases of Equity Securities

The following table reflects our repurchases of our common stock during the fourth quarter of 2011. All stock repurchases during this period were made from employees who received restricted stock grants. All stock repurchases were made at the election of each employee pursuant to an offer to repurchase by us. In each case, the shares repurchased constituted the portion of vested shares necessary to satisfy withholding tax requirements.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
October 2011		2,462	$	49.61	None	$	44,933,570
November 2011	None			N/A	None	$	44,933,570
December 2011	None			N/A	None	$	44,933,570
Total		2,462	$	49.61	None	$	44,933,570

(1)	Represents the remaining dollar value of open market purchases of our common stock which has been authorized by our Board of Directors under a share repurchase program.

During the first three quarters of 2011, we repurchased 34,323 shares through open market purchases at an average cost of $43.49 per share for a total expenditure of $1.5 million. No share repurchases were made under the program during the fourth quarter 2011.

Stock Price Performance Graph

The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on the Nasdaq Composite Index and the AMEX Airline Index for the period beginning on December 31, 2006 and ending on the last day of 2011. The graph assumes an investment of $100 in our stock and the two indices, respectively, on December 31, 2006, and further assumes the reinvestment of all dividends. Stock price performance, presented for the period from December 31, 2006 to December 31, 2011, is not necessarily indicative of future results.

	12/31/06		12/31/07		12/31/08		12/31/09		12/31/10		12/31/11
ALGT	$	100.00	$	114.13	$	172.48	$	167.51	$	179.02	$	193.58
Nasdaq Composite Index	$	100.00	$	109.81	$	65.29	$	93.95	$	109.84	$	107.86
AMEX Airline Index	$	100.00	$	58.84	$	41.62	$	57.99	$	80.67	$	55.65

The stock price performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this annual report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

Item 6. Selected Financial Data

The following financial information for each of the five years ended December 31, 2011, has been derived from our consolidated financial statements. You should read the selected consolidated financial data set forth below along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Certain presentation changes and reclassifications have been made to prior year consolidated financial information to conform to 2011 classifications.

	For the year ended December 31,
FINANCIAL DATA:	2011			2010			2009			2008			2007
Total operating revenue	$	779,117		$	663,641		$	557,940		$	504,012		$	360,573
Total operating expenses		693,673			558,985			435,687			448,164			316,513
Operating income		85,444			104,656			122,253			55,848			44,060
Total other (income) expense		5,930			1,324			1,689			596			(6,645	)
Income before income taxes		79,514			103,332			120,564			55,252			50,705
Net income	$	49,398		$	65,702		$	76,331		$	35,407		$	31,509

Earnings per share to common stockholers(1):
Basic	$	2.59		$	3.36		$	3.81		$	1.74		$	1.56
Diluted	$	2.57		$	3.32		$	3.76		$	1.72		$	1.53

Cash dividends per share	$	-		$	0.75		$	-		$	-		$	-

Cash and cash equivalents	$	150,740		$	113,293		$	90,239		$	97,153		$	144,269
Investment securities		168,786			37,000			141,231			77,635			27,110
Total assets		706,743			501,266			499,639			423,976			405,425
Long-term debt (including capital leases)		146,069			28,136			45,807			64,725			72,146
Stockholder's equity		351,504			297,735			292,023			233,921			210,331

Operating income	$	85,444		$	104,656		$	122,253		$	55,848		$	44,060
Operating margin %		11.0	%		15.8	%		21.9	%		11.1	%		12.2	%
Cash provided by (used in):
Operating activities	$	129,911		$	97,956		$	131,674		$	71,632		$	73,947
Investing activities		(208,223	)		6,782			(97,213	)		(100,505	)		(68,927	)
Financing activities		115,759			(81,684	)		(41,375	)		(18,243	)		8,976

(1)

The Company's unvested restricted stock awards are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. The Basic and Diluted earnings per share for the periods presented reflect the two-class method mandated by accounting guidance for the calculation of earnings per share. The two-class method adjusts both the net income and shares used in the calculation. Application of the two-class method did not have a significant impact on the Basic and Diluted earnings per share for the periods presented.

	For the year ended December 31,
OPERATING DATA:	2011			2010			2009			2008			2007
Total system statistics:
Passengers		6,175,808			5,903,184			5,328,436			4,298,748			3,264,506
Revenue passenger miles (RPMs) (thousands)		5,640,577			5,466,237			4,762,410			3,863,497			3,140,927
Available seat miles (ASMs) (thousands)		6,364,243			6,246,544			5,449,363			4,442,463			3,865,337
Load factor		88.6	%		87.5	%		87.4	%		87.0	%		81.3	%
Operating revenue per ASM (RASM)* (cents)		12.24			10.62			10.24			11.35			9.33
Operating expense per ASM (CASM) (cents)		10.90			8.95			8.00			10.09			8.19
Fuel expense per ASM (cents)		5.20			3.90			3.03			5.17			3.94
Operating CASM, excluding fuel (cents)		5.70			5.05			4.97			4.92			4.25
Operating expense per passenger	$	112.32		$	94.69		$	81.77		$	104.25		$	96.96
Fuel expense per passenger	$	53.54		$	41.28		$	30.97		$	53.42		$	46.61
Operating expense per passenger, excluding fuel	$	58.78		$	53.41		$	50.80		$	50.83		$	50.35
Departures		49,360			47,986			43,795			35,839			28,788
Block hours		113,691			111,739			98,760			81,390			68,488
Average stage length (miles)		858			874			836			836			906
Average number of operating aircraft during period		52.2			49.0			42.7			36.4			27.8
Total aircraft in service end of period		57			52			46			38			32
Average departures per aircraft per day		2.6			2.7			2.8			2.7			2.8
Average block hours per aircraft per day		6.0			6.2			6.3			6.1			6.7
Full-time equivalent employees at end of period		1,595			1,614			1,569			1,348			1,180
Fuel gallons consumed (thousands)		107,616			106,093			93,521			76,972			66,035
Average fuel cost per gallon	$	3.07		$	2.30		$	1.76		$	2.98		$	2.30

Scheduled service statistics:
Passengers		5,776,462			5,609,852			4,919,826			3,894,968			3,017,843
Revenue passenger miles (RPMs) (thousands)		5,314,976			5,211,663			4,477,119			3,495,956			2,844,358
Available seat miles (ASMs) (thousands)		5,797,753			5,742,014			4,950,954			3,886,696			3,423,783
Load factor		91.7	%		90.8	%		90.4	%		89.9	%		83.1	%
Departures		42,586			41,995			37,115			29,548			25,088
Average passengers per departure		136			134			133			132			120
Block hours		101,980			101,242			87,939			70,239			60,607
Yield (cents)		9.69			8.21			7.73			9.47			9.10
Scheduled service revenue per ASM (PRASM) (cents)		8.88			7.45			6.99			8.51			7.56
Total ancillary revenue per ASM* (cents)		3.62			3.38			3.29			2.95			1.90
Total scheduled service revenue per ASM (TRASM)* (cents)		12.50			10.83			10.28			11.46			9.46
Average fare - scheduled service	$	89.15		$	76.26		$	70.38		$	84.97		$	85.80
Average fare - ancillary air-related charges	$	31.18		$	30.25		$	29.06		$	24.52		$	16.02
Average fare - ancillary third party products	$	5.18		$	4.34		$	4.01		$	4.91		$	5.53
Average fare - total	$	125.51		$	110.85		$	103.45		$	114.40		$	107.35
Average stage length (miles)		901			912			891			882			923
Fuel gallons consumed (thousands)		96,999			96,153			83,047			66,291			57,772
Average fuel cost per gallon	$	3.30		$	2.43		$	1.90		$	3.22		$	2.40
Percent of sales through website during period		88.8	%		88.8	%		86.3	%		86.4	%		86.6	%

*	Various components of these measures do not have a direct correlation to ASMs. These figures are provided on a per ASM basis so as to facilitate comparisons with airlines reporting revenues on a per ASM basis.

The following terms used in this section and elsewhere in this annual report have the meanings indicated below:

“ Available seat miles ” or “ ASMs ” represents the number of seats available for passengers multiplied by the number of miles the seats are flown.

“ Average fuel cost per gallon ” represents total aircraft fuel expense for our total system or in scheduled service divided by the total number of fuel gallons consumed in our total system or in scheduled service, as applicable.

“ Average stage length ” represents the average number of miles flown per flight.

“ Load factor ” represents the percentage of aircraft seating capacity that is actually utilized (revenue passenger miles divided by available seat miles).

“ Operating expense per ASM ” or “ CASM ” represents operating expenses divided by available seat miles.

“ Operating CASM, excluding fuel ” represents operating expenses, less aircraft fuel, divided by available seat miles. Although Operating CASM, excluding fuel is not a calculation based on generally accepted accounting principles and should not be considered as an alternative to Operating Expenses as an indicator of our financial performance, this statistic provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors and therefore are beyond our control.

“ Operating revenue per ASM ” or “RASM” represents operating revenue divided by available seat miles.

“ Revenue passengers ” represents the total number of passengers flown on all flight segments.

“ Revenue passenger miles ” or “RPMs” represents the number of miles flown by revenue passengers.

“Total revenue per ASM” or “TRASM” represents scheduled service revenue and total ancillary revenue divided by available seat miles.

“Yield” represents scheduled service revenue divided by scheduled service revenue passenger miles.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents factors that had a material effect on our results of operations during the years ended December 31, 2011, 2010 and 2009. Also discussed is our financial position as of December 31, 2011 and 2010. You should read this discussion in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this annual report. This discussion and analysis contains forward- looking statements. Please refer to the section entitled “Special Note About Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

2011 Results

The year 2011 was another successful year for us, our ninth straight year of profitability, while introducing our first Boeing 757-200 aircraft into revenue service, beginning our MD-80 seat reconfiguration program and further development in our system automation upgrades. During 2011, we earned $49.4 million of net income or $2.57 per share (diluted) on operating revenues of $779.1 million. We experienced unit revenues at the highest levels in our history, with a total average fare increase of 13.2% to $125.51 for 2011, which was achieved despite a 1.9% increase in system capacity. The total average fare performance during the year allowed us to more than offset the effect of high fuel prices as our entire fuel cost increase was attributable to unit cost increases. Our system average cost per gallon increased from $2.30 during 2010 to $3.07 in 2011.

Our strong operating revenue results were driven by a 19.2% increase in scheduled service revenue per available seat mile (“PRASM”). In addition to the PRASM increase, strong third party ancillary product sales for hotel room bookings and rental car sales contributed to a 15.4% increase in total scheduled service revenue and ancillary revenue per ASM (“TRASM”) for 2011 compared with the same period of 2010. We believe our improvement in unit revenue production was due to changes to our pricing strategy, our aggressive capacity management and a strong leisure demand environment.

During 2011, our operating expense per passenger, excluding fuel increased $5.37, or 10.1%, to $58.78, with a main driver being increased maintenance and repairs expense compared to prior years. Maintenance and repairs expense increased $20.6 million, or 34.1%, due primarily from increased engine overhauls year-over-year. In late 2010, due to multiple factors, we changed our approach to engine overhauls. In recent years, we overhauled very few of our engines and instead purchased engine replacements in the secondary market. We are currently managing our engine needs through a combination of performing engine overhauls and purchasing fewer engines for replacement purposes. During 2011, our engine overhauls and repairs expense totaled $18.3 million. We began 2012 with approximately 50% of our engine pool having fewer than 1,000 cycles since overhaul, as compared to just 11% of our engines in January 2011. We believe this will increase operational reliability and reduce the extent of the significant variations from period to period in our maintenance and repairs expense which we have experienced in the recent past.

During 2011, we also made notable progress on a number of ongoing capital projects and have begun to see returns from these projects. We introduced our first Boeing 757-200 aircraft into revenue service in July 2011, and believe the larger aircraft will provide additional revenue opportunities while reducing unit costs associated with its operations. The first MD-80 aircraft from our seat reconfiguration program entered revenue service during third quarter 2011 and we have nine in revenue service as of February 1, 2011. We believe these additional 16 seats will be accretive to earnings as they will allow us to grow capacity without adding incremental aircraft into our operating fleet. Our strategy is to convert each base to 166-seat MD-80 aircraft as soon as possible to optimize the selling effort in that particular base. Another area of significant investment during 2011 has been automation, as we have continued to work on the upgrade of our current system platform. We expect the continued improvement of our website and other automation enhancements will allow us to capitalize on customer loyalty with additional product offerings.

Lastly, we executed our first capital market debt transaction during the year as we closed a $125.0 million senior secured term loan facility (the “Term Loan”) in March 2011. The Term Loan matures on March 10, 2017 and bears interest based on the London Interbank Offered Rate (“LIBOR”) or prime rate with interest payable quarterly or more frequently until maturity. The proceeds from this transaction have provided us the ability, along with our cash from operations, to fund our capital expenditures needs for the future, and provide further financial flexibility to grow the business and weather sudden industry disruptions or U.S. macroeconomic events.

Aircraft

Operating fleet

As of December 31, 2011, our total aircraft in service consisted of 56 MD-80 aircraft and one Boeing 757-200. During 2011, we placed five MD-80 aircraft and one Boeing 757-200 into service, along with the permanent withdrawal of one MD-80 aircraft (130-seat MD-87), which increased our aircraft in service to 57 aircraft at December 31, 2011. The following table sets forth the number and type of aircraft in service and operated by us at the dates indicated:

	As of December 31, 2011						As of December 31, 2010						As of December 31, 2009
	Own (a)(b)		Lease (c)		Total (b)		Own (a)		Lease (d)		Total		Own (a)(e)		Lease		Total

MD82/83/88s		52		2		54		47		2		49		38		4		42
MD87s (f)		2		-		2		3		-		3		4		-		4
B757-200		1		-		1		-		-		-		-		-		-
Total		55		2		57		50		2		52		42		4		46

	(a)	Does not include aircraft owned, but not added to our operating fleet as of the date indicated. See below for further information on our aircraft not yet in our operating fleet.
	(b)	Includes seven MD-80 aircraft (MD-82/83/88s) modified to a 166-seat configuration.

(c)

In December 2011, we exercised purchase options on two MD-80 aircraft and took ownership of these aircraft in January 2012. Subsequent to taking ownership of these two aircraft in January 2012, we no longer have any aircraft under operating leases.

(d)

In February 2010, we exercised purchase options on two MD-80 aircraft under operating leases. In October 2010, we took ownership of these aircraft.

	(e)	Includes two MD-80 aircraft subject to capital leases as of December 31, 2009. In September 2010, we exercised early purchase options and took ownership of these two aircraft.

	(f)	Used almost exclusively for fixed fee flying.

MD-80 aircraft not in service

As of December 31, 2011, two of our MD-80 aircraft previously in storage are being modified to a 166 seat reconfiguration and expected to enter revenue service in the first quarter of 2012. Subsequent to these two MD-80 aircraft being modified to 166 seats, the remaining aircraft in the seat reconfiguration program will be removed from aircraft in service. There is also one additional MD-80 aircraft in storage which could be used for future growth opportunities.

Boeing 757-200 aircraft

As of December 31, 2011, we owned four Boeing 757-200 aircraft, of which three were leased out to third parties on a short-term basis, and one is in revenue service. The expected return dates of the leased out aircraft, under their respective leases, are through the third quarter of 2012. We expect these three aircraft to be added to revenue service through the first half of 2013.

We obtained approval from the Federal Aviation Administration (“FAA”) to begin operating the Boeing 757-200 aircraft type in our operating fleet and in July 2011, initiated service with the aircraft on two of our routes to Las Vegas. Two additional Boeing 757-200 aircraft remain to be purchased under our previous contract. We expect to close on these aircraft during the first half of 2012, with introduction of these aircraft into our fleet during the first half of 2012. We continue our efforts to gain flag carrier status and complete the ETOPS certification process with the goal to launch service with our Boeing 757-200 aircraft to Hawaii in the second half of 2012.

Network

We have increased the number of routes into our leisure destinations from 160 at December 31, 2010 to 171 routes at December 31, 2011. We now serve 76 cities in 39 states (including small cities and destinations) through our route network. The following shows the number of destinations and small cities served as of the dates indicated (includes cities served seasonally):

	As of December 31,		As of December 31,		As of December 31,
	2011		2010		2009

Major leisure destinations		6		6		6
Other leisure destinations		5		5		5
Small cities served		65		62		58
Total cities served		76		73		69

Routes to Las Vegas		48		45		40
Routes to Orlando airports (a)		35		29		31
Routes to Phoenix		29		27		20
Routes to Tampa Bay/St. Petersburg		23		20		20
Routes to Los Angeles		14		17		11
Routes to Ft. Lauderdale		7		7		5
Other routes		15		15		9
Total routes		171		160		136

(a)

From February 2010 until February 2011, we served both Orlando International Airport and Orlando Sanford International Airport. In February 2011, we have consolidated our Orlando operations back to our original operational base at Orlando Sanford International Airport.

Trends and Uncertainties

Oil prices have stabilized during the second half of 2011, but at levels resulting in an increase of our system average cost per gallon to $3.07, a 33.5% increase from $2.30 in 2010. This system average cost per gallon for 2011 was higher than the $2.98 per gallon we experienced in 2008 when fuel reached peak levels. Fuel availability is subject to periods of market surplus and shortage and is affected by demand for heating oil, gasoline and other petroleum products. The cost of fuel cannot be predicted with any degree of certainty and further fuel cost volatility will most likely have a significant impact on our future results of operations. We will continue to try to offset these fuel prices through our continued focus on capacity management, driving additional ancillary revenues and the execution of our low fixed, high variable cost model. We remain pleased with the strength and flexibility of our model and believe it has proven successful to maintain profitability in a high fuel price environment.

We continue to expand our route network and extend our national footprint with the focus on serving residents of small cities. Our national footprint is well balanced and is not dependant on one particular market or geographic region. In January 2012, we announced the establishment of an operational base and expansion of service at Oakland International Airport with seven new routes to serve the San Francisco Bay Area starting in April 2012. We also anticipate service to Hawaii in the second half of 2012 upon completion of our ETOPS certification.

In January 2012, revisions and expansions to a variety of DOT consumer-protection regulations became effective. Among other changes, the new rules substantially reduce the flexibility concerning airline advertising and sales practices, including on websites. These new regulations curtail our ability to advertise, price and sell our services in the particular manner we have developed and found most advantageous, forcing a more homogenized industry approach to advertising and sales. Future DOT rulemaking in this regard may impose further restrictions on us. Although we are taking steps to minimize the extent of any negative impact and we are challenging certain of the new rules in court, our revenues could be adversely affected in the long-term.

We expect to transfer over to our new website in first quarter 2012 and continue to enhance our website offerings to our customers. We believe this will in time provide significant revenue opportunities on which we hope to capitalize.

Our Operating Revenue

Our operating revenue comprises of both air travel on a stand-alone basis and bundled with hotels, rental cars and other travel-related services. We believe our diversified revenue streams distinguish us from other U.S. airlines and other travel companies.

•

Scheduled service revenue. Scheduled service revenue consists of air fare for nonstop flights on our route network.

•

Ancillary revenue. Our ancillary revenue is generated from air-related charges and third party products. Air-related revenue is generated through charges for use of our website to purchase tickets, checked bags, advance seat assignments, priority boarding and other services provided in conjunction with our scheduled air service. We also generate revenue from third party products through the sale of hotel rooms, ground transportation (rental cars and hotel shuttle products), attraction and show tickets and fees we receive from other merchants selling products through our website. We recognize our ancillary revenues net of amounts paid to wholesale providers, travel agent commissions and credit card processing fees.

•

Fixed fee contract revenue. Our fixed fee contract revenue is generated from fixed fee agreements and charter service on a seasonal and ad-hoc basis for other customers. The majority of our fixed fee contract revenue is under fixed fee agreements with affiliates of Caesars Entertainment Inc. and Peppermill Resorts Inc.

•

Other revenue. Other revenue is primarily generated from aircraft and flight equipment leased to third parties.

Seasonality. Our business is seasonal in nature with traffic demand historically being weaker in the third quarter and stronger in the first quarter. Our operating revenue is largely driven by perceived product value, advertising and promotional activities and can be adversely impacted during periods with reduced leisure travel spending, such as the back-to-school season.

Our Operating Expenses

A brief description of the items included in our operating expense line items follows.

Aircraft fuel expense. Aircraft fuel expense includes the cost of aircraft fuel, fuel taxes, into plane fees and airport fuel flowage, storage or through-put fees. Under the majority of our fixed fee contracts, our customer reimburses us for fuel costs. These amounts are netted against our fuel expense.

Salary and benefits expense. Salary and benefits expense includes wages, salaries, and employee bonuses, sales commissions for in-flight personnel, as well as expenses associated with employee benefit plans and employer payroll taxes.

Station operations expense. Station operations expense includes the fees charged by airports for the use or lease of airport facilities and fees charged by third party vendors for ground handling services, commissary expenses and other related services such as deicing of aircraft.

Maintenance and repairs expense. Maintenance and repairs expense includes all parts, materials and spares required to maintain our aircraft. Also included are fees for repairs performed by third party vendors.

Sales and marketing expense. Sales and marketing expense includes all advertising, promotional expenses, travel agent commissions and credit card discount fees associated with the sale of scheduled service and air-related charges.

Aircraft lease rentals expense. Aircraft lease rentals expense consists of the cost of leasing aircraft under operating leases with third parties.

Depreciation and amortization expense. Depreciation and amortization expense includes the depreciation of all fixed assets, including aircraft that we own and amortization of aircraft that we operated under capital leases.

Other expense. Other expense includes the cost of passenger liability insurance, aircraft hull insurance and all other insurance policies except for employee welfare insurance. Additionally, this expense includes loss on disposals of aircraft and other equipment disposals, travel and training expenses for crews and ground personnel, facility lease expenses, professional fees, personal property taxes and all other administrative and operational overhead expenses not included in other line items above.

RESULTS OF OPERATIONS

2011 Compared to 2010

The table below presents our operating expenses as a percentage of operating revenue for the periods presented:

	Year Ended December 31,
	2011			2010
Total operating revenue		100.0	%		100.0	%
Operating expenses:
Aircraft fuel		42.4			36.6
Salary and benefits		15.4			16.3
Station operations		8.6			9.4
Maintenance and repairs		10.4			9.1
Sales and marketing		2.6			2.6
Aircraft lease rentals		0.1			0.3
Depreciation and amortization		5.4			5.3
Other		4.1			4.6
Total operating expenses		89.0	%		84.2	%
Operating margin		11.0	%		15.8	%

Operating Revenue

Our operating revenue increased 17.4% to $779.1 million in 2011 from $663.6 million in 2010 primarily driven by a 13.2% increase in our total average fare from $110.85 to $125.51 and a 3.0% increase in scheduled service passengers. We believe stronger travel demand, changes in our pricing strategy and aggressive capacity management contributed to the improvement in total average fare.

Scheduled service revenue. Scheduled service revenue increased 20.4% to $515.0 million for 2011, up from $427.8 million in 2010. The increase was primarily driven by a 16.9% increase in the average base fare for 2011 compared to 2010, along with a 3.0% increase in the number of scheduled service passengers. The significant increase in average base fare was achieved despite a 1.0% increase in capacity. Passenger growth was driven by a 1.4% increase in the number of scheduled service departures and a slight increase in scheduled service load factor, up almost one percentage point to 91.7% for 2011.

Ancillary revenue. Ancillary revenue increased 8.2% to $210.0 million in 2011 up from $194.0 million in 2010, driven by a 5.1% increase in ancillary revenue per scheduled service passenger from $34.59 to $36.36 and a 3.0% increase in scheduled service passengers. The following table details ancillary revenue per scheduled service passenger from air-related charges and third party products:

	Year Ended December 31,				Percentage
	2011		2010		Change
Air-related charges	$	31.18	$	30.25		3.1	%
Third party products		5.18		4.34		19.4	%
Total ancillary revenue per scheduled service passenger	$	36.36	$	34.59		5.1	%

The following table details the calculation of ancillary revenue from third party products. Third party products consist of revenue from the sale of hotel rooms, ground transportation (rental cars and hotel shuttle products), attraction and show tickets and fees we receive from other merchants selling products through our website:

	Year Ended December 31,
(in thousands)	2011			2010			Change
Gross ancillary revenue—third party	$	106,362		$	89,258			19.2	%
Cost of goods sold		(71,984	)		(60,860	)		18.3	%
Transaction costs(a)		(4,463	)		(4,032	)		10.7	%
Ancillary revenue—third party products	$	29,915		$	24,366			22.8	%
As percent of gross ancillary revenue—third party		28.1	%		27.3	%	0.8pp
Hotel room nights		647,716			568,665			13.9	%
Rental car days		577,749			576,309			0.2	%

During 2011, we generated gross revenue of $106.4 million from third party products, which resulted in net revenue of $29.9 million. Third party products increased on a per-passenger basis primarily as a result of increased hotel room bookings and margin expansion, when compared to the prior year.

Fixed fee contract revenue. Fixed fee contract revenue increased 7.7% to $43.7 million during 2011 from $40.6 million for 2010. The increase in fixed fee contract revenue was primarily attributable to flying under an agreement with Peppermill Resorts Inc. (flying began in January 2011), which more than offset the reduction in fixed fee flying under the Caesars Entertainment Inc. (“Caesars”) agreement. Block hours flown under our fixed fee flying agreement with Caesars decreased from 6,893 block hours in 2010 to 5,605 in 2011.

Other revenue. We generated other revenue of $10.5 million for 2011 compared to $1.2 million for 2010, primarily from lease revenue for aircraft and flight equipment. In the first quarter of 2011, we leased three Boeing 757-200 aircraft to third parties on a short term basis. The expected return dates of these aircraft, under their respective leases, are through the third quarter of 2012.

Operating Expenses

Our operating expenses increased 24.1% to $693.7 million for 2011 compared to $559.0 million in 2010. We primarily evaluate our expense management by comparing our costs per passenger and per ASMs across different periods which enable us to assess trends in each expense category.

The following table presents Operating expense per passenger for the indicated periods (“per-passenger costs”). The table also presents Operating expense per passenger, excluding fuel, which represents operating expenses, less aircraft fuel expense, divided by the number of passengers carried. This statistic provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility. Both the cost and availability of fuel are subject to many economic and political factors beyond our control.

	Year ended December 31,				Percentage
	2011		2010		Change
Aircraft fuel	$	53.54	$	41.28		29.7	%
Salaries and benefits		19.41		18.30		6.1
Station operations		10.80		10.61		1.8
Maintenance and repairs		13.15		10.26		28.2
Sales and marketing		3.22		2.89		11.4
Aircraft lease rentals		0.18		0.29		(37.9	)
Depreciation and amortization		6.80		5.92		14.9
Other		5.22		5.14		1.6
Operating expense per passenger	$	112.32	$	94.69		18.6	%
Operating expense per passenger, excluding fuel	$	58.78	$	53.41		10.1	%

The following table presents unit costs, defined as Operating expense per ASM (“CASM”), for the indicated periods. The table also presents Operating CASM, excluding fuel, which represents operating expenses, less aircraft fuel expense, divided by available seat miles. As on a per passenger basis, excluding fuel on an ASM basis provides management and investors the ability to measure and monitor our cost performance absent fuel price volatility.

	Year Ended December 31,						Percentage
	2011			2010			Change
Aircraft fuel		5.20	¢		3.90	¢		33.3	%
Salary and benefits		1.88			1.73			8.7
Station operations		1.05			1.00			4.7
Maintenance and repairs		1.28			0.97			32.0
Sales and marketing		0.31			0.27			14.8
Aircraft lease rentals		0.02			0.03			(33.3	)
Depreciation and amortization		0.66			0.56			17.9
Other		0.50			0.49			2.0
Operating expense per ASM (CASM)		10.90	¢		8.95	¢		21.8	%
CASM, excluding fuel		5.70	¢		5.05	¢		12.9	%

Our CASM, excluding fuel, increased 12.9%, primarily from increases in maintenance and repairs expense, salaries and benefits expense and depreciation and amortization expense. Lower aircraft utilization inherent in our capacity management plan for the period and a 1.8% decrease in system average stage length contributed to the increase in CASM excluding fuel as increasing total costs were spread over only a slightly higher number of ASMs compared to the prior year.

Aircraft fuel expense. Aircraft fuel expense increased $87.0 million or 35.7% to $330.7 million for 2011, up from $243.7 million in 2010, primarily driven by a 33.5% increase in the system average cost per gallon from $2.30 to $3.07. In addition, the expansion of crack spreads for jet fuel continued to impact our system average cost per gallon during 2011.

Salary and benefits expense. Salary and benefits expense increased 11.0% to $119.9 million in 2011 up from $108.0 million in 2010, due to a 12.3% increase in our salary and benefits expense per full-time equivalent employee. The increase in our salary and benefits expense per full-time equivalent employee was driven by our new pilot and flight attendant compensation agreements which went into effect in May and July 2010, respectively. The number of full-time equivalent employees decreased 1.2% from 1,614 as of December 31, 2010 to 1,595 as of December 31, 2011, with the outsourcing of our station operations in Las Vegas beginning in May 2011 resulting in this decrease.

Station operations expense. Station operations expense increased 6.5% to $66.7 million in 2011 compared to $62.6 million in 2010 as a result of a 3.6% increase in station operations expense per departure and a 2.9% increase in system departures. The increase in station operations expense per departure was attributable to increases in ground handling fees at several airports where we operate, along with outsourcing of our station operations in Las Vegas beginning in May 2011.

Maintenance and repairs expense. Maintenance and repairs expense increased 34.1% to $81.2 million for 2011 compared to $60.6 million in 2010. The increase was primarily a result of increased engine overhauls of $13.4 million during 2011 compared to the prior year. Increases in the repair of rotable parts and usage of expendable parts associated with an increase in average number of our aircraft in service from 49.0 in 2010 to 52.2 for 2011 also contributed to our increased maintenance and repairs expense. The increase in engine overhauls and repairs was driven by a new MD-80 engine maintenance strategy which began in late 2010. Prior to that, fewer engine overhauls were performed and instead were replaced with engines acquired in the secondary market. As a result of having more than 50% of our engines with fewer than 1,000 cycles at the beginning of 2012, we expect maintenance and repair expense to return to more traditional levels in 2012.

Sales and marketing expense. Sales and marketing expense increased 16.7% to $19.9 million in 2011 compared to $17.1 million in 2010 due to higher credit card transaction costs associated with the 16.6% increase in scheduled service and ancillary revenue and an increase in advertising expenses driven by entrance into new markets.

Aircraft lease rentals expense. Aircraft lease rentals expense decreased 36.0%, from $1.7 million in 2010 to $1.1 million in 2011. Two of our MD-80 aircraft were under operating lease agreements during 2011, compared to four aircraft during the majority of 2010. In December 2011, we exercised purchased options on these two aircraft under operating leases and took ownership of the aircraft in January 2012. Upon taking ownership of these two aircraft in January 2012, we no longer have any aircraft under operating leases.

Depreciation and amortization expense. Depreciation and amortization expense increased to $42.0 million in 2011 from $35.0 million in 2010, an increase of 20.0% primarily driven by additional depreciation expense from Boeing 757-200 and MD-80 aircraft and engines. Our Boeing 757-200 aircraft include three aircraft leased to third parties during 2011 and one placed into revenue service in July 2011. We ended 2011 with 57 aircraft in service as compared to 52 aircraft at the end of 2010.

Other expense. Other expense increased 6.2% to $32.2 million in 2011 compared to $30.4 million in 2010. The increase was primarily driven by losses associated with one MD-87 aircraft we permanently grounded during the second quarter of 2011, the disposal of one engine, along with the write-down of engine values in our consignment program. In addition, we had an increase in our administrative expenses associated with our growth, such as property taxes and software support, which contributed to the overall increase in other operating expenses.

Other (Income) Expense

Other (income) expense increased from a net other expense of $1.3 million for 2010, to a net other expense of $5.9 million for 2011. The increase is due to a $4.7 million increase in interest expense in 2011 primarily associated with our $125.0 million term loan borrowing in March 2011.

Income Tax Expense

Our effective income tax rate was 37.9% for 2011 compared to 36.4% for 2010. The higher effective tax rate for 2011 was largely due to the impact of apportionment factor adjustments to filed state income tax returns which contributed to an increase in our state income tax expense. While we expect our tax rate to be fairly consistent in the near term, it will tend to vary depending on recurring items such as the amount of income we earn in each state and the state tax rate applicable to such income. Discrete items particular to a given year may also affect our effective tax rates.

2010 Compared to 2009

The table below presents our operating expenses as a percentage of operating revenue for the periods presented:

	Year Ended December 31,
	2010			2009
Total operating revenue		100.0	%		100.0	%
Operating expenses:
Aircraft fuel		36.6			29.6
Salary and benefits		16.3			16.1
Station operations		9.4			9.7
Maintenance and repairs		9.1			9.5
Sales and marketing		2.6			2.9
Aircraft lease rentals		0.3			0.3
Depreciation and amortization		5.3			5.3
Other		4.6			4.6
Total operating expenses		84.2	%		78.1	%
Operating margin		15.8	%		21.9	%

Operating Revenue

Our operating revenue increased 18.9% to $663.6 million in 2010 from $557.9 million in 2009 primarily due to a 23.6% increase in scheduled service revenue and a 19.2% increase in ancillary revenue. Scheduled service revenue and ancillary revenue increases were primarily driven by a 14.0% increase in scheduled service passengers on a 13.1% increase in scheduled service departures. The increase in scheduled service passengers combined with an overall strengthening in the U.S. economy allowed us to increase our average base airfare $5.88 or 8.4% to $76.26 in 2010 from 2009.

System available seat miles (“ASMs”) increased by 14.6% as a result of a 9.6% increase in system departures and a 4.5% increase in system average stage length. Operating revenue per ASM (“RASM”) increased from 10.24¢ during 2009 to 10.62¢ during 2010 as the rate of increase in total operating revenue slightly exceeded the increase in our capacity.

Scheduled service revenue. Scheduled service revenue increased 23.6% to $427.8 million in 2010, up from $346.2 million in 2009. The increase was primarily driven by a 14.0% increase in the number of scheduled service passengers, along with an 8.4% increase in the scheduled service average base fare for 2010 compared to 2009. Passenger growth was driven by a 13.1% increase in the number of scheduled service departures and a slight increase in scheduled service load factor, up 0.4 percentage points to 90.8%. The increase in departure growth was driven by the increase in routes to our Phoenix market, Los Angeles market (with commencement of flying to Long Beach in July 2010 which has been discontinued in November 2011) and route expansion of our seasonal service during 2010 to Myrtle Beach and Punta Gorda. Overall, our route network expanded from 136 routes served at December 31, 2009 to 160 served at December 31, 2010.

Ancillary revenue. Ancillary revenue increased 19.2% to $194.0 million in 2010 up from $162.7 million in 2009, driven by a 14.0% increase in scheduled service passengers and a 4.6% increase in ancillary revenue per scheduled passenger from $33.07 to $34.58. The following table details ancillary revenue per scheduled service passenger from air-related charges and third party products:

	Year Ended December 31,				Percentage
	2010		2009		Change
Air-related charges	$	30.25	$	29.06		4.1	%
Third party products		4.34		4.01		8.2	%
Total ancillary revenue per scheduled service passenger	$	34.59	$	33.07		4.6	%

The increase in air-related charges per-passenger was primarily attributable to higher baggage fees and booking fees in the comparable periods. We increased baggage fees to comparable industry levels. In addition, we transitioned to an open seating model for customers who do not purchase our assigned seat product. This resulted in an increase in take rates and overall revenue production for our priority boarding and assigned seat products. Ancillary revenue from third party products increased in 2010 on a per-passenger basis as a result of increased volume of sales per passenger and increased margins on the sale of hotel rooms compared to 2009.

The following table details the calculation of ancillary revenue from third party products:

	Year Ended December 31,
(in thousands)	2010			2009			Change
Gross ancillary revenue—third party	$	89,258		$	73,188			22.0	%
Cost of goods sold		(60,860	)		(50,014	)		21.7	%
Transaction costs(a)		(4,032	)		(3,459	)		16.6	%
Ancillary revenue—third party products	$	24,366		$	19,715			23.6	%
As percent of gross ancillary revenue—third party		27.3	%		26.9	%	0.4pp
Hotel room nights		568,665			532,013			6.9	%
Rental car days		576,309			380,261			51.6	%

(a)

Includes credit card fees and travel agency commissions

Fixed fee contract revenue. Fixed fee contract revenue decreased 6.0% to $40.6 million during 2010 from $43.2 million for 2009. Increased flying for the Department of Defense during 2010 was more than offset by the cessation in 2009 of fixed fee flying under the Cuban Family Charter Program and under an agreement with Beau Rivage Resorts, Inc. Fixed fee flying under our agreement with Caesars Entertainment Inc. (formerly Harrah’s Entertainment Inc.) partially offset this decrease as the number of block hours flown under the agreement increased by 4.2% for 2010 compared to 2009.

Other revenue. We generated other revenue of $1.2 million for 2010 compared to $5.8 million for 2009 during which other revenue was primarily leases of flight equipment to third parties. All of these leases were terminated by the end of third quarter 2010.

Operating Expenses

Our operating expenses increased 28.3% to $559.0 million for 2010 compared to $435.7 million in 2009. The following table presents Operating expense per passenger for the indicated periods:

	Year ended December 31,				Percentage
	2010		2009		Change
Aircraft fuel	$	41.28	$	30.97		33.3	%
Salaries and benefits		18.30		16.89		8.3
Station operations		10.61		10.13		4.7
Maintenance and repairs		10.26		9.93		3.3
Sales and marketing		2.89		3.09		(6.4	)
Aircraft lease rentals		0.29		0.36		(19.3	)
Depreciation and amortization		5.92		5.56		6.5
Other		5.14		4.83		6.5
Operating expense per passenger	$	94.69	$	81.77		15.8	%
Operating expense per passenger, excluding fuel	$	53.41	$	50.80		5.1	%

Despite an increase of 4.5% in system average stage length and a 3.6% reduction in average daily departures per aircraft, operating expense per passenger, excluding fuel, increased only 5.1% from $50.80 in 2009 to $53.41 in 2010. An increase in salary and benefits expense per passenger was the principal contributor to the increase. The increase in average fuel cost per gallon of 30.7% and the longer stage length resulted in a $10.31 increase in fuel expense per passenger from $30.97 to $41.28.

The following table presents unit costs, defined as Operating CASM, for the indicated periods:

	Year Ended December 31,						Percentage
	2010			2009			Change
Aircraft fuel		3.90	¢		3.03	¢		28.7	%
Salary and benefits		1.73			1.65			4.8
Station operations		1.00			0.99			1.0
Maintenance and repairs		0.97			0.97			—
Sales and marketing		0.27			0.30			(10.0	)
Aircraft lease rentals		0.03			0.04			(25.0	)
Depreciation and amortization		0.56			0.54			3.7
Other		0.49			0.47			4.3
Operating expense per ASM (CASM)		8.95	¢		8.00	¢		11.9	%
CASM, excluding fuel		5.05	¢		4.97	¢		1.6	%

Aircraft fuel expense. Aircraft fuel expense increased $78.7 million or 47.7% to $243.7 million in 2010, up from $165.0 million in 2009, primarily driven by a 30.7% increase in the system average cost per gallon from $1.76 to $2.30. System departure growth of 9.6% and a 4.5% increase in system average stage length in 2010 resulted in a 13.4% increase in gallons consumed, which increased from 93.5 million to 106.1 million.

Salary and benefits expense. Salary and benefits expense increased 20.0% to $108.0 million in 2010 up from $90.0 million in 2009. Excluding accrued employee bonus expense and stock compensation expense, salary and benefits expense increased 26.8% attributable to a 23.2% increase in salary and benefits expense per full-time equivalent employee and a 2.9% increase in the number of full-time equivalent employees from December 31, 2009 to December 31, 2010. We entered into new compensation agreements with our pilots and flight attendants which went into effect in May and July 2010 respectively. These new compensation arrangements accounted for the majority of the year-over-year increase in salary and benefits expense per full-time equivalent employees. In addition to these agreements, we experienced higher medical premiums and increased 401(k) contributions which were offset by a reduction in employee accrued bonus expense due to a lower level of profitability compared to 2009.

Station operations expense. Station operations expense increased 16.0% to $62.6 million in 2010 compared to $54.0 million in 2009 as a result of a 9.6% in system departures and a 5.9% increase in station operations expense per departure. Our expense per departure increase was primarily attributable to increased airport and common use fees at some of our leisure destination airports. As capacity is reduced at these airports, which was the case in 2009 and 2010, airports reallocate costs among remaining carriers. In addition we operated out of Orlando International Airport from the first quarter 2010 until first quarter 2011, which has approximately 25.0% higher operating costs than those at Orlando Sanford International Airport.

Maintenance and repairs expense. Maintenance and repairs expense increased 14.4% to $60.6 million in 2010 compared to $52.9 million in 2009 as the average number of aircraft in service increased 14.8% from 42.7 aircraft during 2009 to 49.0 during 2010. The timing of maintenance events may cause our maintenance and repairs expense to vary significantly from period to period.

Sales and marketing expense. Sales and marketing expense increased 3.7% to $17.1 million in 2010 compared to $16.5 million in 2009 due to higher credit card transaction costs associated with the 22.1% increase in scheduled service and ancillary revenue. The increase in transaction costs were partially offset by reductions in credit card rates and small city advertising expenses.

Aircraft lease rentals expense. Aircraft lease rentals expense decreased 10.6%, from $1.9 million in 2009 to $1.7 million in 2010. For all of 2009 and a majority of 2010, we operated four leased aircraft. In October 2010 we took ownership of two of our leased aircraft though the exercise of purchase options leaving two aircraft under operating leases in our fleet at the end of 2010.

Depreciation and amortization expense. Depreciation and amortization expense increased to $35.0 million for 2010 from $29.6 million for 2009, an increase of 18.0%, driven by a 13.0% increase in the number of operating aircraft. We ended 2010 with 52 aircraft in revenue service as compared with 46 in 2009. Additionally, depreciation and amortization expense excluding aircraft and aircraft related parts increased as we continued to invest in our ground service equipment and information technology infrastructure.

Other expense. Other expense increased 18.0% to $30.4 million for 2010 compared to $25.7 million for 2009, attributable to an increase in administrative expenses associated with our growth, such as facility rent for our corporate headquarters and aircraft insurance. In addition, we incurred pre-operating expenses associated with the certification process for the Boeing 757-200 aircraft type which began in the first quarter of 2010. Expenses related to this process were approximately $1.5 million in 2010. These increases were offset by a lower loss from the disposal of assets which were $4.9 million in 2009 and $2.9 million in 2010.

Other (Income) Expense

Other (income) expense decreased from a net other expense of $1.7 million for 2009, to a net other expense of $1.3 million for 2010. The change is primarily attributable to a reduction in interest expense due to lower debt balances partially offset by a reduction of interest income earned on cash balances in 2010 compared to 2009.

Income Tax Expense

Our effective income tax rate was 36.4% for 2010 compared to 36.7% for 2009. The lower effective tax rate for 2010 was largely due to the geographic mix of our flying and the impact this had on the state income tax portion of the tax provision.

LIQUIDITY AND CAPITAL RESOURCES

During 2011, our primary sources of funds were cash generated by our operations and cash borrowed under the $125.0 million Term Loan. Our operating cash flows have allowed us to maintain a high level of liquidity while growing our fleet and meeting our short term obligations. Our future capital needs are generally for the purchase of additional aircraft for which we had $39.5 million of obligations as of December 31, 2011 under existing aircraft purchase agreements. In addition, our capital needs include a seat reconfiguration program for our MD-80 aircraft fleet which we expect to have completed by the end of 2012. We believe we have adequate liquidity resources through our operating cash flows and the proceeds from the Term Loan to meet our future capital obligations.

Current Liquidity

Cash and cash equivalents, restricted cash and investment securities (short-term and long-term) totaled $335.0 million, $171.6 million and $249.3 million at December 31, 2011, 2010 and 2009, respectively. Restricted cash represents credit card deposits, cash collateral against notes payable, escrowed funds under our fixed fee flying contracts, and cash collateral against letters of credit required by hotel partners for guaranteed room availability, airports and certain other parties. Investment securities represent highly liquid marketable securities which are available-for-sale. During 2011, we were able to decrease our restricted cash balance by $5.8 million primarily from lower amounts on a number of existing letters of credit issued to our hotel vendors and some airports, along with other funds no longer held under restriction, including a portion of cash collateral against notes payable.

Under our fixed fee flying contracts, we require our customers to prepay for flights to be provided by us. The prepayments are escrowed until the flight is completed. Prepayments are recorded as restricted cash and a corresponding amount is recorded as air traffic liability.

Sources and Uses of Cash

Operating activities. During 2011, our operating activities provided $129.9 million of cash compared to $98.0 million during 2010. We generated more cash from operating activities in 2011 than 2010 as a result of an increase in non-cash items of depreciation and amortization and the change in our deferred income taxes, along with a higher increase in our air traffic liability. In addition, cash from operating activities in 2010 was reduced by the prepayment of $25.0 million for access to hotel rooms for sale through an agreement with one of our key Las Vegas hotel partners.

Investing activities. Cash used in investing activities for 2011 was $208.2 million compared to $6.8 million of cash provided by investment activities in 2010. During 2011, our primary use of cash was for the investment of proceeds from the Term Loan in investment securities and the purchase of property and equipment of $86.6 million. Purchases of property and equipment during 2011 consisted primarily of the cash purchase of two Boeing 757-200 aircraft, expenditures associated with our 166 seat reconfiguration program and other engine and flight equipment purchases. During 2010, proceeds from maturities and sales of our short-term investments net of purchases were offset partially by the use of cash for the purchase of property and equipment. Market conditions and a relatively flat interest rate curve during 2010 resulted in a higher amount of proceeds from maturities and sales of short-term investments, net of purchases, being used in 2010 for the purchase of investments with less than three month maturities which are classified as cash equivalents. Purchases of property and equipment during 2010 consisted of cash purchases of aircraft and induction costs associated with aircraft including payment of pre-delivery deposits on four Boeing 757-200 aircraft.

Financing activities. Cash provided by financing activities for 2011 was $115.8 million, compared to $81.7 million used for 2010. Net of deferred financing costs, we received $136.6 million from the Term Loan and the issuance of notes payable associated with two loans secured by Boeing 757-200 aircraft. Cash received from these financing activities was offset by $21.2 million of principal debt payments, with the majority of this amount attributable to early payment on existing debt obligations secured by MD-80 aircraft in anticipation of the pledge of these aircraft under the Term Loan. In addition, during 2011, we used $1.9 million of cash for stock repurchases. During 2010, we primarily used cash for the repurchase of our common stock in open market purchases of $53.8 million, payment on our debt and capital lease obligations of $31.7 million and the payment of cash dividends to shareholders of $14.9 million.

Debt

Our long-term debt obligations increased from $28.1 million as of December 31, 2010 to $146.1 million as of December 31, 2011. As of December 31, 2011, all of our in-service MD-80 and Boeing 757-200 aircraft were pledged to secure our debt obligations.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

The following table discloses aggregate information about our contractual cash obligations as of December 31, 2011 and the periods in which payments are due (in thousands):

	Total		Less than 1 year		1-3 years		4 to 5 years		More than 5 years
Long-term debt obligations(1)	$	185,331	$	16,238	$	41,518	$	127,575	$	-
Operating lease obligations(2)		50,070		12,867		31,156		4,926		1,121
Aircraft purchase obligations(3)		39,535		39,099		436		-		-
Total future payments on contractual obligations	$	274,936	$	68,204	$	73,110	$	132,501	$	1,121

(1)	Long-term debt obligations include scheduled interest payments.

(2)

Operating lease obligations include aircraft operating leases and leases of office space and airport station property. In January 2012, we took ownership of two MD-80 aircraft for which we exercised purchase options in December 2011 and were operating under operating lease agreements. As a result of exercising the purchase options for these aircraft, there were no contractual cash obligations from these operating lease agreements at December 31, 2011.

(3)	Aircraft purchase obligations under existing aircraft purchase agreements.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2011, we had operated two of our aircraft under operating leases which were not reflected on our balance sheet. In January 2012, we took ownership of these two aircraft after the exercise of purchase options. Upon taking ownership of these aircraft, we no longer have any aircraft under operating leases.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Note 2 to our Consolidated Financial Statements provides a detailed discussion of our significant accounting policies.

Critical accounting policies are defined as those policies that reflect significant judgments about matters that are inherently uncertain. These estimates and judgments affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Our actual results may differ from these estimates under different assumptions or conditions. We believe our critical accounting policies are limited to those described below.

Revenue Recognition. Scheduled service revenue consists of passenger revenue generated from limited frequency nonstop flights in our route network recognized when the travel-related service or transportation is provided or when the itinerary expires unused. Nonrefundable scheduled itineraries expire on the date of the intended flight, unless the date is extended by notification from the customer in advance. Itineraries sold for transportation, but not yet used, as well as unexpired credits, are included in air traffic liability.

Various taxes and fees assessed on the sale of tickets to end customers are collected by us as an agent and remitted to taxing authorities. These taxes and fees have been presented on a net basis in our consolidated statements of income and recorded as a liability until remitted to the appropriate taxing authority.

Fixed fee contract revenue consists largely of long-term agreements to provide charter service on a seasonal and ad hoc basis. Fixed fee contract revenue is recognized when the transportation is provided.

Ancillary revenue consists of passenger revenue from air-related charges and third party products. Air-related charges include optional services provided to passengers such as the use of our website to purchase scheduled service transportation, advance seat assignments, priority boarding, our travel protection product and other services. Revenues from air-related charges are recognized when the transportation is provided if the product is not deemed independent of the scheduled service. Revenues from change fees imposed on passengers for making changes to nonrefundable itineraries are recognized as they occur. Ancillary revenue is also generated from third party products such as the sale of hotel rooms, rental cars, ticket attractions and other items. Revenues from the sale of third party products are recognized at the time the product is utilized, such as the time a purchased hotel room is occupied. The amount of revenues attributed to each element of a bundled sale involving air-related charges and third party products in addition to airfare is determined in accordance with accounting standards for revenue arrangements with multiple deliverables. The sale of ancillary revenue products is recorded net of amounts paid to wholesale providers, travel agent commissions and credit card processing fees in accordance with revenue reporting accounting standards.

Other revenue is generated from leased out aircraft and flight equipment and other miscellaneous sources. Lease revenue is recognized on a straight-line basis over the lease term.

Accounting for Long-Lived Assets. When appropriate, we evaluate our long-lived assets for impairment. We record impairment losses on long-lived assets used in operations when events or circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the net book value of those assets. In making these determinations, we utilize certain assumptions, including, but not limited to: (i) estimated fair market value of the assets; and (ii) estimated future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used in our operations, and estimated salvage values. To the extent a change in estimate for useful lives of our MD-80 aircraft fleet occurs, there could result an acceleration of depreciation expense associated with the change in estimate.

Aircraft maintenance and repair costs. We account for aircraft maintenance activities under the direct expense method. Under this method, maintenance and repair costs for owned and leased aircraft, including major aircraft maintenance activities, are charged to operating expenses as incurred. As a lessee, we may be required under provisions of our lease agreements to make payments to the lessor in advance of the performance of major maintenance activities. These payments of maintenance deposits are calculated based on a performance measure, such as flight hours or cycles, and are available for reimbursement to us upon the completion of the maintenance of the leased aircraft. Accounting guidance for maintenance deposits requires these payments to be accounted for as an asset until reimbursed for incurred maintenance costs or until it is determined that any portion of the estimated total of the deposit is less than probable of being returned. We had no maintenance deposits as of December 31, 2011 or December 31, 2010.

Investment Securities. We maintain a liquid portfolio of investment securities available for current operations and to satisfy on-going obligations. We have classified these investments as “available for sale” and accordingly, unrealized gains or losses are reported as a component of comprehensive income in stockholders’ equity.

Stock-based compensation. We issued stock-based awards, including restricted stock, stock options and stock appreciation rights (“SARs”) to certain officers, directors, employees and consultants. For the years ended December 31, 2011, 2010 and 2009, we recorded $4.7 million, $4.4 million and $3.1 million, respectively, of compensation expense in our consolidated statements of income.

We recognize stock-based compensation expense over the requisite service period using a fair value approach. Determining the fair value requires judgment, and we use the Black-Scholes valuation model for stock options and SARs issued. Significant judgment is required to establish the assumptions to be used in the Black- Scholes valuation model. These assumptions are for the volatility of our common stock, estimated term over which our stock options and SARs will be outstanding, and interest rate to be applied. We use our closing share price on the grant date as the fair value for issuances of restricted stock.

Expected volatilities used for the awards in 2011 were based on the historical volatility of our common stock. No stock options or SARs were granted during 2010. Expected volatilities for the awards issued in 2009 were based on the historical volatilities from publicly traded airline companies of our peer group due to the lack of longer-term historical information on our common stock price for the period. We changed the basis for our expected volatilities to use historical volatility of our common stock as a result of the availability of more historical stock information.

Expected term represents the weighted average time between the option’s grant date and its exercise date. We estimated our expected term assumption in 2011 using historical award exercise activity and employee termination activity. We used the simplified method from accounting guidance for companies with a limited trading history to estimate the expected term on 2009 award grants. We changed the basis for our expected term to the use of historical award exercise activity and employee termination activity as a result of the availability of historical award information.

The risk-free interest rate for periods equal to the expected term of the stock option is based on a blended historical rate using Federal Reserve rates for U.S. Treasury securities.

RECENT ACCOUNTING PRONOUNCEMENTS

See related disclosure at “Item 8—Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 2—Summary of Significant Accounting Policies.”

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this annual report on Form 10-K, and in this section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, future service to be provided and the effects of future regulation and competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project” or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements may be found in Item 1A of this annual report on Form 10-K and generally may be found in our periodic reports and registration statements filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, increases in fuel prices, the effect of the economic downturn on leisure travel, terrorist attacks, risks inherent to airlines, demand for air services to our leisure destinations from the markets served by us, our ability to implement our growth strategy, unionization efforts, our dependence on our leisure destination markets, our ability to add, renew or replace gate leases, the competitive environment, problems with our aircraft, dependence on fixed fee customers, our reliance on our automated systems, economic and other conditions in markets in which we operate, aging aircraft and other governmental regulation, our ability to obtain regulatory approvals, increases in maintenance costs and cyclical and seasonal fluctuations in our operating results.

Any forward-looking statements are based on information available to us today and we undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are subject to certain market risks, including changes in interest rates and commodity prices (specifically, aircraft fuel). The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ. See the Notes to the consolidated financial statements for a description of our financial accounting policies and additional information.

Aircraft Fuel

Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel expense for the years ended December 31, 2011 and 2010 represented approximately 47.7% and 43.6% of our operating expenses, respectively. Increases in fuel prices or a shortage of supply could have a material effect on our operations and operating results. Based on our 2011 fuel consumption, a hypothetical ten percent increase in the average price per gallon of aircraft fuel would have increased fuel expense by approximately $32.8 million for the year ended December 31, 2011. We have not hedged fuel price risk in recent years.

Interest Rates

We have market risk associated with changing interest rates due to the short-term nature of our investment securities at December 31, 2011, which totaled $150.7 million in cash and cash equivalents, $154.8 million of short-term investments and $14.0 million of long-term investments. We invest available cash in money market funds, investment grade commercial paper, government and corporate debt securities and other highly rated financial instruments. Because of the short-term nature of these investments, the returns earned closely parallel short-term floating interest rates. A hypothetical 100 basis point change in interest rates for the years ended December 31, 2011 and 2010, would have affected interest income from cash and investment securities by $0.1 million in each period.

In March 2011, we borrowed $125.0 million under our Term Loan which bears variable-rate interest. As a result of the Term Loan, we had $123.5 million of variable-rate debt outstanding as of December 31, 2011. A hypothetical 100 basis point change in market interest rates as of December 31, 2011, would not have affected interest expense associated with variable rate debt as a result of the LIBOR floor under the Term Loan.

We had $22.5 million, including current maturities, of fixed-rate debt outstanding as of December 31, 2011. A hypothetical 100 basis point change in market interest rates as of December 31, 2011, would not have had a material effect on the fair value of our fixed rate debt instruments. Also, a hypothetical 100 basis point change in market rates during the years ended December 31, 2011 and 2010, would not have impacted our earnings or cash flow associated with our fixed-rate debt.

Item 8. Financial Statements and Supplementary Data

The following consolidated financial statements as of December 31, 2011 and 2010 and for each of the three years in the period ended December 31, 2011 are included below.

Reports of Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets	39
Consolidated Statements of Income	40
Consolidated Statements of Stockholders’ Equity and Comprehensive Income	41
Consolidated Statements of Cash Flows	42
Notes to Consolidated Financial Statements	43

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Allegiant Travel Company

We have audited the accompanying consolidated balance sheets of Allegiant Travel Company and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Allegiant Travel Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Las Vegas, Nevada

February 27, 2012

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Allegiant Travel Company

We have audited Allegiant Travel Company and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Allegiant Travel Company and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2011 and 2010, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2011 and our report dated February 27, 2012, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Las Vegas, Nevada

February 27, 2012

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except for share amounts)

	December 31,			December 31,
	2011			2010


Current assets:
Cash and cash equivalents	$	150,740		$	113,293
Restricted cash		13,986			19,787
Short-term investments		154,779			35,695
Accounts receivable, net		12,866			7,852
Expendable parts, supplies and fuel, net of allowance for obsolescence of $395 and $170 at December 31, 2011 and December 31, 2010, respectively		14,539			13,383
Prepaid expenses		24,861			24,071
Deferred income taxes		13			-
Other current assets		4,577			2,517
Total current assets		376,361			216,598
Property and equipment, net		307,842			267,298
Restricted cash, net of current portion		1,500			1,500
Long-term investments		14,007			1,305
Investment in and advances to unconsolidated affiliates, net		1,980			1,983
Deposits and other assets		5,053			12,582
Total assets	$	706,743		$	501,266

Current liabilities:
Current maturities of long-term debt	$	7,885		$	16,532
Accounts payable		16,756			13,965
Accrued liabilities		34,096			34,473
Air traffic liability		118,768			101,397
Deferred income taxes		-			246
Total current liabilities		177,505			166,613
Long-term debt and other long-term liabilities:
Long-term debt, net of current maturities		138,184			11,604
Deferred income taxes		39,550			25,314
Total liabilities		355,239			203,531
Stockholders' equity:
Common stock, par value $.001, 100,000,000 shares authorized; 21,573,794 and 21,455,634 shares issued; 19,079,907 and 19,005,821 shares outstanding, as of December 31, 2011 and December 31, 2010, respectively		22			21
Treasury stock, at cost, 2,493,887 and 2,449,813 shares at December 31, 2011 and December 31, 2010, respectively		(97,835	)		(95,913	)
Additional paid in capital		187,013			180,704
Accumulated other comprehensive loss, net		(26	)		(9	)
Retained earnings		262,330			212,932
Total stockholders' equity		351,504			297,735
Total liabilities and stockholders' equity	$	706,743		$	501,266

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except for share amounts)

	Year Ended December 31,
	2011			2010			2009


OPERATING REVENUE:
Scheduled service revenue	$	514,984		$	427,825		$	346,222
Ancillary revenue:
Air-related charges		180,078			169,640			143,001
Third party products		29,916			24,366			19,715
Total ancillary revenue		209,994			194,006			162,716
Fixed fee contract revenue		43,690			40,576			43,162
Other revenue		10,449			1,234			5,840
Total operating revenue		779,117			663,641			557,940

OPERATING EXPENSES:
Aircraft fuel		330,657			243,671			165,000
Salary and benefits		119,856			108,000			90,006
Station operations		66,709			62,620			53,993
Maintenance and repairs		81,228			60,579			52,938
Sales and marketing		19,905			17,062			16,458
Aircraft lease rentals		1,101			1,721			1,926
Depreciation and amortization		41,975			34,965			29,638
Other		32,242			30,367			25,728
Total operating expenses		693,673			558,985			435,687
OPERATING INCOME		85,444			104,656			122,253

OTHER (INCOME) EXPENSE:
(Earnings) loss from unconsolidated affiliates, net		(9	)		(14	)		84
Interest income		(1,236	)		(1,184	)		(2,474	)
Interest expense		7,175			2,522			4,079
Total other (income) expense		5,930			1,324			1,689
INCOME BEFORE INCOME TAXES		79,514			103,332			120,564
PROVISION FOR INCOME TAXES		30,116			37,630			44,233
NET INCOME	$	49,398		$	65,702		$	76,331
Earnings per share to common stockholders:
Basic	$	2.59		$	3.36		$	3.81
Diluted	$	2.57		$	3.32		$	3.76
Weighted average shares outstanding used in computing earnings per share to common stockholders:
Basic		18,935			19,407			19,982
Diluted		19,125			19,658			20,278

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(in thousands)

									Accumulated
	Common Stock								Other						Less:
				Par					Comprehensive			Retained			Treasury
	Shares			Value		APIC			Income			Earnings			Stock			Total
Balance at December 31, 2008		20,917		$	21	$	164,206		$	566		$	85,841		$	(16,713	)	$	233,921
Stock compensation expense		-			-		3,109			-			-			-			3,109
Issuance of restricted stock		33			-		-			-			-			-			-
Issuance of unregistered shares		42			-		1,648			-			-			-			1,648
Exercises of stock options		99			-		1,742			-			-			-			1,742
Tax benefit from stock based compensation		-			-		1,157			-			-			-			1,157
Cancellation of restricted stock		(2	)		-		-			-			-			-			-
Other		-			-		25			-			-			(80	)		(55	)
Shares repurchased by the Company and held as treasury shares		-			-		-			-			-			(25,356	)		(25,356	)
Comprehensive income:
Unrealized loss on short-term investments, net of tax		-			-		-			(474	)		-			-			(474	)
Net income		-			-		-			-			76,331			-			76,331
Total comprehensive income																			75,857
Balance at December 31, 2009		21,089		$	21	$	171,887		$	92		$	162,172		$	(42,149	)	$	292,023
Stock compensation expense		-			-		4,437			-			-			-			4,437
Issuance of restricted stock		94			-		-			-			-			-			-
Exercises of stock options		119			-		3,157			-			-			-			3,157
Exercise of warrants		163			-		715			-			-			-			715
Tax benefit from stock based compensation		-			-		821			-			-			-			821
Cancellation of restricted stock		(8	)		-		-			-			-			-			-
Reclassification of stock awards to liabilities		-			-		(313	)		-			-			-			(313	)
Shares repurchased by the Company and held as treasury shares		-			-		-			-			-			(53,764	)		(53,764	)
Cash dividends, $0.75 per share		-			-		-			-			(14,942	)		-			(14,942	)
Comprehensive income:
Unrealized loss on short-term investments, net of tax		-			-		-			(101	)		-			-			(101	)
Net income		-			-		-			-			65,702			-			65,702
Total comprehensive income																			65,601
Balance at December 31, 2010		21,456		$	21	$	180,704		$	(9	)	$	212,932		$	(95,913	)	$	297,735
Stock compensation expense		-			-		4,201			-			-			-			4,201
Issuance of restricted stock		49			-		-			-			-			-			-
Exercises of stock options		73			1		1,834			-			-			-			1,835
Tax benefit from stock based compensation		-			-		274			-			-			-			274
Cancellation of restricted stock		(4	)		-		-			-			-			-			-
Shares repurchased by the Company and held as treasury shares		-			-		-			-			-			(1,922	)		(1,922	)
Comprehensive income:
Unrealized loss on short-term investments, net of tax		-			-		-			(17	)		-			-			(17	)
Net income		-			-		-			-			49,398			-			49,398
Total comprehensive income																			49,381
Balance at December 31, 2011		21,574		$	22	$	187,013		$	(26	)	$	262,330		$	(97,835	)	$	351,504

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year ended December 31,
	2011			2010			2009

OPERATING ACTIVITIES:
Net income	$	49,398		$	65,702		$	76,331

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41,975			34,965			29,638
Loss on aircraft and other equipment disposals		4,794			2,878			4,898
Provision for obsolescence of expendable parts, supplies and fuel		225			(489	)		120
Amortization of deferred financing costs and original issue discount		411			-			-
Stock-based compensation expense		4,735			4,437			3,109
Deferred income taxes		13,977			(737	)		6,768
Excess tax benefits from stock-based compensation		(409	)		(821	)		(1,157	)
Changes in certain assets and liabilities:
Restricted cash		5,801			(3,446	)		(1,809	)
Accounts receivable		(5,014	)		(376	)		(1,901	)
Expendable parts, supplies and fuel		(1,381	)		(2,221	)		(3,788	)
Prepaid expenses		(790	)		(17,231	)		(10,171	)
Other current assets		(3,337	)		195			(1,067	)
Accounts payable		3,065			4,526			2,196
Accrued liabilities		(910	)		(276	)		6,969
Air traffic liability		17,371			10,850			21,538
Net cash provided by operating activities		129,911			97,956			131,674
INVESTING ACTIVITIES:
Purchase of investment securities		(359,035	)		(84,306	)		(124,434	)
Proceeds from maturities and sales of investment securities		227,232			188,436			60,364
Purchase of property and equipment, including pre-delivery deposits		(86,582	)		(98,499	)		(31,663	)
Interest during refurbishment of aircraft		(405	)		-			-
Proceeds from sale of property and equipment		951			483			-
Investment in unconsolidated affiliates, net		3			(630	)		(642	)
Increase (decrease) in deposits and other assets		9,613			1,298			(838	)
Net cash (used in) provided by investing activities		(208,223	)		6,782			(97,213	)
FINANCING ACTIVITIES:
Cash dividends paid to shareholders		-			(14,942	)		-
Excess tax benefits from stock-based compensation		409			821			1,157
Proceeds from exercise of stock options		1,834			3,157			1,742
Proceeds from exercise of warrants		-			715			-
Proceeds from the issuance of long-term debt		139,000			14,000			7,000
Repurchase of common stock		(1,922	)		(53,764	)		(25,356	)
Principal payments on long-term debt		(21,151	)		(31,671	)		(25,918	)
Payments for deferred financing costs		(2,411	)		-			-
Net cash provided by (used in) financing activities		115,759			(81,684	)		(41,375	)
Net change in cash and cash equivalents		37,447			23,054			(6,914	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		113,293			90,239			97,153
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	150,740		$	113,293		$	90,239

SUPPLMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash transactions:
Interest paid	$	6,592		$	2,496		$	4,292
Income taxes paid, net of refunds	$	23,507		$	36,986		$	36,952

Non-cash transactions:
Deposits applied against flight equipment purchase	$	1,277		$	-		$	-
Maintenance deposits applied against aircraft purchases	$	-		$	1,982		$	-
Common stock issued for software operating system	$	-		$	-		$	1,648
Notes payable issued for aircraft and equipment	$	-		$	14,000		$	-

The accompanying notes are an integral part of these consolidated financial statements.

ALLEGIANT TRAVEL COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2011, 2010 and 2009

(Dollars in thousands except share and per share amounts)

1. Organization and Business of Company

Allegiant Travel Company (the “Company”) is a leisure travel company focused on providing travel services and products to travelers between small, underserved cities in the United States and popular leisure destinations. The Company operates a low-cost passenger airline marketed primarily to leisure travelers in small cities, allowing it to sell air transportation both on a stand-alone basis and bundled with the sale of air-related and third party services and products. The Company also provides air transportation under fixed-fee flying arrangements. Because scheduled service and fixed fee air transportation services have similar operating margins, economic characteristics, "production processes" involving check-in, baggage handling and flight services which target the same class of customers and are subject to the same regulatory environment, the Company believes it operates in one reportable segment. Additionally, the Company does not separately track expenses for the scheduled service and fixed fee air transportation services.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Allegiant Travel Company and its wholly-owned operating subsidiaries. Investments in affiliates in which ownership interest ranges from 20 to 50 percent and provides the Company the ability to exercise significant influence over operating and financial policies are accounted for under the equity method. All intercompany balances and transactions have been eliminated.

Certain reclassifications have been made to the prior period’s financial statements to conform to 2011 classifications. These reclassifications had no effect on the previously reported net income.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Due to the prospective nature of these estimates, actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include investments and interest bearing instruments with maturities of three months or less at the date of acquisition. Such investments are carried at cost which approximates market value.

Restricted Cash

Restricted cash represents credit card deposits, cash collateral against notes payable, escrowed funds under fixed fee flying contracts and cash collateral against letters of credit required by hotel properties for guaranteed room availability, airports and certain other parties.

Accounts Receivables

Accounts receivables are carried at cost. They consist primarily of amounts due from credit card companies associated with the sale of tickets for future travel, and amounts due related to fixed fee charter agreements.

Investment Securities

The Company’s investments in marketable securities are classified as available-for-sale and are reported at fair market value with the net unrealized gain or (loss) reported as a component of accumulated comprehensive income in stockholders’ equity. Investment securities are classified as cash equivalents, short-term investments and long-term investments based on maturity date. Cash equivalents have maturities of three months or less, short-term investments have maturities of greater than three months but equal to or less than one year and long-term investments are those with a maturity date greater than one year. As of December 31, 2011, the Company’s long-term investments consisted of U.S. government agency bonds with contractual maturities of less than 15 months. Investment securities consisted of the following:

	As of December 31, 2011									As of December 31, 2010
			Gross Unrealized									Gross Unrealized
		Cost		Gains		(Losses)			Market Value		Cost		Gains		(Losses)			Market Value
Commercial paper	$	63,475	$	7	$	(31	)	$	63,451	$	-	$	-	$	-		$	-
Municipal debt securities		140,250		18		(22	)		140,246		132,268		2		(11	)		132,259
Government debt securities		14,009		-		(2	)		14,007		-		-		-			-
Corporate debt securities		26,851		4		(15	)		26,840		4,870		-		(2	)		4,868
Total	$	244,585	$	29	$	(70	)	$	244,544	$	137,138	$	2	$	(13	)	$	137,127

The amortized cost of investment securities sold is determined by the specific identification method with any realized gains or losses reflected in other (income) expense. The Company had minimal realized losses during the year ended December 31, 2011 and no realized gains or losses during the years ended December 31, 2010 and 2009.

The Company believes unrealized losses related to debt securities are not other-than-temporary.

Expendable Parts, Supplies and Fuel

Expendable parts, supplies and fuel inventories are valued at cost using the first-in, first-out method. Such inventories are charged to expense as they are used in operations. An allowance for obsolescence on spare parts is provided over the remaining useful life of our aircraft fleet.

Software Capitalization

The Company capitalizes certain costs related to the development of computer software during the application development stages of projects. The Company amortizes these costs using the straight-line method over the estimated useful life of three years. The Company had unamortized computer software development costs of $8,524 and $2,387 as of December 31, 2011 and 2010, respectively. Amortization expense related to computer software was $986 and $185 for the years ended December 31, 2011 and 2010, respectively. Amortization expense related to computer software for the year ended December 31, 2009 was minimal. Costs incurred during the preliminary and post-implementation stages of software development are expensed as incurred.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method to their estimated residual values over their estimated useful lives as follows:

Aircraft and engines	3-10 years
Rotable parts	7 years
Equipment and leasehold improvements	3-7 years

Aircraft and engines have an estimated average residual value of 18.7% of original cost; other property and equipment are assumed to have no residual value.

Aircraft under capital lease arrangements are depreciated over the shorter of the useful life of the aircraft or remaining lease term. Depreciation for these aircraft is included in depreciation and amortization expense in the Company’s consolidated statements of income.

Investment in Unconsolidated Affiliates

The Company uses the equity method to account for AFH Inc.’s, a wholly-owned subsidiary, investment in a fuel joint venture. AFH, Inc. has a 50% interest in a joint venture agreement with OSI (an affiliate of the Orlando Sanford International Airport) to handle certain fuel operations for the Orlando Sanford International Airport. The joint venture, SFB Fueling LLC, is responsible for the purchase and transport of jet fuel to a fuel farm facility owned and operated by OSI, and for the sale of jet fuel to air carriers. In addition, AFH, Inc. is responsible for the administrative functions for the joint venture. The Company’s proportionate allocation of net income or loss from this investment and from an investment in an aviation services company are reported in the Company’s consolidated statements of income in other (income) expense, with an adjustment to the recorded investment in the Company’s consolidated balance sheet. These investments treated under the equity method are not material to the financial position or results of operations of the Company.

Capitalized Interest

Interest attributable to funds used to finance the refurbishment of aircraft prior to revenue service is capitalized as an additional cost of the related asset provided the refurbishment is extensive or requires an extended period of time to complete, generally longer than 90 days. Interest is capitalized at the Company’s average interest rate on long-term debt and ceases when the asset is ready for service. The Company capitalized interest of $405 during the year ended December 31, 2011. The Company had no capitalized interest during the years ended December 31, 2010 and 2009.

Measurement of Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations, consisting principally of property and equipment, when events or changes in circumstances indicate, in management’s judgment, that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Cash flow estimates are based on historical results adjusted to reflect the Company’s best estimate of future market and operating conditions. The net carrying value of assets not recoverable is reduced to fair value if lower than carrying value. Estimates of fair value represent the Company’s best estimate based on industry trends, recent transactions involving sales of similar assets and, if necessary, estimates of future discounted cash flows. The Company had no impairment losses on long-lived assets used in operations for the years ended December 31, 2011, 2010 or 2009.

Revenue Recognition

Scheduled service revenue consists of passenger revenue generated from limited frequency nonstop flights between our leisure destinations and small cities and is recognized when the travel-related service or transportation is provided or when the itinerary expires unused. Nonrefundable scheduled itineraries expire on the date of the intended flight, unless the date is extended by notification from the customer in advance. Itineraries sold for transportation, but not yet used, as well as unexpired credits, are included in air traffic liability.

Various taxes and fees assessed on the sale of tickets to end customers are collected by the Company as an agent and remitted to taxing authorities. These taxes and fees are presented on a net basis in the Company’s consolidated statements of income and recorded as a liability until remitted to the appropriate taxing authority.

Fixed fee contract revenue consists largely of agreements to provide charter service on a seasonal and ad hoc basis. Fixed fee contract revenue is recognized when the transportation is provided.

Ancillary revenue consists of passenger revenue from air-related charges and third party products. Air-related charges include fees for optional services provided to passengers such as the use of its website to purchase scheduled service transportation, advance seat assignments, priority boarding, unlimited changes to nonrefundable itineraries and other services. Revenues from air-related charges are recognized when the transportation is provided if the product is not deemed independent of the scheduled service. Revenues from change fees for charges imposed on passengers for making changes to nonrefundable itineraries are recognized as they occur. Ancillary revenue is also generated from the sale of third party products such as hotel rooms, rental cars, ticket attractions and other items. Revenues from the sale of third party products are recognized at the time the product is utilized, such as the time a purchased hotel room is occupied. The amount of revenues attributed to each element of a bundled sale involving air-related charges and third party products in addition to airfare is determined in accordance with accounting standards for revenue arrangements with multiple deliverables. The sale of third party products is recorded net of amounts paid or payable to wholesale providers, travel agent commissions and credit card processing fees in accordance with revenue reporting accounting standards.

Other revenue is generated from leased out aircraft and flight equipment and other miscellaneous sources. Lease revenue is recognized on a straight-line basis over the lease term.

Maintenance and Repair Costs

Aircraft maintenance and repair costs. The Company accounts for aircraft maintenance activities under the direct expense method. Under this method, maintenance and repair costs for owned and leased aircraft, including major aircraft maintenance activities, are charged to operating expenses as incurred. As a lessee, the Company may be required under provisions of the Company’s lease agreements to make payments to the lessor in advance of the performance of major maintenance activities. These payments of maintenance deposits are calculated based on a performance measure, such as flight hours or cycles, and are available for reimbursement to the Company upon the completion of the maintenance of the leased aircraft. Accounting guidance for maintenance deposits requires these payments to be accounted for as an asset until reimbursed for incurred maintenance costs or until it is determined that any portion of the estimated total of the deposit is less than probable of being returned. The Company had no maintenance deposits as of December 31, 2011 and 2010.

Advertising Costs

Advertising costs are charged to expense in the period incurred. Advertising expense was $5,159, $4,742 and $6,456 for the years ended December 31, 2011, 2010 and 2009, respectively.

Earnings per Share

Basic and diluted earnings per share are computed pursuant to the two-class method. Under this method, the Company attributes net income to two classes, common stock and unvested restricted stock awards. Unvested restricted stock awards granted to employees under the Company’s Long-Term Incentive Plan are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock.

Diluted net income per share is calculated using the more dilutive of two methods. Under both methods, the exercise of employee stock options, stock purchase warrants and stock-settled stock appreciation rights are assumed using the treasury stock method. The assumption of vesting of restricted stock, however, differs:

Assume vesting of restricted stock using the treasury stock method.

Assume unvested restricted stock awards are not vested, and allocate earnings to common shares and unvested restricted stock awards using the two-class method.

For the years ended December 31, 2011 and 2010, the second method above which assumes unvested awards are not vested was used in the computation because it was more dilutive than the first method above which assumes vesting of awards using the treasury stock method. Both methods resulted in the same diluted net income per share for the year ended December 31, 2009. The following table sets forth the computation of net income per share on a basic and diluted basis for the periods indicated (shares in table below in thousands):

	Year Ended December 31,
	2011			2010			2009
Basic:
Net income	$	49,398		$	65,702		$	76,331
Less: Net income allocated to participating securities		(283	)		(402	)		(101	)
Net income attributable to common stock	$	49,115		$	65,300		$	76,230
Net income per share, basic	$	2.59		$	3.36		$	3.81

Weighted-average shares outstanding		18,935			19,407			19,982

Diluted:
Net income	$	49,398		$	65,702		$	76,331
Less: Net income allocated to participating securities		(280	)		(398	)		-
Net income attributable to common stock		49,118			65,304			76,331
Net income per share, diluted	$	2.57		$	3.32		$	3.76

Weighted-average shares outstanding		18,935			19,407			19,982
Dilutive effect of stock options, stock purchase warrants, restricted stock and stock-settled stock appreciation rights		209			305			296
Adjusted weighted-average shares outstanding under treasury stock method		19,144			19,712			20,278
Participating securities excluded under two-class method		(19	)		(54	)		N/A
Adjusted weighted-average shares outstanding under two-class method		19,125			19,658			N/A

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with accounting standards which require the compensation cost relating to share-based payment transactions be recognized in the Company’s consolidated statements of income. The cost is measured at the grant date, based on the calculated fair value of the award using the Black- Scholes option pricing model for stock options and stock appreciation rights (“SARs”), and based on the closing share price of the Company’s stock on the grant date for restricted stock awards. The cost is recognized as an expense over the employee’s requisite service period (the vesting period of the award). The vesting period of the Company’s awards is generally three years. The Company’s stock-based employee compensation plan is more fully discussed in Note 13—Employee Benefit Plans.

Income Taxes

The Company’s provision for income taxes is based on estimated effective annual income tax rates. The provision differs from income taxes currently payable because certain items of income and expense are recognized in different periods for financial statement purposes than for tax return purposes. A valuation allowance for net deferred tax assets is provided unless realizability is judged by the Company to be more likely than not. The Company has determined that all of its deferred tax assets are more likely than not to be realized. The Company determines the net current and non-current deferred tax assets or liabilities separately for federal, state, and other local jurisdictions.

The Company’s income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the locations where the Company operates. The Company assesses potentially unfavorable outcomes of such examinations based on the criteria set forth in uncertain tax position accounting standards. The accounting standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

Accounting standards for income taxes, utilize a two-step approach for evaluating tax positions. Recognition (Step I) occurs when the Company concludes that a tax position, based on its technical merits, is more likely than not to be sustained upon examination. Measurement (Step II) is only addressed if the position is deemed to be more likely than not to be sustained. Under Step II, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement. Accounting for income taxes standards generally identify the term “more likely than not” to represent the likelihood of occurrence to be greater than 50%.

The tax positions failing to qualify for initial recognition are to be recognized in the first subsequent interim period that they meet the “more likely than not” standard. If it is subsequently determined that a previously recognized tax position no longer meets the “more likely than not” standard, it is required that the tax position be derecognized. Accounting for income taxes standards specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions. As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes.

Newly Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”), which amends Topic 220 in the FASB Accounting Standards Codification (“ASC”) for the presentation of comprehensive income in the financial statements. This new guidance allows companies the option to present other comprehensive income in either a single continuous statement or in two separate but consecutive statements. Under both alternatives, companies will be required to present each component of net income and comprehensive income. The adoption of this updated guidance will impact the presentation of the Company’s consolidated financial statements, but it will not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This requirement will become effective on a retrospective basis at the beginning of the Company’s 2012 fiscal year. In December 2011, FASB issued Accounting Standards Update No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05” (“ASU 2011-12”), to defer the effective date of the specific requirement to present items reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is currently evaluating the impact adoption will have on its consolidated financial statements.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”),” which amends Topic 820 in the ASC and relates to a major convergence project of the FASB and the International Accounting Standards Board to improve IFRS and U.S. GAAP. This new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between IFRS and U.S. GAAP. The new guidance also changes some fair value measurement principles and enhances disclosure requirements related to activities in Level 3 of the fair value hierarchy. The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. The Company has evaluated the guidance and determined that it will not likely have any significant impact on its consolidated financial statements.

In September 2009, the FASB ratified Emerging Issues Task Force Issue No. 08-01, “Revenue Arrangements with Multiple Deliverables” (“EITF 08-1”). EITF 08-1 updated the guidance pertaining to multiple-element revenue arrangements included in ASC Topic 605 and changed the allocation methods used in determining how to account for multiple payment streams. It also results in the ability to separately account for more deliverables and potentially less revenue deferrals. This accounting standard became effective for new revenue arrangements entered into by the Company after January 1, 2011. Adoption of the new accounting guidance has not had a material effect on the Company’s consolidated financial statements.

3. Property and Equipment

At December 31, 2011, the Company’s aircraft fleet consisted of 56 MD-80 aircraft and one Boeing 757-200 aircraft in revenue service. In addition, the Company owns three MD-80 aircraft not in revenue service and three Boeing 757-200 aircraft leased out to third parties on a short-term basis. At December 31, 2010, the Company owned 52 MD-80 aircraft in revenue service, and eight MD-80 aircraft and two Boeing 757-200 aircraft not in revenue service.

Property and equipment consist of the following:

	As of December 31,			As of December 31,
	2011			2010
Flight equipment	$	431,924		$	364,075
Ground property and equipment		30,301			20,712
Total property and equipment		462,225			384,787
Less accumulated depreciation and amortization		(154,383	)		(117,489	)
Property and equipment, net	$	307,842		$	267,298

Depreciation and amortization expense for the years ended December 31, 2011, 2010 and 2009 was $41,975, $34,965 and $29,638, respectively.

4. Accrued Liabilities

Accrued liabilities consist of the following:

	As of December 31,		As of December 31,
	2011		2010
Salaries, wages and benefits	$	11,169	$	11,590
Maintenance and repairs		11,414		4,738
Passenger taxes and fees payable		4,662		6,078
Station expenses		6,037		5,373
Interest payable		501		104
Other accruals		313		6,590
Total accrued liabilities	$	34,096	$	34,473

5. Long-Term Debt

Long-term debt consists of the following:

	As of December 31,			As of December 31,
	2011			2010


Senior secured term loan facility, interest at LIBOR plus 4.25% with LIBOR floor of 1.5%, due March 2017	$	123,522		$	-
Notes payable, secured by aircraft, interest at 4.95%, due October 2015		6,739			-
Notes payable, secured by aircraft, interest at 6.28%, due March 2015		5,814			-
Notes payable, secured by aircraft, interest at 6.26%, due August 2014		9,994			13,224
Notes payable, secured by aircraft, interest at 6%, due April 2012		-			6,437
Notes payable, secured by aircraft, interest at 8.5%, due November 2011		-			6,209
Notes payable, secured by aircraft, interest at 6.8%, due June 2011		-			1,616
Notes payable, secured by aircraft, interest at 6%, due at varying dates through February 2011		-			650
Total long-term debt		146,069			28,136
Less current maturities		(7,885	)		(16,532	)
Long-term debt, net of current maturities	$	138,184		$	11,604

Maturities of long-term debt, as of December 31, 2011, for the next five years and thereafter, in aggregate, are: 2012 - $7,885; 2013 - $8,297; 2014 - $7,738; 2015 - $3,212; 2016 - $1,146; thereafter - $117,791.

Senior Secured Term Loan Facility

On March 10, 2011, the Company borrowed $125,000 under a senior secured term loan facility (the “Term Loan”). The Term Loan matures on March 10, 2017, bears interest based on the London Interbank Offered Rate (“LIBOR”) or prime rate with interest payable quarterly or more frequently until maturity and includes a LIBOR floor of 1.5%. The Term Loan is secured by all property and assets of the Company with certain exceptions. The Term Loan contains a restriction on future borrowing, provides for maximum annual capital expenditures and contains other affirmative and negative covenants. In addition to quarterly principal payments equal to 0.25% of the initial loan, the Term Loan also provides for mandatory and optional prepayment provisions. In connection with the borrowing under the Term Loan, the Company made early payments in February 2011 of all existing debt obligations secured by its MD-80 aircraft. Proceeds from the Term Loan are also being used for the funding of current and future capital expenditure programs and general corporate purposes.

As of December 31, 2011, management believes the Company is in compliance with all covenants under the Term Loan.

Other

In September 2011, the Company borrowed $7,000 under a loan agreement secured by one Boeing 757-200 aircraft purchased in March 2011. The note payable issued under the loan agreement bears interest at 4.95% per annum and is payable in monthly installments through October 2015.

In March 2011, the Company borrowed $7,000 under a loan agreement secured by one Boeing 757-200 aircraft purchased in February 2011. The note payable issued under the loan agreement bears interest at 6.28% per annum and is payable in monthly installments through March 2015.

In September 2010, the Company exercised early purchase options on two aircraft subject to capital leases and retired the outstanding capital lease obligations for these aircraft.

In August 2010, the Company borrowed $14,000 under a loan agreement secured by two Boeing 757-200 aircraft. The notes payable issued under the loan agreement bear interest at 6.26% per annum and are payable in monthly installments through August 2014. The Company applied a portion of the proceeds from this loan to make payment on existing debt obligations of $7,219 secured by four MD-80 aircraft that would have been due in June 2011 and June 2014. In accordance with the loan agreement, collateral is held on deposit until certain terms are met.

6. Leases

The Company leases aircraft and other assets, including office facilities, airport and terminal facilities and office equipment with terms extending through 2019.

As of December 31, 2011, the Company was party to operating lease agreements for two MD-80 aircraft. In December 2011, the Company exercised purchase options on these two aircraft and took ownership of the aircraft in January 2012. Upon taking ownership of these two aircraft in January 2012, the Company no longer has any aircraft under operating leases.

In February 2010, the Company exercised purchase options on two MD-80 aircraft under operating leases and took ownership of the aircraft in October 2010.

The office facilities under lease include approximately 75,000 square feet of space for the Company’s primary corporate offices. The lease has two five-year renewal options, but the Company has the right to terminate after the seventh year of the lease in April 2015. As of April 2011, the Company has the right to purchase the building. The Company is also responsible for its share of common area maintenance charges.

Airport and terminal facility leases are entered into with a number of local governments and other third parties. These lease arrangements have a variety of terms and conditions. Leasehold improvements made at these facilities are not material.

Total rental expense for aircraft and non-aircraft operating leases for the years ended December 31, 2011, 2010 and 2009 was $8,336, $8,742 and $8,204 respectively.

At December 31, 2011, scheduled future minimum lease payments under operating leases with initial or remaining non-cancelable lease terms in excess of one year are as follows:

	Operating Leases
2012	$	12,867
2013		12,447
2014		11,458
2015		7,251
2016		2,417
Thereafter		3,630
Total	$	50,070

7. Stockholders’ Equity

The Company is authorized by the Board of Directors to acquire the Company’s stock through open market purchases under its share repurchase program. During 2011, the Company repurchased 34,323 shares through open market purchases at an average cost of $43.49 per share for a total expenditure of $1,493. During 2010, the Company repurchased 1,206,689 shares through open market purchases at an average cost of $44.40 per share for a total expenditure of $53,574. As of December 31, 2011, the Company had $44,934 in unused stock repurchase authority remaining under the Board approved program.

On May 3, 2010, 162,500 shares of our common stock were issued through the exercise of warrants. These warrants were issued to a placement agent in connection with a private placement of equity in 2005. The Company received $715 in proceeds from the exercise of these warrants.

On April 26, 2010, the Company’s Board of Directors declared a one-time cash dividend of $0.75 per share on its outstanding common stock payable to stockholders of record on May 14, 2010. On June 1, 2010, the Company paid cash dividends of $14,942 to these stockholders.

In May 2009, the Company completed a secondary offering for the sale of shares from certain existing stockholders. The Company did not sell any shares in this underwritten offering.

In March 2009, Allegiant Information Systems, Inc., a wholly owned subsidiary of the Company, completed a plan of merger with an organization that owned the exclusive rights to the travel applications of the software operating system the Company has used since its inception. In consideration for the acquisition, the Company issued 41,450 shares of its unregistered common stock.

8. Comprehensive Income

The components of comprehensive income included the following:

	Year ended December 31,
	2011			2010

Net income	$	49,398		$	65,702
Other comprehensive (loss) income :
Unrealized (loss) gain on short-term investments, net of tax		(17	)		(101	)
Total comprehensive income	$	49,381		$	65,601

9. Fair Value Measurements

Fair value measurements accounting standards define fair value, establish a consistent framework for measuring fair value, and require disclosures for each major asset and liability category measured at fair value on either a recurring or a nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy is established in accounting standards. The hierarchy prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2011, the Company held cash equivalents and investment securities that are required to be measured at fair value on a recurring basis. The Company uses the market approach valuation technique to determine fair value for these cash equivalents and investment securities. The assets classified as Level 1 consist of money market funds for which original cost approximates fair value. The assets classified as Level 2 consist of municipal debt securities, government debt securities, corporate debt securities and commercial paper, which are valued using quoted market prices or alternative pricing sources including transactions involving identical or comparable assets and models utilizing market observable inputs.

For those assets classified as Level 2 that are not in active markets, the Company obtained fair value from pricing sources using quoted market prices for identical or comparable instruments and based on pricing models which include significant observable inputs, including maturity dates, issue dates, settlement date, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers and other market related data. These observable inputs can be derived from or corroborated by observable market data for substantially the full term of the asset.

Assets measured at fair value on a recurring basis at December 31, 2011 and December 31, 2010 were as follows (in thousands):

			Fair Value Measurements at Reporting Date Using
Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash equivalents
Money market funds	$	50,559	$	50,559	$	-	$	-
Commercial paper		12,030		-		12,030		-
Municipal debt securities		63,728		-		63,728		-
Total cash equivalents		126,317		50,559		75,758		-

Short-term investments
Commercial paper		51,421		-		51,421		-
Municipal debt securities		76,518		-		76,518		-
Corporate debt securities		26,840		-		26,840		-
Total short-term investments		154,779		-		154,779		-
Long-term investments
Government debt securities		14,007		-		14,007		-
Total long-term investments		14,007		-		14,007		-

Total investment securities	$	295,103	$	50,559	$	244,544	$	-

			Fair Value Measurements at Reporting Date Using
Description	December 31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash equivalents
Money market funds	$	4,390	$	4,390	$	-	$	-
Municipal debt securities		100,127		-		100,127		-
Total cash equivalents		104,517		4,390		100,127		-

Short-term investments
Municipal debt securities		30,827		-		30,827		-
Corporate debt securities		4,868		-		4,868		-
Total short-term investments		35,695		-		35,695		-
Long-term investments
Municipal debt securities		1,305		-		1,305		-
Total long-term investments		1,305		-		1,305		-

Total investment securities	$	141,517	$	4,390	$	137,127	$	-

There were no significant transfers between Level 1 and Level 2 assets for the years ended December 31, 2011 or 2010.

The carrying value for all long-term debt, including current maturities, owed by the Company for the years ended December 31, 2011 and 2010, approximates fair value.

10. Income Taxes

The Company is subject to income taxation in the United States and various state jurisdictions in which it operates. In accordance with income tax reporting accounting standards, the Company recognizes tax benefits or expense on the temporary differences between the financial reporting and tax bases of its assets and liabilities.

The components of the provision (benefit) for income taxes are as follows:

	Year Ended December 31,
	2011		2010			2009
Current:
Federal	$	16,920	$	32,082		$	35,905
State		2,890		2,607			1,613
Total current		19,810		34,689			37,518

Deferred:
Federal		9,982		3,030			6,195
State		324		(89	)		520
Total deferred		10,306		2,941			6,715
Total income tax provision	$	30,116	$	37,630		$	44,233

The Company recorded $274, $821 and $1,157 as an increase to additional paid in capital for certain tax benefits from employee stock-based compensation for the years ended December 31, 2011, 2010 and 2009, respectively.

Reconciliations of the statutory income tax rate and the Company’s effective tax rate for 2011, 2010, and 2009 are as follows:

	Year Ended December 31,

	2011			2010			2009
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		1.7	%		1.2	%		1.6	%
Other		1.2	%		0.2	%		0.1	%
Effective tax rate		37.9	%		36.4	%		36.7	%

The major components of the Company’s net deferred tax assets and liabilities are as follows:

	As of December 31,
	2011					2010
	Assets		Liabilities			Assets		Liabilities

Current:
Accrued Vacation	$	775	$	-		$	688	$	-
Prepaid expenses		-		(3,489	)		-		(2,718	)
State taxes		636		-			691		-
Accrued property taxes		610		-			386		-
Other		1,481		-			707		-
Total current		3,502		(3,489	)		2,472		(2,718	)

Noncurrent:
Depreciation		-		(42,932	)		-		(27,964	)
Goodwill		826		-			931		-
Stock-based compensation expense		2,478		-			1,642		-
Other		78		-			77		-
Total noncurrent:		3,382		(42,932	)		2,650		(27,964	)
Total	$	6,884	$	(46,421	)	$	5,122	$	(30,682	)

The Company paid income taxes, net of refunds, of $23,507, $36,986 and $36,952 in 2011, 2010 and 2009, respectively.

Effective January 1, 2007, the Company adopted accounting standards for uncertain tax positions. Accounting standards for income taxes utilize a two-step approach for evaluating tax positions. A tax position is recognized if it is more likely than not to be sustained upon examination and measured as the largest amount of benefit that is more likely than not (greater than 50%) to be realized upon settlement.

If it is subsequently determined that a previously recognized tax position no longer meets the “more likely than not” standard, it is required that the tax position be derecognized. Accounting for income taxes standards specifically prohibit the use of a valuation allowance as a substitute for derecognition of tax positions.

A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

	As of December 31,
	2011			2010
Beginning Balance	$	3,619		$	-
Increases for tax position of prior years		-			3,277
Increases for tax position of current year		-			342
Decreases for tax positions of prior years		(1,754	)		-
Settlements		-			-
Decreases for lapses in statute of limitations		(1,865	)		-
Ending Balance	$	-		$	3,619

For the years ended December 31, 2011 and 2010, the Company has recognized a liability for uncertain tax positions of $0 and $3,619, respectively. During the third quarter of 2011, the liability recognized for the uncertain tax positions decreased by $3,619 as a result of lapses in statute of limitations, changes in judgment and other items. The Company’s uncertain tax position related to timing differences and no amount, if recognized, would impact the effective tax rate.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2011 and 2010, the Company recognized no interest and penalties.

The Company files income tax returns in the U.S. federal jurisdiction as well as multiple state jurisdictions. The Company is not currently under examination by the IRS. Various federal, state and local tax returns remain open to examination. The Company believes that any potential assessment would be immaterial.

11. Related Party Transactions

The building in which the Company maintains its headquarters is leased from a limited liability company in which the Chief Executive Officer and two other Directors own significant interests as non-controlling members. In June 2008, the Company entered into a lease agreement for additional office space to be used as its training facility which is located in a building adjacent to the Company’s headquarters. The second building is also owned by a limited liability company in which the Chief Executive Officer and two other Directors own significant interests as non-controlling members. Under the terms of these agreements, the Company made rent payments of $2,284, $2,361 and $2,016, in 2011, 2010 and 2009, respectively.

12. Financial Instruments and Risk Management

The Company’s debt with a carrying value of $146,069 and $28,136 as of December 31, 2011 and 2010, respectively, approximates fair value. These fair value estimates were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing for similar liabilities.

The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to their short term nature.

13. Employee Benefit Plans

401(k) Plan

The Company has a defined contribution plan covering substantially all eligible employees. Under the plan, employees may contribute up to 90% of their eligible annual compensation with the Company making matching contributions on employee contributions of up to 5% of eligible employee wages. The Company recognized expense under this plan of $2,002, $1,650 and $908 for the years ended December 31, 2011, 2010 and 2009, respectively.

Stock-based employee compensation

In 2006, the Board of Directors adopted, and the stockholders approved, a Long-Term Incentive Plan (the “2006 Plan”) and reserved 3,000,000 shares of common stock for the Company to grant stock options, restricted stock, SARs and other stock-based awards to certain officers, directors, employees, and consultants of the Company. The 2006 Plan is administered by the Company’s compensation committee of the Board of Directors. Upon the merger of Allegiant Travel Company, LLC into Allegiant Travel Company (a Nevada corporation) immediately prior to the Company’s initial public offering, all outstanding stock options under the previously adopted share option program (the “Share Option Program”) were transferred to the 2006 Plan. In addition, no further option grants may be made under the predecessor company’s Share Option Program. The transferred options continue to be governed by their existing terms, unless the compensation committee elects to extend one or more features of the 2006 Plan to those options.

Compensation expense

For the years ended December 31, 2011, 2010 and 2009, the Company recorded $4,735, $4,437 and $3,109, respectively, of compensation expense in the consolidated statements of income related to stock options, SARs (stock-settled and cash-settled) and restricted stock.

The unrecognized compensation cost and weighted-average period over which the cost is expected to be recognized for nonvested awards as of December 31, 2011 are presented below:

	Unrecognized Compensation Cost		Weighted Average Period (years)
Stock options and stock-settled SARs	$	306		0.74
Restricted stock		3,158		1.59
Cash-settled SARs		1,416		2.23
Total	$	4,880	$	1.79

Fair value

The fair value of stock options and SARs granted was estimated as of the grant date using the Black-Scholes option-pricing model. Cash-settled SARs are liability-based awards and the fair value and compensation expense recognized for these awards are updated each reporting period. No stock options or SARs were granted in 2010. The assumptions used in the Black-Scholes option-pricing model are noted in the table below:

	2011			2010		2009

Weighted-average volatility		58.32	%		N/A		42.34	%
Expected term (in years)		3.5			N/A		3.5
Risk-free interest rate		0.80	%		N/A		1.33	%
Expected dividends		-			N/A		-

Expected volatilities used for the awards in 2011 were based on the historical volatility of the Company’s own common stock. Expected volatilities for the awards issued in 2009 were based on the historical volatilities from publicly traded airline companies of the Company’s peer group due to the lack of longer-term historical information on the Company’s stock price. The Company changed the basis for its expected volatilities to the use of historical volatility of its own common stock as a result of the availability of more historical stock information.

Expected term represents the weighted average time between the award’s grant date and its exercise date. The Company estimated its expected term assumption in 2011 using historical award exercise activity and employee termination activity. The Company used the simplified method from accounting guidance for companies with a limited trading history, to estimate the expected term of the 2009 award grants. The Company changed the basis for its expected term to the use of historical award exercise activity and employee termination activity as a result of the availability of historical award information.

The risk-free interest rate for periods equal to the expected term of the award is based on a blended historical rate using Federal Reserve rates for U.S. Treasury securities. The contractual terms of the Company’s stock option and SAR awards granted range from five to ten years.

Stock options and stock-settled SARs

A summary of option and stock-settled SARs activity as of December 31, 2011 and changes during the year then ended is presented below:

	Options and Stock-Settled SARS			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2011		568,833		$	33.18
Granted		-			-
Exercised		(72,900	)		25.18
Forfeited		(2,500	)		38.32
Outstanding at December 31, 2011		493,433		$	34.34		2.64	$	9,374,814
Fully vested and expected to vest at December 31, 2011		472,511		$	34.38		2.64	$	8,961,160
Exercisable at December 31, 2011		380,267		$	33.13		2.76	$	7,683,310

The weighted average fair value per share of awards granted during the year ended December 31, 2009 was $12.44. No options or stock-settled SARs were granted during the years ended December 31, 2011 and 2010. During the years ended December 31, 2011, 2010 and 2009, the total intrinsic value of options exercised was $1,407, $2,972 and $2,917, respectively. Cash received from option exercises for the years ended December 31, 2011, 2010 and 2009, was $1,834, $3,157 and $1,742, respectively.

Restricted stock awards

A summary of the status of the Company’s nonvested restricted stock grants during the year ended December 31, 2011 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011		106,270		$	49.60
Granted		49,384			43.32
Vested		(44,307	)		48.10
Forfeited		(4,124	)		50.09
Nonvested at December 31, 2011		107,223		$	47.22

The weighted average grant date fair value per share of restricted stock grants during the years ended December 31, 2011, 2010 and 2009 was $43.32, $52.44 and $38.31, respectively. The total fair value of restricted stock vested during the years ended December 31, 2011, 2010 and 2009, was $2,131, $899 and $1,605, respectively.

Cash-settled stock appreciation rights

A summary of cash-settled SARs awards activity during the year ended December 31, 2011 is presented below:

	Cash-Settled SARs			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2011		-		$	-
Granted		117,042			19.01
Exercises		-			-
Forfeited		(919	)		19.01
Outstanding at December 31, 2011		116,123		$	19.01
Exercisable at December 31, 2011		-			-

The weighted average grant date fair value per share of cash-settled SARs granted during the year ended December 31, 2011 was $19.01. No cash-settled SARs were granted in 2010 or 2009. No cash-settled SARs were exercised during 2011.

14. Selected Quarterly Financial Data (Unaudited)

Quarterly results of operations for the years ended December 31, 2011 and 2010 are summarized below.

	March 31		June 30		September 30		December 31
2011
Operating revenues	$	193,231	$	200,449	$	191,500	$	193,937
Operating income		27,827		20,712		16,731		20,174
Net income		17,153		11,949		9,486		10,810
Earnings per share to common stockholers:
Basic		0.90		0.63		0.50		0.57
Diluted		0.89		0.62		0.49		0.56
2010
Operating revenues	$	169,637	$	168,350	$	163,621	$	162,033
Operating income		36,245		28,081		19,480		20,850
Net income		22,600		17,562		13,159		12,381
Earnings per share to common stockholers:
Basic		1.14		0.89		0.68		0.65
Diluted		1.12		0.87		0.67		0.64

The sum of the quarterly earnings per share amounts does not equal the annual amount reported since per share amounts are computed independently for each quarter and for the full year based on respective weighted-average common shares outstanding and other dilutive potential common shares.

15. Commitments and Contingencies

The Company is subject to certain legal and administrative actions which management considers routine to its business activities. Management believes after consultation with legal counsel, the ultimate outcome of any pending legal matters will not have a material adverse impact on the Company’s financial position, liquidity or results of operations.

In November 2011, the Company entered into a purchase agreement to purchase up to 13 MD-80 aircraft and 12 JT8D-219 spare aircraft engines. As of December 31, 2011, the remaining contractual obligations under the purchase agreement was $17,438 to be paid in 2012 and 2013, upon taking ownership of the remaining aircraft and spare engines.

In March 2010, the Company entered into a purchase contract for six Boeing 757-200 aircraft. As of December 31, 2011, the Company purchased four of these aircraft, and the remaining contractual obligation under the purchase agreement was $19,550 to be paid in the first half of 2012 upon taking ownership of the remaining aircraft.

16. Subsequent Events

In January 2012, the Company took ownership of two MD-80 aircraft for which the Company exercised purchase options in December 2011 and which the Company was operating under operating lease agreements. Subsequent to taking ownership of these two aircraft, the Company no longer has any aircraft under operating leases.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of disclosure controls and procedures. As of the end of the period covered by this report, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”). Based on this evaluation, our management, including our CEO and CFO, has concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information we are required to disclose is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon this evaluation, the CEO and CFO concluded that our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed in our reports filed with or submitted to the SEC under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

The effectiveness of our or any system of controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control- Integrated Framework. Based on our assessment, management has concluded that, as of December 31, 2011, our internal control over financial reporting was effective based on those criteria.

Ernst & Young, LLP, the independent registered public accounting firm who audited our consolidated financial statements included in this Form 10-K, has issued a report on the Company’s internal control over financial reporting, which is included herein.

Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of our year ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

The information required by this Item is incorporated herein by reference to the data under the headings “ELECTION OF DIRECTORS,” “EXECUTIVE OFFICERS” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of stockholders to be held June 5, 2012, which Proxy Statement is to be filed with the Commission.

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference to the data under the headings “EXECUTIVE COMPENSATION” and “REPORT OF THE COMPENSATION COMMITTEE” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of stockholders to be held June 5, 2012, which Proxy Statement is to be filed with the Commission.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated herein by reference to the data under the heading “STOCK OWNERSHIP” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of stockholders to be held June 5, 2012, which Proxy Statement is to be filed with the Commission. The information required by this item with respect to securities authorized for issuance under our equity compensation plans is included in Part II, Item 5 of this Annual Report on Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference to the data under the heading “RELATED PARTY TRANSACTIONS” and “Director Independence” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of stockholders to be held June 5, 2012, which Proxy Statement is to be filed with the Commission.

Item 14. Principal Accountant’s Fees and Services

The information required by this Item is incorporated herein by reference to the data under the heading “PRINCIPAL ACCOUNTANT FEES AND SERVICES” in the Proxy Statement to be used in connection with the solicitation of proxies for our annual meeting of stockholders to be held June 5, 2012, which Proxy Statement is to be filed with the Commission.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements and Supplementary Data. The following consolidated financial statements of the Company are included in Item 8 of this report:

Reports of Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets	39
Consolidated Statements of Income	40
Consolidated Statements of Stockholders’ Equity and Comprehensive Income	41
Consolidated Statements of Cash Flows	42
Notes to Consolidated Financial Statements	43

Financial Statement Schedules. Schedules are not submitted because they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.

Exhibits. The Exhibits listed below are filed or incorporated by reference as part of this Form 10-K. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference.

Exhibit Number		Description
3.1*		Articles of Incorporation of Allegiant Travel Company.
3.2		Bylaws of Allegiant Travel Company (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed with the Commission on November 9, 2009).
3.3		Specimen Stock Certificate (incorporated by reference to Exhibit 3.3 to the Form 8-A filed with the Commission on November 22, 2006).
10.1		2006 Long-Term Incentive Plan, as amended on July 19, 2009.(1) (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed with the Commission on November 9, 2009.)
10.2		Form of Stock Option Agreement used for officers of the Company.(1) (Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 3, 2009).
10.3		Form of Restricted Stock Agreement used for Directors of the Company.(1) (Incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 3, 2009).
10.4*		Form of Indemnification Agreement.
10.5		Lease dated May 1, 2007, between Allegiant Air, LLC and Windmill Durango Office, LLC (Incorporated by reference to Exhibit 10.22 to the Form S-1 registration statement filed with the Commission on May 16, 2007).
10.6		Terminalling Agreement between AFH, Inc. and Kinder Morgan Liquids Terminals, LLC (Incorporated by reference to Exhibit 10.23 to the Post-Effective Amendment No. 1 to Form S-1 registration statement filed with the Commission on June 25, 2007).
10.7		Shipper’s Agreement between AFH, Inc. and Central Florida Pipeline, LLC (Incorporated by reference to Exhibit 10.24 to the Post-Effective Amendment No. 1 to Form S-1 registration statement filed with the Commission on June 25, 2007).
10.8		Amendment to Lease dated as of June 23, 2008 between Windmill Durango Office, LLC and Allegiant Air, LLC. (Incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 3, 2009.)
10.9		Lease dated June 23, 2008 between Windmill Durango Office II, LLC and Allegiant Air, LLC. (Incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Commission on March 3, 2009.)
10.10		Addendum to Lease between Windmill Durango Office II, LLC and Allegiant Air, LLC signed on June 17, 2009. (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 filed with the Commission on August 7, 2009.)

10.11		Employment Agreement dated as of October 16, 2009, between the Company and Andrew C. Levy.(1) (Incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Commission on March 9, 2010.)
10.12		Restricted Stock Agreement dated October 16, 2009 between the Company and Andrew C. Levy.(1) (Incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Commission on March 9, 2010.)
10.13		Stock Appreciation Rights Agreement dated October 16, 2009, between the Company and Andrew C. Levy.(1) (Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Commission on March 9, 2010.)
10.14		Aircraft Sale and Purchase Agreement dated as of December 30, 2009 between the Company and Scandinavian Airlines System, Denmark—Norway—Sweden.(3) (Incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Commission on March 9, 2010.)
10.15		Aircraft Sale Agreement dated as of March 3, 2010 between Sunrise Asset Management, LLC and Aercap Partners I Limited and Wells Fargo Bank Northeast (owner trustee under the MSN 26963 and 26964 Trust Agreements) (2) (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed with the Commission on May 7, 2010.)
10.16		Agreement dated October 15, 2009 and Amendment dated June 1, 2010 between the Company and entities known collectively as Harrah’s. (3) (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the Commission on August 9, 2010.)
10.17		Credit Agreement dated as of March 10, 2011 between the Company, the Lenders, Citadel Securities Trading LLC, as administrative agent, and The Bank of New York Mellon, as collateral agent for the Lenders. (3) (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the Commission on May 10, 2011.)
10.18		Guarantee and Collateral Agreement dated as of March 10, 2011 between the Company and The Bank of New York Mellon, collateral agent. (3) (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the Commission on May 10, 2011.)
10.19		Aircraft Security Agreement dated as of March 10, 2011, between the Company and The Bank of New York Mellon as collateral agent. (3) (Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the Commission on May 10, 2011.)
10.20		Airport Use and Lease Agreement signed on March 17, 2011 between the Company and Clark County Department of Aviation.
21.1		List of Subsidiaries
23.1		Consent of Ernst & Young LLP.
24.1		Powers of Attorney (on signature page)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32		Section 1350 Certifications
101		The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 27, 2012, formatted in XBRL includes (i) Consolidated Income Statements for the years ended December 31, 2011, 2010 and 2009 (ii) Consolidated Balance Sheets at December 31, 2011 and December 31, 2010 (iii) Consolidated Cash Flow Statements for the years ended December 31, 2011, 2010 and 2009 (iv) the Notes to the Consolidated Financial Statements. (4)

*	Incorporated by reference to Exhibits filed with Registration Statement #333-134145 filed by Allegiant Travel Company with the Commission and amendments thereto.

(1)	Management contract or compensation plan or agreement required to be filed as an Exhibit to this Report on Form 10-K pursuant to Item 15(b) of Form 10-K.

(2)

Portions of the indicated document have been omitted pursuant to the grant of confidential treatment and the documents indicated have been filed separately with the Commission as required by Rule 406 under the Securities Act of 1933, as amended, or Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(3)	Portions of the indicated document have been omitted pursuant to a request for confidential treatment and the document indicated has been filed separately with the Commission as required by Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(4)	Pursuant to Rule 406 of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Las Vegas, State of Nevada on February 27, 2012.

	Allegiant Travel Company

	By:	/s/ SCOTT SHELDON
		Scott Sheldon
		Chief Financial Officer

POWERS OF ATTORNEY

Each person whose signature appears below hereby appoints Scott Sheldon and Maurice J. Gallagher, Jr., as his true and lawful attorneys-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Maurice J. Gallagher, Jr.	Chief Executive Officer and Director	February 27, 2012
Maurice J. Gallagher, Jr.	(Principal Executive Officer)

/s/ Scott Sheldon	Chief Financial Officer	February 27, 2012
Scott Sheldon	(Principal Financial and Accounting Officer)

/s/ Gary Ellmer	Director	February 27, 2012
Gary Ellmer

/s/ Montie Brewer	Director	February 27, 2012
Montie Brewer

/s/ Timothy P. Flynn	Director	February 27, 2012
Timothy P. Flynn

/s/ Charles W. Pollard	Director	February 27, 2012
Charles W. Pollard

/s/ John Redmond	Director	February 27, 2012
John Redmond

The following exhibits are filed as part of this report.

Exhibit Number		Description
10.20		Airport Use and Lease Agreement signed on March 17, 2011 between the Company and Clark County Department of Aviation.
21.1		List of Subsidiaries
23.1		Consent of Ernst & Young LLP, independent registered public accounting firm
24.1		Power of Attorney (included on signature page hereto).
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32		Section 1350 Certifications
101		The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 27, 2012, formatted in XBRL includes (i) Consolidated Income Statements for the years ended December 31, 2011, 2010 and 2009 (ii) Consolidated Balance Sheets at December 31, 2011 and December 31, 2010 (iii) Consolidated Cash Flow Statements for the years ended December 31, 2011, 2010 and 2009 (iv) the Notes to the Consolidated Financial Statements. (1)

(1)

Pursuant to Rule 406 of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed to be not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Exhibit 10.20

AIRLINE – AIRPORT USE AND LEASE AGREEMENT

McCARRAN INTERNATIONAL AIRPORT

ALLEGIANT AIR, LLC

CLARK COUNTY DEPARTMENT OF AVIATION

LAS VEGAS, NEVADA

Effective Date:

July 1, 2010

Approved as to Form by

Clark County Board of Commissioners on September 7, 2010

Approved as to Form September 7, 2010

-1-

ARTICLE 1 - DEFINITIONS

SECTION 1.01 DEFINITIONS	7
SECTION 1.02 CROSS-REFERENCES	26

ARTICLE 2 -TERM

SECTION 2.01 TERM	27
SECTION 2.02 TERMINATION OF EXISTING AGREEMENTS	28

ARTICLE 3 - RIGHTS AND SPECIFIC PRIVILEGES

SECTION 3.01 USE OF THE AIRPORT	29
SECTION 3.02 SPECIFIC RIGHTS AND RESPONSIBILITIES OF AIRLINE	29
SECTION 3.03 LIMITATIONS ON USE BY AIRLINE	34
SECTION 3.04 GROUND HANDLING SERVICES BY AIRLINE AND AVIATION SUPPORT PROVIDER COMPANIES	38
SECTION 3.05 AVIATION SUPPORT PROVIDER SERVICES	40

ARTICLE 4 - PREMISES

SECTION 4.01 TERMINAL COMPLEX SPACE AND APRON AREA	42
SECTION 4.02 RIGHT TO AUTHORIZE USE OF AIRLINE SPACE	47
SECTION 4.03 REASSIGNMENT OF LEASED PREMISES	48
SECTION 4.04 SURRENDER OF THE PREMISES	56
SECTION 4.05 EMPLOYEE PARKING FACILITIES	57
SECTION 4.06 ACCESS	58
SECTION 4.07 ASSIGNMENT OF PREFERENTIAL AND COMMON USE FACILITIES	60
SECTION 4.08 AVIATION SUPPLIED COMMON USE EQUIPMENT AND STOCK	61
SECTION 4.09 WIRELESS APPLICATIONS AND SIMILAR TECHNOLOGIES	65
SECTION 4.10 OFF-AIRPORT PASSENGER CHECK-IN PROGRAM	66
SECTION 4.11 IN-LINE BAGGAGE HANDLING SYSTEM OBLIGATIONS, DUTIES, AND RESPONSIBILITIES	67

ARTICLE 5 – AVIATION CAPITAL IMPROVEMENTS

SECTION 5.01 AIRPORT EXPANSION	69
SECTION 5.02 CAPITAL IMPROVEMENT PROGRAM	69
SECTION 5.03 MAJOR REVISIONS TO THE CIP	70
SECTION 5.04 ADDITIONAL CAPITAL IMPROVEMENT(S)	70
SECTION 5.05 CAPITAL OUTLAYS	71

ARTICLE 6 - RENTALS AND FEES

SECTION 6.01 CONSIDERATION	72
SECTION 6.02 TERMINAL COMPLEX RENTALS	73
SECTION 6.03 AIRCRAFT GATE USE FEES AND APRON STORAGE FEES	74
SECTION 6.04 LANDING FEES	75
SECTION 6.05 PLANNING AND ENVIRONMENTAL STUDIES	75
SECTION 6.06 OTHER FEES AND CHARGES	76
SECTION 6.07 INFORMATION TO BE SUPPLIED BY AIRLINE	79
SECTION 6.08 PAYMENTS	81
SECTION 6.09 PASSENGER FACILITY CHARGES	83
SECTION 6.10 ADDITIONAL RENTALS	84
SECTION 6.11 ADDITIONAL FEES AND CHARGES	85
SECTION 6.12 SECURITY FOR PERFORMANCE	85
SECTION 6.13 NO OTHER FEES AND CHARGES	87
SECTION 6.14 POLICY REGARDING RATES AND CHARGES	87

Approved as to Form September 7, 2010

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ARTICLE 7 – RATE CHAGES FOR RENTALS, FEES AND CHARGES

SECTION 7.01 ANNUAL RATE CHANGES	89
SECTION 7.02 OTHER RATE CHANGES	90
SECTION 7.03 INCORPORATION OF EXHIBITS D1 THROUGH D12	90
SECTION 7.04 RATE STABILIZATION ACCOUNT	90
SECTION 7.05 AMORTIZATION DUE FROM SIGNATORY AIRLINES ACCOUNT	91
SECTION 7.06 FISCAL YEAR TRUE-UP	92
SECTION 7.07 EXTRAORDINARY ADJUSTMENTS OF RENTALS, FEES, AND CHARGES	93
SECTION 7.08 AVIATION COVENANTS	93

ARTICLE 8 – MASTER INTENDURE AND FLOWOF FUNDS

SECTION 8.01 SUBORDINATION TO MASTER INDENTURE	94
SECTION 8.02 FLOW OF FUNDS	94

ARTICLE 9 - OPERATION, MAINTENANCE, REPAIR, ALTERATIONS, AND IMPROVEMENTS

SECTION 9.01 AIRLINE’S RESPONSIBILITIES	98
SECTION 9.02 AVIATION’S RESPONSIBILITIES	103
SECTION 9.03 AVIATION’S RIGHT TO INSPECT AND MAKE REPAIRS	104
SECTION 9.04 ALTERATIONS AND IMPROVEMENTS	105

ARTICLE 10 - DAMAGE OR DESTRUCTION, INSURANCE, INDEMNIFICATION,

AND RELEASE OF LIABILITY
SECTION 10.01 DAMAGE OR DESTRUCTION	107
SECTION 10.02 INSURANCE	107
SECTION 10.03 INDEMNIFICATION	110
SECTION 10.04 RELEASE OF LIABILITY RE: CERTAIN DAMAGES	111

ARTICLE 11 - ASSIGNMENT OF SPACE AND BANKRUPTCY

SECTION 11.01 ASSIGNMENT AND SUBLETTING	113
SECTION 11.02 NONWAIVER OF RESPONSIBILITY	114
SECTION 11.03 RELINQUISHMENT OF SPACE	114
SECTION 11.04 BANKRUPTCY	114
SECTION 11.05 CONSENT	115

ARTICLE 12 - DEFAULT

SECTION 12.01 DEFAULT	116

ARTICLE 13 - RULES AND REGULATIONS, OPERATING DIRECTIVES,

COMPLIANCE WITH LAW, NONDISCRIMINATION
SECTION 13.01 RULES AND REGULATIONS AND OPERATING DIRECTIVES	119
SECTION 13.02 COMPLIANCE WITH LAW	120
SECTION 13.03 NONDISCRIMINATION	122

ARTICLE 14 – ENVIRONMENTAL COMPLIANCE

SECTION 14.01 ENVIRONMENTAL POLICY	125
SECTION 14.02 AIR QUALITY	129

ARTICLE 15 - COVENANT NOT TO GRANT MORE FAVORABLE TERMS

SECTION 15.01 COVENANT NOT TO GRANT MORE FAVORABLE TERMS	131

ARTICLE 16 - TERMINATION

SECTION 16.01 EVENTS PERMITTING TERMINATION OF AGREEMENT BY AIRLINE	132
SECTION 16.02 EVENTS PERMITTING TERMINATION OF AGREEMENT BY AVIATION	132
SECTION 16.03 POSSESSION BY AVIATION	133

ARTICLE 17 - NOTICES

SECTION 17.01 DELIVERY OF NOTICES	134

Approved as to Form September 7, 2010

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ARTICLE 18 - MISCELLANEOUS

SECTION 18.01 SUCCESSORS AND ASSIGNS BOUND	136
SECTION 18.02 GOVERNING LAW	136
SECTION 18.03 NONINTERFERENCE WITH OPERATION OF THE AIRPORT	136
SECTION 18.04 SEVERABILITY	136
SECTION 18.05 QUIET ENJOYMENT	136
SECTION 18.06 TAXES	137
SECTION 18.07 LIENS	137
SECTION 18.08 OBTAINING FEDERAL AND STATE FUNDS	139
SECTION 18.09 NONLIABILITY OF AVIATION’S OR AIRLINE’S OFFICERS, AGENTS, AND EMPLOYEES	139
SECTION 18.10 SUBORDINATION TO AGREEMENTS WITH THE U.S. GOVERNMENT	139
SECTION 18.11 INCORPORATION OF EXHIBITS	140
SECTION 18.12 CONSTRUCTION OF CERTAIN WORDS	140
SECTION 18.13 INCORPORATION OF REQUIRED PROVISIONS	140
SECTION 18.14 PRICE LEVEL ADJUSTMENTS	140
SECTION 18.15 ENTIRE AGREEMENT	141
SECTION 18.16 NONWAIVER OF RIGHTS	141
SECTION 18.17 FORCE MAJEURE	141
SECTION 18.18 HEADINGS	141
SECTION 18.19 NONEXCLUSIVE RIGHTS	141
SECTION 18.20 INSPECTION OF BOOKS AND RECORDS	142
SECTION 18.21 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES	142
SECTION 18.22 GENERAL INTERPRETATION	142
SECTION 18.23 HOLDING OVER	142
SECTION 18.24 CONSENT NOT TO BE UNREASONABLY WITHHELD	143
SECTION 18.25 AUTHORITY OF DIRECTOR	143
SECTION 18.26 INVALID PROVISION	143
SECTION 18.27 AMENDMENTS	143
SECTION 18.28 PAYMENT OF UTILITY CHARGES	143
SECTION 18.29 VENDING MACHINES	144
SECTION 18.30 PUBLIC ADDRESS SYSTEM	144
SECTION 18.31 CONTROL OF EMPLOYEES, AGENTS, REPRESENTATIVES, ETC. OF AIRLINE	144
SECTION 18.32 REMOVAL OF DISABLED AIRCRAFT	144
SECTION 18.33 LICENSES, FEES, AND PERMITS	145
SECTION 18.34 PRUDENT OPERATOR	145
SECTION 18.35 AIRPORT ACCESS LICENSE/PERMIT	145
SECTION 18.36 ENERGY CONSERVATION	145
SECTION 18.37 COMPLIANCE WITH PART 77, TITLE 14, CFR	146
SECTION 18.38 RESERVATIONS RE: AIRSPACE AND NOISE	146
SECTION 18.39 NATIONAL EMERGENCY	146
SECTION 18.40 AMERICANS WITH DISABILITIES ACT AND ASSOCIATED REGULATIONS	146
SECTION 18.41 SIGNS AND/OR WORKS OF ART	146
SECTION 18.42 TIME IS OF THE ESSENCE	147

EXHIBITS

EXHIBIT A1 AIRPORT ENVIRONS MAP	TAB A
EXHIBIT A2 AIRPORT SYSTEM COST CENTERS MAP	TAB A
EXHIBIT B1 PREMISES DRAWINGS	TAB B
EXHIBIT C1 5-YEAR CAPITAL IMPROVEMENT PROGRAM (CIP)	TAB C
EXHIBIT D1 CALCULATION OF TERMINAL COMPLEX RENTAL RATE	TAB D
EXHIBIT D2 CALCULATION OF GATE USE FEE	TAB D
EXHIBIT D3 CALCULATION OF LANDING FEE RATE	TAB D
EXHIBIT D4 CALCULATION OF PARKING AND ROADWAY NET REVENUE OR LOSS	TAB D
EXHIBIT D5 CALCULATION OF RELIEVER AIRPORT COST CENTER NET REVENUE OR LOSS	TAB D

Approved as to Form September 7, 2010

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EXHIBIT D6 CALCULATION OF COMMERCIAL DEVELOPMENT CENTER NET REVENUE OR LOSS	TAB D
EXHIBIT D7 CALCULATION OF WESTSIDE LANDING FEE RATE	TAB D
EXHIBIT D8 CALCULATION OF COMMON USE BAGGAGE HANDLING SYSTEM; COMMON USE TICKET COUNTERS; AND COMMON USE BAGGAGE SERVICE OFFICES	TAB D
EXHIBIT D9 CALCULATION OF COMMON USE GATES	TAB D
EXHIBIT D10 RATE STABILIZATION ACCOUNT FLOW OF FUNDS	TAB D
EXHIBIT D11 AMORTIZATION DUE FROM SIGNATORY AIRLINES ACCOUNT FLOW OF FUNDS	TAB D
EXHIBIT D12 AIRPORT SYSTEM MASTER INDENTURE FLOW OF FUNDS	TAB D
EXHIBIT E1 MAINTENANCE MATRIX	TAB E

Approved as to Form September 7, 2010

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AIRLINE – AIRPORT USE AND LEASE AGREEMENT

MCCARRAN INTERNATIONAL AIRPORT

This Airline – Airport Use and Lease Agreement, hereinafter the “Agreement,” made and entered into this _____ day of _____________, 2010 by and between the County of Clark, a political subdivision of the State of Nevada, hereinafter referred to as “AVIATION,” and ALLEGIANT AIR, LLC , a corporation organized and existing under the laws of the State of Nevada and authorized to do business in the State of Nevada, hereinafter referred to as “AIRLINE;”

W I T N E S S E T H:

WHEREAS, AVIATION is responsible for management and control of the Clark County Airport System, as defined under Clark County Code, Title 20, which includes McCarran International Airport, hereinafter the “Airport,” located in Las Vegas, Nevada, and has the right to lease portions of the Airport and to grant operating privileges thereon subject to the terms and conditions hereinafter set forth; and

WHEREAS, AIRLINE is a corporation primarily engaged in the business of providing Air Transportation of persons, property, cargo, or mail; and

WHEREAS, AIRLINE desires to lease certain space and have use of certain facilities, and acquire certain rights and privileges from AVIATION in connection with its use of the Airport and AVIATION is willing to lease and grant same to AIRLINE under the terms and conditions hereinafter stated; and

WHEREAS, AVIATION has the power and authority, as provided under Nevada Revised Statute (NRS) 496 to enter into this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and considerations herein contained, AVIATION and AIRLINE agree as follows.

Approved as to Form September 7, 2010

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ARTICLE 1 – DEFINITIONS

Section 1.01 Definitions

A. For the purposes of this Agreement, the words and phrases in this Section shall have the following meanings when used elsewhere in this Agreement. All other words and phrases that are not specifically defined herein are to have the meanings set forth in the Master Indenture.

1. “Advertising / Promotional Signage” shall mean any signage that is for the purpose of advertising AIRLINE, to highlight any destination or new air service, including any reference to a particular logo or other similar identification of any alliance, company and/or other entity in compliance with any type of marketing agreement or similar arrangement (whether written or verbal) held with AIRLINE, regardless if such signage is required for an operational use. AIRLINE will be allowed to advertise any new service into or from the Las Vegas market within its assigned ticket counter area only, upon prior approval from AVIATION, and for a period of two (2) weeks, however, such advertisement will not be allowed in the gate holdroom areas, unless otherwise approved by Director.

2. “Affiliate Carrier” or “Affiliate” shall mean any Air Transportation Company that provides air transportation services for AIRLINE, operates essentially under the same trade name as AIRLINE at the Airport, and uses essentially the same livery, airline code, and/or flight number designation as AIRLINE. AIRLINE and any Affiliate shall be counted as one entity for the purposes of computing any Joint Use Formula, MII formulas, and/or minimum utilization clauses under this Agreement. AIRLINE shall be responsible for submitting all payments, statistical reports, and other requirements under this Agreement on behalf of any Affiliate. An Affiliate Carrier will not be eligible to enter into a separate Signatory Agreement or other operating permit with AVIATION for operations at the Airport. The term Affiliate Carrier shall not include any carrier that is providing Air Transportation services on behalf of AIRLINE that is a code-share partner or marketing partner and that is flying such flights under such carrier’s own livery.

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3. “Air Transportation” shall mean the carriage of persons, property, cargo, or mail by aircraft.

4. “Air Transportation Company” shall mean a person, company or corporation providing Air Transportation by aircraft for the purpose of carriage of persons, cargo, mail, and/or or other property.

5. “Aircraft Arrivals” shall mean any aircraft arrivals at the Airport, including, without limitation, scheduled, charter, sightseeing, training, test, ferry, courtesy, and inspection flights, or any other flights, operated by an Air Transportation Company. Aircraft Arrivals shall not include any flights that immediately return to the Airport because of mechanical, meteorological, or other precautionary reason, or following required mechanical inspections or repairs performed at the Airport.

6. “Aircraft Gate” shall mean those aircraft loading positions within the Apron Areas, as shown on Exhibit A2 as they now exist or as they may hereinafter be added or modified.

7. “Airport” shall mean the presently existing McCarran International Airport and all property within its general environs at the date of execution, as shown in Exhibit A1 or as the same may be expanded or changed from time to time, also known as McCarran Airfield, as further defined in the Master Indenture.

8. “Airport System” shall mean all airports situated in Clark County, Nevada and their related facilities, appurtenances and improvements and any other aviation related facility, owned and operated by Clark County, Nevada, under the authority and direction of the Board of County Commissioners, and any other airports as may be owned and/or operated by AVIATION in the future, or as may be further defined in Title 20 Ordinance or the Master Indenture. The five (5) aviation facilities currently operated by AVIATION are: McCarran International Airport, North Las Vegas Airport, Henderson Executive Airport, Overton Municipal Airport, and Jean Airport. AIRLINE

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acknowledges that AVIATION is in the process of planning, designing, and/or constructing a heliport and a supplemental commercial service airport currently referred to as Ivanpah Airport, at locations that are outside of the current Airport System on properties either owned by County and/or under the control and administration of AVIATION. Such facilities shall be included in this definition of Airport System, unless specifically excluded under a specific portion of this Agreement.

9. “Airport System Cost Centers” shall mean the specific cost areas, for accounting purposes, to be used in accounting for Airport System revenues and expenses, including operational and maintenance expenses, and for calculating and adjusting rentals and fees described herein. Such Airport System Cost Centers, as shown in Exhibit A2 attached hereto and by reference made a part hereof, are more particularly described below:

a. “Airfield Area Cost Center” shall mean those areas on the Airport, as shown in Exhibit A2, as they now exist or as they may hereafter be modified, changed, or developed, that provide for the landing, takeoff, taxiing, parking (other than in the Apron Area) or other operations of aircraft. The Airfield Area includes the runways, taxiways, approach and clear zones, safety areas, infield areas, landing and navigational aids, ramp areas (other than Apron Area), and other facilities and land areas necessary for navigational purposes, including but not limited to, safety zones, runway protection zones, and Noise Protection Zones, at the Airport required by or related to aircraft operations.

i. “Ramp Area” shall mean the area from the edge of the Apron Area up to the edge of the Airfield Area, including any FAA controlled taxiway and/or taxilane.

ii. “Westside Cost Center” shall mean the western most portion of the Airport that includes but is not limited to land leased to the Fixed Base Operators (FBOs), private aviation tenants, and/or corporate hangar developments.

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b. “Administrative Cost Center” shall mean all direct, indirect and general administrative operating and maintenance expenses for all administrative functions of the Airport System, and includes those land areas as further shown on Exhibit A2. The Administrative Cost Center shall be re-allocated to the direct Airport System Cost Centers based on their proportionate share of all other direct and indirect Operating and Maintenance Expenses.

c. “Apron Area Cost Center” shall mean the areas of the Airport that extends at least one hundred (100) feet from the airside of the Level 1 exterior face of the Terminal Complex and concourse / gate areas, or to the nearest vehicular driving lanes, that are used by vehicle traffic to navigate on the airside of the Airport (whichever is greater). Apron Area Cost Center shall also include all “Remain Over Night” (RON) aircraft parking areas, as shown in Exhibit A2, as it now exists or as they may hereafter be modified, changed, or developed, that are dedicated to the parking, servicing, and ground handling of aircraft at the Terminal Complex, as well as all uncovered ramp storage locations.

i. “Fuel Facilities” shall mean any fuel farms and associated improvements thereto, including but not limited to fuel storage tanks, fuel hydrant systems, off-load racks, and any other facility and/or improvement that is required for the operation of AVIATION’s fuel system at the Airport. Any net gains or losses for any Fiscal Year associated with the Fuel Facilities shall be allocated to the Airfield Cost Center.

d. “Commercial Development Cost Center” shall mean those portions of the Airport that have commercial facilities at the Airport, as further defined below, including the facilities, installations, and improvements thereon as they now exist or as they may hereafter be modified, changed, or developed, and any other interest owned by AVIATION in real property with regard to the Airport.

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The Commercial Development Cost Center shall include the following sub-cost centers:

i. “Cargo Ramp” and/or “GSE” shall mean all areas of the Airport for the purpose of cargo and/or GSE facilities.

ii. “Government Facilities” shall mean any facility owned and/or leased by the Federal government that is not in the Terminal Complex, including but not limited to the FAA air traffic control tower and TRACON.

iii. “Private Tenant Land” shall mean any land areas, including areas both on the Airport proper and land adjacent to the Airport and/or that is owned by County and/or controlled by AVIATION, that is leased to commercial non-aviation users.

e. “Consolidated Car Rental Facility Cost Center” or “CCRF” shall mean the area constructed by AVIATION and used by multiple car rental companies to conduct business. Any net gains or losses, other than land rental charges, for any Fiscal Year associated with the CCRF Cost Center shall be excluded from Airport System Revenues or Airport System Expenses. Any net gains shall be deposited into the Capital Improvement Fund and any net losses shall be paid from the Capital Improvement Fund.

f. “Heliport Cost Center” shall mean all direct, indirect and general operating and maintenance expenses for the development, construction, maintenance, and operation of a regional heliport facility to be located off of McCarran International Airport, on property owned by County and that is under the control and administration of AVIATION. This shall include any reasonable costs associated with the relocation that may be incurred at the discretion of Director, with the concurrence of the Clark County Board of Commissioners, of any of the existing helicopter operating companies from the Airport to the new regional heliport facility. Prior to the Date of Beneficial Occupancy, any planning studies or other Airport System Expenses incurred as a result of planning for the Regional Heliport facility shall be charged to the Capital Improvement Fund. After DBO, any net gains or losses for any Fiscal Year associated with the Heliport Cost Center shall be allocated to the Airfield Cost Center.

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g. “Ivanpah Cost Center” shall mean all direct, indirect and general operating and maintenance expenses for the development, construction, maintenance and operation of a new commercial service airport, to be located in the Ivanpah Valley, currently being referred to as Ivanpah Airport, or as it may be referred to in the future, that is owned by County and that is under the control and administration of AVIATION. This shall include any reasonable costs associated with the relocation that may be incurred at the discretion of Director, with the concurrence of the Board of County Commission, of any of the existing Air Transportation Companies from the Airport to the new Ivanpah Airport. Any planning studies or other Airport System Expenses incurred as a result of planning for the Ivanpah Airport shall be charged to the Capital Improvement Fund created by the Master Indenture.

h. “Parking and Roadways Cost Center” shall mean the access roads, public and employee automobile parking areas, and other areas surrounding the Terminal Complex as they exist on the landside portion of the Airport, as shown in Exhibit A2, as such areas now exist or as they may hereafter be modified, changed, or developed, including rental car concession fees.

i. “Reliever Airports Cost Center” shall mean the system of general aviation airports, other than the Airport, Regional Heliport, or Ivanpah, owned by County and under the control and administration of AVIATION, as such system now exists or as it may hereafter be modified, changed, or developed. AVIATION’s Reliever Airports are currently North Las Vegas Airport, Jean Airport, Overton Airport, and Henderson Executive Airport.

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j. “Terminal Complex Cost Center” shall mean all terminal buildings serving the Air Transportation Companies, including Terminal 1, Terminal 2, and Terminal 3, together with the associated concourses, in-line baggage handling system facilities, covered ramp storage, moving trams, and satellites, as shown in Exhibit A2, as they now exist or as they may hereafter be reconstructed, modified, changed, or developed.

10. “Airport System Expense” shall mean all costs and expenses incidental to, necessary for, or arising out of the operation of the Airport System, including but not limited to Operation and Maintenance Expenses, Annual Bond Debt Service and Debt Service Coverage Requirement on Airport System Revenue Bonds, repayment of loans, and the cost of defending, settling, or satisfying the results of any litigation or threatened litigation directly arising out of the operation and management of the Airport System, or any aspect thereof.

11. “Airport System Purpose” shall mean any action or undertaking by AVIATION reasonably relating to the development and preservation of the Airport System for air commerce.

12. “Airport System Revenue” shall mean Gross Revenues as defined in the Master Indenture, derived by AVIATION from the operation of the Airport System.

13. “Annual Bond Debt Service” shall mean Aggregate Debt Service Requirement as defined in the Master Indenture.

14. “Annual Budget” shall mean the budget submitted to the Airline Airport Affairs Committee (AAAC) for each Fiscal Year for the purpose of establishing the rates and charges.

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15. “Aviation Support Provider” shall mean a person, company or corporation that AIRLINE may contract with for the purpose of providing aircraft services, ground handling, ramp services, passenger services, ticketing, baggage handling and/or delivery, aircraft cleaning services, maintenance services, fueling services, screening/security services, catering, provisioning (including, but not limited to, supplying of food, snacks, and/or beverages to AIRLINE stores and/or supplies), or other similar services to Air Transportation Companies.

16. “Baggage Handling System” or “BHS” shall mean the baggage system, including all associated components, hardware, software, and/or other associated equipment and facilities that is required to transport baggage from any ticketing, skycap, and/or other similar passenger check-in location, either on or off Airport property, that is owned, operated and maintained by AVIATION and provided to AIRLINE for the purpose of transporting baggage from such areas to the TSA for screening purposes and then to a designated baggage make-up area that is assigned for use by AIRLINE either as Preferential Use Space or as Common Use Space.

17. “Bonds” shall mean any bond or bonds issued in accordance with the provisions of the Master Indenture.

18. “Capital Improvement” shall mean any single item having a net cost in excess of one million dollars ($1,000,000), plus the inflationary index as allowed in Section 18.14 of this Agreement, and a useful life in excess of five (5) years, acquired, purchased, or constructed to improve, maintain, preserve, or develop the Airport System. Capital Improvements include but shall not be limited to:

a. The acquisition of land or easements.

b. The purchase of machinery, equipment, or rolling stock.

c. The planning, engineering, design, and construction of new facilities.

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d. The staffing reasonably required to provide support services that are necessary to accommodate growth demand.

19. “Catering” shall mean the acquisition and/or supplying of food, snacks, or beverages to AIRLINE’s aircraft through a vendor authorized to do business at the Airport. This shall not include any Provisioning activities, as further defined in Section 1.01(A)(48) of this Agreement and shall be subject to any applicable fees for such activity.

20. “County” shall mean Clark County, Nevada, as governed by the Clark County Board of Commissioners.

21. “Common Use Space” shall mean the areas specifically designated by AVIATION in the Terminal Complex for the purpose of allowing multiple Air Transportation Companies to provide air transportation services to the traveling public. Such areas shall be assigned to AIRLINE by AVIATION for specific portions of the day to accommodate AIRLINE’s flight operations. Common Use Space is more specifically defined as follows:

a. “Common Use Baggage Make-Up” shall include all carrousels and/or piers that are located in one of the Airport screening nodes, the surrounding baggage make-up space within the screening node, and the surrounding areas available for tug and baggage cart and/or baggage container staging.

b. “Common Use Baggage Service Office” or “BSO” shall include any BSO that is shared by multiple Air Transportation Companies for the purpose of providing customer services relating to baggage service.

c. “Common Use Gates” shall include, but is not limited to, holdrooms, gate apron areas designating the aircraft parking envelope and ramp equipment staging, and jetbridges.

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d. “Common Use Ticket Counter” shall include, but is not limited to ticket counter positions and associated equipment, ticket queuing space, skycap check-in positions, and skycap queuing.

e. Other areas as may be designated by Director during the Term of this Agreement.

22. “Connecting Passenger” shall mean any passenger who boards an aircraft directly after deplaning from another flight at the Airport, as further defined in the Federal Register Notice, dated September 18, 2002, Volume 67, Number 181, and effective October 18, 2002. On-line single carrier connections involve flights of the same carrier, while interline or off-line connections involve flights of two different carriers.

23. “Date of Beneficial Occupancy” or “DBO” shall mean that date upon which a Capital Improvement is so substantially complete that it is operationally available to user and public without hazard or undue inconvenience, but in no event later than thirty (30) days after AVIATION notifies user that the Capital Improvement has been certified by the project architect/engineer as available for public use and/or user occupancy, including any Temporary Certificate of Occupancy (TCO) that may be issued by an authorized agency.

24. “Debt Service Coverage Requirement” shall mean twenty-five percent (25%) of all annual debt service payments associated with senior lien debt issued by AVIATION plus ten percent (10%) of all annual debt service payments associated with subordinate lien debt issued by AVIATION. Debt Service Coverage Requirements shall not include any PFC debt, any general obligation debt, or any Jet A Fuel Tax debt issued by AVIATION.

25. “Department of Aviation” or “DOA” shall mean the department that has been designated by the Board of County Commissioners, through Title 20 Ordinance, to provide oversight and management of the airports within the Airport System, which includes McCarran International Airport. It is understood by both parties that the terms “Department of Aviation” and “AVIATION” may be used interchangeably through this Agreement and during the course of business operations with AIRLINE and other tenants and/or users of the Airport.

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26. “Director” shall mean AVIATION’s Director of Aviation, or designee. The Director may take such actions under this Agreement, as designated, empowered, or otherwise authorized by the Board of County Commissioners through Clark County Code, Title 20 Ordinance or other lawful action designated as such by County, and shall include such person or persons as may, from time to time, be authorized to act for the Director with respect to any or all matters pertaining to this Agreement.

27. “DOA Directed Relocation” or “DDR” shall refer to an event when AVIATION’s Ramp Control staff requires AIRLINE to push its aircraft off of an aircraft gate to a RON location or other aircraft holding position.

28. “Environmental Laws” shall mean any one or all of the applicable laws and/or regulations of the Environmental Protection Agency or other federal, state, or local agencies, including, but not limited to the following as the same are amended from time to time:

a. Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C., Section 9601 et seq.);

b. Resource Conservation and Recovery Act (42 U.S.C., Section 6941 et seq.);

c. Toxic Substances Control Act (15 U.S.C., Section 2601 et seq.);

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d. Safe Drinking Water Act (42 U.S.C., Section 300h et seq.);

e. Clean Water Act (33 U.S.C., Section 1251 et seq.);

f. Clean Air Act (42 U.S.C., Section 7401 et seq.);

g. Sanitation (Nevada Revised Statutes, Chapter 444);

h. Nevada Water Pollution Control Law (Nevada Revised Statutes 445.131 through 445.399);

i. Hazardous Materials, Including Underground Storage Tank Regulations (Nevada Revised Statutes, Chapter 459);

j. Occupational Safety and Health Administration (OSHA) (29 CFR, Sections 1910 and 1926);

and regulations promulgated thereunder and any other applicable laws, regulations and ordinances (whether enacted by the federal, state, or local government) now in effect or hereinafter enacted that deal with the regulation or protection of the environment, including, but not limited to ambient air procedures and records detailing chlorofluorocarbons (CFC), ambient air, ground water, surface water and land use, including sub-strata land.

29. “Exclusive Use Space” shall mean the space leased to AIRLINE, by AVIATION, for use by only AIRLINE, under the terms and conditions of this Agreement, as more fully set forth in Exhibit B1, or as the same may be amended from time to time. Such areas are more clearly defined to include, but not be limited to, non-public areas such as airline ticket offices (behind ticket counters), and airline operations areas.

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30. “FAA” shall mean the Federal Aviation Administration of the U.S. Government or any federal agencies succeeding to its jurisdiction.

31. “Federal Security Space” shall mean all space at the Airport dedicated to the Transportation Security Administration (TSA) to oversee aviation security and/or screening functions and/or operations, as mandated by the Federal government and without reimbursement, but shall not include any administrative space used by TSA at the Airport.

32. “Fiscal Year” shall mean the twelve (12) months commencing on July 1 st of any calendar year and ending on June 30th of the next succeeding calendar year.

33. “Hazardous Material” shall mean the definitions of hazardous substance, hazardous material, toxic substance, regulated substance or solid waste as defined within the following:

a. Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C., Section 9601 et seq.);

b. Resource Conservation and Recovery Act (42 U.S.C., Section 6901 et seq.);

c. Hazardous Materials Transportation Act (49 U.S.C, Section 1801 et seq.);

and all present or future regulations promulgated thereto, as well as:

d. Department of Transportation Table (49 CFR, Section 172.101 and amendments thereto);

e. Environmental Protection Agency (40 CFR, Part 302 and amendments thereto);

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f. Transportation of Hazardous Materials by Motor Vehicle (Nevada Revised Statutes 459.700 through 459.780);

and all present or future regulations promulgated thereto. This definition shall also include all substances, materials, and wastes that are, or that become regulated under, or that are or that become classified as hazardous or toxic under any Environmental Law, whether such are federal, state, or local;

g. Sanitation (Nevada Revised Statutes, Chapter 444);

h. Nevada Water Pollution Control Law (Nevada Revised Statutes 445.131 through 445.399);

i. Hazardous Materials, Including Underground Storage Tank Regulations (Nevada Revised Statutes, Chapter 459);

j. Occupational Safety and Health Administration (OSHA) (29 CFR, Sections 1910 and 1926);

and regulations promulgated thereunder and any other laws, regulations and ordinances (whether enacted by the federal, state, or local government) now in effect or hereinafter enacted that deal with the regulation or protection of the environment, including, but not limited to ambient air procedures and records detailing chlorofluorocarbons (CFC), ambient air, ground water, surface water and land use, including sub-strata land.

34. “Interest” shall mean any amount assessed against any payment required to be made to AVIATION under this Agreement, including Passenger Facility Charges in accordance with all applicable federal regulations, for failure to pay timely as specified in this Agreement.

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35. “Joint Use Formula” shall mean the formula to be used to pro-rate ninety percent (90%) of the specified charge, referenced in Section 6.02(B)(1) of this Agreement, according to the ratio of the number of enplaning passengers for each Air Transportation Company operating in the Terminal Complex (during the most recent month for which such information is available) to the total number of enplaning passengers of all Air Transportation Companies during that same month. The remaining ten percent (10%) will be prorated over a number equal to the number of Signatory Airlines, plus one (1). Joint Use Formula may also mean such other formula as may be agreed upon by a majority of Signatory Airlines using the service or space and approved by County’s Board of County Commissioners.

36. “Joint Use Space” shall mean the Terminal Complex space used jointly by all Air Transportation Companies including, but not limited to, Federal Security Space, security queuing areas, wheelchair staging areas, baggage claim areas, travel document verification areas, and other areas as may be identified and modified from time to time. The Joint Use Space is more particularly set forth in Exhibit B1, or as the same may be amended from time to time, and shall be applicable to each Air Transportation Company operating at the Airport.

37. “Master Indenture” shall mean the Master Indenture of Trust, dated May 1, 2003, and all amendments and supplements thereto, and series indentures thereunder, whether made before or after the effective date of this Agreement. The term “Master Indenture” shall also include any ordinance, resolutions, or other instrument related to bond issues currently outstanding at the time of this Agreement, or as may be modified from time to time, and to bond issues that may be issued in the future, authorizing the issuance of bonds or other securities or obligations (including without limitation, interest rate swap and other notional amounts contracts related to bonds or other borrowings) which are payable from or secured by all other or any part of the Airport System Revenue.

38. “Maximum Certificated Gross Landing Weight” or “MCGLW” shall mean the maximum certificated weight, in one thousand (1,000) pound units, that each aircraft operated by AIRLINE is certificated by the FAA identified in FAA Advisory Circular 150/5300-13, as may be modified from time to time or as listed in the FAA Aircraft Character Database as it is posted on the FAA website ( www.faa.gov ), whichever is greater, governing that aircraft type or as certificated for that particular aircraft.

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39. “Non-Revenue Passenger” shall mean all passengers that are traveling free or pursuant to token charges, as further defined in the Federal Register Notice, dated September 18, 2002, Volume 67, Number 181, and effective October 18, 2002, and shall be reported to AVIATION, as required under all applicable Department of Transportation reporting requirements for commercial air transportation.

40. “Non-Signatory Airline” shall mean any Air Transportation Company using the Airport which is not a Signatory Airline, as defined in Section 1.01(A)(53) of this Agreement.

41. “Noise Protection Zone” shall mean those areas or parcels of land acquired by AVIATION for noise attenuation purposes at Airport System airports.

42. “Operational Signage” shall mean any signage that is required for the purpose of directing passengers (i.e. enter, exit, ticketing position number, etc.). AVIATION will provide such Operational Signage. Operational Signage shall also mean any signage that is required for the purpose of identification or clarification of an AIRLINE policy (i.e. excess baggage charges, carry-on baggage policy, etc.), which shall be provided by AIRLINE, shall meet AVIATION’s sign standards, and must have prior approval from Director.

43. “Operating Directives” shall mean the lawful, reasonable, and nondiscriminatory Operating Directives, effective June 1, 2001, or any successor documents, as may be amended, modified, or supplemented from time to time, not inconsistent with the terms of this Agreement or materially adversely affecting AIRLINE’s rights or obligations hereunder, and issued by the Director as authorized by the Title 20 Ordinance, for the orderly use of the Airport System by both Air Transportation Companies and other users of the Airport System, including, but not limited to, the Airport Environmental Directive, Airport Environmental Handbook, and Airport Tenant Improvement Manual. Updates can be found on AVIATION’s website ( www.mccarran.com ).

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44. “Operation and Maintenance Expenses” shall mean all reasonable and necessary current expenses of the Airport System, that are incurred by AVIATION, including capital outlays which do not meet the definition of a Capital Improvement under Section 1.01(18), paid or accrued, for operating, maintaining, and repairing the Airport System, as more specifically defined in the Master Indenture.

45. “Passenger Facility Charge” shall mean the passenger fee imposed by AVIATION and collected by AIRLINE, under 49 U.S.C. section 40117 et seq., 14 CFR Section 158, et seq. as may be modified from time to time, for each ticket sold for transportation of a passenger enplaned on an aircraft at AVIATION’s commercial service airport, constituting trust funds held for the beneficial interest of AVIATION, as authorized by the FAA under 49 U.S.C. section 40117 et seq., 14 CFR Section 158, et seq., as may be modified from time to time.

46. “Preferential Use Space” shall mean the non-exclusive space in the Terminal Complex assigned by AVIATION to AIRLINE for which AIRLINE has preferential, but not exclusive use rights, for use in common with others, and that is more fully set forth in Exhibit B1, attached hereto or as the same may be amended from time to time, and by reference made a part hereof. Such areas may include, but shall not be limited to, passenger check-in areas (excluding airline ticket offices), skycap podiums, aircraft gates and their associated passenger loading bridges, apron area, holdroom, and related equipment assignments.

47. “Premises” shall mean all Exclusive Use Space, Preferential Use Space, Common Use Space, Joint Use Space, or any other areas of the Airport, as assigned to AIRLINE by the Director, more fully described in Exhibit B1, attached hereto or as the same may be amended from time to time, and by reference made a part hereof. Any subsequent amendments to the Premises will be done in accordance with Section 1.01(A)(54) and Section 4.01(A)(1) of this Agreement.

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48. “Provisioning” shall mean the supplying of food, snacks, or beverages to AIRLINE’s aircraft through its own AIRLINE stores and/or supplies. This shall not include any Catering activities, as defined in Section 1.01(A)(19) of this Agreement. However, if any portion of these supplies are brought to the Airport by a third-party vendor and then transferred to an aircraft, such supplies shall be subject to the applicable catering fees.

49. “Public Areas” shall mean those Terminal Complex areas not leased on an exclusive, preferential, common use, or joint use basis, or otherwise, to any person, company, or corporation and which are open to the general public.

50. “Rented Space” shall mean the space rented to Signatory Airlines on an Exclusive, Preferential, or Joint Use basis, or as the same may be amended from time to time.

51. “Revenue Passenger” shall mean passengers that pay for carriage on AIRLINE, as further defined in the Federal Register Notice, dated September 18, 2002, Volume 67, Number 181, and effective October 18, 2002, and shall be reported to AVIATION as required under all applicable Department of Transportation reporting requirements for commercial Air Transportation.

52. “Rules and Regulations” shall mean those lawful, reasonable, and nondiscriminatory Rules and Regulations approved by the Board of County Commissioners on May 1, 2001 and effective June 1, 2001, or any successor document, as may be amended, modified, or supplemented from time to time, (not inconsistent with the terms of this Agreement or materially adversely affecting AIRLINE’s rights or obligations hereunder), promulgated by County and issued by the Director for the orderly use of the Airport System by Air Transportation Companies and other users of the Airport System. Most current update is on the McCarran website ( www.mccarran.com ).

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53. “Signatory Airline” shall mean any Air Transportation Company that has executed and delivered to AVIATION this Agreement covering the use and occupancy of facilities at the Airport, and shall therefore be governed by such Agreement. Such Air Transportation Company must be able to meet specific requirements and/or minimum standards for Signatory Airlines status as may be established by Director. Once AIRLINE has been offered Signatory Airline status under this Agreement, AIRLINE must execute such Agreement within ninety (90) days of presentation of this Agreement to AIRLINE by Director. In the event such Agreement is not executed within this time period, or any extension given by Director in writing, AVIATION is no longer obligated to offer Signatory Airline status to AIRLINE during the term of this Agreement.

54. “Space Use Letter” shall mean a letter issued by the Director, as provided for under Section 1.01(A)(47) and Section 4.01(A)(1) of this Agreement, mutually agreed by both parties, amending the Premises and related exhibits. Such Space Use Letter may include more specific terms for use of space assigned under each Space Use Letter.

55. “Special Facilities” shall mean structures, hangars, aircraft overhaul, maintenance, or repair shops, heliports, hotels, retail and commercial facilities, storage facilities, garages, other facilities, and appurtenances, being a part of and located on the Airport System, the cost of the construction or other acquisition of which Special Facilities is financed with the proceeds of Special Facilities Bonds issued pursuant to the Master Indenture or other sources of financing.

56. “Title 20 Ordinance” shall mean the Clark County Code, Title 20, as may be amended from time to time and as approved by the Board of County Commissioners.

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57. “Through Passenger” shall mean any passenger who does not disembark the aircraft upon arrival at the particular stop of Las Vegas, Nevada while en route to the final destination other than Las Vegas, Nevada, and shall be reported to AVIATION as required under all applicable Department of Transportation reporting requirements for commercial Air Transportation.

58. “Total Landed Weight” shall mean the sum of the Maximum Certificated Gross Landing Weight for all Signatory Airline aircraft arrivals over a stated period of time. Said sum shall be rounded up to the nearest one thousand (1,000) pound unit for all landing fee computations.

59. “TSA” shall mean the Transportation Security Administration of the U.S. Government or any federal agencies succeeding to its jurisdiction.

Section 1.02 Cross-References

All references to articles, sections, and exhibits in this Agreement pertain to material in this Agreement, unless specifically noted otherwise.

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ARTICLE 2 –TERM

Section 2.01 Term

A. This Agreement shall become effective at 12:01 a.m. on July 1, 2010, and continue for five (5) years until June 30, 2015 (the “Initial Term”), subject to prior termination as provided herein. AVIATION and a majority of Signatory Airlines, based on total market share, may agree to extend the Initial Term for a period of two (2) years, until June 30, 2017 (the “Extended Term”), and such extension shall be binding on all Signatory Airlines.

B. No later than twelve (12) months prior to the expiration of the Term of this Agreement, whether the Initial Term (if not extended under Section 2.01(A) above) or the Extended Term, the parties hereby agree to commence negotiation of a new agreement. If upon the expiration of the Term a new agreement has not been finalized, then AVIATION may, at Director’s sole discretion, continue this Agreement in holdover, as provided in Section 18.23 of this Agreement, and in that case the parties shall continue negotiations for a new agreement. Such holdover period may continue until a new agreement becomes effective. However, at any time, after a six (6) month period under holdover, AVIATION may, at the Director’s sole discretion, terminate this Agreement upon thirty (30) days advance written notice to all Signatory Airlines, and in that case all Air Transportation Companies, including AIRLINE, will operate under Clark County Code, Title 20 Ordinance and AIRLINE shall forego all rights under this Agreement.

C. Upon the natural expiration or other termination of this Agreement, howsoever caused, all such Premises and improvements thereon, shall be automatically returned to AVIATION for reassignment under a new agreement, provided that such reassignment shall be consistent with Section 4.03 of this Agreement.

D. If at the natural expiration and/or termination of this Agreement, including the Extended Term (if exercised by mutual agreement as required above), AVIATION offers to continue to lease all or any portion of the Premises covered by this Agreement and if AIRLINE declines, it shall be deemed as a voluntary abandonment of such declined space and AVIATION shall not be responsible for any unamortized costs or other obligations as to such declined space, as further described in Section 4.03 of this Agreement.

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Section 2.02 Termination of Existing Agreements

A. Coincident with the effective date of this Agreement, the existing lease or permit covering the use or occupancy of facilities in the Airfield Area, Apron Area, or Terminal Complex, with AIRLINE shall be automatically terminated, provided that the termination of such lease shall not be construed as a waiver, relinquishment, or release of any claims, damages, liability, rights of actions, or causes of action that either of the parties hereto may have against the other under such existing lease and that have accrued before the effective date of this Agreement.

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ARTICLE 3 - RIGHTS AND SPECIFIC PRIVILEGES

Section 3.01 Use of the Airport

A. The parties agree that the purpose of this Agreement is to enable AIRLINE to provide Air Transportation services using Airport facilities on the east side of the Airport. Consistent with this purpose, AIRLINE shall have for itself and for its employees, passengers, guests, patrons, and invitees the right to the use, in common with other duly authorized users of the Airport and appurtenances, including all facilities, improvements, equipment, and services that have been or may hereafter be provided for common use at or in connection with the Airport, subject to the terms and conditions of this Agreement and further subject to the lawful ordinances of County.

Section 3.02 Specific Rights and Responsibilities of AIRLINE

A. Consistent with the purpose set forth in Section 3.01, and subject to lawful ordinances of County, AIRLINE shall have the rights and responsibilities, in addition to all rights and responsibilities elsewhere granted in this Agreement, to use the designated Airport areas for the following purposes:

1. The operation of an Air Transportation Company for the sole purpose of carriage of persons, property, cargo or mail, by aircraft, including performing all activities reasonably necessary to such operation for itself and its Affiliates.

2. The landing, taking off, flying over, taxiing, pushing, towing, loading, unloading, delivering fuel to aircraft, repairing, maintaining, conditioning, servicing, parking, storing, and testing of aircraft or other equipment of or operated by AIRLINE or other carriers, including the right to provide or handle all or part of the operations or services of such other Air Transportation Companies. For operations handled by AIRLINE on behalf of other Air Transportation Companies or service provided to other Air Transportation Companies, AIRLINE shall pay to AVIATION a nondiscriminatory concession fee, as established by the Director, and as further provided for in Section 3.04 of this Agreement, excepting, however, the handling of AIRLINE’s Affiliate Carrier(s), as defined in Section 1.01(A)(2) of this Agreement.

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3. The sale of tickets, documentation of shipments, handling of reservations, and the loading and unloading of persons, property, cargo or mail at the Airport by such motor vehicles or other means of conveyance as AIRLINE may desire to use in the operation of its Air Transportation business.

4. Training at the Airport of persons and testing of aircraft and other equipment, such training and testing to be limited to operations that are incidental to AIRLINE’s Air Transportation business at the Airport. Such training outside of the Premises, shall be undertaken by AIRLINE only with the prior written approval of the Director, and to the extent permitted by, and subject to, the conditions of the Rules and Regulations and Operating Directives of AVIATION.

5. The purchase of AIRLINE’s requirements of personal property, including fuel, lubricants, food, beverage, and other passenger supplies, and any other materials, supplies, and provisions used by AIRLINE from its own stores, or from any person or company of AIRLINE’s choice, subject to Section 3.04(D) of this Agreement. Nothing herein shall restrict AVIATION from levying any applicable nondiscriminatory fees to any person or company for conducting business activities at the Airport, including AIRLINE if it provides such services to another Air Transportation Company other than to an Affiliate Carrier. AIRLINE shall obtain services from vendors and/or Aviation Support Providers in accordance with Section 3.05 of this Agreement. Airline may not provide Catering or Provisioning to any Air Transportation Company that it ground handles or that is not an Affiliate.

6. The purchase of services from any person or company, having prior written authorization by AVIATION under Title 20 Ordinance to do business at the Airport. It is AVIATION’s intent to grant the right to provide aviation support services to a limited number of operators as may be reasonably determined by AVIATION. Nothing herein will restrict AVIATION from levying a nondiscriminatory concession fee on any person or company for operating a service business at the Airport.

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7. The sale or other disposal of AIRLINE’s aircraft, engines, accessories, and other equipment, and materials or supplies, provided that such items are not otherwise available on the Airport, except other equipment, materials, parts or supplies provided under the Mutual Assistance Ground Service Agreement (MAGSA), and such right shall not be construed as authorizing the conduct of a separate regular business by AIRLINE, but as permitting AIRLINE to perform only such functions for itself as are incidental to the conduct or operation of its Air Transportation business.

8. The servicing by AIRLINE, or by its suppliers of materials, or furnishers of services, subject to Section 3.02(A)(6) and Section 3.04, of aircraft and other equipment operated by AIRLINE, on Exclusive Use Space, Preferential Use Space, Common Use Space, or at assigned aircraft parking positions or other locations designated by the Director.

9. The installation and operation of identifying signs, posters, and graphics only within the AIRLINE’s non-public Exclusive Use Space, subject to the prior written approval of the Director.

10. The installation, maintenance and operation of radio, meteorological, and aerial navigation equipment and facilities (excluding wireless equipment, systems, or similar technologies) at suitable locations on the Airport as may be necessary or convenient in the opinion of the AIRLINE, for its operations provided that:

a. The location of such equipment and facilities shall be subject to the prior written approval of the Director; and

b. All such installations must be tied into AVIATION’s backbone infrastructure and AIRLINE shall be required to identify requirements for and install and/or tie into any emergency power system.

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c. The use and location of such equipment and facilities shall not conflict with other similar equipment and facilities on the Airport; and

d. The use and location of such equipment and facilities on the Airport, if not within the Premises, shall be subject to payment of such nondiscriminatory reasonable fee or charge as may be lawfully established by AVIATION for such use of the Airport by AIRLINE and shall be added to this Agreement by Space Use Letter.

Any such installation shall be done in accordance with the Tenant Improvement Manual, AIRLINE shall be responsible to remove such installations, as may be required by the Director, and restore the area to its original condition, reasonable wear and tear excepted, at its sole cost and expense. All such locations shall be assigned to AIRLINE through the issuance of a Space Use Letter.

11. AIRLINE shall change over to AVIATION’s backbone infrastructure, any existing proprietary computer data lines, phones, telecommunications equipment, or similar infrastructure within twelve (12) months from the Effective Date of this Agreement, or such other reasonable timeframe established by the Director, in writing to AIRLINE, unless otherwise approved in writing by the Director. AVIATION reserves the right to charge AIRLINE for use of AVIATION’s infrastructure if, due to the circumstances associated with such use, it is determined to be in AVIATION’s best interest to do so. Such charges shall be in accordance with AVIATION’s policy for use of AVIATION’s communication fiber. However, in the event that AIRLINE has a specific requirement that can’t be met by AVIATION through its back-bone infrastructure within a reasonable timeframe, AVIATION may, at the discretion of the Director, allow AIRLINE to proceed with the installation, maintenance and operation of AIRLINE’s computer data lines, telephone communications equipment and associated conduits, telephone and/or wireless communications, switchgear, other wireless technologies or similar technologies, and/or support computers at suitable locations on the Airport, as may be necessary for AIRLINE’s operations; provided that:

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a. The location of such equipment shall be subject to the prior written approval of the Director;

b. Any cable installation that may be required by AIRLINE to operate such equipment will be without cost to AVIATION, either directly or as a reimbursable cost under NRS 496;

c. Ownership of any cable installation completed under this provision shall be immediately transferred to AVIATION and shall become part of AVIATION’s backbone system at no cost to AVIATION, including under the relocation provisions contained in Section 4.03 of this Agreement. AVIATION shall assume responsibility for maintenance of such cabling.

d. The use and location of such equipment shall not interfere with the use of other similar equipment on the Airport; and

e. The use and location of such equipment on the Airport shall be subject to payment of such nondiscriminatory reasonable fee or charge as may be lawfully established by AVIATION for such use of the Airport by AIRLINE, it being expressly understood that there shall be no fee or charge for the installation, maintenance, and operation of associated conduits or other communication lines.

Any such installation shall be done in accordance with the Tenant Improvement Manual. AIRLINE shall be responsible to remove such installations, as may be required by the Director, and restore the area to its original condition, reasonable wear and tear excepted, at its sole cost and expense. If such installations are found to have been completed, without prior written approval from the Director, AVIATION has the right to have AIRLINE remove such improvements within ten (10) days of notice, or AVIATION may remove and bill AIRLINE for such removal costs, including restoration work, at cost plus twenty percent (20%) administrative fee. AVIATION also reserves the right to take further actions as may be necessary if such unauthorized installation has had any type of negative impact to any warranty, functionality, or similar action as a result of AIRLINE’s unauthorized installation.

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12. The access to and use of AVIATION’s telecommunication system, information system, telephone switchgear, and cabling excluding wireless technologies. AVIATION reserves the right to assess a nondiscriminatory reasonable fee or charge as may lawfully be established by AVIATION.

13. The use of AIRLINE’s space by authorized vendors and/or service providers for their operational needs, and the operation of passenger clubs, lounges, or VIP rooms within AIRLINE’s Exclusive Use Space, subject to the approval of the Director and provided that such right shall not be construed as authorizing the conduct of a separate regular business by AIRLINE, but as permitting AIRLINE to perform only such functions as are incidental to the conduct or operation of its Air Transportation business.

14. Airport Security Badges: AIRLINE shall be responsible for obtaining and providing any Transportation Security Administration (TSA) required and AVIATION administered criminal history record checks, security threat assessments, badging, vehicle decals, and/or other activities required to ensure their agents, employees, vendors, suppliers, service providers, directors, or officers are in compliance with the Airport Security Program, Title 20 Ordinance, TSA Regulations 49 CFR Parts 1500, 1520, 1540, 1542, 1544, 1546, 1548, and 1550, as promulgated, and the terms and conditions of this Agreement, as each may be modified from time to time.

Section 3.03 Limitations on Use by AIRLINE

A. In connection with the exercise of its rights under this Agreement, AIRLINE shall have the following limitations:

1. AIRLINE shall not add, change, remove, or otherwise modify, or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to add, change, remove, or otherwise modify anything at or about the Airport that may interfere with or modify, reduce, or similarly decrease the effectiveness or accessibility of the passenger processing areas, the operations of the Airport, drainage and sewage system, electrical system, heating, ventilation and air conditioning (HVAC) system, fire protection system, sprinkler system, alarm system, fire hydrants and hoses, or other similar systems if any, installed or located on or within the Airport.

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2. AIRLINE shall make all reasonable efforts to staff and manage their ticketing and queuing operations within the areas identified by AVIATION in an effort to reduce queuing lines that extend beyond the queuing areas assigned by AVIATION for AIRLINE’s use. AIRLINE shall make all reasonable efforts to avoid implementing staffing plans, modify queuing areas, or take similar actions that may result in or cause any negative impacts to the operation of the Airport. AIRLINE may be required to bear the actual, documented and reasonable cost of AVIATION staff and/or its contractors, plus twenty percent (20%) administrative fee, that is required to manage crowds and/or that negatively impact terminal operations and roadway functions as determined by the Director.

3. AIRLINE shall not perform or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to perform any act or thing upon the Airport that will invalidate or conflict with any fire or other casualty insurance policies (copies of which, together with premium schedules, shall be furnished to AIRLINE on request) covering the Airport or any part thereof.

4. AIRLINE shall not improperly dispose of or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to improperly dispose of any waste material taken from, or products used (whether liquid or solid) with respect to its aircraft or its operations, into the sanitary or storm sewers at the Airport, or engage in any other form of improper disposal of such materials. AIRLINE shall ensure that any such waste material or products are properly disposed of in full and complete compliance with all Federal, including the Environmental Protection Agency, State and County laws, Rules and Regulations, Operating Directives, and Airport Environmental Handbook for disposal of these waste materials and products. Nothing herein shall relieve AIRLINE of full responsibility and liability for the improper disposal of any such waste materials or products used by AIRLINE, its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, officers, or invitees.

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5. AIRLINE shall not keep or store, at any time, or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to keep or store, at any time, flammable or combustible liquids except in accordance with applicable laws in storage facilities especially constructed for such purposes in accordance with Federal, State, and County laws including the Uniform Fire Code and the Uniform Building Code, Rules and Regulations, Operating Directives, and Airport Environmental Handbook. For purposes of this Agreement flammable or combustible liquids shall have the same definitions as set forth in the most recent Uniform Fire Code.

6. AIRLINE shall not perform or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to perform any act or thing upon the Airport that will be in conflict with FAR Part 139 or jeopardize the Airport’s operating certificate.

7. AIRLINE shall not perform or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors or officers to perform any act or thing in conflict with the approved Airport Security Program, as further described in Section 3.02(A)(14) above.

8. AIRLINE shall not dispense or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to dispense food, snacks, or beverage in any form in its holdrooms, assigned jet bridges, or other public view areas of the Terminal Complex without the prior written approval of the Director, except in the case of an emergency. However, any food or beverages dispensed with the prior written approval of the Director, shall not be transported to the approved areas through public view areas of the Terminal Complex. Any such approval shall be subject to and AIRLINE shall, to the extent reasonable, procure such food and beverage items from an approved food and beverage vendor, flight kitchen, or in the case of an emergency, from AIRLINE’s own stores.

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9. AIRLINE shall not perform or permit its agents, employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers to perform the installation and operation of signs, posters, banners, graphics, pamphlets, magazines, televisions, closed-circuit televisions (CCTVs), celebratory and/or holiday displays, and/or similar advertising on or within the Premises, or any assigned jet bridge, without the prior written approval of the Director. Such signs shall be substantially uniform in size, type, and location with those of other airlines, consistent with AVIATION’s graphic standards, the Rules and Regulations, the Operating Directives, and in compliance with all applicable laws and ordinances. Any such installation shall be done in accordance with the Airport Tenant Improvement Manual. AIRLINE shall be responsible to remove any such installation, as may be required by the Director, and restore the area to its original condition, reasonable wear and tear excepted, at its sole cost and expense.

10. AIRLINE will be specifically prohibited from placing any type of Advertising / Promotional Signage, as defined in Section 1.01(A)(1) of this Agreement, or any similar marketing materials or items in the Preferential Use Space or in any public areas of the Airport, without the prior written approval of the Director. AIRLINE shall be restricted as to the signage, placards, card holders and/or any type of advertising, regardless if it is solely for the benefit of AIRLINE or if it is in any type of partnership (i.e. marketing, advertising, or other similar arrangement, etc.) with another party, that it may wish to install or otherwise have placed in the public areas of the Airport, in accordance with Section 18.41 of this Agreement. AIRLINE may be allowed, with prior written approval from AVIATION, to place on a temporary basis, notices, banners, or other similar celebratory paraphernalia and/or other displays in the ticketing and gate holdroom portions of the Preferential Use Space areas that announces new air service to be provided by AIRLINE into the Las Vegas market. AIRLINE acknowledges that any approval given by the Director under this provision of the Agreement, may include any applicable advertising fees as further outlined in Section 18.41 of this Agreement. Such signs shall be substantially uniform in size, type, and consistent with AVIATION’s graphic standards, the Rules and Regulations, Operating Directives, and in compliance with all applicable laws and ordinances.

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Section 3.04 Ground Handling Services by AIRLINE and Aviation Support Provider Companies

A. Subject to Section 3.02(A)(6) of this Agreement, in the event AIRLINE agrees to ground handle any portion of the operations of another Air Transportation Company, AIRLINE shall provide the Director thirty (30) days advance written notice of such proposed activities, including, but not limited to, the following:

1. A description of the type and extent of services to be provided; and

2. The Air Transportation Company to whom the services are to be provided; and

3. The ticket counters, skycap areas, aircraft gates, holdrooms, ramp storage and staging areas, and other facilities that will be involved in the ground handling operation and the charges therefore. All such services must occur within the Premises of the AIRLINE; and

4. A complete ninety (90) day flight schedule, commencing on the date of start-up for such Air Transportation Company; and

5. Disclosure of such Air Transportation Company as AIRLINE’s Affiliate Carrier.

B. Such ground handling arrangement is subject to the prior written approval of the Director. AIRLINE shall be responsible for the payment of all applicable operational fees for the Air Transportation Company that they are requesting approval to ground handle, unless specifically authorized by the Director, in writing, whether collected or uncollected, and as such shall bear the attending risk for such payments.

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1. AIRLINE shall be the designated representative for such Air Transportation Company and as such shall be responsible for all of its activities and coordination with AVIATION, including but not limited to any and all security, customer service, and/or other operational requirements as may be necessary for the safe and efficient operation of said Air Transportation Company.

2. AIRLINE’s sales of ground handling services to any Air Transportation Company, other than AIRLINE’s Affiliate Carriers, shall be subject to the five percent (5%) ground handling fee, or other such reasonable fees as may be established by the Director from time to time, payable to AVIATION, as further described in Section 3.04 (C) below. AIRLINE will include this five percent (5%) ground handling fee into any overhead calculation and shall not list this ground handling fee as a separate line item on any invoice for such services (i.e. “airport fee,” “port fee,” “airport tax” or other similar description). Any such separation on any invoice presented for payment by AIRLINE to another Air Transportation Company will be considered as additional gross revenue and therefore subject to the provisions of Section 6.08(E) of this Agreement.

C. AIRLINE shall report and pay to AVIATION a nondiscriminatory concession fee, as referenced in Section 3.04(B) above, based on the gross revenues derived by AIRLINE for providing such services to any Air Transportation Company, other than AIRLINE’s Affiliate Carriers, whether collected or uncollected. AIRLINE shall perform such services and meet similar performance standards as may be set by the Director, for similar Aviation Support Providers.

D. AVIATION reserves the right (if it is deemed to be in the AVIATION’s best interest as determined by the Director) to establish through a formal Request for Proposal (RFP), Request for Qualification (RFQ), or other similar process, the total number of Aviation Support Providers available at the Airport. Nothing herein shall restrict AVIATION to any specific limitation whatsoever based on either a total number of providers or based on a specific type of service. However, AVIATION and AIRLINE agree that there should be no less than three (3) Aviation Support Providers, in addition to the Signatory Airlines, to provide such services. In the event of such action by AVIATION, AIRLINE shall be allowed to continue to provide such services and shall be required to adhere to any established performance measures to the extent reasonably possible to do so.

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Section 3.05 Aviation Support Provider Services

A. AIRLINE shall use its best efforts to comply with the payment arrangements it makes with any Aviation Support Provider, as defined in Section 1.01(A)(15) of this Agreement, or other services provider that may be required from time to time, at the Airport, including any applicable fees that such Aviation Support Provider is required to pay to AVIATION, whether such services are provided to AIRLINE under a direct arrangement between AIRLINE and the services provider, or provided to AIRLINE through a consortium.

B. AIRLINE will be required to utilize the Aviation Support Provider companies that hold an existing operating permit with AVIATION to provide such services at the Airport. AIRLINE may request AVIATION’s consideration to approve a new Aviation Support Provider, no less than sixty (60) days in advance of when AIRLINE desires such services to commence. However, AVIATION is under no obligation to approve such request that it deems not to be in the best interest of the Airport operations. AVIATION will not consider cost or national solicitations for a single service provider as the sole or mitigating factor in its consideration of AIRLINE’s request. AIRLINE understands that it shall be responsible to provide for the full accommodation within its Premises of all space requirements, including, but not limited, to office space, employee areas, and/or operational space that may be required by its Aviation Support Providers and/or its vendors that they do business with at the Airport.

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C. AVIATION hereby reserves the right to limit the total number of Aviation Support Providers, through an RFP, RFQ, or other similar process, if AVIATION determines that it is in the best interest of the operation of the Airport to take such action. AIRLINE acknowledges and agrees that it will be required to contract for such services only with the authorized providers that may result from such action.

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ARTICLE 4 - PREMISES

Section 4.01 Terminal Complex Space and Apron Area

A. AVIATION hereby leases to and AIRLINE hereby accepts from AVIATION the “Premises,” and as further defined in Section 1.01(A)(47) of this Agreement and being more particularly delineated in Exhibit “B1,” attached hereto and by reference made a part hereof. AIRLINE agrees that, upon AIRLINE’s occupancy of its Premises, such space is accepted in “ AS IS ” condition at the time of this Agreement.

1. Subsequent amendments of areas leased to AIRLINE shall be accomplished through the issuance of a Space Use Letter, executed by the Director, in accordance with Section 1.01(A)(54) of this Agreement, including any applicable revised Exhibit B1 drawings. It is hereby understood and agreed that any new space assignment will be under the general terms and conditions of this Agreement or other conditions as may be needed to meet the operational needs of the Airport, as determined by the Director, and as agreed by AIRLINE. AIRLINE shall make reasonable efforts to execute such Space Use Letters and/or other Letters of Agreement, as may be necessary during the term of this Agreement, and return said documents to AVIATION within ninety (90) days of receipt. It is understood by both parties that AIRLINE’s occupation of space identified under a Space Use Letter shall be deemed as AIRLINE’s consent regardless if the Space Use Letter has been executed by AIRLINE.

B. AIRLINE shall use its Premises, as currently assigned or amended by a Space Letter as referenced above, subject to the terms and conditions of this Agreement, AVIATION’s Rules and Regulations, Operating Directives, and/or Space Use Letter for the purposes authorized under Article 3 of this Agreement to conduct its Air Transportation business.

C. All Preferential Use Space, as defined in Section 1.01(A)(46) of this Agreement, shall be assigned to AIRLINE by the Director on a preferential, nonexclusive use basis. Continuous assignment of Preferential Use Space is subject to AIRLINE maintaining AVIATION’s minimum gate utilization and ticket counter utilization standards, as outlined in Section 4.01(D)(1) and Section 4.04 (D)(2) of this Agreement.

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1. It is understood that the terms contained in this portion of the Agreement does not constitute nor shall it be in any way construed or implied that these are “eligibility” requirements that, once met by AIRLINE, should entitle AIRLINE to lease or otherwise lay claim to any additional facilities at the Airport.

2. It is further understood by AIRLINE that the purpose of the provisions contained herein shall be for recovery and reassignment to another Air Transportation Company or reverting back to AVIATION as Common Use Space, in the event that AIRLINE is not using the assigned facilities in an efficient and/or effective manner, as determined by Director. AIRLINE understands that such provisions are necessary to allow AVIATION to meet the increasing demands for air service into the Las Vegas Valley.

3. AIRLINE shall be required to submit to AVIATION, its proposed flight schedule for the next ninety (90) day period in an electronic format provided by AVIATION, every thirty (30) days, so that AVIATION may utilize such information to make reasonable determinations on how to best utilize the Airport facilities and to assign such facilities to meet facility demands during peak time periods.

4. AIRLINE shall reasonably provide to AVIATION such proposed schedules, using a standard format provided by AVIATION, including but not limited to the submission of such schedules utilizing a secure log-in web-based application with specific log-in information and passwords for each AIRLINE, excluding such market information as city-pairs, on a monthly basis and for a period covering no less than ninety (90) days in advance, to allow AVIATION to anticipate AIRLINE’s future facility requirements.

5. AVIATION will use the submission of such schedules for the purpose of assigning and tracking utilization of facilities, using the prioritization formulas established by Director. AVIATION will make every effort legally available to AVIATION to keep such proprietary information confidential, however, AVIATION will be allowed to share such information in a general form to the TSA for the sole purpose of allowing them to anticipate the staffing levels that will be required to operate the security checkpoints and the baggage screening facilities, or other services that may be provided by TSA in the future.

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6. AIRLINE shall not commence any schedule that includes the use of Common Use Space or other non-preferential facilities, without the prior written approval of the Director. Additionally, AIRLINE shall accommodate its scheduled flights, as well as any flights of any Air Transportation Company that AIRLINE ground handles, on the Preferential Use Gates that it has been assigned to under this Agreement through a Space Use Letter. AVIATION reserves the right to deny the request by AIRLINE for the use of any Common Use Space if, as determined by AVIATION, such flight(s) can be accommodated on AIRLINE’s Preferential Use Gates.

D. Upon failure of AIRLINE to maintain the minimum gate utilization and/or ticket counter utilization standards as outlined herein, AVIATION may issue written notice of its intent to reassign all or a portion of AIRLINE’s Preferential Use Space (gates and/or ticket counters), as Common Use Space, or as Preferential Use Space of another Signatory Airline. Upon receipt of such notice, AIRLINE shall have thirty (30) days to demonstrate to AVIATION that it will meet AVIATION’s utilization standard for such Preferential Use Space. Otherwise, upon expiration of such thirty (30) day notice period AVIATION shall make the reassignment. AVIATION shall use the following, as minimum criteria, for the purpose of determining AIRLINE’s facility utilization, any prioritizations for any space assignments and/or space utilization purposes. Such minimum criteria shall be used to determine AIRLINE’s utilization of Preferential Use Space and any assignment of all Common Use Space. AVIATION reserves the right to establish additional criteria to determine prioritization of Common Use Space.

1. Gate Utilization: If AIRLINE’s utilization of such Preferential Use Gate is less than an average of nine hundred (900) total seats, based on a seven (7) day average, OR seven hundred fifty (750) seats plus five (5) flights per gate, per day into the Las Vegas market, based on a seven (7) day average, for the previous ninety (90) day period, AVIATION may, subject to the notice and cure process described in Section 4.01(D) above, reassign such Preferential Use Gate to another Air Transportation Company or reclaim such Preferential Use Space and designate same as a Common Use Gate without cost to AVIATION or further claim by AIRLINE for such reassignment. In determining AIRLINE’s gate utilization, Director may consider seasonal dynamics of airline scheduling. Any reassignment by AVIATION under this Section shall not be subject to the provisions of Section 4.03 of this Agreement.

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2. Ticket Counter Utilization: For the purpose herein, the Preferential Use Space that shall be included in this minimum ticket counter utilization determination, shall include the ticket counters, queuing, skycap check-in, and check-in kiosk areas. AVIATION reserves the right to conduct ticket counter utilization surveys (constant manning during peak times) to determine the usage of such Preferential Use Space during peak times for both the Airport and the AIRLINE. If it is determined that any position(s) assigned to AIRLINE as Preferential Use Space that is not used on a regular basis; especially during AIRLINE’s scheduled peak times, as determined by AVIATION’s analysis, AVIATION may, subject to the notice and cure process described in Section 4.01(D) above, reassign such Preferential Use Space to another Air Transportation Company and/or reclaim such space and designate it as Common Use Space, without cost to AVIATION or further claim by AIRLINE for such reassignment. In determining AIRLINE’s ticket counter utilization, Director may also consider seasonal dynamics of airline scheduling. Any reassignment by AVIATION under this Section shall not be subject to the provisions of Section 4.03 of this Agreement.

E. Off-Gate Airport Parking positions for RON aircraft shall be assigned, subject to the submission of a ninety (90) day flight schedule, on a common use, nonexclusive use basis, at the discretion of the Director. All such positions shall be assigned by the Director, to meet the operational needs of the Airport, and will be subject to all applicable fees. AIRLINE must not use and/or schedule activities that will result in more than the designated number of RON spaces without the prior written approval of AVIATION, which may be rescinded with ten (10) days written notice to AIRLINE.

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F. AIRLINE shall not be authorized to make any improvements or alterations of any kind on or to the Premises during the term of this Agreement without prior written approval of AVIATION. Any changes or improvements completed without the Director’s prior written approval, are subject to immediate removal at the expense of the AIRLINE if so requested by the Director. Plans for any such improvements are to be submitted to AVIATION, for AVIATION’s approval and coordination, first in conceptual form in a manner acceptable to AVIATION, and then upon written approval of the project concept, in accordance with the Airport Tenant Improvement Manual. Should AIRLINE or any sublessee cause any improvements to the Premises, AIRLINE shall cause any contract with contractor, designer, or other person providing work, labor, or materials to the Premises to include the following clause:

“Contractor agrees on behalf of itself, its subcontractors, suppliers, and consultants and their employees that there is no legal right to file a lien upon any County-owned property and will not file a mechanic’s lien or otherwise assert any claim against County’s real estate or any leasehold interest thereon on account of any work done, labor performed, or materials furnished under this contract. Contractor agrees to indemnify, defend and hold AVIATION and County and AIRLINE harmless from any liens filed upon the County’s property and AIRLINE’s leasehold interest and shall promptly take all necessary legal action to ensure that removal of any such lien at Contractor’s sole cost.”

However, should any lien be placed on the Premises or any improvements thereon, AIRLINE will cause to be removed any and all liens of any nature, including but not limited to, tax liens and liens arising out of or because of any construction or installation performed by or on behalf of AIRLINE or any of its contractors or subcontractors upon the AIRLINE’s Premises or arising out of or because of the performance of any work or labor to it or them at said Premises or the furnishing of any materials to it or them for use at said Premises. Should any such lien be made or filed, AIRLINE will bond against or discharge the same within thirty (30) days after written request by Director.

G. Should a conflict arise between the AIRLINE and other tenants at the Airport regarding the scope of service privileges or the use of Premises and/or the Airport, the Director shall resolve the conflict. AIRLINE agrees to abide by the Director’s decision under this Agreement.

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Section 4.02 Right to Authorize Use of AIRLINE Space

A. The Director shall have the right to authorize other Air Transportation Companies to use AIRLINE’s assigned Preferential Use Space, as defined in Section 1.01(A)(46) of this Agreement, when such facilities are not required for AIRLINE’s operating flights, as determined by the schedule submitted to AVIATION by AIRLINE for gate/ramp control purposes. AIRLINE shall have the right to require the other Air Transportation Companies to indemnify AIRLINE against liability arising out of such use. AVIATION may require AIRLINE, at no expense to AIRLINE, to relocate its aircraft to an aircraft parking apron by issuing a DDR, as defined in Section 1.01(A)(27) of this Agreement, so that AIRLINE’s Preferential Use Gate(s) may be used by others for active actual flight operations.

B. Should AIRLINE fail to reasonably accommodate such issued DDR by AVIATION, to relocate such aircraft and/or other associated equipment within the reasonable time frame requested by AVIATION, AIRLINE may be subject a penalty of one thousand dollars ($1,000.00) per occurrence. In the event of AIRLINE’s failure to reasonably accommodate such request, AVIATION shall have the right to recover such gate with thirty (30) days notice to AIRLINE and reclaim such gate as a Common Use Gate.

1. In the event that AIRLINE is required to vacate a Preferential Use Gate for use by another Air Transportation Company for enplaning and/or deplaning activities, AIRLINE will not be charged any applicable RON charges as long as the aircraft remains at an RON position under the same DDR event.

2. Conversely, if AIRLINE is requiring the use of a Preferential Use Gate that has been assigned under this Agreement to another Air Transportation Company for their operations, AIRLINE will be subject to the payment to AVIATION of all applicable per turn fees that are in effect at that time. Such fees shall be collected by AVIATION and shall become part of the rate base, as if they were collected for use of a Common Use Gate.

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C. AIRLINE shall be responsible to push its aircraft from a Preferential Use Gate if issued a DDR, within thirty (30) minutes of being directed to do so by AVIATION’S Ramp Control staff or at least thirty (30) minutes prior to the scheduled use of such Preferential Use Gate by another Air Transportation Company. AIRLINE shall bear all costs of such DDR operations. AVIATION shall track the number of uses of such Preferential Use Gate(s) by other Air Transportation Companies, unless it is an Affiliate Carrier of AIRLINE who has use of such gate as a Preferential Use Gate or unless such use is by a carrier who AIRLINE ground handles, as provided under Section 3.04 of this Agreement. Signatory Airlines will receive an annual credit as part of the year-end true-up, equaling the applicable per turn fee for either a narrow body aircraft operation or a wide body aircraft operation, that would be collected by AVIATION for the use of such Preferential Use Gate as a Common Use Gate. Such credit will be included in the overall year-end true-up, described in Section 7.04 and Section 7.05 of this Agreement, to either off-set any additional amounts owed to AVIATION or to be added to amounts that will be due AIRLINE as part of the calculations under Section 7.04 and Section 7.05 of this Agreement.

D. The Director shall have the right to authorize other Air Transportation Companies to use AIRLINE’s ticket counter, queuing, skycap areas, and baggage make-up areas assigned to AIRLINE as Preferential Use Space, when such positions are not required for AIRLINE’s operating flights. This right does not include the right to use AIRLINE’s airline ticket office(s) behind the ticket counters. AVIATION will charge such Air Transportation Companies the current fee applicable for use of AVIATION Common Use Space. Such fees shall be collected by AVIATION and shall become part of the rate base, as if they were collected for use of any Common Use Space.

Section 4.03 Reassignment of Leased Premises

A. To improve and maximize the utilization and functional capacity of the Terminal Complex or to implement a Capital Improvement, the Director shall have the right to reassign, reallocate, or relocate part of the Premises during the course of this Agreement. As such, it is understood and agreed that any such actions will be done so for the best use of the Airport to meet the operational needs of the Airport. AIRLINE acknowledges that the Director will assign the use of any portion of the Premises in a manner to ensure the best utilization of the Airport and available facilities, and that such assignments will be determined at the discretion of the Director.

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1. Under this Section, AVIATION will provide reimbursement for expenses reasonably necessary to move AIRLINE’s operations to the reassigned space. A determination of such expenses will be made, at the time it is determined that a reassignment is required, and will be based on a walk-through of the space that AIRLINE is being reassigned to under this Section, with AIRLINE’s participation. AVIATION will not reimburse for expenses to bring vacated space back to original condition, reasonable wear and tear excepted, regardless of the reason for such vacation.

2. AVIATION shall not be responsible to reimburse for any equipment or otherwise pay to relocate any proprietary equipment, cable, communications equipment and/or devices, millwork, or other similar facilities, equipment, and/or infrastructure that:

a. Has been previously reimbursed by AVIATION to AIRLINE under the provisions of a previous Agreement, either as part of a previous relocation or as a Tenant Improvement for which AIRLINE has been reimbursed under the provisions of NRS 496, regardless of whether or not the work was completed by AIRLINE or by a third party on behalf of AIRLINE.

b. That has been installed or caused to be installed by AIRLINE without the prior written approval of AVIATION, in accordance with the Airport Tenant Improvement Manual.

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c. That is recovered by AVIATION under Section 4.01(D)(1) and/or Section 4.01(D)(2) above for the AIRLINE’s failure to meet minimum gate and/or minimum ticket counter utilization criteria.

d. Restoration of space that has been vacated by AIRLINE, regardless of the reason for such vacation. AVIATION and AIRLINE will participate in a walk-through of the vacated space to determine what actions AIRLINE will be responsible for to bring the vacated space to reasonable condition.

B. TERMINAL 3 REASSIGNMENTS: Prior to the opening of Terminal 3, AVIATION will make a determination, based on the operational requirements at that time, as to which airlines will be reassigned space in Terminal 3. In addition to the terms contained in this Section 4.03(A) above, such reassignments shall be subject to the following:

1. AVIATION shall provide AIRLINES with a minimum of one hundred eighty (180) days notice of the need to reassign space under this Section. AIRLINE hereby acknowledges that such reassignments may be required in a coordinated manner as part of an overall program to reassign certain airlines to Terminal 3 by the opening date. As such, AIRLINE agrees that it will make reasonable and timely efforts to complete any necessary tenant improvements and will relocate the reassigned operations to its new Premises by the date provided by AVIATION. AIRLINE also acknowledges that AIRLINE’s failure to meet such completion dates may result in a delay to another airline’s ability to meet their required schedule and that AVIATION may require AIRLINE to accelerate its work to meet its completion date, at AIRLINE’s expense, unless AIRLINE has used good faith efforts to reasonably and timely complete the necessary tenant improvements, and delays are beyond the reasonable control of AIRLINE, as determined by the Director.

2. AIRLINE will be given a not-to-exceed allowance to complete any tenant improvements and to cover any actual relocation costs associated with such reassignment. This not-to-exceed allowance will be based on One Hundred and 00/100 ($100.00) per square foot for the specific Premises AIRLINE is being reassigned to. AIRLINE will be required to submit all applicable receipts and proof of payment for any cost under this reimbursement provision for review by AVIATION.

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3. AIRLINE shall adhere to the Airport Tenant Improvement Manual, as required under Section 9.04 of this Agreement.

4. AIRLINE shall bear the costs of the restoration of any space that is vacated as a result of such reassignment under this provision of the Agreement.

C. If it becomes necessary for AVIATION to reassign, reallocate, or relocate AIRLINE’s Exclusive Use Space under Section 4.03(A) above, the Director will give AIRLINE thirty (30) days written notice of its intent to modify all or portions of AIRLINE’s space. AVIATION shall:

1. Give AIRLINE written notice of their new assigned Exclusive Use Space and the required relocation time. AIRLINE shall commence design within thirty (30) days and commence construction of such relocation work within one hundred twenty (120) days and be completed within one hundred eighty (180) days unless otherwise approved by the Director in writing. AIRLINE will have thirty (30) days to identify what its requirements will be at the new location and submit its conceptual layout of the new area in sufficient detail to be able to make a determination as to what items would be eligible for reimbursement under this Section of the Agreement, and including all associated costs.

2. At the discretion of the Director, AVIATION may elect to compensate AIRLINE for such relocation through one of the following methods:

a. Provide space similar in design and finish to the space subject to relocation, reallocation and/or reassignment, for which the reasonable cost of necessary improvements shall initially be born by AIRLINE and reimbursed by AVIATION upon completion of the improvements that have received the prior written approval by the Director prior to construction, and in accordance with NRS 496;

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b. If the notification by AVIATION to relocate is received by AIRLINE, after the Effective Date of this Agreement, reimburse AIRLINE the unamortized cost of AIRLINE’s improvements that have been installed subject to the prior approval of the Director under Section 9.04 of this Agreement, in the space to be vacated. Such reimbursement shall be based on generally accepted accounting principles on a straight line depreciation schedule for such improvements or for a period not to exceed five (5) years commencing upon the completion date of such approved improvements only, unless AVIATION previously reimbursed AIRLINE, either directly or through a third-party for such approved improvements. At the sole discretion of the Director, the amortization period of five (5) years may be extended through a Letter of Agreement which shall be subordinate to this Agreement and which shall survive any future Agreement and shall be interpreted under the terms and conditions of this Agreement only, for facilities that may be executed between AVIATION and AIRLINE that is in effect during the period of such extension, if the specific circumstances so warrant. However, any such extension may not exceed ten (10) years commencing upon the completion date of such approved improvements only. All other provisions of this Section shall apply to such extension, if granted, however if the provisions of this Agreement are modified in any way, the Letter of Agreement for such extension shall be interpreted using the term and conditions of this Agreement only. AVIATION shall not be responsible to reimburse AIRLINE for any improvements that were made to Premises without the prior written approval of AVIATION. Any improvements made to any Premises leased to AIRLINE prior to July 1, 2003 are not subject to this provision and are not eligible for any reimbursement consideration under Section 4.03 of this Agreement. AIRLINE shall be responsible to keep accurate records of all improvements to the Premises, including costs and date of beneficial occupancy for such improvements, and AIRLINE shall provide to AVIATION the following items, within thirty (30) days of request from AVIATION:

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i. A current schedule of assets within the Premises, or relative portions that are associated with such improvements and remaining amortization such improvements;

ii. All construction and/or installation dates of such improvements and/or equipment (including any subsequent modifications);

iii. The total construction and/or installation costs (including any subsequent modifications);

iv. All maintenance records for such improvements and/or equipment, including all warranties, maintenance manuals, or other similar documentation. In the event there is any warranty that is in effect, AIRLINE shall transfer its interest in and deliver to AVIATION any and all applicable warranties, manuals, excess parts, or other applicable materials. AIRLINE will make every effort to ensure that any warranties given to AIRLINE for improvements and/or equipment that is subject to this provision of the Agreement will be transferable to AVIATION and that such action will not have any negative effect on said warranty, in the event of such recovery by AVIATION; and

v. Verification that such improvements received the prior written approval of AVIATION and that they were completed in accordance with the Airport Tenant Improvement Manual.

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c. All assets, when fully depreciated at the end of the depreciation schedule outlined above in this Agreement, or upon the voluntary abandonment of space by AIRLINE, or at the expiration of this Agreement, whichever date occurs first, shall fully vest to AVIATION and AVIATION shall retain ownership of such improvements. Additionally, all improvements that have been authorized in writing by AVIATION and that have been completed prior to the commencement of this Agreement shall be automatically transferred to AVIATION upon expiration of the previous Agreement, in accordance with Section 4.04 of the Scheduled Airline Operating Agreement and Terminal Building Lease, dated July 1, 2003, or any applicable Operating Permit that has been executed by AIRLINE and AVIATION, collectively hereinafter “Previous Airline Agreement,” if the Premises that AIRLINE occupied at the time of the expiration and/or termination of the Previous Airline Agreement is the same space that is assigned by AVIATION to AIRLINE at the commencement of this Agreement. As such, AVIATION shall not be held responsible for the reimbursement of such costs for relocation, reallocation, and/or reassignment under this Section of the Agreement for any improvements that were transferred to AVIATION. The provisions of this Section of the Agreement are excluded if any of the following occurs:

i. AIRLINE receives reimbursement from AVIATION for such improvements as provided under NRS 496;

ii. AIRLINE declares bankruptcy and AIRLINE rejects this Agreement or any portion thereof;

iii. AIRLINE transfers its interests in such improvements to another Air Transportation Company, as part of a merger or other similar transaction that transfers ownership, and that includes any remuneration and/or financial benefit of such transfer of ownership.

3. Reassign or reallocate the space to another Air Transportation Company within a reasonable time frame or hold the space without lease commitment.

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4. None of the above shall apply to any improvements made by AIRLINE without the express written approval of the Director, in accordance with the Airport Tenant Improvement Manual. Any improvements that have been made by AIRLINE without the prior written approval of AVIATION shall not be eligible for reimbursement under this or any other portion of this Agreement. Further, AVIATION shall have the right to have AIRLINE remove such unauthorized improvements and restore the Premises to its original condition prior to such installation, at AIRLINE’s sole cost and expense, or to reimburse AVIATION for the cost of such removal and restoration plus twenty percent (20%) administrative fee. Nothing herein shall preclude AVIATION from further pursuing any remedies legally available to AVIATION, including, but not limited to, seeking reimbursement for time, materials, and/or staffing by AVIATION and/or its contractors, in the event that such unauthorized installation negatively impacts any warranty held by AVIATION, limits the functionality of a facility and/or system, or that any causes any operational impacts to the Airport.

5. All assets paid for by AVIATION shall belong and remain with AVIATION. AVIATION reserves the right to lease such assets to AIRLINE and require AIRLINE to be responsible for all maintenance of such assets.

D. If the Director makes a decision to relocate, reallocate, or reassign AIRLINE’s Premises or any portion thereof, AIRLINE shall not be required to:

1. Incur reasonable expenses to relocate its operation to other Exclusive Use Space that it does not agree to incur.

2. Accept Exclusive Use Space not reasonably adequate from an operational standpoint.

E. If AIRLINE voluntarily abandons any space or gives up space to AVIATION, at any time during the Agreement or upon the natural expiration of this Agreement, AVIATION shall not bear any expense for unamortized improvements within such space and ownership of such improvements shall vest to AVIATION.

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Section 4.04 Surrender of the Premises

A. AVIATION shall not be required to give any notice to AIRLINE to quit possession at the expiration date of the term of this Agreement, or on earlier termination, howsoever caused unless otherwise provided for herein. AIRLINE covenants and agrees that on expiration of the term of this Agreement, or on earlier termination as hereinafter provided, or on reassignment of the Premises to others, it will peaceably surrender possession of the Premises leased hereunder and will vacate and leave such Premises in good condition, reasonable wear and tear, acts of God, fire, and other casualties excepted, and AVIATION shall have the right to take possession of said Premises.

B. AIRLINE shall have the right, unless otherwise directed by the Director, on termination or expiration of this Agreement and within thirty (30) days thereafter, to remove all trade fixtures, equipment, and other personal property installed or placed by it at its expense, in, on, or about the Airport, except that, during the term of this Agreement:

1. AIRLINE shall not remove fixtures, equipment, and other personal property for which AVIATION is to reimburse, or has previously reimbursed AIRLINE pursuant to Section 4.03; and

2. AIRLINE’s right shall be subject to any valid lien that AVIATION may have thereon for unpaid rentals or fees. AIRLINE shall not abandon any of its movable personal property on the Premises without the prior written consent of the Director.

C. Any and all movable personal property not removed by AIRLINE within the thirty (30) days period shall thereupon, at the option of AVIATION, become a part of the land on which it is located, and title thereto shall vest in AVIATION. All AVIATION property damaged by, or as the result of, the removal of AIRLINE’s property shall be restored by AIRLINE, at its own expense, to the condition existing prior to such damage. All material items, whether owned by AIRLINE or are in AIRLINE’s custody and control, shall be removed from the Premises. Any material items left behind by or on behalf of AIRLINE, shall be considered abandoned and shall be disposed of accordingly by AVIATION at the sole cost of AIRLINE. In the event that such items are not removed or disposed of in accordance with Section 4.04, unless authorized in writing by the Director, AIRLINE shall reimburse AVIATION for all expenses to remove and dispose of any materials left at the Airport, plus twenty percent (20%) administration fee.

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D. AIRLINE shall be required to remove any improvements, equipment, cabling, communications, fixtures, cabinetry, or other similar items owned and/or installed by AIRLINE from the Premises and shall restore the Premises to its original leasable condition, reasonable wear and tear excepted, as directed by the Director, at no cost to AVIATION. Any such removal and restoration shall be completed within ninety (90) days of the date notice is sent to AIRLINE or within such other time frame approved by the Director in writing. Such restoration shall be identified through a walk-through of the Premises with a representative from both AIRLINE and AVIATION. Additionally, any such removal and restoration shall be at the sole cost and expense of AIRLINE, shall comply with the Airport Tenant Improvement Manual, Rules and Regulations, and Operating Directives, and shall be completed by a licensed and qualified vendor to perform such work.

E. Ownership of any systems, facilities, or improvements (i.e. electrical, HVAC, mechanical, etc.) left in place at the discretion of the Director, at the end of this Agreement, shall automatically vest to AVIATION. AIRLINE shall transfer its interest in and deliver to AVIATION any and all applicable warranties, manuals, excess parts, or other applicable materials within thirty (30) days of the surrender of the Premises.

Section 4.05 Employee Parking Facilities

A. AIRLINE shall have the right to the use of reasonably adequate vehicular parking facilities for its employees, who are assigned to work at the Airport and whose physical location remains at the Airport (actively working on the Airport environs) in common with other employees. Such facilities shall be located in an area designated by the Director. AVIATION reserves the right to assess a reasonable charge, and AIRLINE shall pay on a monthly basis, as additional rentals any employee parking charges, for such employee parking facilities, based on the cost of providing, operating, and maintaining the facilities, and such charges may be modified from time to time at the discretion of the Director. AIRLINE shall, on request of AVIATION, provide verification that AIRLINE is only providing parking for its employees who are actively working at the Airport environs, including, but not limited to, providing AVIATION with the names of eligible employees. AVIATION, may at some time in the future request from AIRLINE, and AIRLINE agrees to provide upon such request, copies of employee staffing schedules, in general terms and by employee classification, in the event that this information is needed to make such determinations regarding the demand during specific peak periods and/or future on-going employee parking needs. The foregoing notwithstanding, AVIATION may implement an employee trip reduction program in conjunction with its air quality program, in consultation with AIRLINE. AIRLINE hereby acknowledges and agrees that no commercial operations or activities of any kind shall be conducted by AIRLINE, its agents, employees, contractors, subcontractors, vendors, suppliers, and/or representatives from such parking facilities or other areas of the Airport. AIRLINE acknowledges and agrees that any violation of this clause may result in the immediate suspension of such parking privileges under this Agreement. AVIATION shall have the right to determine the assignment of employee parking spaces based on criteria determined by the Director to be in the best interest of AVIATION to meet the operational needs of the Airport, including but not limited to requiring AIRLINE to accommodate, at its own expense at a location not on the Airport, parking for such employee classification as may be necessary from time to time to meet the employee and public parking demands. AIRLINE acknowledges and accepts that the public parking needs will be given a higher priority than employee parking needs.

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Section 4.06 Access

A. AIRLINE has the right of reasonable ingress and egress from its Premises over Airport roadways, including common-use roadways, subject to the Rules and Regulations, Operating Directives, and/or any security regulations which may have been established or shall be established in the future by the AVIATION, County, Federal, and/or State of Nevada. Such rights of reasonable ingress and egress shall apply to AIRLINE’s employees, contractors, subcontractors, invitees, agents, vendors, suppliers, guests, patrons, and other authorized individuals. This right shall extend to aircraft, vehicles, machinery, and equipment used by or for the benefit of AIRLINE in its Air Transportation business.

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B. The ingress and egress provided for in Section 4.06(A) shall not be used, enjoyed, or extended to any person engaging in any activity or performing any act or furnishing any service for or on behalf of AIRLINE that AIRLINE is not authorized by the Director to engage in or perform under the provisions hereof, as required by Title 20 Ordinance.

C. For AIRLINE’s vendors and suppliers of materials to the public areas of the Airport and to areas and facilities leased to or designated herein for use by AIRLINE: This privilege will extend to vehicles, machinery and equipment of such vendors and suppliers used in their business of furnishing such supplies and services to AIRLINE; provided, however, that AVIATION has given its prior written approval for such activities. Such approval may include, but is not limited to, the AVIATION’s requirement for an operating permit between such company and AVIATION under Title 20 Ordinance and to AVIATION’s right to impose a charge upon AIRLINE’s suppliers in an amount sufficient to recover the costs incurred in the reasonable regulation by AVIATION of such suppliers in the exercise by them of the foregoing right of ingress and egress. Nothing herein shall restrict AVIATION from levying a nondiscriminatory privilege fee on any person or company for conducting non-Air Transportation business at the Airport.

D. AVIATION shall have the right at any time or times to close, relocate, reconstruct, change, alter, or modify any such means of access provided for AIRLINE’s use pursuant to this Agreement or otherwise, either temporarily or permanently, provided that reasonable notice to AIRLINE and a reasonably convenient and adequate alternative means of access, ingress, and egress shall exist or be provided in lieu thereof. AVIATION shall suffer no liability by reason thereof, and such action shall in no way alter or affect any of AIRLINE’s obligations under this Agreement.

E. Use of Apron and Ramp: AIRLINE acknowledges that the Director will assign the use of the Preferential Use Space, and Common Use Space, including, but not limited to apron and ramp areas and other areas of the Airport, and that such assignments will be determined at the sole discretion of the Director. It is acknowledged by AVIATION that AIRLINE may use certain vehicles and equipment in the operation of its business pursuant to the Agreement. The use and movement of these vehicles and equipment in, on, and about the ramp areas and any other areas of the Airport covered by the terms of this Agreement will be accomplished by AIRLINE, its employees, contractors, subcontractors, invitees, vendors, suppliers, agents, or other authorized representatives, in accordance with the responsible safety and traffic practices and in accordance with any Rules and Regulations, Operating Directives, and/or procedures established by AVIATION, the Director, or any other governmental agency. When not in use, the vehicles and other equipment will be parked within the assigned areas or other areas as specifically instructed by AVIATION.

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F. Use of Equipment: All vehicles and equipment operated by AIRLINE and its employees, contractors, subcontractors, invitees, vendors, suppliers, agents, or other authorized representatives, in the operation of AIRLINE’S business at the Airport, shall meet Airport operational standards, as set forth in the Rules and Regulations, Operating Directives, and CFR Part 139, will be kept in a neat and clean manner, and shall be operated in a safe and orderly manner at all times. Upon objection from the Director to AIRLINE concerning the operation of such vehicles and equipment or the unsafe and unclean condition of such vehicles and/or equipment, AIRLINE will immediately remedy the cause of the objection or within a reasonable time frame approved by the Director. AIRLINE will provide the Director, within thirty (30) days of a written notice, a complete list of all equipment, regardless of owned or leased, used by AIRLINE at the Airport under this Agreement. Such list shall include, at a minimum, equipment serial number and/or inventory number, equipment type, ownership/lease, combustion engine or other engine type, and age of equipment, the dispensation of any equipment that was included on a previous report and that is no longer in service, and the date such equipment was place in service and/or removed from service at the Airport.

Section 4.07 Assignment of Preferential and Common Use Facilities

A. AVIATION has the right to schedule or otherwise assign all space within the Airport, including, but not limited to, Preferential Use Space, and Common Use Space, as further defined in Sections 1.01(A)(46) and 1.01(A)(21), respectively, of this Agreement. AIRLINE acknowledges that AVIATION will assign the use of Preferential Use Space and Common Use Space, and that such assignments will be reasonably determined at the sole discretion of the Director to meet the operational needs of the Airport. AIRLINE also acknowledges that it will cooperate and work with any other AIRLINE that may be assigned to such Preferential Use Space and Common Use Space.

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Section 4.08 AVIATION Supplied Common Use Equipment and Stock

A. Common Use Equipment: AVIATION agrees to supply and maintain all Common Use Equipment, which shall be situated at every ticket counter, skycap, gate podium, kiosk, and gate counter position. AVIATION makes no express warranty as to the operability of the equipment and the sole extent of liability of AVIATION with respect to the equipment shall be limited to repair and/or replacement of malfunctioning equipment. AVIATION will respond as expeditiously and as reasonably as possible to technical difficulties with the Common Use Equipment after AIRLINE has notified AVIATION of such difficulties through the AVIATION’s designated central help desk number. AIRLINE shall ensure the same responsiveness and assistance to AVIATION staff to identify and resolve AIRLINE and/or AIRLINE-vendor issues relating to AIRLINE’s applications that run in conjunction with the Common Use Equipment systems. AIRLINE will work cooperatively with AVIATION for the implementation of other new technologies to improve the efficiency of the Airport.

B. Common Use Equipment Stock: AIRLINE may be asked to supply its own ticket and SpeedCheck™ (kiosk) stock in the use of the Common Use Equipment at all Preferential Use Space and Common Use Space positions from time to time. However, in the event that AVIATION needs to assign AIRLINE’s Preferential Use Space to another Air Transportation Company, AIRLINE shall remove its own stock and allow the other airline to use the AVIATION-supplied stock, as further outlined herein. When utilizing AVIATION-assigned Common Use Space or AIRLINE’s Preferential Use Space, AIRLINE may use either its own stock or AVIATION’s common stock. If AIRLINE elects to use its own stock, it shall be responsible to remove all stock from the AVIATION’s equipment at the end of the usage period. AIRLINE stock shall be subject to approval by AVIATION. In the event that AVIATION deems AIRLINE stock to be injurious to AVIATION’s CUTE equipment, AIRLINE will immediately cease usage of the offending stock upon such notice by AVIATION. AVIATION reserves the right to sell and collect applicable advertising revenues that may be generated from the reverse side of any AVIATION-supplied stock.

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C. Radio Frequency Identification Bag Tag Stock: AVIATION will supply all Radio Frequency Identification (RFID) bag tag stock for use in as part of the Baggage Handling System. AIRLINE shall be required to meet the IATA / ATA standards for the twenty-one inch (21”) bag tag (or as the standard may be amended by IATA / ATA), prior to the start-up of activities at the Airport. Additionally, AIRLINE shall provide to AVIATION the necessary Baggage Service Messages (BSMs) that will be required to facilitate AIRLINE’s baggage through the Baggage Handling System that utilizes RFID technology to track and route baggage to the appropriate baggage carrousel. AVIATION makes no express warranty as to the operability of the technology and/or baggage handling system equipment and the sole extent of liability of AVIATION with respect to the technology and/or baggage handling system equipment shall be limited to repair and/or replacement of malfunctioning equipment. AVIATION will respond as expeditiously and as reasonably possible to technical difficulties with the BHS equipment after AIRLINE has notified AVIATION of such difficulties through AVIATION’s designated central help desk number. AIRLINE shall ensure the same responsiveness and assistance to AVIATION staff to identify and resolve AIRLINE and/or AIRLINE-vendor issues relating to AIRLINE’s applications that run in conjunction with the RFID, BHS, and BSMs systems. AIRLINE will not be allowed to use its own bag tag stock, unless specifically directed to do so in writing by AVIATION, which must at the time meet any and all standards that may be set forth by AVIATION for such stock. AVIATION reserves the right to sell and collect applicable advertising revenues that may be generated from the reverse side of any AVIATION-supplied bag tag stock.

D. Common Use Self-Service Kiosk (CUSS) Equipment: AIRLINE will not install, deploy, or otherwise engage in the use of any proprietary self-service check-in kiosks and/or device, applications, and/or technologies on its Premises, any portion of the Airport, or at any off- Airport location with the expectation to screen any checked bags at the Airport. At the request of the Director, AIRLINE will work with AVIATION and other related parties in the development of a Common Use Self Service (CUSS) compliant kiosk application, or other similar applications, and/or devices as may be required to have AIRLINE operational on all CUSS kiosks at the Airport or at off-Airport locations. AVIATION reserves the right to establish the locations for implementation of such CUSS kiosks to meet the needs of its customers and the Air Transportation Companies, as well as the operational needs of the Airport. AVIATION agrees to supply and maintain, with its personnel and at its expense, all common-use self-service kiosk equipment (also known as SpeedCheck™ and SpeedCheck Advance™), which shall be situated at designated ticket counters, at various areas of the terminal lobby and esplanade areas, off-airport passenger check-in locations, and other such locations, and using such passenger processing models as determined by the Director to be most beneficial to meet the operational needs of the Airport. AVIATION will supply all of the boarding pass stock necessary for the use of the CUSS equipment, and as such, reserves the right to sell and collect applicable advertising revenues that may be generated from the reverse side of any AVIATION-supplied boarding pass stock. AVIATION makes no express warranty as to the operability of the equipment and the sole extent of liability of AVIATION with respect to the equipment shall be limited to repair and/or replacement of malfunctioning equipment. AVIATION will respond as expeditiously and as reasonably as possible to technical difficulties with the Common Use Equipment after AIRLINE has notified AVIATION of such difficulties through AVIATION’s designated central help desk number. AIRLINE shall ensure the same responsiveness and assistance to AVIATION staff to identify and resolve AIRLINE and/or AIRLINE’s vendor issues relating to AIRLINE’s applications that run in conjunction with the CUSS systems. AIRLINE will work cooperatively with AVIATION for the implementation of other new technologies to improve the efficiency of the Airport.

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E. No Modifications to AVIATION’s Equipment: AIRLINE shall not be allowed to install at any gate holdroom, gate counter, skycap, ticket counter, kiosk, or baggage service office, any AIRLINE owned or proprietary computer equipment, kiosks, phones, other electronic equipment, or similar equipment without the prior express written permission of Director. Further, AIRLINE shall not make any modification whatsoever to AVIATION’s Common Use Equipment, including but not limited to, modifying the keyboards, adding adhesive or other markings, or otherwise modifying the equipment physically and/or electronically. Any such modifications and/or damage that is willfully or negligently caused by AIRLINE shall be remedied by AIRLINE, to the sole satisfaction of AVIATION, at the sole cost of AIRLINE. In the event that the damage is repaired by the AVIATION, AIRLINE will reimburse AVIATION for both the fully-allocated cost of time and materials pertaining to the repairs plus twenty percent (20%) administrative fees.

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F. Network Usage: AIRLINE will not be allowed to install any proprietary cabling and/or similar infrastructure at the Airport. As such, AIRLINE shall make use of AVIATION’s data communications backbone at the Airport for its communications needs to connect separate operating locations within the Airport campus, (i.e. ticketing, baggage service, operations, maintenance, etc.). AIRLINE shall be fully integrated into AVIATION’s infrastructure backbone within twelve (12) months from the Effective Date of this Agreement and shall be responsible to remove all proprietary cabling and/or other similar infrastructure, back to point of origin, at AIRLINE’s sole cost. Where authorized, at the discretion of the Director, any and all data communication cabling installed by AIRLINE shall be in accordance with the AVIATION’s Airport Tenant Improvement Manual requirements, and upon installation shall become the property of AVIATION, and shall be maintained by AVIATION. Such improvements shall not be subject to any reimbursement or useful life clauses under Section 4.03 of this Agreement. AVIATION may impose reasonable fees to AIRLINE for the use of such network, including but not limited to, any fees for unusual and/or excessive or non-standard usage, as reasonably determined by Director.

1. AIRLINE will assign a representative(s), hereinafter “Authorized Network Representative,” to work with AVIATION to determine user access and network connectivity information. AIRLINE shall be solely responsible for ensuring that Authorized Network Representatives are not security risks, and upon AVIATION’s request, provide AVIATION with any information reasonably necessary for AVIATION to evaluate any security event or incident relating to any Authorized Network Representative or use of AVIATION’s network.

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2. AIRLINE shall be solely responsible for the selection, implementation, and maintenance of security procedures and policies that are sufficient to ensure that (i) AIRLINE’s use of AVIATION’s network is secure and is used only for authorized purposes stated herein, and (ii) AIRLINE’s business information and data are protected against improper access, use, loss, disclosure, alternation, or destruction. AIRLINE agrees that it will not abuse or misuse the Network Connection, or any of the components thereof, or any of the capabilities provided thereby. Unless otherwise explicitly provided herein, in no event shall AIRLINE use the Network Connection as its internet service provider.

3. AIRLINE shall notify AVIATION’s Information Systems as soon as possible upon the discovery of any security breach or potential security breach that may affect AIRLINE or AVIATION’s confidential information or the security of the Network or any Network Connection.

4. AIRLINE shall ensure adequate security protection for AVIATION from any third party connections established on AIRLINE’s network. Adequate security protection means (i) protection to preserve confidentiality, integrity, and availability of the Network and information of AVIATION, and (ii) protection from malicious codes and/or unauthorized intrusions.

5. AIRLINE and AVIATION shall be responsible for maintaining the highest industry standards for security best practices on computing devices that could affect the availability and health of the Network connection, the Network, systems, applications or data of AIRLINE and AVIATION, respectively, specifically including, but not limited to, use of up-to-date antivirus protection, anti-SPAM, and establishment and use of a timely security patch management process.

Section 4.09 Wireless Applications and Similar Technologies

A. AIRLINE acknowledges that AVIATION has and continues to install wireless capabilities for Air Transportation Company operational use, in accordance with applicable Federal Communications Commission (FCC) regulations, rulings, and/or guidelines. AIRLINE agrees that it will not install, deploy, or otherwise engage in the use of any transmitting wireless device, applications, and/or technologies on its Premises, any portion of the Airport or within the Airport System (regardless of any Exclusive Use, Preferential Use, Common Use, and/or Joint Use assignments) without having first obtained the express written permission of the Director. Such wireless applications shall only be for AIRLINE’s operational use. Use by any others or for the benefit of any other parties is specifically prohibited.) At the request of the Director, AIRLINE will cease operation of a particular device due to interference with another transmitting device that is deemed necessary for operational and/or life-safety purposes.

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Section 4.10 Off-Airport Passenger Check-In Program

A. AVIATION has established the Off-Airport Passenger Check-In Program, hereinafter “Off-Airport Program.” As such, it is the intent and the expectation of AVIATION that AIRLINE will use every reasonable option available to AIRLINE, including, but not limited to, the Off-Airport Program, to manage passenger queuing lines at the Airport.

B. AIRLINE will make reasonable efforts to fully participate in AVIATION’s Off-Airport Program upon the commencement of this Agreement. AIRLINE agrees to work with AVIATION and its designated Off-Airport Program vendor regarding operational issues and promotional materials, including but not limited to, website links, in-flight magazine articles, and other similar marketing or advertising venues, at no cost to AVIATION.

C. It is the intent of AVIATION that in the event that AIRLINE does not make use of all such options available to AIRLINE, including, but not limited to, the Off-Airport Program, AVIATION will charge AIRLINE for all crowd control costs attributable to AIRLINE as noted herein. In the event that AIRLINE chooses not to participate in the Off-Airport Program, AIRLINE will be subject to charges (payable to AVIATION) as determined by Director, to recover all costs of AIRLINE’s facility impacts (i.e. crowd control, additional facilities, etc.) plus twenty percent (20%) administrative fee.

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Section 4.11 In-Line Baggage Handling System Obligations, Duties, and Responsibilities

A. AIRLINE will have use of the In-Line Baggage Handling Systems (BHS) in a location as designated by the Director to meet the operational needs of the Airport. AIRLINE will be responsible to verify that it has a certified CUTE, CUSS, RFID, and Baggage Service Messages (BSM) applications to operate the BHS, prior to the start-up of service at the Airport. AIRLINE will actively work with AVIATION staff and AIRLINE’s system provider(s) to expedite all information systems and/or technologies work that may be required to ensure such applications are properly certified by AVIATION and its system provider(s), if applicable. AVIATION shall have the right to charge AIRLINE for any expenses incurred by AVIATION, including staffing to manage passenger lines and/or additional maintenance staff, if AIRLINE fails to adhere to BHS system procedures and/or properly staff the baggage make-up areas to meet the demand and such failure results in an operational impact to the Airport and/or the BHS equipment.

B. Following AVIATION’s BHS training, provided by AVIATION to AIRLINE, AIRLINE will be solely responsible for the proper operations, training, and supervision of its staff for its portion of the operational responsibilities of the BHS system. AIRLINE shall ensure that it maintains staffing levels during all operational hours, including irregular operations, that are sufficient to retrieve baggage from the baggage make-up carrousels and/or piers in order to prevent the inefficient use of the in-line baggage handling system in a fully automated mode and to prevent the system from initiating a “die-back” situation, which may require AVIATION to intercede manually and/or cause additional staffing by AVIATION, its contractors, or TSA staff to initiate baggage screening mitigation procedures as a result of baggage stacking up on the make-up carrousels and/or piers. AIRLINE shall not initiate any procedures or work rules that, as determined by the Director, will negatively impact the in-line BHS without the prior written approval of AVIATION and without concurrence from TSA. AVIATION reserves the right to recover any costs from AIRLINE that may result from AIRLINE’s failure to comply with this Section of the Agreement.

C. AIRLINE will designate a representative as a Ground Security Coordinator (GSC) to handle issues that may arise from time to time with the BHS. The GSC will be the point of contact with the TSA and AVIATION for all issues concerning checked passenger baggage and/or BHS performance. The GSC must be available during AIRLINE’s operational hours.

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D. AIRLINE acknowledges that all oversized checked baggage must be delivered to a designated oversized area for screening.

E. AIRLINE acknowledges it may have a more stringent screening requirement for checked passenger baggage than that of TSA. As such, AIRLINE will be responsible to provide these additional screening services and associated staffing to meet such requirements, including, but not limited to, X-Ray screening, and any additional training for additional services, and/or any additional services at no additional cost to AVIATION. AIRLINE must provide evidence of proper training for such additional measures to the Director upon request. AVIATION may, at its sole discretion provide and maintain the X-Ray screening device.

F. AIRLINE shall be responsible to order and pick-up from AVIATION and maintain an appropriate level of any and all consumables related to the Common Use Equipment and/or BHS, including, but not limited to, RFID embedded bag tag stock, boarding pass stock, toner cartridges for laser printers, or other similar items, in accordance with policies and procedures established by AVIATION.

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ARTICLE 5 – AVIATION CAPITAL IMPROVEMENTS

Section 5.01 Airport Expansion

A. As AVIATION may deem necessary to protect the interests of the public, AVIATION may incur costs to acquire land; plan, design and construct facilities; or purchase and install furniture, fixtures and equipment to preserve, rehabilitate, protect, enhance, expand, or improve the Airport System during the Term of this Agreement in accordance with the provisions of this Article 5. AIRLINE acknowledges that it has a responsibility to AVIATION to provide AVIATION with as much information as possible, as far in advance as possible, so that AVIATION may make reasonable determinations as to the facility and/or other capital improvements that may be required to meet the demand of all Air Transportation Companies operating at the Airport.

Section 5.02 Capital Improvement Program

A. AVIATION has developed a five-year Capital Improvement Program, hereinafter “CIP,” for the Airport System, which is attached and incorporated herewith as Exhibit C1. The Capital Improvement identified in the CIP are hereby approved by the Signatory Airlines. AVIATION may proceed with each and all of those Capital Improvement without any additional review by the Signatory Airlines, provided, however, that AVIATION shall adhere to the general timing and budget estimates as shown on Exhibit C1.

B. AVIATION may recover through Rentals, Fees, and Charges, a proper allocation of the Net Costs of such Capital Improvement either through recovery of Annual Bond Debt Service, including Coverage and/or Amortization beginning in the Fiscal Year of beneficial use including recovery of any necessary Operating & Maintenance Expenses.

C. Contemporaneously with the processes set forth in Article 7, and otherwise at periodic times when information is available during each Fiscal Year as needed, AVIATION shall report to all Signatory Airlines on the progress of its implementation of the CIP including the then-current cost estimates and expenditures to date.

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D. Notwithstanding the provisions of 5.04(B), AVIATION may undertake Additional CIP, recover the Net Costs attributable to each Additional CIP through Rentals, Fees, and Charges without any Signatory Airline approvals, if such Additional CIP is undertaken for any project where the Net Costs do not increase Rentals, Fees and Charges, including Capital Improvement(s) that have projected Revenues that exceed Net Costs.

Section 5.03 Major Revisions to the CIP

A. If, upon receipt of bids or engineering estimates for a Capital Improvement(s), the projected cost of such Capital Improvements(s) causes the overall CIP budget to increase more than twenty percent (20%) in the aggregate, AVIATION shall notify the Signatory Airlines in writing and may convene a meeting to discuss the CIP. Following such meeting, the revised CIP shall be deemed approved for purposes of Article 5.02(A) unless Signatory Airlines who constitute seventy-five percent (75%) of the Signatory Airlines in number and who pay more than seventy-five percent (75%) of the Rentals, Fees and Charges notify AVIATION that they do not concur with said Capital Improvement(s), and in that case the Capital Improvement(s) shall be deferred until the ensuing Fiscal Year. The foregoing notwithstanding, a minimum of two (2) Signatory Airlines must not oppose said Capital Improvement(s) in order for AVIATION to implement said Capital Improvement(s). In such ensuing Fiscal Year, AVIATION may implement such Capital Improvement(s) and recover through Rentals, Fees and Charges a proper allocation of the Net Costs of such Capital Improvement(s) as provided for in Section 5.02(B) of this Agreement.

Section 5.04 Additional Capital Improvement(s)

A. Signatory Airlines recognize that, from time to time, AVIATION may consider it necessary, prudent, or desirable to undertake Capital Improvement(s) other than those identified in the CIP, hereinafter “Additional CIP,” and that the Net Cost of such Additional CIP may be recoverable through Signatory Airline Rentals, Fees and Charges.

B. Contemporaneously with the processes set forth in Article 7, and otherwise at any time during each Fiscal Year as needed, AVIATION shall notify the Signatory Airlines, in writing and may convene a meeting to discuss all such proposed Additional CIP. Following such meeting, the Additional CIP shall be part of the CIP and be deemed approved for purposes of Article 5.02(A) unless Signatory Airlines who constitute seventy-five (75%) of the Signatory Airlines in number and who pay more than seventy-five percent (75%) of the Rentals, Fees and Charges notify AVIATION that they do not concur with said Additional CIP, and in that case the Additional CIP shall be deferred until the ensuing Fiscal Year. The foregoing notwithstanding, a minimum of two (2) Signatory Airlines must not oppose said Additional CIP in order for AVIATION to implement said Additional CIP. In such ensuing Fiscal Year, AVIATION may implement such Additional CIP and recover through Rentals, Fees, and Charges a proper allocation of the Net Costs of such Additional CIP as provided for in Section 5.02(B) of this Agreement.

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C. When undertaking the CIP or Additional CIP, AVIATION will use its best efforts to apply for all available federal grants and will seek approval for collection and use of Passenger Facility Charges to the extent permitted by law or FAA policy.

Section 5.05 Capital Outlays

A. Equipment and Capital Outlays of less than one-million and 00/100 ($1,000,000) dollars shall not be subject to Signatory Airline approval. The cost of Equipment and Capital Outlays for any Fiscal Year shall be allocated to the cost center upon which the asset benefits in the Fiscal Year in which they were purchased. AVIATION will make its best efforts to disclose the budgeted Equipment and Capital Outlays during the budget processes in accordance with Article 7 of this Agreement. Signatory Airlines recognize, however, that certain unbudgeted Equipment and Capital Outlays may be required to be undertaken during the course of any Fiscal Year in order to properly operate, maintain, or repair the Airport System. AVIATION reserves the right to undertake such Equipment and Capital Outlays as it deems necessary.

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ARTICLE 6 – RENTALS, FEES, AND CHARGES

Section 6.01 Consideration

A. The consideration that AIRLINE agrees to provide AVIATION for the Premises under this Agreement includes but is not limited to the following:

1. Providing regularly scheduled Air Transportation to and from the Airport in an amount that meets the specific requirements and/or minimum standards for Signatory Airline status, as established by the Director, for seats into the Las Vegas market.

2. Paying the Rentals, Fees, and Charges, currently in effect at the time, without deduction or set-off, during the term of this Agreement, as approved by the Board of County Commissioners and as further described in Title 20 Ordinance.

3. Pursuant to 49. U.S.C. section 40117 et seq., 14 CFR Section 158, et. seq., as may be modified from time to time, or its successor provision, paying the proceeds of Passenger Facility Charges, as defined in Section 1.01(A)(45) and constituting trust funds held for the beneficial interest of AVIATION, as required under this Agreement, and providing AVIATION with the AIRLINE’s annual Passenger Facility Charge Report as prepared by AIRLINE’s Independent Auditor within ninety (90) days of the close of AIRLINE’s fiscal year.

4. Post a Letter of Credit, as further detailed in Section 6.12 of this Agreement.

5. Not be in bankruptcy at the time this Agreement is to be executed.

6. Not be in arrears with any payments due AVIATION.

7. Must be in compliance with any conditions of existing agreements or permits.

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B. Without limiting any other rights and remedies available to AVIATION under this Agreement and under law, failure to provide any of the above delineated consideration shall permit AVIATION to terminate this Agreement on thirty (30) days advance written notice. Unless this Agreement is terminated by AVIATION and absent breach of this Agreement, AIRLINE shall pay to AVIATION Rentals, Fees, and Charges hereunder for the Term of this Agreement. In the event AVIATION terminates this Agreement pursuant to this Section 6.01, AIRLINE shall have no further liability to AVIATION hereunder except for liabilities incurred prior to the termination date.

Section 6.02 Terminal Complex Rentals

A. For the term of this Agreement, AIRLINE’s Terminal Complex rentals shall be determined as the sum of AIRLINE’s rentals for Exclusive Use Space, Preferential Use Space, Common Use Space, and Joint Use Space. AIRLINE’s rental payment for Exclusive Use Space and Preferential Use Space shall be determined by multiplying the rental rate for the period, calculated in accordance with Exhibit D1, and established under Title 20 Ordinance, by the amount of space leased by AIRLINE, as set forth in Exhibit B1, which may be revised from time to time through an AVIATION issued Space Use Letter.

B. Total Terminal Complex rentals for Joint Use Space shall be calculated as the product of the appropriate Terminal Complex rental rate for the period, calculated in accordance with Exhibit D1, and established under Title 20 Ordinance, and the amount of Joint Use Space. AIRLINE’s share of the total Terminal Complex rentals each month for Joint Use Space shall be determined in accordance with the Joint Use Formula.

1. For inclusion in the Joint Use Formula, AIRLINE shall include in its monthly report of its passengers the total number of Enplaned, Deplaned, Non-Revenue, Revenue, and Through Passengers handled or otherwise accommodated by AIRLINE for other Air Transportation Companies not having an Agreement with AVIATION that provides for the direct payment to AVIATION of appropriate charges for the use of Joint Use Space.

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C. AIRLINE agrees to pay AVIATION, without deduction or set-off, during the Term of this Agreement, Rentals, Fees and Charges currently in effect at the time, as further outlined by Title 20 Ordinance, as may be modified from time to time.

D. Minimum Terminal Complex Rentals Guarantee: If AIRLINE shall discontinue all service to the Airport or reduce its service into the Las Vegas market to less than the amount that meets the specific requirements and/or minimum standards for Signatory Airline status, as established by the Director, for seats into the Las Vegas market, at any time and for any reason during the term of this Agreement, AIRLINE agrees to pay AVIATION, for each month the AIRLINE has no passenger or limited passenger service at the Airport, through the expiration of this Agreement, a minimum monthly Terminal Complex Rentals, Fees, and Charges (excluding Landing Fees and Passenger Facility Fees) which shall be determined as follows, whichever is amount is greater:

1. By taking an average of AIRLINE’s total current Terminal Complex Rentals, Fees, and Charges, including, but not limited to, any applicable Common Use fees or Joint Use Space fees, and aircraft per turn charges, (regardless if aircraft gates were assigned as Preferential Use Space or Common Use Space or any combination thereof), payable under this Agreement for the latest twelve (12) month period.

Such Minimum Terminal Complex Rentals Guarantee shall be paid to AVIATION, on a monthly basis, for the remaining Term of this Agreement, unless determined otherwise by mutual agreement of all Signatory Airlines and AVIATION. AVIATION will have no obligation to accept or otherwise recover any space that AIRLINE may vacate in the event of any reduction in or cessation of service into the Las Vegas market under this provision of the Agreement.

Section 6.03 Aircraft Gate Use Fees and Apron Storage Fees

A. Total Aircraft Gate Use Fees, for Preferential Use Space, as defined in Section 1.01(A)(46) of this Agreement, which includes gate aircraft parking position and the associated gate apron area (including jetbridges), shall be calculated each Fiscal Year during the Term of this Agreement as the product of the Aircraft Gate Use Fee for the period, calculated in accordance with Exhibit D2, and established under Title 20 Ordinance, and shall be applied to the number of gates leased as Preferential Use Space by AIRLINE, as set forth in Exhibit B1, which may be revised from time to time by AVIATION through an issued Space Use Letter.

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B. Apron Area or Ramp Area Storage Fees: For use of Apron Areas (covered apron storage or uncovered apron storage not part of a Preferential Use Space assignment), including, but not limited to, for storing and/or staging GSE, vehicles, or supplies needed for AIRLINE’s operations, AIRLINE will be charged at the rates established under Title 20 Ordinance.

Section 6.04 Landing Fees

A. AIRLINE shall pay monthly to AVIATION fees for all Aircraft Arrivals for the preceding month, hereinafter “Landing Fees.” AIRLINE’s Landing Fees shall be determined as the product of the Landing Fee Rate for the period, calculated in accordance with Exhibit D3, and the AIRLINE’s total landed weight for the month. AIRLINE’s landed weight for the month shall be determined as the sum of the products obtained by multiplying the Maximum Certificated Gross Landing Weight, as defined in Section 1.0(A)(38) of this Agreement, for each type of AIRLINE’s aircraft by the number of Aircraft Arrivals of each said aircraft during the month.

1. AVIATION reserves the right, during the Term of this Agreement, to implement a landing fee, calculated in accordance with Exhibit D7, hereinafter “Westside Landing Fee Rate,” that will be applicable to all users of the Airfield Area Cost Center, as defined in Section 1.01(A)(9)(a) of this Agreement. AVIATION shall notify all users of such implementation six (6) months in advance of implementing the Westside Landing Fee Rate. Upon implementation, the Westside Landing Fee Rate shall be applicable to all Aircraft Arrivals at the Airport, regardless of the aircraft type, or whether or not such Aircraft Arrival is conducted by a commercial, private, or other aircraft operator classification.

Section 6.05 Planning and Environmental Studies

A. The parties agree that during the Term of this Agreement, should AVIATION, incur any expenses in the Heliport or Ivanpah Cost Centers pertaining to the planning studies and/or environmental studies, that the costs of these studies will be paid for from the AVIATION Capital Fund and that AIRLINE agrees that the studies will be amortized over a useful life of five (5) years using the straight-line depreciation methodology. It is further agreed that should either of these projects be discontinued during the Term of this Agreement, AVIATION shall write-off any unamortized amounts and shall amortize these amounts over ten (10) years. The parties agree that any amortization of the amounts shall be charged to the Airfield Area Cost Center.

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Section 6.06 Other Fees and Charges

A. AIRLINE shall pay AVIATION for the non-exclusive use of any Common Use Space, as defined in Section 1.01(A)(21) of this Agreement, and other facilities which shall be assigned to AIRLINE at the discretion of the Director, the following fees or charges, as set forth in Exhibit D9 and/or are established under Title 20 Ordinance, as may be amended from time to time.

1. Common Use Aircraft Gate Fee or Aircraft Per Turn Fee:

a. For each aircraft flight operation, which equates to one arrival plus departure, accommodated at an AVIATION controlled gate, AIRLINE shall be charged the current Common Use Aircraft Gate Fee at the rates determined as set forth in Exhibit D9 and established under Title 20 Ordinance.

b. AIRLINE’s total Common Use Aircraft Gate Fees at a single gate shall be capped. Such cap shall be set on a monthly basis for each Common Use Gate used by AIRLINE, at a number of narrow body aircraft turns and/or a number of wide body aircraft turns (using a seven (7) day average), intended to approximate the amount of revenue that would be paid to AVIATION if such gate (including holdroom and gate use fee) were leased by AIRLINE.

c. The capped Common Use Gate Fees, as described herein, is not intended to be a cap on the amount of aircraft per turn fees paid at a single gate, but rather a cap for each individual Air Transportation Company using a single gate. AVIATION reserves the right to adjust the number of narrow body and/or wide body turns that establishes the capped fees under this provision of the Agreement, at the reasonable discretion of the Director.

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d. If AIRLINE schedules the use of a Common Use Gate, thereby making it unavailable for use at that time by another Air Transportation Company, and for any reason does not use such Common Use Gate, AIRLINE will be charged for the use of the gate, as if it actually operated on said gate.

B. Off-Gate RON Aircraft Parking Fee: Each AIRLINE shall pay Off-Gate RON Aircraft Parking Fees for each aircraft parking position used which is beyond or off of a Preferential Use Space aircraft gate, at the rates established under Title 20 Ordinance. Such rates shall also apply to the use of any cargo ramp aircraft parking position used for aircraft maintenance activities or other non-cargo activities. Fees for AIRLINE Off-Gate RON Aircraft Parking Fees will be waived in an amount equal to 0.4 aircraft parking spaces per leased gate, using standard rounding to the nearest integer, to the extent such spaces are available, or other formula deemed necessary and mutually agreed to by both parties.

C. Employee Parking Fee: AVIATION shall charge AIRLINE or its employees a reasonable and nondiscriminatory fee based on AVIATION’s cost of providing services and facilities for the employee parking area(s) provided at the Airport, by AVIATION, in accordance with Section 4.05 of this Agreement, and established under Title 20 Ordinance.

D. Ground Handling Fees: AIRLINE shall pay to AVIATION all applicable ground handling fees equal to five percent (5%) of the total ground handling fee that it charges to another Air Transportation Company (except AIRLINE’s Affiliate Carriers) for providing ground handling and aviation support services to such Air Transportation Company, as further described in Section 3.04 of the Agreement.

E. Badging and Fingerprinting Fees: AIRLINE shall be responsible for any and all costs associated with the issuance of security badges, including but not limited to fingerprinting, lost badge charges, and/or any applicable rebadging fees. In the event that AIRLINE, or any of its employees, agents, vendors, suppliers, service providers, contractors, subcontractors, officers, and/or directors fails to return such badges, as required by Section 3.02(A)(14) of this Agreement, and/or any cause of action that either singularly or collectively would require AVIATION to re-badge all currently badged Airport personnel, as required under TSA Regulations and the Airport’s Security Program, AIRLINE shall solely bear the total cost of such re-badging process.

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F. Additional Fees and Charges: AVIATION expressly reserves the right to assess and collect the following:

1. Reasonable and non-discriminatory Rentals, Fees, and Charges for services provided by AIRLINE for an Air Transportation Company, other than AIRLINE’s Affiliate Carriers, that are not Signatory Airlines if such services or concessions would otherwise be available from a concessionaire or licensee of AVIATION.

2. Reasonable and non-discriminatory Rentals, Fees, and Charges for services or facilities not enumerated in this Agreement, but provided by AVIATION or its contractors and utilized by AIRLINE, including, but not limited to, special maintenance of Premises, equipment, permanent and temporary storage areas, and International Facility Use fees.

3. Pro-rata shares of any charges for the provision of any service or facilities which AVIATION is required or mandated to provide by any government entity (other than AVIATION) having jurisdiction over the Airport System.

4. All increases in Rental, Fees, and Charges as provided in Article 7 of this Agreement.

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Section 6.07 Information to be Supplied by AIRLINE

A. Not later than fifteen (15) days after the end of each month, AIRLINE shall electronically file with AVIATION on forms provided by AVIATION, at the email address identified herein, a written report for activity conducted by AIRLINE during said month, and separately, a written report for activity handled by AIRLINE for each Air Transportation Company not having an agreement with AVIATION, or not providing for its own submission of activity data to AVIATION. Such reports shall be emailed to AVIATION ( LASActivity@mccarran.com ), and shall comply with all applicable Department of Transportation reporting requirements for commercial air transportation. Such activity shall include, but is not limited to, the following:

1. The number of aircraft operations;

2. The number of domestic Revenue Passengers, as defined in Section 1.01(A)(51) of this Agreement, with enplaned and deplaned passengers reported separately;

3. The number of international Revenue Passengers, as defined in Section 1.01(A)(51) of this Agreement, with enplaned and deplaned passengers reported separately;

4. The number of Non-Revenue Passengers, as defined in Section 1.01(A)(39) of this Agreement, with enplaned and deplaned passengers reported separately;

5. The number of Connecting Passengers, as defined in Section 1.01(A)(22) of this Agreement;

6. The number of Through Passengers, as defined in Section 1.01(A)(57) of this Agreement;

7. The number of Aircraft Arrivals, including the amount of Maximum Certificated Gross Landing Weight, as defined in Section 1.01(A)(38) of this Agreement; and

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8. The number of pounds of cargo, mail, freight, and express shipments, both domestic and international, reported separately by each category.

B. AVIATION shall have the right to rely on said activity reports in determining Rentals, Fees, and Charges due hereunder, as well as for the Minimum Terminal Complex Rentals Guarantee under Section 6.02(D) of this Agreement. AIRLINE shall have full responsibility for accuracy of said reports. Payment deficiencies due to incomplete or inaccurate activity reports shall be subject to interest charges as set forth in Section 6.08(G).

C. AIRLINE shall at all times maintain and keep records reflecting the activity statistics of AIRLINE’s activities at the Airport to be reported pursuant to Section 6.07(A). Such records shall be maintained by AIRLINE for a period of three (3) years subsequent to the activities reported herein, or such other retention period as set forth in FAR Part 249, and upon prior written notice to AIRLINE shall be made available at Las Vegas, Nevada for audit and/or examination by AVIATION or its duly authorized representative during all business hours. AIRLINE shall produce such books and records in Las Vegas, Nevada within thirty (30) calendar days of AVIATION’s notice to conduct such audit and/or examination or pay all reasonable expenses, including but not limited to, transportation, food, lodging, etc., necessary for an auditor(s) selected by AVIATION to audit said books and records. The Director will at any time have the right to cause an audit of the business of AIRLINE to be made, as referenced above, and if the business activity reports previously made to AVIATION by AIRLINE are found to be intentionally incomplete, inaccurate, or understated in any respect, or to be understated (either intentionally or unintentionally by a greater margin than one (1%) percent) of AIRLINE’s actual activity for the period of review, as shown by such audit, AIRLINE will immediately pay to AVIATION the costs of such audit, as well as the additional payments shown to be payable to AVIATION by AIRLINE, otherwise the cost of such audit will be paid by AVIATION. If such audit discloses any willful or intentional inaccuracies, this Agreement, at the option of the Director and as a cumulative remedy, may be terminated.

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Section 6.08 Payments

A. Payments of one-twelfth of the total annual Rentals, Fees, and Charges for AIRLINE’s Exclusive Use Space and Preferential Use Space, shall be due in advance, without demand or invoice, on the first (1 st ) of each month. Said Rentals, Fees, and Charges shall be deemed delinquent if payment is not received by the fifth (5) day of the month.

B. Payments of AIRLINE’s Common Use Space Fees and Joint Use Space shall be due fifteen (15) days from AVIATION’s issuance of invoice, and shall be deemed delinquent if not received within five (5) days of the due date.

C. Payments of AIRLINE’s Off-Gate RON Aircraft Parking Fees, if any, and Employee Parking Fees, and Badging and Fingerprinting Fees shall be due fifteen(15) days from AVIATION’s issuance of invoice, and shall be deemed delinquent if not received within five (5) days from the due date.

D. Payment of AIRLINE’s Landing Fees shall be due fifteen (15) days from AVIATION’s issuance of invoice, and shall be deemed delinquent if not received within five (5) days of the due date.

E. Payment of AIRLINE’s ground handling fees shall be due fifteen (15) days from the end of the month that AIRLINE provided such service, along with a report of such gross revenues and the percentage of such gross revenues due to AVIATION, as identified in Section 3.04(B)(2) of this Agreement, and shall be deemed delinquent if not received within five (5) days of the due date.

F. Payment of all other Rentals, Fees, and Charges due hereunder, shall be due as of the date stated on AVIATION’s invoice. Said Rentals, Fees, and Charges shall be deemed delinquent if payment is not received within fifteen (15) days of the stated date of such invoice.

G. AVIATION shall provide notice of any and all payment delinquencies, including any payment deficiencies which may be due as a result of AVIATION’s estimates of activity pursuant to Section 6.07(C) herein, provided, however, interest at the rate of eighteen percent (18%) per annum shall accrue against any and all delinquent payment(s) from the due date until the payments are received by AVIATION, including any Passenger Facility Charge proceeds payment, as required under Section 6.09 of this Agreement. This provision shall not preclude AVIATION from canceling this Agreement for default in the payment of Rentals, Fees, and Charges, as provided for in Article 12 of this Agreement, or from exercising any other rights contained herein or provided by law.

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H. In the event AIRLINE fails to submit its monthly activity reports as required in Section 6.07(A), AVIATION shall estimate the Rentals, Fees, and Charges based upon the highest month of the previous twelve (12) month’s activity reported by AIRLINE and issue an invoice to AIRLINE for the same. If no activity data is available, AVIATION shall reasonably estimate such activity and invoice AIRLINE for same. AIRLINE shall be liable for any deficiencies in payments based on estimates made under this provision; payment for said deficiencies shall be deemed due as of date such Rentals, Fees, and Charges was due and payable. If such estimate results in an overpayment by AIRLINE, AVIATION shall apply such overpayment as a credit against subsequent amounts due for such Rentals, Fees, and Charges from AIRLINE; provided, however, AIRLINE shall not be entitled to any credit for interest on payments of such estimated amounts.

I. In the event AIRLINE’s obligations with respect to AIRLINE’s Premises or rights, licenses, or privileges granted hereunder shall commence or terminate on any date other than the first or last day of the month, AIRLINE’s Rentals, Fees, and Charges shall be prorated on the basis of the number of days such premises, facilities, rights, licenses, services or privileges were enjoyed during that month.

J. All payments due and payable hereunder shall be paid in lawful money of the United States of America, without set off, made payable to AVIATION and delivered to:

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Via Wire Transfer:

Bank of America

Las Vegas, NV 89101

ABA122400724

Credit Account #014236214

County of Clark, Dept of Aviation

Attn: Finance

To Benefit:

______________________________

By Check Via US Mail:

Clark County Department of Aviation

Accounts Receivable

P.O. Box 11005

Las Vegas, NV 89111-1005

Via Express Mail :

Clark County Department of Aviation

McCarran International Airport

Attn: Accounts Receivable

5757 Wayne Newton Blvd.

Las Vegas, NV 89119

K. The acceptance by AVIATION of any payment made by AIRLINE shall not preclude AVIATION from verifying the accuracy of AIRLINE’s report, submitted to AVIATION as provided in Section 6.07(A), or from recovering any additional payments actually due from AIRLINE.

Section 6.09 Passenger Facility Charges

A. AIRLINE agrees to faithfully collect and promptly remit, without notice or demand by AVIATION in accordance with 49 U.S.C. section 40117 et seq., 14 CFR Section 158, et seq., as may be modified from time to time, the proceeds of AVIATION’s Passenger Facility Charge, as defined in Section 1.01(A)(45) and constituting trust funds held for the beneficial interest of AVIATION, to AVIATION, so long as AVIATION has an FAA approved Passenger Facility Charge in effect. Further, both AIRLINE and AVIATION hereby covenant to fulfill their responsibilities under the terms of 49 U.S.C. section 40117 et seq., 14 CFR Section 158, et seq., as may be modified from time to time.

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B. If the legislation and regulations, in effect on the date of this Agreement, governing Passenger Facility Charges, use fees, or similar charges on AIRLINE’s passengers using the Airport are amended, changed, or eliminated during the term of this Agreement, AVIATION reserves the right to appropriately adjust such charges, levy new charges, revise charges, or implement additional charges.

Section 6.10 Additional Rentals

A. AVIATION, after due notice to AIRLINE, may, but is not obligated to, cure any default on AIRLINE’s part in fulfilling AIRLINE’s covenants and obligations under this Agreement. Any amounts paid or costs incurred by AVIATION to cure any such default are hereby agreed on and declared to be additional rentals. Unless otherwise provided herein, all additional rentals shall be due and payable with the next succeeding installment of monthly rentals due under this Agreement.

B. If AIRLINE imposes a surcharge in addition to normal airfare and tax on its Air Transportation to recover all or a portion of the amount payable by AIRLINE as Rental, Fees, and Charges hereunder, and if AIRLINE expressly identifies the surcharge as such to the public, or if AIRLINE separately delineates on any invoice for any applicable ground handling fees that AIRLINE is required to pay to AVIATION for any ground handling services that is provided to another Air Transportation Company as an “airport fee,” “port fee,” “airport tax,” or other similar description, the total amount of the surcharge and/or delineation or notation shall be considered as additional rentals or in the case for any ground handling services, as described in Section 3.04 of this Agreement, shall be considered as part of the applicable percentage of gross revenues, and shall be due with each installment of monthly rentals due under this Agreement. Provided, however, that absent such an expressly identified surcharge, nothing herein shall be construed to give AVIATION any right to additional rentals with respect to the fares for Air Transportation established by AIRLINE, irrespective of the amount of such fares; and fares for Air Transportation established by AIRLINE to the public is not for the recovery of Rentals, Fees, and Charges hereunder (e.g., for purposes of a fuel tax), no additional rentals shall be payable with respect to such a surcharge.

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Section 6.11 Additional Fees and Charges

A. If legislation or regulations are enacted that would permit AVIATION to levy charges, use fees or similar charges on AIRLINE’s passengers using the Airport, AVIATION reserves the right to enact such fee or charge, which shall be treated as “per-passenger charges” under the definition of Gross Revenues in the Master Indenture. If AVIATION levies such fees or charges, AIRLINE agrees to cooperate with the collection and remittance, less the reasonable cost of collection and administration, to AVIATION of such fees or charges. AVIATION shall treat the proceeds of such fee or charge in the same manner as current grants-in-aid and the proceeds shall be applied to Airport System Capital Fund or the early retirement of Airport System debt, except as otherwise provided in the Master Indenture.

B. AIRLINE shall be responsible to remit any fees, penalties, and/or administrative assessments imposed under regulations promulgated by AVIATION for capital improvements required by TSA and for infractions, violations, or non-compliance by AIRLINE, its employees, vendors, suppliers, service providers, contractors, subcontractors, directors, or officers, with the Rules and Regulations, Operating Directives, Airport’s Security Program, and/or TSA Regulations 49 CFR Parts 1500, 1520, 1540, 1542, 1544, 1546, 1548, and 1550, as promulgated.

Section 6.12 Security for Performance

A. Commencing on the Effective Date of this Agreement, AIRLINE shall provide to AVIATION a Letter of Credit in an amount equal to the estimate of three (3) months Rentals, Fees, and Charges payable by AIRLINE (excluding Passenger Facility Charges), to guarantee faithful performance by AIRLINE of its obligations under this Agreement and the payment of all Rentals, Fees, and Charges due hereunder. The Letter of Credit shall be adjusted, at a minimum, on an annual basis or at such time that there is a significant increase to AIRLINE’s operational activities and/or space rental increases or decreases.

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B. The security for performance shall be in the form of an irrevocable Letter of Credit, in a format and containing language satisfactory to AVIATION and approved by the Director. The Letter of Credit shall remain in full force and effect for a period extending, at a minimum of six (6) months following the expiration or termination of this Agreement as provided under Section 2.01 of this Agreement.

C. AVIATION may reduce the amount of the Letter of Credit requirement by fifty percent (50%) if, after 12 months of continuous services under this Agreement, the AIRLINE has:

1. Never filed for bankruptcy in the previous two (2) years;

2. Has had an excellent payment history with AVIATION, as determined by the Director;

3. Provides timely reporting of passengers, landings, and cargo/freight, and mail, along with all applicable payments as required by this Agreement;

4. Provides timely reporting and payment of applicable gross revenues for AIRLINE’s ground handling activities; and

5. Maintains an average of nine hundred (900) seats OR seven hundred fifty (750) seats AND five (5) flights into the Las Vegas market per gate, per day, based on a seven (7) day average.

If AIRLINE’s credit rating materially declines or AIRLINE shall file bankruptcy or its payment history deteriorates during the Term of this Agreement, Director shall have the right to require AIRLINE to reinstate the Letter of Credit to the full amount as originally required in Section 6.12(A).

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D. If payment is required by AIRLINE under the terms of this Agreement and is not made in accordance with the payment provisions set forth in Article 6 of this Agreement, AVIATION shall have the right to forfeit, take, and use Letter of Credit to make such payment in full for all Rentals, Fees, and Charges (including Passenger Facility Fees) and to exercise any other legal remedies to which it may be entitled.

Section 6.13 No Other Fees and Charges

A. Except as expressly provided for under this Agreement, including without limitation in Article 7 of this Agreement, no further Rentals, Fees, and Charges shall be charged against or collected from AIRLINE, its passengers, shippers, and receivers of freight and express, and its suppliers of material, by AVIATION for the Premises, facilities, rights, licenses, and privileges granted to AIRLINE in this Agreement. However, AVIATION expressly reserves the right to assess and collect reasonable fees for in-flight catering, vending, ground transportation, aviation support provider services, GSE services, screening/security services, maintenance services, damages to Airport property, excess utility usage, crew base parking, re-badging expenses, penalties and/or administrative assessments, and other similar services or expenses provided for under Article 3 of this Agreement and/or Title 20 Ordinance. However, AVIATION may not implement other Rentals, Fees, and Charges without prior written notice to AIRLINE.

B. Anything in this Agreement to the contrary notwithstanding, this Section shall not be interpreted or understood as contracting away AVIATION’s governmental authority.

Section 6.14 Policy Regarding Rates and Charges

A. AVIATION covenants to comply with the DOT Policy Regarding Rates and Charges in its capacity as Airport sponsor and operator in establishing rents and fees for the use of the Airport by aeronautical users.

B. AVIATION agrees to comply with Federal regulations concerning the diversion of Airport System Revenue for non-Airport System purposes.

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C. The parties agree that the rate making methodology established in this Agreement is consistent with the FAA Aeronautical Users Rate Policy. The parties agree that so long as AVIATION complies with the terms and rate making conditions of this Agreement in adjusting these Rentals, Fees, and Charges then AVIATION shall be deemed to be in compliance with the DOT Policy Regarding Rates and Charges.

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ARTICLE 7 – RATE CHANGES FOR RENTALS,

FEES, AND CHARGES

Section 7.01 Annual Rate Changes

A. No later than ninety (90) days prior to the end of each Fiscal Year, AVIATION shall notify AIRLINE of the proposed schedule of rates for Rentals, Fees, and Charges for the ensuing Fiscal Year. Said rates shall be determined and presented to AIRLINE substantially in conformance with the methods and format set forth in Exhibits D1, D2, D3, D4, D5, D6, D7, D8, D9, D10, and D11, attached hereto and by reference, made a part hereof. All Rentals, Fees, and Charges are subject to the final approval of the Board of County Commissioners, including any applicable modification to Title 20 Ordinance.

B. The Signatory Airlines, through the Airline Airport Affairs Committee (AAAC), shall have the right to review and comment on the proposed operating and maintenance budget. No later than thirty (30) days after forwarding the proposed schedule of rates for the Fiscal Year Rentals, Fees, and Charges, AVIATION agrees to meet with the AAAC at a mutually convenient time for the purpose of discussing such Rentals, Fees, and Charges. In advance of said meeting, AVIATION shall make available to the AAAC any reasonable requested additional information relating to the determination of the proposed rates. AVIATION agrees to fully consider the comments and recommendations of the Signatory Airlines prior to finalizing its schedule of rates for Rentals, Fees, and Charges for the ensuing Fiscal Year.

C. Following said meeting and prior to the end of the then current Fiscal Year, AVIATION shall notify AIRLINE, in writing, of the final schedule of rates for Rentals, Fees, and Charges for the ensuing Fiscal Year.

D. If calculation of the new Rentals, Fees, and Charges is not completed by AVIATION and noticed provided in Section 7.01(C) is not given on or prior to the end of the current Fiscal Year, the rates for Rentals, Fees, and Charges then in effect shall continue to be paid by AIRLINE until such calculations are concluded and such notice is given. Any differences shall be reconciled as part of the settlement described in Section 7.06.

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Section 7.02 Other Rate Changes

A. Rates for Rentals, Fees, and Charges may be changed at any other time that unaudited monthly Airport System financial statements indicate that the total Rentals, Fees, and Charges pursuant to the then current rate schedules are reasonably estimated and anticipated by AVIATION to increase or decrease by more than ten percent (10%) from the total Rentals, Fees and Charges that would be payable based upon the use of monthly financial data then available for said Fiscal Year. Rates for Rentals, Fees, and Charges shall also be changed whenever required by the terms and provisions of the Master Indenture; provided, however, that Signatory Airlines’ total Rentals, Fees, and Charges payable to AVIATION shall be allocated to AIRLINE in accordance with this Agreement.

Section 7.03 Incorporation of Exhibits D1 Through D12

A. Adjustments to rates for Rentals, Fees, and Charges, but not the methodology of calculating them, shall apply without the necessity of formal amendment of this Agreement. Upon each adjustment pursuant to this Article 7, revised Exhibits D1, D2, D3, D4, D5, D6, D7, D8, D9, D10, D11, and D12 of this Agreement, attached hereto and by reference made a part hereof, showing the calculation of adjusted rates for Rentals, Fees and Charges, shall be prepared by AVIATION and transmitted to AIRLINE. Said Exhibits shall then be deemed part of this Agreement without formal amendment thereto.

Section 7.04 Rate Stabilization Account

A. AIRLINE and AVIATION hereby agree that amortization on assets acquired or constructed from the proceeds of the Capital Improvement Fund shall be calculated on a straight-line amortization basis over the estimated useful life of the asset. AIRLINE and AVIATION further agree that only fifty percent (50%) of such calculated amortization shall be included in the calculation of the Rentals, Fees, and Charges, as further described in Exhibits D1 through D12 of this Agreement. The parties also agree that this amortization shall be deposited into a Rate Stabilization Account (up to the capped amount in Section 7.04(B) below) when collected from the AIRLINE, and that AVIATION may use such funds for, but is not necessarily limited to, the following:

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1. To fund true-ups at the end of any Fiscal Year up to the amount available in the Rate Stabilization Account;

2. To cover any amounts that are due as a result of any Air Transportation Company (Signatory or Non-Signatory) bankruptcy or that otherwise discontinues service into the Las Vegas market;

3. To pay down debt; or

4. For other similar uses as they may be identified during the term of this Agreement.

B. The Rate Stabilization Account shall be capped at eighteen and one-half percent (18.5%) of the current Fiscal Year’s operating and maintenance budget. It is agreed by both parties that AVIATION may charge up to one hundred percent (100%) of the Capital Improvement Fund amortization in subsequent years to replenish the Rate Stabilization Account to maintain the eighteen and one-half percent (18.5%) capped amount, in the event that AVIATION uses funds from the Rate Stabilization Account as permitted in Section 7.04(A) above.

C. In the event that the amount available in the Rate Stabilization Account is not sufficient to cover any true-ups at the end of any Fiscal Year, the parties agree that the amount in excess of the Rate Stabilization Account balance that is required to fund such true-ups shall be invoiced to the Signatory Airlines. AIRLINE shall pay its pro-rata share of such amount, determined based on the calculation of Rentals, Fees, and Charges, as further described in Exhibits D1 through D12 herein, within thirty (30) days of invoicing. The function of the Rate Stabilization Account and the flow of funds is further described on Exhibit D10.

Section 7.05 Amortization Due From Signatory Airlines Account

A. AVIATION will establish an Amortization Due From Signatory Airlines Account that will identify the accumulation of the fifty percent (50%) of amortization that has not been included in the calculation of the Rentals, Fees, and Charges, as further described in Exhibits D1 through D12 of the Agreement, and not charged to the Signatory Airlines for any Fiscal Year of this Agreement.

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B. AIRLINE and AVIATION agree that at the end of any Fiscal Year, if the true-up for that Fiscal Year results in a credit due to the Signatory Airlines, as referenced in Section 7.06 of this Agreement, the amount of such credit shall be deposited into the Capital Improvement Fund and the credit due amount will be credited against the Amortization Due From Signatory Airlines Account.

C. To the extent that the Amortization Due From Signatory Airlines Account reaches the zero, and additional credits are due the Signatory Airlines, a prorate share of such credits would be paid by AVIATION to AIRLINE within thirty (30) days. The function of the Amortization Due From Signatory Airlines Account and the flow of funds is further described on Exhibit D11.

Section 7.06 Fiscal Year True-Up

A. AVIATION shall use its best efforts such that within one-hundred fifty (150) days following the close of each Fiscal Year, or as soon as audited financial statements for said Fiscal Year are available, rates for Rentals, Fees, and Charges for the proceeding Fiscal Year shall be recalculated using audited financial data in place of the budgeted data and using the methods set forth in Exhibits D1 through D11. AIRLINE shall have reasonable access to the records of the Airport System, and shall have the right to audit the financial data in connection with such recalculations. Upon the determination of any differences between the actual Rentals, Fees and Charges paid by Signatory Airlines during the preceding Fiscal Year and the Rentals, Fees and Charges, including the application of both the Rate Stabilization Account and the Amortization Due From Signatory Airlines Account, as described above in Section 7.04 and Section 7.05, respectively, AVIATION shall, in the event of an overpayment, promptly refund to AIRLINE the amount of such overpayment within thirty (30) days, and in the event of an underpayment, invoice AIRLINE for the amount of such underpayment. Said invoice shall be due and payable within thirty (30) days of the invoice dates, or other date as mutually agreed to by both parties.

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Section 7.07 Extraordinary Adjustments of Rentals, Fees, and Charges

A. Notwithstanding any other provision hereof, if, at any time during the term of this Agreement, the revenues of the Airport System are not sufficient to pay all items included in the reports by AVIATION prepared pursuant to this Article 7, when due, or to pay any obligation or expense or cost incidental or necessary to, or arising out of the operation of the Airport System, including, without limitation, emergency repairs or expenses, the amounts required under the Master Indenture, the reasonably necessary cost of defending, settling, or satisfying any litigation or threatened litigation that relates to the Airport System, or any aspect thereof, or to compensate for the loss of revenue by reason of any labor dispute, AVIATION may, upon notice to and consultation with AIRLINE, increase Rentals, Fees, and Charges to such amounts as are sufficient to assure AVIATION that all such items, expenses, and costs shall be paid in full, solely from revenues of the Airport System.

Section 7.08 AVIATION Covenants

A. AVIATION covenants that for purposes of assigning and allocating costs, it shall utilize generally accepted accounting practices utilized for airports operating as an enterprise fund and include only those charges properly attributable to the Airport System.

B. AVIATION shall operate the Airport System in a manner as to produce Airport System Revenue from concessions, tenants, and other uses of the Airport System of a nature and amount which would be produced by a reasonably prudent operator of an airport system of substantially similar size, use, and activity, with due regard for the interests of the public, subject to existing leases.

C. AVIATION shall use Airport System Revenue in accordance with the Master Indenture, as amended, and applicable law.

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ARTICLE 8 – MASTER INDENTURE AND FLOW OF FUNDS

Section 8.01 Subordination to Master Indenture

A. This Agreement and all rights of AIRLINE hereunder are expressly subordinated and subject to the lien and provisions of any pledge, transfer, hypothecation, or assignment made at any time by AVIATION pursuant to the terms, covenants, and conditions of the Master Indenture.

B. In the event of any conflicts between this Agreement and the Master Indenture, the Master Indenture shall govern.

C. All definitional terms that are not specifically defined herein are to have the meanings set forth in the Master Indenture.

Section 8.02 Flow of Funds

A. Subject to the provisions of the Master Indenture, for reference, the flow of funds set forth in the Master Indenture, is shown on Exhibit D12, attached hereto and by reference made a part hereof.

B. All Airport System Revenue derived from the Airport System in each Fiscal Year shall be deposited in the Revenue Fund and used and applied in the following priority:

1. To the Operation and Maintenance Fund, an amount sufficient to increase the balance in the fund to at least the amount in the Annual Budget for Operation and Maintenance Expenses, as more fully described in Section 506 of the Master Indenture. Amounts shall be paid out of the Operation and Maintenance Fund from time to time by AVIATION for the necessary expenses for the operation, maintenance, repairs, and ordinary replacement and reconstruction of the Airport System.

2. To the Bond Fund, an amount equal to the aggregate annual amount of principal, interest, and Sinking Fund Requirement on any outstanding Bonds payable from annual Airport System Revenue, as more fully described in Section 507 of the Master Indenture. Amounts shall be paid out of the Bond Interest, Principal, Sinking Fund, and Redemption Accounts from time to time as necessary to pay required interest and principal and the Sinking Fund Requirement due on any Bonds outstanding and payable from Airport System Revenue, as more fully described in Section 507 of the Master Indenture.

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3. To the Debt Service Reserve Fund, an amount required to maintain the balance required by the Master Indenture. Amounts shall be paid out of the Debt Service Reserve Funds from time to time as necessary, to pay interest and principal due on any Bonds Outstanding and payable from Airport System Revenue to the extent that other moneys are not available within the Bond Fund, as more fully described in Section 508 of the Master Indenture.

4. To the Subordinate Securities Fund, an amount necessary to pay the annual requirements on any Subordinate Securities or other obligations of the Airport System payable from Airport System Revenue, as more fully described in Section 511 of the Master Indenture. Amounts shall be paid out of the Subordinate Securities Fund, from time to time as necessary, to pay any Subordinate Securities or other obligations payable from Airport System Revenue, as more fully described in Section 511 of the Master Indenture.

5. To the Working Capital and Contingency Reserve Fund, an amount required to maintain in such fund a balance equal to one-sixth (1/6) the amount in the Annual Budget for Operation and Maintenance Expenses for the current Fiscal Year, or such other amount as determined by AVIATION but not more than one-fourth (1/4) of the Annual Budget. Amounts shall be accumulated or reaccumulated and maintained as a contingency reserve in the Working Capital and Contingency Reserve Fund to be used only to prevent deficiencies in the payment of Operation and Maintenance Expenses from the Operation and Maintenance Fund. In this event, such moneys can be withdrawn from the Working Capital and Contingency Reserve Fund and transferred to the credit of the Operation and Maintenance Fund. Any moneys in the Working Capital and Contingency Reserve Fund exceeding the Minimum Working Capital Reserve shall be transferred to the Revenue Fund.

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6. To the Coverage Fund, an amount required to maintain in such fund twenty-five percent (25%) of the Aggregate Debt Service Requirements for the Senior Lien Bonds and ten percent (10%) of the Aggregate Debt Service Requirements for the Subordinate Lien Bonds of each series then outstanding for the Fiscal Year.

7. To the Capital Fund, all remaining moneys from the current Fiscal Year. All remaining moneys shall be applied during the Fiscal Year within the Capital Fund in the following priority:

a. The Capital Improvement Fund: To deposit all remaining amounts, after all required deposits have been made to each of the foregoing funds, into the Capital Improvement Fund. The Capital Improvement Fund shall be used to pay the costs of constructing or otherwise acquiring any enlargements, extensions of, or any other improvement to the Airport System, or to provide for the early retirement of Airport System Revenue Bonds or other debt obligations. The annual deposit to the Capital Improvement Fund shall be equal to the gaming revenue, CCRF Cost Center net revenues, and amortization of AVIATION funded Airport System assets for the current Fiscal Year.

8. If, at the end of any Fiscal Year in which Bonds or other debt obligations payable from Airport System Revenue remain outstanding, the balance in the Capital Improvement Account not programmed pursuant to the five-year CIP as presented in Exhibit C1 exceeds the greater of fifty million dollars ($50,000,000) or the sum of annual gaming concession revenues and the net revenues from the CCRF Cost Center for the three most recent Fiscal Years for which such data are available, then such excess shall be transferred as soon as possible to the Redemption Account of the Bond Fund or some like account and be used together with the investment income thereon to provide for the early retirement of such Bonds or other debt obligations at such time as AVIATION determines market conditions to be favorable for such purpose.

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C. Any balances in any of the hereinabove described funds and accounts shall remain assets of AVIATION to be used pursuant to the terms of this Agreement and, after termination or expiration of this Agreement, for any lawful Airport System purpose.

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ARTICLE 9 - OPERATION, MAINTENANCE, REPAIR,

ALTERATIONS, AND IMPROVEMENTS

Section 9.01 AIRLINE’s Responsibilities

A. It is understood and agreed that AIRLINE and AVIATION shall have the following maintenance and repair obligations as further outlined on Exhibit E1, Maintenance Matrix, attached hereto and by reference made a part hereof, or as the same may be modified from time to time through the issuance of a Space Use Letter, for its Premises. If AIRLINE fails to perform its obligations under this Article 9, AVIATION may do so after reasonable notice and recover its entire costs plus a twenty percent (20%) administrative charge from AIRLINE as additional rentals. In addition to these responsibilities, AIRLINE further agrees to the following:

1. AIRLINE shall perform its maintenance responsibilities as noted on Exhibit E1, at its sole cost and expense, except as hereinafter provided, shall not call on AVIATION for such services. AIRLINE shall perform such maintenance responsibilities in a manner acceptable to AVIATION. AIRLINE further agrees that:

a. AIRLINE shall be responsible for the removal and proper disposal of garbage, debris, contaminants, and other waste material (whether solid or liquid) arising out of its occupancy of the Premises or out of its operation. Such removal will conform with all governmental requirements and regulations.

b. If AIRLINE fails to perform its obligations under this Section of the Agreement, AVIATION may effect such repairs, maintenance, and/or janitorial services after providing AIRLINE reasonable notice and recover its costs plus twenty (20%) administrative charge.

c. AIRLINE may be required to pay as additional rentals to AVIATION, at the discretion of the Director, the cost to AVIATION of providing within AIRLINE’s Premises (except Joint Use Space) such water, sewer service, electricity, any modifications or connections to existing heating, air conditioning, plumbing, and electrical systems, as required by AIRLINE, including the payment of connection fees and any recurring periodic charges, and other utilities as are reasonably required. However, AIRLINE shall not pay for heating and air conditioning. The cost to AIRLINE shall be determined, at the discretion of the Director, by meter or by flat rate, calculated according to the proportion of the utility service used by AIRLINE and in the same manner as such flat rate is calculated for other utility users on the Airport. Any installations or alterations which have been approved by the Director, will be in accordance with the Airport Tenant Improvement Manual, applicable code, Airport Rules and Regulations, Operating Directives, and all other applicable governmental rules and regulations and building codes. AIRLINE, at the discretion of the Director, may be required to pay all costs associated with electrical power for additional elements based on general power rates established by AVIATION’s Energy Management Section. AVIATION may also require the installation of a meter by AIRLINE so that AIRLINE may become a direct customer of NV Energy, and AIRLINE will be responsible for the payment of such connection fees and any recurring periodic charges. AVIATION may elect to install its own metering system and/or devices and charge AIRLINE any costs, at the rate paid by AVIATION for the additional electrical usage.

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d. AIRLINE shall contract with AVIATION’s telecommunications provider at the Airport for any telephone systems and shall be responsible for all connection fees and any recurring periodic charges. AIRLINE shall also be responsible for any additional computer and/or communications systems, not otherwise provided by AVIATION (such as CUTE, CUSS, wireless applications, etc.), if desired and approved by the Director, including the payment of installation, maintenance, and/or recurring periodic charges.

e. AIRLINE will maintain its Apron Area and Ramp Area in a neat, clean, and orderly condition, and properly store all items on the Apron Area and Ramp Area in a manner that keeps such areas free from litter, debris, foreign object debris (FOD), refuse, petroleum products, or grease that may result from activities of its passengers, employees, agents, or suppliers; and remove all oil and grease spillage that is attributable to AIRLINE’s aircraft or equipment from its aircraft parking positions, in accordance with AIRLINE’s regulations and the Airport Rules and Regulations and Operating Directives.

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f. AIRLINE will perform, at its sole expense, ordinary preventive maintenance and ordinary upkeep and nonstructural repair of all facilities, personal property, and equipment, including, but not limited to, fixtures, doors and windows, floor coverings, airline baggage make-up areas (excluding the Baggage Handling Systems), and other facilities that may be used or occupied by AIRLINE from time to time, including all electrical work, plumbing, appliances, and fixtures located within its Exclusive Use Space. AIRLINE shall provide repairs and maintenance for manual and overhead automatic doors. AVIATION, at its own expense, shall maintain the exterior portions of the walls and roof of the Exclusive Use Space and all central mechanical distribution systems in good repair and condition.

g. AIRLINE shall immediately repair any damage in any other space at the Airport occasioned by the fault or negligence of AIRLINE, its officers, agents, employees, contractors, subcontractors, vendors, suppliers, licensees, passengers, and invitees, or other representatives, and not covered by insurance carried by AVIATION. AVIATION, at its option, may make such repairs and AIRLINE agrees to reimburse AVIATION, for its costs for labor and materials plus twenty percent (20%) administrative costs.

h. AVIATION shall have the right to implement an automated maintenance and/or service request system to receive and track any and all requests for maintenance and/or service from AVIATION. Upon such implementation, AVIATION will provide training to AIRLINE on the use of such system, and AIRLINE shall be responsible to make all such request for service using such system. AVIATION will not be responsible for any requests for service that are not done through the use of any automated system implemented by AVIATION under this section of the Agreement.

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2. AIRLINE expressly agrees that AVIATION shall not be liable to AIRLINE for bodily injury or for any loss or damage to real or personal property occasioned by flood, fire, earthquake, lightning, windstorm hail, explosion, riot, strike, civil commotion, smoke, vandalism, malicious mischief, or acts of civil authority and not caused by the negligence or willful acts or omissions of AVIATION.

3. AIRLINE agrees to provide reasonable level of service to comply with TSA Regulations 49 CFR Part 1500, 1520, 1540, 1542, 1544, 1546, 1548, and 1550, as promulgated for pre-departure screening and/or ticket checking, or other similar services which may be required from time to time, to accommodate Airport traffic levels without unreasonable backups or delays. AIRLINE agrees to provide AVIATION with a staffing and supervision plan for providing pre-departure screening and/or ticket checking, or other similar services which may be required from time to time, for AVIATION’s review. AVIATION will be provided updates as the staffing and supervision plan changes from time to time. AVIATION reserves the right to identify deficiencies in staffing or supervision and to require AIRLINE to correct such deficiencies in the interest of public safety. At any time during which activities take place, AIRLINE agrees that its contractor(s) will have supervision on duty with management authority to correct deficiencies resulting in passenger delay or backups. Disagreements arising between the parties concerning such activities will be resolved by using the procedure described in Section 4.01(G) of this Agreement. If AIRLINE fails to perform its obligations under this Section of the Agreement, AVIATION may, after reasonable notice, recover its entire costs, plus twenty percent (20%) administrative charge from AIRLINE as additional rentals, to manage the impacts or to correct such actions that impact Airport operations, including but not limited to, staffing to manage lines.

4. AIRLINE agrees to routinely inspect any and all operating areas and Premises, whether owned, operated, maintained, or otherwise under the control of AIRLINE, that is used by AIRLINE in the conduct of its business at the Airport, for any damage that may exist and/or repairs that may be required. AIRLINE shall report any such findings to AVIATION, through its Airport Control Center and to AVIATION’s automated system, as further described in Section 9.01(A)(1)(h) above (upon implementation of such system), within two (2) hours of its inspection, unless otherwise deemed to require an immediate response or an emergency. Upon AIRLINE’s inspection and subsequent notification to AVIATION, AIRLINE will not utilize such facilities and AIRLINE will also block off the area with safety cones or other similar safety devices to keep the public from entering the area that requires attention, maintenance, or repair. If AIRLINE uses such areas, under its reasonable discretion, AIRLINE shall accept full liability for its determination and use of the area.

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5. AIRLINE recognizes the importance of customer service in the Las Vegas Community and the traveling public. As such, AIRLINE will have appropriate personnel available to meet its specific flight schedules and to handle its customers and provide a high level of customer service in all areas of AIRLINE’s operation. AIRLINE shall also provide sufficient personnel to handle peak operating hours at any assigned gates, ticket counters, skycap positions, or other areas where AIRLINE representatives, agents, contractors, and/or other service providers are required to be available to process its customers, and any delays or other similar emergencies that may arise from time to time.

6. AIRLINE shall ultimately be responsible for all aspects of safety and security relating to AIRLINE’s operations, including but not limited to, providing access to the aircraft for physically challenged passengers as may be appropriate and as required under 49 CFR Part 27, whether or not the aircraft type is specifically excluded from this ruling. AIRLINE shall not make any modifications to any of the jetbridges and associated equipment, including the installation of equipment that may be required to comply with the requirements of 49 CFR Part 27, without the prior written approval of the Director. AIRLINE shall not be allowed to make any modifications or installations to the jetbridges and associated equipment that will in any way limit the functionality of the jetbridges and the associated equipment, as determined by AVIATION, or that will in any way limit or negatively impact any warranty that AVIATION may have in effect for such jetbridges and associated equipment. AIRLINE shall be responsible to train its employees, on a recurring basis, regarding the proper use and storage of all AVIATION provided equipment, including but not limited to Common Use Equipment, jetbridges and all ancillary equipment associated with the use of the jetbridge. AVIATION may request, and AIRLINE shall provide upon such request, training records or other similar documentation of such recurrent training for the use and storage of such equipment.

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Section 9.02 AVIATION’s Responsibilities

A. It is understood and agreed that AVIATION shall have the following maintenance and repair obligations as stated herein or as further identified on Exhibit E1 of this Agreement. The undertaking by AVIATION under this Section 9.02 does not relieve AIRLINE of its duties to maintain any Premises and to use Joint Use facilities and all other portions of the Airport with due care.

B. AVIATION, during the term of this Agreement, shall retain FAA Airport Certification and keep in good repair, or arrange for the operation, maintenance, and good repair of the Airport, including, but not limited to, the Public Areas and the Joint Use Space of the Terminal Complex, vehicular parking areas, runways, field lighting, taxiways, aprons, roadways, and all appurtenances, facilities, and services now or hereafter connected with the foregoing. AVIATION also shall keep the Airport free from obstruction, including, without limitation, vegetation, stones, and other foreign matter, as reasonably necessary, from the landing area, ramp area, taxi area, roadways, vehicular parking areas, and aircraft parking areas for the safe, convenient, and proper use of the Airport by AIRLINE.

C. AVIATION shall keep, or make appropriate arrangements to keep, the public view areas of the Terminal Complex adequately and attractively equipped, furnished, decorated, clean, and presentable. AVIATION shall provide and supply in such areas of the Terminal Complex signs, heat, electricity, light, power, air conditioning, wastewater disposal, water, and janitorial services, including rubbish removal. Interruptions of services shall not constitute a breach of this Agreement by AVIATION; but AVIATION shall use its best efforts to restore such service after interruption.

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D. AVIATION shall only be called upon by AIRLINE to provide exterior structural maintenance, maintenance of fluorescent light fixtures (including relamping), preventive maintenance (non-repair type maintenance) on overhead manual and automatic doors, and general plumbing (with the exception of AIRLINE’s exclusive plumbing facilities), as outlined on Exhibit E1 of this Agreement. AVIATION will relamp all public view areas. If AIRLINE relamps any public view areas, AIRLINE will relamp in a manner that is consistent in quality and appearance with AVIATION’s relamping program.

Section 9.03 AVIATION’s Right to Inspect and Make Repairs

A. AVIATION, by its authorized officers, employees, agents, contractors, subcontractors, and other representatives, shall have the right to enter AIRLINE’s Premises, at such times, and after giving proper notice, (not less than twenty-four (24) hours except in the event of an emergency), as may be reasonable under the circumstances and shall use best efforts not to interfere with AIRLINE’s operations, for the following purposes:

1. To inspect such space to determine whether AIRLINE has complied and is complying with the terms and conditions of this Agreement.

2. To accomplish repairs or replacements by AVIATION pursuant to Section 9.02, or in any case where AIRLINE is obligated to make repairs or replacements and has failed to do so, after notice, make such repairs or replacements on AIRLINE’s behalf.

3. In the exercise of AVIATION’s police powers or in the event of an emergency. For the purposes herein, the term “emergency” shall mean any situation, health or safety concern, incident, or action that, as determined by the Director, may cause or has caused structural, hazardous, or other similar catastrophic damage to the Premises or surrounding areas.

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4. No such entry by or on behalf of AVIATION upon any Premises leased to AIRLINE shall cause or constitute a termination of the letting thereof or be deemed to constitute an interference with the possession thereof by AIRLINE.

Section 9.04 Alterations and Improvements

A. AIRLINE agrees that any alterations, additions, improvements to, or installations on the Premises or other portions of the Airport shall be made in accordance with AVIATION’s Tenant Improvement Manual, as the same may be amended from time to time. The foregoing notwithstanding, AIRLINE shall make no alterations, additions, improvements to, or installations on the Premises, or other portions of the Airport, without the prior written approval of the Director. AIRLINE shall be responsible for the immediate removal, at its sole cost and expense, of any improvements made by AIRLINE to the Premises or other portions of the Airport without the prior written approval of the Director. In the course of AIRLINE’s tenant improvement work, AVIATION reserves the right, at its reasonable discretion, to direct the AIRLINE to install specific equipment, fixtures, and/or communication cables, at no cost to AVIATION, which meet specific standards of AVIATION to the reasonable extent such items remain compatible with AVIATION’s existing facilities and systems.

B. Any improvements completed without the prior written approval of the Director shall not be reimbursable under any of the provisions, terms, and/or conditions of this Agreement. Any such improvements may be subject to additional conditions, to which both parties agree, to be eligible for any reimbursement, payment, and/or unamortized costs under this Agreement. AVIATION may require AIRLINE to remove such improvements or have such improvements removed by AVIATION or a designee of AVIATION and recover such costs from AIRLINE, including any restoration, plus twenty percent (20%) administrative costs as additional rentals.

C. AIRLINE shall be responsible for the restoration of all or any portion of the Premises (except Joint Use Space) assigned to AIRLINE under this Agreement, upon the natural expiration or termination of this Agreement, howsoever caused, or upon relinquishment of any space assigned to AIRLINE during the course of this Agreement. All such restoration work shall be at the sole cost and expense of AIRLINE, and shall return the space to its original condition, reasonable wear and tear excepted, including, but not limited to, removal of all cabling installed by AIRLINE or its contractors back to the point of origin, patch and paint of walls, clean and repair floor tiles and/or carpet, and removal of fixtures and/or cabinetry owned or installed by AIRLINE.

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D. AIRLINE will be financially responsible for damage to the Terminal Complex, or any other portion of the Airport, caused by AIRLINE or AIRLINE’s officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, or other representatives during its operations, and/or any alterations or improvements to its Premises. If AVIATION repairs such damage on AIRLINE’s behalf, AVIATION will invoice AIRLINE in accordance with Section 6.10 of this Agreement, for the cost of the repairs plus twenty percent (20%) for administrative costs. The invoice will be due and payable within fifteen (15) days of receipt of such invoice.

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ARTICLE 10 - DAMAGE OR DESTRUCTION, INSURANCE, INDEMNIFICATION, AND RELEASE OF LIABILITY

Section 10.01 Damage or Destruction

A. If the Premises, including, but not limited to, Exclusive Use Space, Preferential Use Space, Common Use Space, or Joint Use Space, or any portions thereof, or buildings or structures of which such space may be a part, are rendered untenantable by reason of damage by fire or other casualty, AVIATION shall promptly notify AIRLINE whether the space shall be repaired. If the space is to be repaired, it will be repaired with due diligence by AVIATION, and the Rentals, Fees, and Charges allocable to the particular building, rooms, or other portion of the space rendered untenantable, for the period from the occurrence of the damage to the completion of the repairs, shall be abated. AVIATION shall exert its best effort to provide AIRLINE with temporary substitute space, if available, at such rent as deemed necessary and reasonable by AVIATION, until such time as the repairs are completed.

B. If AVIATION fails to notify AIRLINE of AVIATION’s decision within sixty (60) days after destruction, AVIATION shall be deemed to have elected to terminate this Agreement as to the space damaged or destroyed, and the Agreement shall automatically terminate as to such space as of the date of the damage.

C. In the event AIRLINE, its officers, agents, employees, sublessees, vendors, suppliers, contractors, subcontractors, or other representatives are determined responsible for any damage to the Airport and/or facilities AIRLINE shall pay to AVIATION the costs, including but not limited to labor and materials, for repairs for such damage plus twenty percent (20%) administrative fee. Payments shall be due upon presentation of an invoice for such costs to AIRLINE by AVIATION.

Section 10.02 Insurance

A. AIRLINE shall purchase and maintain in force the following insurance coverage as appropriate:

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1. Aircraft Liability insurance and Comprehensive Commercial Aviation General Public Liability insurance for claims of property damage, bodily injury, or death allegedly resulting from AIRLINE’s activities into, on, and leaving any part of the Airport or Airport System, in an amount not less than One Hundred Fifty Million ($150,000,000) Dollars per occurrence.

2. Liquor Liability insurance for any facility of AIRLINE serving alcoholic beverages on the Airport in an amount not less than Ten Million ($10,000,000) Dollars per occurrence, combined single limit.

3. Hangarkeepers Liability insurance in an amount adequate to cover any non-owned property in the care, custody, and control of AIRLINE on the Airport, but in any event in an amount not less than Five Million ($5,000,000) Dollars per occurrence, combined single limit.

4. Automobile Liability insurance (owned, non-owned, and hired policies) in an amount adequate to cover vehicles operating on the Airport in an amount not less than Five Million ($5,000,000) Dollars per person and per occurrence, combined single limit. Such coverage may be maintained in the form of “excess liability coverage.”

B. AVIATION, in operating the Airport, will carry and maintain comprehensive liability insurance in accordance with the Master Indenture in such amounts as would normally be maintained by public bodies engaged in carrying on similar activities.

C. The parties understand and agree that the minimum limits of the insurance herein required may become inadequate during the Term of this Agreement, and AIRLINE and AVIATION agree that each will increase such minimum limits by reasonable amounts on request of the other party.

D. All policies of insurance required herein shall be in a form and with a company or companies reasonably satisfactory to AVIATION. The rating of the insurance operator’s financial strength shall be “A-VIII” or stronger, as published in the latest Best’s Key Rating Guide or a comparable rating from a comparable rating service, and shall be fully disclosed within the certificates of insurance. Each certificate of insurance supplied by AIRLINE shall expressly name Clark County, its officers, employees, and volunteers as an additional insured with respect to liability arising out of the activities by or on behalf of the named insured to the extent of the liability assumed by AIRLINE in Section 10.03 herein. Each such policy and/or certificate supplied by AIRLINE must be endorsed to provide that such policy or coverage may not be materially changed, altered, suspended, voided, canceled, or reduced in coverage or in limits without first giving at least thirty (30) days written notice to AVIATION. Such notice does not waive the insurance requirements herein.

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E. Policies or certificates of the coverages required under this Section of the Agreement shall be delivered to AVIATION.

F. AIRLINE shall provide a current policy or certificate evidencing that AIRINE has current coverage as required under this Agreement, at all times throughout the Term of this Agreement. In the event that AIRLINE does not comply with this provision of the Agreement, AIRLINE will be considered to be in default, as further identified in Section 12.01(A)(7) of this Agreement.

G. If at any time AIRLINE shall fail to obtain or maintain in force the insurance required herein, the Director will advise AIRLINE with ten (10) days notice of AVIATION’s intention to purchase such insurance for AIRLINE’s account. If AIRLINE has not delivered evidence of insurance to AVIATION before the date on which the current insurance expires, AVIATION may provide such insurance by taking out policies in companies satisfactory to AVIATION. Such insurance shall be in amounts no greater than those stipulated herein or as may be in effect from time to time. The amount of the premiums paid for such insurance by AVIATION shall be payable by AIRLINE immediately upon receipt of AVIATION’s billing therefore, with interest at the interest rate of twenty percent (20%) per year, accrued and compounded on a monthly basis, commencing at the date of payment by AVIATION.

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H. If any claim for damages is filed with AIRLINE or if any lawsuit is instituted against AIRLINE, AIRLINE shall give prompt and timely notice thereof to AVIATION, provided that claims and lawsuits subject to such notice are only those that arise out of or are in any way connected with AIRLINE’s use of the Premises or AIRLINE’s operations or activities in regard to the Airport or Airport System and that in any way, directly or indirectly, contingently or otherwise, affect or might reasonably affect AVIATION, pursuant to Section 10.03 of this Agreement. Notice shall be deemed prompt and timely if given within thirty (30) days following the date of receipt of a claim or thirty (30) days following the date of service of process of a lawsuit.

I. If any claim for damages is filed with AVIATION or if any lawsuit is instituted against AVIATION, AVIATION shall give prompt and timely notice thereof to AIRLINE, provided that claims and lawsuits subject to such notice are only those that arise out of or are in any way connected with the operation of the Airport by AVIATION and that in any way, directly or indirectly, contingently or otherwise, affect or might reasonably affect AIRLINE. Notice shall be deemed prompt and timely if given within thirty (30) days following the date of receipt of a claim or thirty (30) days following the date of service of process of a lawsuit

J. The time limitations set forth in Section 10.02(H) and Section 10.02(I) herein are discretionary. If the notice required to be given by these Sections is late, that is, if notice is not given within the time period set forth therein, the party is not precluded from establishing that the notice actually given was prompt and timely under the circumstances of the particular claim or lawsuit, unless by the failure to give such notice within the applicable time period, the other party has been prejudiced in its ability to consider such claim or to respond or to properly defend such lawsuit. If the other party is so prejudiced by a late notice, then the late notice shall not be deemed to be prompt and timely.

Section 10.03 Indemnification

A. AIRLINE agrees to indemnify and shall protect, defend, and hold AVIATION and its officers and employees completely harmless from and against any and all liabilities, losses, suits, claims, judgments, fines, or demands, or direct expenses that may be imposed upon AVIATION arising by reason of injury or death of persons, including wrongful death, or damage to any property, including all reasonable costs for investigation and defense thereof, including but not limited to defense costs, attorney fees, court costs, and/or expert fees, of any nature whatsoever arising out of or incident to this Agreement and/or the use or occupancy of, or operations of AIRLINE at or about the Airport, or the acts or omissions of AIRLINE’s officers, agents, employees, contractors, subcontractors, suppliers, sublessees, licensees, invitees, and/or other representatives under control of AIRLINE, including movement of aircraft, regardless of where the injury, death, or damage may occur, except to the extent such injury, death, or damage is caused by the negligence of AVIATION, its officers or employees, provided, however that such indemnity will not apply as to any negligent act of AVIATION, its employees, agents, or representatives. AVIATION shall give to AIRLINE prompt notice of any such claims or actions. AIRLINE shall also use counsel reasonably acceptable to AVIATION in carrying out its obligations hereunder. The provisions of this Section shall survive the expiration or early termination of this Agreement with respect to matters arising before such expiration or early termination. These duties shall apply whether or not the allegations are found to be true.

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B. AVIATION agrees to be responsible to the extent provided by law, including but not limited to Nevada Revised Statutes Chapter 41, for any liability arising out of the performance of any condition of this Agreement proximately caused by any act or omission of its officers, agents, and employees.

Section 10.04 Release of Liability RE: Certain Damages

A. AVIATION shall not be liable for, and is hereby released from, all liability to AIRLINE, to AIRLINE’s insurance carrier, or to anyone claiming under or through AIRLINE for any loss or damage whatsoever to the property or effects of AIRLINE resulting from the discharge of water or other substances from pipes, sprinklers, or conduits, containers or appurtenances thereof or fixtures thereto, or for any damage resulting from the discharge or failure of electric current, regardless of cause or origin, except for such damage as may be primarily caused by reason of the negligence of AVIATION, its employees, or agents. The provisions of this Section shall not be construed as a limitation of AVIATION’s rights pursuant to Section 10.03, but are additional to the rights and exclusions from liability provided in Section 10.03.

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B. Any repairs made by AVIATION on behalf of AIRLINE under Section 9 of this Agreement does not release AIRLINE from any liability which may have arisen out of such damage, lack of maintenance, or omission by AIRLINE.

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ARTICLE 11 - ASSIGNMENT OF SPACE AND BANKRUPTCY

Section 11.01 Assignment and Subletting

A. AIRLINE shall not assign this Agreement, or any part hereof, in any manner whatsoever or sublet the Premises, or any part thereof, or any of the privileges recited herein without the prior written consent of the Director.

B. Assignment: AIRLINE shall have the right to assign all or any part of its rights and interest under this Agreement to any Air Transportation Company which is a wholly owned subsidiary of AIRLINE or which AIRLINE is a wholly owned subsidiary of, or any successor to its business through merger, consolidation, voluntary sale, or transfer of substantially all of its assets and with due notice of AIRLINE’s intent for any such assignment which shall be given to the Director thirty (30) days prior to such assignment hereunder. AVIATION’s consent thereof shall not be unreasonably withheld.

C. Subleasing: AIRLINE shall have the right to sublease a portion of its Premises to another approved Air Transportation Company, vendor, contractor, subcontractor, and/or ground handler only with the prior written approval of the Director. Any sublease arrangements must be in the form of a written instrument and must be specifically for purposes and uses of the facilities, as authorized under this Agreement and subject to the terms and conditions of this Agreement. AIRLINE shall provide AVIATION with a copy of the sublease agreement along with its request for AVIATION’s approval prior to AIRLINE’s execution of such sublease agreement. AIRLINE hereby agrees that any such sublessee’s operations must be contained completely within the AIRLINE’s operations area and Premises. AVIATION reserves the right for any sublessee of the AIRLINE to also enter into a written operating permit/agreement as required under Title 20 Ordinance as a condition of AVIATION’s approval of the sublease. AVIATION also reserves the right to require the AIRLINE to immediately remove any sublessee that has not been approved by the Director.

D. Nothing herein shall prevent the assignment of this Agreement to any corporation with which AIRLINE may merge or consolidate, or which may succeed to the business of AIRLINE pursuant to a merger or consolidation, but due notice of any such assignment shall be given to the Director within thirty (30) days after such merger, consolidation, or succession.

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Section 11.02 Nonwaiver of Responsibility

A. No assignment, transfer, conveyance, sublease, or granting a nonexclusive license by AIRLINE shall relieve AIRLINE of its responsibility for payment of Rentals, Fees, and Charges and the performance of all other obligations provided in this Agreement, without specific written consent of the Director to such relief.

Section 11.03 Relinquishment of Space

A. If AIRLINE desires to relinquish any of its Exclusive Use Space, Preferential Use Space, Common Use Space, or any rights to Joint Use Space, AIRLINE may notify the Director of the space available. No reassignment by the Director, nor any assignment, transfer, conveyance, or sublease by AIRLINE shall relieve AIRLINE of its primary responsibility for payment of Rentals, Fees, and Charges and the performance of all other obligations provided in this Agreement, without specific written consent by the Director to such relief.

Section 11.04 Bankruptcy

A. Section 11.01 shall not apply to any valid assumption or assignment of this Agreement, the Premises, or any part thereof, by a trustee, or AIRLINE as a debtor in possession under Section 365 of the Bankruptcy Code of 1994, as amended. For the purposes of the assumption or assignment of this Agreement, AIRLINE shall provide the assurances listed below which may include, but shall not be limited to:

1. Adequate assurance of the reliability of the proposed source for the Rentals, Fees, and Charges due under this Agreement on the assumption or assignment of this Agreement.

2. Adequate assurance that all other consideration due under this Agreement shall be forthcoming after the assumption or assignment of this Agreement.

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3. The procurement of a Letter of Credit, as required in Section 6.12 of this Agreement, from a financially reputable surety covering any costs or damages incurred by AVIATION in the event that AVIATION within thirty (30) days following the assumption or assignment of this Agreement, becomes entitled to and exercises any right to reassign the Premises covered by this Agreement under Article 4 of this Agreement.

4. Assurances regarding the immediate cure of delinquent amounts due under the Agreement.

5. Assurances that, in the case of an assignment or assumption of the Agreement, that the Assignee will not reduce the number of seats into the Las Vegas market within the first year, as deemed reasonable by the Director. AIRLINE shall notify the Director in writing, with sixty (60) days advance notice, of any such reduction of service into the Las Vegas market. AVIATION reserves the right to:

a. Revoke any and all space that was acquired by AIRLINE under assignment and assumption; and/or

b. Demand continued payment of such space until the number of seats are restored into the Las Vegas market by AIRLINE.

Section 11.05 Consent

A. Consent by the Director to any type of transfer provided for under this Agreement shall not in any way be construed to relieve AIRLINE from obtaining further consent for any subsequent transfer or assignment of any nature whatsoever.

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ARTICLE 12 – DEFAULT

Section 12.01 Default

A. AIRLINE, or its successor in interest thereto, pursuant to Article 11 of this Agreement, will be in default under this Agreement in the event of any one (1) or more of the following occurs:

1. Failure to pay any Rentals, Fees, and Charges, including but not limited to, Passenger Facility Charge payments or any other money payment required under this Agreement when the same are due and the continuance of such failure for a period of fifteen (15) days after the due date;

2. Fails to continue to complete any of its covenants and agreements after performance is commenced, or after the filing of any petition, proceedings, or action by, for, or against AIRLINE under any insolvency, bankruptcy, or reorganization act of law;

3. AIRLINE voluntarily abandons all or a significant portion of the Premises leased or assigned to it or discontinues its Air Transportation business at the Airport or ceases to provide any or all of the services required under this Agreement.

4. Failure to comply with or violation by AIRLINE, its employees, invitees, officers, agents, contractors, subcontractors, vendors, suppliers, sublessees, or other representatives, of the terms and conditions of this Agreement, as determined by Director. If such default is not cured as provided in this Article 12 of this Agreement, AVIATION may, at its sole discretion, suspend or terminate this Agreement.

5. If AIRLINE shall fail to abide by all applicable laws, ordinances, rules and regulations of the United States, State of Nevada.

6. If AIRLINE shall fail to take possession of the Premises.

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7. AIRLINE fails to provide the required certificates of insurance or Letter of Credit as required under this Agreement.

B. All rights and remedies of AVIATION herein created or otherwise existing at law are cumulative, and the exercise of one or more rights or remedies shall not be taken to exclude or waive the right to exercise of any other. All such rights and remedies may be exercised and enforced concurrently and whenever and as often as deemed advisable.

1. Any amount paid or expense or liability incurred by AVIATION for the account of AIRLINE may be deemed to be additional fees and charges and the same may, at the option of AVIATION, be added to any Rentals, Fees, and Charges then due or thereafter falling due hereunder.

2. AIRLINE agrees to keep all insurance policies in effect as required under Article 10 of this Agreement, until the time it surrenders its Premises.

C. Cure: AIRLINE will be considered in default of this Agreement if AIRLINE fails to fulfill any of the terms, covenants and conditions set forth in this Agreement, if such failure continues for a period of more than thirty (30) days (except failure to pay Rentals, Fees, and Charges in which case a ten (10) day cure period shall apply) after delivery by AVIATION of a written notice of such breach or default, except that AIRLINE shall not be in default of this Agreement if the fulfillment of its obligation requires activity over a period of time, and AIRLINE has commenced in good faith to perform whatever may be required for fulfillment within ten (10) days after receipt of notice from AVIATION and continues such performance without interruption except for causes beyond its control.

D. Upon default and after the cure period provided herein, AVIATION, without terminating this Agreement, may enter the Premises and improve and relet all or any part of it to others, for the account of AIRLINE, including costs of renovation and twenty percent (20%) administrative fee to be paid to AVIATION for all sublease rentals received, and AIRLINE shall promptly reimburse AVIATION for any deficiency in rentals or other payments received under such subletting, as compared with AIRLINE’s obligations hereunder.

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E. At any time before or after a reentry and reletting as provided in this Section 12.01, AVIATION may terminate AIRLINE’s rights under this Agreement, and AVIATION may reenter and take possession of all space, and cancel all rights and privileges granted to AIRLINE hereunder, without any restriction on recovery by AVIATION for past due Rentals, Fees, and Charges and other obligations of AIRLINE.

F. AVIATION shall have all additional rights and remedies as may be provided to landlords by law, including lien rights created under Nevada Revised Statute 108.702 for labor, materials, supplies, and/or storage.

G. In addition to all other remedies available, if default is made by AIRLINE as described in this Section 12.01, and such default is not cured as provided in Section 12.01(C) above, AVIATION may elect to terminate this Agreement with thirty (30) days written notice to AIRLINE.

1. If AVIATION elects to terminate this Agreement, it will in no way prejudice the right of action for arrearages of Rentals, Fees, and Charges owed by AIRLINE.

2. In the event of any termination for default by AIRLINE, AVIATION will have the right to enter upon the Premises and take exclusive possession of same. Redelivery and disposal of improvements will be as described in Section 4.04 of this Agreement.

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ARTICLE 13 - RULES AND REGULATIONS, OPERATING DIRECTIVES, COMPLIANCE WITH LAW, NONDISCRIMINATION

Section 13.01 Rules and Regulations and Operating Directives

A. AIRLINE shall not use or permit the use of any Airport facilities by its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, other representatives, or any other persons over whom it has control for any purpose or use other than those specifically authorized by this Agreement, and such other purposes or uses as may be mutually agreed upon in writing.

B. AIRLINE shall comply with, and shall require its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, other representatives, and any other persons over whom it has control to comply with such lawful, reasonable, and nondiscriminatory Rules and Regulations, Operating Directives, Airport Security Program, Nevada Revised Statutes, County Ordinances, or any successor documents, as well as other governmental regulations, whether municipal, state, or federal, including, but not limited to, all applicable Environmental Laws, governing the use of Airport facilities pursuant to this Agreement as may from time to time be adopted and promulgated, provided that such regulations promulgated by AVIATION are not inconsistent with the provision of this Agreement and do not materially adversely affect AIRLINE’s rights or obligations under this Agreement, including, but not limited to, health, safety, environmental concern, sanitation, and good order, and with such amendments, revisions, or extensions thereof as may from time to time be adopted and promulgated by AVIATION or other appropriate governmental agency. AIRLINE agrees to be subject to any lawful fines and/or administrative assessment(s) and/or penalties resulting from violations of any lawful, reasonable and nondiscriminatory Rules and Regulations and Operating Directives. AIRLINE will keep current all applicable municipal, state, or federal licenses, permits, or certificates required for the conduct of its business.

C. AIRLINE’s right of access to the Airport shall be subject to all state, local, and Federal laws or regulations and all lawful, reasonable, and nondiscriminatory Airport Rules and Regulations, Operating Directives, and ordinances, now in effect, or hereinafter adopted or promulgated by AVIATION acting in its governmental capacity.

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D. AIRLINE shall, at all times, maintain its Premises in compliance with any and all applicable present and future laws, ordinances, and general rules or regulations of any public or governmental authority now or at any time during the term of this Agreement in force relating to environment, sanitation, or public health, safety, or welfare.

E. Nothing herein contained shall be construed to prevent AIRLINE from contesting the validity, reasonableness, or applicability of any Federal, State, or local law, regulation, or ordinance now in effect or hereinafter adopted or promulgated, and AIRLINE shall not be deemed to be in default of any requirement of this Agreement so long as such contest is diligently prosecuted in an appropriate forum by AIRLINE or any other party to a similar agreement having interests consistent with those of AIRLINE, or until thirty (30) days following the entry of a final judgment contrary to AIRLINE’s position. However, should AIRLINE contest the validity or applicability of any tax or fee, the payment of which might constitute a lien on the Airport facilities, AVIATION may require the posting of a bond or placing in escrow of the amount of such tax or fee pending the outcome of such contest in order to avoid the imposition of such lien.

F. AIRLINE shall be responsible for and pay to AVIATION any penalties and/or administrative assessments, as established by the Operating Directives, and imposed by the Director for any violation of the Rules and Regulations, Operating Directives, and/or the terms and conditions of this Agreement. Such payments shall be due within thirty (30) days after receipt of such notice of violation.

Section 13.02 Compliance with Law

A. AIRLINE shall not use the Airport or its Premises (including, but not limited to, its Exclusive Use Space, Preferential Use Space, Joint Use Space, Common Use Space, or any part thereof), or permit the same to be used by any of its employees, officers, agents, contractors, subcontractors, vendors, suppliers, sublessees, invitees, or other representatives, for any illegal purposes and shall, at all times during the term of this Agreement, with respect to exercise of its rights hereunder, comply with all applicable ordinances, laws, and Rules and Regulations and Operating Directives of AVIATION (subject to Section 13.01 above) and of any city, county, or state government or agency of the U.S. Government, and of any political division or subdivision or agency, city, or commission thereof that may have jurisdiction to pass laws or ordinances or to make and enforce rules or regulations with respect to the uses hereunder, including, but not limited to, the Environmental Laws and all Operating Directives pertaining to the environment. AIRLINE will verify within a reasonable time frame, upon request from AVIATION, AIRLINE’s compliance with any such requirements as they may be amended or otherwise modified from time to time.

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B. At all times during the term of this Agreement, AIRLINE shall, in connection with its activities and operations on the Airport:

1. Comply with and conform to all existing and future statutes and ordinances, and the rules and regulations promulgated thereunder, of all Federal, State, and other governmental bodies of competent jurisdiction that apply to or affect, either directly or indirectly, AIRLINE or AIRLINE’s operations and activities under this Agreement.

2. Make, at its own expense, all nonstructural improvements, repairs, and alterations to its Exclusive Use Space, equipment, and personal property that are required to comply with or conform to all laws, ordinances, and rules and regulations of Federal, State, and other governmental bodies of competent jurisdiction that apply to AIRLINE or AIRLINE’s operation on the Airport.

3. Reimburse AVIATION for AIRLINE’s pro-rata share of all nonstructural improvements, repairs, and alterations to its Common Use Space and Joint Use Space that are required to comply with or conform to all laws, ordinances, and rules and regulations of Federal, State, and other governmental bodies of competent jurisdiction that apply to AIRLINE or AIRLINE’s operation on the Airport.

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4. Be and remain an independent contractor with respect to all installations, construction, and services performed by or at the request of AIRLINE hereunder.

Section 13.03 Nondiscrimination

A. AIRLINE, as part of the consideration hereof and as a covenant running with the land, hereby covenants and agrees that:

1. In the event facilities are constructed, maintained, or otherwise operated for a purpose for which a Federal Department of Transportation program or activity is extended or for another purpose involving the provision of similar services or benefits, AIRLINE shall maintain and operate such facilities and services in compliance with all other requirements imposed pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in Federally Assisted Programs of the Department of Transportation, Effectuation of Title VI of the Civil Rights Act of 1964, and as such regulations may be amended.

2. No person on the grounds of race, color, creed, national origin, sex, sexual orientation, age, or physical handicap shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of said facilities.

3. No person on the grounds of race, color, creed, national origin, sex, sexual orientation, age, or physical handicap shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination in the construction of any improvements on, over, or under the leased premises and the furnishing of services thereon.

4. AIRLINE shall use the Premises in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in Federally Assisted Programs of the Department of Transportation, Effectuation of Title VI of the Civil Rights Act of 1964, and as such regulations may be amended.

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5. AIRLINE agrees that it shall insert the provisions of Section 13.03(A)(1), (2), (3), and (4), inclusive, in any lease, contract, or other agreement by which it grants a right or privilege to any person, firm, or corporation to render accommodations and/or services to the public on the Premises herein leased.

6. AIRLINE agrees to reasonably participate with AVIATION, to the reasonable extent possible, in the development of a competition plan, as may be required by the Department of Transportation under 49 U.S.C. 47106(f) and 47106(j).

B. In the event of breach of any of the nondiscrimination covenants set forth in this Section, AVIATION shall, if required by the Federal agency having jurisdiction with respect thereto, have the right to terminate this Agreement and to reenter and repossess the Premises and the facilities thereon, and hold the same as if this Agreement had never been made or issued. This provision shall not become effective until the procedures of Title 49, Code of Federal Regulations, Part 21, are followed and completed, including the expiration of appeal rights.

C. AIRLINE shall furnish its accommodations and/or services on a fair, equal, and not unjustly discriminatory basis to all users thereof, and it shall charge fair, reasonable, and not unjustly discriminatory prices for each unit or service. AIRLINE may be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. Noncompliance with this Section 13.03(C) shall constitute a material breach hereof. In the event of such noncompliance, AVIATION shall, if required by the Federal agency having jurisdiction with respect thereto, have the right to terminate this Agreement and the estate hereby created without liability therefor.

D. AIRLINE assures AVIATION that AIRLINE will undertake an affirmative action program as required by FAA Regulations, Title 14, Code of Federal Regulations, Part 152, Subpart E, entitled “Nondiscrimination in Airport Aid Program,” or otherwise approved by the FAA, to ensure that no person shall, on the grounds of race, creed, color, national origin, sex, sexual orientation, or age be excluded from participation in any employment activities covered in such Subpart E. AIRLINE further assures AVIATION that no person shall be excluded on such grounds from participating in or receiving the services or benefits of any program or activity covered by such Subpart E. AIRLINE further assures AVIATION that it will require that its covered suborganizations provide assurances to AIRLINE that they similarly will undertake affirmative action programs and that they will require assurances from their suborganizations, as required by Title 14, Code of Federal Regulations, Part 152, Subpart E, to the same effect.

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E. AIRLINE covenants and agrees that no person shall be excluded from participation in, denied the benefits of, or otherwise discriminated against in the performance of this Agreement on the grounds of race, color, creed, national origin, sex, sexual orientation, age, or physical handicap, as provided in Part 23, of Title 49, of the Code of Federal Regulations entitled “Participation by Minority Business Enterprise in Department of Transportation Programs.”

F. In the event of a breach by AIRLINE of any of the assurances or covenants in Section 13.03(D) and (E), AVIATION shall, if required by the Federal agency having jurisdiction with respect thereto, have the right to terminate this Agreement, and to reenter and repossess any Premises hereunder, and to hold the same as if this Agreement had never been made or issued, but not without the express direction of the U.S. Department of Transportation or the FAA following suitable review, if any, of such breach and affording AIRLINE a reasonable opportunity to rectify the same, if appropriate.

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ARTICLE 14 – ENVIRONMENTAL COMPLIANCE

Section 14.01 Environmental Policy

A. Violation of Environmental Laws: AIRLINE will not cause or permit any Hazardous Material to be used, generated, manufactured, produced, stored, brought upon, or released on, under or about the Airport, or transported to and from the Premises, by AIRLINE, its employees, invitees, officers, agents, representatives, contractors, subcontractors, suppliers, sublessees and/or other representatives of AIRLINE in violation of applicable Environmental Laws, or Rules and Regulations and Operating Directives, as defined in this Agreement.

1. AVIATION will have access to the Premises to inspect same to ensure that AIRLINE is using the Premises in accordance with applicable Environmental Laws, as outlined in Article 13 of this Agreement, including the Airport Environmental Directive and Airport Environmental Handbook, as they now exist or as may be modified from time to time.

2. If AVIATION has reasonable cause to believe that AIRLINE is not using the Premises in compliance with applicable Environmental Laws, Rules and Regulations, and Operating Directives, AVIATION may request, in writing, that AIRLINE conduct reasonable testing and analysis, at no cost to AVIATION, to show that AIRLINE is complying with applicable Environmental Laws as outlined in Article 13, including the Rules and Regulations and Operating Directives. Any such tests will be conducted by qualified independent experts chosen by AIRLINE and subject to AVIATION’s reasonable approval. Copies of such reports from any such testing will be provided to the Director. Should AIRLINE fail to conduct requested testing, AVIATION will obtain the qualified independent experts and all costs incurred by AVIATION plus twenty percent (20%) administrative fee will be reimbursed by AIRLINE.

3. AIRLINE will provide copies of all notices, reports, claims, demands, or actions received by AIRLINE (that are not subject to an attorney/client privilege) pertaining to the Premises or AIRLINE’s use of the Airport, regarding any environmental concern or release or threatened release of Hazardous Materials or special wastes to the environment caused by AIRLINE, its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, or other representatives, if requested by Director.

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B. Contamination of Premises: If the presence of any Hazardous Material on, under, or about the Premises or the Airport caused or permitted by AIRLINE, its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, or other representatives, during the term of this Agreement results in any contamination of the AIRLINE’s Premises or other portion of the Airport used by AIRLINE in violation of applicable Environmental Laws, as outlined in Article 13, including the Rules and Regulations and Operating Directives, AIRLINE will promptly take any and all actions, at its sole cost and expense, as are necessary to remediate such area(s) as required by applicable Environmental Laws to a condition that existed prior to the introduction of any such Hazardous Material to said area(s). AIRLINE will take any and all steps necessary to remedy and remove any such Hazardous Materials and special wastes and any other environmental contaminations as are presently or subsequently discovered on or under the Premises and caused by AIRLINE, its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, or other representatives, during the term of this Agreement as are necessary to protect the public health and safety and the environment from actual or potential harm and to bring the Premises into compliance with all applicable Environmental Laws, as outlined in Article 13, including the Rules and Regulations and Operating Directives. Such procedures are subject to:

1. Prior approval of Director, which approval will not be unreasonably withheld, conditioned or delayed. AIRLINE will submit to Director a written plan for completing all remediation work. AVIATION retains the right to review and inspect all such work at any time using consultants and/or representatives of his/her choice. If AVIATION is required to obtain services from consultants to address AIRLINE remediation work, all costs plus twenty percent (20%) administrative fee will be reimbursed by AIRLINE.

2. Such actions of remediation by AIRLINE will not potentially have any material adverse long term effect on the Premises in the reasonable judgment of AVIATION.

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C. Compliance with all Governmental Authorities: AIRLINE will promptly make all submission to, provide all information to, and comply with all requirements of the appropriate governmental authority under all applicable Environmental Laws, as outlined in Article 13, including the Rules and Regulations and Operating Directives.

1. Should any applicable government authority with jurisdiction determine that a site characterization, site assessment, and/or cleanup plan be prepared or that a cleanup should be undertaken because of any spills or discharges of Hazardous Materials at the Premises which occur during the Term of this Agreement and caused by AIRLINE, its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, or other representatives, then AIRLINE shall (at its own expense) prepare and submit required plans and financial assurances, and carry out the approved plans in accordance with the Rules and Regulations and Operating Directives, as outline in Article 13, as well as all applicable regulations, laws, and/or ordinance. At not cost or expense to AVIATION, AIRLINE will promptly provide all information requested by AVIATION necessary to respond to any governmental investigation or to respond to any claim of liability by third parties which is related to such environmental contamination.

2. AIRLINE’s obligation and liabilities under this provision will continue so long as AVIATION bears any responsibility under the Environmental Laws for any action that occurred on the Premises during the Term of this Agreement.

3. The indemnification in Section 10.03 of this Agreement shall include, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal, or restoration work required by any Environmental Law, as outlined in Article 13, including the Rules and Regulations and Operating Directives as they now exists or as may be modified from time to time, because of Hazardous Material located on the Premises or present in the soil or ground water on, under, or about the Premises caused by AIRLINE, its officers, agents, employees, contractors, subcontractors, sublessees, vendors, suppliers, or other representatives, during the term of this Agreement in violation of Environmental Laws.

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4. The parties agree that AVIATION’s right to enforce AIRLINE’s promise to indemnify is not an adequate remedy at law for AIRLINE’s violation of any provision of this Agreement. AVIATION will also have the rights set forth in Section 14.02(D) of this Agreement in addition to all other rights and remedies provided by law or otherwise provided in this Agreement.

D. AVIATION’s Termination Rights for Violation of Environmental Laws: AVIATION shall have the following rights:

1. AVIATION may terminate this Agreement for AIRLINE’s failure, or that of its employees, invitees, officers, agents, representatives, contractors, subcontractors, suppliers, sublessees and/or other representatives of AIRLINE, or the failure of a third party under AIRLINE’s control, to comply with any of the requirements and obligations of this Agreement or applicable Environmental Laws, as outlined in Article 13, including the Rules and Regulations and Operating Directives, such failure constitutes a material default of this Agreement and will permit AVIATION to pursue this termination right in addition to all other rights and remedies provided by law or otherwise provided in this Agreement, to which AVIATION may resort cumulatively, or singularly, in the alternative.

2. AVIATION may, at AVIATION’s election, keep this Agreement in effect and enforce all of its rights and remedies under this Agreement, including:

a. The right to recover rent and other sums as they become due by the appropriate legal action; and/or

b. The right, upon thirty (30) days written notice to AIRLINE, to make payments required of AIRLINE or perform AIRLINE’s obligations and be reimbursed by AIRLINE within such thirty (30) day period; provided, however, that this time frame may be extended, if allowed by law, if AIRLINE’s obligations cannot reasonably be completed within thirty (30) days and AIRLINE has taken reasonable steps as determined by the Director, to initiate the required action within thirty (30) days

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3. Notwithstanding any other provision of this Agreement to the contrary, in the event AIRLINE fails to respond to any violation of applicable Environmental Laws, as outlined in Article 13, including the Rules and Regulations and Operating Directives, AVIATION will have the right of “self help” or similar remedy including access to the Premises in order to minimize any damages, expenses, penalties, and related fees or costs, arising from or related to a violation of applicable Environmental Law on, under, or about the Premises.

Section 14.02 Air Quality

A. AIRLINE shall comply within a reasonable period of time with all lawful, reasonable, and nondiscriminatory applicable AVIATION Rules and Regulations and Operating Directives pertaining to air quality that may be imposed on AVIATION by another authorized governmental agency or authority. AIRLINE reserves the right to challenge any such initiatives.

B. AIRLINE acknowledges that in order to comply with laws applicable to the expansion of the Airport System, and to comply with the Clean Air Act, certain improvements or changes to operating practices may be required. Such improvements or changes to operating practices may include, but not be limited to:

1. Conversion of all or a portion of AIRLINE’s ground service equipment (including, but not limited to, ground power units) and airline support vehicles to alternative fuels such as compressed natural gas or electricity.

2. AIRLINE utilization of AVIATION’s refueling or recharging stations or equipment. If AIRLINE chooses not to use AVIATION’s stations or equipment, AIRLINE agrees to provide its own alternate refueling arrangements. Such arrangements are subject to the prior approval of the Director, which approval will not be unreasonably withheld.

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3. Participation in programs that may be created under County Code or adopted into Airport Rules and Regulations, Operating Directives, and/or the Airport Environmental Handbook.

4. Use of 400 Hz power when and where available. AIRLINE shall limit the use of auxiliary power units or similar equipment when 400 Hz power units are available. AIRLINE may request approval for the use of any auxiliary power units that comply with clean air standards in effect at the time that may be necessary to provide additional cooling to an aircraft when parked. Such use would be further subject to the Rules and Regulations and Operating Directives, as outlined in Article 13.

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ARTICLE 15 - COVENANT NOT TO GRANT MORE FAVORABLE TERMS

Section 15.01 Covenant Not to Grant More Favorable Terms

A. AVIATION covenants and agrees not to enter into any lease, contract, or any other agreement with any other Air Transportation Company containing materially more favorable terms than this Agreement, or to grant to any tenant engaged in Air Transportation, rights or privileges with respect to the Airport that are not accorded AIRLINE hereunder, unless the same rights, terms, and privileges are concurrently made available to AIRLINE.

B. If any aircraft operator shall undertake any operations at the Airport for the carriage of passengers, cargo, or mail by air, AVIATION shall require, to the extent legally permissible, such other aircraft operator to execute and deliver an agreement, permit, license, lease, or contract with AVIATION providing for:

1. The payment of Landing Fees at rates and on such other terms and conditions as are not more favorable to the other party than those rates or terms and conditions then in effect for AIRLINE.

2. The payment of Rentals, Fees, and Charges for any space leased from AVIATION in the Terminal Complex at rates not less than those rates then payable by AIRLINE for similar space.

3. The payment for use by such aircraft operator of all Common Use Space and Joint Use Space and operating costs of all baggage handling or other passenger service systems, calculated and billed to such party as in the case of AIRLINE.

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ARTICLE 16 – TERMINATION

Section 16.01 Events Permitting Termination of Agreement by AIRLINE

A. AIRLINE may terminate this Agreement and terminate all of its future obligations hereunder at any time that AIRLINE is not in default in its payments or other obligations to AVIATION hereunder, by giving the Director thirty (30) days advance written notice if:

1. AVIATION is in default of any material portion of this Agreement; or

2. Any act occurs that deprives AIRLINE permanently of the rights, power, and privileges necessary for the proper conduct and operation of its Air Transportation business at the Airport.

Section 16.02 Events Permitting Termination of Agreement by AVIATION

A. AVIATION, at its option, may declare this Agreement terminated on the happening of any one (1) or more of the following events, and may exercise all rights of entry and re-entry on AIRLINE’s Premises:

1. If AIRLINE is found to be in default beyond any applicable cure period, as further described in Article 12 of this Agreement.

2. If any act occurs that deprives AIRLINE permanently of the rights, power, and privileges necessary for the proper conduct and operation of its Air Transportation business at the Airport.

3. If AIRLINE ceases the conduct of scheduled air service at the Airport for a period of sixty (60) consecutive days in accordance with Section 6.01 of this Agreement, except by reason of strikes or causes beyond the control of the AIRLINE.

4. If AIRLINE abandons and fails to use its Premises for a period of thirty (30) consecutive days, except when such abandonment and cessation are due to fire, earthquake, labor dispute, strike, governmental action, default of AVIATION, or other cause beyond AIRLINE’s control.

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5. If AIRLINE uses or permits the use of its Premises or any portion of the Airport at any time for any purpose for which the use thereof at that time is not authorized by this Agreement, or by a subsequent written agreement between the parties, or permits the use thereof in violation of any law, rule, or regulation to which AIRLINE has agreed in this Agreement to conform.

6. If AIRLINE is in violation of any provision of this Agreement and has not begun to remedy within thirty (30) days notice thereof.

B. AVIATION’s termination shall not be effective unless and until at least thirty (30) days have elapsed after written notice to AIRLINE specifying the date upon which such termination shall take effect and the cause for which it is being terminated has not been cured. However, if AIRLINE commences to cure the cause of such termination within said thirty (30) day period, such termination by AVIATION may be withdrawn or extended so long as AIRLINE continues diligently and in good faith to cure such cause.

Section 16.03 Possession by AVIATION

A. In any of the aforesaid events, AVIATION may take possession of the Premises upon thirty (30) days notice and remove AIRLINE’s effects, without being deemed guilty of trespassing. On said default AVIATION shall have and reserve all of its available remedies at law as a result of said breach of this Agreement.

B. Failure of AVIATION to declare this Agreement terminated on default of AIRLINE for any of the reasons set forth herein shall not operate to bar, destroy, or waive the right of AVIATION to cancel this Agreement by reason of any subsequent violation of the terms hereof.

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ARTICLE 17 – NOTICES

Section 17.01 Delivery of Notices

A. All notices, requests, consents, approvals, or other communication required under this Agreement shall be in writing and served or given by certified mail, registered mail, or email, facsimile, overnight delivery, except in cases of emergency, in which case they will be confirmed by email or facsimile. All communication via email or facsimile will be confirmed by a response email or facsimile or automated confirmation method. Either party shall have the right, by giving written notice to the other, to change the address at which its notices are to be received. Until any such change is made, notices shall be addressed and delivered as follows:

1. Notices intended for AVIATION will be addressed to:

Director of Aviation

P. O. Box 11005

Las Vegas, Nevada 89111-1005

Phone (702) 261-4640 FAX (702) 597-9553

Email: Business@mccarran.com

or to such other address as may be designated by AVIATION by written notice to AIRLINE.

2. Notices intended for AIRLINE will be addressed to:

Mr. Brian Davis

Director – Airport Planning

ALLEGIANT AIR, LLC

8360 S. Durango Drive

Las Vegas, NV 89113

Phone (702) 851-7316 FAX (702) 851-7322

Email: brian.davis@allegiantair.com

or to such other address as may be designated by AIRLINE by written notice to AVIATION.

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B. If notice is given in any other manner or at any other place, it will also be given at the place and in a manner specified in Section 17.01(A).

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ARTICLE 18 – MISCELLANEOUS

Section 18.01 Successors and Assigns Bound

A. This Agreement shall be binding on and inure to the benefit of the successors and assigns of the parties hereto.

Section 18.02 Governing Law

A. The laws of the State of Nevada shall govern this Agreement and all disputes arising hereunder.

Section 18.03 Noninterference with Operation of the Airport

A. AIRLINE, by accepting this Agreement, expressly agrees for itself, its successors, and assigns that it will not make use of the leased Premises in any manner that might interfere with the landing and taking off of aircraft at the Airport or otherwise constitute a hazard. In the event the aforesaid covenant is breached, upon reasonable notice to AIRLINE and opportunity to cure, AVIATION reserves the right to enter upon the Premises hereby leased and cause the abatement of such interference at the expense of AIRLINE.

B. AVIATION shall maintain and keep in repair the Airport landing areas, including taxiways, and shall have the right to direct and control (consistent with the Federal Air Regulations) all activities of AIRLINE in this regard.

Section 18.04 Severability

A. If one or more clauses, sections, or provisions of this Agreement shall be held to be unlawful, invalid, or unenforceable, it is agreed that the remainder of the Agreement shall not be affected thereby.

Section 18.05 Quiet Enjoyment

A. AIRLINE shall, upon payment of the Rentals, Fees, and Charges herein required, and subject to performance and compliance by AIRLINE of the covenants, conditions, and agreements on the part of AIRLINE to be performed and complied with hereunder, peaceably have and enjoy the rights, uses, and privileges of the Airport, its appurtenances, and facilities as granted hereby and by the Rules and Regulations, Operating Directives, and Space Use Letters.

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Section 18.06 Taxes

A. AIRLINE shall pay, but such payment shall not be considered part of Airport System Revenue, all lawful taxes, including any possessory interest tax, assessments, personal property tax, and charges of a like nature, if any, which at any time during the Term of this Agreement may be levied against AIRLINE or become a lien by virtue of any levy, assessment, or charge against AIRLINE by the Federal Government, the State of Nevada, the County of Clark acting in its governmental capacity, any municipal corporation having jurisdiction over the Airport, any local government entity, any government successor in authority to the foregoing, or any other tax or assessment levying bodies, in whole or in part, upon or in respect to any of the Premises under this Agreement or such facilities of the Airport as are made available for use by AIRLINE hereunder, or upon or in respect to any personal property belonging to AIRLINE situated on the Premises under this Agreement. Payment of such taxes, assessments, and charges, when and if levied or assessed, shall be made by AIRLINE directly to the taxing or assessing authority charged with collection thereof.

B. Notwithstanding anything contained herein to the contrary, AIRLINE may, at its own expense, contest the amount or validity of any tax or assessment, or the inclusion of the space leased under this Agreement as taxable or assessable property, directly against the taxing or assessing authority.

C. On any termination of this Agreement, all lawful taxes then levied or a lien upon any such property or taxable interest therein shall be paid in full by AIRLINE forthwith, or as soon as a statement thereof has been issued by the tax collector if termination occurs during the interval between attachment of the lien and issuance of a statement.

Section 18.07 Liens

A. AIRLINE shall cause to be removed promptly any and all liens of any nature arising out of or because of any construction performed by AIRLINE or any of its officers, agents, employees, contractors, subcontractors, vendors, suppliers, or other representatives upon Exclusive Use Space, Preferential Use Space, Common Use Space, or Joint Use Space or arising out of or because of the performance of any work or labor by or for it or them at said Premises, reserving the right to contest in court the validity of any such liens. AIRLINE shall have the right to post an appropriate bond to cover its obligations pursuant to this paragraph.

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B. AIRLINE shall take or cause to be taken all steps that are required or permitted by law in order to avoid the imposition of any lien upon the Premises or improvements thereon, or any other portion of the Airport. However, should any lien be placed on the Premises or any improvements thereon, or any other portion of the Airport, the AIRLINE will cause to be removed any and all liens of any nature, including, but not limited to the following:

1. Any tax liens and liens arising out of or because of any construction or installation performed by or on behalf of AIRLINE, its officers, agents, employees, contractors, subcontractors, vendors, suppliers, or other representatives upon AIRLINE’s Premises, or any other portion of the Airport;

2. Any lien arising out of or because of the performance of any work or labor to AIRLINE at said Premises or other portions of the Airport;

3. Any lien arising out of or because of the furnishing of materials, goods, supplies, and/or other services to AIRLINE at said Premises or other portions of the Airport;

4. Any lien arising out of or because of non-payment by AIRLINE, its contractors, subcontractors, vendors, suppliers, or other representatives for work, labor, and/or materials to AIRLINE at said Premises or other portions of the Airport.

Should any such lien be made or filed, AIRLINE will bond against or discharge the same within thirty (30) days after written request by the Director. AIRLINE shall submit to the Director adequate documentation to show that the lien has been properly resolved and/or discharged.

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C. In the event any person or corporation shall attempt to assert a mechanic’s lien against the Premises for improvements made by AIRLINE, AIRLINE shall hold AVIATION harmless from such claim, including the cost of defense.

D. Nothing in this section shall prevent AIRLINE from contesting the validity of liens placed upon its Exclusive Use Space, Preferential Use Space, Common Use Space, or Joint Use Space. If AIRLINE contests a lien, it will do so in a prompt and expeditious manner.

Section 18.08 Obtaining Federal and State Funds

A. AVIATION shall use its best efforts to obtain appropriate grants from State or Federal agencies or other sources, when consistent with prudent management of the Airport.

Section 18.09 Nonliability of AVIATION’s or AIRLINE’s Officers, Agents, and Employees

A. No elected official, commissioner, councilman, director, officer, agent, or employee of either party shall be charged personally or held contractually liable by or to the other party under any term or provision of this Agreement or because of any breach thereof or because of its or their execution or attempted execution thereof.

Section 18.10 Subordination to Agreements with the U.S. Government

A. This Agreement is subject and subordinate to the provisions of any agreements heretofore or hereafter made between AVIATION and the United States, relative to the operation or maintenance of the Airport System, or to the expenditure of Federal funds for the improvement or development of the Airport System, including the expenditure of Federal funds for the development of the Airport System in accordance with the provisions of the Federal Aviation Act of 1958, the Federal Aid to Airports Act, the Airport and Airway Development Act of 1970, and the Airport and Airway Improvement Act of 1982, as such Acts have been amended from time to time. As of the effective date of this Agreement, the Director is not aware of any conflicts with the foregoing.

B. In the event that the FAA requires, as a condition precedent to the granting of funds for the improvement of the Airport System, modifications or changes to this Agreement, AIRLINE agrees to consent to such amendments, modifications, revisions, supplements, or deletions of any of the terms, conditions, or requirements of this Agreement as may be required to enable AVIATION to obtain such grant of funds. These modifications or changes shall only be made after consultation with the airlines and must be consistent with the tenets of sound airport management, and also must be consistent with the prudent operator requirements contained in Section 18.34.

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Section 18.11 Incorporation of Exhibits

A. All exhibits referred to in this Agreement are intended to be and hereby are specifically made a part of this Agreement.

Section 18.12 Construction of Certain Words

A. Words used in this Agreement may be construed as follows:

1. Number. Words used in the singular number include the plural, and words used in the plural number include the singular.

2. Tense. Words used in the present tense include the future as well as the present.

Section 18.13 Incorporation of Required Provisions

A. AVIATION and AIRLINE incorporate herein by this reference all provisions lawfully required to be contained herein by any governmental body or agency.

Section 18.14 Price Level Adjustments

A. When not otherwise provided for herein, the fixed dollar amounts contained in this Agreement may be adjusted each year pursuant to the Master Indenture or otherwise in proportion to the changes in the Gross Domestic Product Implicit Price Deflator index published by the U.S. Department of Labor, Bureau of Labor Statistics, using as a base the latest published index available as of January 1 st for the current year in which such adjustments may be made.

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Section 18.15 Entire Agreement

A. This Agreement, together with all exhibits attached hereto, constitutes the entire agreement between the parties hereto, and all other representations or statements heretofore made, verbal or written, are merged herein, and this Agreement may be amended only in writing, and executed by duly authorized representatives of the parties hereto.

Section 18.16 Nonwaiver of Rights

A. No waiver of default by either party of any of the terms, covenants, and conditions hereof to be performed, kept, and observed by the other party shall be construed, or shall operate, as a waiver of any subsequent default of any of the terms, covenants, or conditions herein contained, to be performed, kept, and observed by the other party.

Section 18.17 Force Majeure

A. Neither AVIATION nor AIRLINE shall be deemed in violation of this Agreement if it is prevented from performing any of the obligations hereunder by reason of strikes, boycotts, labor disputes, embargoes, shortage of energy or materials, acts of God, acts of a public enemy, acts of superior governmental authority, weather conditions, riots, rebellion, sabotage, or any other circumstances for which it is not responsible or that are not within its control, provided these provisions shall not excuse AIRLINE from paying the rentals and fees specified in Article 6.

Section 18.18 Headings

A. The headings of the several articles and sections of this Agreement are inserted only as a matter of convenience and for reference and do not define or limit the scope or intent of any provisions of this Agreement and shall not be construed to affect in any manner the terms and provisions hereof or the interpretation or construction thereof.

Section 18.19 Nonexclusive Rights

A. It is understood and agreed that nothing herein contained shall be construed to grant to AIRLINE any exclusive right or privilege within the meaning of Section 308 of the Federal Aviation Act for the conduct of any activity on the Airport, except that, subject to the terms and provisions hereof, AIRLINE shall have the right to exclusive possession of the Exclusive Use Space leased to AIRLINE under the provisions of this Agreement.

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Section 18.20 Inspection of Books and Records

A. Each party hereto, at its expense and on reasonable notice, shall have the right from time to time to inspect and copy the books, records, and other data of the other party relating to the provisions and requirements hereof, provided such inspection is made during regular business hours.

Section 18.21 Generally Accepted Accounting Principles

A. Whenever any report or disclosure referred to in this Agreement consists, either in whole or in part, of financial information, such report or disclosure shall be prepared in accordance with generally accepted accounting principles, except as specifically provided to the contrary in this Agreement.

Section 18.22 General Interpretation

A. Insofar as this Agreement grants, permits, or contemplates the use of space or facilities or the doing of any other act or thing at the Airport by AIRLINE, such use or the doing of such act or thing is to be in connection with the operation of AIRLINE’s Air Transportation business for the carriage by aircraft of persons, property, cargo, or mail on scheduled or nonscheduled flights, whether as a common carrier, a contract carrier, a private carrier, or otherwise. Each of the parties, however, has entered into this Agreement solely for its own benefit; and, without limiting the right of either party to maintain suits, actions, or other proceedings because of breaches of this Agreement, the Agreement does not grant to any third person, excepting a successor party to AVIATION or AIRLINE, a right to claim damages or bring any suit, action, or other proceeding against either AVIATION or AIRLINE because of any breach hereof. Nothing in this Agreement shall restrict AVIATION’s authority in its governmental capacity to enact ordinances affecting the Airport System.

Section 18.23 Holding Over

A. If AIRLINE remains in possession of the Premises after the expiration of this Agreement, such holding over shall not be deemed as a renewal or extension of this Agreement, but shall create only a tenancy from month to month that may be terminated at any time by AVIATION. Such holding over, if with the approval of AVIATION, shall be upon the same terms and conditions as set forth in this Agreement. If such holding over is without the approval of AVIATION, such holding over shall be upon the same terms and conditions as set forth in the Agreement, except for Rentals, Fees, and Charges which will be billed at the Non-Signatory rates in effect at that time.

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Section 18.24 Consent Not to be Unreasonably Withheld

A. Whenever consent is required herein by either AVIATION or AIRLINE, such consent shall not be unreasonably withheld.

Section 18.25 Authority of Director

A. The Director has the authority to act on behalf of the Board of County Commissioners for all purposes under this Agreement, and as such, all rights and obligations of AVIATION under this Agreement may be exercised by the Director, unless specifically provided otherwise or required by law.

Section 18.26 Invalid Provision

A. If any covenant, condition, or provision herein contained is held to be invalid by any court of competent jurisdiction, the invalidity of any such covenant, condition, or provision shall in no way affect any other covenant, condition, or provision herein contained, provided that the invalidity of any such covenant, condition, or provision does not materially prejudice either party hereto in its respective rights and obligations contained in the valid covenants, conditions, or provisions in this Agreement.

Section 18.27 Amendments

A. This Agreement may be amended in whole or in part without further consideration upon mutual written consent of AVIATION and AIRLINE.

Section 18.28 Payment of Utility Charges

A. AIRLINE shall pay promptly for all extra ordinary utilities and utility services used by AIRLINE at or in AIRLINE’s Exclusive Use Space in excess of those utility services specifically provided by AVIATION.

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Section 18.29 Vending Machines

A. AIRLINE shall ensure that no amusement vending (excluding self ticketing machines), public pay phones, or other machines operated by coins, tokens, or credit cards are installed or maintained in or at AIRLINE’s public Exclusive Use Space or Preferential Use Space except with the prior written permission of the Director.

Section 18.30 Public Address System

A. AIRLINE agrees that the use of AVIATION’s public address system will be in accordance with AVIATION’s written public address system policy. AIRLINE shall not install, cause to be installed, or use any other public address system at the Terminal Complex without the prior written approval of the Director.

Section 18.31 Control of Employees, Agents, Representatives, Etc. of AIRLINE

A. AIRLINE shall require all of its officers, agents, employees, contractors, subcontractors, vendors, suppliers, sublessees, or other representatives hired by AIRLINE working in view of the public and about the Terminal Complex to wear clean and neat attire and to display appropriate identification. AIRLINE will, in and about the Airport and its Premises, exercise reasonable control over the conduct, demeanor and appearance of its employees, invitees (excluding passengers), officers, agents, sublessees, contractors, subcontractors, suppliers, vendors, and other representatives in an orderly and proper manner so as not to harass, irritate, disturb or be offensive to others. All such personnel must conduct themselves at all times in a courteous manner toward the public and at all times act in accordance with the Airport Rules and Regulations, Operating Directives, and Airport Security Program. Upon objection from the Director to AIRLINE concerning the conduct, demeanor or appearance of such persons, AIRLINE will, within a reasonable time, remedy the cause of the objection.

Section 18.32 Removal of Disabled Aircraft

A. AIRLINE shall promptly remove any of its disabled aircraft from any part of the Airport, including, without limitation, runways, taxiways, aprons and gate positions, and place any such disabled aircraft in such storage areas as may be designated by the Director. AIRLINE may store such disabled aircraft only for such length of time and on such terms and conditions as may be established by AVIATION. If AIRLINE fails to remove any of its disabled aircraft promptly, the Director may, but shall not be obligated to, cause the removal of such disabled aircraft, provided, however, the obligation to remove or store such disabled aircraft shall not be inconsistent with Federal laws and regulations and AIRLINE agrees to reimburse AVIATION for all costs of such removal, and AIRLINE further hereby releases AVIATION from any and all claims for damage to the disabled aircraft or otherwise arising from or in any way connected with such removal by AVIATION unless caused by the negligence or recklessness of AVIATION.

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Section 18.33 Licenses, Fees, and Permits

A. AIRLINE shall obtain and pay for all licenses, fees, permits, or other authorization or charges as required under Federal, State, or local laws and regulations insofar as they are necessary to comply with the requirements of this Agreement and the privileges extended hereunder.

Section 18.34 Prudent Operator

A. AVIATION agrees to operate the Airport in a prudent manner and to maximize nonairline revenue consistent with its obligations as a public airport sponsor.

Section 18.35 Airport Access License/Permit

A. AVIATION reserves the right to establish a licensing or permit procedure for vehicles, consistent with AVIATION’s air quality program, requiring access to the Airport operational areas and to levy directly against AIRLINE or its suppliers a reasonable regulatory or administrative charge to recover the cost of any such program for issuance of such Airport access license or permit.

Section 18.36 Energy Conservation

A. AIRLINE shall comply with lawful, reasonable and nondiscriminatory AVIATION Rules and Regulations and Operating Directives pertaining to energy conservation and management to the extent that such Rules and Regulations and Operating Directives do not infringe on the rights and privileges granted herein.

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Section 18.37 Compliance with Part 77, Title 14, CFR

A. AIRLINE agrees to comply with the notification and review requirements covered in Part 77, Title 14, Code of Federal Regulations, FAA Regulations, in the event future construction of a building is planned for the leased Premises, or in the event of any planned modification or alteration of any present or future building or structure situated on the leased Premises.

Section 18.38 Reservations RE: Airspace and Noise

A. There is hereby reserved to AVIATION, its successors, and assigns, for the use and benefit of the public, a right of flight for the passage of aircraft in the airspace above the surface of the Premises and other portions of the Airport.

Section 18.39 National Emergency

A. This Agreement and all the provisions hereof shall be subject to whatever right the U.S. Government now has, or in the future may have or acquire, affecting the control, operation, regulation, and taking over of said Airport or the exclusive or nonexclusive use of the Airport by the United States during the time of war or national emergency.

Section 18.40 Americans with Disabilities Act and Associated Regulations

A. AIRLINE will throughout the Term of this Agreement be in compliance with all applicable provisions of the Americans with Disabilities Act, Public Law 101-336, as well as any other applicable rules, regulations, laws, ordinances, either in effect now, or as may be promulgated, including but not limited to, the requirement to provide an aircraft lift device to accommodate appropriate passengers accessing smaller aircraft.

Section 18.41 Signs and/or Works of Art

A. AVIATION will provide the applicable signage required by AIRLINE in accordance with the signage standards set forth in the Airport Tenant Improvement Manual. AIRLINE will not erect, install, operate, nor cause or permit to be erected, installed, or operated upon the Premises (except within non-public portions of AIRLINE’s Exclusive Use Space) or elsewhere upon the Airport property, any signs or other similar advertising devices and/or directional signs for its own business or for the benefit of any marketing, advertising, or other similar partnership(s) that AIRLINE may enter into. AVIATION reserves all rights to establish any advertising signs located on the Premises and other areas of the Airport, as well as the duration of such advertising. Any identifying signs erected, installed, operated or attached to the Premises, or on the Airport, will require the prior written approval of the Director, which will not be unreasonably withheld. Such advertising shall be subject to standard airport advertising fee schedule and shall be in conformance with the Airport Advertising Policy. Such approval may consider and provide conditions concerning factors including, but not limited to, size, type, content, and method of installation.

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B. AIRLINE will not commission, install, or display any work of art without the prior written approval of the Director, and without a full written waiver by the artist of all rights under the Visual Arts Rights Act of 1990, 17 U.S.C. Sections 106A and 113. The parties acknowledge and agree that AVIATION retains all rights to billboard sign sites, which may presently, or in the future, exist upon the Airport.

Section 18.42 Time is of the Essence

A. Time is of the essence in this Agreement.

*****

AIRLINE warrants and represents that it has the right, power, and legal capacity to enter into, and perform its obligations under this Agreement, and no approvals or consents of any persons are necessary in connection with it. The execution, delivery, and performance of this Agreement by AIRLINE have been duly authorized by all necessary corporate action of AIRLINE, and this Agreement will constitute a legal, valid, and binding obligation of AIRLINE, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally and general principles of equity.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

CLARK COUNTY, NEVADA	ALLEGIANT AIR, LLC

BY:______________________________	BY:______________________________
RANDALL H. WALKER	PRINT:___________________________
Director of Aviation	TITLE:___________________________


APPROVED AS TO FORM:
David Roger, District Attorney

BY:______________________________
(Deputy)

Approved as to form by the Clark County Board of Commissioners at its regularly scheduled meeting held on September 7, 2010.

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EXHIBIT D1

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF TERMINAL COMPLEX RENTAL RATE

The annual Terminal Complex Rental Rate shall be calculated in accordance with the following formula.

A. The Terminal Complex Requirement shall be determined by taking the sum of the following:

1. Operations & Maintenance Expenses : Direct and indirect expenses allocated to the Terminal Complex Cost Center in accordance with AVIATION’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Terminal Complex based on the percentage of direct operating and maintenance expenses allocated to the Terminal Complex Cost Center of all direct cost center operating and maintenance expenses.

2. Working Capital and Contingency Reserve Fund Deposit Requirements: Any amounts necessary to maintain the required balances in the Working Capital and Contingency Reserve Fund in accordance with the Master Indenture and allocated to the Terminal Complex Cost Center.

3. Debt Service Plus Coverage: The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Terminal Complex Cost Center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture, and allocated to the Terminal Complex Cost Center.

4. Amortization: Fifty percent (50.0%) or such other percentage as may be determined in accordance with provisions contained in Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Terminal Complex Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Terminal Complex Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology.

5. Equipment and Capital Outlay Fund: The annual amount for equipment and capital outlays, as defined herein, included in the Airport System’s Operating and Maintenance Budget and allocated to the Terminal Complex Cost Center.

B. And subtracting from this amount, the following:

1. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Terminal Complex Cost Center.

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2. Non-Airline Revenues: The amount of Non-Airline Revenue allocated to the Terminal Complex Cost Center, including, but not necessarily limited to, the following:

i. Terminal Concession Fees (excluding Gaming revenue);

ii. Private Tenant Terminal Complex Rentals;

iii. Covered Ramp Storage;

iv. Fifty percent (50%) of Unrestricted Interest Income earned by the Airport System net of any interest income allocated to the Consolidated Rental Car Facility (CRCF) based on the same percentage as allocated operating and maintenance expenses to the CRCF Cost Center to all Airport System operating and maintenance expenses; and

v. Any Miscellaneous Revenue allocated to the Terminal Complex Cost Center.

3. Airline Revenues: The amount of Airline Revenues allocated to the Terminal Complex Cost Center, including, but not limited to, the following:

i. Common Use Per Passenger Ticketing Fees;

ii. Common Use Baggage Handling System Fees;

iii. Customs and Immigration Terminal Fees; and

iv. Non-Signatory Airline Terminal Complex Rentals.

4. Net Parking and Roadway Cost Center Net Revenue or Loss: The amount of net revenue or net loss, whichever the case may be, of the Parking and Roadway Cost Center which represent the net revenues from the rental car concession fees and the ground transportation fees only, as calculated in accordance with Exhibit D4.

C. The Terminal Complex Requirement shall then be divided by the total square footage of Exclusive Use Space and Preferential Use Space leased to all Signatory Airlines, plus the Joint Use Space, to determine the annual Terminal Complex Rental Rate.

D. Non-Signatory Airlines shall pay a Terminal Complex Rental Rate equal to no less than one hundred twenty-five percent (125%) of the Signatory Airline Terminal Complex Rental Rate.

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EXHIBIT D2

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF AIRCRAFT GATE USE FEE

The annual Aircraft Gate Use Fees shall be calculated in accordance with the following formula.

A. The Apron Area Requirement shall be determined by taking the sum of the following:

1. Operations & Maintenance Expenses : Direct and indirect expenses allocated to the Apron Area Cost Center in accordance with the AVIATION’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Apron Area Cost Center based on the percentage of direct operating and maintenance expenses allocated to the Apron Area Cost Center of all direct cost center operating and maintenance expenses.

3. Debt Service Plus Coverage: The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Apron Area Cost Center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture, and allocated to the Apron Area Cost Center.

4. Amortization: Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions contained in Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Apron Area Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Apron Area Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology.

B. And subtracting from this amount, the following:

1. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Apron Area Cost Center.

2. Non-Airline Revenues: The amount of Non-Airline Revenue allocated to the Apron Area Cost Center, including, but not necessarily limited to, the following:

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i. Fuel System Rentals;

ii. Remote Overnight Aircraft Parking Fees;

iii. Uncovered Ramp Storage; and

iv. Any Miscellaneous Revenue allocated to the Apron Area Cost Center.

3. Airline Revenues: The amount of Airline Revenues allocated to the Apron Area Cost Center, including, but not limited to, the following:

i. Common Use Aircraft Gate Fees; and

ii. Non-Signatory Airline Aircraft Gate Use Fees.

C. The Apron Area Requirement shall then be divided by the total number of gates leased by Signatory Airlines to determine the Aircraft Gate Use Fee.

D. Non-Signatory Airlines shall pay an Aircraft Gate Use Fee equal to no less than one hundred twenty-five percent (125%) of the Signatory Airline Aircraft Gate Use Fee.

Approved as to Form September 7, 2010

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EXHIBIT D3

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF LANDING FEE RATE

The annual Landing Fee Rate shall be calculated in accordance with the following formula.

A. The Airfield Area Requirement shall be determined by taking the sum of the following:

1. Operations & Maintenance Expenses : Direct and indirect expenses allocated to the Airfield Area Cost Center in accordance with the AVIATION’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Airfield Area based on the percentage of direct operating and maintenance expenses allocated to the Airfield Area Cost Center of all direct cost center operating and maintenance expenses.

3. Debt Service Plus Coverage: The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Airfield Area Cost Center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture, and allocated to the Airfield Area Cost Center.

4. Amortization: Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions contained in Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Airfield Area Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Airfield Area Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology. For purposes of this calculation, Land shall have a useful life of fifty (50) years.

6. Prior Fiscal Year True-Ups: The amount of any prior year true-ups that had been deferred, subject to the provisions of Section 7.06 of this Agreement.

B. And subtracting from this amount, the following:

1. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Airfield Area Cost Center.

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2. Non-Airline Revenues: The amount of Non-Airline Revenue allocated to the Airfield Area Cost Center, including, but not necessarily limited to, the following:

i. Consolidated Rental Car Facility land rentals;

ii. Ground Handling fees;

iii. Westside Cost Center fees;

iv. Fuel Flowage fees;

v. Land Rentals for FBO and private hangar tenants who lease land in the Airfield Area, as defined herein;

vi. Fifty percent (50%) of any Unrestricted Interest Income allocated to the Airport System net of any interest income allocated to the Consolidated Rental Car Facility (CRCF) based on the same percentage as allocated operating and maintenance expenses to the CCRF Cost Center to all Airport System operating and maintenance expenses; and

vii. Any Miscellaneous Revenue allocated to the Airfield Area Cost Center.

3. Airline Revenues: The amount of Airline Revenues allocated to the Airfield Area Cost Center, including, but not limited to, the following:

i. Non-Signatory Landing Fees.

4. Net Parking and Roadway Cost Center Net Revenue or Loss: The amount of net revenue or net loss, whichever the case may be, of the Parking and Roadway Cost Center, which represent the net revenues from the public and employee parking only, as calculated in accordance with Exhibit D4.

5. Commercial Development Net Revenue or Loss: The amount of net loss or net gain, whichever the case may be, of the Airport System Commercial Development Cost Center, as calculated in accordance with Exhibit D6.

C. The Airfield Area Requirement shall then be divided by the total number of pounds of aircraft landed weight for Aircraft Arrivals of all Air Transportation Companies, as reported to AVIATION. For the purposes of the calculation of the Landing Fee Rate, landed weights for Aircraft Arrivals from other than Air Transportation Companies shall not be included in this calculation.

Approved as to Form September 7, 2010

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EXHIBIT D4

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF PARKING AND ROADWAYS NET REVENUE OR LOSS

The calculation of the Parking and Roadways Cost Center net revenue or loss to be included in the calculation of the Terminal Complex Rental Rate shall be calculated in accordance with the following formula.

A. Gross income allocable to the Parking and Roadways Cost Center shall include, but not necessarily be limited to, the following:

1. Rental Car Concession Fees : The concession fees actually collected or accrued from each of the on-airport car rental companies shall be allocated to the Parking and Roadways Cost Center. Any concession or other fees collected or accrued from off-airport car rental companies shall be allocated to the Parking and Roadways Cost Center (excluding any Customer Facility Charges).

2. Ground Transportation Fees: All fees and charges collected or accrued from concession fees associated with limousine operators, taxi cabs, courtesy vans or busses, and other AVI transpondered vehicles shall be allocated to the Parking and Roadways Cost Center (excluding CCRF ground transportation fees).

3. Parking Fees: All fees and charges collected or accrued from the operation of the public parking lots, employee parking lots, valet fees, or any other Airport public or employee parking facility revenues shall be allocated to the Parking and Roadways Cost Center.

4. Prepaid Coverage: The amount of any prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Parking and Roadways Cost Center.

B. And subtracting from this gross income amount, the following expenses:

1. Operations & Maintenance Expenses : Direct and indirect expenses allocated to the Parking and Roadways Cost Center in accordance with the Department’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Parking and Roadways based on the percentage of direct operating and maintenance expenses allocated to the Parking and Roadways Cost Center of all direct cost center operating and maintenance expenses.

2. Amortization: Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions of Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Parking and Roadways Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Parking and Roadways Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology. For the purposes of this calculation, Land shall have a useful life of fifty (50) years.

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3. Debt Service Plus Coverage: The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Parking and Roadways Cost Center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture.

4. Equipment and Capital Outlay Fund: The annual amount for equipment and capital outlays, as defined herein, included in the Airport System Operating and Maintenance Budget and allocated to the Parking and Roadways Cost Center.

5. Working Capital and Contingency Reserve Fund Deposit: Any amounts necessary to maintain the required balances in the Working Capital and Contingency Reserve Fund in accordance with the Master Indenture and allocated to the Parking and Roadways Cost Center.

C. The Parking and Roadways Cost Center net revenue or net loss shall be determined by subtracting the above referenced expenses (B) from the gross income (A).

D. The allocation of the net revenue or net loss determined in Paragraph C above, shall be allocated to the Airfield Cost Center and the Terminal Complex Cost Center as follows:

1. Gross parking revenues shall be allocated to the Airfield Cost Center and gross rental car concession fees and gross ground transportation fees shall be allocated to the Terminal Complex Cost Center.

2. The amount of Prepaid Coverage shall be allocated to the Airfield Cost Center and Terminal Complex Cost Center based on each cost center’s share of the total revenue as determined in Paragraph D(1) above.

3. Costs, expenses or requirements for Operations and Maintenance Expenses, Amortization, Debt Service Plus Coverage, Equipment and Capital Outlays, and Working Capital and Reserve Fund Deposit shall be allocated to the Airfield Cost Center and Terminal Complex Cost Center based on the share of gross revenues allocated to each cost center, as determined in Paragraph D(1) plus Paragraph D(2) above.

4. The amount of net revenue or net loss, whichever the case may be, allocated to the Airfield Cost Center and Terminal Complex Cost Center shall be the sum of revenue allocated to each cost center under Paragraph D(1) plus Paragraph D(2) above, minus the amount of costs, expenses, and requirements allocated to each cost center under Paragraph D(3) above.

Approved as to Form September 7, 2010

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EXHIBIT D5

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF RELIEVER AIRPORTS COST CENTER

NET REVENUE OR LOSS

The net revenue or net loss of the Reliever Airports Cost Center to be included in the calculation of the Landing Fee Rate shall be calculated in accordance with the following formula.

A. Gross income allocable to the Reliever Airports Cost Center shall include, but not necessarily be limited to, the following:

1. Net Fuel Sales : The net amount of fuel sales at the Airport System General Aviation Airports determined by taking the gross sales from the sale of Jet Fuel and 100 Octane Fuel and deducting from the gross sales the cost of such fuel.

2. Tiedown and Hangar Rentals : All rentals collected or accrued from based tenants and transient aircraft renting tiedown space or hangars at the Airport System General Aviation Airports.

3. Other Merchandise Sales : The net amount of merchandise sales at the Airport System General Aviation Airports determined by taking the gross sales and deducting the cost of goods sold. This category includes, but is not necessarily limited to, oil, oil additives, oxygen, charts, and various merchandise.

4. Commercial Activity Fees : Any rental fees associated with the doing business at the Airport System General Aviation Airports including, but not necessarily limited to, aircraft repairs, aircraft parts, food/beverage, aircraft leasing, etc.

5. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Reliever Airports Cost Center.

B. And subtracting from this gross income amount, the following expenses:

1. Operating & Maintenance Expenses : Direct and indirect expenses allocated to the Reliever Airports Cost Center in accordance with the Department’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Reliever Airports based on the percentage of direct operating and maintenance expenses allocated to the Reliever Airports Cost Center of all direct cost center operating and maintenance expenses.

2. Amortization: Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions contained in Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Reliever Airports Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Reliever Airports Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology. For the purposes of this calculation, Land shall have a useful life of fifty (50) years.

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3. Debt Service plus Coverage: The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Reliever Airports Cost Center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture.

4. Equipment & Capital Outlay: The annual amount for equipment and capital outlays, as defined herein, and included in the Airport System’s Operating and Maintenance Budget and allocated to the Reliever Airport Cost Center.

5. Working Capital and Contingency Reserve Fund Deposit : Any amounts necessary to maintain the required balances in the Working Capital and Contingency Reserve Fund in accordance with the Master Indenture and allocated to the Reliever Airports Cost Center.

C. The Reliever Airports Cost Center net revenue or net loss, whichever the case may be, shall be determined by subtracting the above referenced expenses (B) from the gross income (A).

D. Upon the implementation of a Westside Landing Fee Rate at McCarran International Airport, the Reliever Airports Cost Center net revenue or net loss, whichever the case may be, shall be reduced in the case of a net loss or increased in the case of net revenue by the amount of Landing Fees collected or accruing from the Aircraft Arrivals for other Air Transportation Companies and Westside itinerant aircraft, net of any collection fees. The Westside Landing Fee Rate shall be determined in accordance with Exhibit D7.

Approved as to Form September 7, 2010

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EXHIBIT D6

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF COMMERCIAL DEVELOPMENT COST CENTER NET REVENUE OR LOSS

The net revenue or net loss of the Commercial Development Cost Center to be included in the calculation of the Landing Fee Rate shall be calculated in accordance with the following formula.

A. Gross income allocable to the Commercial Development Cost Center shall include, but not necessarily be limited to, the following:

1. Off-Site Building Rentals : The rental fees actually collected or accrued from off-site building rentals shall be allocated to the Commercial Development Cost Center.

2. Cargo Building and Ramp Rentals : All cargo building rental fees and/or cargo building ramp rentals collected or accrued from cargo tenants, cargo air carriers and/or third party cargo developers shall be allocated to the Commercial Development Cost Center.

3. Billboard Land Rentals : All rental or concession fees collected or accrued from the lease of land for billboards shall be allocated to the Commercial Development Cost Center. However, any Billboard Land Rentals accruing from land purchased with AIP grants shall be restricted and not included in this calculation.

4. Private Developer Land Rentals : All land rentals and development fees associated with the private developments of Airport System land shall be allocated to the Commercial Development Cost Center. However, any Private Tenant Land Rentals accruing from land purchased with AIP grants shall be restricted and not included in this calculation.

5. Ground Services Equipment (GSE) Building and Ramp Rentals : All rentals associated with the GSE buildings and/or GSE ramp rentals shall be allocated to the Commercial Development Cost Center.

6. Concessionaire Land Rentals : All land rentals for land rented to Airport System concessionaires shall be allocated to the Commercial Development Cost Center. However, any Concessionaire Land Rentals accruing from land purchased with AIP grants shall be restricted and not included in this calculation.

7. Miscellaneous Fees : Any miscellaneous fees collected or accrued and allocable to the Commercial Development Cost Center.

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8. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Commercial Development Cost Center.

B. And subtracting from this revenue amount, the following expenses:

1. Operating & Maintenance Expenses : Direct and indirect expenses allocated to the Commercial Development Cost Center in accordance with the Department’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Commercial Development based on the percentage of direct operating and maintenance expenses allocated to the Commercial Development Cost Center of all direct cost center operating and maintenance expenses.

2. Amortization: Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions contained in Section 7.04 and Section 7.05 of the Agreement, of the annual amount of amortization allocable to the Commercial Development Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Commercial Development Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology. For the purposes of this calculation, Land shall have a useful life of fifty (50) years.

3. Debt Service plus Coverage: The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Commercial Development Cost Center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture.

5. Working Capital and Contingency Reserve Fund Deposit : Any amounts necessary to maintain the required balances in the Working Capital and Contingency Reserve Fund in accordance with the Master Indenture and allocated to the Commercial Development Cost Center.

C. The Commercial Development Cost Center net revenue or net loss, whichever the case may be, shall be determined by subtracting the above referenced expenses from the above referenced revenues.

Approved as to Form September 7, 2010

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EXHIBIT D7

Clark County, Department of Aviation

McCarran International Airport

CALCULATION OF WESTSIDE LANDING FEE RATE

The annual Westside Landing Fee Rate shall be calculated in accordance with the following formula.

A. The Westside Landing Fee Requirement shall be determined by taking the sum of the following:

1. Operation & Maintenance Expenses : Direct and indirect expenses allocated to the Airfield Area Cost Center in accordance with the Department’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Airfield Area based on the percentage of direct operating and maintenance expenses allocated to the Airfield Area Cost Center of all direct cost center operating and maintenance expenses.

2. Debt Service : The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Airfield Area Cost Center and payable from Airport System Revenues (excluding any Coverage).

3. Amortization : One hundred percent (100.0%) of the annual amount of amortization allocable to the Airfield Area Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Airfield Area Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology. For the purposes of this calculation, Land shall have a useful life of fifty (50) years.

4. Equipment and Capital Outlay Fund : The annual amount for equipment and capital outlays, as defined herein, and included in the Airport System’s Operating and Maintenance Budget and allocated to the Airfield Area Cost Center.

5. Reliever Airports Net Revenue or Loss : The amount of the net revenue or net loss of the Airport System Reliever Airports Cost Center as calculated in accordance with Exhibit D5.

B. And subtracting from this amount, the following:

1. Eastside Ramp Credit : The annual estimated amount of operating and maintenance expenses and debt service associated with the 10.9 million square feet of ramp space located on the Eastside that the Westside users would never have cause to use. (O&M expenses estimated at $0.66 per square foot in FY 2011 and debt service estimated at $0.81 per square foot).

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2. Non-Airline Revenues : The amount of Non-Airline Revenue allocated to the Westside Cost Center, including, but not necessarily limited to:

i. Westside General Aviation fees,

ii. Fuel Flowage fees,

iii. Land Rentals for FBO and private hangar tenants who lease land in the Airfield Area, as defined herein.

iv. Fifty percent (50%) of any Unrestricted Interest Income allocated to the Airport System net of any interest income allocated to the Consolidated Rental Car Facility (CRCF) based on the same percentage as allocated operating and maintenance expenses to the CRCF Cost Center to all Airport System operating and maintenance expenses; and

v. Any Miscellaneous Revenue allocated to the Airfield Area Cost Center.

C. The Westside Landing Fee Requirement (A minus B) shall then be divided by the total number of pounds of aircraft landed weight for Aircraft Arrivals of all Air Transportation Companies, including Aircraft Arrivals from other than Air Transportation Companies and Westside itinerant aircraft, as reported to AVIATION.

D. It is agreed that the minimum Landing Fee for an Aircraft Arrival shall be the greater of the Westside Landing Fee Rate as calculated in accordance with this Exhibit D7 times the certificated landed weight of said aircraft or one hundred fifty ($150.00) and 00/100 dollars, as adjusted each Fiscal Year.

Approved as to Form September 7, 2010

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EXHIBIT D8

Clark County Department of Aviation

McCarran International Airport

CALCULATION OF COMMON USE BAGGAGE HANDLING SYSTEM FEES;

COMMON USE TICKET COUNTERS FEES; AND

COMMON USE BAGGAGE SERVICE OFFICE FEES

The annual per enplaned passenger rate for the use of the Common Use Baggage Handling System, Common Use Ticket Counters, and Common Use Baggage Service Offices shall be calculated in accordance with the following formula.

A. The Terminal Complex Common Use Requirement shall be determined by taking the sum of the following:

1. Operation & Maintenance Expenses : Direct and indirect expenses allocated to the Terminal Complex Cost Center in accordance with the AVIATION’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Terminal Complex based on the percentage of direct operating and maintenance expenses allocated to the Terminal Complex Cost Center of all direct cost center operating and maintenance expenses.

3. Debt Service Plus Coverage : The annual amount of principal and interest due on Airport System outstanding Bonds allocated to the Terminal Complex Cost center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture, and allocated to the Terminal Complex Cost Center.

4. Amortization : Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions contained in Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Terminal Complex Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Terminal Complex Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology.

5. Equipment and Capital Outlay Fund : The annual amount for equipment and capital outlays, as defined herein, and included in the Airport System’s Operating and Maintenance Budget and allocated to the Terminal Complex Cost Center.

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B. And subtracting from this amount, the following:

1. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Terminal Complex Cost Center.

2. Non-Airline Revenues: The amount of Non-Airline Revenue allocated to the Terminal Complex Cost Center, including, but not necessarily limited to, the following:

i. Terminal Concession Fees (excluding Gaming revenue);

ii. Private Tenant Terminal Complex Rentals;

iii. Covered Apron Storage;

v. Any Miscellaneous Revenue allocated to the Terminal Complex Cost Center.

3. Net Parking and Roadway Cost Center Net Revenue or Loss: The amount of net revenue or net loss, whichever the case may be, of the Parking and Roadways Cost Center which represent the net revenues from the rental car concession fees and the ground transportation fees only, as calculated in accordance with Exhibit D4.

C. The Terminal Complex Common Use Requirement shall then be divided by the sum of 1) the total square footage of Exclusive Use Space and Preferential Use Space leased to all Signatory Airlines, plus the Joint Use Space; and 2) the Common Use Baggage Handling System square footage; the Common Use Ticket Counter square footage; the Common Use Sky Cap square footage; and the Common Use Baggage Service Offices to determine the annual Terminal Complex Common Use Rental Rate.

D. The Common Use Baggage Handling System Fee shall be calculated by taking the Terminal Complex Common Use Rental Rate, as calculated in Paragraph C above, times the Common Use Baggage Handling System square footage. The product of this calculation shall be divided by the estimated enplaned passengers of those Air Transportation Companies that will be utilizing the Baggage Handling System.

E. The Common Use Ticket Counter Fee shall be calculated by taking the Terminal Complex Common Use Rental Rate, as calculated in Paragraph C above, times the Common Use Ticket Counter square footage. The product of this calculation shall be divided by the estimated enplaned passengers of those Air Transportation Companies that will be utilizing the Common Use Ticket Counters.

F. The Common Use Baggage Service Office Fee shall be calculated by taking the Terminal Complex Common Use Rental Rate, as calculated in Paragraph C above, times the Common Use Baggage Service Office square footage. The product of this calculation shall be divided by the estimated enplaned passengers of those Air Transportation Companies that will be utilizing the Common Use Baggage Service Offices.

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G. Non-Signatory Airlines shall pay fees for the use of the Common Use Baggage Handling System, Common Use Ticket Counters, and Common Use Baggage Service Office, equal to no less than one hundred twenty-five percent (125%) of the common use fees identified above.

Approved as to Form September 7, 2010

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EXHIBIT D9

Clark County Department of Aviation

McCarran International Airport

CALCULATION OF COMMON USE AIRCRAFT GATES FEES

The Common Use Aircraft Gate Fee shall be calculated in accordance with the following formula, and shall be charged on a per turn basis.

A. The Common Use Aircraft Gate Requirement shall be determined by taking the sum of the following:

1. Operation & Maintenance Expenses : Direct and indirect expenses allocated to the Apron Area Cost Center in accordance with the AVIATION’s cost accounting methodology and any indirect Administrative Cost Center Expenses allocated to the Apron Area based on the percentage of direct operating and maintenance expenses allocated to the Apron Area Cost Center of all direct cost center operating and maintenance expenses.

3. Debt Service Plus Coverage : The annual amount of principal and interest due on Airport System outstanding Bonds (excluding PFC Bonds) allocated to the Apron Area Cost center and payable from Airport System Revenues plus any required Coverage requirements in accordance with the Master Indenture, and allocated to the Apron Area Cost Center.

4. Amortization : Fifty percent (50.0%) or such other percentage as may be determined in accordance with the provisions contained in Section 7.04 and Section 7.05 of this Agreement, of the annual amount of amortization allocable to the Apron Area Cost Center on assets acquired or constructed from the proceeds of the Capital Improvement Fund and benefiting the Apron Area Cost Center. Amortization shall be calculated using the assets’ projected useful life and the straight-line depreciation methodology.

B. And subtracting from this amount, the following:

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1. Prepaid Coverage: The amount of the prior years’ Debt Service Coverage Requirement, as defined herein, and allocated to the Apron Area Cost Center.

2. Non-Airline Revenues: The amount of Non-Airline Revenue allocated to the Apron Area Cost Center, including, but not necessarily limited to, the following:

i. Fuel System Rental;

ii. RON Parking Fees;

iii. Uncovered Apron Storage;

iv. Any Miscellaneous Revenue allocated to the Terminal Complex Cost Center.

C. The Common Use Aircraft Gate Requirement shall then be divided by the total number of gates to determine the Common Use Aircraft Gate Requirement per gate.

D. The Common Use Aircraft Gate Requirement per gate shall then be added to the annual cost of leasing an average size holdroom (average size holdroom square footage times the Terminal Complex Rental Rate determined in Exhibit D1).

E. The result determined in Paragraph D above, shall then be divided by the average number of annual turns per gate (average daily turns per gate times 365) at the Airport to determine the Common Use Aircraft Gate Fee.

F. The monthly charge for using a Common Use Aircraft Gate Fee shall be determined by multiplying the number of turns per month times the per turn charge determined in Paragraph E above.

G. Non-Signatory Airlines shall pay an amount equal to no less than one hundred twenty-five percent (125%) of the established per turn rate identified above.

Approved as to Form September 7, 2010

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EXHIBIT D10

Clark County, Department of Aviation

McCarran International Airport

RATE STABILIZATION ACCOUNT FLOW OF FUNDS

Approved as to Form September 7, 2010

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EXHIBIT D11

Clark County, Department of Aviation

McCarran International Airport

AMORTIZATION DUE FROM SIGNATORY AIRLINES

ACCOUNT FLOW OF FUNDS

Approved as to Form September 7, 2010

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EXHIBIT D12

Clark County, Department of Aviation

McCarran International Airport

AIRPORT SYSTEM MASTER INDENTURE FLOW OF FUNDS

Approved as to Form September 7, 2010

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Exhibit 21.1

List of Subsidiaries

Allegiant Air, LLC, a Nevada limited liability company

Allegiant Vacations, LLC, a Nevada limited liability company

AFH, Inc., a Nevada corporation

Allegiant Information Systems, Inc., a Nevada corporation

SFB Fueling, LLC, a Delaware limited liability company 50% owned by AFH, Inc.

Sunrise Asset Management LLC, a Nevada limited liability company

Fly Tel Solutions, Inc., a Nevada corporation

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference of our reports dated February 27, 2012, with respect to the consolidated financial statements and the effectiveness of internal control over financial reporting of Allegiant Travel Company and subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2011 in the following registration statements and related prospectuses.

Allegiant Travel Company Form S-8	File No. 333-141227

Allegiant Travel Company Form S-3	File No. 333-153282

Allegiant Travel Company Form S-3ASR	File No. 333-161966

/s/ Ernst & Young LLP

Las Vegas, Nevada

February 27, 2012

Exhibit 31.1

Certifications

I, Maurice J. Gallagher, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Allegiant Travel Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2012	/s/ Maurice J. Gallagher, Jr.
	Title: Principal Executive Officer

Exhibit 31.2

Certifications

I, Scott Sheldon, certify that:

1. I have reviewed this annual report on Form 10-K of Allegiant Travel Company;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2012	/s/ SCOTT SHELDON
	Title: Principal Financial Officer

Exhibit 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Allegiant Travel Company, a Nevada corporation (the “Company”) on Form 10-K for the period ending December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Maurice J. Gallagher, Jr., Chief Executive Officer of the Company, and Scott Sheldon, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 27, 2012	/s/ Maurice J. Gallagher, Jr.
	Name:	Maurice J. Gallagher, Jr.
	Title:	Principal Executive Officer

Dated: February 27, 2012	/s/ scott sheldon
	Name:	Scott Sheldon
	Title:	Principal Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.